Information for this article comes from long-time business, finance and political writer and analyst Bob Chapman who publishes the bi-weekly International Forecaster. It's power-packed with key information and a valued source for this writer. He obtained voluminous material directly from its source. People need to know it. Read on.
SueAnn Arrigo is the source. She was a high-level CIA insider. Her title was Special Operations Advisor to the Director of Central Intelligence (DCI). She also established the Remote Viewing Defense protocols for the Pentagon in her capacity as Remote Viewing Advisor to the Joint Chiefs of Staff (JCS). It earned her a two-star general rank in the military. She called it a "ploy" so the Pentagon could get more of her time and have her attend monthly Joint Chiefs of Staff meetings. Only high-level types are invited, and she was there from October 2003 to July 2004.
Part of her job involved intelligence gathering on Iraq and Afghanistan - until August 2004 when she refused to spread propaganda about a non-existant Iranian nuclear weapons program and left. She followed in the footsteps of others at CIA who resigned for reasons of conscience and became critics - most notably Ray McGovern, Ralph McGehee, and Phil Agee.
On May 16, 2008, Arrigo sent extensive government corruption and cover-up information to Henry Waxman, Chairman of the House Oversight and Government Reform committee - in 12 separate cases. This article covers four of them or about one-third of what Congress got. The 12 are explosive and revealing but just the tip of the iceberg:
-- of government corruption and war profiteering;
-- sweetheart deals and kickbacks;
-- high-level types on the take;
-- trillions of missing dollars;
-- on September 10, 2001, Rumsfeld admitting "According to some estimates, we cannot track $2.3 trillion in transactions;"
-- imagine the current amount;
-- its corrosive effect on the nation; and people should
-- demand accountability - who profits, who pays and what are the consequences of militarism gone mad.
SueAnn Arrigo offers a glimpse and at great personal risk. In August 2001, DCI George Tenet told her to assemble "a moving van full of Pentagon documents showing Defense Contractor kickbacks to Pentagon officials." She did as instructed but not to expose corruption as she learned - to conceal it and in her judgment so CIA could divert defense business to Halliburton and "Carlyle-related contractors." She stated: "The mood at the CIA and Pentagon was 'war is coming' because the Bush Family stands to make billions from it -- so get ready."
Arrigo was shocked at what she found and how brazenly the Pentagon wrote it up because it feels untouchable, especially since 2001. That notion proved misguided after CIA used the material to blackmail or bribe its officials "into 'working on' the Halliburton-Carlyle team." Top CIA types were involved, and Tenet laid it out for Arrigo: You've "given me the keys to the kingdom. (These) documents will make me rich."
She collected three types. Her report covers one but has plenty of incriminating evidence. Her precise recall of dates and names is incomplete, but events are factually right and damning on how Washington operates. It's always been this way but never to the degree as under George Bush. Arrigo exposes the scheme - the systematic looting of the treasury to enrich contractors and high-level officials at Pentagon, CIA and others well-placed in government. Precise amounts are unknown, but at mimimum are countless multi-billions, even trillions - at taxpayer expense and diverted from essential social and infrastructure needs.
Case 1: Ordering Unneeded New Fighter Aircraft
Arrigo discovered high-level Pentagon corruption. It involved bid-rigging and implicated "an Air Force general on the JCS and a Defense Contractor, Boeing." She disclosed it to JCS Chairman Hugh Shelton and DCI George Tenet, and in both instances drew blanks. She also reported it to the Government Accountability Office (GAO), the investigative arm of Congress. It was vetted and confirmed, but left unaddressed the larger issue of whether new generation planes are needed at an enormous cost to taxpayers. Arrigo believed not, and several Air Force generals agreed. Not other JCS members, however, who she learned are on the take.
There's more. They "had the gall to try to force through another unneeded plane contract for Boeing." At an early 2004 JCS meeting, Arrigo complained about the previous undelivered order because it didn't meet Pentagon specifications. Yet one general in particular tried "to force the US military to buy another (unneeded) upgrade." One other JCS member backed her to no avail, and the new order went through. Arrigo rightfully concluded that new plane orders were to enrich Boeing and high-level Pentagon types getting kickbacks for their cooperation.
She also learned how much - an average $22,000 "for each (JCS meeting) vote according to their bank" records. Not US ones. CIA-arranged Swiss accounts specifically for this purpose. Everyone at the meeting cashed in, except Arrigo and one dissenting general. More disturbing is that this is standard Pentagon practice - handouts to contractors; kickbacks to complicit brass; and taxpayers out multi-billions - year after year.
Jeff St. Clair wrote about it in his 2005 book "Grand Theft Pentagon: Tales of Corruption and Profiteering in the War on Terror." It's an explosive account of how contractors like Halliburton, Lockheed Martin, Boeing, Bechtel and the Bush family-connected Carlyle Group scam multi-billions at taxpayer expense and not a whiff of it in the mainstream. It's the reason US annual "defense" spending tops $1.1 trillion (conservatively) with all military, homeland security, veterans, NASA, debt service and other allocations included.
Case 2: Halliburton Delivers Half Full Cartons to the Pentagon's "Swing Shift"
Arrigo refers to the Pentagon's Receiving Department "swing shift" personnel. They alone are on the take so other shifts are shut out and can't report it. As a CIA insider, she checked and found damning evidence - about "the military (not) getting supplies to the troops on time." She also learned that Halliburton has its "Representative to the CIA," and one at the Pentagon as well. Both get federal salaries but neither was "hired by CIA or the military through their personnel departments. Neither had done military training or trained at (CIA's) 'Farm' as a spy." Arrigo was disturbed and with good reason when orders from the top said back off.
It got worse. Arrigo worked at CIA for over 30 years and reported directly to Tenet. But she wasn't prepared for what she found - a new section at the Agency without her knowledge. It employed 40 people, all working for Halliburton "while being paid by the US taxpayer as if they were CIA." It was secret. No files were on them. They were never interviewed, never vetted, and she concluded: "CIA had a back door in its security to let Halliburton put anyone they wanted in (its) hallways. It was an outrageous (breach) of US National Security," and in a post-9/11 "war on terrorism" climate.
She was shocked and told Tenet. His reply: "Yes, I know." Head of CIA building security also knew. Arrigo asked what he'd do about it. His answer: "Keep my mouth shut so I can stay alive and I suggest you do the same." She asked if he, CIA or Halliburton would kill her if she talked. He didn't think so. Would national security firm CACI do it because it's affiliated with Halliburton and also has a CIA back door for its personnel at the Agency.
Arrigo dug deeper. She got inside Halliburton's area and asked questions. Why was the company shipping half the contracted for amounts and shortchanging the troops and taxpayers. It was no different for war zones. Halliburton "set up the same corrupt system of swing shift receivers (for) at least 3 continents. They received the cartons and signed (off) that the goods were all received properly. Then the shortages later were chalked up to thefts or war damage, etc."
Arrigo again informed Tenet. His answer: "This is nothing new," then added: "Have a report about it on my desk before Christmas (2001)." It got worse. Arrigo told Tenet he's responsible for "correct(ing) Halliburton's short-shipping and its invasion of the CIA." He said he couldn't because the White House tied his hands. Call Congress, Arrigo said. DCI "should be a man of courage." Tenet ignored her, so Arrigo faxed documents revealing Halliburton fraud to GAO - omitting national security secrets. One of them crowed about the scheme's profitability, and having high-level officials involved made it foolproof.
It was clever and even more devious than Arrigo imagined. Halliburton uses each shortage complaint as a new order. "In that way (it) never (loses) by having to make good for (what's) missing," and (it gets) paid double for the same merchandise.
Arrigo knew too much, took risks to learn it, and what happened next is shocking. Halliburton's "CIA Representative" confronted her, tore out her phone, ransacked her office, removed every shred of paper, and hauled her off bodily "to a prison cell" inside its basement offices. She was intimidated and threatened. Thought she might be killed. She survived, but the message was clear. She complained to Tenet. Showed him her bruises. He responded dismissively: "There, there, everything will be all right in the morning."
GAO still has Arrigo's files. It began investigating but stopped. She thinks that Congress can resume it and asked Waxman to do it. That's where things now stand.
Case 3: The White House Conspiracy to Cook the Books - Halliburton, Carlyle and CIA
In 2002, Arrigo tried a new tact - ingratiating herself with "Halliburton's Man" and using it to her advantage. She offered cooperation for access to his space and make him think she was on his side. It worked, went on for four and one-half months through late May, and it paid off - with plenty of insider knowledge "about Halliburton and how it works." Enough to fill a book, she says, but her account sticks to highlights.
First off, it's pure myth that Dick Cheney stopped running the company. "He called in orders to the man I worked for almost every day and sometimes two or more times a day. He remained (Halliburton's) functional head in all but name. No one....had the power to override his orders." Second, Cheney never divested himself of Halliburton profits. "He merely hid how (he got them) through a series of shell companies."
One of Arrigo's jobs was to liaison between Halliburton and CIA's "creative accounting departments." In other words, their co-conspiratorial treasury looting efforts, and Arrigo got insider access to it. Her advanced math and computer software training qualified her. In a few months, she became expert in how CIA and Halliburton hid their "financial illegalities."
She explained - "Computers are good ways to fool most people because (they don't) look inside of them." They can be programmed "to print out one set of books for regulators, another for Defense Contractors, another for the Pentagon, another for the taxpayer," and so forth. It's simple. Decide what you want, and machines will create it in any desired form. The trick is doing it expertly, most criminals can't, so they need professionals to do it for them. It means crimes are never secret, and many computer experts know about them. CIA has always been tainted, kept it secret since inception, so far has been untouchable, but remains vulnerable to exposure by people of conscience like Arrigo.
She explained: Halliburton has eight software programmers at CIA. Its home office has many more. She was on conference calls with 60 of them on ways to conceal illegalities and assure none of it leaks out. The company has less expertise than CIA so the Agency took charge to make the two systems compatible. It took several years and over 100 programmers. They came, left for other jobs, and took insider knowledge with them. It risks more leaks about Halliburton, other contractors, CIA, the Pentagon, high-ups in government, and the Basel-based Bank of International Settlements for its part in corruption.
Many investigations are ongoing, but huge pressure is exerted to quash them. It's feared leaks may unravel the whole scheme - a vast corruption web involving countless numbers of contractors, related companies, and many high level government and Pentagon insiders. Cover-up software hides it. Taxpayers fund it. Amounts keep getting greater, and they're up to unimaginable levels.
Arrigo explained the system. Suppose Halliburton sold product A in 100 Lot Sizes, in Quantity X at Price Y to the Pentagon on a given date. Most civilian invoices disclose this. Pentagon ones don't so contractors can cheat and Pentagon brass profit. Missing information conceals whether all merchandise was delivered as nothing indicates quantities shipped. Further, repackaging also hides proper amounts. Omitting the price alone conceals whether a shipment was shorted, but CIA is more clever than that. It experimented with "tested receivers at some of its front companies" to learn how best to deceive them. What works best is "shifting prices around like random noise" - one day this cost, another a different one, and so forth.
One company used a "gross overcharge method" that looked suspicious. It got receivers to discover the real price, and that defeated CIA's scheme. When it works, it cooks the books, and no one's the wiser. Ledger entries are inflated, undercut, omitted, added, or varied in amounts of similar transactions. Like a "professional crime institution," CIA is expert at falsifying books so no one catches on. How? By random price variations to keep auditors off balance and unable to discover corruption patterns.
Another example:
CIA varies its front company prices monthly. Suppose Halliburton made a purchase "when it (used) a cost inflation idea of cheating. Halliburton (has) an incentive to inflate the cost of its purchases (to) justify (its) high (price) to the military." So as standard practice it uses CIA's highest price and claims that amount for its cost.
But comparing two sets of books reveals the scheme. So methodology became more sophisticated to conceal it. Halliburton takes CIA prices and doubles them on its books. It then claims the Agency recorded half the charge "accidently," says its front company promised a 50% discount, but never delivered. CIA looks bad, and it balked. No matter. Halliburton still does it, but CIA has "lots of fronts with lots of customers and worse problems (to hide) than merely jacking up prices. Some fronts (are) fictitious and (make) no products." Others have real customers plus fake ones to launder money. CIA tries to "make (their) crimes 'undetectable.' " Halliburton hopes to "sneak by" until caught, then find a way to weasel out of it with minimal damage or cost.
