55 34.4 Americans used Food Stamps in May; but bailed-out AIG head to earn $7 million

34.4 Americans used Food Stamps in May; but bailed-out AIG head to earn $7 million

(1) China's Miracle Economy: The Government Owns the Banks Rather than the Reverse
(2) Americans seek Health Care in Mexico
(3) Global Trade Collapsing; China replaces US as Japan’s largest export destination
(4) 38.8 million Americans in poverty - not counting the 2009 layoffs
(5) 34.4 Americans used Food Stamps in May
(6) Bailed-out AIG head to earn $7 million annually

(1) China's Miracle Economy: The Government Owns the Banks Rather than the Reverse

From: Ellen Brown <ellenhbrown@gmail.com> Date: 18.08.2009 08:39 AM

China's Miracle Economy: Have the Chinese Become the World's Greatest Capitalists?

http://www.huffingtonpost.com/ellen-brown/chinas-miracle-economy-ha_b_260409.html

Ellen Brown

Posted: August 17, 2009 03:27 PM

    "I don't care if it's a white cat or a black cat. It's a good cat so long as it catches mice." -- Deng Xiaoping, who opened China to foreign investment after 1978

China is being called a "miracle economy." It seems to have decoupled from the rest of the world, preserving an 8% growth rate while the rest of the world sinks into the worst recession since the 1930s. How is that phenomenal growth rate possible, when other countries relying heavily on exports have suffered major downturns and remain in the doldrums? Economist Richard Wolff skeptically observes:

    We now have a situation in the world where we have a global capitalist crisis. Everywhere, consumption is down. Everywhere, people are buying fewer goods, including goods from China. How is it possible that in that society, so dependent on the world economy, they could now have an explosive growth? Their stock market is now 100 percent higher than at its low -- nothing remotely like that hardly anywhere in the world, certainly not in the United States or Europe. How is that possible? In order to believe what the Chinese are saying, you would have to agree that in a matter of months, at most a year, no more, they have been able to transform their economy from an export-based powerhouse to a domestically focused industrial engine. Nowhere in the world has that ever taken less than decades.

Perhaps, and the United States has certainly failed to pull that result off with its own stimulus plan; but there is a notable difference between its stimulus plan and China's. What Wolff calls a "global capitalist crisis" is actually a credit crisis; and in China, unlike in the U.S., credit has been flowing freely again to businesses and industry. State-owned banks have massively increased lending, with local governments and state enterprises borrowing on a huge scale. The People's Bank of China estimates that total loans for the first half of 2009 were $1.08 trillion, 50% more than the amount of loans Chinese banks issued in all of 2008. The U.S. Federal Reserve has also engaged in record levels of lending, but its loans have gone chiefly to bail out the financial sector itself, leaving Main Street high and dry.

The Secret of China's Success

Samah El-Shahat is a presenter for Al Jazeera English who has a doctorate in developmental economics from the University of London. In an August 10 article titled "China Puts People Before Banks," she writes:

    China is the one leading economy where the divide -- the disconnect between its financial sector and the world normal Chinese people and their businesses inhabit -- doesn't exist. Both worlds are booming again and this is due to the way the government handled its banks. China hasn't allowed its banking sector to become so powerful, so influential, and so big that it can call the shots or highjack the bailout. In simple terms, the government preferred to answer to its people and put their interests first before that of any vested interest or group. And that is why Chinese banks are lending to the people and their businesses in record numbers.

In the U.S. and the U.K., by contrast:

    [T]he financial sector is booming, while the world of normal people seems to be going from bad to worse, unemployment is high, businesses are folding and house foreclosures are still taking place. Wall Street and Main Street might as well be existing on different planets. And this is in large part because banks are still not lending money to the people. In the UK and US, banks have captured all the money from the taxpayers and the cheap money from quantitative easing from central banks. They are using it to shore up, and clean up their balance sheets rather than lend it to the people. The money has been hijacked by the banks, and our governments are doing absolutely nothing about that. In fact, they have been complicit in allowing this to happen.

Cracks in the Dike?

