U.S. companies are cozier with the NSA than previously thought

Newly disclosed documents reveal the agency has “under cover” spies working at some corporations

and , ProPublica

U.S. companies are cozier with the NSA than previously thought
This originally appeared on ProPublica.

ProPublica Newly disclosed National Security Agency documents suggest a closer relationship between American companies and the spy agency than has been previously disclosed.

The documents, published last week by The Intercept, describe “contractual relationships” between the NSA and U.S. companies, as well as the fact that the NSA has “under cover” spies working at or with some U.S. companies.

While not conclusive, the material includes some clear suggestions that at least some American companies are quite willing to help the agency conduct its massive surveillance programs.

The precise role of U.S. companies in the NSA’s global surveillance operations remains unclear. Documents obtained by Edward Snowden and published by various news organizations show that companies have turned over their customers’ email, phone calling records and other data under court orders. But the level of cooperation beyond those court orders has been an open question, with several leading companies, such as Apple, Google, Microsoft and Facebook, asserting that they only turn over customer information that is “targeted and specific” in response to legal demands.

The documents do not identify any specific companies as collaborating with the NSA. The references are part of an inventory of operations, of which the very “fact that” they exist is classified information. These include the:

 

“SIGINT” in NSA jargon is signals intelligence, the intercepting of data and voice communications. According to the document, “contractual relationships” can mean that U.S. companies deliberately insert “backdoors” or other vulnerabilities that the NSA then uses to access communications. The existence of deals to build these backdoors is secret:



 

The NSA’s efforts to break encryption and establish backdoors were disclosed last year, but left open the possibility that the companies didn’t know about the activities. This new disclosure makes clear that some of those relationships are cooperative.

The documents also describe a program codenamed Whipgenie. Its purpose is to safeguard one of the NSA’s most important secrets, the “relationships” between “U.S. Corporate partners” and the agency division that taps fiber optic cables. It refers to the dealings with U.S. companies as ECI — exceptionally controlled information: It says:

 

The Whipgenie document details one company’s involvement in “domestic wire access collection” – an apparent reference to eavesdropping inside the United States. Under current law, such surveillance is only allowed after the government obtains a court order. But the document said that at least one “Corporate Partner” was involved in a “cooperative effort” to break into U.S. communications. This information, it says, is itself classified and should be closely guarded:

 

The Whipgenie document makes clear that the program being shielded from public view involves data that moves through the United States. (Emails and other information from one foreign address to another frequently hopscotch across international borders as companies use the cheapest routing for traffic.) The document tells NSA officials that they should protect:

 

In 2008, Congress authorized the agency to collect information that traveled through the United States. But the agency is supposed to discard entirely domestic communications that it picks up “incidentally.”

A draft document indicates that the NSA targets U.S. manufacturers of commercial equipment used for communications. The document obliquely refers to covert operations by NSA agents aimed at what is termed “specific commercial entities.” Those companies are identified in the document only by the letters: A, B, and C.

 

Sentry Owl, the program that protects this particular bit of spying, is among the most closely guarded secrets in the intelligence community. Documents describe it as “Exceptionally Controlled Information” that can only be disclosed to “a very few select” people in government.

 

Sen. Dianne Feinstein and Rep. Mike Rogers, who head the congressional intelligence oversight committees, did not respond to requests for comment on whether they had been briefed on the program. Sen. Ron Wyden, an outspoken critic of NSA activities that impact U.S. residents, also declined to comment.

In a statement, NSA spokeswoman Vanee Vines said NSA surveillance is authorized by law and subject to multiple layers of oversight. She added: “It should come as no surprise that NSA conducts targeted operations to counter increasingly agile adversaries.”

 

http://www.salon.com/2014/10/19/u_s_companies_have_cozier_relationship_with_nsa_than_we_thought_partner/?source=newsletter

The American oligarchy

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18 October 2014

There is an unspoken rule in American politics, expressed ever more clearly in each election cycle, that the more important an issue is, the less it can be discussed—much less decided—by the election. The US military has embarked on a new war in the Middle East, democratic rights have been eviscerated, millions are without jobs, household incomes are falling, and a record number of people are being deported from the country. Yet, with the 2014 midterm election just 17 days away, none of these issues are being discussed.