Case 4: Halliburton's Rigged Back Door Accounting Computer at the Pentagon
In early 2002, GAO got damning evidence: that Halliburton overbills and short-ships - deliberate fraudulent acts as standard company practice, confident it can get away with it, and most often it does.
GAO has the goods to expose it from Halliburton and Pentagon invoices. They reveal a problem. They don't match, are grossly inflated, and payments exceed amounts billed - by about 35%. Arrigo met with GAO and compared notes. Halliburton has similar Pentagon and CIA-paid staff, and George Bush approved it in a secret Executive Order Arrigo has for proof. She gave it to GAO plus other documents showing national security is compromised and taxpayers cheated - hugely.
One document lists Halliburton's CIA and Pentagon staff, what little official records discloses about them, their secret office locations, and information on their private security staff. Arrigo discovered that Halliburton's top CIA man served time for felony fraud. Another at Pentagon was convicted as well - for stealing Army vehicles, then profiteering by transshipping them overseas.
Dick Cheney knew, blocked background checks to conceal it, but Arrigo found out and about the Pentagon fraud that followed. She has a handwritten Cheney memo instructing his man "to make sure that the Pentagon pays us all that it owes us and then some." CIA's forgery department verified the writing is Cheney's.
Arrigo also has a letter from Halliburton's Pentagon man to his CIA counterpart, and it's damning. He brags how he's "getting more than we bargained for (from) the Pentagon" and suggested they get together to compare notes. They did and Arrigo taped it. The evidence once more is damning - about how easy it is to scam the system; befriend accounting personnel; install company programmers; check bills supposedly behind in payments; install a special software code for higher amounts; and do all of the above at Pentagon and CIA.
Arrigo informed George Tenet so he'd stop "Halliburton from ripping off the American taxpayer via the CIA and Pentagon." Tenet hardly blinked and responded casually: "Well, you certainly have done a thorough job as usual." He then offered to inform the White House to "correct the problem." Arrigo did herself, GAO as well, and later learned that the Bush administration (likely Dick Cheney) blocked an investigation.
This article covers four of Arrigo's 12 cases. Their evidence is damning and shows systemic contractor, government, CIA and Pentagon fraud involving enormous amounts of money. One or more articles will follow if more material can be obtained. It's not what Pentagon and CIA want outed so getting it is never simple and revealing it not without risks.
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Friday, 13 June 2008
''Complicit Enablers'' - UK Media Ignore US Whistleblowers
In April 2006, George Bush bade farewell to his outgoing White House press secretary, Scott McClellan:
“One day he and I are going to be rocking on chairs in Texas talking about the good old days and his time as press secretary." (http://www.independent.co.uk/news/world/americas/bushs-fury-as-exspokesman-twists-the-knife-837678.html)
The rocking chair plans will have been shelved for good after the publication of McClellan’s new memoir, ‘What Happened: Inside the Bush White House and Washington's Culture of Deception.’
McClellan describes how Bush relied on a "political propaganda campaign" rather than the truth to sell the Iraq war to the American public. The invasion was "unnecessary", he suggests, a "strategic blunder", with Bush having made up his mind early on to attack Saddam Hussein. (Ibid) The way Bush managed the issue "almost guaranteed that the use of force would become the only feasible option." (http://ap.google.com/article/ALeqM5guUtnrUWgvNv66lQY1EVplm1xBqwD90UNQ2O1)
McClellan adds:
"In the permanent campaign era, it was all about manipulating sources of public opinion to the president's advantage.” (Ibid))
The claim that Bush decided early in his presidency to attack Iraq is supported by earlier exposés. The leaked minutes of a highly confidential Downing Street memo dated July 23, 2002 records the words of Sir Richard Dearlove, the head of the British intelligence service MI6. Dearlove commented on a recent visit to Washington where he had held talks with George Tenet, director of the CIA:
"Military action was now seen as inevitable. Bush wanted to remove Saddam, through military action, justified by the conjunction of terrorism and WMD. But the intelligence and facts were being fixed around the policy.” (Michael Smith, 'Blair planned Iraq war from start,' Sunday Times, May 1, 2005)
This was eight months before the invasion, but the decision to attack had been taken much earlier. In January 2004, former US Treasury secretary Paul O'Neill revealed that the Bush administration had come to office determined to topple Saddam Hussein:
"It was all about finding a way to do it. The president saying 'Go find me a way to do this'... From the very beginning, there was a conviction that Saddam Hussein was a bad person and that he needed to go." (Julian Borger, 'Bush decided to remove Saddam "on day one"’, The Guardian, January 12, 2004)
O'Neill reported seeing one memorandum preparing for war dating from the first days of the administration. Another, marked "secret" was titled, "Plan for Post-Saddam Iraq.” (Ibid)
According to McClellan, Bush has little time for policy detail. He prefers to follow his gut feelings on foreign affairs, about which he knew next to nothing when he took office. Since then, he has lived in a kind of “bubble" that isolates him from the real world. As McClellan put it in a recent interview, "only as you leave the White House bubble, can you take off your partisan hat and take a clear-eyed view of things". (http://www.washingtonpost.com/wp-dyn/content/story/2008/05/28/ST2008052803135.html)
Squashing Dissent
McClellan has also rounded on the media, calling them "complicit enablers" in Bush’s campaign to manipulate public opinion. (Jennifer Loven, ‘White House calls McClellan's book sour grapes,’ Associated Press, May 28, 2008; http://news.yahoo.com/s/ap/20080528/ap_on_go_pr_wh/bush_mcclellan_book)
Several journalists have backed his criticisms. CBS news anchor, Katie Couric, said last month that the lack of media scepticism ahead of the war was “one of the most embarrassing chapters in American journalism.” Couric disclosed that, while working as a host of ‘Today’ on NBC, she had felt pressure from “the corporations who own where we work and from the government itself to really squash any kind of dissent or any kind of questioning of it.” (http://transcripts.cnn.com/TRANSCRIPTS/0805/28/sitroom.01.html)
Howard Kurtz, the host of CNN's ‘Reliable Sources’ commented:
“Couric has told me that while she was at NBC... she got what she described as complaints from network executives when she challenged the Bush administration.” (Ibid)
Jessica Yellin, who worked for MSNBC in 2003 and now reports for CNN, said last month that journalists had been “under enormous pressure from corporate executives, frankly, to make sure that this was a war presented in a way that was consistent with the patriotic fever in the nation.” (http://www.salon.com/opinion/greenwald/2008/05/29/yellin/)
Yellin added: “And my own experience at the White House was that, the higher the president's approval ratings, the more pressure I had from news executives... the more pressure I had from news executives to put on positive stories about the president.” (Ibid)
She explained that media bosses “would edit my pieces. They would push me in different directions. They would turn down stories that were more critical and try to put on pieces that were more positive, yes. That was my experience.” (Ibid)
As we reported in March, pieces critical of Bush-Blair claims on Iraq were also rejected in the British media. (See http://www.medialens.org/alerts/08/080305_flat_earth_news.php)
Phil Donahue was host of ‘Donohue’ on MSNBC from 2002-2003. Despite having the highest ratings of any show on MSNBC, the programme was cancelled on February 25, 2003. A leaked NBC memo described how the show presented a "difficult public face for NBC in a time of war... He seems to delight in presenting guests who are anti-war, anti-Bush and skeptical of the administration's motives." (http://www.salon.com/opinion/greenwald/2008/05/29/yellin/)
Bill Moyers interviewed Donahue in 2007:
Moyers: “You had Scott Ritter, former weapons inspector. Who was saying that if we invade, it will be a historic blunder.”
Donahue: “You didn't have him alone. He had to be there with someone else who supported the war. In other words, you couldn't have Scott Ritter alone. You could have Richard Perle alone.”
Moyers: “You could have the conservative.”
Donahue: “You could have the supporters of the President alone. And they would say why this war is important. You couldn't have a dissenter alone. Our producers were instructed to feature two conservatives for every liberal.”
Moyers: “You're kidding.”
Donahue: “No this is absolutely true.”
Moyers: “Instructed from above?”
Donahue: “Yes. I was counted as two liberals.” (Ibid)
Senior journalists very rarely admit that their employers pressure them to follow a political line; it is a pressure that is supposed not to exist. And yet there has been only one mention of Yellin’s comment (in the Independent), and none of Couric’s, in the entire UK press.
Smearing the Whistleblower - It's All Cisterns Go!
As was the case with Paul O’Neill before him, references to McClellan’s whistleblowing have tended to focus on abuse directed at him by critics, mostly former colleagues. Tom Baldwin of The Times, for example, published a classic smear:
“Scott McClellan sought yesterday to justify writing a excoriating tell-tale account of his time as one of President Bush’s closest aides, saying that he had been guided by a ‘higher loyalty‘.
“Critics, including close colleagues and friends, have accused the former White House press secretary of betraying Mr Bush. Others have described his book as ‘pathetic’ or a desperate effort to make some money having become virtually unemployable since leaving his post.” (http://www.timesonline.co.uk/tol/news/world/us_and_americas/article4029640.ece)
Trent Duffy, who worked as McClellan's deputy, was quoted:
"Here's a man who owes his whole career to George W. Bush, and here he's stabbing him in the back. He appears to be dancing on his political grave for cash."
Baldwin could have quoted any number of anti-war commentators who would have been happy to praise McClellan for his honesty. Media Channel’s Danny Schechter, for example, wrote:
“It’s easy to put McClellan down... but, at least, he had the courage, these many years later, to confirm what I and others have been saying for years.” (http://www.mediachannel.org/wordpress/2008/06/02/mcclellan-missile-media-crimes-as-war-crimes/)
Not one comment of this kind has been cited anywhere in the UK press praising McClellan. The Guardian and the Daily Telegraph, for example, also focused solely on critics heaping opprobrium on McClellan. Christopher Hitchens wrote in the Sunday Express:
“When President Bush's Treasury Secretary Paul O'Neill defected from the Cabinet in 2002... Michael Kinsley observed that the President deserved all he got from the book. Anyone dumb enough to hire a fool like O'Neill in the first place ought to have known what to expect.
“So it goes with the ludicrous figure of Scott McClellan, the former White House press secretary. I used to watch this mooncalf blunder his way through press conferences and think: ‘Exactly where do we find such men?
“’For the job of swabbing out the White House stables, yes. But for any task involving the weighing of words? Hah!’" (Hitchens, ‘Bush is brought to book,’ Sunday Express, June 8, 2008)
In discussing the story, the Guardian, the Independent, the Times, the Daily Telegraph, the Mirror, the Evening Standard and the Sunday Express all failed to mention McClellan’s key reference to the media as “complicit enablers”.
This silence links to one of the great pillars of modern thought control: namely, that the media’s claim to impartiality must not be subject to serious discussion. The public is to understand that the media offer neutral windows on the world. The idea that these windows might all be framed, structured and oriented to present essentially the same view of the world favouring the same powerful interests is a thought too far.
The +fact+ of totalitarian levels of thought control in our society is clear - the precise mechanism by which that control is achieved in an ostensibly free society, is complex and interesting, but of secondary importance.
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“One day he and I are going to be rocking on chairs in Texas talking about the good old days and his time as press secretary." (http://www.independent.co.uk/news/world/americas/bushs-fury-as-exspokesman-twists-the-knife-837678.html)
The rocking chair plans will have been shelved for good after the publication of McClellan’s new memoir, ‘What Happened: Inside the Bush White House and Washington's Culture of Deception.’
