the financial crisis, the recession, and the american political economy: a systemic perspective

Video - Charles Ferguson is not sanguine about prospects for political hope or change.

mitworld | Charles Ferguson shows how useful a varied background in math, political science and business can be, as he dissects the complexities and recent crisis of the U.S. financial system. In a lecture that distills many of the arguments of his recent film, Inside Job, Ferguson conveys dispassionately yet persuasively the reasons we all should feel profound anxiety not only about the nation’s financial institutions, but about our economic and political future as well.

Ferguson details the “securitization food chain,” a system of investing (and gambling) with debt that U.S. financial institutions enthusiastically adopted around 15 years ago. Encouraged by friendly government policies, a handful of investment behemoths such as JP Morgan and Lehman Brothers began transforming the banking landscape, buying up mortgages and other forms of debt worth countless billions of dollars, and packaging these securities for buyers worldwide. Allied financial institutions became adept at selling cheap mortgages to ordinary people, creating an inflated housing market. Insurance and ratings companies bought in. The speed of growth and scale of this securities chain was unprecedented, recounts Ferguson -- as was its impact on the nation’s economy, both at the market’s peak, and after its collapse.

Ferguson provides a very detailed and pointed sidebar on industry incentives that underlay the wild growth years. These included allowing investment banks to bet on the failure of their own securities; and linking rating agencies’ income to their approval of risky securities. Individuals inside big institutions made out like bandits, because they could. Senior executives in places like Bear Stearns took out over $1 billion in cash each in the years prior to the 2008 collapse. The head of Countrywide Mortgage saw the end coming, and cashed out over $100 million in stock. Asks Ferguson, “Why was such extreme behavior permitted? I have to conclude there was a complete abdication on the part of the regulatory system.”

Ferguson finds galling both government apathy in regulating and in prosecuting high-end white collar crime, but perceives the reason: a financial services industry that “as it rapidly consolidated and concentrated became the dominant source not only of corporate profits but campaign contributions and political funding in the U.S.” Evidence for unrestrained financial power lies in the fact that the government response to the crisis has been engineered by Wall Street insiders intent on shoring up firms too big to fail. Ferguson cites as well “corruption of the economics discipline,” the rising role of money in politics, and the increasing concentration of wealth in the hands of a few.

The dominance of a single industry constitutes a deep change and danger for America, believes Ferguson. The nation “has evolved a political duopoly where two political parties agree on things related to finance and money.” Without a political structure immune to such influence, Ferguson sees little likelihood of challenging the interests of the financial giants.

neighbor goes in on neighbor...,

WSJ | Few things agitate Sid Schulman, who often shoots the breeze with other retirees and flirts with women friends at their condominium complex here.

But it galls him when neighbors stop paying their mortgages and maintenance fees, and leave the cost of community upkeep to others. "I am paying for these guys," said the 75-year-old sitting poolside, a diamond stud in his left ear.

Last year, he took matters into his own hands. Near the mailbox of each condo building he posted a list of residents delinquent on their maintenance fees, with the message "Pay up or move out" and the same in Spanish, Pague O Mudese. He also tried, unsuccessfully, to get the cable company to cut off service to nonpayers.

The public shaming angered some of those named. "You know where I live—come and tell me that to me face," said Lorena Garcia, 36, who lost her job and ability to pay.

The storm that struck the housing market has strewn many casualties—lenders, builders, real-estate agents, mortgage-bond investors.

Add to the list the comity of certain communities where residents live close together, some of them paying their mortgages and homeowner-association fees, and some not.

As banks slow foreclosures amid concerns about sloppy record keeping, some delinquent homeowners get to stay put even longer without paying. The delays are further inflaming some neighbors who consider that unfair.

2011 - a brave new dystopia?

