Bill Totten's Weblog

Friday, July 31, 2009

Michael Pollan: We Are Headed Toward a Breakdown in Our Food System

by David Beers

The Tyee (June 12 2009)

AlterNet (July 04 2009)

Michael Pollan's famous motto for a smart, healthy diet is "Eat food. Not too much. Mostly plants." Add to that: "And when you happen to be on your publisher's expense account, splurge". The night we met up to chat at a place of his choosing, he tucked into a roasted slab of British Columbia wild Chinook salmon, a tangle of salad greens and several glasses of good Okanagan Pinot Gris in the swank environs of the Blue Water Cafe in Vancouver's Yaletown neighbourhood.

Pollan, who lives in Berkeley, California, has championed the cause of stronger local food networks with his bestsellers The Omnivore's Dilemma (2007) and In Defense of Food (2009). He was in town to sign books and headline a sold-out picnic fundraiser to preserve the University of British Columbia's urban farm as a working laboratory for sustainable agriculture. His rousing talk drew a standing ovation, and even a few tears. {1}

As a dinner companion, Pollan is loose, friendly, and, as you might expect, intellectually omnivorous, peppering his interviewer with more questions than he was asked.

Along the way, he sketched the current state of food politics inside the White House and within his own home. He was surprised to learn the 100-Mile Diet was launched in British Columbia (on The Tyee) and said meeting 100-Mile Diet {2} creators Alisa Smith and James MacKinnon is on his list of things to do (message delivered, Alisa and James). He compared today's food movement to Martin Luther's reform of the Church and he predicted certain breakdown for a North American food system far too dependent on cheap energy and big corporations. Between bites, here's what else Pollan shared …

On raising an ultra-picky eater:

Michael Pollan: My sixteen-year-old son Isaac has been a very complex, tortuous food story. He was a terrible eater. One of the reasons I got interested in writing about food is he didn't eat anything. I love food, my wife loves food, and he just was tortured about food. He was one of these kids - and there are many of them - who only ate white food. He ate bread, pasta, rice, potatoes. There are a lot more of these kids than there used to be. I'm not exactly sure why.

But he basically found food scary and overwhelming. And so he controlled that by eating food that was as bland as possible. He was the same way about clothes. He didn't like any variety in clothing. So he wore black clothes for about eight years of his childhood. Ate white, dressed black. In both cases, in retrospect, he was trying to reduce sensory input. It was overwhelming. Smell was overwhelming, taste was overwhelming, colour was overwhelming. And he just had trouble processing.

A very interesting turnaround happened about two years ago. He discovered food. He became very serious about it, partly through cooking. And now he loves food. But he doesn't eat everything. No seafood, for example. But he'll eat any kind of meat, many kinds of vegetables. Last summer he worked a summer job in a kitchen. He worked as a chef. So he's gone through this really interesting transformation.

But I've since heard that many chefs have gone through this as children. That they couldn't eat because their sensory apparatuses were overly receptive. And I heard this story from [famous Chez Panisse owner and chef] Alice Waters, who herself was a very, very picky eater as a child. She predicted Isaac would flip around. She met him when he was young and actually tried to cook for him when he was eleven. Such a waste of her talent! (laughs).

So anyway, my son's whole journey around food has been interesting for me to watch. And now he likes to cook and we cook together and he's a good cook. But now, of course, he's a horrible food snob. It'll be like, he's doing homework so I'm doing the cooking, and he'll say, 'What are we having?' And I'll say, 'Well, I've got this nice grass-fed steak I'm going to make'. And he'll say, 'Can you make a reduction to go with that? Maybe a Port reduction would be good.' And I'll say, 'Fuck you! If you want to do a Port reduction, you do it'! (laughs) And depending on how much homework he has, he will do it. He'll make this delicious Port reduction for his steak. He's a complicated character.

On the personal politics of pint-sized picky eaters:

MP: Kids' relations to food are complex. This generation will have its own neuroses, that's for sure. But it's very concerning that there are such high levels of allergies among kids nowadays. The reasons are as yet unexplained. But I've heard that it has complicated kids' relationships with food because so many have allergies, or think they do.

I've discovered cooking and gardening are great ways to get kids to reorient their relationships to food in a positive way. Kids will eat things that they'll pick in the garden that they'll never eat off the plate. Or they'll eat things that they've cooked themselves. Because I think a big issue for them is control. Food is really, I think, a primary political phenomenon. It is the first time you can control what you take into your body, and the first time you can say no to your parents and assert your identity. So I think food and politics are very intertwined.

On whether Barack Obama is going to be good for food:

MP: We don't know yet. I think Obama gets the issues. He's a great dot connector. He connects the dots between the way we grow food and the health care crisis and the climate change crisis and the energy crisis. He understands that and he's spoken about that eloquently. The question is how much political capital he is going to put into changing the system.

So far the most significant thing is what his wife has done, the way Michelle Obama has been talking about food, especially the importance of giving your children real food. When she planted a vegetable garden at the White House, she was very careful to let the world know that it was an organic garden. And that's a big deal, because organics are fighting words in this battle and in fact the industry came back at her.

A group with the wonderful name of the Crop Life Association, which is the lobbying group for the pesticide manufacturers, was very upset that she was casting aspersions on conventional agriculture. The Crop Life Association really should go by the opposite name, the Bug Death Association. (laughs) They understood Michelle Obama's garden to be a critique of non-organic agriculture. And it was a critique. But their backlash hasn't deterred her. She is going to make food one of her issues.

I was a bit surprised. I thought she was going to be leading with, like, war widows, families of soldiers, which she said was going to be her issue. But this came out first. And she's got great feedback on it and is going to do more, from what I've heard.

On Obama's side, you've got Tom Vilsack who is the Secretary of Agriculture. As the former governor of Iowa, he seemed like a real conventional choice. But in fact he's been quite surprising, too. He's also planted a garden at the Department of Agriculture, which you could dismiss as symbolism, but he's talking a lot about local food and urban agriculture. Most significantly, he appointed as his number two a woman name Kathleen Merrigan, who is a genuine reformer. She founded the organic program at USDA, she wrote the original organic law for Senator Patrick Leahy and she's a real staunch supporter of sustainable agriculture and she's running the Department of Agriculture! That's pretty mind blowing. We'll see. She's up against incredible forces of inertia.

On the health dollar costs of America's 'diet catastrophe':

MP: At some abstract level Obama sees that he's not going to get his health care costs under control unless we change the way Americans eat. Because the crisis of rising costs in the American health care system can be translated very simply as the catastrophe of the American diet, which represents probably half of what we spend on health care in America. We spend about $2 trillion a year. The Centers for Disease Control says that 1.5 trillion goes to treat chronic disease. Now you've got smoking in there, alcoholism, but other than that, chronic disease is mostly food related. So you really can't get control of that system unless you are preventing some of those chronic diseases. And the way you do that, really, is to change the food system. But, you know, it's very, very hard to do.

My bet is that what we'll see from the Obama administration is a lot of support for alternative groups such as local and organic. Money for farmers to transition, money to rebuild local food economies. Whether we'll actually see an attack on conventional agriculture is less likely, given the politics of it. The reason is you can't do anything with the current agriculture committees we've got in Congress. You can't drive any reform through. It's going to take a few years to change the populations of those committees.

On whether he's trying to rally a movement in time to avert disaster, or just prepare us for the inevitable mess caused by scarcer oil, degrading ecologies, and global warming:

MP: It's more the latter. We need to have these alternatives around and available when the shit hits the fan, basically.

One of the reasons we need to nurture several different ways of feeding ourselves - local, organic, pasture-based meats, and so on - is that we don't know what we're going to need and we don't know what is going to work. To the extent that we diversify the food economy, we will be that much more resilient. Because there will be shocks. We know that. We saw that last summer with the shock of high oil prices. There will be other shocks. We may have the shock of the collapsing honey bee population. We may have the shock of epidemic diseases coming off of feed lots. We're going to need alternatives around.

When we say the food system is unsustainable we mean that there is something about it, an internal contradiction, that means it can't go on the way it is without it breaking up. And I firmly believe there will be a breakdown.

On whether he's a fan of the 100-Mile Diet:

MP: I think the 100-Mile Diet, as a pedantic exercise, is really important. People really learn a lot. They learn what's available. They learn how much they appreciate things that come from far away. It was one of the great teaching exercises. And we need those. People don't know where their food comes from and they have no idea what they are eating.

But you know, when I was working on The Omnivore's Dilemma I talked to Joel Salatin {3}, a farmer who is kind of a hero of alternative agriculture. He is radical. Beyond organic. Really uncompromising. In fact he hates organic, thinks it's already sold out. So I asked him: 'Are you going to blow up this food system?' He said, 'No, this isn't a revolution, this is a reformation'. And that's a good metaphor.

It's like once upon a time there was one way to feed yourself spiritually as a Christian. It was the Catholic Church. And you had to go through those doors to have any relationship with God. And then Luther came along and suddenly you have many denominations. And that's where we are now. Luther is like the organic pioneers, maybe Wendell Berry {4}, I don't know. And these alternatives are thriving, and everyone is very excited about the possibilities. But the Catholic Church didn't go away. It just got smaller, you know? And I think realistically that's what’s going to happen. There still will be supermarket food. There still will be food that travels around the world. I just hope there is less of it and more good alternatives.

On the communal pleasures and benefits of 'locavore' eating:

MP: It's a part of the food movement that people don't pay enough attention to. Actually I met Agriculture Secretary Vilsack and at some point, apropos of nothing, he went into this incredibly eloquent riff about farmers' markets. He just loves farmers' markets. He said, 'You know, this isn't about food, this is about community. People are starved for community.' And he's absolutely right. And I'm amazed that the US Secretary of Agriculture has that insight.

At my farmer's market, people go whether they are going to be cooking or not. They go to hang out. They go because they're going to see their friends. They go because there's politicking and music and massages and all these other things happening. And it's just as important.

