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April, 2008



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Greed-The Worm In The Capitalist Apple
By Edward W. Miller, MD

"Thou hast taken usury and increase, and thou hast greedily gained of thy neighbors by extortion, and thou hast forgotten me saith the Lord." Ezekiel 22:12 (King James Bible)
Last summer's fall and shaky, uncertain recovery of the stock market bubble which, as it burst, toward the end of August had cost investors over $6 trillion in US dollars, was echoed in England where thousands of Brits stood in line to demand their money back from one of the country's largest banks. (San Francisco Chronicle).
This last week the Fed suddenly responded to the Wall Street free-fall. As the March 17thWashington Post reported: " The Federal Reserve took dramatic action on multiple fronts Sunday night to avert a crisis in the global financial system." The Feds, promised some $200 Billion as a "lender of last resort" for 20 major Wall Street firms a role it had played, since its founding in 1913, only for commercial banks. In 1902 and again in 1909, J.P. Morgan personally set aside funds to bail out failing banks.

This $200 billion offer of ultra-safe Treasury securities to our nation's banks, including several major brokerage firms, will be in exchange for a variety of collateral options -- including the very mortgage-backed securities that have caused the recent financial crisis. Thus banks will be able to unload some of those not so secure assets, thus freeing up money to keep the nation's economic bloodstream flowing. It was a central banking move that many investors had been waiting for.

As Peter Schiff noted (DINL March 16th)" The Fed may have been partially spurred to take the step as a result of the rapid collapse of Carlyle Capital Corp. a publicly traded private equity firm that is a subsidiary of the Carlyle Group. The Dutch firm could not meet margin calls on its depreciating collateral of AAA-rated mortgaged-backed securities guaranteed by Fannie Mae and Freddie Mac. On Friday, the Fed then took the unusual step of providing this emergency "non-recourse" funding...Apparently the Fed now stands willing to assume any mortgage-related risk that no other private entity would touch."

First on the list, the Feds gave JP Morgan Chase, a major Wall Street bank, $ 236.2 million, allowing them to buy out the 85 year-old Bear Steans investment firm, at a price representing only 1% of what Bear Stearns had been worth only ten days before this buyout... The investment forms' stock had fallen from $70 a share to only $2 a share in that short time period.

On Monday, after that precarious weekend, Asian stocks were sharply lower. Japan's Nikkei Index fell more than 4% and the dollar was down sharply against the yen and Euro, since the Fed's $200 Billion in paper money had effectively diluted out the world's supply of US dollars.

The fallout from the Bear Stearns collapse and buyout was not long in coming. That Monday KPFA's financial reporter on Amy Goodman's "Democracy-Now" noted that the California Teachers Retirement Plan, investment in Bear Stearns, had just lost $85 million.

Meanwhile, there seems to be a comparatively smaller largess directed at the American Taxpayer from Bush and our Congress: On January 24th, 2008 The Bush administration and leaders of the House of Representatives agreed on a plan to provide almost $100 billion in tax rebates to 117 million taxpayers and another $40 billion in tax reductions for businesses in a bid to avert a recession. Individuals with adjusted gross incomes of $3,000 to $75,000 would get rebates worth $300 to $600. Joint filers with annual incomes up to $150,000 would receive up to $1,200. Individuals and families that earn more than those limits would get rebates that decline as their incomes increase. Families also would get bonuses of $300 per child, except for families that earn more than $186,000. If congressional leaders get a final package to Bush, Jr. millions of Americans could begin getting some extra cash by mid-May.

Don't hold our breath. Treasury Secretary Henry Paulson, who helped broker the bipartisan deal in a marathon closed-door negotiation, added: ""Within roughly 60 days (after enactment) more or less, we will be able to begin making payments. "I believe we can get the lion's share of payments done in something under 10 weeks from the time we start mailing them."

Like all of these "bail-out" deals the Fed is [promising, the money will eventually come out of the taxpayer's pocket. Printing extra money simply dilutes out the basic value of the US dollar on the world market, making everything we buy more expensive.

To make cheating easier, deregulation of business began during the Carter administration and both houses cooperated to rescind the regulations of business passed during the depression of the 1930's and thus the acceptance by banks of sub-prime mortgages began over ten years ago. Deregulation began to cover corporate theft in both Republican and Democratic administrations... Bill Clinton signed the Gramm-Leach-Baily Act of 1999, which permitted banks, stockbrokers and insurance companies to merge, overturning one of the major regulatory achievements of the New Deal. More important, both political parties refused to place restraints on interest rates charged by banks, encouraging the crime of usury, or excessive interest.

The ongoing failure of millions of "sub-prime" mortgages with foreclosures across the country, the increasing demand for "affordable housing", a consumer debt of $2.52 trillion, and the daily not-quite believable assurances by Wall Street, our president and big money that " the economy is basically strong", comes as no surprise to those keeping a close eye on our economy for the past half century.

Beginning not too long after June 23rd, 1947 when a newly elected Republican Congress passed the Taft-Hartley Act over president Truman's veto, the economic signposts have been out in the open for all to see. Following this Republican assault on American labor, the downhill slide of our economy could have been anticipated. Truman himself, who had sold clothes in a haberdashery before he entered politics, understood all too well the value of the dollar and the importance of strong unions to balance the political power of big industry, hence his attempt to stop this assault by veto.