TruthDig | The political philosopher Sheldon Wolin uses the term “inverted totalitarianism” in his book “Democracy Incorporated” to describe our political system. It is a term that would make sense to Huxley. In inverted totalitarianism, the sophisticated technologies of corporate control, intimidation and mass manipulation, which far surpass those employed by previous totalitarian states, are effectively masked by the glitter, noise and abundance of a consumer society. Political participation and civil liberties are gradually surrendered. The corporation state, hiding behind the smokescreen of the public relations industry, the entertainment industry and the tawdry materialism of a consumer society, devours us from the inside out. It owes no allegiance to us or the nation. It feasts upon our carcass.

The corporate state does not find its expression in a demagogue or charismatic leader. It is defined by the anonymity and facelessness of the corporation. Corporations, who hire attractive spokespeople like Barack Obama, control the uses of science, technology, education and mass communication. They control the messages in movies and television. And, as in “Brave New World,” they use these tools of communication to bolster tyranny. Our systems of mass communication, as Wolin writes, “block out, eliminate whatever might introduce qualification, ambiguity, or dialogue, anything that might weaken or complicate the holistic force of their creation, to its total impression.”

The result is a monochromatic system of information. Celebrity courtiers, masquerading as journalists, experts and specialists, identify our problems and patiently explain the parameters. All those who argue outside the imposed parameters are dismissed as irrelevant cranks, extremists or members of a radical left. Prescient social critics, from Ralph Nader to Noam Chomsky, are banished. Acceptable opinions have a range of A to B. The culture, under the tutelage of these corporate courtiers, becomes, as Huxley noted, a world of cheerful conformity, as well as an endless and finally fatal optimism. We busy ourselves buying products that promise to change our lives, make us more beautiful, confident or successful as we are steadily stripped of rights, money and influence. All messages we receive through these systems of communication, whether on the nightly news or talk shows like “Oprah,” promise a brighter, happier tomorrow. And this, as Wolin points out, is “the same ideology that invites corporate executives to exaggerate profits and conceal losses, but always with a sunny face.” We have been entranced, as Wolin writes, by “continuous technological advances” that “encourage elaborate fantasies of individual prowess, eternal youthfulness, beauty through surgery, actions measured in nanoseconds: a dream-laden culture of ever-expanding control and possibility, whose denizens are prone to fantasies because the vast majority have imagination but little scientific knowledge.”

Our manufacturing base has been dismantled. Speculators and swindlers have looted the U.S. Treasury and stolen billions from small shareholders who had set aside money for retirement or college. Civil liberties, including habeas corpus and protection from warrantless wiretapping, have been taken away. Basic services, including public education and health care, have been handed over to the corporations to exploit for profit. The few who raise voices of dissent, who refuse to engage in the corporate happy talk, are derided by the corporate establishment as freaks.

The façade is crumbling. And as more and more people realize that they have been used and robbed, we will move swiftly from Huxley’s “Brave New World” to Orwell’s “1984.” The public, at some point, will have to face some very unpleasant truths. The good-paying jobs are not coming back. The largest deficits in human history mean that we are trapped in a debt peonage system that will be used by the corporate state to eradicate the last vestiges of social protection for citizens, including Social Security. The state has devolved from a capitalist democracy to neo-feudalism. And when these truths become apparent, anger will replace the corporate-imposed cheerful conformity. The bleakness of our post-industrial pockets, where some 40 million Americans live in a state of poverty and tens of millions in a category called “near poverty,” coupled with the lack of credit to save families from foreclosures, bank repossessions and bankruptcy from medical bills, means that inverted totalitarianism will no longer work.

blues for christmas

Video - John Lee Hooker Blues for Christmas

humanity's defining moment?

Counsel on Renewal | Mish Shedlock has made a well-deserved name for himself, especially since the crash of 2008, as one of the few people who understand the problem we’re facing. I agree he’s way beyond the regular financial media that’s utterly clueless. This means he carries a certain moral obligation. But based on a recent article

I’m afraid he has yet to step up to the plate because he’s still endorsing the same archaic left vs. right, union vs. business, capitalist vs. socialist rhetoric from politicians who have no clue about the flaws in our debt-based monetary system.The 2-tier Economy
Embedded in the article is an unspoken assumption that the lower classes need to take pay cuts and layoffs so global bondholders and Chase bankers can be paid in full. That’s so…uh…20th century. If astute bloggers don’t start educating politicians by injecting into the political debate what they clearly know when they engage in market debate, the coming downward mobility for everyone but the bondholders is going to be galactic.