What accounts for this hollowing-out of American politics and the transformation of elections into empty biennial rituals? As with all significant political transformations, these changes are rooted in deeper social processes. One does not have to look all too far to identify them.

Over the past several weeks, report after report has been released documenting the extraordinary growth of social inequality in the United States and throughout the world.

Late last month, Forbes magazine reported that the 400 richest people in the United States saw their wealth grow 14 percent over the past year. The following week, the Organization for Economic Cooperation and Development reported that global social inequality has eclipsed the pre-Great Depression highs of the 1920s.

This week, Credit Suisse reported that the top one percent of the world’s population control nearly half of all wealth, with the ultra-rich concentrated in the United States.

This was followed by the release of a paper by economists Emmanuel Saez and Gabriel Zucman showing that wealth in the US is increasingly monopolized not merely by the wealthiest 10 percent or even the top 1 percent, but by the top 0.1 percent. They concluded, “Virtually all the increase in the top 10 percent and top 1 percent shares over the last three decades is due to the rise in the top 0.1 percent share, from 7 percent in the late 1970s to 22 percent in 2012.”

Even US Federal Reserve Chair Janet Yellen, who is overseeing the continued handout of oceans of cash to the financial markets, felt compelled to warn of the “extent of and continuing increase in inequality in the United States.” She noted in remarks Friday, “By some estimates, income and wealth inequality are near their highest levels in the past hundred years, much higher than the average during that time span and probably higher than for much of American history before then.”

How can these vast changes in economic relationships not have had a profound and transformative impact on political life?

The historian Edward Gibbon once summed up the political form of the Roman Empire as “an absolute monarchy disguised by the forms of a commonwealth.” Taking our cue from his definition, we can say that the United States has become an oligarchy disguised by the outward, increasingly threadbare trappings of a democracy.

Whatever the pretense of “one person, one vote,” the fact is that the top 0.1 percent dictates policy and essentially selects the personnel tasked with carrying it out. A somewhat broader, still highly privileged and small, section of the population has some influence—the top 5 or 10 percent. The interests and concerns of the bottom 90 percent have absolutely no impact on government actions.

Money buys elections. The 2012 election, the most expensive election cycle in history, was decided by some $6.3 billion in campaign cash. An analysis of elections to the House of Representatives found that 93 percent were decided by which candidate raised the most money. In the 2004 elections, a stunning 98 percent of victorious candidates out-spent their opponents.

2014 is set to be the most expensive non-presidential election in US history, despite widespread popular indifference.

Not only do the politicians do the bidding of the wealthy, they are themselves increasingly numbered among the rich and super-rich. Earlier this year, the Center for Responsive Politics reported that, for the first time in history, most members of the US Congress are millionaires.

Not content with the power it already has, the US ruling class is moving to remove all remaining restraints on money in politics. In April, the United States Supreme Court issued a ruling removing the cap on the total amount of money individuals can contribute to political campaigns.

The financial oligarchy has used its unlimited political power and influence to divert an ever-greater share of the US economy to financial speculation and fraud. The Obama administration and the Federal Reserve, after bailing out the banks, have kept interest rates at zero for nearly six years, fueling a raging financial bubble.

The dictatorship of the wealthy is inextricably tied to the basic structure of the capitalist system. Economic life is totally subordinated to the insatiable profit demands of the giant banks and corporations, whose top executives account for a growing portion of America’s ultra-rich. As the Socialist Equality Party program states, “All the basic needs of the working class come into immediate and direct conflict with the dictatorship of the giant banks and financial institutions over every aspect of political and economic life.”

No progressive change—ending social inequality, guaranteeing the social and economic rights of working people, halting the drive to dictatorship, preventing a new world war—can be achieved without expropriating the vast fortunes of the financial aristocracy and nationalizing the banks and corporations under the democratic control of the working class, i.e., initiating the socialist restructuring of the US and world economy.