McClellan describes how Bush relied on a "political propaganda campaign" rather than the truth to sell the Iraq war to the American public. The invasion was "unnecessary", he suggests, a "strategic blunder", with Bush having made up his mind early on to attack Saddam Hussein. (Ibid) The way Bush managed the issue "almost guaranteed that the use of force would become the only feasible option." (http://ap.google.com/article/ALeqM5guUtnrUWgvNv66lQY1EVplm1xBqwD90UNQ2O1)
McClellan adds:
"In the permanent campaign era, it was all about manipulating sources of public opinion to the president's advantage.” (Ibid))
The claim that Bush decided early in his presidency to attack Iraq is supported by earlier exposés. The leaked minutes of a highly confidential Downing Street memo dated July 23, 2002 records the words of Sir Richard Dearlove, the head of the British intelligence service MI6. Dearlove commented on a recent visit to Washington where he had held talks with George Tenet, director of the CIA:
"Military action was now seen as inevitable. Bush wanted to remove Saddam, through military action, justified by the conjunction of terrorism and WMD. But the intelligence and facts were being fixed around the policy.” (Michael Smith, 'Blair planned Iraq war from start,' Sunday Times, May 1, 2005)
This was eight months before the invasion, but the decision to attack had been taken much earlier. In January 2004, former US Treasury secretary Paul O'Neill revealed that the Bush administration had come to office determined to topple Saddam Hussein:
"It was all about finding a way to do it. The president saying 'Go find me a way to do this'... From the very beginning, there was a conviction that Saddam Hussein was a bad person and that he needed to go." (Julian Borger, 'Bush decided to remove Saddam "on day one"’, The Guardian, January 12, 2004)
O'Neill reported seeing one memorandum preparing for war dating from the first days of the administration. Another, marked "secret" was titled, "Plan for Post-Saddam Iraq.” (Ibid)
According to McClellan, Bush has little time for policy detail. He prefers to follow his gut feelings on foreign affairs, about which he knew next to nothing when he took office. Since then, he has lived in a kind of “bubble" that isolates him from the real world. As McClellan put it in a recent interview, "only as you leave the White House bubble, can you take off your partisan hat and take a clear-eyed view of things". (http://www.washingtonpost.com/wp-dyn/content/story/2008/05/28/ST2008052803135.html)
Squashing Dissent
McClellan has also rounded on the media, calling them "complicit enablers" in Bush’s campaign to manipulate public opinion. (Jennifer Loven, ‘White House calls McClellan's book sour grapes,’ Associated Press, May 28, 2008; http://news.yahoo.com/s/ap/20080528/ap_on_go_pr_wh/bush_mcclellan_book)
Several journalists have backed his criticisms. CBS news anchor, Katie Couric, said last month that the lack of media scepticism ahead of the war was “one of the most embarrassing chapters in American journalism.” Couric disclosed that, while working as a host of ‘Today’ on NBC, she had felt pressure from “the corporations who own where we work and from the government itself to really squash any kind of dissent or any kind of questioning of it.” (http://transcripts.cnn.com/TRANSCRIPTS/0805/28/sitroom.01.html)
Howard Kurtz, the host of CNN's ‘Reliable Sources’ commented:
“Couric has told me that while she was at NBC... she got what she described as complaints from network executives when she challenged the Bush administration.” (Ibid)
Jessica Yellin, who worked for MSNBC in 2003 and now reports for CNN, said last month that journalists had been “under enormous pressure from corporate executives, frankly, to make sure that this was a war presented in a way that was consistent with the patriotic fever in the nation.” (http://www.salon.com/opinion/greenwald/2008/05/29/yellin/)
Yellin added: “And my own experience at the White House was that, the higher the president's approval ratings, the more pressure I had from news executives... the more pressure I had from news executives to put on positive stories about the president.” (Ibid)
She explained that media bosses “would edit my pieces. They would push me in different directions. They would turn down stories that were more critical and try to put on pieces that were more positive, yes. That was my experience.” (Ibid)
As we reported in March, pieces critical of Bush-Blair claims on Iraq were also rejected in the British media. (See http://www.medialens.org/alerts/08/080305_flat_earth_news.php)
Phil Donahue was host of ‘Donohue’ on MSNBC from 2002-2003. Despite having the highest ratings of any show on MSNBC, the programme was cancelled on February 25, 2003. A leaked NBC memo described how the show presented a "difficult public face for NBC in a time of war... He seems to delight in presenting guests who are anti-war, anti-Bush and skeptical of the administration's motives." (http://www.salon.com/opinion/greenwald/2008/05/29/yellin/)
Bill Moyers interviewed Donahue in 2007:
Moyers: “You had Scott Ritter, former weapons inspector. Who was saying that if we invade, it will be a historic blunder.”
Donahue: “You didn't have him alone. He had to be there with someone else who supported the war. In other words, you couldn't have Scott Ritter alone. You could have Richard Perle alone.”
Moyers: “You could have the conservative.”
Donahue: “You could have the supporters of the President alone. And they would say why this war is important. You couldn't have a dissenter alone. Our producers were instructed to feature two conservatives for every liberal.”
Moyers: “You're kidding.”
Donahue: “No this is absolutely true.”
Moyers: “Instructed from above?”
Donahue: “Yes. I was counted as two liberals.” (Ibid)
Senior journalists very rarely admit that their employers pressure them to follow a political line; it is a pressure that is supposed not to exist. And yet there has been only one mention of Yellin’s comment (in the Independent), and none of Couric’s, in the entire UK press.
Smearing the Whistleblower - It's All Cisterns Go!
As was the case with Paul O’Neill before him, references to McClellan’s whistleblowing have tended to focus on abuse directed at him by critics, mostly former colleagues. Tom Baldwin of The Times, for example, published a classic smear:
“Scott McClellan sought yesterday to justify writing a excoriating tell-tale account of his time as one of President Bush’s closest aides, saying that he had been guided by a ‘higher loyalty‘.
“Critics, including close colleagues and friends, have accused the former White House press secretary of betraying Mr Bush. Others have described his book as ‘pathetic’ or a desperate effort to make some money having become virtually unemployable since leaving his post.” (http://www.timesonline.co.uk/tol/news/world/us_and_americas/article4029640.ece)
Trent Duffy, who worked as McClellan's deputy, was quoted:
"Here's a man who owes his whole career to George W. Bush, and here he's stabbing him in the back. He appears to be dancing on his political grave for cash."
Baldwin could have quoted any number of anti-war commentators who would have been happy to praise McClellan for his honesty. Media Channel’s Danny Schechter, for example, wrote:
“It’s easy to put McClellan down... but, at least, he had the courage, these many years later, to confirm what I and others have been saying for years.” (http://www.mediachannel.org/wordpress/2008/06/02/mcclellan-missile-media-crimes-as-war-crimes/)
Not one comment of this kind has been cited anywhere in the UK press praising McClellan. The Guardian and the Daily Telegraph, for example, also focused solely on critics heaping opprobrium on McClellan. Christopher Hitchens wrote in the Sunday Express:
“When President Bush's Treasury Secretary Paul O'Neill defected from the Cabinet in 2002... Michael Kinsley observed that the President deserved all he got from the book. Anyone dumb enough to hire a fool like O'Neill in the first place ought to have known what to expect.
“So it goes with the ludicrous figure of Scott McClellan, the former White House press secretary. I used to watch this mooncalf blunder his way through press conferences and think: ‘Exactly where do we find such men?
“’For the job of swabbing out the White House stables, yes. But for any task involving the weighing of words? Hah!’" (Hitchens, ‘Bush is brought to book,’ Sunday Express, June 8, 2008)
In discussing the story, the Guardian, the Independent, the Times, the Daily Telegraph, the Mirror, the Evening Standard and the Sunday Express all failed to mention McClellan’s key reference to the media as “complicit enablers”.
This silence links to one of the great pillars of modern thought control: namely, that the media’s claim to impartiality must not be subject to serious discussion. The public is to understand that the media offer neutral windows on the world. The idea that these windows might all be framed, structured and oriented to present essentially the same view of the world favouring the same powerful interests is a thought too far.
The +fact+ of totalitarian levels of thought control in our society is clear - the precise mechanism by which that control is achieved in an ostensibly free society, is complex and interesting, but of secondary importance.
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News and politics
media
Tuesday, 10 June 2008
Potential Future Hyperinflation - Stephen Lendman
Walter "John" Williams thinks out of the box. He makes disquieting reading, but you won't find him in the mainstream. At least not often. He runs a "Shadow Government Statistics" site with an electronic by-subscription newsletter. Anyone can access some of his data and occasional special reports. They can also assess his reasoning. In his judgment, government data are manipulated, corrupted and unreliable. He's not alone thinking that.
First, through technical changes over time in how data are collected and/or interpreted. The intent is to portray a more rosy scenario and ignore real world experiences of ordinary people. Calculating the CPI is an example:
-- in the 1980s, the Bureau of Labor Statistics (BLS) switched from using house prices to their rental equivalent;
-- then a decade ago, BLS made a spurious assumption for reasons other than it stated; it was that consumers substitute cheaper products for ones that have risen in price - such as hamburger for steak or chicken for meat; the idea wasn't to reflect their buying habits; it was to artificially lower inflation and distort its calculation; and
-- BLS has long adjusted prices for quality improvements; it's called "hedonic adjustment" that, in fact, cooks the books; so if computer speed increases, its cost is lowered proportionally even if its price rises; the same is true for autos with better brakes or other assorted innovations; again the result is distortion, and it affects all sorts of products; as a result, inflation is artificially and fraudulently lowered.
Another example is how federal deficits are calculated. Beginning with Nixon in 1969, a "unified budget" was adopted to artificially lower them by offsetting expenditures with "off-budget" Social Security revenues. The idea was to hide government's true cost at a time wartime and Great Society spending was high and would later factor into the 1970s and 1980s inflation. If deficits were calculated then and now by GAAP methodology (required of all publicly-traded corporations), they'd be much higher than annually reported - since the 1970s, in multiple trillions of dollars; fiscal alchemy sweeps them under the rug.
A further example was Nixon's "core inflation" idea. More artificial rigging - to exclude volatile food and energy prices to produce a lower figure. No matter that these items account for a large portion of consumer spending, especially for lower income households.
Others like this are numerous. They all amount to manipulative rigging for political or financial market purposes, and the practice goes back decades. A recent Bush administration one is switching to monthly instead of semi-annual jobs data seasonal adjustments to make the number friendlier. Later on (too late for markets to react) they're matched against payroll figures for a once a year adjustment and more accurate jobs created or lost reading.
The Clinton administration was also manipulative. In calculating employment, it lowered its monthly household sample from 60,000 to 50,000, reducing it mainly in inner cities. The effect is to artificially lower jobless numbers among blacks, Latinos and the poor overall. The calculation is also rigged by keeping out the 2.3 million prison population. The overall effect is illusion, not reality - to erase "free market" capitalism's defects and make it look wondrous and beneficial to mankind.
Williams reverse-engineers the GDP, employment and inflation data for more accurate readings. He backs out manipulative changes to produce more valid figures. Take the 5.5% May unemployment rate for example. BLS calculates it on persons who looked for work in the last 30 days. Williams adds those who want to work but gave up in frustration plus people working part-time who want (but can't find) full-time jobs. Result: real unemployment of over 12%.
The same methodology works for economic growth. The real value of all goods and services produced is lower than official GDP numbers when adjusted for higher inflation. More of it means higher prices, not increased output. It's how Williams makes his calculation, and he's worried. He sees inflation rising and a threat of hyperinflation ahead. He highlighted his concern in a recent April 2008 report called "Hyperinflation Special Report" with three dramatic sub-headings:
-- "Inflationary Recession Is in Place;
-- Banking Solvency Crisis Has Opened First Phase Monetary Inflation;" and
-- "Hyperinflationary Depression Remains Likely As Early as 2010."
Time alone will prove him right or wrong. But given current economic conditions, the financial malpractice that precipitated them, continued mismanagement since then, and resultant dangers they created, it pays to examine his analysis. It's not for the faint-hearted and hopefully won't bear out. But it's happened before at other times in other countries, and when it hits it ruins lives and savings. Is America now headed for that type future? Williams thinks so, and here's his argument.
He sees the US economy in an "intensifying inflationary recession" heading for "a hyperinflationary great depression." He expects it as soon as 2010, maybe sooner, and "likely" no later than in a decade. Blame it on reckless monetary and fiscal policy - creating torrents of money, borrowing outsized amounts, and spending ourselves into bankruptcy by supporting short-term "big-monied special interests."
Things are so out of hand, Williams sees "no way of avoiding a financial Armageddon." We're nearly or already bankrupt; are creating money to cover our obligations; the more we print, the more we need; it's fiat currency unbacked by gold; and every new dollar created dilutes the value of all others in circulation. Double the money supply, and presto - every dollar is worth 50 cents. Double it again, and you get the point. We've been doing it for decades, especially since Nixon closed the gold window in 1971.