Mish agrees with NJ Governor Christie that the reason teachers are facing layoffs is because of teacher unions. Of course that’s true within the constraints of our current monetary system where lower class pay cuts are “good for the economy” while at the same time increased rent extraction by the financial class is “good for the economy.” One is the flip-side of the other. Manufacturing workers have learned this in spades, especially since their communities and way of life have been completely destroyed and moved to China. It’s a predator-prey economic relationship, precisely the reason unions exist in the first place. So what’s the real problem: the unions or the nature of the monetary system itself?

In a system where 100% of all money is sourced by going into debt to private capital holders who demand exponential returns, employees in fields like education which are managed on the balance sheet as “cost centers” must live within the austerity of cost reduction metrics. In real life terms, this means in order for the bondholders at the top to maintain their ever-increasing quality of life, millions of employees in cost centers must be happy with continually declining quality of life. During inflationary periods when capital holders are injecting more liquidity, this translates into cost center employees receiving raises that stay below the inflation rate (these teachers stayed ahead, but systemically across the entire economy, cost centers are managed below inflation–again just look at the offshoring). During deflationary periods when capital holders are removing liquidity, cost center AND revenue center employees take pay cuts and get fired so the capital holders can keep making more money.

Questioning the Status Quo
Unlike politicians, Mish is smart enough to step out of the existing monetary framework and ask himself what might be a better solution given the extreme situation we’re facing. Why doesn’t he? Why don’t most people? Perhaps they haven’t been faced with the type of austerity that forces a person to question the sanity of a system where all money is controlled by private capital. Or perhaps they’re “survival of the fittest” fundamentalists like Larry Summers, i.e. private sector bondholders deserve to win all the poker chips while everyone else is left with nothing. Or maybe they’ve just been enjoying a comfortable inflationary ride for so long that they can’t fathom the fatal flaw that’s been embedded in the monetary system from the very beginning.

That is…until now. The exponential game is reaching its end as the debt load approaches the point of saturation. If we don’t change the system before that inflection point, we’ll see the biggest austerity program ever as millions of people enter a tomorrow most people can’t dare to ponder today. In market terms, that inflection point is when global capital holders run on Treasuries and the Fed is forced to jack up its short rate to defend its balance sheet. That point may be next year or 10 years from now, but it’s coming if the status quo is not changed. And look out when it does.

This is not populist rhetoric, but the basic mathematical fact of our system.

Rather than justifying it, this should make us reevaluate the monetary system we’ve been living under for 100 years. We’ve experienced a lot of development. We’ve already built the brave new world. Does a never-ending stream of new gadgets from Apple, reality shows from Fox, and dead bodies from wars really justify milking more return on capital (ROC) from the lower classes forever? Of course we know that’s impossible. The system is reaching not only its human velocity limits but its mathematical limits. A systemic sabbatical has never been more necessary, so an alternative form of liquidity to supplement our current system is necessary. Fist tap Dale.

paring down...,

NYTimes | Faced with the steepest and longest decline in tax collections on record, state, county and city governments have resorted to major life-changing cuts in core services like education, transportation and public safety that, not too long ago, would have been unthinkable. And services in many areas could get worse before they get better.

The length of the downturn means that many places have used up all their budget gimmicks, cut services, raised taxes, spent their stimulus money — and remained in the hole. Even with Congress set to approve extra stimulus aid, some analysts say states are still facing huge shortfalls.

