31 Once world loses faith in $, how will US be able to import manufactured goods? Paul Craig Roberts

(1) Steve Keen and Ross Gittens silent on restoring the tariffs that free trade removed
(2) Protectionist Party formed in Australia
(3) Once world loses faith in $, how will US be able to import manufactured goods? Paul Craig Roberts
(4) Joseph Stiglitz: war spending a contributor to US economic collapse
(5) U.S. considers Curbs on Speculative Trading of Oil
(6) ECB not monetizing public debt, but otherwise running a loose monetary policy
(7) Funding shortfall forces UN to slash delivery to millions of starving people

(1) Steve Keen and Ross Gittens silent on restoring the tariffs that free trade removed

From: Tony Ryan <tonyryan43@gmail.com> Date: 28.07.2009 06:56 AM

> http://www.debtdeflation.com/blogs/2009/07/27/rudds-essay-is-on-the-money/
> http://business.smh.com.au/business/rudds-new-bogy-fearing-the-pain-of-recovery-20090726-dxj3.html

I suppose it is nice to be able to listen to Steve Keen and Ross Gittens deliver their drawing room perspectives on the difference between discernible and increasingly painful reality, and Rudd's pulpit analysis of a disaster to which his own ALP contributed massively.

But thank you Ross, for tapping the history pages that say, as far as Australia is concerned, our troubles commenced with Whitlam's signing of the Lima Agreement and his reduction of tariffs that hitherto protected manufacturing, farmers, jobs and workers. It was indeed Whitlam, Hawke and Keating who dragged us kicking and screaming into the claws of the Free Trade Theocracy; and it was largely Keating who sold Australia's earlier prosperity to corporatists and bankers. But Howard's continuance was also seamless.

What I am saying here is that, unless one subscribes to some kind of institutionalised sociopathy, real world economics is primarily about people, not numbers. I am also saying that our woes have little to do with the financial meltdown, other than the investors who lost out. 70% of Aussies had no investments to lose, other then mandatory superannuation, which was being ratted long before Wall St fell apart.

The human problem in Australia is the real unemployment that both Gittens and Keen are in denial over, now well over 20% in terms of incapacity to adequately feed ones family or oneself. Although both Gittens and Keen acknowledge the free market ideology that eliminated our entire middle class, neither utters a single word as to the obvious remedy... restoring the tariffs that free trade removed.

And neither acknowledges Terminator II, which will commence marauding in the shape of cap 'n' trade; driven by yet another neo-theocracy. As Archibald described so graphically, we can now anticipate removal of 40% of the people's remaining incomes into the global bankers vaults.

I have a better solution than either guru... let the people of Australia determine their own future. Unlike Gittens and Keen, I survey Aussie opinion and I know what they will say.

(2) Protectionist Party formed in Australia

From: Father John Brown <fatherjohnbrown2009@yahoo.com> Date: 30.07.2009 01:30 AM
Subject: Stopp Anna's fire-asset-sale, join APP

After the ALP became the Alternative Liberal Party, there is only one party left in Australia, which will stop the sell out of the assets of the Australian People and defend old Australian Labour Party- traditions and Langism, namely the Australian Protectionist Party. See more about her on:
http://www.protectionist.net

(3) Once world loses faith in $, how will US be able to import manufactured goods? Paul Craig Roberts

From: IHR News <news@ihr.org>  Date: 01.08.2009 03:41 PM

http://informationclearinghouse.info/article23068.htm

Can The Economy Recover?

By Paul Craig Roberts

July 15, 2009 "Information Clearing House" -- -There is no economy left to recover. The US manufacturing economy was lost to offshoring and free trade ideology. It was replaced by a mythical "New Economy."

The "New Economy" was based on services. Its artificial life was fed by the Federal Reserve's artificially low interest rates, which produced a real estate bubble, and by "free market" financial deregulation, which unleashed financial gangsters to new heights of debt leverage and fraudulent financial products.