At some point, the music stops, the dollar collapses, it becomes worthless paper, and related dollar-demoninated paper assets go down with it. Williams quotes a law professor who experienced Weimar Germany's hyperinflation first hand. It was the worst by far ever recorded. "It was horrible. Horrible! Like lightening it struck. No one was prepared." Shelves in grocery stores emptied. "You could buy nothing with your paper money." At the trough in 1923, the mark plunged to an astonishing 4,200,000,000,000 to the dollar.
Can it happen here? It might, and rising world inflation is worrisome. Analyst Bob Chapman's International Forecaster reports current US inflation at 12.5%; China's 8.5%; Russia's 14%; Gulf oil producers on average 12%; India 8%; Indonesia 12%; Brazil 5%; Chile 8.3%; Venezuela 29.3% and Argentina 23%. This likely plays into the European Central Bank's (ECB) reluctance to cut rates and the Bank of England's holding off on further ones. It's also a factor affecting dollar weakness and rising gold prices that hedge against depreciating currencies and geopolitical uncertainties.
Williams is justifiably concerned as inflationary pressures build. First some definitions. Inflation results from a money supply increase that causes prices to rise. Williams refers only to goods and services, not financial assets like stocks and bonds. He also leaves out speculation and market manipulation that's key to understanding high oil and food prices. Markets don't move randomly. Big-monied speculators move them, but that's a separate topic from what Williams addresses.
He mentions various types of hyperinflation. They range from the double or triple-digit kind, several-fold that level, to what happened in Weimar Germany when it went to infinity. Once the genie is unleashed, there's no telling how bad things may get. Williams sees them getting pretty bad. So much so that dollars get dumped, holders flee to safety, and a downward spiral intensifies with no idea of a bottom.
In his view and others, the culprit is fiat currency, without gold backing. Its worth depends solely on the full faith and credit of the issuing government. Absent that and currencies crash. Print too much of it, and that's its future. Examine Fed policy under Greenspan and Bernanke, and draw your own conclusions.
They've been virtual money-creation machines unmindful of the history they should know. By issuing too much of a good thing for too many years, they fueled asset bubbles. When they burst, they made things worse and may now have headed the economy for collapse. In Williams judgment, America today is no different from other nations in other eras that followed similar policies. They all met the same fate, and today this country has already "obligated itself to liabilities well beyond its ability ever to pay off." Not a cheery assessment, and he's not alone believing it.
More definitions:
-- Deflation - a decrease in goods and services prices, generally from a money supply contraction;
-- Inflation - the reverse of the above;
-- Hyperinflation - extreme inflation, as explained above, to a level where money becomes worthless or nearly so; according to Williams, the coming hyperinflation is because of a "lack of monetary discipline formerly imposed....by the gold standard, and a (Fed) dedicated to preventing a collapse in the money supply (and preventing) the implosion of the (ongoing) extremely over-leveraged domestic financial system;"
-- Recession - officially defined as two or more consecutive (inflation-adjusted) GDP contracting quarters; many economists don't agree on this, and some gauge conditions by the relative strength or weakness of industrial production, payroll employment, retail sales, and so forth; add it up and clearly the US is in recession; how bad and for how long will only be known in time;
-- Depression - a recession "where (inflation-adjusted) peak-to-trough contraction exceeds 10%; and a
-- Great depression - one where the peak-to-trough exceeds 25%. It happened only once so far in US history in the 1930s.
Williams believes the current US contraction is about halfway to becoming a "depression," but before it ends it may become "Great Depression II" to distinguish it from the earlier one. We're now in an "inflationary recession," and available data confirm it - soaring food and oil prices, a weakened dollar, true unemployment over 12%, real inflation nearly as high, weak industrial production, and more. In his judgment, expect worse ahead when added "inflationary effects of soaring broad money growth....start" surfacing later in the year. In his judgment, by year-end 2008, "official CPI" figures should begin showing it.
Current computations cook the books, and not just for inflation. According to Williams, the economy has been in recession since late 2006 when it entered the "second down-leg" of a multiple dip contraction. It began in 1999, then showed up officially in 2001. His current outlook takes account of "further bounces and dips in economic activity." We may now be in an upward swing before reheading down. It happened during the Great Depression, only to fall to new lows.
Conditions today are hazardous. A major financial crisis precipitated them. Reckless policies caused it. It threatens the solvency of major banks and other financial institutions. It also hurts the greater economy. Solutions - massive liquidity injections, interest rate cuts and reckless deficit spending. Result - financial malpractice for a short-term fix. Consequences - "financial Armageddon" according to Williams.
M3 (the broadest money supply measure) growth is so high that the Fed no longer reports it. Economists like Williams do because it's crucial to know, and the data he reveals are disturbing - record M3 growth at a near 18% annual pace. Hyperinflationary seeds are now sown. Dollar valuation is falling, and at some point may accelerate when investors flee it for safer havens. The Fed again will respond. More debt will be monetized. It will build over time. Things will get worse and then be exacerbated when the government is less able to meet its obligations. "Therein lies the ultimate basis for the pending hyperinflation," in Williams' judgment.
He believes it will morph into a hyperinflationary depression, then a "great depression." And when it hits, it will be with "surprising speed." Already disposable income is falling in a weakened economy in crisis. As things worsen, politicians get blamed, and Williams raises an interesting possibility. If conditions get bad enough, voters may respond with their feet, declare a pox on both major parties, and turn to a third alternative around 2010 or 2012. It happened before in our history. The Republican Party is Exhibit A. It was created in 1854 at a time Democrats and Whigs were the two dominant parties. Exit Whigs, and enter Republicans with Abraham Lincoln its first elected president in 1860.
Williams shows US inflation data going back to 1665. It was fairly stable up to the Fed's 1913 creation. It then began rising and accelerated post-WW II. Government calculations mask it. Alternative ones are more revealing and accurate. Except for minor price declines in 1944 and 1955, the US hasn't had a deflationary period since the 1930s. Abandoning the gold standard is why. It imposed monetary discipline. Roosevelt went off it in 1933. He had to. The banking system collapsed, money supply imploded, and economic stimulus was needed. It released the Fed to create money freely. Therein lies the problem, and it shows up in the numbers.
Current Fed Chairman Bernanke and Alan Greenspan are students of the Great Depression. "Helicopter Ben" especially vowed never again, and his actions prove it to a fault. He knows the risks and stated them in an earlier speech. He said:
"Like gold, US dollars have value only to the extent that they are strictly limited in supply. But the US government has a technology called a printing press (now its electronic equivalent), that allows it to produce as many US dollars as it wishes." By doing so, it "reduce(s) the value of a dollar in terms of goods and services" which raises their prices...."under a paper-money system, a determined government can always generate higher spending and hence positive inflation."
So it has, according to Williams, and it caused a "slow-motion destruction of the US dollar's purchasing power" since 1933. It shows up in GAAP-based 2007 federal deficit figures - $4 trillion for the fiscal year, not the official $163 fiction reported. Williams estimates total outstanding federal obligations at $62.6 trillion. At least one other economist puts it over $80 trillion. There's no way to honor this debt level, so the "government effectively is bankrupt." At that point, it has three choices - default, declare a moratorium, or repudiate the entire amount.
Sooner or later, markets will react. Holders of US debt already are balking, but so far modestly and quietly. Ahead, that may change if dollar valuations plunge. It will force the Fed's hand. Greater debt monetization will follow. Dollar valuations will sink further, and so forth in a progressive downward cycle to oblivion if Williams is right.
If conditions get severe enough, the Fed can create huge amounts of currency in a few days or weeks - enough to match the dollar's lost purchasing power in the last 75 years. Combine it with fiscal irresponsibility and imagine the consequences.
Official data alone today are reason for concern - soaring food and oil prices, the dollar near historic lows, money growth at an all-time high, and off-the-charts federal deficits and debt. The trend continues, and it shows up in gold prices - topping $1000, then retreating, but nearly certain to soar way above previous highs on its way to numbers not discussed in the mainstream - $2000 an ounce, $3000? Who knows. Williams sees it "setting new historic highs."
In 1980, its price hit $850 an ounce. In CPI inflation-adjusted terms, around $2300 an ounce would match it today. But if the government hadn't cooked the CPI calculation, the number would be about $6250 an ounce. By that standard, gold today is cheap. It's way below its real 1980 top, and if inflation accelerates as Williams predicts, expect much higher prices as dollars keep deflating.
Under this scenario, the "US government cannot cover (its) existing obligations." Annual federal deficits are "careening wildly out of control, averaging $4.6 trillion per year for the six years through 2007." That's with all unfunded liabilities included like Social Security, Medicare, Medicaid, other social services, debt service and more.
Williams says things are so out of control that "if the government (raised taxes) to seize 100% of all wages, salaries and corporate profits, it still would (show) an annual deficit using GAAP accounting" methods. At the same time, "given current revenues, if it stopped (all) spending (including defense and homeland security) other than Social Security and Medicare obligations, the government still would (show) an annual deficit." The hole is so deep, it's impossible to dig out, according to Williams.
But given political realities, officials spend whatever it takes to get elected and keep their jobs. That's besides foreign wars, limitless corporate subsidies and more. Things, however, won't improve. They'll worsen, and that for Williams spells hyperinflation ahead. It's happening "with the full knowledge of political Washington and the Federal Reserve." It it weren't for the US's "special position," our debt would likely be rated "below investment grade instead of triple-A." Longer term bonds are especially risky. At some point, they'll lose their full value. They also risk default, and that's besides their loss in dollar terms.
It's just a matter of time before foreign investors get worried enough to act - buying fewer Treasuries down to none, then followed by redemptions. The Fed will have to compensate. Print more currency, and the problem deepens. Its value declines and inflation accelerates.
Trade policies worsen things. We're in a global race to the bottom. The once bedrock manufacturing base eroded. It's now 10% of the economy and falling. Services currently account for around 84% of it and rising. Jobs in all categories are being offshored to low-wage countries. Average inflation-adjusted wages keep declining. Real earnings are below their early 1970s peak. Living standards are falling. Consumer debt is rising to make up the shortfall. Savings are liquidated. Before the housing decline, mortgage refinancing helped when valuations rose. It meant taking on more debt. Fed policy encouraged it. Today's dilemma "is payback" for unsustainable bubble-creation policies. Recalling a relevant quote: "Things that can't go on forever won't."
Bad policy caused enormous structural change, and trade deficits are part of it. They've "risen to the highest level for any country in history." They're one more problem for a seriously over-extended economy. It places "the federal government and Federal Reserve in untenable positions, where they cannot easily or rapidly address the underlying problems, even if standard economic stimuli were available."
Given the federal deficit and out-of-control spending, fiscal policy limits have been reached. The Fed's in the same bind. It can neither stimulate the economy or contain inflation. Rate cuts have done little. Saving the dollar may require raising them, but that won't "contain non-demand driven inflation." It shows up in high food, energy, health care, and companies like Dow Chemical announcing on May 28 that it will raise prices across the board up to 20% to offset increased costs.
More cause for worry, and Williams anticipates depression. Hyperinflation will follow, and it will sink "the economy into a great depression." It will halt commercial activity. The greater disparity in income, the more negative its consequences. "Extremes in income variance usually are followed by financial panics and economic depressions. US income variance today is higher" than in 1929 and "nearly double that of any other 'advanced' economy."
Federal bailouts have worsened things. Dollar creation exploded. Crisis has been pushed into the future. Its enormity will be far greater, and foreign investors will get stuck with a lot of it. When it arrives in strength, capital outflow will follow, and dollar valuation will plunge with it. Williams believes that "both central bank and major private investors know that the dollar is going to be a losing proposition. They either expect and/or hope that they can get of (it) in time to lock in their profits (or for central bankers) that they can forestall the ultimate global economic crisis" as long as possible.
Dollars are very vulnerable in this environment. If Treasuries are dumped, the Fed will monetize debt to make up the difference. Inflation will then accelerate, multi-trillion dollar deficits will worsen things, and a "self-feeding cycle of currency debasement and hyperinflation" will follow.
Cash as we know it will disappear. A barter system and black market will replace it or possible introduction of a new currency. Since most money today is electronic, not physical, chances of it adapting "are practically nil." With hyperinflation, electronic commerce would completely shut down and economic collapse would follow. Gold and silver will be invaluable. Holders could exchange them for goods and services.