On how food insecurity can unravel an empire:

MP: That's what brought down Soviet communism, you know. By the end of the Soviet Union, fifty per cent of the food was being grown outside the official system. And people just realized, okay, supermarkets aren't working, we're going to set up this other economy. We're going to grow it ourselves, we're going to tend small allotment farms. And I think it was the crisis of legitimacy of the whole system. Again, it was another reformation. The collective farms were still there, still producing large amounts of bread or whatever. But you had this alternative that just rose up.






Bill Totten

Fractional Reserve Banking

by Murray N Rothbard

The Freeman (October 1995)

We have already described one part of the contemporary flight from sound, free market money to statized and inflated money: the abolition of the gold standard by Franklin Roosevelt in 1933, and the substitution of fiat paper tickets by the Federal Reserve as our "monetary standard". Another crucial part of this process was the federal cartelization of the nation's banks through the creation of the Federal Reserve System in 1913.

Banking is a particularly arcane part of the economic system; one of the problems is that the word "bank" covers many different activities, with very different implications. During the Renaissance era, the Medicis in Italy and the Fuggers in Germany, were "bankers"; their banking, however, was not only private but also began at least as a legitimate, non-inflationary, and highly productive activity. Essentially, these were "merchant bankers", who started as prominent merchants. In the course of their trade, the merchants began to extend credit to their customers, and in the case of these great banking families, the credit or "banking" part of their operations eventually overshadowed their mercantile activities. These firms lent money out of their own profits and savings, and earned interest from the loans. Hence, they were channels for the productive investment of their own savings.

To the extent that banks lend their own savings, or mobilize the savings of others, their activities are productive and unexceptionable. Even in our current commercial banking system, if I buy a $10,000 CD ("certificate of deposit") redeemable in six months, earning a certain fixed interest return, I am taking my savings and lending it to a bank, which in turn lends it out at a higher interest rate, the differential being the bank's earnings for the function of channeling savings into the hands of credit-worthy or productive borrowers. There is no problem with this process.

The same is even true of the great "investment banking" houses, which developed as industrial capitalism flowered in the nineteenth century. Investment bankers would take their own capital, or capital invested or loaned by others, to underwrite corporations gathering capital by selling securities to stockholders and creditors. The problem with the investment bankers is that one of their major fields of investment was the underwriting of government bonds, which plunged them hip-deep into politics, giving them a powerful incentive for pressuring and manipulating governments, so that taxes would be levied to pay off their and their clients' government bonds. Hence, the powerful and baleful political influence of investment bankers in the nineteenth and twentieth centuries: in particular, the Rothschilds in Western Europe, and Jay Cooke and the House of Morgan in the United States.

By the late nineteenth century, the Morgans took the lead in trying to pressure the US government to cartelize industries they were interested in - first railroads and then manufacturing: to protect these industries from the winds of free competition, and to use the power of government to enable these industries to restrict production and raise prices.

In particular, the investment bankers acted as a ginger group to work for the cartelization of commercial banks. To some extent, commercial bankers lend out their own capital and money acquired by CDs. But most commercial banking is "deposit banking" based on a gigantic scam: the idea, which most depositors believe, that their money is down at the bank, ready to be redeemed in cash at any time. If Jim has a checking account of $1,000 at a local bank, Jim knows that this is a "demand deposit", that is, that the bank pledges to pay him $1,000 in cash, on demand, anytime he wishes to "get his money out". Naturally, the Jims of this world are convinced that their money is safely there, in the bank, for them to take out at any time. Hence, they think of their checking account as equivalent to a warehouse receipt. If they put a chair in a warehouse before going on a trip, they expect to get the chair back whenever they present the receipt. Unfortunately, while banks depend on the warehouse analogy, the depositors are systematically deluded. Their money ain't there.

An honest warehouse makes sure that the goods entrusted to its care are there, in its storeroom or vault. But banks operate very differently, at least since the days of such deposit banks as the Banks of Amsterdam and Hamburg in the seventeenth century, which indeed acted as warehouses and backed all of their receipts fully by the assets deposited, for example, gold and silver. This honest deposit or "giro" banking is called "100 percent reserve" banking. Ever since, banks have habitually created warehouse receipts (originally bank notes and now deposits) out of thin air. Essentially, they are counterfeiters of fake warehouse-receipts to cash or standard money, which circulate as if they were genuine, fullybacked notes or checking accounts. Banks make money by literally creating money out of thin air, nowadays exclusively deposits rather than bank notes. This sort of swindling or counterfeiting is dignified by the term "fractional-reserve banking", which means that bank deposits are backed by only a small fraction of the cash they promise to have at hand and redeem. (Right now, in the United States, this minimum fraction is fixed by the Federal Reserve System at ten percent.)

Fractional Reserve Banking

Let's see how the fractional reserve process works, in the absence of a central bank. I set up a Rothbard Bank, and invest $1,000 of cash (whether gold or government paper does not matter here). Then I "lend out" $10,000 to someone, either for consumer spending or to invest in his business. How can I "lend out" far more than I have? Ahh, that's the magic of the "fraction" in the fractional reserve. I simply open up a checking account of $10,000 which I am happy to lend to Mr Jones. Why does Jones borrow from me? Well, for one thing, I can charge a lower rate of interest than savers would. I don't have to save up the money myself, but simply can counterfeit it out of thin air. (In the nineteenth century, I would have been able to issue bank notes, but the Federal Reserve now monopolizes note issues.) Since demand deposits at the Rothbard Bank function as equivalent to cash, the nation's money supply has just, by magic, increased by $10,000. The inflationary, counterfeiting process is under way.

The nineteenth-century English economist Thomas Tooke correctly stated that "free trade in banking is tantamount to free trade in swindling". But under freedom, and without government support, there are some severe hitches in this counterfeiting process, or in what has been termed "free banking". First: why should anyone trust me? Why should anyone accept the checking deposits of the Rothbard Bank? But second, even if I were trusted, and I were able to con my way into the trust of the gullible, there is another severe problem, caused by the fact that the banking system is competitive, with free entry into the field. After all, the Rothbard Bank is limited in its clientele. After Jones borrows checking deposits from me, he is going to spend it. Why else pay money for a loan? Sooner or later, the money he spends, whether for a vacation, or for expanding his business, will be spent on the goods or services of clients of some other bank, say the Rockwell Bank. The Rockwell Bank is not particularly interested in holding checking accounts on my bank; it wants reserves so that it can pyramid its own counterfeiting on top of cash reserves. And so if, to make the case simple, the Rockwell Bank gets a $10,000 check on the Rothbard Bank, it is going to demand cash so that it can do some inflationary counterfeit-pyramiding of its own. But, I, of course, can't pay the $10,000, so I'm finished. Bankrupt. Found out. By rights, I should be in jail as an embezzler, but at least my phoney checking deposits and I are out of the game, and out of the money supply.

Hence, under free competition, and without government support and enforcement, there will only be limited scope for fractional-reserve counterfeiting. Banks could form cartels to prop each other up, but generally cartels on the market don't work well without government enforcement, without the government cracking down on competitors who insist on busting the cartel, in this case, forcing competing banks to pay up.

Central Banking

Hence the drive by the bankers themselves to get the government to cartelize their industry by means of a central bank. Central Banking began with the Bank of England in the 1690s, spread to the rest of the Western world in the eighteenth and nineteenth centuries, and finally was imposed upon the United States by banking cartelists via the Federal Reserve System of 1913. Particularly enthusiastic about the Central Bank were the investment bankers, such as the Morgans, who pioneered the cartel idea, and who by this time had expanded into commercial banking.

In modern central banking, the Central Bank is granted the monopoly of the issue of bank notes (originally written or printed warehouse receipts as opposed to the intangible receipts of bank deposits), which are now identical to the government's paper money and therefore the monetary "standard" in the country. People want to use physical cash as well as bank deposits. If, therefore, I wish to redeem $1,000 in cash from my checking bank, the bank has to go to the Federal Reserve, and draw down its own checking account with the Fed, "buying" $1,000 of Federal Reserve Notes (the cash in the United States today) from the Fed. The Fed, in other words, acts as a bankers' bank. Banks keep checking deposits at the Fed and these deposits constitute their reserves, on which they can and do pyramid ten times the amount in checkbook money.

Here's how the counterfeiting process works in today's world. Let's say that the Federal Reserve, as usual, decides that it wants to expand (that is, inflate) the money supply. The Federal Reserve decides to go into the market (called the "open market") and purchase an asset. It doesn't really matter what asset it buys; the important point is that it writes out a check. The Fed could, if it wanted to, buy any asset it wished, including corporate stocks, buildings, or foreign currency. In practice, it almost always buys US government securities.

Let's assume that the Fed buys $10,000,000 of US Treasury bills from some "approved" government bond dealer (a small group), say Shearson, Lehman on Wall Street. The Fed writes out a check for $10,000,000, which it gives to Shearson, Lehman in exchange for $10,000,000 in US securities. Where does the Fed get the $10,000,000 to pay Shearson, Lehman? It creates the money out of thin air. Shearson, Lehman can do only one thing with the check: deposit it in its checking account at a commercial bank, say Chase Manhattan. The "money supply" of the country has already increased by $10,000,000; no one else's checking account has decreased at all. There has been a net increase of $10,000,000.

But this is only the beginning of the inflationary, counterfeiting process. For Chase Manhattan is delighted to get a check on the Fed, and rushes down to deposit it in its own checking account at the Fed, which now increases by $10,000,000. But this checking account constitutes the "reserves" of the banks, which have now increased across the nation by $10,000,000. But this means that Chase Manhattan can create deposits based on these reserves, and that, as checks and reserves seep out to other banks (much as the Rothbard Bank deposits did), each one can add its inflationary mite, until the banking system as a whole has increased its demand deposits by $100,000,000, ten times the original purchase of assets by the Fed. The banking system is allowed to keep reserves amounting to ten percent of its deposits, which means that the "money multiplier" - the amount of deposits the banks can expand on top of reserves - is ten. A purchase of assets of $10 million by the Fed has generated very quickly a tenfold, $100,000,000 increase in the money supply of the banking system as a whole.