The Chinese economy is not perfect. Chinese workers are now complaining of too much capitalism, since they are having to pay for housing, health care and higher education formerly picked up by the State. The push to make profits, particularly from foreign investment capital, has encouraged speculative ventures, with a great deal of money going into high-rise apartments and other real estate developments that most people cannot afford. And state-owned businesses and large corporations are still getting most of the loans, because the banks have been told to tighten their lending standards, and these larger entities are safer credit risks. But efforts are being made to make more loans available to medium-sized and small businesses, and China's stimulus plan seems to be working well overall.

Wolff thinks China's "miracle" is a bubble that is about to burst, with catastrophic consequences. But historically, when bubbles have collapsed suddenly, it has generally been because they were punctured by speculators. When the Japanese stock market bubble burst in 1990, and when other Asian countries followed in 1998, it was because foreign speculators were able to attack their currencies with exotic derivatives. The victims tried to defend by buying up their own national currencies with their foreign currency reserves, but the reserves were soon exhausted. Today, China has accumulated so much in the way of dollar reserves that it would be very difficult for speculators to do the same thing to the Chinese stock market. A gradual stock market decline due to natural market forces is something an economy can take in stride.

Economic Role Reversal

To the extent that China's stimulus plan is working better than in the U.S. and the U.K., this seems to be because the government is using the banks for public ends, rather than allowing the banks to use the government for private ends. The Chinese government can operate the banks' credit mechanisms in a way that serves public enterprise and trade because it actually owns the banking sector, or most of it. Ironically, that feature of China's economy may have allowed it to get closer to the original American capitalist ideal than the United States itself.

Politically, China is often referred to as communist, although it has never really been communist as defined in the textbooks and is far less so now than formerly. As Deng Xiaoping famously pointed out, the name isn't as important as whether the job gets done; and China's economy today provides a framework that effectively encourages entrepreneurs. Jim Rogers is an expatriate American investor and financial commentator based in Singapore. He wrote in a 2004 article titled "The Rise of Red Capitalism":

    Some of the best capitalists in the world live and work in Communist China....No matter how long China's leaders persist in calling themselves Communists, they seem quite intent on creating the world's dominant capitalist economy.

Five years later, the Chinese have evidently succeeded in this endeavor; and they have done it by keeping a brake on irresponsible bank speculation and profiteering by keeping a leash on their banking sector. While the Chinese have been busy perfecting their own brand of capitalism, the U.S. has sunk into what Rogers calls "socialism for the rich." When ordinary businesses go bankrupt, they are left to deal with the asphalt jungle on their own. But when banks considered "too big to fail" go bankrupt, we the taxpayers pay the losses while the banks' owners keep the profits and are allowed to continue speculating with them.

The bailout of Wall Street with taxpayer money represents a radical departure from capitalist principles, one that has changed the face of the American economy. The capitalism we were taught in school involved Mom and Pop stores, single-family farms, and small entrepreneurs competing on a level playing field. The government's role was to set the rules and make sure everyone played fair. But that is not the sort of capitalism we have today. The Mom and Pop stores have been squeezed out by giant chain stores and mega-industries; the small private farms have been bought up by multinational agribusinesses; and Wall Street banks have gotten so powerful that Congressmen are complaining that the banks now own Congress. Giant banks and corporations have rewritten the rules for their own ends. Healthy competition has been replaced by a form of predator capitalism in which small fish are systematically swallowed up by sharks. The result has been an ever-widening gap between rich and poor that represents the greatest transfer of wealth in history.

The Best of Both Worlds

The Chinese solution to a failed banking system would be to nationalize the banks themselves, not just their bad debts. If the U.S. were to follow that example, we the people could get something of value for our investment -- a stable and accountable banking system that belongs to the people. If the word "nationalize" sounds un-American, think "publicly-owned and operated for the benefit of the public," like public libraries, public parks, and public courts.

We need to get our dollars out of Wall Street and back on Main Street, and we can do that only by taking the punch bowl away from our out-of-control private banking monopoly. We need to reclaim "the full faith and credit of the United States" as a monopoly of the people of the United States. If the Chinese can have the best of both worlds, so can we. ==

Ellen,

> When the Japanese stock market bubble burst
> in 1990, and when other Asian countries followed
> in 1998, it was because foreign speculators were
> able to attack their currencies with exotic derivatives

I know this happened in the case of the Asia Crisis of 1997; and I wondered if it happened in Japan about 1990. What evidence is there of that?