Andre Damon

 

http://www.wsws.org/en/articles/2014/10/18/pers-o18.html

Richest one percent controls nearly half of global wealth

By Andre Damon
17 October 2014

The richest one percent of the world’s population now controls 48.2 percent of global wealth, up from 46 percent last year, according to the most recent global wealth report issued by Credit Suisse, the Swiss-based financial services company.

Hypothetically, if the growth of inequality were to proceed at last year’s rate, the richest one percent for all intents and purposes would control all the wealth on the planet within 23 years.

The report found that the growth of global inequality has accelerated sharply since the 2008 financial crisis, as the values of financial assets have soared while wages have stagnated and declined.

“These figures give more evidence that inequality is extreme and growing, and that economic recovery following the financial crisis has been skewed in favour of the wealthiest,” commented Emma Seery, head of Inequality at Oxfam, the British anti-poverty charity. “This report shows that those least able to afford it have paid the price of the financial crisis whilst more wealth has flooded into the coffers of the very richest.”

The study revealed that the richest 8.6 percent of the world’s population—those with a net worth of more than $100,000—control 85 percent of the world’s wealth. Meanwhile, the bottom 70 percent of the world’s population—those with less than $10,000 in net worth—hold a mere 2.9 percent of global wealth.

The growth in inequality is bound up with a worldwide surge in paper wealth, fueled by the trillions of dollars pumped into the financial system by central banks via zero interest rate and “quantitative easing” policies. The total amount of global wealth grew by 8.3 percent over the past year, the highest increase ever recorded, hitting a total of $263 trillion. This year alone, the total wealth of the US grew by $12.3 trillion—about the same amount that was wiped out in the 2008 financial crash.

As the report noted, “The overall global economy may remain sluggish, but this has not prevented personal wealth from surging ahead during the past year. Driven by … robust equity prices, total wealth grew by 8.3% worldwide … the first time household wealth has passed the $250 trillion threshold.”

Credit Suisse added, “The annual rise of $20.1 trillion … continues a trend which has seen global wealth increase every year since 2008, so that it now stands at 20% above the pre-crisis peak and 39% above the recent low in 2008.”

This ongoing growth in asset values has generated a sharp rise in the number of millionaires. The number of adults with a net worth of over one million dollars increased by 12 percent in the United States last year, from 12.5 to 14.2 million.

In a significant observation, the report directly related the growth of social inequality to the 2008 financial crash. “Our research suggests that countries often experienced a structural break in inequality trends around the time of the financial crisis … after 2007, wealth inequality has tended to increase.”

In the aftermath of the 2008 crash, state treasuries all around the world were looted to bail out the financial system, while central banks printed money to prop up the values of financial assets held primarily by the rich. Meanwhile, social services were slashed to pay for these bailouts, even as companies used mass unemployment to drive down their employees’ wages. The result has been an unprecedented increase in social inequality.

This process was spearheaded by the Obama administration, which heads the most unequal of all the advanced capitalist countries. The US is home to a disproportionate number of what are known as ultra-high net worth individuals, those with a net worth of more than 50 million dollars. The US has half of the world’s ultra-high net worth individuals, twice the number that live in Europe and nearly ten times more than the country with the next-highest total of such people.

The report, issued by a major European financial institution, sounded a worried note. It observed that since the financial crisis, financial wealth has grown much faster than disposable income, which has been constrained by the lackluster state of the real economy.

Noting that the present ratio of wealth to income, 6.5 (i.e., wealth is 6.5 times income), is much higher than the postwar average of less than five, and is the highest level in postwar history, Credit Suisse wrote, “This is a worrying signal given that abnormally high wealth income ratios have always signaled recession in the past.” It added that “the ratio briefly rose above 6 in 1999 during the dot.com bubble and broke that barrier again during 2005–2007,” immediately before the 2008 crash.

The warning from Credit Suisse that the policies implemented over the past six years have only created the conditions for a new financial collapse follow similar statements of concern from other sections of the ruling class—and come amidst a surge in volatility on the global markets over the past week.