The real economy was traded away for a make-believe economy. When the make-believe economy collapsed, Americans' wealth in their real estate, pensions, and savings collapsed dramatically while their jobs disappeared.

The debt economy caused Americans to leverage their assets. They refinanced their homes and spent the equity. They maxed out numerous credit cards. They worked as many jobs as they could find. Debt expansion and multiple family incomes kept the economy going.

And now suddenly Americans can't borrow in order to spend. They are over their heads in debt. Jobs are disappearing. America's consumer economy, approximately 70% of GDP, is dead. Those Americans who still have jobs are saving against the prospect of job loss. Millions are homeless. Some have moved in with family and friends; others are living in tent cities.

Meanwhile the US government's budget deficit has jumped from $455 billion in 2008 to $2,000 billion this year, with another $2,000 billion on the books for 2010. And President Obama has intensified America's expensive war of aggression in Afghanistan and initiated a new war in Pakistan.

There is no way for these deficits to be financed except by printing money or by further collapse in stock markets that would drive people out of equity into bonds.

The US government's budget is 50% in the red. That means half of every dollar the federal government spends must be borrowed or printed. Because of the worldwide debacle caused by Wall Street's financial gangsterism, the world needs its own money and hasn't $2 trillion annually to lend to Washington.

As dollars are printed, the growing supply adds to the pressure on the dollar's role as reserve currency. Already America's largest creditor, China, is admonishing Washington to protect China's investment in US debt and lobbying for a new reserve currency to replace the dollar before it collapses. According to various reports, China is spending down its holdings of US dollars by acquiring gold and stocks of raw materials and energy.

The price of one ounce gold coins is $1,000 despite efforts of the US government to hold down the gold price. How high will this price jump when the rest of the world decides that the bankruptcy of "the world's only superpower" is at hand?

And what will happen to America's ability to import not only oil, but also the manufactured goods on which it is import-dependent?

When the over-supplied US dollar loses the reserve currency role, the US will no longer be able to pay for its massive imports of real goods and services with pieces of paper. Overnight, shortages will appear and Americans will be poorer.

Nothing in Presidents Bush and Obama's economic policy addresses the real issues. Instead, Goldman Sachs was bailed out, more than once. As Eliot Spitzer said, the banks made a "bloody fortune" with US aid.

It was not the millions of now homeless homeowners who were bailed out. It was not the scant remains of American manufacturing--General Motors and Chrysler--that were bailed out. It was the Wall Street Banks.

According to Bloomberg.com, Goldman Sachs' current record earnings from their free or low cost capital supplied by broke American taxpayers has led the firm to decide to boost compensation and benefits by 33 percent. On an annual basis, this comes to compensation of $773,000 per employee.

This should tell even the most dimwitted patriot who "their" government represents.

The worst of the economic crisis has not yet hit. I don't mean the rest of the real estate crisis that is waiting in the wings. Home prices will fall further when the foreclosed properties currently held off the market are dumped. Store and office closings are adversely impacting the ability of owners of shopping malls and office buildings to make their mortgage payments. Commercial real estate loans were also securitized and turned into derivatives.

The real crisis awaits us. It is the crisis of high unemployment, of stagnant and declining real wages confronted with rising prices from the printing of money to pay the government's bills and from the dollar's loss of exchange value. Suddenly, Wal-Mart prices will look like Nieman Marcus prices.

Retirees dependent on state pension systems, which cannot print money, might not be paid, or might be paid with IOUs. They will not even have depreciating money with which to try to pay their bills. Desperate tax authorities will squeeze the remaining life out of the middle class.

Nothing in Obama's economic policy is directed at saving the US dollar as reserve currency or the livelihoods of the American people. Obama's policy, like Bush's before him, is keyed to the enrichment of Goldman Sachs and the armament industries.

Matt Taibbi describes Goldman Sachs as "a great vampire squid wrapped around the face of humanity, relentless jamming its blood funnel into anything that smells like money." Look at the Goldman Sachs representatives in the Clinton, Bush and Obama administrations. This bankster firm controls the economic policy of the United States.