Peter

(2) Americans seek Health Care in Mexico

From: World View <ummyakoub@yahoo.com>  Date: 18.08.2009 10:37 AM

As U.S. health row rages, many seek care in Mexico
Tim Gaynor
Thu Aug 13, 2009
http://www.reuters.com/article/domesticNews/idUSTRE57C40C20090813?sp=true

NACO, Mexico (Reuters) - Retired police officer Bob Ritz has health insurance that covers his medical and dental care in the United States.

But every few months he drives from his home in Tombstone, Arizona, to this small town in northern Mexico to avoid the healthcare costs that aren't paid by insurance.

"I pay $400 a month for my health insurance, and it's still cheaper to come to Mexico," says Ritz, 60, as he stood outside a sun-bleached pharmacy in Naco, a few hours drive southeast of Phoenix.

President Barack Obama is locked in a bitter fight to overhaul U.S. healthcare, as he seeks to increase the number of Americans getting coverage and drive down costs of around $2.5 trillion a year.

Republican critics charge that Obama and his Democratic allies in Congress are seeking a government takeover of healthcare that will drive up the budget deficit.

With Washington bickering over how to reform the system and contain its spiraling costs, many Americans like Ritz simply head to Mexico to get care they can afford.

The total number making the trip is unclear. But a recent study by the UCLA Center for Health Policy Research estimated that nearly 1 million people from California alone seek medical, dental or prescription services in Mexico each year.

Some making the trek have little or no medical coverage. Others like Ritz are on fixed incomes and want to avoid so-called co-pays and deductibles charged by U.S. insurers on top of policies that routinely cost from a few hundred dollars to a few thousand each month.

"The very wealthy can afford whatever they want, the very poor get it through aid, but the working and the middle-class have to struggle to pay insurance," said Ritz, who worked as a police officer in Chicago for 28 years.

"I'm very lucky to live near enough to Mexico to get good healthcare at a reasonable price," he added.

BROKEN BONES AND BRONCHITIS

Healthcare reform is the flagship domestic policy drive of Obama's first year in office.

He wants coverage for around 46 million uninsured Americans and to rein in rising medical costs, and regulate insurers that already provide care to millions more.

Republican opponents say Obama's plan amounts to socialism by stealth and argue that its trillion-dollar price tag will hurt the economy as the United States remains mired in the worst recession in decades.
While the bitter row continues to rage at town hall meetings across the United States, signs of the U.S. system's failings are visible in Mexican border cities, where cut-price pharmacies, dental clinics and doctors' surgeries vie for business from Americans who can't afford treatment at home.

In Tijuana, where medical tourism from neighboring San Diego is big business, clinics offer operations ranging from cut-rate cosmetic procedures to hysterectomies and bariatric surgery to curb obesity.
"I waste up to four hours coming to an appointment, but it's worth it as we'll save thousands of dollars," said Beatriz Iturriaga, a 26-year-old mother of two from Eastlake, south of San Diego, who paid $6,500 for bariatric surgery at a Tijuana clinic that would cost up to $40,000 stateside.

At the other end of the cost spectrum in Naco, Mexican physician Sixto de la Pena Cortes charges the 15 or so Americans that trek to his clinic-cum-pharmacy each week $20 for a check-up -- the cost of an average co-pay in the United States.

"Most common (ailments) are bronchitis, pneumonia and stomach problems," said de la Pena Cortes, 62, who said he has also set broken bones and arranged for an appendix to be removed at a hospital in nearby Agua Prieta at a cost of around $2,000.