However, despite these worried remarks as the world economy approaches a new financial precipice, neither Credit Suisse nor any faction of the ruling class has any solution to a crisis that is rooted in the historic and intractable contradictions of the capitalist system.

 

http://www.wsws.org/en/articles/2014/10/17/ineq-o17.html

The invisible election

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15 October 2014

In less than three weeks, the United States will hold national elections to choose a third of US senators, all 435 members of the US House of Representatives, the governors of 36 out of 50 states, and thousands of state legislators.

The elections come at a time of immense crisis, nationally and internationally. The American people are being dragged into yet another war in the Middle East, as Washington pursues a global militarist policy that leads inexorably toward World War III.

At home, chronically high unemployment is fueling a growth of poverty, while basic social services—education, health care, housing—are being slashed, along with wages and pensions.

Democratic rights are being shredded, with police-state mobilizations in cities such as Ferguson, Missouri against social protest and the government sweeping up the communications of every American.

Social inequality has reached levels not seen since before the Great Depression of the 1930s. And now an Ebola epidemic in Africa is exposing the criminal neglect of healthcare infrastructure in the US and threatening to spiral into an international catastrophe.

All of these issues are being ignored in the election campaigns of the two big business parties, the Democrats and the Republicans. Instead, what predominate are banal and right-wing platitudes combined with mutual mudslinging. The entire process is dominated by corporate money, with all of the rival candidates on the take.

The Democratic Party is seeking to hold onto its majority in the upper house of Congress, the Senate. This is presented by the media as a momentous issue. In reality, which party ends up in control of Congress makes no difference for working people. The outcome of every election, regardless of which party wins, is a shift of the political system further to the right.

The Democrats secured comfortable majorities in both the House and the Senate in 2008. They proceeded to continue the war in Iraq, escalate the war in Afghanistan, expand the taxpayer bailout of Wall Street, implement a health care “reform” that slashes workers’ benefits and increases their costs, impose a 50 percent cut in the pay of newly hired auto workers, and oversee a vast expansion of government spying on the population.

Neither party offers any policies to address the raging social crisis. The Obama administration touts a “recovery” that has brought the share of total household wealth held by the richest 0.5 percent to just under 35 percent and that of the top 0.1 percent to 20 percent. The Republicans, who work hand-in-glove with the Democrats to slash working class living standards, demand even bigger tax cuts for the rich and deeper cuts in social programs.

The basic bipartisan unity extends to a foreign policy of endless war and militarism. The Democrats who postured as opponents of the Iraq war under Bush—and insured that war funds were continued when they gained control of Congress—are avidly backing Obama’s new war in Iraq and Syria.

On the domestic front, there is no mention of the bankruptcy of Detroit, imposed by a Republican governor working with a Democratic mayor and backed by the Obama White House. The gutting of Detroit city workers’ pensions and health benefits, in violation of the state constitution and under the dictates of an unelected “emergency manager,” is being used as a precedent for cities across the US. In a debate Sunday night, Mark Schauer, the Democratic challenger to Republican Governor Rick Snyder, made clear that he supported the Detroit bankruptcy as well as the wage-cutting bankruptcy of General Motors and Chrysler.

War, austerity and the attack on democratic rights are all massively unpopular, but the views and interests of working people, the vast majority of the population, find no expression in the election campaigns of the two parties. The experience of the Obama administration, which came to power by exploiting popular disgust with Bush and his policies of war and social reaction, only to continue and deepen the same policies, has further alienated the masses of Americans from the political system.

They no longer believe that their votes will have any impact on the policies pursued by the government. They try to block out the meaningless debates between the candidates and the mind-numbing attack ads financed by the corporate donors who control both parties and the system as a whole.

The crisis of the American capitalist political system results in an election that is barely being followed by the electorate, the majority of whom feel little commitment but a great deal of anger toward both parties. One would hardly know, from the level of interest shown by the population, that an election is taking place.

None of the traditional outward signs of an election—license plate stickers, lawn signs promoting candidates, campaign buttons—are to be seen.