Little wonder that Goldman Sachs has record earnings while the rest of us grow poorer by the day.

(4) Joseph Stiglitz: war spending a contributor to US economic collapse

Joseph Stiglitz and Linda J. Bilmes: Adding up the true costs of two wars

From: IHR News <news@ihr.org> Date: 28.07.2009 06:26 PM

http://www.madison.com/tct/opinion/column/457378

Joseph Stiglitz and Linda J. Bilmes — 7/07/2009 6:06 am

Last week the U.S. "stood down" in Iraq, finalizing the pullout of 140,000 troops from Iraqi cities and towns -- the first step on the long path home. After more than six years, most Americans are war-weary, even though a smaller percentage of us have been involved in the actual fighting than in any major conflict in U.S. history.

But not so fast. The conflict that began in 2003 is far from over for us, and the next chapter -- confronting a Taliban that reasserted itself in Afghanistan while the U.S. was sidetracked in Iraq -- will be expensive and bloody. The death toll for U.S. troops in Iraq and Afghanistan reached 5,000 in June. An additional 80,000 Americans have been wounded or injured since the war in Iraq began. More than 300,000 of our troops have required medical treatment, and Army statistics show that more than 17 percent of our returning soldiers suffer from post-traumatic stress disorder.

Meanwhile, in Iraq, even though most of the population has long told pollsters they can't wait for U.S. forces to leave, U.S. officials have said we are likely to station 50,000 troops at military bases in the country for the foreseeable future. This is because the situation in Iraq is highly precarious.

Moreover, the U.S. barely has begun to face the enormous financial bill for the war. By our accounting, the U.S. has already spent $1 trillion on operations and related defense spending, with more to come -- and it will cost perhaps $2 trillion more to repay the war debt, replenish military equipment and provide care and treatment for U.S. veterans back home. Many of the wounded will require indefinite care for brain and spinal injuries. Disability payments are ramping up and will grow higher for decades. The stress of extended, multiple tours to Iraq means that a whole generation of U.S. military men and women may now be suffering from long-term mental health issues. The suicide rate in the Army is at its highest level since record-keeping began.

This wartime spending undoubtedly has been a major contributor to our present economic collapse. The U.S. has waged an expensive war as if it required little or no economic sacrifice, funding the conflict by massive borrowing. As we've observed in the past, you can't spend $3 trillion on a reckless foreign war and not feel the pain at home.

Burned by the difficulties in Iraq, our political leaders have no illusions about the length and difficulty of the challenge facing us in Afghanistan. But in other respects we seem set to repeat the same mistakes that we made in Iraq. The president has just signed yet another "emergency" supplemental appropriations measure ($80 billion) to fund continuing operations in Iraq and expansion into Afghanistan. This means that for the 30th time since 2001, war spending has been rushed through the budget process without serious scrutiny.

Obstacles continue to beset returning veterans too. Despite an increase in the Department of Veterans Affairs budget, the backlog of disability claims has reached its highest level.

Early this year, President Barack Obama committed 20,000 troops to a "surge" in Afghanistan. That, combined with a large, ongoing presence in Iraq and continued reliance on private contractors for virtually every aspect of military support, remains a recipe for staggering out-of-control expenditures. Surely we can draw some lessons from the Iraq debacle and set aside money to care for our veterans, crack down on fraud and profiteering, and account for the true costs of the war in the budget so the American taxpayer can see what we are paying for.

Linda J. Bilmes of Harvard University is a former assistant secretary of Commerce. Joseph Stiglitz of Columbia University is a winner of the Nobel Prize in economics and a former chairman of the Council of Economic Advisors. They are the co-authors of "The Three Trillion Dollar War: The True Cost of the Iraq Conflict."

(5) U.S. considers Curbs on Speculative Trading of Oil

"My firm belief is that we must aggressively use all existing authorities to ensure market integrity," Gary Gensler, the chairman of the Commodity Futures Trading Commission, said in a statement.

