Romnesia: The Ability of the Very Rich to Forget the Context in Which They Made Their Money

ECONOMY

Monbiot.com / By George Monbiot

Romnesia: The Ability of the Very Rich to Forget the Context in Which They Made Their Money

A potent myth is being used to justify economic capture by a parasitic class.

September 25, 2012  |  

 

Photo Credit: Shutterstock.com

We could call it Romnesia: the ability of the very rich to forget the context in which they made their money. To forget their education, inheritance, family networks, contacts and introductions. To forget the workers whose labour enriched them. To forget the infrastructure and security, the educated workforce, the contracts, subsidies and bail-outs the government provided.
Every political system requires a justifying myth. The Soviet Union had Alexey Stakhanov, the miner reputed to have extracted 100 tonnes of coal in six hours. The United States had Richard Hunter, the hero of Horatio Alger’s rags-to-riches tales(1).

Both stories contained a germ of truth. Stakhanov worked hard for a cause in which he believed, but his remarkable output was probably faked(2). When Alger wrote his novels, some poor people had become very rich in the United States. But the further from its ideals (productivity in the Soviet Union’s case, opportunity in the US) a system strays, the more fervently its justifying myths are propounded.

As the developed nations succumb to extreme inequality and social immobility, the myth of the self-made man becomes ever more potent. It is used to justify its polar opposite: an unassailable rent-seeking class, deploying its inherited money to finance the seizure of other people’s wealth.

The crudest exponent of Romnesia is the Australian mining magnate Gina Rinehart. “There is no monopoly on becoming a millionaire,” she insists. “If you’re jealous of those with more money, don’t just sit there and complain; do something to make more money yourselves – spend less time drinking, or smoking and socialising and more time working … Remember our roots, and create your own success.”(3)

Remembering her roots is what Rinehart fails to do. She forgot to add that if you want to become a millionaire – in her case a billionaire – it helps to inherit an iron ore mine and a fortune from your father, and to ride a spectacular commodities boom. Had she spent her life lying in bed and throwing darts at the wall, she would still be stupendously rich.

The rich lists are stuffed with people who either inherited their money or who made it through rent-seeking activities: by means other than innovation and productive effort. They’re a catalogue of speculators, property barons, dukes, IT monopolists, loansharks, bank chiefs, oil sheikhs, mining magnates, oligarchs and chief executives paid out of all proportion to any value they generate.
Looters, in short. The richest mining barons are those to whom governments sold natural resources for a song. Russian, Mexican and British oligarchs acquired underpriced public assets through privatisation, and now run a toll-booth economy(4). Bankers use incomprehensible instruments to fleece their clients and the taxpayer. But as rentiers capture the economy, the opposite story must be told.

Scarcely a Republican speech fails to reprise the Richard Hunter narrative, and almost all these rags-to-riches tales turn out to be bunkum. “Everything that Ann and I have,” Mitt Romney claims, “we earned the old-fashioned way”(5). Old-fashioned like Blackbeard perhaps. Two searing exposures in Rolling Stone magazine document the leveraged buyouts which destroyed viable companies, value and jobs(6), and the costly federal bail-out which saved Romney’s political skin(7).

Romney personifies economic parasitism. The financial sector has become a job-destroying, home-breaking, life-crushing machine, which impoverishes other people to enrich itself. The tighter its grip on politics, the more its representatives must tell the opposite story: of life-affirming enterprise, innovation and investment, of brave entrepreneurs making their fortunes out of nothing but grit and wit.

There is an obvious flip-side to this story. “Anyone can make it – I did without help” translates as “I refuse to pay taxes to help other people, as they can help themselves”. Whether or not they inherited an iron ore mine from daddy.
In the article in which she urged the poor to emulate her, Gina Rinehart also proposed that the minimum wage should be reduced. Who needs fair pay if anyone can become a millionaire?