Physical goods will also be precious for survival and as a medium of exchange. Anything with a long shelf life may be stocked in advance, and providers of essential services could barter them for goods and other services. Forewarned is forearmed. Safety and liquidity are crucial. Anything retaining value is essential. Real estate, other currencies for example. Foreign equities and debt to a small degree because US financial assets hammering will spill everywhere.
With all that to deal with, consider another dilemma - the likelihood of painful political change, civil unrest, disruptive violence, and utter chaos. If Williams is right and hyperinflation arrives, Katie bar the door on what may follow. Revolutions are possible with three notable last century ones to consider - in Russia, Weimer Germany and Nationalist China. In each case, the old order ended, everything changed, but not for the good. How does Williams advise? Evaluate one's own circumstances, use common sense, and forewarned is forearmed. That will help, but hard times hurt everyone.
Hopefully they won't arrive, at least not full-blown as Williams predicts. But make no mistake. Excess has a price. The more of it the greater. America has an ocean of it. Sooner or later comes payback. "Things that can't go on forever won't."
Stephen Lendman is a Research Associate of the Centre for Research on Globalization. He lives in Chicago and can be reached at lendmanstephen@sbcglobal.net.
Also visit his blog site at sjlendman.blogspot.com and listen to The Global Research News Hour on RepublicBroadcasting.org Mondays from 11AM to 1PM US Central time for cutting-edge discussions with distinguished guests. All programs are archived for easy listening.
News and politics
inflation
First, through technical changes over time in how data are collected and/or interpreted. The intent is to portray a more rosy scenario and ignore real world experiences of ordinary people. Calculating the CPI is an example:
-- in the 1980s, the Bureau of Labor Statistics (BLS) switched from using house prices to their rental equivalent;
-- then a decade ago, BLS made a spurious assumption for reasons other than it stated; it was that consumers substitute cheaper products for ones that have risen in price - such as hamburger for steak or chicken for meat; the idea wasn't to reflect their buying habits; it was to artificially lower inflation and distort its calculation; and
-- BLS has long adjusted prices for quality improvements; it's called "hedonic adjustment" that, in fact, cooks the books; so if computer speed increases, its cost is lowered proportionally even if its price rises; the same is true for autos with better brakes or other assorted innovations; again the result is distortion, and it affects all sorts of products; as a result, inflation is artificially and fraudulently lowered.
Another example is how federal deficits are calculated. Beginning with Nixon in 1969, a "unified budget" was adopted to artificially lower them by offsetting expenditures with "off-budget" Social Security revenues. The idea was to hide government's true cost at a time wartime and Great Society spending was high and would later factor into the 1970s and 1980s inflation. If deficits were calculated then and now by GAAP methodology (required of all publicly-traded corporations), they'd be much higher than annually reported - since the 1970s, in multiple trillions of dollars; fiscal alchemy sweeps them under the rug.
A further example was Nixon's "core inflation" idea. More artificial rigging - to exclude volatile food and energy prices to produce a lower figure. No matter that these items account for a large portion of consumer spending, especially for lower income households.
Others like this are numerous. They all amount to manipulative rigging for political or financial market purposes, and the practice goes back decades. A recent Bush administration one is switching to monthly instead of semi-annual jobs data seasonal adjustments to make the number friendlier. Later on (too late for markets to react) they're matched against payroll figures for a once a year adjustment and more accurate jobs created or lost reading.
The Clinton administration was also manipulative. In calculating employment, it lowered its monthly household sample from 60,000 to 50,000, reducing it mainly in inner cities. The effect is to artificially lower jobless numbers among blacks, Latinos and the poor overall. The calculation is also rigged by keeping out the 2.3 million prison population. The overall effect is illusion, not reality - to erase "free market" capitalism's defects and make it look wondrous and beneficial to mankind.
Williams reverse-engineers the GDP, employment and inflation data for more accurate readings. He backs out manipulative changes to produce more valid figures. Take the 5.5% May unemployment rate for example. BLS calculates it on persons who looked for work in the last 30 days. Williams adds those who want to work but gave up in frustration plus people working part-time who want (but can't find) full-time jobs. Result: real unemployment of over 12%.
The same methodology works for economic growth. The real value of all goods and services produced is lower than official GDP numbers when adjusted for higher inflation. More of it means higher prices, not increased output. It's how Williams makes his calculation, and he's worried. He sees inflation rising and a threat of hyperinflation ahead. He highlighted his concern in a recent April 2008 report called "Hyperinflation Special Report" with three dramatic sub-headings:
-- "Inflationary Recession Is in Place;
-- Banking Solvency Crisis Has Opened First Phase Monetary Inflation;" and
-- "Hyperinflationary Depression Remains Likely As Early as 2010."
Time alone will prove him right or wrong. But given current economic conditions, the financial malpractice that precipitated them, continued mismanagement since then, and resultant dangers they created, it pays to examine his analysis. It's not for the faint-hearted and hopefully won't bear out. But it's happened before at other times in other countries, and when it hits it ruins lives and savings. Is America now headed for that type future? Williams thinks so, and here's his argument.
He sees the US economy in an "intensifying inflationary recession" heading for "a hyperinflationary great depression." He expects it as soon as 2010, maybe sooner, and "likely" no later than in a decade. Blame it on reckless monetary and fiscal policy - creating torrents of money, borrowing outsized amounts, and spending ourselves into bankruptcy by supporting short-term "big-monied special interests."
Things are so out of hand, Williams sees "no way of avoiding a financial Armageddon." We're nearly or already bankrupt; are creating money to cover our obligations; the more we print, the more we need; it's fiat currency unbacked by gold; and every new dollar created dilutes the value of all others in circulation. Double the money supply, and presto - every dollar is worth 50 cents. Double it again, and you get the point. We've been doing it for decades, especially since Nixon closed the gold window in 1971.
At some point, the music stops, the dollar collapses, it becomes worthless paper, and related dollar-demoninated paper assets go down with it. Williams quotes a law professor who experienced Weimar Germany's hyperinflation first hand. It was the worst by far ever recorded. "It was horrible. Horrible! Like lightening it struck. No one was prepared." Shelves in grocery stores emptied. "You could buy nothing with your paper money." At the trough in 1923, the mark plunged to an astonishing 4,200,000,000,000 to the dollar.
Can it happen here? It might, and rising world inflation is worrisome. Analyst Bob Chapman's International Forecaster reports current US inflation at 12.5%; China's 8.5%; Russia's 14%; Gulf oil producers on average 12%; India 8%; Indonesia 12%; Brazil 5%; Chile 8.3%; Venezuela 29.3% and Argentina 23%. This likely plays into the European Central Bank's (ECB) reluctance to cut rates and the Bank of England's holding off on further ones. It's also a factor affecting dollar weakness and rising gold prices that hedge against depreciating currencies and geopolitical uncertainties.
Williams is justifiably concerned as inflationary pressures build. First some definitions. Inflation results from a money supply increase that causes prices to rise. Williams refers only to goods and services, not financial assets like stocks and bonds. He also leaves out speculation and market manipulation that's key to understanding high oil and food prices. Markets don't move randomly. Big-monied speculators move them, but that's a separate topic from what Williams addresses.
He mentions various types of hyperinflation. They range from the double or triple-digit kind, several-fold that level, to what happened in Weimar Germany when it went to infinity. Once the genie is unleashed, there's no telling how bad things may get. Williams sees them getting pretty bad. So much so that dollars get dumped, holders flee to safety, and a downward spiral intensifies with no idea of a bottom.
In his view and others, the culprit is fiat currency, without gold backing. Its worth depends solely on the full faith and credit of the issuing government. Absent that and currencies crash. Print too much of it, and that's its future. Examine Fed policy under Greenspan and Bernanke, and draw your own conclusions.
They've been virtual money-creation machines unmindful of the history they should know. By issuing too much of a good thing for too many years, they fueled asset bubbles. When they burst, they made things worse and may now have headed the economy for collapse. In Williams judgment, America today is no different from other nations in other eras that followed similar policies. They all met the same fate, and today this country has already "obligated itself to liabilities well beyond its ability ever to pay off." Not a cheery assessment, and he's not alone believing it.
More definitions:
-- Deflation - a decrease in goods and services prices, generally from a money supply contraction;
-- Inflation - the reverse of the above;
-- Hyperinflation - extreme inflation, as explained above, to a level where money becomes worthless or nearly so; according to Williams, the coming hyperinflation is because of a "lack of monetary discipline formerly imposed....by the gold standard, and a (Fed) dedicated to preventing a collapse in the money supply (and preventing) the implosion of the (ongoing) extremely over-leveraged domestic financial system;"
-- Recession - officially defined as two or more consecutive (inflation-adjusted) GDP contracting quarters; many economists don't agree on this, and some gauge conditions by the relative strength or weakness of industrial production, payroll employment, retail sales, and so forth; add it up and clearly the US is in recession; how bad and for how long will only be known in time;
-- Depression - a recession "where (inflation-adjusted) peak-to-trough contraction exceeds 10%; and a
-- Great depression - one where the peak-to-trough exceeds 25%. It happened only once so far in US history in the 1930s.
Williams believes the current US contraction is about halfway to becoming a "depression," but before it ends it may become "Great Depression II" to distinguish it from the earlier one. We're now in an "inflationary recession," and available data confirm it - soaring food and oil prices, a weakened dollar, true unemployment over 12%, real inflation nearly as high, weak industrial production, and more. In his judgment, expect worse ahead when added "inflationary effects of soaring broad money growth....start" surfacing later in the year. In his judgment, by year-end 2008, "official CPI" figures should begin showing it.
Current computations cook the books, and not just for inflation. According to Williams, the economy has been in recession since late 2006 when it entered the "second down-leg" of a multiple dip contraction. It began in 1999, then showed up officially in 2001. His current outlook takes account of "further bounces and dips in economic activity." We may now be in an upward swing before reheading down. It happened during the Great Depression, only to fall to new lows.
Conditions today are hazardous. A major financial crisis precipitated them. Reckless policies caused it. It threatens the solvency of major banks and other financial institutions. It also hurts the greater economy. Solutions - massive liquidity injections, interest rate cuts and reckless deficit spending. Result - financial malpractice for a short-term fix. Consequences - "financial Armageddon" according to Williams.
M3 (the broadest money supply measure) growth is so high that the Fed no longer reports it. Economists like Williams do because it's crucial to know, and the data he reveals are disturbing - record M3 growth at a near 18% annual pace. Hyperinflationary seeds are now sown. Dollar valuation is falling, and at some point may accelerate when investors flee it for safer havens. The Fed again will respond. More debt will be monetized. It will build over time. Things will get worse and then be exacerbated when the government is less able to meet its obligations. "Therein lies the ultimate basis for the pending hyperinflation," in Williams' judgment.
He believes it will morph into a hyperinflationary depression, then a "great depression." And when it hits, it will be with "surprising speed." Already disposable income is falling in a weakened economy in crisis. As things worsen, politicians get blamed, and Williams raises an interesting possibility. If conditions get bad enough, voters may respond with their feet, declare a pox on both major parties, and turn to a third alternative around 2010 or 2012. It happened before in our history. The Republican Party is Exhibit A. It was created in 1854 at a time Democrats and Whigs were the two dominant parties. Exit Whigs, and enter Republicans with Abraham Lincoln its first elected president in 1860.
Williams shows US inflation data going back to 1665. It was fairly stable up to the Fed's 1913 creation. It then began rising and accelerated post-WW II. Government calculations mask it. Alternative ones are more revealing and accurate. Except for minor price declines in 1944 and 1955, the US hasn't had a deflationary period since the 1930s. Abandoning the gold standard is why. It imposed monetary discipline. Roosevelt went off it in 1933. He had to. The banking system collapsed, money supply imploded, and economic stimulus was needed. It released the Fed to create money freely. Therein lies the problem, and it shows up in the numbers.
Current Fed Chairman Bernanke and Alan Greenspan are students of the Great Depression. "Helicopter Ben" especially vowed never again, and his actions prove it to a fault. He knows the risks and stated them in an earlier speech. He said:
"Like gold, US dollars have value only to the extent that they are strictly limited in supply. But the US government has a technology called a printing press (now its electronic equivalent), that allows it to produce as many US dollars as it wishes." By doing so, it "reduce(s) the value of a dollar in terms of goods and services" which raises their prices...."under a paper-money system, a determined government can always generate higher spending and hence positive inflation."