By EDMUND L. ANDREWS

Published: July 7, 2009

http://www.nytimes.com/2009/07/08/business/08cftc.html?_r=1&hp

WASHINGTON - Reacting to the violent swings in oil prices in recent months, federal regulators announced on Tuesday that they were considering new restrictions on "speculative" traders in markets for oil, natural gas and other energy products.

The move is a big departure from the hands-off approach to market regulation of the last two decades. It also highlights a broader shift toward tougher government oversight under President Obama.

Since Mr. Obama took office, the Justice Department has stepped up antitrust enforcement activities, abandoning many legal doctrines adopted by the Bush administration.

The Obama administration is also proposing an overhaul of financial regulation that would include tougher capital requirements for big banks, tighter regulation of hedge funds and a new consumer protection agency with broad power to regulate credit cards, mortgages and other consumer lending.

In the case of oil and gas trading, regulators made it clear that they were willing to move, without waiting for Congress to act on Mr. Obama's overhaul, invoking their existing powers.

The Commodity Futures Trading Commission said it would consider imposing volume limits on trading of energy futures by purely financial investors and that it already has adopted tougher information requirements aimed at identifying the role of hedge funds and traders who swap contracts outside of regulated exchanges like the New York Mercantile Exchange.

"My firm belief is that we must aggressively use all existing authorities to ensure market integrity," said Gary Gensler, chairman of the commission, in a statement. He said regulators would also examine whether to impose federal "speculative limits" on futures contracts for energy products.

Much of Mr. Gensler's announcement was focused on precise issues well within his agency's authority, suggesting that he was serious about seeking changes. But his proposals could encounter fierce opposition from big banks and Wall Street firms, which are each big traders in the commodity markets and manage big investment funds focused on commodities. Oil prices hit a record high of $145 a barrel last summer, then plunged to $33 a barrel last December and have since bounced back to more than $60.

Much of the wild swings over the last year were caused by chaos in the global financial system, as banks and much of Wall Street came perilously close to collapse last September and the global economy fell into the most severe recession in decades.

But a growing number of critics have blamed those who are betting on the direction of energy prices for some of the extreme volatility.

"It is the regulatory authority's business to make sure the markets work," said Edward L. Morse, head of research at LCM Commodities, a brokerage in New York. "If there's a lesson of that last few years, it's that the markets haven't been functioning as well as they should have been."

Analysts said regulators face huge challenges in distinguishing normal volatility, which is always high during a chaotic economic period, from speculative swings propelled by investors seeking purely financial gains who end up distorting energy prices.

Mr. Gensler appears focused on two basic goals. The first is to limit the volume of trading by purely financial investors, the "speculators," as opposed to businesses like airlines or oil companies that consume or produce oil and want to minimize their exposure to big changes in price. But according to data compiled by the Commodity Futures Trading Commission, other noncommercial traders accounted for almost one-fifth of the activity in several major oil and gas products for June.

The government already imposes speculative limits on agricultural commodities like corn and wheat. But for energy products, the limits are left to exchanges like the New York Mercantile Exchange. Mr. Gensler said the limits that have been set in the past have never been aimed at reducing speculative excesses, and financial traders often receive exemptions.

The government's second goal is to shed more light on who the players really are.

The commission also announced that it will pull back part of the veil on the oil and gas markets, publishing much more detailed information about the aggregate activity of hedge funds and tapping into new information about traders who swap energy contracts outside of traditional exchanges.

Mr. Gensler's proposals are likely to be opposed by the banks and Wall Street firms that arrange swap contracts in the commodity markets and operate funds that invest in commodities.

Mr. Gensler is in some ways a surprising person to lead the charge for tougher regulation. A former investment banker and a high-ranking Treasury official during the Clinton administration, he was among those who defeated efforts in the late 1990s to regulate financial derivatives, an effort led by one of Mr. Gensler's predecessors at the futures trading commission, Brooksley E. Born.