Interestingly, all economists agree on the mechanics of this process even though they of course disagree sharply on the moral or economic evaluation of that process. But unfortunately, the general public, not inducted into the mysteries of banking, still persists in thinking that their money remains "in the bank".

Thus, the Federal Reserve and other central banking systems act as giant government creators and enforcers of a banking cartel; the Fed bails out banks in trouble, and it centralizes and coordinates the banking system so that all the banks, whether the Chase Manhattan, or the Rothbard or Rockwell banks, can inflate together. Under free banking, one bank expanding beyond its fellows was in danger of imminent bankruptcy. Now, under the Fed, all banks can expand together and proportionately.

"Deposit Insurance"

But even with the backing of the Fed, fractional reserve banking proved shaky, and so the New Deal, in 1933, added the lie of "bank deposit insurance", using the benign word "insurance" to mask an arrant hoax. When the savings and loan system went down the tubes in the late 1980s, the "deposit insurance" of the federal FSLIC [Federal Savings and Loan Insurance Corporation] was unmasked as sheer fraud. The "insurance" was simply the smoke-and-mirrors term for the unbacked name of the federal government. The poor taxpayers finally bailed out the S&Ls, but now we are left with the formerly sainted FDIC [Federal Deposit Insurance Corporation], for commercial banks, which is now increasingly seen to be shaky, since the FDIC itself has less than one percent of the huge number of deposits it "insures".

The very idea of "deposit insurance" is a swindle; how does one insure an institution (fractional reserve banking) that is inherently insolvent, and which will fall apart whenever the public finally understands the swindle? Suppose that, tomorrow, the American public suddenly became aware of the banking swindle, and went to the banks tomorrow morning, and, in unison, demanded cash. What would happen? The banks would be instantly insolvent, since they could only muster ten percent of the cash they owe their befuddled customers. Neither would the enormous tax increase needed to bail everyone out be at all palatable. No: the only thing the Fed could do, and this would be in their power, would be to print enough money to pay off all the bank depositors. Unfortunately, in the present state of the banking system, the result would be an immediate plunge into the horrors of hyperinflation.

Let us suppose that total insured bank deposits are $1,600 billion. Technically, in the case of a run on the banks, the Fed could exercise emergency powers and print $1,600 billion in cash to give to the FDIC to pay off the bank depositors. The problem is that, emboldened at this massive bailout, the depositors would promptly redeposit the new $1,600 billion into the banks, increasing the total bank reserves by $1,600 billion, thus permitting an immediate expansion of the money supply by the banks by tenfold, increasing the total stock of bank money by $16 trillion. Runaway inflation and total destruction of the currency would quickly follow.


This article originally appeared in the October 1995 issue of The Freeman and is reprinted with permission:

Murray N Rothbard (1926-1995), the founder of modern libertarianism and the dean of the Austrian School of economics, was the author of The Ethics of Liberty (1982) and For a New Liberty (1973) and many other books and articles. He was also academic vice president of the Ludwig von Mises Institute and the Center for Libertarian Studies, and the editor - with Lew Rockwell - of The Rothbard-Rockwell Report.

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Bill Totten

Thursday, July 30, 2009

How California Could Turn its IOUs into Dollars

by Ellen Brown (July 22 2009)

California has over $17 billion on deposit in banks that have refused to honor its IOUs, forcing legislators to accept crippling budget cuts. These austerity measures are unnecessary. If the state were to deposit its money in its own state-owned bank, it could have enough credit to solve its budget crisis with funds to spare.

"We make money the old-fashioned way", said Art Rolnick, chief economist of the Minneapolis Federal Reserve. "We print it". That works for the federal government's central bank, but states are forbidden by the Constitution to issue "bills of credit", a term that has been interpreted to mean the state's own paper money. "Sacramento is not Washington", said California Governor Arnold Schwarzenegger in May. "We cannot print our own money". When legislators could not agree on how to solve the state's $26.3 billion budget deficit, the Governor therefore did the next best thing: he began paying the bills with IOUs ("I Owe You's", or promises to pay bearing interest).

The problem was that most banks declined to honor the IOUs, at least after July 24. "They said something about not wanting to enable the dysfunctional state legislature", observed a San Diego Union-Tribune {1} staff writer, "which is kind of funny as the federal government has been enabling the dysfunctional financial sector for almost a year".

On July 21, California legislators were strong-armed into a tentative agreement {2} on budget cuts, a forced move that was called "painful" by the Speaker of the Assembly and "devastating" by the executive director of the California State Association of Counties. The cuts involve more job losses, more bleeding of school funds, more closing of facilities. Worse, they will not solve the budget crisis long-term. The state's economy is expected to continue to deteriorate along with its revenues. But without banks to honor the state's IOUs, California has no time to negotiate or explore alternatives. There is no "quick fix" {3}, says UCLA Professor Daniel Mitchell.

Or is there?

More Than One Way to Solve a Budget Crisis

Among the banks rejecting California's IOUs are six of particular interest: Citibank, Union Bank, Bank of America, Wells Fargo, US Bank, and Westamerica Bank. These banks are interesting because they are six of the seven depository banks {4} in which the state of California currently deposits its money. (The seventh is Bank of the West, which loyally said it would accept the IOUs indefinitely.)

Banks operate under federal or state charters that grant them special rights and privileges. Chartered banks are endowed with a gift that keeps on giving: they can "leverage" the value of their deposits into anywhere from ten to thirty times that sum in interest-bearing loans. This "multiplier effect" is attested to by many authorities {5}, including President Obama himself. He said in a speech at Georgetown University on April 14:

"[A]lthough there are a lot of Americans who understandably think that government money would be better spent going directly to families and businesses instead of banks - 'where's our bailout?', they ask - the truth is that a dollar of capital in a bank can actually result in eight or ten dollars of loans to families and businesses, a multiplier effect that can ultimately lead to a faster pace of economic growth".

The website of the Federal Reserve Bank of Dallas {6} explains:

"Banks actually create money when they lend it. Here's how it works: Most of a bank's loans are made to its own customers and are deposited in their checking accounts. Because the loan becomes a new deposit, just like a paycheck does, the bank ... holds a small percentage of that new amount in reserve and again lends the remainder to someone else, repeating the money-creation process many times."

Combine this with another interesting fact: according to the California Treasurer's report {7}, as of May 2009 the state had aggregate deposits and investments exceeding $55 billion. Of this sum, $1.1 billion was held in demand deposit accounts (non-interest-bearing accounts allowing unlimited deposits and withdrawals) and $16.5 billion was in NOW accounts (interest-bearing accounts allowing unlimited deposits and withdrawals). According to the Treasurer's office, the non-interest-bearing demand deposits are held at the seven depository banks named earlier, while the NOW accounts are held at Citibank and Union Bank. Applying a "multiplier effect" of ten to the total sum on deposit at these seven banks ($17.6 billion), the banks collectively have the ability to make $176 billion in loans. At five percent, $176 billion can generate $8.8 billion in interest for the banks.

Rather than showing their gratitude by reciprocating, however, six of the seven depository banks have refused to honor California's IOUs. Worse, three of these six actually received federal bailout money from the taxpayers, something that was supposedly done to keep credit flowing to the states and their citizens. Citibank got $45 billion in bailout money {8}, Wells Fargo got $25 billion, and Bank of America got $45 billion, not to mention guarantees of $300 billion for Citibank and $118 billion for Bank of America. When Governor Schwarzenegger asked for a loan guarantee for a mere $6 billion {9} to bolster California's credit rating, on the other hand, he was turned down. Californians compose one-eighth of the nation's population.

When the state's appeal for aid was rejected by the banks, California State Treasurer Bill Lockyer said he was "disappointed". He and other state leaders should show their disappointment with their feet. California could pull its deposits out of those depository banks refusing its IOUs and put them instead in its own state-owned bank, following the lead of North Dakota, which now has the only state-owned bank in the country. Set up in 1919 to escape Wall Street predators, the Bank of North Dakota {10} has been generating low-interest credit for the state and its residents for nearly a century. North Dakota is one of only two states {11} (along with Montana) currently able to meet their budgets.

A state-owned bank could be fast-tracked into operation in a matter of weeks. With over $17 billion available to deposit in its own bank, California could create $170 billion or more in credit - enough not only to meet its budget shortfall but to fund many other much-needed projects; and rather than feeding an ungrateful Wall Street, the bank's profits would return to the state and its people.














Ellen Hodgson Brown is an attorney and the author of eleven books, including Web of Debt: the Shocking Truth About Our Money System and How We Can Break Free (2007). She can be reached through her website at

(c) Copyright 2007 Ellen Brown. All Rights Reserved.

Bill Totten

Debt Deflation Arrives

What the Jump in the US Savings Rate Really Means

by Michael Hudson

CounterPunch (June 30 2009)

Happy-face media reporting of economic news is providing the usual upbeat spin on Friday's debt-deflation statistics. The Commerce Department's National Income and Product Accounts (NIPA) for May show that US "savings" are now absorbing 6.9 percent of income.

I put the word "savings" in quotation marks because this 6.9 per cent is not what most people think of as savings. It is not money in the bank to draw out in rainy-day emergencies like losing one's job, as thousands are every day. The statistic means that 6.9 per cent of national income is being earmarked to pay down debt - the highest savings rate in fifteen years, up from actually negative rates (living on borrowed credit) just a few years ago. The only way in which these savings are "money in the bank" is that they are being paid by consumers to their banks and credit card companies.

Income paid to reduce debt is not available for spending on goods and services. It therefore shrinks the economy, aggravating the depression. So why is the jump in "saving" good news?