All signs point to a record low turnout on November 4, even lower than the dismal 37 percent of eligible voters who cast ballots in the last nonpresidential election, in 2010. Voter turnout in the primary elections earlier this year, in which the Democrats and Republicans chose their candidates, hit new lows, with, in many cases, fewer than 5 percent of eligible voters going to the polls.

The likely participation of younger voters, who turned out in relatively large numbers to elect Obama in 2008, is particularly revealing. In recent polls, only 23 percent of voters between the ages of 18 and 29 said they were definitely going to cast a ballot this year.

The contrast could hardly be starker between the acuteness of the issues the American people confront—war, poverty, dictatorship—and the empty and right-wing character of the campaign and general popular disinterest in the election. This contradiction bespeaks a system that is coming to the end of its rope. The immense growth of social inequality has turned American democratic institutions into hollow shells behind which the corporations, the military brass and the intelligence agencies conspire against the people of the US and the world.

The political system is incapable of responding to the crisis facing the working class because it is an instrument of a plutocracy.

The 2014 election is an expression of the crisis of American capitalism, which is at the center of the breakdown of world capitalism. The abstention is not an expression of either acceptance of the status quo or popular complacency. Social opposition is mounting, but the working masses as of yet see no alternative.

As they enter into struggle, they will inevitably seek alternatives outside the two official parties. The burning question is the building of the Socialist Equality Party to prepare the coming mass movement, ensure that it breaks all ties with the Democratic Party, and imbue it with socialist consciousness and an independent revolutionary program.

Barry Grey

10 Facts About Being Homeless in the USA

As the Crisis Deepens, the Government is Doing Less to Help
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by BILL QUIGLEY

Three True Stories

Renee Delisle was one of over 3500 homeless people in Santa Cruz when she found out she was pregnant.  The Santa Cruz Sentinel reported she was turned away from a shelter because they did not have space for her.  While other homeless people slept in cars or under culverts, Renee ended up living in an abandoned elevator shaft until her water broke.

Jerome Murdough, 56, a homeless former Marine, was arrested for trespass in New York because he was found sleeping in a public housing stairwell on a cold night.  The New York Times reported that one week later, Jerome died of hypothermia in a jail cell heated to over 100 degrees.

Paula Corb and her two daughters lost their home and have lived in their minivan for four years.  They did laundry in a church annex, went to the bathroom at gas stations, and did their studies under street lamps, according to America Tonight.

 

Fact One.  Over half a million people are homeless

On any given night, there are over 600,000 homeless people in the US according to the US Department of Housing and Urban Development (HUD).  Most people are either spending the night in homeless shelters or in some sort of short term transitional housing.  Slightly more than a third are living in cars, under bridges or in some other way living unsheltered.

Fact Two.  One quarter of homeless people are children

HUD reports that on any given night over 138,000 of the homeless in the US are children under the age of 18. Thousands of these homeless children are unaccompanied according to HUD.  Another federal program, No Child Left Behind, defines homeless children more broadly and includes not just those living in shelters or transitional housing but also those who are sharing the housing of other persons due to economic hardship, living in cars, parks, bus or train stations, or awaiting foster care placement.  Under this definition, the National Center for Homeless Education reported in September 2014 that local school districts reported there are over one million homeless children in public schools.

Fact Three.  Tens of thousands of veterans are homeless

Over 57,000 veterans are homeless each night.  Sixty percent of them were in shelters, the rest unsheltered.  Nearly 5000 are female.

Fact Four.  Domestic violence is a leading cause of homelessness in women

More than 90% of homeless women are victims of severe physical or sexual abuse and escaping that abuse is a leading cause of their homelessness.

Fact Five. Many people are homeless because they cannot afford rent

The lack of affordable housing is a primary cause of homelessness according to the National Law Center on Homelessness and Poverty.  HUD has seen its budget slashed by over 50% in recent decades resulting in the loss of 10,000 units of subsidized low income housing each and every year.

Fact Six.  There are fewer places for poor people to rent than before

One eighth of the nation’s supply of low income housing has been permanently lost since 2001.  The US needs at least 7 million more affordable apartments for low income families and as a result millions of families spend more than half their monthly income on rent.