Several important Senate Democrats opposed Mr. Gensler because they suspected he was too friendly to industry. Senator Byron L. Dorgan, Democrat of North Dakota, voted against Mr. Gensler's nomination and said on Tuesday that he wanted to see the chairman follow through with actual rules.

"I welcome the announcement," Mr. Dorgan said in a written statement. "but it is only concrete action that will prove the C.F.T.C. is finally an effective cop on the beat."

The commission is an independent agency that regulates the trading of futures contracts for commodities including wheat, corn, oil, precious metals and currencies. For years it has followed a deregulatory path that rarely interfered the growing markets under its jurisdiction.

A future is a contract to buy or to sell a particular volume of a commodity by a particular date. Futures contracts were created to help farmers shield themselves from price volatility for their crops, and speculators absorb that risk by buying contracts that allow them to bet on price swings. Futures are now used to trade a wide variety commodities, including oil, gas, precious metals, Treasury bonds and foreign currencies.

(6) ECB not monetizing public debt, but otherwise running a loose monetary policy

Hard talk, soft policy

The ECB has run as loose a monetary policy as other central banks have. It is just rather more coy about it

Jul 2nd 2009

From The Economist print edition

http://www.economist.com/businessfinance/displaystory.cfm?story_id=13952926

THE global economy has stopped sinking and central bankers are pausing for breath. As The Economist went to press on July 2nd, the European Central Bank (ECB) was expected to keep its main "refi" interest rate unchanged, at 1%. The ECB's rate-setting council has been chary of cutting rates closer to zero as policymakers elsewhere have done. Its reluctance to do more has attracted criticism, only some of it fair.

The focus on policy rates may put the ECB in a bad light but these are no longer a reliable guide to the overall monetary-policy stance. If you look at market rates the policy stance in the euro area is as loose as anywhere else, because of stimulus decisions taken at the height of the financial crisis. In October the ECB decided it would offer banks as much cash as they wanted, at a fixed interest rate (the refi rate) and against a wider range of security than usual, for up to six months. It also scheduled extra three-month and six-month refinancing operations, so that banks could come more often to the central-bank well.

In May the ECB council agreed to extend the offer of fixed-rate cash to one year. At the first 12-month refinancing operation on June 24th, euro-zone banks borrowed a staggering €442 billion ($620 billion). With so much cash splashing around, the charge that banks make for overnight loans has stayed well below the refi rate, with some occasional spikes (see chart). Since the €442 billion cash injection, overnight interest rates in the euro zone have fallen to a record low of 0.3%, below those in Britain and scarcely higher than in America. Indeed banks can now borrow more cheaply in euros than in pounds for either three, six or 12 months.

Before the crisis, the ECB would aim to keep overnight interest rates close to the refi rate. Since it moved to unlimited fixed-rate funding, the central bank has been content to allow the overnight rate to drift much lower than the policy rate. In effect, the bank now has a target range for short-term rates: the upper bound is the 1% refi rate and the lower bound is the rate the central bank pays on banks' deposits with it, currently 0.25%. The deposit rate has been a better guide to the policy stance than the refi rate has. ECB-watchers and markets understand this, even though it has not been spelt out in so many words by Jean-Claude Trichet, the ECB's president.

Why be so coy? One concern is that by playing up the fight against recession, the ECB could appear to have lost sight of inflation. Keeping the totemic refi rate above zero may be seen as necessary to prevent inflation expectations from drifting up. There may also be a reluctance to admit that such a gushing provision of liquidity has altered the policy stance. Since the start of the crisis in August 2007, the ECB has insisted the two are separate. "They are bold on liquidity because they don't see it as mainstream monetary policy," says Charles Wyplosz of the Graduate Institute in Geneva. Yet the terms of its refinancing for banks have clearly led to looser monetary conditions.

Another reason for obfuscation is to mask differences among rate-setters. Monetary-policy hawks can reassure themselves that the policy rate is not too low. Doves are happy that effective interest rates are nearer to zero. And Mr Trichet can claim there is a "consensus". The terms of the truce make it easier to reverse policy when the time comes. By restricting its liquidity support, the ECB will be able to guide overnight interest rates towards 1% without having to alter its policy rate.