So it has, according to Williams, and it caused a "slow-motion destruction of the US dollar's purchasing power" since 1933. It shows up in GAAP-based 2007 federal deficit figures - $4 trillion for the fiscal year, not the official $163 fiction reported. Williams estimates total outstanding federal obligations at $62.6 trillion. At least one other economist puts it over $80 trillion. There's no way to honor this debt level, so the "government effectively is bankrupt." At that point, it has three choices - default, declare a moratorium, or repudiate the entire amount.
Sooner or later, markets will react. Holders of US debt already are balking, but so far modestly and quietly. Ahead, that may change if dollar valuations plunge. It will force the Fed's hand. Greater debt monetization will follow. Dollar valuations will sink further, and so forth in a progressive downward cycle to oblivion if Williams is right.
If conditions get severe enough, the Fed can create huge amounts of currency in a few days or weeks - enough to match the dollar's lost purchasing power in the last 75 years. Combine it with fiscal irresponsibility and imagine the consequences.
Official data alone today are reason for concern - soaring food and oil prices, the dollar near historic lows, money growth at an all-time high, and off-the-charts federal deficits and debt. The trend continues, and it shows up in gold prices - topping $1000, then retreating, but nearly certain to soar way above previous highs on its way to numbers not discussed in the mainstream - $2000 an ounce, $3000? Who knows. Williams sees it "setting new historic highs."
In 1980, its price hit $850 an ounce. In CPI inflation-adjusted terms, around $2300 an ounce would match it today. But if the government hadn't cooked the CPI calculation, the number would be about $6250 an ounce. By that standard, gold today is cheap. It's way below its real 1980 top, and if inflation accelerates as Williams predicts, expect much higher prices as dollars keep deflating.
Under this scenario, the "US government cannot cover (its) existing obligations." Annual federal deficits are "careening wildly out of control, averaging $4.6 trillion per year for the six years through 2007." That's with all unfunded liabilities included like Social Security, Medicare, Medicaid, other social services, debt service and more.
Williams says things are so out of control that "if the government (raised taxes) to seize 100% of all wages, salaries and corporate profits, it still would (show) an annual deficit using GAAP accounting" methods. At the same time, "given current revenues, if it stopped (all) spending (including defense and homeland security) other than Social Security and Medicare obligations, the government still would (show) an annual deficit." The hole is so deep, it's impossible to dig out, according to Williams.
But given political realities, officials spend whatever it takes to get elected and keep their jobs. That's besides foreign wars, limitless corporate subsidies and more. Things, however, won't improve. They'll worsen, and that for Williams spells hyperinflation ahead. It's happening "with the full knowledge of political Washington and the Federal Reserve." It it weren't for the US's "special position," our debt would likely be rated "below investment grade instead of triple-A." Longer term bonds are especially risky. At some point, they'll lose their full value. They also risk default, and that's besides their loss in dollar terms.
It's just a matter of time before foreign investors get worried enough to act - buying fewer Treasuries down to none, then followed by redemptions. The Fed will have to compensate. Print more currency, and the problem deepens. Its value declines and inflation accelerates.
Trade policies worsen things. We're in a global race to the bottom. The once bedrock manufacturing base eroded. It's now 10% of the economy and falling. Services currently account for around 84% of it and rising. Jobs in all categories are being offshored to low-wage countries. Average inflation-adjusted wages keep declining. Real earnings are below their early 1970s peak. Living standards are falling. Consumer debt is rising to make up the shortfall. Savings are liquidated. Before the housing decline, mortgage refinancing helped when valuations rose. It meant taking on more debt. Fed policy encouraged it. Today's dilemma "is payback" for unsustainable bubble-creation policies. Recalling a relevant quote: "Things that can't go on forever won't."
Bad policy caused enormous structural change, and trade deficits are part of it. They've "risen to the highest level for any country in history." They're one more problem for a seriously over-extended economy. It places "the federal government and Federal Reserve in untenable positions, where they cannot easily or rapidly address the underlying problems, even if standard economic stimuli were available."
Given the federal deficit and out-of-control spending, fiscal policy limits have been reached. The Fed's in the same bind. It can neither stimulate the economy or contain inflation. Rate cuts have done little. Saving the dollar may require raising them, but that won't "contain non-demand driven inflation." It shows up in high food, energy, health care, and companies like Dow Chemical announcing on May 28 that it will raise prices across the board up to 20% to offset increased costs.
More cause for worry, and Williams anticipates depression. Hyperinflation will follow, and it will sink "the economy into a great depression." It will halt commercial activity. The greater disparity in income, the more negative its consequences. "Extremes in income variance usually are followed by financial panics and economic depressions. US income variance today is higher" than in 1929 and "nearly double that of any other 'advanced' economy."
Federal bailouts have worsened things. Dollar creation exploded. Crisis has been pushed into the future. Its enormity will be far greater, and foreign investors will get stuck with a lot of it. When it arrives in strength, capital outflow will follow, and dollar valuation will plunge with it. Williams believes that "both central bank and major private investors know that the dollar is going to be a losing proposition. They either expect and/or hope that they can get of (it) in time to lock in their profits (or for central bankers) that they can forestall the ultimate global economic crisis" as long as possible.
Dollars are very vulnerable in this environment. If Treasuries are dumped, the Fed will monetize debt to make up the difference. Inflation will then accelerate, multi-trillion dollar deficits will worsen things, and a "self-feeding cycle of currency debasement and hyperinflation" will follow.
Cash as we know it will disappear. A barter system and black market will replace it or possible introduction of a new currency. Since most money today is electronic, not physical, chances of it adapting "are practically nil." With hyperinflation, electronic commerce would completely shut down and economic collapse would follow. Gold and silver will be invaluable. Holders could exchange them for goods and services.
Physical goods will also be precious for survival and as a medium of exchange. Anything with a long shelf life may be stocked in advance, and providers of essential services could barter them for goods and other services. Forewarned is forearmed. Safety and liquidity are crucial. Anything retaining value is essential. Real estate, other currencies for example. Foreign equities and debt to a small degree because US financial assets hammering will spill everywhere.
With all that to deal with, consider another dilemma - the likelihood of painful political change, civil unrest, disruptive violence, and utter chaos. If Williams is right and hyperinflation arrives, Katie bar the door on what may follow. Revolutions are possible with three notable last century ones to consider - in Russia, Weimer Germany and Nationalist China. In each case, the old order ended, everything changed, but not for the good. How does Williams advise? Evaluate one's own circumstances, use common sense, and forewarned is forearmed. That will help, but hard times hurt everyone.
Hopefully they won't arrive, at least not full-blown as Williams predicts. But make no mistake. Excess has a price. The more of it the greater. America has an ocean of it. Sooner or later comes payback. "Things that can't go on forever won't."
Stephen Lendman is a Research Associate of the Centre for Research on Globalization. He lives in Chicago and can be reached at lendmanstephen@sbcglobal.net.
Also visit his blog site at sjlendman.blogspot.com and listen to The Global Research News Hour on RepublicBroadcasting.org Mondays from 11AM to 1PM US Central time for cutting-edge discussions with distinguished guests. All programs are archived for easy listening.
News and politics
inflation
Ban GMOs Now
by Dr. Mae-Wan Ho
(ISIS.org)
Invited lecture at conference on TRADITIONAL SEEDS OUR NATIONAL TREASURE AND HERITAGE -Traditional and Organic Agriculture instead of GMO, 17 May 2008, Bewelder, Warsaw, Poland
News and politics
GMO
(ISIS.org)
Invited lecture at conference on TRADITIONAL SEEDS OUR NATIONAL TREASURE AND HERITAGE -Traditional and Organic Agriculture instead of GMO, 17 May 2008, Bewelder, Warsaw, Poland
The Brave New World of GM Science
In 1994, I met some of the most remarkable leaders in the Third World: Tewolde Berhan Gebre Egziabher (Institute of Sustainable Development, Addis Ababa, Ethiopia), Martin Khor (Third World Network, Penang, Malaysia), and Vandana Shiva (Navdanya, New Delhi, India), who persuaded me to look into genetically modified organisms (GMOs), especially GM crops, which they rightly saw as a special threat to small family farmers. The biotech industry was promising miracle GM crops that would boost yield to feed the world, improve nutrition, and clean up and protect the environment. Monsanto’s Flavr Savr tomato, the first GM crop, had just been commercialised, though it turned out to be a complete flop, and was withdrawn several years later..
The biotech industry’s aggressive campaign of disinformation and manipulation of science did nothing to obscure the signs that the dream would soon turn into nightmare; and I said so in my book first published in 1997/1998 [1] Genetic Engineering Dream or Nightmare, the Brave New World of Bad Science and Big Business, which became an international bestseller, translated into many languages, and recently reprinted with an extended introduction to coincide with its translation into Indonesian. Everything predicted in that book has happened. It also explained why the science behind GM is obsolete; a story elaborated further in Living with the Fluid Genome [2] published in 2003.
Genetic modification based on an obsolete theory and hence ineffective and dangerous
Genetic engineering of plants and animals began in the mid 1970s in the belief that the genome (the totality of all the genetic material of a species) is constant and static, and that the characteristics of organism are simply hardwired in their genome. But geneticists soon discovered that the genome is remarkably dynamic and ‘fluid’, and constantly in conversation with the environment. This determines which genes are turned on, when, where, by how much and for how long. Moreover, the genetic material itself could also be marked or changed according to experience, and the influence passed on to the next generation.
The best thing about the human genome project is to finally explode the myth of genetic determinism, revealing the layers of molecular complexity that transmit, interpret and rewrite the genetic texts [3] (Life Beyond the Central Dogma series, SiS 24). These processes are precisely orchestrated and finely tuned by the organism as a whole, in a highly coordinated molecular ‘dance of life’ that’s necessary for survival.
In contrast, genetic engineering in the laboratory is crude, imprecise and invasive. The rogue genes inserted into a genome to make a GMO could land anywhere; typically in a rearranged or defective form, scrambling and mutating the host genome, and have the tendency to move or rearrange further once inserted, basically because they do not know the dance of life. That’s ultimately why genetic modification doesn’t work and is also dangerous.
Independent science against GM
In 1999, I co-founded the Institute of Science in Society (ISIS) with my husband and long-time collaborator Peter Saunders, Professor of Mathematics at King’s College, London, to work for science, society and sustainability and to reclaim science for the public good. We are fortunate to have the support of wonderful fellow scientists, especially Prof. Joe Cummins, who joined ISIS from the start and continues to play the leading role in monitoring GM science. (Joe Cummins has been honoured with the ISIS Distinguished Fellow Award 2008.)
In 2003, dozens of scientists from around the world joined us in ISIS to form the Independent Science Panel, and produced a report, The Case for A GM-Free Sustainable World [4], documenting all the problems and hazards of GM crops as well as the successes and benefits of non-GM sustainable agriculture. The report was republished within a year, translated into many languages and widely circulated. We presented the report to the European Parliament in 2004 [5] (Keep GM Out of Europe, SiS 24), with the help of Jill Evans MEP.
In 2007, we updated the ISP report with a dossier containing more than 160 fully referenced articles from the archives of ISIS’ magazine Science in Society, spelling out the scandals of serious hazards ignored, scientific fraud, the regulatory sham and violation of farmers’ rights [6] (GM Science Exposed: Hazards Ignored, Fraud, Regulatory Sham, Violation of Farmers Rights). Duped farmers in India are driven to suicide in hundreds of thousands. GM science is a crime against humanity.
In a scientific review paper [7] (GM Food Nightmare Unfolding in the Regulatory Sham), we documented how national and international regulators and advisory bodies such as the European Food Safety Authority have been ignoring the precautionary principle (which is accepted by the European Commission), abusing science, sidestepping the law, and helping to promote GM technology in the face of evidence piling up against the safety of GM food and feed.
We presented our dossier and review paper to the European Parliament in June 2007, once again to press for a GM-Free Europe and a GM-free world, thanks to the sponsorship of Polish MEP Mr. Janusz Wojciechowski and his office. Our panel consisted of key scientists from six countries including Poland, and friends of independent scientists, including MEPs Dr. Caroline Lucas and Jill Evans.
The case for a GM-free world has grown much stronger since 2004, not only because so much more evidence has stacked up against GM crops; but especially because accelerating global warming, the depletion of water and fossil fuels, and the current food crisis make it that much more urgent to shift comprehensively to sustainable food and energy systems as proposed in ISIS/TWN’s energy report Which Energy? [8]. There is neither the time nor resources to waste on GM.