(Additional reporting by Lizbeth Diaz in Tijuana and Julian Cardona in Ciudad Juarez; editing by Eric Beech)

(3) Global Trade Collapsing; China replaces US as Japan’s largest export destination

From: chris lenczner <chrispaul@netpci.com>  Date: 21.08.2009 02:08 AM

Global Trade Collapsing, China Now Japan's Top Trade Partner<= 20.4%/total>

Submitted by Tyler Durden on 08/20/2009

http://www.zerohedge.com/users/tyler-durden

The Japan External Trade Organization has released its latest trade figures, which paint a grim picture for foreign trade by the world's second largest economy. Year to date imports have dropped by 31.9% to $252.9 billion, while exports have plunged 36.8% to $252.2 billion. Most stunning is the disclosure on trade flows with the United States: exports to the US have dropped by 43.5% to $40.5 billion, resulting in Japan's largest positive trade balance. Another development is that China has now replaced the US as Japan's primary trade destination. However that is not saying much: trade with China has declined for the 8th consecutive month. The last fact is among the primary reasons why the Chinese Central Bank has blown a credit bubble of epic proportions in order to mitigate the unprecedented collapse in Chinese trade with its traditional trade partners.
To make up for the estimated 20% decline in Chinese exports, and in order to "maintain" the artifical minimum 8% growth of the economy, the Chinese bank has to redirect consumption to internal sources of demand, which can only be achieved by providing virtually free credit. The problem with that is that practically all of mainland China has taken the free cash and invested it in the stock market. The eventual collapse of this fake liquidity transfer will be one for the ages.

In the meantime, JETRO's notes the following on Japanese-Chinese trade relations.

    Overview of Japan-China trade in the first half of 2009
    Japan’s trade with China posted negative growth (year-on-year) for eight consecutive months, from November 2008 to June 2009. The decline was attributed to China’s economic slowdown and a drop in external demand.

    In the first quarter of 2009, imports and exports were down across the board due to weakened economies in Japan and China, as well as a build-up of inventories in China as external demand fell off.

    The second quarter, however, saw an increase in exports of some machinery-related products, fueled by increased infrastructure investment in China due to the government’s 4-trillion-yuan (approximately 56 trillion yen) economic stimulus package. A recovery was also seen in exports of parts and materials used in production of finished goods for sale in China, reflecting growing demand in the country for home appliances in part due to the government’s consumption promotion measures such as the “Home Appliances to the Countryside” subsidy program. In addition, imports of some home appliances and food products showed signs of recovery in the quarter.

    The drop in Japan’s trade with China (with falls in both imports and exports) was smaller than that for the nation’s overall trade. As a result, the share of Japan-China trade rose to 20.4% of Japan’s total trade, the highest level ever (on a semi-annual basis). Japan’s exports to China also set a record (also on a semi-annual basis), making the country Japan’s largest export destination and eclipsing the US for the first time.

And here is the summary for year-to-date exports and imports as presented by JETRO.

(4) 38.8 million Americans in poverty - not counting the 2009 layoffs

http://www.wsws.org/articles/2009/aug2009/cens-a21.shtml

Initial jobless claims rise unexpectedly
2008 US Census shows sharp increase in poverty
By Tom Eley
21 August 2009

When 2008 census data is released next month, it is expected to show a dramatic increase in the number of Americans living in poverty and without health insurance, according to Rebecca Blank, undersecretary of economic affairs for the Commerce Department.

The number living below the official poverty threshold increased in 2008 by 1.5 million people to 38.8 million, a number equivalent to 12.7 percent of the population, the census is expected to show.

These numbers are not yet final, and Blank indicated the report could portray an even bleaker picture upon its September 10 release. “There’s no question that 2008 economically was a much worse year than 2007,” she told the Associated Press. “The question is how much and how bad.”

The report will also reveal that the ranks of the uninsured increased in 2008, a result of unemployment and the scrapping of employee-sponsored healthcare plans, although Blank did not provide early statistics.

The forthcoming census data does not measure the growth in poverty that has taken place in 2009, which has seen massive job loss, particularly in the first months of the year. Blank has estimated that the official poverty rate could rise to 14.8 percent, more than one in seven Americans, should the unemployment rate rise to 10 percent, as many economists forecast.

The official US poverty rate is based on income thresholds. The Census Bureau counts a family of four as impoverished if its pretax income falls below $21,660; for an individual, the figure is $10,830. A more accurate measure of poverty, preferred by many sociologists and advocacy groups, places the threshold at 200 percent of the official measure. Using this guide, New York state’s 2007 official poverty rate of 14.5 percent becomes 31.9 percent, for example.