Fact Seven.  In the last few years millions have lost their homes

Over five million homes have been foreclosed on since 2008, one out of every ten homes with a mortgage.  This has caused even more people to search for affordable rental property.

Fact Eight.  The Government does not help as much as you think

There is enough public rental assistance to help about one out of every four extremely low income households.  Those who do not receive help are on multi-year waiting lists.  For example, Charlotte just opened up their applications for public housing assistance for the first time in 14 years and over 10,000 people applied.

Fact Nine.  One in five homeless people suffer from untreated severe mental illness

While about 6% of the general population suffers from severe mental illness, 20 to 25% of the homeless suffer from severe mental illness according to government studies.  Half of this population self-medicate and are at further risk of addiction and poor physical health.  A University of Pennsylvania study tracking nearly 5000 homeless people for two years discovered that investing in comprehensive health support and treatment of physical and mental illnesses is less costly than incarceration, shelter and hospital services for the untreated homeless.

Fact Ten.  Cities are increasingly making homelessness a crime

A 2014 survey of 187 cities by the National Law Center on Homelessness & Poverty found: 24% make it a city-wide crime to beg in public; 33% make it illegal to stand around or loiter anyplace in the city; 18% make it a crime to sleep anywhere in public; 43% make it illegal to sleep in your car; and 53% make it illegal to sit or lay down in particular public places.   And the number of cities criminalizing homelessness is steadily increasing.

For more information look to the National Law Center on Homelessness & Poverty, the National Center for Homeless Education and the National Coalition on the Homeless.

Bill Quigley teaches law at Loyola University New Orleans.  You can reach Bill at quigley77@gmail.com

 

 

The U.S. Is Number One — But in What?

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The country is tops when it comes to violence and weapons exports but ranks low in healthcare and education.
 

American politicians are fond of telling their audiences that the United States is the greatest country in the world. Is there any evidence for this claim?

Well, yes. When it comes to violence and preparations for violence, the United States is, indeed, No. 1. In 2013, according to a report by the Stockholm International Peace Research Institute, the U.S. government accounted for 37 percent of world military expenditures, putting it far ahead of all other nations. (The two closest competitors, China and Russia, accounted for 11 percent and 5 percent respectively.) From 2004 to 2013, the United States was also the No. 1 weapons exporter in the world. Moreover, given the U.S. government’s almost continuous series of wars and acts of military intervention since 1941, it seems likely that it surpasses all rivals when it comes to international violence.

This record is paralleled on the domestic front, where the United States has more guns and gun-related deaths than any other country. A study released in late 2013 reported that the United States had 88 guns for every 100 people, and 40 gun-related deaths for every 400,000 people―the most of any of the 27 economically developed countries surveyed. By contrast, in Britain there were 6 guns per 100 people and 1 gun-related death per 400,000 people.

Yet, in a great many other areas, the United States is not No. 1 at all.

Take education. In late 2013, the Program for International Student Assessment released a report on how 15-year old students from 65 nations performed on its tests. The report showed that U.S. students ranked 17th in reading and 21st in math. An international surveya bit earlier that year by the Organization for Economic Cooperation and Development found that the ranking was slightly worse for American adults. In 2014, Pearson, a multinational educational services company, placed the United States 20th in the world in “educational attainment”―well behind Poland and the Slovak Republic.

American healthcare and health fare even worse. In a 2014 study of healthcare (including infant mortality, healthy life expectancy, and mortality from preventable conditions) in 11 advanced industrial countries, the Commonwealth Fund concluded that the United States ranked last among them. According to the World Health Organization, the U.S. healthcare system ranks 30th in the world. Other studies reach somewhat different conclusions, but all are very unflattering to the United States, as are studies of American health. The United States, for example, has one of the world’s worst cancer rates (the seventh highest), and life expectancy is declining compared to other nations. An article in the Washington Post in late 2013 reported that the United States ranked 26th among nations in life expectancy, and that the average American lifespan had fallen a year behind the international average.