Cities and states are notorious for crying wolf around budget time, and for issuing dire warnings about draconian cuts that never seem to materialize. But the Great Recession has been different. Around the country, there have already been drastic cuts in core services like education, transportation and public safety, and there are likely to be more before the downturn ends. The cuts that have disrupted lives in Hawaii, Georgia and Colorado may be extreme, but they reflect the kinds of cuts being made nationwide, disrupting the lives of millions of people in ways large and small.

bringing in the sheaves

Visit msnbc.com for breaking news, world news, and news about the economy

Fist tap Dale.

nuke baby nuke!

Video - An Atomic Bomb will stop the Gulf Oil Leak.

NYTimes | The chatter began weeks ago as armchair engineers brainstormed for ways to stop the torrent of oil spilling into the Gulf of Mexico: What about nuking the well?

Decades ago, the Soviet Union reportedly used nuclear blasts to successfully seal off runaway gas wells, inserting a bomb deep underground and letting its fiery heat melt the surrounding rock to shut off the flow. Why not try it here?

The idea has gained fans with each failed attempt to stem the leak and each new setback — on Wednesday, the latest rescue effort stalled when a wire saw being used to slice through the riser pipe got stuck.

“Probably the only thing we can do is create a weapon system and send it down 18,000 feet and detonate it, hopefully encasing the oil,” Matt Simmons, a Houston energy expert and investment banker, told Bloomberg News on Friday, attributing the nuclear idea to “all the best scientists.”

Or as the CNN reporter John Roberts suggested last week, “Drill a hole, drop a nuke in and seal up the well.”

This week, with the failure of the “top kill” attempt, the buzz had grown loud enough that federal officials felt compelled to respond.

Stephanie Mueller, a spokeswoman for the Energy Department, said that neither Energy Secretary Steven Chu nor anyone else was thinking about a nuclear blast under the gulf. The nuclear option was not — and never had been — on the table, federal officials said.

“It’s crazy,” one senior official said.

xalisco boys...,

LATimes | A lethal business model targets Middle America. Sugar cane farmers from a tiny Mexican county use savvy marketing and low prices to push black-tar heroin in the U.S.

Immigrants from an obscure corner of Mexico are changing heroin use in many parts of America. Farm boys from a tiny county that once depended on sugar cane have perfected an ingenious business model for selling a semi-processed form of Mexican heroin known as black tar.

Using convenient delivery by car and aggressive marketing, they have moved into cities and small towns across the United States, often creating demand for heroin where there was little or none. In many of those places, authorities report increases in overdoses and deaths.

Immigrants from Xalisco in the Pacific Coast state of Nayarit, Mexico, they have brought an audacious entrepreneurial spirit to the heroin trade. Their success stems from both their product, which is cheaper and more potent than Colombian heroin, and their business model, which places a premium on customer convenience and satisfaction.

Users need not venture into dangerous neighborhoods for their fix. Instead, they phone in their orders and drivers take the drug to them. Crew bosses sometimes call users after a delivery to check on the quality of service. They encourage users to bring in new customers, rewarding them with free heroin if they do.

In contrast to Mexico's big cartels -- violent, top-down organizations that mainly enrich a small group -- the Xalisco networks are small, decentralized businesses. Each is run by an entrepreneur whose workers may soon strike out on their own and become his competitors. They have no all-powerful leader and rarely use guns, according to narcotics investigators and imprisoned former dealers.

Leaving the wholesale business to the cartels, they have mined outsize profits from the retail trade, selling heroin a tenth of a gram at a time. Competition among the networks has reduced prices, further spreading heroin addiction.

"I call them the Xalisco boys," said Dennis Chavez, a Denver police narcotics officer who has arrested dozens of dealers from Xalisco (pronounced ha-LEES-ko) and has studied their connections to other cities. "They're nationwide."

teabonic anger rooted in issues of "class"

NYTimes | Their fierce animosity toward Washington, and the president in particular, is rooted in deep pessimism about the direction of the country and the conviction that the policies of the Obama administration are disproportionately directed at helping the poor rather than the middle class or the rich.