The results of labor's defeat presented itself gradually over the next decade as American dads, who for years had fed and clothed their families, educated their kids and provided a safe retirement, found their paychecks no longer covered all the bills, and began to accept 50 or 60 hour weeks or found a second job. A few years later mother pitched in to bring home extra cash, and not too many years passed before the percentage of women in the American workforce far exceeded that of any other industrialized country. Labor statistics demonstrate that since 1972 the income of the great American middle class has been falling farther and farther behind the rising cost of living.

The next step down the economic slide was the subtle onslaught of the Credit-Card industry which began mailing their plastic cards out by the millions to the unwary shoppers who, lacking enough cash at the Safeway checkout, found it increasingly easy to run that pretty piece of plastic through the machine. "In 2006 banks sent out 8 billion credit card applications, a 30% increase since 2005. Credit card companies spend an average of $56 to sign up a new customer and since 1996 when the Supreme Court struck down limits on credit card fees, the average late penalty has jumped 102% and the average fee for exceeding credit card limits is up 138%. In 2004 after Discovery charged a woman more than $9000 in interest, penalties and fees, on an initial bill of $1900, an Ohio judge erased her debt, slamming the company for being "unreasonable, unconscionable, and unjust."(Mother Jones Sept 2007 pg 28) Before long Americans found themselves with billions in credit-card debt.

While all this was going on at home, big manufacturing, with total disregard for their loyal local employees, in towns and cities across the country, were quietly closing their plants to re-assemble them, first across the border in Mexico and then in Chine, India and Malaysia, while at the same time, while Congress was paid to look the other way, those same companies which began to avoid their patriotic responsibility to support their country's economy established tax-exempt entities on off-shore islands and distant lands.

Statistics show that in the past ten years, US labor has lost over six million manufacturing, jobs to foreign countries, jobs that had always paid good wages and had often been the major economic support in the towns and cities in which they were located. Though unemployment statistics failed to show this, millions of these fired workers found jobs in the service industries, which paid less and were often part-time so employers could avoid paying pension or health care costs. Add to these economic injuries Bush's 2001 tax cut for the rich, which over the next ten years will subtract an estimated $2 Trillion from our economy over the next critical ten years.

To better understand the damaging effects on labor of the Taft-Hartley Act, one must, as Steven Wagner, Professor of History at Missouri Southern State College, has pointed out, (http// one should go back to the Wagner Act, of 1935, passed by a post New Deal Congress. The Wagner Act, termed "Labor's Bill of Rights", which covered all firms and employees except agricultural and government workers and most railroad, giving workers the right to organize and join labor unions, to bargain collectively through representatives of their own choosing, and to strike It set up the National Labor Relations Board, and gave it the right to certify a union as representing a certain group of employees. The Wagner Act forbade employers from interfering with workers right to organize and bargain collectively, or to interfere with these processes. It required " Good faith" in bargaining and forbade discrimination against labor for union activities, thus permitting "closed shops" and "union shops."

The Taft-Hartley Act, passed by a Republican-controlled Congress over Truman's veto has served to undermine many rights to which labor had become accustomed since 1935. In fact, some labor leaders have termed this Republican bill the "Slave Labor Act." The Bill permitted the president, when he felt a strike threatened the country's health or safety, after appointing an investigating board, to get an injunction from the Attorney General and force a "cooling off " period. The Bill forbids both secondary boycotts and sympathy strikes by labor, forbids jurisdictional strikes, forbids closed shops and hiring halls that discriminate against non-labor and requires union officials to file "non-communist" affidavits with the government, a questionable practice which has been subject to extensive court litigation. During the Eisenhower administration, several attempts were made by democrats to revise the Taft-Hartley Act, but without avail. Labor had lost much of its political muscle.

As writer Paul Craig Roberts (Information Clearing House 9/10/2007) pointed out " The US economy continues its slow death before our eyes". Roberts noted that in goods- industries, jobs declined by 64,000 by August 2007 and that most domestic job growth has been in service, rather than in manufacturing positions, noting that the unemployment figures reported in Washington have remained steady largely because only those actively seeking jobs are counted. Many of the 340,000 Americans who dropped out of the work force were thus not counted. Roberts also noted that the US is running a trade deficit with every part of the world, totaling $838 billion in 2006. Our deficit with OPEC alone is $106 billion.

Having moved so much manufacturing overseas, today the US imports more than $326 billion industrial supplies and materials. Roberts points out that our $800 billion trade deficit means Americans consumed $800 billion more than they produced. He adds that with the exception of CEOs, hedge fund managers and investment bankers " the 21st Century has brought Americans no growth in real medial household income." The continued increase in US budget debt and trade debt has flooded the world with US dollars, which have lost about 33% in value related to other currencies.

Since the war in Iraq adds $2 billion every week to a national debt of $453 Billion, it seems obvious that the sooner we bring our troops home from both Afghanistan and Iraq, the sooner we can begin to address the problems associated with a failing economy. Nobel Laureate Joseph Stiglitz calculates the total war cost, plus lifetime care for injured veterans will cost Americans $3 trillion. Not mentioned by any of our gang of politicians campaigning for the 2008 election, a repeal of the Taft-Hartley Act should be one of the first political challenges offered the 2009 congress. Confining our political campaigns to six weeks with taxpayer funding for both incumbent and challengers plus free TV and radio time would do much to return control of this country to its suffering people.

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