In 2010, the richest 1% in the United States captured an astonishing 93% of that year’s gain in incomes(8). In the same year, corporate chief executives made, on average, 243 times as much as the median worker (in 1965 the ratio was ten times lower, namely 24:1)(9,10). Between 1970 and 2010 the Gini coefficient, which measures inequality, rose in the United States from 0.35 to 0.44: an astonishing leap(11).

As for social mobility, of the rich countries listed by the OECD, the three in which men’s earnings are most likely to resemble their father’s are, in this order, the UK, Italy and the US(12). If you are born poor or born rich in these nations, you are likely to stay that way. It is no coincidence that these three countries all promote themselves as lands of unparalleled opportunity.

Equal opportunity, self-creation, heroic individualism: these are the myths that predatory capitalism requires for its political survival. Romnesia permits the ultra-rich both to deny the role of other people in the creation of their own wealth and to deny help to those less fortunate than themselves. A century ago, entrepreneurs sought to pass themselves off as parasites: they adopted the style and manner of the titled, rentier class. Today the parasites claim to be entrepreneurs.

References:

1. The Ragged Dick series.
2. http://www.nytimes.com/1985/08/31/world/in-soviet-eager-beaver-s-legend-works-overtime.html
3. http://www.ipa.org.au/sectors/northern-australia-project/publication/2081/let%27s-get-back-to-our-roots
4. Mike Lofgren uses this term in this fascinating article:http://www.theamericanconservative.com/articles/revolt-of-the-rich/
5. http://www.motherjones.com/politics/2012/09/full-transcript-mitt-romney-secret-video
6. http://www.rollingstone.com/politics/news/greed-and-debt-the-true-story-of-mitt-romney-and-bain-capital-20120829
7. http://www.rollingstone.com/politics/news/the-federal-bailout-that-saved-mitt-romney-20120829
8. Emmanuel Saez, 2nd March 2012. Striking it Richer: the Evolution of Top Incomes in the United States (Updated with 2009 and 2010 estimates).http://elsa.berkeley.edu/~saez/saez-UStopincomes-2010.pdf
9. Joseph Stiglitz, 2012. The Price of Inequality. Allen Lane, London.
10. Lawrence Mishel, Jared Bernstein and Heidi Shierholz. The State of Working America 2008/2009. Economic Policy Institute, cited by Joseph Stiglitz, as above.
11. http://krugman.blogs.nytimes.com/2012/05/23/was-greed-good/
12. OECD, 2010. Economic Policy Reforms: Going for Growth. Chapter 5, Figure 5.1.http://www.oecd.org/tax/publicfinanceandfiscalpolicy/45002641.pdf

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George Monbiot is the author Heat: How to Stop the Planet from Burning. Read more of his writings at Monbiot.com. This article originally appeared in the Guardian.

Tax-Free Capitalism

Tax-Free Capitalism

by Robert Hunziker / September 19th, 2012

The wealthy capitalist elites are at war against taxes!

This undeclared war is so substantive that its consequences have undermined the ability of major governments to provide social services to ordinary citizens, and it is a direct cause of unsustainable, mushrooming governmental deficits. While the wealthy elite have experienced an once-in-a-lifetime boost in income and inordinate wealth creation, major governments have been experiencing once-in-a-lifetime operating deficits and unprecedented debt-to-GDP ratios. These phenomena are a consequence of one another.

Governments cannot collect taxes on money that is vacationing offshore in numbered or imitation/pseudo/sham bank accounts!

The major accounting firms of the world are the prime movers & shakers; i.e., the feeder system, of tax-free capitalism.