The overwhelming majority of Tea Party supporters say Mr. Obama does not share the values most Americans live by, and that he does not understand the problems of people like themselves. More than half say the policies of the administration favor the poor, and 25 percent, compared with 11 percent of the general public, think that the administration favors blacks over whites. They are more likely than the general public, and Republicans, to say that too much has been made of the problems facing black people.

Asked what they are angry about, Tea Party supporters offered three main concerns: the recent health care overhaul, government spending, and a feeling that their opinions are not represented in Washington.

“The only way they will stop the spending is to have a revolt on their hands,” Elwin Thrasher, a 66-year-old semi-retired lawyer in Florida, said in an interview following the poll. “I’m sick and tired of them wasting money and doing what our founders never intended to be done with the federal government.”

They are far more pessimistic than Americans in general about the economy improving. More than 90 percent of Tea Party supporters think the country is headed in the wrong direction, compared with about 60 percent of the general public. About 6 in 10 say America’s best days are behind us when it comes to the availability of good jobs for American workers.

Nearly 9 in 10 disapprove of the job Mr. Obama is doing overall, and about the same percentage fault his handling on the specifics, too: health care, the economy, and the federal budget deficit. More than 8 in 10 hold an unfavorable view of him personally, and 92 percent believe he is moving the country toward socialism – an opinion shared by about half the general public. Tea Party supporters are also more likely than most Americans to believe, mistakenly, that the president has increased taxes for most Americans.

one classroom from sea to shining sea

NYTimes | AMERICAN public education, a perennial whipping boy for both the political right and left, is once again making news in ways that show how difficult it will be to cure what ails the nation’s schools.

Only last week, President Obama declared that every high school graduate must be fully prepared for college or a job (who knew?) and called for significant changes in the No Child Left Behind law. In Kansas City, Mo., officials voted to close nearly half the public schools there to save money. And the Texas Board of Education approved a new social studies curriculum playing down the separation of church and state and even eliminating Thomas Jefferson — the author of that malignant phrase, “wall of separation” — from a list of revolutionary writers.

Each of these seemingly unrelated developments is part of a crazy quilt created by one of America’s most cherished and unexamined traditions: local and state control of public education. Schooling had been naturally decentralized in the Colonial era — with Puritan New England having a huge head start on the other colonies by the late 1600s — and, in deference to the de facto system of community control already in place, the Constitution made no mention of education. No one in either party today has the courage to say it, but what made sense for a sparsely settled continent at the dawn of the Republic is ill suited to the needs of a 21st-century nation competing in a global economy.

Our lack of a national curriculum, national teacher training standards and federal financial support to attract smart young people to the teaching profession all contribute mightily to the mediocre-to-poor performance of American students, year in and year out, on international education assessments. So does a financing system that relies heavily on local property taxes and fails to guarantee students in, say, Kansas City the same level of schooling as students in more affluent communities.

italy's african heroes

NYTimes | This month, rioting by African immigrants broke out in Rosarno, in southern Italy, after at least one immigrant was shot with an air rifle. The riots were widely portrayed as clashes between immigrants and native Italians, but they were really a revolt against the ’Ndrangheta, the powerful Calabrian mafia. Anyone who seeks to negate or to minimize this motive is not familiar with these places where everything — jobs, wages, housing — is controlled by criminal organizations.

The episode in Rosarno was the second such uprising against organized crime in Italy in the last few years. The first took place in 2008 in Castel Volturno, a town near Naples, where hit men from the local mob, the Camorra, killed six Africans. The massacre was intended to intimidate, but it set off the immigrants’ anger instead.

In Castel Volturno, the immigrants work in construction. In Rosarno, they pick oranges. But in both places the mafias control all economic activity. And the only ones who’ve had the courage to rebel against them are the Africans.

An immigrant who lands in France or Britain knows he’ll have to abide by the law, but he also knows he’ll have real and tangible rights. That’s not how it is in Italy, where bureaucracy and corruption make it seem as if the only guarantees are prohibitions and mafia rule, under which rights are nonexistent. The mafias let the African immigrants live and work in their territories because they make a profit off them. The mafias exploit them, but also grant them living space in abandoned areas outside of town, and they keep the police from running too many checks or repatriating them.