It certainly is a good idea for consumers to get out of debt. But the media are treating this diversion of income as if it were a sign of confidence that the recession may be ending and that Obama's "stimulus" plan is working. The Wall Street Journal has reported that Social Security recipients of one-time government payments "seem unwilling to spend right away", while The New York Times wrote that "many people were putting that money away instead of spending it". It is as if people can afford to save more.

The reality is that most consumers have little real choice but to pay. Unable to borrow more as banks cut back credit lines, their "choice" is either to pay their mortgage and credit card bill each month, or lose their homes and see their credit ratings slashed, pushing up penalty interest rates near twenty per cent. To avoid this fate, families are shifting to cheaper and less nutritious food, eating out less or at fast food restaurants, and cutting back on vacation spending. So it seems contradictory to applaud these "savings" (that is, debt-repayment) statistics as an indication that the economy may emerge from depression in the next few months. While unemployment approaches the ten per cent rate and new layoffs are being announced every week, isn't the Obama administration taking a big risk in telling voters that its stimulus plan is working? What will people think this winter when markets continue to shrink? How thick is Obama's Teflon?

In the wreckage of the Greenspan bubble

As recently as two years ago consumers were buying so many goods on credit that the domestic savings rate was zero. Financing the US government's budget deficit with foreign central bank recycling of the dollar's balance-of-payments deficit actually produced a negative two per cent savings rate. During these bubble years savings by the wealthiest ten per cent of the population found their counterpart in the debt that the bottom ninety per cent were running up. In effect, the wealthy were lending their surplus revenue to an increasingly indebted economy at large.

Today, homeowners no longer can re-finance their mortgages and compensate for their wage squeeze by borrowing against rising prices for their homes. Payback time has arrived - paying back bank loans, whose volume has swollen to include accrued interest charges and penalties. New bank lending has hit a wall as banks are limiting their activity to raking in amortization and interest on existing mortgages, credit cards and personal loans.

Many families are able to remain financially afloat by running down their personal savings and cutting back their spending to try and avoid bankruptcy. This diversion of income to pay creditors explains why retail sales figures, auto sales and other commercial statistics are plunging vertically downward in almost a straight line, while unemployment rates soar toward the ten per cent level. The ability of most people to spend at past rates has hit a wall. The same income cannot be used for two purposes. It cannot be used to pay down debt and also for spending on goods and services. Something must give. So more stores and shopping malls are becoming vacant each month. And unlike homeowners, absentee property investors have little compunction about walking away from negative equity situations - owing creditors more than the property is worth.

Over two-thirds of the US population are homeowners, and real estate economists estimate that about a quarter of US homes are now in a state of negative equity as market prices drop below the mortgages attached to them. This is the condition in which Citigroup and AIG found themselves last year, along with many other Wall Street institutions. But whereas the government absorbed their losses "to get the economy moving again" (or at least Congress's major campaign contributors), personal debtors are in no such favored position. Their designated role is to help make the banks whole by paying off the debts they have been running up in an attempt to maintain living standards that their take-home pay no longer supports.

Banks for their part are slashing credit-card debt limits and jacking up interest and penalty charges. (I see little chance that Congress will approve the Consumer Financial Products Agency that Obama promoted as a flashy balloon for his recent bank giveaway program. The agency is to be dreamed about, not enacted.) The problem is that default rates are rising rapidly. This has prompted many banks to strike deals with their most overstretched customers to settle outstanding balances for as little as half the face amount (much of which is accrued interest and penalties, to be sure). Banks are now competing not to gain customers but to shed them. The plan is to offer steep enough payment discounts to prompt bad risks to settle by sticking rival banks with ultimate default when they finally give up their struggle to maintain solvency.

The trillions of dollars that the Bush and Obama administration have given away to Wall Street would have been enough to buy a great bulk of the mortgages now in default - mortgages beyond the ability of many debtors to pay in the first place. The government could have enacted a Clean Slate for these debtors, financed by re-introducing progressive taxation, restoring the full capital gains tax to the same rate as that levied on earned income (wages and profits), and closing the tax loopholes that effectively free finance, insurance and real estate (FIRE) sector from income taxation. Instead, the government has made Wall Street virtually tax exempt, and swapped Treasury bonds for trillions of dollars of junk mortgages and bad debts. The "real" economy's growth prospects are being sacrificed in an attempt to carry its financial overhead.

Banks and credit-card companies are girding for economic shrinkage. It was in anticipation of this state of affairs, after all, that they pushed so hard from 1998 onward to make what finally became the 2005 bankruptcy laws so pro-creditor, so cruel to debtors by making personal bankruptcy an economic and legal hell.

So, to avoid this fate, people are putting more money away, but not into savings accounts. They are indeed putting it into banks, but in the form of paying down debt. To accountants looking at balance sheets, savings represent the increase in net worth. In times past this was mainly the result of a buildup of liquid funds. But today's money being saved is not available for spending. It merely reduces the debt burden being carried by individuals. Unlike Citibank, AIG and other Wall Street institutions, they are not having their debts conveniently wiped off the books. The government is not nice enough to buy back their investments that had lost up to half their value in the past year. Such bailouts are for creditors and money managers, not their debtors.

The story that the media should be telling is how today's post-bubble economy has turned the concept of saving on its head.

This is not what people expected a half-century ago. Economists wrote about how technology would raise productivity levels, people would be living in near utopian conditions by the year 2000. The textbooks need to be rewritten.

Keynesian economics turned inside-out

Most individuals and companies emerged from World War Two in 1945 nearly debt-free, and with progressive income taxes. Economists anticipated - indeed, even feared - that rising incomes would lead to higher saving rates. The most influential view was that of John Maynard Keynes. Addressing the problems of the Great Depression in 1936, his General Theory of Employment, Interest, and Money warned that people would save relatively more as their incomes rose. Spending on consumer goods would tail off, slowing the growth of markets, and hence new investment and employment.

From this perspective, the propensity to save out of wages and profits diverted the circular flow of payments between producers and consumers. The main cloud on the horizon, Keynesians worried, was that people would be so prosperous that they would not spend their money. Their prescription to deter this under-consumption was for economies to move in the direction of more leisure and more equitable income distribution.

The modern dynamics of saving - and the increasingly top-heavy indebtedness in which savings are invested - are quite different from, and worse than, what Keynes hoped for. Most financial savings are lent out, not plowed into tangible capital formation and industry. Most new investment in tangible capital goods and buildings comes from retained business earnings, not from savings that pass through financial intermediaries. Under these conditions, higher personal saving rates are reflected in higher indebtedness. That is why the saving rate has fallen to a zero or "wash" level. A rising proportion of savings find their counterpart more in other peoples' debts rather than being used to finance new direct investment.

Each business recovery since World War Two has started with a higher debt ratio. Saving is indeed interfering with consumption, but it is not the result of rising incomes and prosperity. A rising savings rate merely reflects the degree to which the economy is working off its debt overhead. It is "saving" in the form of debt repayment in a shrinking economy. The result is financial dystopia, not the technological utopia that seemed so attainable back in 1945, just sixty-five years ago. Instead of a consumer-friendly leisure economy, we have debt peonage.

To get an idea of how oppressive the debt burden really is, I should note that the 6.9 per cent savings rate does not even reflect the sixteen per cent of the economy that the NIPA report for interest payments to carry this debt, or the penalty fees that now yield as much as interest yields to credit-card companies - or the trillions of dollars of government bailouts to try and keep this unsustainable system afloat. How an economy can hope to compete in global markets as an industrial producer with so high a financial overhead factored into the cost of living and doing business is another story.

Reference: Jack Healy, "As Incomes Rebound, Saving Hits Highest Rate in 15 Years", The New York Times (June 27 2009).

Michael Hudson is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new edition, Pluto Press, 2002) He can be reached via his website,

Bill Totten

Wednesday, July 29, 2009

Drifting Downward

The Deflating Economy

by Mike Whitney

BCounterPunch (July 13 2009)

There should be a modest uptick in GDP in either in the fourth quarter 2009 or the first quarter 2010. This will mark the end of the current twenty month-long recession, but not the end of the crisis. The blip in growth doesn't mean that the troubles are over or that the economy is on the way to recovery. It simply means that Obama's $787 billion fiscal stimulus is beginning to kick in, giving a boost to consumer spending and generating short-term economic activity. Regrettably, when the stimulus runs out, the economy will slide back into negative territory. That's because the US consumer has crossed an important threshold and no longer has the ability to drive the economy through debt-fueled consumption. The data indicates a critical change in consumer behavior which portends a shift away from the current model for economic growth. It's a whole new ballgame.

From the mid-1980s to 2007, the ratio of debt-to-GDP rocketed from 165% to to over 350%; more than doubling in that same period. The build-up of personal debt follows the exact same trend-line as the aggregate profits of the financial sector; they're opposite sides of the same coin. Financial institutions increase profitability by expanding credit and inflating asset bubbles, not by allocating capital to productive enterprises. Their business model is inherently flawed. Speculative bubblemaking is Wall Street's method of shifting wealth from workers to the investor class. It never fails. It's the reason why 42 states are now facing budget shortfalls, unemployment has risen to 9.5 percent, and $45 trillion has vanished from global equity markets. Financialization has created a global crisis, crushed consumer demand, increased systemic instability, and put the economy into a nosedive.

In the last decade, the shifting of wealth from one class to another has greatly accelerated due to deregulation and the Fed's low interest rates. Stagnant wages have forced reluctant participants into the market seeking a better return on their savings, while lax lending standards and easy credit have seduced workers into increasing their personal debt-load. All of this has been done by design to ensure the profits for the few over the well-being of the many.