We’d had 30 years of GMOs and more than enough damage done, as detailed in the ISP Report [4], in our GM Science dossier [6], and more recent evidence has been piling up.
Thirty years of GMOs are more than enough
· No increase in yields; on the contrary GM soya decreased yields by up to 20 percent compared with non-GM soya [4], and up to 100 percent failures of Bt cotton have been recorded in India [6]. New studies confirmed these findings. Research from the University of Kansas found a 10 percent yield drag for Roundup Ready soya [9] that required extra manganese applied to the soil to make up the yield deficit. A team of scientists from the USDA and the University of Georgia found growing GM cotton in the US could result in a drop in income by up to 40 percent [10, 11] (Transgenic Cotton Offers No Advantage, SiS 38)
· No reduction in pesticides use; on the contrary, USDA data showed that GM crops increase pesticide use by 50 million pounds from 1996 to 2003 in the United States [4]. New data paint an even grimmer picture: the use of glyphosate on major crops went up more than 15-fold between 1994 and 2005, along with increases in other herbicides [12] in order to cope with rising glyphosate resistant superweeds [6]. Roundup tolerant canola volunteers are top among the worries of Canadian farmers [13, 14] (Study Based on Farmers’ Experience Exposes Risks of GM Crops, SiS 38)
· Roundup herbicide is lethal to frogs and toxic to human placental and embryonic cells [6]. Roundup is used in more than 80 percent of all GM crops planted in the world
· GM crops harm wildlife, as revealed by UK’s farm scale evaluations [6], and more recently in a study led by Loyola University, Chicago, Illinois in the United Stated, which found that wastes from Bt corn impaired the growth of a common aquatic insect [15, 16] (Bt Crops Threaten Aquatic Ecosystems, SiS 36)
· Bt resistance pests and Roundup tolerant superweeds render the two major GM crop traits practically useless [6]. A recent review concluded that [17] “evolved glyphosate-resistant weeds are a major risk for the continued success of glyphosate and transgenic glyphosate-resistant crops.” And the evolution of Bt resistant bollworms worldwide have now been confirmed and documented in more than a dozen fields in Mississippi and Arkansas between 2003 and 2006 [18]
· Vast areas of forests, pampas and cerrados lost to GM soya in Latin America, 15 m hectares in Argentina alone [6]; and this has worsened considerably with the demand for biofuels (see later)
· Epidemic of suicides in the cotton belt of India involving 100 000 farmers between 1993-2003, and a further 16 000 farmers a year have died since Bt cotton was introduced [6]
· Transgene contamination unavoidable, scientists find GM pollination of non-GM crops and wild relatives 21 kilometres away [19]
· GM food and feed linked to deaths and sicknesses both in the fields in India and in lab tests around the world (more below)
GM food and feed inherently hazardous to health [7]
Here are some highlights from our GM Science dossier [6] on the hazards of GM food and feed. Dr. Irina Ermakova of the Russian Academy of Sciences showed how GM soya made female rats give birth to severely stunted and abnormal litters, with more than half dying in three weeks, and those remaining are sterile. Hundreds of villagers and cotton handlers in India suffer allergy-like symptoms, thousands of sheep died after grazing on the Bt cotton residues, goat and cows as well were reported in 2007 and 2008 [20] (Mass Protests against GM Crops in India , SiS 38). A harmless bean protein transferred to pea when tested on mice cause severe inflammation in the lungs and provoked generalised food sensitivities. Dozens of villagers in the south of the Philippines fell ill when neighbouring GM maize fields came into flower in 2003, five have died and some remain ill to this day. A dozen cows died having eaten GM maize in Hesse Germany and more in the herd had to be slaughtered from mysterious illnesses. Arpad Pusztai and his colleagues in the UK found GM potatoes with snowdrop lectin damaged every organ system of young rats; the stomach lining grew twice as thick as controls. Chickens fed GM maize Chardon LL were twice as likely to die as controls. And finally, GM maize Mon 863 was claimed to be as safe as non-GM maize by the company, and accepted as such by European Food Safety Authority. But independent scientists of CriiGen in France re-analysed the data and found signs of liver and kidney toxicity.
Different animals and human beings exposed to a variety of transgenic crops with different traits either fall ill or die. The evidence compels us to consider the possibility that the hazards of GMOs may be inherent to the technology, as I suggested more than ten years ago [1].
Table 1. Summary of Exposure of Animals and Human Beings to GMOs
| Species | GM species | Transgene trait | Effect |
| Rat | Soya | Roundup Ready | Stunting, death, sterility |
| Humans | Cotton | Cry1Ac/Cry1Ab | Allergy symptoms |
| Sheep | " | " | Death, liver toxicity |
| Cows | " | " | " |
| Goats | " | " | " |
| Mice | Pea | Alpha-amylase Inhibitor | Lung Inflammation, General food sensitivity |
| Mice | Soya | Roundup Ready | Liver, pancreas and testis affected |
| Humans | Maize | Cry1Ab | Illnesses and death |
| Rats | Maize | Cry3Bb | Liver and kidney toxicity |
| Cows | Maize | Cry1Ab/Cry1Ac | Death and illnesses |
| Rats | Potato | Snowdrop lectin | Damage in every organ system. Stomach lining twice as thick as controls |
| Mice | Potato | Cry1A | Gut lining thickened |
| Rats | Tomato | Delay ripening | Holes in the stomach |
| Chickens | Maize | Glufosinate tolerance | Deaths |
US courts rule GM crop field-tests and releases illegal
The message that GM crops are unsafe appears to have got through to the judiciary system in the United States. There have been three court rulings against the US Department of Agriculture (USDA) for failing to carry out proper environmental impact assessment, making the original releases illegal [21] (Approval of GM Crops Illegal, US Federal Courts Rule, SiS 34). These are the first rulings against GMOs in the top producing country in the world, which has been also promoting GMOs aggressively.
The first case was on drug-producing GM crops in Hawaii. The court said that the USDA violated the Endangered Species Act as well as the National Environmental Policy Act.
The second court case not only ruled GM herbicide-tolerant creeping bentgrass illegal, but also that the USDA must halt approval of all new field trials until more rigorous environmental reviews are conducted.
The third decision was passed on Monsanto’s Roundup Ready alfalfa for having been commercial released illegally without an Environment Impact Statement.
An avalanche of bans and rulings strikes GM crops worldwide
There have been numerous bans and restrictions imposed on GM crops in recent years, which say a lot about the inadequacies of regulatory regimes worldwide (see Box 1).
| Rulings and bans on GMOs between May 2007 and May 2008 -- US GM alfalfa ban made permanent [22] -- US Federal Court of Appeals ruled against GM bentgrass again [23] -- Four counties in California have bans or moratorium on GM crops and the first state bill to protect Californian farmers against lawsuits that intimate and harass them when their field are contaminated passed through the Agriculture committee in January 2008 [24] -- Montville USA became the first town outside California to ban GM crops [25] -- South Australia extended its GM ban [26] -- Romania joined EU members in banning GM crop Mon 810 [27], the others are France, Hungary, Italy, Austria, Greece, and Poland -- 13 out of 20 counties in Croatia have declared themselves GM-Free [28] -- Greece renewed its ban on GM maize seeds [29] -- Germany imposed much stricter regulations on GM maize [30] -- Scotland backs GM ban in Europe [31] -- France banned GM maize Mon 810 in February 2008 and passed GMO law in April to guard against contamination by GMO, making it compulsory for farmers to “respect agricultural structures, local ecosystems and non-GMO commercial and production industries” [32, 33] -- Wales is set to ban GM crops [34] -- More than 230 regions, over 4 000 municipalities and other local entities and tens of thousands of farmers and food producers in Europe have declared themselves GMO-free so far [35] |
EU Commissioner for the Environment Stavros Dimas has expressed serious reservations concerning GMOs [36] (GM-Free Europe Beginning?, SiS 36), which is unprecedented in the history of the European Commission. On 7 May 2008, the European Commission delayed a decision on allowing farmers to grow more GM crops, and asked European Food Safety Authority to reconsider its previous review, which it had admitted was inadequate, as it was unable to take indirect and long term impacts into account [37].
No case for GM crops, small scale organic farming is the way ahead
Meanwhile, on 15 April 2008, 400 scientists of the International Assessment of Agricultural Science and Technology for Development (IAASTD) released its 2 500-page report [38] that took 4 years to complete. It is a thorough examination of global agriculture on a scale comparable to the Intergovernment Panel on Climate Change. Its conclusions are remarkably similar to our own report Food Futures Now *Organic *Sustainable *Fossil Fuel Free [39] launched in UK Parliament a week later.
The IAASTD calls for a fundamental change in farming practice to counteract soaring food prices, hunger, poverty and environmental disasters, it says GM crops are controversial with respect to safety for health and the environment, and will not play a substantial role in addressing climate change, loss of biodiversity, hunger and poverty. Small scale farmers and agro-ecological methods are the way forward, and indigenous and local knowledge are as important as formal scientific knowledge. It warns that growing crops for biofuels could worsen food shortages and price rises [40] (“GM-Free Organic Agriculture to Feed the World”, SiS 38)
The Director is Prof. Robert Watson, Chief Scientist at the World Bank and also UK’s Department for the Environment, Food and Rural Affairs. He says, “Are transgenics the simple answer to hunger and poverty? I would argue no.” And “Small organic farms are the way ahead” (BBC Radio 4 Today Programme, 19 April 2008).
Our Food Futures Now report goes a step further. We argue that only organic agriculture can truly feed the world. More than that, organic agriculture and localised food and energy systems can potentially compensate for all ghg emissions due to human activities and free us from fossil fuels, and we need to implement this urgently.
The UN has declared 2008 the year of the Global Food Crisis, and it has been the top news story everyday for months now as the crisis deepens. Food prices increased by an average of 40 percent last year; a string of food riots and protests spread around the world including the UK, and more than 25 000 farmers killed themselves in India.
Most commentators agree that the immediate cause of the food crisis is the divestment of food grains into producing biofuels. BusinessWeek identified Monsanto as a “prime beneficiary”. Its stock correlated closely with the price of oil (better than ExxonMobile), and hardly correlated with the price of corn, basically because no one will eat its GM corn. Nevertheless the pro-GM lobby are out in force, using the food crisis to promote GM crops.
I can only repeat what I said earlier. GM crops are one big failed experiment based on an obsolete scientific theory, and this failure has been evident since 2004 [41] (Puncturing the GM Myths, SiS 22). Apart from yielding less and requiring more pesticides, anecdotal evidence since 2005 from farmers around the world indicates that GM crops also require more water [42]. Industrial Green Revolution agriculture is now generally acknowledged to be a major driver of climate change as well as being vulnerable to climate change because of its heavy dependence on fossil energies and water, and its susceptibility to pests, diseases and climate extremes [38, 39, 43]. GM crops have all the worst features of industrial Green Revolution varieties exaggerated, including susceptibility to diseases and climate extremes on account of genetic uniformity [44] ] (Beware the New "Doubly Green Revolution", SiS 37); and not least, there are outstanding safety concerns (as described above). Growing GM crops for biofuels does not make them safe, as they will contaminate our food crops all the same.
Any further indulgence in GMOs will surely damage our chances of surviving global warming. We must get on with the urgent business of building organic, sustainable food and energy systems right now.
References
- Ho MW. Genetic Engineering Dream of Nightmare? The Brave New World of Bad Science and Big Business, Third World Network, Gateway Books, MacMillan, Continuum, Penang, Malaysia, Bath, UK, Dublin, Ireland, New York, USA, 1998, 1999, 2007 (reprint with extended Introduction).
- Ho MW. Living with the Fluid Genome, ISIS & TWN, London and Penang, 2003.
- Ho MW. Life beyond the Central Dogma series, Science in Society 24, 4-13, 2004.
- Ho MW and Lim LC. The Case for a GM-Free Sustainable World, Independent Science Panel Report, Institute of Science in Society and Third World Network, London and Penang, 2003; republished GM-Free, Exposing the Hazards of Biotechnology to Ensure the Integrity of Our Food Supply, Vitalhealth Publishing, Ridgefield, Ct., 2004 (both available from ISIS online bookstore http://www.i-sis.org.uk/onlinestore/books.php#1)
- Lim LC. Keep GM out of Europe! Science in Society 24, 26-27, 2004.