Because the ECB has had one eye on the exit since the start of the crisis it has earned plaudits from those who think the Federal Reserve has been incautious. That judgment is too kind to the ECB, which could afford to have scruples about the medium term because other central banks were taking more care of the present. It is also unfair on the Fed, which had to stand in place of America's collapsed shadow-banking system. When the economy was in most danger, the ECB could have cut rates more quickly. "If the ECB had been more proactive, the recession would have been less bad," says Marco Annunziata of UniCredit. The striving for consensus militated against bolder action.

Another criticism is that the ECB has not done more to ease credit conditions by buying government and corporate bonds outright, as the Bank of England and the Fed have done. Its scheme to purchase up to €60 billion of the safest bank bonds, launched this month, is modest by comparison. Mr Trichet believes that focus makes sense, as euro-zone businesses and homebuyers rely more on banks than capital markets for credit. In America, capital markets matter more, so the Fed had to get its hands dirtier by buying commercial paper and mortgage-backed securities.

The ECB is also loth to soil its hands with public debt, though banks flush with central-bank cash are keen buyers of such low-risk assets. If this is monetisation at a remove, so be it. The central bank keeps its independence from government and does not have to worry about selling bonds back into the market once the interest-rate cycle turns. "If you want to stay clean, the exit strategy is easier," says Thomas Mayer of Deutsche Bank.

But offering ample liquidity support to banks gets you only so far. By buying assets, the Fed allows American banks to shed them, freeing scarce capital for fresh lending. As losses mount in the euro zone, capital may trump liquidity in determining credit growth. Lending to the private sector slowed to 1.8% in the year to May, an all-time low. Until credit starts to revive, the ECB cannot think about tightening policy. It may yet have to be bolder.

(7) Funding shortfall forces UN to slash delivery to millions of starving people

From: David West <dgwest7@gmail.com> Date: 01.08.2009 09:02 AM

http://news.bbc.co.uk/2/hi/in_depth/8179250.stm

Page last updated at 19:40 GMT, Friday, 31 July 2009 20:40 UK

'Dire shortage' at UN food agency

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The WFP has suspended some of its aid deliveries

The UN food agency says it is facing critical funding shortages that have forced it to cut aid deliveries to millions of people facing starvation.

The World Food Programme (WFP) said it could have to close parts of its airway, used to fly aid workers to humanitarian trouble-spots.

Deliveries have already been suspended to north Uganda, Ivory Coast and Niger.

The organisation has issued similar warnings in the past when facing funding shortages.

The UN Humanitarian Air Service (UNHAS), operated by WFP, has a budget for 2009 of $160m (£96m) but has received less than $90m in fees and contributions this year.

WFP spokesman Greg Barrow said UNHAS was "a vital component of humanitarian operations across the world".

"But because of a funding shortfall there is now a grave risk that the air service ... could literally be grounded in the next few weeks due to a lack of funds," he said.

Closures

WFP said funding for the airline's Chad service will run out on 15 August and needs $6.7m (£4m) to continue flying to the end of the year.

Spokeswoman Emilia Casella said the single-plane service flies an average of 4,000 humanitarian passengers to and from Chad each month.

She said the cancellation would not stop food deliveries taking place, but would mean that aid workers would not be able to reach communities that need them most.

The service supplying Liberia, Sierra Leone and Guinea needs $3.3m (£1.9m) to continue flying to the end of the year.

Pierre Carrasse, Chief of WFP's Aviation Branch, asked how workers could reach the often remote areas affected by conflict without the airline.

"How will WFP reach the hungry? How will doctors reach their patients? How will people have clean water if the engineers who help to build wells can't get there," he asked.

Shortages have already led to UNHAS closing its service in Ivory Coast in February.

The Niger service, also suspended that month, is expected to resume in August after a recent donation from the UN Common Emergency Relief Fund.

The UN says 102 million people in 78 countries received food aid last year.