What about the environment? Specialists at Yale University have developed a highly sophisticated Environmental Performance Index to examine the behavior of nations. In the area of protection of human health from environmental harm, their 2014 index placed the United States 35th in health impacts, 36th in water and sanitation, and 38th in air quality. In the other area studied―protection of ecosystems―the United States ranked 32nd in water resources, 49th in climate and energy, 86th in biodiversity and habitat, 96th in fisheries, 107th in forests, and 109th in agriculture.

These and other areas of interest are dealt with by the Social Progress Index, which was developed by Michael Porter, an eminent professor of business (and a Republican) at Harvard. According to Porter and his team, in 2014 the United States ranked 23rd in access to information and communications, 24th in nutrition and basic medical care, 31st in personal safety, 34th in water and sanitation, 39th in access to basic knowledge, 69th in ecosystem sustainability, and 70th in health and wellness.

The widespread extent of poverty, especially among children, remains a disgrace in one of the world’s wealthiest nations. A 2013 report by the United Nations Children’s Fund noted that, of the 35 economically advanced countries that had been studied, only Romania had a higher percentage of children living in poverty than did the United States.

Of course, the United States is not locked into these dismal rankings and the sad situation they reveal about the health, education, and welfare of its citizens. It could do much better if its vast wealth, resources, and technology were employed differently than they are at present.

Ultimately, it’s a matter of priorities. When most U.S. government discretionary spendinggoes for war and preparations for war, it should come as no surprise that the United States emerges No. 1 among nations in its capacity for violence and falls far behind other nations in providing for the well-being of its people.

Americans might want to keep this in mind as their nation embarks upon yet another costly military crusade.

 

http://www.alternet.org/us-number-one-what?akid=12354.265072.7cry8K&rd=1&src=newsletter1023009&t=9&paging=off&current_page=1#bookmark

Storm clouds gather over world economy

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By Nick Beams
14 October 2014

The annual International Monetary Fund (IMF) and World Bank meetings concluded in Washington over the weekend in the midst of a deepening economic and financial crisis, with no prospect of a recovery in the world economy.

The euro zone seems set to enter its third recession since the global financial crisis erupted in 2008, and there are fears that the policies being pursued by the world’s major central banks are creating the conditions for another crash.

The IMF and World Bank meetings were held following the release of data showing that Germany could be moving into a recession. Industrial production dropped 4 percent from July, the biggest decline since January 2009. New orders for September fell at their fastest pace since 2009, according to a survey of purchasing managers.

Output of investment goods slumped 8.8 percent in August, intermediate goods were down 1.9 percent, consumer goods fell 0.4 percent, and construction dropped by 2 percent. Only energy output increased, by 0.3 percent.

The IMF cut its forecast for German growth for 2014 from 1.9 to 1.4 percent and downgraded its 2015 prediction from 1.7 to 1.5 percent. Even these predictions are likely to be too optimistic, since Germany’s economy shrank in the second quarter of this year. Germany, which depends highly on exports, is being hit by stagnation across Europe, its largest single market, as well as recession in Brazil, another key market, and the marked slowdown in Chinese growth.

The world slump, growing uncertainties over the direction of central bank policies and increasing geo-political tensions in Ukraine and the Middle East are all combining to create volatile conditions in financial markets.

Trading on Wall Street opened this week with the S&P 500 Index experiencing its worst three-day loss since 2011, led by falls in airline shares as a result of the Ebola crisis and declines in energy stocks as the price of oil hit its lowest point in four years. Monday’s losses came after a week in which $1.5 trillion was wiped off the value of global equities.

Fears of another financial crisis prompted US and British financial officials to organise a war game yesterday in which they sought to ascertain whether lessons had been learned from the 2008 crisis. Reporting on the war game on Sunday, Larry Elliott, the Guardian economics correspondent, summed up the atmosphere at the IMF meeting.

“The Fund’s annual meeting was like a gathering of international diplomats at the League of Nations in the 1930s. Those attending were desperate to avoid another war but were unsure how to do so. They see dark forces gathering but lack the weapons or the will to tackle them effectively.”