The American Institute of CPA’s (“AICPA”) does have a Code of Professional Conduct, Article II Section 53.04 stating: “All who accept membership in the American Institute of Certified Pubic Accountants commit themselves to honor the public trust.” Well, well, well… time, and again, this trust has been tested and broken; e.g., Enron and the entire 2007-08 financial meltdown nightmare, but honestly, one has to wonder who’s left to pay dues to this forlorn organization.
Tax dodging is one of the largest businesses in the world according to a landmark study entitled “The Pin-Stripe Mafia: How Accountancy Firms Destroy Societies,” Austin Mitchell (MP, UK House of Commons) & Prem Sikka (University of Essex), Association for Accountancy & Business Affairs, United Kingdom, 2011:

All over the world tax revenues are under relentless attack from a highly organized tax avoidance industry dominated by four accountancy firms: Deloitte & Touche, PricewaterhouseCoopers, KPMG, and Ernst & Young  (the combined gross global annual revenues of the major accountancies of the world are $95 Billion, making them the 54^th largest economy in the world.) They employ thousands of individuals for the sole purpose of undermining tax laws, which does not create any social value, but enables corporations and wealthy elites to dodge corporate tax, income tax, National Insurance Contributions (NIC), Value Added Tax (VAT) and anything else that might enable governments to improve the quality of life… The loss of tax revenues is a major cause of the current economic crisis that is inflicting misery on millions of people.

Over the past few decades, coincident with the advocacy of Supply-side economics, commenced under President Reagan, it has become increasingly fashionable for capitalists to cheat governments by hiding money offshore.  One would think the Supply-side economic tenets of cutting taxes for the rich would be enough for them, for example, in America the top marginal tax rate has been cut from 70% under LBJ, whose presidency experienced the strongest annual GDP growth rate since WWII, to 35% today, but no, once the elite got the taste of more and more non-taxable income levels (they also achieved cuts in capital gains, dividends, and estates), it turned into an epidemic, and they simply can not get enough! In spite of Supply-side taxation windfalls for the super rich, they have migrated like swarms of locusts to offshore tax havens to avoid taxes altogether. The money fever led them to it!

And the authorities know all about it!

According to a recent extensive study (July 2012) conducted by James Henry, former chief economist of McKinsey & Company, the wealthy elite have up to $32 Trillion stashed away in offshore tax havens. This is twice the size of the U.S. economy, and remarkably, the James Henry Analysis excluded ownership of tangibles like RE, yachts, fancy cars, and entire islands (metaphorically speaking, those hidden assets comprise the largest economy in the world… a tax-free economy… a pure libertarian nation-state.)

The American Sustainable Business Council, Washington, D.C. claims:

Offshore tax havens provide cover for banks, hedge funds, and corporations to shift taxable income from the United States to tax havens for the sole purpose of escaping taxation. Tax haven secrecy allows wealthy Americans to hide assets, helps companies manipulate their finances, and fosters the casino economy.

A U.S. Governmental Accounting Office study found that at least 83 of the top 100 publicly traded corporations use offshore tax havens, as directed by their public accounting firms.

The egregiousness of this massive fraud against governments is almost impossible to comprehend because the numbers involved are beyond the bounds of normal rational thinking. For example, similar to the enormous debt burdens of trillions-upon-trillions carried by many democratic capitalistic countries, the numbers involved in tax avoidance are so large as not to register within one’s consciousness, but to put it into some kind of perspective, consider this: One trillion seconds of ordinary clock time equals 31,546 years, and thirty thousand years ago there was an Ice Age, and it was then that Neanderthals ceased to exist (one school of thought claims Cro-Magnons exterminated the Neanderthals.) Extrapolating the numbers further: 32 Trillion, which is the amount stashed away in offshore accounts, takes us back one million years in clock time. The enormity of the crime of offshore tax avoidance takes us back to when humans first started using fire. Wow!

Isn’t it despicable that this crime of the century isn’t the ‘first order of business’ for governments around the world, but come to think about it, the U.S. Congress is filled with elite multimillionaires… So?

Speaking of which, America had no compunction whatsoever about sending U.S. Marines into Iraq based upon bogus WMDs. How about U.S. Marines raiding offshore banks to collect Wealth Taxes of 20% of total assets from FWMDs (Financial Weapons of Mass Destruction)? But… this time it’s not bogus! What’s more harmful to the integrity and security of American society:  Offshore terrorists or offshore bank accounts?  Maybe it’s deadlocked.