The immigrants are temporarily willing to accept peanut wages, slave hours and poor living conditions. They’ve already handed over all they owned, risked all they had, just to get to Italy. But they came to make a better life for themselves — and they’re not about to let anyone take the possibility of that life away.

There are native Italians who reject mafia rule as well, but they have the means and the freedom to leave places like Rosarno, becoming migrants themselves. The Africans can’t. They have to stand up to the clans. They know they have to act collectively, for it’s their only way of protecting themselves. Otherwise they end up getting killed, which happens sometimes even to the European immigrant workers.

It’s a mistake to view the Rosarno rioters as criminals. The Rosarno riots were not about attacking the law, but about gaining access to the law.

chinese economic juggernaut is gaining on japan

NYTimes | For years, Japan has been readying itself for the day that it is eclipsed economically by China. But as a result of the global slowdown, Japan’s difficulty in managing its economy and China’s rise — on vivid display Thursday as Beijing celebrated the 60th anniversary of the founding of the People’s Republic — that day may come sooner than anyone predicted.

Though recent wild currency swings could delay the reckoning, many economists expect Japan to cede its rank as the world’s second-largest economy sometime next year, as much as five years earlier than previously forecast.

At stake are more than regional bragging rights: the reversal of fortune will bring an end to a global economic order that has prevailed for 40 years, with ramifications across arenas from trade and diplomacy to, potentially, military power.

China’s rise could accelerate Japan’s economic decline as it captures Japanese export markets, and as Japan’s crushing national debt increases and its aging population grows less and less productive — producing a downward spiral.

“It’s beyond my imagination how far Japan will fall in the world economy in 10, 20 years,” said Hideo Kumano, economist at the Dai-Ichi Life Research Institute in Tokyo.

Not long ago, Japan was “the economic miracle,” an ascendant juggernaut on its way to rivaling the United States, which has the biggest economy.

Now, many here ask whether Japan is destined to be the next Switzerland: rich and comfortable, but of little global import, largely ignored by the rest of the world.

Yet even this widely held hope among the country’s 127 million people may be slipping from Japan’s grasp.

thousands line up for promise of free health care

NYTimes | They came for new teeth mostly, but also for blood pressure checks, mammograms, immunizations and acupuncture for pain. Neighboring South Los Angeles is a place where health care is scarce, and so when it was offered nearby, word got around.

For the second day in a row, thousands of people lined up on Wednesday — starting after midnight and snaking into the early hours — for free dental, medical and vision services, courtesy of a nonprofit group that more typically provides mobile health care for the rural poor.

Like a giant MASH unit, the floor of the Forum, the arena where Madonna once played four sold-out shows, housed aisle upon aisle of dental chairs, where drilling, cleaning and extracting took place in the open. A few cushions were duct-taped to a folding table in a coat closet, an examining room where Dr. Eugene Taw, a volunteer, saw patients.

When Remote Area Medical, the Tennessee-based organization running the event, decided to try its hand at large urban medical services, its principals thought Los Angeles would be a good place to start. But they were far from prepared for the outpouring of need. Set up for eight days of care, the group was already overwhelmed on the first day after allowing 1,500 people through the door, nearly 500 of whom had still not been served by day’s end and had to return in the wee hours Wednesday morning.

The enormous response to the free care was a stark corollary to the hundreds of Americans who have filled town-hall-style meetings throughout the country, angrily expressing their fear of the Obama administration’s proposed changes to the nation’s health care system. The bleachers of patients also reflected the state’s high unemployment, recent reduction in its Medicaid services for the poor and high deductibles and co-payments that have come to define many employer-sponsored insurance programs.

Many of those here said they lacked insurance, but many others said they had coverage but not enough to meet all their needs — or that they could afford. Some said they were well aware of the larger national health care debate, and were eager for changes.