Wall Street has conjured up myriad complex debt-instruments (derivatives and securitization) which have been used to enhance leverage by many trillions of dollars so that financial mandarins and hedge fund managers can skim lavish bonuses and salaries on the front end before the Ponzi scam implodes. In the present crisis, the situation came to a head when two Bear Stearns hedge funds defaulted in July 2007, creating pandemonium in the stock markets while credit markets froze over. As housing prices fell and unemployment rose, households were left with little choice but to slash spending to pay-down debts. The sharp downturn has dramatically changed consumer behavior and lifted the savings rate to 6.9% in the last month, a fifteen-year high. Savings are expected to continue to increase despite the Fed's attempts to restart the economy with zero-percent interest rates. A recent "Economic Letter: US Household Deleveraging and Future Consumption Growth" by the Federal Reserve Bank of San Francisco outlines the conditions which have triggered this dramatic change in consumer behavior. Here's an extended excerpt:

US household leverage, as measured by the ratio of debt to personal disposable income, increased modestly from 55% in 1960 to 65% by the mid-1980s. Then, over the next two decades, leverage proceeded to more than double, reaching an all-time high of 133% in 2007. That dramatic rise in debt was accompanied by a steady decline in the personal saving rate. The combination of higher debt and lower saving enabled personal consumption expenditures to grow faster than disposable income, providing a significant boost to US economic growth over the period.

In the long-run, however, consumption cannot grow faster than income because there is an upper limit to how much debt households can service, based on their incomes. For many US households, current debt levels appear too high, as evidenced by the sharp rise in delinquencies and foreclosures in recent years. To achieve a sustainable level of debt relative to income, households may need to undergo a prolonged period of deleveraging, whereby debt is reduced and saving is increased.

Beginning in 2000, however, the pace of debt accumulation accelerated dramatically ... Rising debt levels were accompanied by rising wealth. An influx of new and often speculative homebuyers with access to easy credit helped bid up prices to unprecedented levels relative to fundamentals, as measured by rents or disposable income. Equity extracted from rapidly appreciating home values provided hundreds of billions of dollars per year in spendable cash for households that was used to pay for a variety of goods and services ... Rapid debt growth allowed consumption to grow faster than income.

Since the start of the US recession in December 2007, household leverage has declined. It currently stands at about 130% of disposable income. How much further will the deleveraging process go?

Going forward, it seems probable that many US households will reduce their debt. If accomplished through increased saving, the deleveraging process could result in a substantial and prolonged slowdown in consumer spending relative to pre-recession growth rates. {1}

Household wealth has dipped $14 trillion since the crisis began. Wages are slowly retreating and unemployment is at 9.5% a 25 year high. Also, the percentage of home equity has fallen below fifty percent for the first time on record. And - since one-third of homes have no mortgages (100% ownership) - the remaining homes have only twelve percent equity. If prices continue to drop in 2010, the vast majority of homeowners will be underwater presaging a sharp rise in the number of foreclosures.

In the last eighteen months, the ratio of debt to disposable income has only eased to 128%, which means that it will take at least a decade to rebuild balance sheets enough to resume spending at pre-crisis levels. It's going to be a long hard slog even if the stimulus works according to plan, especially since unemployment is headed for ten percent by the end of September and higher by 2010. Household deleveraging will continue regardless of positive developments in the markets, which means that the economy will reset at a lower level of activity. This precludes any chance of a strong recovery. According to David Rosenberg, chief economist for Gluskin Sheff :

By our estimates, there is up to another $5 trillion of household debt that has to be eliminated in coming years and that process is going to require that consumers go on a semi-permanent spending diet. Companies see this, which is why they are not just downsizing their payroll, but have also cut the workweek to a record low of 33.1 hours. Fewer people are working and those that are still working have seen their hours dramatically cut this cycle ...

The op-ed column by Bob Herbert in the Saturday New York Times really hit the nail on the head on this whole 'green shoot' issue - how can there be 'green shoots' when the labour market is deteriorating at such a rapid clip fully nine months after the Lehman collapse. The full brunt of the credit collapse may be behind us, but please, the other two shocks, namely deflating labour markets and deflating home prices, are very much still front and centre. For every job opening in the USA, there are more than five unemployed actively seeking work vying for those jobs. That is unprecedented and nearly double what we saw at the depths of the 2001 recession. The official ranks of the unemployed have doubled during this recession to fourteen million and if you take into account all forms of labour market slack, the unofficial number is bordering on thirty million, another record. For those who still believe that we somehow managed to avoid an economic depression this cycle because of a thirteen percent fiscal deficit/GDP and a pregnant Fed balance sheet, the Center for Labour Market Studies at Northeastern University estimates that the real unemployment now stands at 18.2%, which is actually higher than the posted rate at the end of the 1930 ...

"What makes this cycle "different" is that three-quarters of the workers that were fired over the last year were let go on a permanent, not a temporary basis. A record 53% of the unemployed today are workers who were displaced permanently - not just temporarily because of the vagaries of the traditional business cycle. This means that these jobs are not going to be coming back that quickly, if at all, when the economy does in fact begin to make the transition to the next expansion phase. {2}

Rosenberg's comments should be carefully considered in relation to the scaremongering about inflation by conservatives and alarmists in the media. Inflation is not serious danger for the foreseeable future. The velocity of money has collapsed and deflation is pushing down asset prices and wages. Every sector is contracting. Without stimulus, the economy will remain in negative GDP. Here's Scott Patterson from the Wall Street Journal:

A rule of thumb is that inflation doesn't become sticky until the unemployment rate dips below five percent. Since 2001, the Nonaccelerating Inflation Rate of Unemployment, or NAIRU, the rate at which economists estimate the labor market can trigger inflation, has stood at 4.8% unemployment, according to the Congressional Budget Office.

In the first quarter, the spread between the NAIRU and the actual unemployment rate averaged 3.3 percentage points, the widest spread since 1983, when unemployment hovered around ten percent. A high spread suggests the labor market needs to get stronger before inflation is a concern. {3}

The inflation hobgoblin is a political ploy by the Republicans to derail Obama's recovery plan. And, in some respects, it's working. Public support for a second stimulus package has withered, and with it, any hope for sustained rebound. Pressure on wages and prices are growing while the effects of deflation are becoming more and more apparent. Delinquencies, defaults, bankruptcies and foreclosures are all up, while state budgets buckle and joblessness mushrooms. The Republicans are following the neoliberal handbook, trying to crash the economy so that public assets can be privatized and public services terminated. They're being helped in their campaign by bailout-weary citizens who don't understand that short-circuiting government spending during a deep recession can precipitate a bigger catastrophe.

That said, liberal economists have made poor case for more stimulus. Stimulus is not a panacea; it's merely a bridge from Point A to Point B. Government spending can take up the slack in demand, but it can't fix the economy's underlying problems. That takes policymakers who are willing to do battle with the big banks and re-regulate the financial system. No one in the Obama administration is willing to perform that task, so the economy will continue its downward drift.

Presently, the banks have more than a $1 trillion in toxic assets on their balance sheets and the wholesale credit markets (securitization) are in a shambles. Nothing has been done to separate commercial from investment banks, force all derivatives onto regulated platforms, unwind insolvent financial institutions, establish prices for complex securities, increase capital requirements, or put an end to off-balance sheet operations.

If the underlying problems are not going to be fixed, than why are liberal economists so eager to use their talents to minimize the effects of the recession? They're just making it easier for Wall Street huckster's to start gaming the system again. The job of progressive economists is to promote a more equitable system that reduces inequality and provides for the basic material needs of all its citizens. There's no sense in cheering on stimulus if it just perpetuates the same dog-eat-dog system.

The subtext of the financial crisis is class warfare, a fact that mainstream economists would rather ignore than invoke the musty imagery of disheveled revolutionaries and Soviet-era repression. Nevertheless, during the Bush years, the chasm between rich and poor widened to levels not seen since the Gilded Age. Now the top one percent of wealth holders own more than twice as much as the bottom eighty percent of the population. All of the real gains in national income, total net-worth, and overall growth in financial worth have gone to the same one percent.

But the strides in personal enrichment have come at great cost. The US consumer, long considered an inexhaustible resource, is tapped out. Without job security and access to easy credit; consumer spending will slow, prices will fall, demand will flag and the economy will tank. There won't be a recovery, because pre-crisis levels of consumption will not return; that much is certain. Sustainable growth requires higher wages and longer working hours; neither of which are likely anytime soon. The economy is headed for a protracted slowdown with persistent high unemployment and growing social unrest. The future is deflation.


{1} "US Household Deleveraging and Future Consumption Growth", by Reuven Glick and Kevin J Lansing, FRBSF Economic Letter

{2} David Rosenberg chief economist Gluskin Sheff

{3} "Inflation fears? Not in this job market", Scott Patterson, The Wall Street Journal

Mike Whitney lives in Washington state. He can be reached at

Bill Totten

Evil Syndicated

Clusterfuck Nation

by James Howard Kunstler

Comment on current events by the author of
The Long Emergency
(2005) (July 27 2009)

By now, everyone in that fraction of the world that pays attention to something other than American Idol and their platter of TGI Friday's loaded potato skins knows that Goldman Sachs has been caught at another racket in the stock market: front-running trades. What a clever gambit, done with the help of the markets themselves - the Nasdaq in particular - in which information on trades is held back a fraction of a second from public view, while the data is shoveled to the computers of privileged subscribers who can execute zillions of programmed micro-trades before the rest of the herd makes a move. This allows them to vacuum up hundreds of millions of dollars by doing absolutely nothing of value. The old-fashioned method used by brokers was called "churning", in which stocks were bought and sold incessantly (by phone) from the portfolios of inattentive clients merely to generate commissions. In any sensible society - that is, a society with an instinct for self-preservation - it would be against the law and the people doing it would be sent to prison.

I'm not a lawyer, but I've got to think that the actions at the Nasdaq end - shoveling the data to the privileged subscribers a fraction of a second early - is patently illegal in the first place, since the whole purpose of an exchange is to create a fair trading space. Where both parties are concerned, it should amount to a plain vanilla criminal conspiracy to commit stock trading fraud. Maybe the larger question is: since when did we become a society lacking the instinct for self-preservation - that is, a society bent on suicide? Or maybe the question is better put to Goldman Sachs's CEO Lloyd Blankfein.