“The simple fact of the matter is this: tax breaks for Big Oil, corporate jets, and companies that send jobs overseas have the practical effect of raising taxes on everyone else. That’s not right. That’s not smart. That’s not fair. And it’s high time we do something about it,” according to Congressman Chris Van Hollen (D. MY) who is co-sponsor of legislation to close offshore tax loopholes: Stop Tax Haven Abuse Act (H.R. 2669), which bill, as of 3/21/2012, has been referred to 12 separate committees for consideration. Also, Senator Carl Levin (D. MI) is the sponsor of Cut Unjustified Tax Loopholes Act (S.2075), which was assigned to one committee February. 7, 2012; however, will the bills ever get out of committees?

“Taxes are not just numbers in spreadsheets,” says Joseph Rotella, owner of Spencer Organ Company in Waltham, Massachusetts, who spoke at a Public Interest Research Group (“PIRG”) forum: “Taxes provide the revenues that pay for roads, bridges, public safety, public schools, public transportation and other infrastructure and services my business and my customers count on. We need to stop the tax haven abuse that lets big corporations avoid paying their fair share and gives them an unfair advantage in the marketplace.”
According to Forbes Magazine:

For people who think that they can still zip off to Panama or Switzerland to avoid paying taxes, think again. Beverly Hills, Calif.-based international tax lawyer Gary S. Wolfe says that while countries such as the Caymans do not impose taxes, that does not apply to U.S. citizens or residents. ‘The mistake that Americans make is that they go offshore and think that they don’t have to pay any taxes,’ he says. ‘The reality is that U.S. citizens are taxable anywhere in the world.’

In fact, taxes follow the passport of U.S. citizens even after expatriation because, assuming one gives up a U.S. passport, it can still take up to ten years before the U.S. no longer has jurisdiction over U.S. taxable income.

Nevertheless, a new breed of wealthy elite, the Transnational Class (reference: Towards A Global Ruling Class? Globalization and the Transnational Capitalist Class, William I. Robinson and Jerry Harris, Science and Society, Vol 64, No 1, Spring 2000.), who look down with disdain upon the masses, are not in the least concerned about the consequences of utilizing tax havens. Their haughtiness is expressed by a disregard for national borders and against the strictures of nation-states. They truly believe the world is their oyster and consider themselves exclusive members of a worldwide community of like-minded wealthy elites, not beholden to any sovereign, and because they express themselves in a worldly manner, their allegiance extends no further than to their rich compatriots. It is probable they do not view tax havens as anything other than a parking place for money or assets whilst they travel the globe, meeting their ilk at fancy restaurants, or sumptuous resorts, or a brunch with Bono at locations where price alone blocks out the rest of the world. Furthermore, assuming they are caught cheating, they’ll pay the fine, instructing their legion of accountants and attorneys to “settle” the issue.  This is reality in today’s world, leaving the middle/working classes to fend for themselves and for their slowly regressing respective governments, which are similar in many respects to the film Blade Runner’s tension between past, present, and future which is high-tech and gleaming (Tokyo) in some scenes but decayed (Detroit) and old  (Buffalo) elsewhere.

The very fact that such a huge amount of money is stashed offshore, and the whole world is fully aware sends a portentous message that the elites behind the offshore accounts control the message; they control who can or cannot do anything about the problem, and furthermore, they do not consider it a problem at all. Rather, it is a logical conclusion to their earned right for achievement in society. Their contempt for the masses of people comes from a belief that personal merit occasioned their rise to wealth and power, and this is true. Most of the new rich did not inherit their wealth. They earned it.  Meritocracy is their creed, not equality and fraternity. They have turned the national motto of the French Revolution liberté, égalité, and fraternité on its head. If you do not ‘achieve’ in life, then you do eat cake, but Queen Marie Antoinette did not say, “let them eat cake.” Radical agitators who were trying to turn the populace against her attributed the phrase to her in 1789, and their plan worked beautifully as she lost her head on the guillotine to the executioner Charles Henri Sanson at Place de la Révolution, where tens of thousands of citizens stood by quietly, until the blade dropped, and then, they cheered and danced.  Meanwhile, and while holding onto their heads, most of the aristocracy of Paris had already fled the city. Their overt pretensions of lifestyle finally did them in, and their families’ homes were looted, losing fortunes. They did not have offshore accounts to hide wealth… like today’s elite.  In this sense, things do change over time.