The poverty rate is telling, but it is far from the only measure of the impoverishment of broad sections of the population. According to the Center for American Progress, between June 2007 and December 2008, personal wealth declined in the US by nearly 23 percent, the sharpest decline on record—far more than the 12 percent decline triggered by the oil crisis of 1973-1974. Family wealth declined by a similar proportion, wiping out some $15 trillion.

Much of this decline in wealth has come from the collapse of housing values, which have fallen by about one third on average since the start of the recession.

New data suggests the housing market has yet to hit bottom. The Mortgage Bankers Association (MBA) released a report on Thursday revealing a record high level of home mortgages in foreclosure or delinquency, 13.6 percent.

Tellingly, the MBA report reveals that foreclosures and delinquencies among holders of subprime and adjustable-rate mortgages actually fell during the spring. But this was more than offset by foreclosures among prime mortgages, driven by layoffs and wage cuts among sections of the population that were, until recently, relatively secure.

“It is unlikely we will see meaningful reductions in the foreclosure and delinquency rates until the employment situation improves,” MBA chief economist Jay Brinkmann noted.

But unemployment continues to mount. Initial jobless claims rose unexpectedly this week to 576,000 as employers continued to pare down their workforces, the Labor Department reported. Economists had expected a decline from last week’s number of 561,000. Meanwhile, those collecting long-term unemployment benefits for the week ending August 8 rose to 6.24 million. ...

(5) 34.4 Americans used Food Stamps in May

http://www.wsws.org/articles/2009/aug2009/food-a20.shtml

One in nine Americans uses food stamps
By Tom Eley
20 August 2009

One in nine Americans relied on food stamps in May, the highest proportion ever, according to recently released data from the US Department of Agriculture (USDA). In all, 34.4 million people used the Supplemental Nutrition Assistance Program (SNAP), a federal program that provides assistance to low-income people, an increase of more than 2 percent from the previous month, and a staggering increase of 6 million over the past year.

May’s increase was the sixth consecutive month that set a new record in food stamp use. Government food assistance increased in every state, with Florida registering the sharpest gain at 4.2 percent.

The year-over-year percentage increase in food stamp use is more striking, with 13 states, representing every region of the country, registering a spike of more than 25 percent. These were Utah (45.5 percent), Nevada (39 percent), Idaho (36.3 percent), Washington (34.5 percent), Florida (34.2 percent), Vermont (33.6 percent), Wisconsin (31.3 percent), Arizona (29.7 percent), Colorado (28.9 percent), Georgia (28.3 percent), Maryland (27.2 percent), Massachusetts (25.3 percent), and Oregon (25 percent).

“Food stamp enrollment is rising because the economy is having a devastating impact on low-income families and they need this program to eat,” said Stacy Dean of the Center on Budget and Policy Priorities said. “Every single state has been affected.”

The food stamp program is largely funded by the federal government and administered by the states. Historically, recipients could redeem stamps or coupons for food assistance at grocery stores, but in recent years paper stamps have been phased out in favor of a debit card system called Electronic Benefit Transfer.

The program aims to assist the desperately poor. According to the USDA, the average gross monthly income of food stamp-receiving households was $640, with nearly 80 percent of all benefits going to households with children.

The program provides an average of $133 monthly per person requesting food assistance. By way of comparison, according to the USDA’s own estimates, a “low-cost” monthly nutritional scheme for a single teenage boy requires a minimum of $220 spending on food per month.

Federal food assistance for the poor was a Great Society measure created during the the Lyndon Johnson administration (1963-1969). Since the late 1970s, it has weathered round after round of cuts at the hands of both Democratic and Republican administrations and congresses, who claimed to be creating a “culture of responsibility” among the poor. ...

“People are desperate,” said Gary Madden, a charity worker who assists people in gaining access to food stamps in San Bernardino County, California. “People calling now are saying things like ‘I’ve never asked for help in my life. I don’t know what I’m going to do. I’ve lost my job and I’m about to lose my home.’ More men are calling. Families are doubling up in homes.”