Since this racket was made public, there has been chatter all over the Web about how angry the American public is about Wall Street in general, and increasingly about Goldman Sachs in particular. Nobody has summed it up better than Rolling Stone's Matt Taibbi, calling the company "... a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money". And Taibbi's fierce article about Goldman Sachs came out weeks before this latest outrage. As we turn the corner toward autumn, President Obama looks increasingly like a dupe, a tool, or a co-conspirator of Goldman Sachs. If he doesn't instruct the Justice Department to commence investigations of the company, and if he doesn't dissociate himself from their alumni hanging around the White House, the Treasury Department, and elsewhere in the government, he's going to become the object of an awful public wrath. Obama has no other choice at this point except to clean house - to fire Larry Summers, Robert Rubin, Tim Geithner, and all other former Goldman Sachs employees in positions of power and influence around him.

Actually, it's not necessary for the whole general public to be fed up with this situation. According to the Pareto eighty-twenty rule, it only takes one-fifth of the public to set social actions in motion, and only one-fifth of that one-fifth to do the heavy lifting. I think we've reached that point. The sentiment is now overwhelmingly tipped against Goldman Sachs (and Wall Street generally) and the only questions are whether the President of the US ends up lumped in with them, and whether we'll see orderly prosecutions or disorderly persecutions. At this point, it even begins to look as though Mr Obama is taking cover behind the health care reform debate to avoid answering for his government's association with Goldman Sachs.

The trouble is, if the thoughtful and trustworthy members of the "Pareto twenty percent" don't stir themselves into action over Goldman's behavior, then sooner or later the thoughtless and reckless will take over. Bill Moyers hosted a fascinating report on his most recent podcast about the savagery of right-wing broadcasting and how it had led, in one instance, to the murder of a doctor who performed abortions. What bothers me is that, sooner or later, the conduct of Goldman Sachs will lead the growing ranks of the unemployed, foreclosed, disentitled, and hopeless into the hands of a savage right wing seeking mindless vengeance, for instance, against "the Jews", (as represented by Goldman Sachs), or brown-skinned people (as embodied by a vilified president).

Readers of this blog know I'm allergic to conspiracy theories. But surveying the scene out there, it is hard to not conclude that Goldman Sachs has become the "front-runner" of a criminal syndicate defrauding US taxpayers. This isn't the first time in American history that business veered into extremely antisocial behavior on the grand scale. The last quarter of the 19th century was just as bad, with frauds, swindles, sociopathic trusts, and predatory corporations preying on people trying desperately to make an honest living. Then, one summer day in 1901, a factory drone named Leon Czolgosz stepped up to President William McKinley in a reception line at the Buffalo World's Fair and plugged him twice in the abdomen. (Czolgosz liked to think of himself as an "anarchist", a then-fashionable ideology among the simmering powerless.) Eight days later, McKinley expired and Teddy Roosevelt became president - to the extreme chagrin of the Republican business establishment - "... now that damned cowboy is in the White House!" cried Republican national leader Mark Hanna of Ohio.

He was correct to be nervous. TR turned the corporate world upside down with reform, from dismantling monopolies to establishing the cabinet departments of Commerce and Labor, to bringing the new food industry under regulation. This naturally leads me to wonder if or when Barack Obama will have his TR Moment, when he stands up to the large malign forces operating arrantly in the daily life of this nation. I get volumes of email complaining about Mr Obama. The writers behind them seem, on the whole, crankish, cynical to an extreme, and not very trustworthy observers of the scene. But I begin to sympathize with them.

In the meantime, the US economy gives the illusion of recovery - but to what? Back to a "consumer" credit card shopping orgy? Another house-buying fiesta? I don't think so. Households are drowning in debt. They're using their credit cards, if they still can, to buy staple foods. Those are the lucky ones who still have lines of credit left. Soon, many of these families won't even amount to households because they won't have a house. There is absolutely no way we are going back to that particular bubble economy. The only bubble left is the government debt bubble, now leading to such extravagant excess that it can only end up wrecking the government, and perhaps American society with it. In the meantime, how much remaining wealth is Goldman Sachs and its cohorts vacuuming off the floor?

Also meanwhile, oil is heading back to the $70 range (with the dollar shedding basis points). That's the oil price range where the economy begins to get wrecked all over again - that is, whatever remains of the economy. That's the price range where airlines go back to the intensive care unit and citizens have to max out their credit cards to buy gasoline. We're moving toward a very hard landing and very soon.


My new novel of the post-oil future, World Made By Hand, is available at all booksellers.

Bill Totten

Tuesday, July 28, 2009

The Anti-Ecology of Money

by John Michael Greer

The Archdruid Report (July 22 2009)

Druid perspectives on nature, culture, and the future of industrial society

Last week's Archdruid Report post built on one of E F Schumacher's more trenchant insights to propose a controversial way of making sense of modern economics. Schumacher, in Small Is Beautiful (1973), drew a distinction between primary goods produced by natural processes, and secondary goods produced by human labor, and pointed out that secondary goods can't be produced at all unless you have the necessary primary goods on hand.

This is quite true, though it's a point often missed by today's economists. There is at least an equal difference, though, between either of these classes of goods and a third class produced neither by nature nor by labor. These are tertiary or, more descriptively, financial goods; they form the largest single class of goods in the world today, in terms of dollar value, and the markets in which they are bought and sold dominate the economies of the industrial nations. To call this unfortunate is a drastic understatement, because the biases imposed on our societies by the domination of financial goods are among the most potent forces dragging the world to ruin.

A specific example of a tertiary good may be useful here to help clarify the concept. Consider a corporate bond with a face value of $1000. This is a good in the economic sense - that is, it can be bought for money, it can be sold for money, there are people who want to buy it and people who are able to produce and sell it. Compare it to any more tangible item of value, though, and the bond is clearly a very strange sort of good. It consists of nothing more than a promise, on the part of some corporation, to pay $1000 at some future date. That promise may or may not be honored - junk bonds are bought and sold, for example, in full knowledge of the fact that the chances the issuers will pay up are not good - but even then the chance of collecting on it is treated as an object of value.

The differences between a tertiary good and a primary or secondary one reach further than this. Tangible goods produced by natural cycles or human labor are available in amounts limited by the supply. If there's only so much water in a river, for example, that's how much water there is; the fact that people want more, if such is the case, does not produce any more water than the hydrologic cycle is already willing to provide. Equally, if a country's labor force, capital plant, and resource base are fully engaged in making a certain quantity of secondary goods, producing more requires a good deal more than an agreement to do so; the country must increase its labor pool, its capital plant, its access to resources, or some combination of these, in order to increase the supply of goods.

Yet tertiary goods are available in amounts limited only by the demand. How many bonds can a corporation print? For all practical purposes, as many as people are willing to buy. A good number of the colorful bankruptcies that have enlivened the business pages in recent months, for example, took out firms that mistook a temporary bubble for permanent prosperity, issued bonds far beyond their ability to pay, and crashed and burned when all that debt started to come due. On an even more gargantuan scale, the United States government is currently trying to restart its economy by spending money it doesn't have, selling bonds to cover the difference, and amassing debt on a scale that makes the most extravagant Third World kleptocracies look like a bunch of pikers. It's hard to imagine any way in which the results of this absurd extravagance will be anything but ugly, and yet buyers around the world are still snapping up US treasury bonds as though there's a scintilla of hope they will see their money again.

The difference between supply-limited and demand-limited goods, as this suggests, is among other things a difference between kinds of feedback. Think about a thermostat and it's easy to understand the principle at work. When the temperature in the house goes below a certain threshold, the heat comes on and brings the temperature back up; when the temperature goes above a higher threshold, the heat shuts off and the temperature goes back down. This is called negative feedback.

In a market economy, all secondary goods are subject to negative feedback. That's the secret of Adam Smith's invisible hand: since the supply of any secondary good is limited by the available natural inputs, labor pool, and capital stock, increased demand pushes up the price of the good, forcing some potential buyers out of the market, while decreased demand causes the good to become less expensive and allows more buyers back into the market. Equally, rising prices for a good encourage manufacturers to allocate more resources, labor, and capital plant to producing that good, helping to meet additional demand, while falling prices make other uses of resources, labor and capital plant more lucrative and curb supply.

Negative feedback loops of a very similar kind control the production of primary goods by the Earth's natural systems. Every primary good from the water levels in a river and the fertility of a given patch of soil, to more specialized examples such as the pollination services provided by bees to agricultural crops, is regulated by delicately balanced processes of negative feedback working through some subset of the planetary biosphere. The parallel is close enough that ecologists have drawn on metaphors from economics to make sense of their field, and it's quite possible that an ecological economics using natural systems as metaphors for the secondary economy could return the favor and create an economics that makes sense in the real world.

It's when we get to the tertiary economy of financial goods that things change, because the feedback loops governing tertiary goods are not negative but positive. Imagine a thermostat designed by a sadist. In the summer, whenever the temperature goes up above a certain level, the sadothermostat makes the heat come on and the house gets even hotter; in the winter, when the temperature goes below another threshold, the temperature shuts off and the house gets so cold the pipes freeze. That's positive feedback, and it's the way the tertiary economy works when it's not constrained by limits imposed by the primary or secondary economies.

The late and loudly lamented housing bubble is a case in point. It's a remarkable case, not least because houses - which are usually part of the secondary economy, being tangible goods created by human labor - were briefly and disastrously converted into tertiary goods, whose value consisted primarily in the implied promise that they could be cashed in for more than their sales price at some future time. (As a tertiary good, their physical structure had no more to do with their value than does the paper used to print a bond.) When the price of a secondary good goes up, demand decreases, but this is not what happened in the housing bubble; instead, the demand increased, since the rising price made further appreciation appear more likely, and the mis-, mal- and nonfeasance of banks and mortgage companies willing to make six- and seven-figure loans to anyone with a pulse removed all limits from the supply.