Elliott pointed out that the IMF and central bankers are well aware that pumping money into the financial system has not boosted the real economy through expanded investment and increased production, but led only to increased financial risk-taking. At the same time, they fear that lifting interest rates to halt speculation will push their economies into recession, and so they “cross their fingers and hope for the best.” The IMF, he continued, knows something is going “badly wrong in Europe, but was powerless to do anything about it.”

Clear evidence of the gathering slump is provided by the sharp declines in commodity prices. Oil prices are reported to be in “free fall,” with benchmark Brent Crude down 24 percent since the middle of the year. The International Energy Agency says oil prices have been “weighed down by abundant supplies” and weakening demand.

The price of iron ore, a key indicator of investment because of steel’s role in construction, has dropped by 41 percent this year to its lowest level for five years. The Bloomberg industrial metals index is down 37 percent from its highest point after the financial crisis and 50 percent below the levels reached in 2007.

The price of gold is 38 percent off the high it reached in 2011. Agricultural product prices, another key indicator, are also sharply down. Corn prices are 22 percent lower than they were in June, wheat is down by 16 percent over the same period, and soybean prices have fallen 28 percent to their lowest level in four years.

The growing slump is compounded by uncertainty and confusion in financial markets. Last week, the US Federal Reserve Board released the minutes from the September meeting of its policy-making committee, revealing that “some participants expressed concern that the persistent shortfall of economic growth and inflation in the euro area could lead to a further appreciation of the dollar and have adverse effects on the US external sector.” The Fed’s vice-president, Stanley Fisher, has said that the central bank will monitor the impact of the dollar’s strength on the level of global demand for US goods and services.

The minutes raised questions over how far and how fast the Fed will seek to raise interest rates to more normal levels. The risk of turbulence results from the fact that while the Fed is ostensibly on an ill-defined path back to higher rates, the European Central Bank (ECB) and the Bank of Japan are pushing rates down. This creates the conditions for so-called carry trades, where investors borrow at lower rates in international markets and then invest in US assets, pushing up the value of the dollar and impacting US exports.

The uncertainty over the direction of Fed policy has contributed to a sharp rise in the VIX volatility index, which tracks movements on US share markets. It has increased by 21 percent over the past week, following months of what was described as an “eerie calm.”

The problems in financial markets are exacerbated by differences in the policies of the major economic powers, which emerged into the open at a seminar organised during the IMF meeting.

Centering his fire on Germany, former US Treasury Secretary Lawrence Summers, who last year warned of the prospect of “secular stagnation” for the world economy, criticised Europe’s “dismal” economic performance, comparing it to the two-decades-long stagnation in Japan and the Great Depression of the 1930s.

German Finance Minister Wolfgang Schäuble struck back, dismissing the suggestion that the crisis was the outcome of European policy failings. “America was the cause of the crisis, to be frank,” he said.

The US, as well as the IMF, wants the ECB to extend its asset-buying program to the purchase of government bonds in order to increase financial stimulus. But ECB President Mario Draghi has said the ECB is close to the limit of what it can do. In 2012, Draghi managed to avert a financial crisis originating in Spain, Greece, Portugal and other highly indebted euro zone countries by declaring that the ECB would do “whatever it takes.”

As six years of central bank interventions have demonstrated, however, injections of money cannot bring about increased investment and production in the real economy, which is where the crisis is now centered. The only beneficiaries are the banks, finance houses and ultra-wealthy speculators.

Moreover, there are deep divisions in the ECB itself. German representatives have already voted against the present round of asset purchases and are certain to stridently oppose any central bank move to buy up government bonds and extend quantitative easing.

The IMF discussions presented a picture of a ruling class in disarray. Divided over what to do and unable to advance a program to promote anything remotely resembling an economic recovery, the ruling elites are acutely aware they are sitting on a powder keg. They are united only by their fear that the worsening social conditions and deepening inequality produced by the breakdown of the economic order over which they preside will provoke an explosion of social struggles from below.

 

 

http://www.wsws.org/en/articles/2014/10/14/econ-o14.html