“I am on point with the news,” said Elizabeth Harraway, 50, who is unemployed and came for dental care. “I think the president’s ideas are awesome, and I believe opening up health care is going to work."

financial ruin of the western world beckons

Telegraph | Events have already forced Premier Brian Cowen to carry out the harshest assault yet seen on the public services of a modern Western state. He has passed two emergency budgets to stop the deficit soaring to 15pc of GDP. They have not been enough. The expert An Bord Snip report said last week that Dublin must cut deeper, or risk a disastrous debt compound trap.

A further 17,000 state jobs must go (equal to 1.25m in the US), though unemployment is already 12pc and heading for 16pc next year.

Education must be cut 8pc. Scores of rural schools must close, and 6,900 teachers must go. "The attacks outlined in this report would represent an education disaster and light a short fuse on a social timebomb", said the Teachers Union of Ireland.

Nobody is spared. Social welfare payments must be cut 5pc, child benefit by 20pc. The Garda (police), already smarting from a 7pc pay cut, may have to buy their own uniforms. Hospital visits could cost £107 a day, etc, etc.

"Something has to give," said Professor Colm McCarthy, the report's author. "We're borrowing €400m (£345m) a week at a penalty interest."

No doubt Ireland has been the victim of a savagely tight monetary policy e_SEmD given its specific needs. But the deeper truth is that Britain, Spain, France, Germany, Italy, the US, and Japan are in varying states of fiscal ruin, and those tipping into demographic decline (unlike young Ireland) have an underlying cancer that is even more deadly. The West cannot support its gold-plated state structures from an aging workforce and depleted tax base.

As the International Monetary Fund made clear last week, Britain is lucky that markets have not yet imposed a "penalty interest" on British Gilts, given the trajectory of UK national debt – now vaulting towards 100pc of GDP – and the scandalous refusal of this Government to map out any path back to solvency.

"The UK has been getting the benefit of the doubt, both in the Government bond market and also the foreign exchange market. This benefit of the doubt is not going to last forever," said the Fund.

France and Italy have been less abject, but they began with higher borrowing needs. Italy's debt is expected to reach the danger level of 120pc next year, according to leaked Treasury documents. France's debt will near 90pc next year if President Nicolas Sarkozy goes ahead with his "Grand Emprunt", a fiscal blitz masquerading as investment.

intertribal tensions test eu rules...,

Washington Post | Workers carrying placards that said "British jobs for British workers" staged demonstrations at more than a dozen refineries and power stations in England, Scotland, Wales and Northern Ireland.

The workers are protesting a decision by Total, the French oil company, to award a $280 million contract to an Italian firm, IREM, for work at a plant in Lincolnshire, England. The project will involve about 400 foreign workers.

Nearly 2 million Britons are jobless, the highest unemployment level since 1997. As job losses mount, officials are reporting increasing antagonism toward foreign workers.

European Union rules require a free flow of labor among member nations. And officials have cautioned that such an important pillar of European unity should not be undermined by an economic downturn.

Hundreds of thousands of Poles, Latvians, Lithuanians and other newer members of the European Union flocked to Britain in recent years as the country's economy boomed. But as recession hit, and the buying power of Britain's pound has fallen sharply, increasing numbers of immigrants are returning home. Those who remain are competing with local workers for a far smaller pool of jobs.

frozen in indifference....,

Detroit News | Inside the abandoned Roosevelt Warehouse in Detroit, a body lies frozen in a block of ice. "Yeah, he's been down there since last month at least."

He was asked if he called the police.

"No, I thought it was a dummy myself," he said unconvincingly. Besides, Williams said, there were more pressing issues like keeping warm and finding something to eat.

"You got a couple bucks?" he asked.

Waiting for a response
There are at least 19,000 homeless people in Detroit, by some estimates. Put another way, more than 1 in 50 people here are homeless.

The human problem is so bad, and the beds so few, that some shelters in the city provide only a chair. The chair is yours as long as you sit in it. Once you leave, the chair is reassigned.