The limits, rather, were on the demand side, where they always are in a speculative bubble: eventually the supply of buyers runs out because everyone who is willing to plunge into the bubble has already done so. Once this happened, prices began to sink, and once again positive feedback came into play. Since the sole value of these homes to most purchasers consisted, again, of the implied promise that they could be cashed in someday for more than their sales price, each decline in price convinced more people that this would not happen, and drove waves of selling that forced the price down further. This process typically bottoms out around the time that prices are as far below the median as they were above it at the peak, and for a similar reason: as a demand-limited process, a speculative bubble peaks when everyone willing to buy has bought, and bottoms when everyone capable of selling has sold.

It's important to note that in this case, as in many others, the positive feedback in the tertiary economy disrupted the workings of the secondary economy. Long before the housing boom came to its messy and inevitable end, there was a massive oversupply of housing in many markets - there are, for example, well over 50,000 empty houses in Phoenix, Arizona right now. Absent a speculative bubble, the mismatch between supply and demand would have brought the production of new houses to a gentle halt. Instead, due to the positive feedback of the tertiary economy, supply massively overshot demand, leading to a drastic misallocation of resources in the secondary economy, and thus to an equally massive recession.

It's long been popular to compare the tertiary economy to gambling, but the role of positive feedback in the tertiary economy introduces an instructive difference. When four poker players sit down at a table and the cards come out, their game has negative feedback. The limiting factor is the ability of the players to make good on their bets; the amount of wealth in play at the start of the game is exactly equal to the amount at the end, though it's likely to go through quite a bit of redistribution. For every winner, in other words, there is an equal and opposite loser.

The tertiary economy does not work this way. When a market is going up, everyone invested in it gains; when it goes down, everyone invested in it loses. Paper wealth appears out of thin air on the way up, and vanishes into thin air on the way down. The difference between this and the supply-limited negative feedback cycles of the environment could not be more marked. In this sense it's not unreasonable to call the tertiary economy a kind of anti-ecology, a system in which all the laws that govern ecology are stood on their heads - until, that is, the delusional patterns of behavior generated by the tertiary economy collide with the hard limits of ecological reality.

It's not all that controversial to describe financial bubbles in this way, though you can safely bet that during any given bubble, a bumper crop of economists and pundits will spring up to insist that the bubble isn't a bubble and that rising prices for whatever the speculation du jour happens to be are perfectly justified by future prospects. On the other hand, it's very controversial just now to suggest that the entire tertiary economy is driven by positive feedback. Still, I suggest that this is a fair assessment of the financial economy of the industrial world, and the only reason that it's controversial is simply that we, our great-grandparents' great-grandparents, and all the generations in between have lived during the upward arc of the mother of all speculative bubbles.

The vehicle for that bubble has not been stocks, bonds, real estate, derivatives, or what have you, but industrialism itself: the entire project of increasing the production of goods and services to historically unprecedented levels by amplifying human labor with energy drawn from the natural world, first from wind and water, and then from fossil fuels in ever-increasing amounts. Like the real estate at the core of the recent boom and bust, this project had its roots in the secondary economy, but quickly got transformed into a vehicle for the tertiary economy: people invested their money in in industrial projects because of the promise of more money later on.

Like every other speculative bubble, the megabubble of industrialism paid off spectacularly along its upward arc. It's inaccurate to claim, as some of its cheerleaders have, that everybody benefited from it; one important consequence of the industrial system was a massive distortion of patterns of exchange in favor of the major industrial nations, to the massive detriment of the rest of the planet. (It's rarely understood just how much of today's Third World poverty is a modern phenomenon, the mirror image and necessary product of the soaring prosperity of the industrial nations.) Still, for some three hundred years, standards of living across the industrial world soared so high that people of relatively modest means in America or western Europe had access to goods and services not even emperors could command a few centuries before.

In the absence of ecological limits, it's conceivable that such a process could have continued until demand was exhausted, and then unraveled in the usual way. The joker in the deck, though, was the dependence of the industrial project on the extraction of fossil fuels at an ever-increasing pace. Beneath the giddy surface of industrialism's bubble, in other words, lay the hard reality of the tertiary economy's dependence on resources from the primary economy. The positive feedback loop driving the industrial bubble can't make resources out of thin air - only money can be invented so casually - but it has proven quite successful at preventing industrial economies from responding to the depletion of their fossil fuel supplies fast enough to stave off what promises to be the great-grandmother of all speculative busts.

The results of this failure are beginning to come home to roost in our own time. To understand the economics of the resulting collision, though, it's necessary to note the relationship between economics and the least popular law of physics - a subject central to next week's post.

John Michael Greer has been active in the alternative spirituality movement for more than 25 years, and is the author of a dozen books, including The Druidry Handbook (2006) and The Long Descent (2008). He lives in Ashland, Oregon.

Bill Totten


A Health Care Rationing Scheme to Enrich Insurers, Drug Companies and Large Hospital Chains

by Stephen Lendman (July 20 2009)

On February 24, Barack Obama told a joint session of Congress that "we must ... address the crushing cost of health care ... caus(ing) a bankruptcy in America every thirty seconds. By the end of the year, it could cause 1.5 million Americans to lose their homes. In (each of) the last eight years ... one million ... Americans have lost their health insurance ... Given these facts, we can no longer afford to put health care reform on hold ... health care reform cannot wait, it must not wait, and it will not wait another year."

Behind the facade of reform, Obama and leading Democrats ruled universal, single-payer coverage off the table before debate even began. Instead they've focused on taxing more, rationing care, placing profits above human need, disdaining vital change, shifting the cost burden to individuals and requiring everyone to be insured; imposing fines up to $1000 for non-compliance, and making a broken system even worse.

On June 10, Physicians for a National Health Program advisor Walter Tsou told the House Education and Labor Committee:

"Attempting to reconcile the dual imperatives of universal coverage and cost control through alternative methods besides single payer is an exercise in futility. When some congressional leaders declare that single payer is off the table, they are in effect saying that insurers will be protected, leaving the pain to patients, taxpayers and health care providers."

At the same hearing, the California Nurses Association and National Nurses Organizing Committee co-president Geri Jenkins said:

"The current system rations care based on an ability to pay. Right now we are the only nation on earth that barters human life for money."

The administration and lawmakers have been unresponsive in moving ahead with House and Senate legislation to enrich health insurers, Big Pharma, and large hospital chains. It will ration care, curb expensive treatments and surgeries for those who can't afford them, leave millions in the country uncovered, deny it altogether to undocumented immigrants even though they pay income, payroll and other taxes, and claim it's real reform like they always do.

On May 20th S 1099: Patients' Choice Act was introduced "to provide comprehensive solutions for the health care system of the United States, and for other purposes". It was referred to the Senate Finance and Health, Education, Labor and Pensions Committees (HELP) for consideration.

The Senate Finance Committee may craft its own version. On July 15 along party lines, HELP voted 13 to 10 to approve a $615 billion Democrat-sponsored bill that's substantially similar to House legislation with provisions that Obama wants.

On July 14th HR 3200: America's Affordable Health Choices Act of 2009 was introduced "To provide affordable, quality health care for all Americans and reduce the growth in health care spending, and for other purposes". It was referred to the following House committees for consideration: Energy and Commerce, Ways and Means, Education and Labor, Oversight and Government Reform, and Budget.

House and Senate bills stress cost-containing "evidence-based" solutions with Obama appearing on a June 24 ABC News "Questions for the President: Prescription for America" infomercial touting his plan to carefully selected reporters and others invited to the White House East Room for a scripted Q & A.

Cutting costs and free-market solutions were emphasized, not real reform stressing human need with Obama saying "If we don't drive down costs, then we're not going to be able to achieve all of those other things". Which ones he didn't say before stressing the need for "evidence-based care", meaning less is better for those unable to pay so that millions will be sacrificed on the alter of cost containment while enriching private insurers, Big Pharma, and large hospital chains that will flourish as community and public ones shut down for lack of enough resources.

Obama was callous in saying "Loading up on additional tests or additional drugs" must be curbed. "Maybe (some would be) better off not having ... surgery, but taking (a) painkiller" instead. He showed disdain and indifference in stating that "the chronically ill and those toward the end of their lives are accounting for potentially eighty percent of the total health care bill out there" - the inference being ration their care and let 'em die to cut costs.

At the same time, he favored big insurers by saying that "One of the incentives for (them) to get involved in this process is that potentially they're going to have a whole bunch of new customers, paying customers ... insurance companies will thrive" under this plan.

As for a "public option" to fill holes, Obama was receptive to alternatives but adamantly against universal single-payer coverage in saying: "For us to completely change our system, root and branch, would be hugely disruptive". Only market-based solutions will be considered along with huge cost-containment measures, mostly affecting millions of working Americans, the poor, elderly, and chronically ill.

Over the next decade, Medicare and Medicaid may lose over $600 billion in funding with recipients, of course, making up the difference or foregoing care. About $317 billion is proposed for "efficiencies" with another $313 billion in cuts for hospitals that treat the poor and uninsured. Many of them are already severely strapped as unemployment soars, charitable donations are down, expenses rise, vital services and staffs have to be cut to stay afloat, and growing numbers won't make it as economic conditions worsen.

Instead of helping to fill budget gaps, Obama plans less aid to shut them down. It will leave some areas dependent on more distant ones for treatment, and let large chains consolidate for greater dominance. Accessible quality care will be less available and affordable so, of course, patients will lose out - mostly the elderly, chronically ill, those on society's lower rungs, and all working Americans because an uncaring administration and Congress threw them overboard for profit and "efficiencies".

If "Obamacare" passes, most working people, the disadvantaged, and those singled out as less important will experience large rollbacks in quality, readily accessible coverage. For them, future health problems will be more hazardous than ever because a callous nation doesn't care.