- GM Science Exposed: Hazards Ignored, Fraud, Regulatory Sham and Violation of Farmers’ Rights, ISIS CD book, 2007.
- Ho MW, Cummins J and Saunders PT. GM food nightmare unfolding in the regulatory sham. Microbial Ecology in Health and Disease 2007, Disease 2007, 19, 66-77.
- Ho MW, Bunyard P, Saunders PT, Bravo E and Gala R. Which Energy? 2006 ISIS Energy Report, Institute of Science in Society, London, 2006. http://www.i-sis.org.uk/onlinestore/books.php#238
- Gordon B. Better Crops 2007, 91, 12-14.
- Jost P, Shurley D, Culpepper S, Roberts P, Nichols R, Reeves J and Anthony S. Economic Comparison of transgenic and montransgenic cotton production systems in Georgia. Agronomy Journal 2008, 100, 42-51. (doi:10.2134/agronj2006.0259)
- Ho MW and Saunders PT. Transgenic cotton offers no advantage, Science in Society 38 (in press).
- Who benefits from gm crops? The rise in pesticide use, executive summary, Friends of the Earth International, Amsterdam, January 2008.
- Mauro IJ and McLachlan SM. Farmer knowledge and risk analysis: postrelease evalulation of herbicide-tolerant canola in Western Canada. Risk Analysis 2008, 28, DOI:10.1111/j.1539-6924.200801027.x
- Ho MW. Study based on farmers’ experience exposes risks of GM crops. Science in Society 38 (in press).
- Rosi-Marxhall EJ, Tank JL, Royer TV, Whiles MR, Evans-White M, Chamgers C, Griffiths NA, Pokelsek J and Stephen ML. Toxins in transgenic crop byproducts may affect headwater stream ecosystems. PNAS 2007, 104, 16204-8.
- Ho MW. Bt crops threaten aquatic ecosystems. Science in Society 36, 49, 2007.
- Powles, SB. Evolved glyphosate-resistant weeds around the world: lessons to be learnt. Pest Management Science 2008, 64, 360-5.
- “First documented case of pest resistance to biotech cotton” Science Daily, 8 February 2008, http://www.sciencedaily.com/releases/2008/02/080207140803.htm
- Van de Water PK, Watrud LS, Lee EH, Burdick C and King GA. Long-distance GM pollen movement of creeping bentgrass using modelled wind trajectory analysis. Ecological Applications 2007, 17, 1244-56.
- Kurunganti K. Mass protests against GM crops in India. Science in Society 38 (in press).
- Cummins J and Ho MW. Approval of GM crops illegal, US federal courts rule. Science in Society 34, 24, 2007.
- ““An American court bans genetically modified alfalfa – How sill Ottawa react:, CNW TELBEC, 4 May 2007, http://www.cnw.ca/fr/releases/archive/May2007/04/c5427.html
- “D.C. Circuit Court says “no” to Scotts and Monsanto on biotech grasses”, Center for Food Safety Press Release, 19 March 2008, http://www.centerforfoodsafety.org/bentgrassPR3_19_08.cfm
- History of AB 541, Californians for GE-Free Agriculture, http://www.calgefree.org/speakout.html
- “Montville: first U.S. town outside of California to ban genetically engineered crops”, Food for Maines Future, 29 March 2008, http://foodformainesfuture.org/blog/?p=30
- “GM crop ban extended indefinitely in SA”, The Land, 18 April 2008, http://theland.farmonline.com.au/news/nationalrural/grains-and-cropping/general/gm-crop-ban-extended-indefinitely-in-sa/85116.aspx
- “Romania joins EU members in GM crop ban”, Matt Williams, The Parliament.com, 28 March 2008, http://www.theparliament.com/policy-focus/agriculture/agriculture-article0/newsarticle/romania-joins-eunbspmembers-in-gm-crop-ban/511/
- Ho MW, Saunders PT and Jost M. Croatia to be organic and GM-Free. Science in Society 38 (in press)
- “Greenpeace applauds Greek ban on GMO corn”, ANA-MPA, 7 May 2008, http://www.ana.gr/anaweb/user/showplain?maindoc=3869485&maindocimg=1151649&service=8
- “Germany tightens restrictions on genetically modified corn”, Der Spiegel, 9 May 2007, http://www.spiegel.de/international/business/0,1518,481952,00.html
- “Government to back bid to ban GM crops in Europe”, Sunday Herald, 25 November 2007, http://www.robedwards.com/2007/11/government-to-b.html
- “French state body upholds decision of GM crop ban”, Reuters.com, 21 March 2008, http://www.freshplaza.com/news_detail.asp?id=186092
- “French Senate approves GMO law”, Reuters, 18 April 2008, http://www.planetark.com/dailynewsstory.cfm/newsid/48044/story.htm
- “Wales set to ban GM crops”, Steve Dube, icWales.co.uk, 18 March 2008, http://www.checkbiotech.org/green_News_Genetics.aspx?Name=genetics&infoId=17269
- GMO-free regions, biodiversity and rural development, GENET, May 2008, http://www.genet-info.org/gmo-free-regions.html
- Ho MW. GM-free Europe beginning? Science in Society 36, 51, 2007.
- “EU food agency under fire as commission debates GMOs”, Friends of the Earth Europe, Greenpeace Press Release, 7 May 2008,
- International Assessment of Agricultural Knowledge, Science & Technology (IAASTD) Synthesis Report 25 November 2007, http://www.agassessment.org/docs/Synthesis_Report_261107_text.pdf
- Ho MW, Burcher S, Lim LC, et al. Food Futures Now, Organic, Sustainable, Fossil Fuel Free, ISIS and TWN, London, 2008.
- Ho MW. GM-free organic agriculture to feed the world. International panel of 400 Agricultural scientists call for fundamental change in farming practice. Science in Society 38 (in press).
- “Puncturing the GM myths”, Interview of Dr. Mae-Wan Ho by Anastasia Stephens of the Evening Standard, Science in Society 22, 23-25, 2004.
- “Farmers ask why GM crops worse in drought”, Network of Concerned Farmers, 30 June 2005, http://www.non-gm-farmers.com/news_details.asp?ID=2253
- Manifesto on Climate Change and the Future of Food Security, The International Commission on the Future of Food and Agriculture, Florence, Italy, 2008.
- Ho MW. Beware the new “doubly green revolution”. Science in Society 37, 26-29, 2008.
News and politics
GMO
Sunday, 8 June 2008
Rainforest Alliance vs Fairtrade
From United Students for Fairtrade (US)
Rainforest Alliance (RA) is a certification that is mostly applied to estate, or large-scale, coffee operations. It establishes conservation and pest management standards which improve the environmental stewardship practices of estates. RA certification also includes considerations for workers’ rights and basic necessities. These are minimal with no spending requirements and often amount to compliance with national laws in the producing country. Additionally, producers are only required to comply with 70% of the certification guidelines, so it is possible for an estate to become certified while ignoring key standards.
Fair Trade Certification (FTC) offers the combination of relatively strong social and environmental standards. It is an empowerment model that helps family farmers gain direct access to international markets and develop necessary business capacity for competing in the global marketplace. The guaranteed Fair Trade floor price ($1.26 for coffee) allows farmers to cover production costs and invest in business capacity in pursuit of financial stability and independence. In short, Fair Trade is the only certification that focuses on empowerment and funds its mandate. Trade Certified products.
Why are so many large-scale coffee companies using Rainforest Alliance products?
Recently, many businesses have started to promote Rainforest Alliance certified coffee. This upsurge is driven by pure business logic: Rainforest Alliance products are cheaper than high-bar sustainability initiatives like Fair Trade Certified. They know there is demand for Fair Trade but assume consumers won’t do their homework. Their logic goes like this: if we put a ‘sustainable’ label on our package, customers will be satisfied, so let’s choose the cheapest. What do customers know about different certification standards?
Why is Rainforest Alliance cheaper?
It is true that Rainforest Alliance certification has strong environmental standards. But, they provide no price guarantee for farmers, and thus farmers still fall victim to highly volatile commodity markets. Rainforest Alliance guarantees the national minimum wage for workers (which isn’t much; currently $1.38 per day in Nicaragua) and basic necessities, but has no specific spending requirements for basic necessities and provides no guarantee of financial returns to farmers. They instead rely on market mechanisms alone. It’s no wonder that Rainforest Alliance is a cheaper option for businesses. This is not Fair Trade.
Do I Have to Choose Farmers Over the Environment?
Absolutely not. Most people associate Fair Trade with farmer empowerment, but it’s important to remember that protecting the earth is a fundamental tenant of Fair Trade as well. Fair Trade farming organizations are inspected on an annual basis for compliance with standards that require:
1. Protection of valuable ecosystems including virgin forests and waterways
2. Limited use of agrochemicals (In fact, a longer list of restricted chemicals than Rainforest Alliance standards.)
3. Waste management and recycling initiatives
4. Guaranteed financial premium for organic conversion
5. Strict prohibition of any GMO material in production or processing (Rainforest Alliance does not restrict GMOs.)
Like Fair Trade certification, Rainforest Alliance has strong environmental standards, but it does not take into account the link between financial stability and environmental protection. When farmers have no financial guarantee, they experience pressure to destroy their natural surroundings for short term financial gain. Fair Trade relieves financial burdens that are often the motivation for destroying the environment.
Rainforest Alliance
Fair Trade
Rainforest Alliance (RA) is a certification that is mostly applied to estate, or large-scale, coffee operations. It establishes conservation and pest management standards which improve the environmental stewardship practices of estates. RA certification also includes considerations for workers’ rights and basic necessities. These are minimal with no spending requirements and often amount to compliance with national laws in the producing country. Additionally, producers are only required to comply with 70% of the certification guidelines, so it is possible for an estate to become certified while ignoring key standards.
Fair Trade Certification (FTC) offers the combination of relatively strong social and environmental standards. It is an empowerment model that helps family farmers gain direct access to international markets and develop necessary business capacity for competing in the global marketplace. The guaranteed Fair Trade floor price ($1.26 for coffee) allows farmers to cover production costs and invest in business capacity in pursuit of financial stability and independence. In short, Fair Trade is the only certification that focuses on empowerment and funds its mandate. Trade Certified products.
Why are so many large-scale coffee companies using Rainforest Alliance products?
Recently, many businesses have started to promote Rainforest Alliance certified coffee. This upsurge is driven by pure business logic: Rainforest Alliance products are cheaper than high-bar sustainability initiatives like Fair Trade Certified. They know there is demand for Fair Trade but assume consumers won’t do their homework. Their logic goes like this: if we put a ‘sustainable’ label on our package, customers will be satisfied, so let’s choose the cheapest. What do customers know about different certification standards?
Why is Rainforest Alliance cheaper?
It is true that Rainforest Alliance certification has strong environmental standards. But, they provide no price guarantee for farmers, and thus farmers still fall victim to highly volatile commodity markets. Rainforest Alliance guarantees the national minimum wage for workers (which isn’t much; currently $1.38 per day in Nicaragua) and basic necessities, but has no specific spending requirements for basic necessities and provides no guarantee of financial returns to farmers. They instead rely on market mechanisms alone. It’s no wonder that Rainforest Alliance is a cheaper option for businesses. This is not Fair Trade.
Do I Have to Choose Farmers Over the Environment?
Absolutely not. Most people associate Fair Trade with farmer empowerment, but it’s important to remember that protecting the earth is a fundamental tenant of Fair Trade as well. Fair Trade farming organizations are inspected on an annual basis for compliance with standards that require:
1. Protection of valuable ecosystems including virgin forests and waterways
2. Limited use of agrochemicals (In fact, a longer list of restricted chemicals than Rainforest Alliance standards.)
3. Waste management and recycling initiatives
4. Guaranteed financial premium for organic conversion
5. Strict prohibition of any GMO material in production or processing (Rainforest Alliance does not restrict GMOs.)
Like Fair Trade certification, Rainforest Alliance has strong environmental standards, but it does not take into account the link between financial stability and environmental protection. When farmers have no financial guarantee, they experience pressure to destroy their natural surroundings for short term financial gain. Fair Trade relieves financial burdens that are often the motivation for destroying the environment.
Rainforest Alliance
Fair Trade
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