“Callers are saying, ‘bank bailouts, auto company bailouts, where’s my bailout?’,” Madden told BlackVoiceNews.com.

(6) Bailed-out AIG head to earn $7 million annually

http://www.wsws.org/articles/2009/aug2009/aig-a20.shtml

New AIG head to get at least $7 million annually
By Jerry White
20 August 2009

In a regulatory filing Monday, American International Group (AIG) disclosed that it would pay its new CEO, Robert H. Benmosche, at least $7 million a year. The 65-year-old former head of the giant insurance and investment firm MetLife will get $3 million in cash and $4 million in stock annually, and be eligible for another $3.5 million in stock as part of an incentive plan.

According to the filing with the Security and Exchange Commission (SEC), the pay package has already received “approval in principle” from Kenneth Feinberg, the Obama administration official who oversees compensation for executives at seven large financial concerns bailed out by the government. AIG received more than $180 billion in taxpayer-funded support—the largest of all the Wall Street bailouts.

Benmosche took over AIG on August 10, replacing Edward Liddy, a member of the board of directors of Goldman Sachs and former head of Allstate. Liddy was appointed by President Bush’s treasury secretary, Henry Paulson, the former CEO of Goldman Sachs, to pay off AIG’s debts and restructure the company.

Of the $180 billion in government aid provided to AIG, at least $13 billion found its way to Goldman Sachs, which held credit default swaps with AIG to insure it against the gambling losses the politically connected Wall Street firm suffered on the subprime mortgage market.

In March 2009, public outrage erupted over Liddy’s decision to pay up to $165 million in executive bonuses, including retention bonuses to the London-based financial unit that was involved in the credit default swaps that bankrupted the company. In response Liddy gave up his bonus and announced he would work for a dollar a year as a “public service.” However, he retained at least $3 million in stocks from Goldman Sachs and was paid nearly half a million in compensation for air travel, housing and other expenses.

Despite the populist posturing by Democratic and Republican politicians, including President Obama, the AIG bonuses went through. It was later revealed that the head of the Senate Banking Committee, Connecticut Democrat Christopher Dodd—who first denied, then admitted to amending earlier legislation to allow the AIG bonuses—had received $160,000 in campaign contributions from employees of AIG.

At the time, White House economic advisor Lawrence Summers insisted that the government, its 80 percent ownership of AIG notwithstanding, could do nothing about the bonuses. “We are a country of law,” he proclaimed. “These are contracts. The government cannot just abrogate contracts.”

Summers and other Obama administration officials had no problem, however, in abrogating the contracts of tens of thousands of auto workers who saw their wages, health care and pension benefits slashed as a result of the White House’s forced bankruptcies of General Motors and Chrysler.

Before leaving, Liddy said AIG would need to pay his successor significantly more in order to retain a “well-qualified individual.” CNNMoney.com reported, “Rep. Elijah Cummings, D-Maryland, who has been outspoken about his criticism of AIG’s bonus payments, has said AIG should be led by an executive paid a competitive salary who can help ensure the company pays back its sizeable debt to taxpayers.”

In addition to his compensation from AIG, Benmosche will retain 500,000 shares and 2.1 million options in his former company MetLife—estimated to be worth $94 million at current share prices. Because of this, he will not receive any bonuses in connection with any deals between MetLife and AIG, the company said in its filing.

Earlier this month, AIG reported second-quarter net income of $1.8 billion, or $2.30 a share, after six losing quarters in a row. A year ago, the company lost $5.4 billion, or $41.13 a share. Like the rest of the Wall Street banks, AIG’s first quarterly profit since late 2007 is the result of the massive government bailout and the resumption of much of the reckless speculation that precipitated the crisis. AIG shares rose almost 22 percent after the earnings report.

While tens of millions of workers continue to lose their jobs, homes and see public services slashed to pay for the multi-trillion dollar Wall Street bailout, the huge payout to AIG’s new CEO, along with the record bonuses going to banking and other corporate executives is an indication of who will benefit from the “economic recovery” the Obama administration has pronounced.