Thousands of down-on-their-luck adults do nothing more with their day than clutch onto a chair. This passes for normal in some quarters of the city.

"I hate that musical chair game," Ruben said. He said he'd rather live next to a corpse.

Living Among Somali Pirates

Kansas City Star | On the night of Sept. 17, a watchman aboard the Centauri noticed the stars shining off the wake of the pirates’ small vessel and sounded the alarm. But within five minutes of the first sighting, two boatloads of pirates armed with rifles and rocket-propelled grenades had swarmed aboard on makeshift ladders.

“They were shouting, ‘Captain, is not problem, just money,’ ” recalled Capt. Renato Tanada, his face twisting wryly.

“And when they found out we were Filipino, they said, ‘Filipino and Somali — friends!’ ” added crew member Alvin Genonangan with a laugh. “When they were shooting, we ducked down behind the walls. ... Then, when they came in, we just stood there with our hands in the air and the captain tried to talk calmly to them.”

The pirates did not let the crew telephone their families but treated them well, the sailors said, arranging deliveries of live goats to the ship for food, sharing their meals with the hostages, and encouraging them to work, fish and bake bread as a way of keeping busy. The pirates provided the flour, a luxury in impoverished Somalia, where nearly half the population is dependent on aid.

Most of the pirates were young, averaging around 25, Tanada said. They guarded the ship in shifts, with never fewer than 14 armed men on board, to be rotated every four or five days. The pirates slept on mats on the bridge and the deck, and the crew was not allowed above deck after dark.

But as the hostages got to know their guards, the crew discovered that the Somalis played a card game similar to a Filipino game. They established the rules with hand signals. Genonangan said he beat the pirates sometimes — but not too often.

In the meantime, the crew saw first one, then another captured vessel drop anchor in the blue waters alongside them.

a frenzy over free food

Denver Post | Want one more palpable sign of a desperate economy?

An estimated 40,000 people came to a Weld County farm Saturday to collect free potatoes, carrots and leeks.

Cars snaked around cornfields and parallel parked along Colorado 66 and 119 early in the morning to get free food from the Miller family, who farm 600 acres outside of Platteville, about 37 miles north of Denver.

As this prolonged Indian summer continued, the Millers had decided to give away produce because so much was left over at the end of their annual fall festival. Any day now, a few deep freezes would kill it off.

They expected between 5,000 and 10,000 people spread out over a couple of days. Instead, they found themselves on Saturday morning inundated with cars and people with sacks and wagons and barrels ready to harvest whatever was available.

The Millers canceled the second day of the giveaway originally planned for today because, as Chris Miller put it, "the pickins' are very slim now."

At one point, 30 acres of family farmland had become a parking lot. Their crowd estimate of 40,000 plus was based on the number of cars. Sheriff's officials said they "wouldn't be surprised" if that count was accurate.

Traffic was backed up almost to Interstate 25, and police ticketed people who had illegally abandoned their cars in the frenzy.

"Overwhelmed is putting it mildly," Miller said. "People obviously need food."

Gasoline Shortages

Where is our gasoline and diesel supply headed? Even before Ike hit, quite a few areas of the US were starting to see gasoline shortages. The impact of Ike could only make shortages worse. Most likely, it will take refineries at least a week or two to get production back to normal levels after a storm of this type, considering the impacts of electrical outages and flooding. In this article, I will examine some of the issues that seem to be involved. Based on my analysis, fuel supply shortages are likely to last well into October, and are likely to get considerably worse before they get better.
Until Colonial pipeline is back to carrying full capacity of gasoline, diesel, and other refined products, there are likely to be shortages along the gulf coast and the Southeast. The Northeast may also begin to see shortages.

Other major outages have also been reported. Explorer pipeline, carrying 700,000 barrels a day of petroleum products from Texas/LA to Indiana, is completely shut down. Plantation pipeline, carrying 600,000 barrels a day of petroleum products from Louisiana to Virginia, is operating at reduced rates. Implications of a ten day refinery outage.

Map of the Colonial Pipeline