On July 17 as expected, two of three key House committees passed HR 3200. Largely along party lines, Ways and Means voted 23 - 18. Education and Labor approved 26 - 22 with a Kucinich amendment that may not survive a floor vote or make it to the Senate.

It leaves HR 3200 intact but lets states create single-payer plans. Eight are now considering them - California, Colorado, Illinois, Maine, Pennsylvania, Minnesota, Missouri, and Washington with perhaps more to follow.

On June 11 in Pennsylvania, HealthCare4ALLPA organized over 400 people for a state capital rally, and its Executive Director Chuck Pennachio predicts pending legislation passage later in the year because bipartisan support backs it. So do most Pennsylvanians, and Governor Ed Rendell said he'll sign what comes to his desk.

Kucinich hailed its importance in saying:

"There are many models of health care reform from which to choose around the world - the vast majority of which perform far better than ours. The one that has been the most tested here and abroad is single-payer. Under (it) everyone in the US would get a card that would allow access to any doctor at virtually any hospital. Doctors and hospitals would continue to be privately run, but the insurance payments would be in public hands. By getting rid of the for-profit insurance companies, we can save $400 billion per year and provide coverage for all medically necessary services for everyone in the US."

Tens of billions more annually could be saved if the government negotiated drug prices like it does for the Veterans Administration and Medicaid. The Congressional Budget Office estimated it would be $110 billion over ten years for Medicare recipients alone, comprising about fifteen percent of Americans. For the entire population, it would be much greater even though over-aged 65 people use more prescription drugs than any other age group.

A Fly in Obamacare's Ointment

One emerged on July 16 when Congressional Budget Office (CBO) Director Douglas Elmendorf told the Senate Budget Committee that health care bills under consideration will raise, not cut costs. "We do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending. On the contrary, the legislation significantly expands the federal responsibility for health care costs" even though much of it is shifted to individuals.

Reversing its earlier opposition, the influential American Medical Association (AMA) endorsed the House bill after a new payments provision was added to halt scheduled 2010 cuts to doctors under Medicare.

AMA's president, Dr James Rohack, said:

"We pledge to work with the House committees and leadership to build support for passage of health reform legislation to expand access to high quality affordable health care for all Americans". The AMA calls it "an important step, but one of many steps in the process", including income-increasing measures for their members and "individual responsibility for health insurance, including premium assistance for those who need it".

Opposing Obamacare are advocates for universal single-payer coverage like Physicians for a National Health Program (PNHP). On July 16, it said the House health reform bill is a "proven failure" and called for an amendment to overturn it and implement a Medicare-for-all system.

PNHP's Dr Quentin Young said similar state efforts repeatedly foundered. Citing Massachusetts' experience, he explained that "The state is dumping 30,000 legal residents off insurance, and the largest safety-net hospital is suing the state for decimating the hospital's budget to shore up reform. Meanwhile one in six (state) residents (can't) pay their medical bills, and eighteen percent (of them) with insurance skipped care last year because they couldn't afford it. The Massachusetts model is no solution." Neither are House and Senate bills that will make a broken system worse. It will backtrack from real reform and make it harder than ever to implement. The time to do it right is now.

That's what Single Payer Action believes - "1,000,000 Strong for Single Payer, everybody in, nobody out". They're activists for "Medicare for all in our lifetimes". They're "sick that 22,000 Americans die every year from lack of health insurance; (that) health insurance companies (jack) up premiums while their ... CEO's make out like bandits". They deplore pre-existing condition exclusions, "high deductibles, co-pays, and in-network, out-of-network Rube Goldberg" shenanigans in today's system. They'll keep confronting government and corporate officials until single-payer is the law of the land and America treats health care coverage like all other Western nations.

Democrats on Damage Control

After CBO Director Elmendorf's cost alert, Representative Mike Ross (Democrat, Arkansas) said "There's no way they can pass this bill (as is) on the House floor. Not even close." Other House and Senate Democrats also expressed unease. Damage control followed.

Speaker Pelosi said a bill is on track for a floor vote before the House and Senate August 10 through Labor Day weekend recess. "We're in excellent shape", she told reporters in response to questions about growing breaks in the ranks.

Obama was just as positive in saying "Those who are betting against this happening this year are badly mistaken". In a lengthy prepared statement, he cited "unprecedented progress" so far "that will finally lower costs, guarantee coverage, and provide more choice ... Let me repeat: Health insurance reform cannot add to our deficit over the next decade and I mean it ... eventually this is going to happen".

Perhaps so with New York Times backing. A March 7 editorial said "President Obama has shown both courage and sound judgment pressing for quick action on comprehensive health care reform, even in the midst of the country's deep economic crisis. He has rightly stressed the urgency of reining in skyrocketing health care costs that are straining the budgets of families, businesses, and federal and state governments." Unmentioned was that insurance and drug company profiteers cause the problem or that universal single-payer coverage is the obvious, fairest, and only solution.

In a July 6 editorial, The Times referred to the "bloated, inefficient health care system", but stressed cost control on the backs of recipients, not providers, and perhaps raising taxes.

"The first task is to find savings. Some respected analysts suggest that as much as thirty percent of all health care spending in this country - some $700 billion a year - may be wasted on tests and treatments that do not improve the health of the recipients."

Unconsidered was the right of doctors and patients to assess problems and choose treatments, not elected officials, bureaucrats, unnamed analysts, or Times editorial writers. Yet the paper stressed the importance of "reallocating hundreds of billions of dollars from projected spending on Medicare and Medicaid (and) impos(ing) additional cuts after a few years if savings are less than projected". Again, The Times and other media sources stress market-based solutions and are mindless to the harm that Obama's plan will cause.

Possible Intrusive Provisions in Obamacare

On July 16,'s Editor-in-Chief Terence Jeffrey covered another concern that needs watching. He cited the "official summary" of the approved Senate Health, Education, Labor and Pensions Committee's version of S 1099 that:

"Authorizes a demonstration program to improve immunization coverage. Under this program, CDC will provide grants to states to improve immunization coverage of children, adolescents, and adults through the use of evidence-based interventions." The word "interventions" causes concern. "States may use funds to implement interventions that are recommended (or perhaps mandated) by the Community Preventive Services Task Force, such as reminders or recalls for patients or providers, or home visits". Including "home visits" suggests that perhaps immunization teams will intervene at personal residences to assure everyone is vaccinated if federal mandates order it.

S. 1099's Title III is also worrisome: "Improving the Health of the American People". Under Subtitle C: "Creating Healthier Communities", the Health and Human Services (HHS) secretary may "establish a demonstration program to award grants to states to improve the provision of recommended immunizations for children, adolescents, and adults through the use of evidence-based, population-based interventions for high-risk populations".

Under one of Title III's provisions, grant money may be used for home visit immunization "interventions". Specifically:

"Funds received under a grant under this subsection (Title III, Method E) shall be used to implement interventions that are recommended by the Task Force on Community Preventive Services (as established by the secretary, acting through the Director of the Centers for Disease Control and Prevention) or other evidence-based interventions, including:

"(A) providing immunization reminders or recalls for target populations of clients, patients, and consumers; (B) educating target populations and health care providers concerning immunizations in combination with one or more other interventions; (C) reducing out-of-pocket costs for families for vaccines and their administration; (D) carrying out immunization-promoting strategies for participants or clients of public programs, including assessments of immunization status, referrals to health care providers, education, provision of on-site immunizations, or incentives for immunization; (E) providing for home visits that promote (or perhaps mandate) immunization through education, assessments of need, referrals, provision of immunizations, or other services; (F) providing reminders or recalls for immunization providers; (G) conducting assessments of, and providing feedback to, immunization providers; or (H) any combination of one or more interventions described in this paragraph".

All Vaccines Are Hazardous

In three recent articles, this writer cited scientific evidence of hidden dangers in all vaccines. They contain squalene-based adjuvants that cause a host of annoying to life-threatening autoimmune diseases and must be avoided, even if mandated. It's also known that vaccines don't protect against diseases they're designed to prevent and often cause them.

Currently at issue is concern over Swine Flu and WHO's June 11 declaration of a global pandemic even though no forensic evidence links any deaths to H1N1. Yet experimental, untested, toxic and extremely dangerous vaccines are being rushed to market for potentially mandated immunizations globally as the fall flu season approaches. If enacted in time, Obamacare may provide cover, and if not, other US laws empower the HHS and Defense secretaries to declare a national emergency and compel everyone in the country to be vaccinated, even though submitting risks serious health consequences.

Staying alert is essential as Obamacare's passage will shift more of the health care burden on those who can least afford it and prepare Americans for hazardous mandatory Swine Flu vaccinations in the fall. Grassroots opposition to both schemes is vital to the health and well-being of everyone.


About Steve Lendman:

I was born in 1934 in Boston, Massachusetts. Raised in a modest middle class family, attended public schools, received a BA from Harvard University in 1956 and an MBA from the Wharton School at the University of Pennsylvania in 1960 following two years of obligatory military service in the US Army. Spent the next six years as a marketing research analyst for several large US corporations before becoming part of a new small family business in 1967, remaining there until retiring at the end of 1999. Have since devoted my time and efforts to the progressive causes and organizations I support, all involved in working for a more humane and just world for all people everywhere, but especially for the most needy, disadvantaged and oppressed. My efforts since summer 2005 have included writing on a broad range of vital topics ranging from war and peace; social, economic and political equity for all; and justice for all the oppressed peoples of the world like the long-suffering people of Haiti and the Palestinians. Also co-hosting The Global Research News Hour, occasional public talks, and frequent appearances on radio and at times television.

Stephen Lendman is a Research Associate of the Centre for Research on Globalization. He lives in Chicago and can be reached at

Also visit his blog site at and listen to The Global Research News Hour on Monday - Friday at 10 am US Central time for cutting-edge discussions with distinguished guests on world and national issues. All programs are archived for easy listening.

Bill Totten