What may or may not change in November is the presidency of the United States, and millions of middle class Americans will cast votes for Mitt Romney, who is the Poster Boy for Offshore Bank Accounts and for the wealthy elites.  In this arena, Romney has Obama beaten hands down, but frankly, it is difficult to visualize average middle class families with Romney posters staked in the front yard. It seems so incongruous!

During the Republican presidential debates, Newt Gingrich remarked, “I don’t know of any American president who has had a Swiss bank account.” But, Mitt closed his Swiss bank account. However, he does have accounts in the prototypical tax havens of the Caymans, the Bahamas, and Luxemburg. Thus, it should come as no surprise that unlimited funds are readily available to finance his pathway to the White House.  The wealthy elite need somebody in charge who can veto H.R. 2669 and S. 2075 should the bills make it out of committee!

Robert Hunziker, a former hedge fund manager, is a professional independent negotiator for worldwide commodity actual transactions and a freelance writer for progressive publications as well as business journals. Mr. Hunziker earned an MA degree in economic history at DePaul University/Chicago, and he resides in Los Angeles. He can be contacted at: rlhunziker@gmail.com. Read other articles by Robert.

This article was posted on Wednesday, September 19th, 2012 at 8:00am and is filed under Capitalism, Tax.

America’s Descent into Poverty: Why the GOP and Romney is the Problem and Not the Solution

United States

America’s Descent into Poverty 

By Paul Craig Roberts

Institute for Political Economy

Saturday, Sep 1, 2012

The United States has collapsed economically, socially, politically, legally, constitutionally, and environmentally. The country that exists today is not even a shell of the country into which I was born. In this article I will deal with America’s economic collapse. In subsequent articles, i will deal with other aspects of American collapse.

  Economically, America has descended into poverty. As Peter Edelman says, “Low-wage work is pandemic.” Today in “freedom and democracy” America, “the world’s only superpower,” one fourth of the work force is employed in jobs that pay less than $22,000, the poverty line for a family of four. Some of these lowly-paid persons are young college graduates, burdened by education loans, who share housing with three or four others in the same desperate situation. Other of these persons are single parents only one medical problem or lost job away from homelessness.

Others might be Ph.D.s teaching at universities as adjunct professors for $10,000 per year or less. Education is still touted as the way out of poverty, but increasingly is a path into poverty or into enlistments into the military services.

Edelman, who studies these issues, reports that 20.5 million Americans have incomes less than $9,500 per year, which is half of the poverty definition for a family of three.

There are six million Americans whose only income is food stamps. That means that there are six million Americans who live on the streets or under bridges or in the homes of relatives or friends. Hard-hearted Republicans continue to rail at welfare, but Edelman says, “basically welfare is gone.”

In my opinion as an economist, the official poverty line is long out of date. The prospect of three people living on $19,000 per year is farfetched. Considering the prices of rent, electricity, water, bread and fast food, one person cannot live in the US on $6,333.33 per year. In Thailand, perhaps, until the dollar collapses, it might be done, but not in the US.

As Dan Ariely (Duke University) and Mike Norton (Harvard University) have shown empirically, 40% of the US population, the 40% less well off, own 0.3%, that is, three-tenths of one percent, of America’s personal wealth. Who owns the other 99.7%? The top 20% have 84% of the country’s wealth. Those Americans in the third and fourth quintiles–essentially America’s middle class–have only 15.7% of the nation’s wealth. Such an unequal distribution of income is unprecedented in the economically developed world.

In my day, confronted with such disparity in the distribution of income and wealth, a disparity that obviously poses a dramatic problem for economic policy, political stability, and the macro management of the economy, Democrats would have demanded corrections, and Republicans would have reluctantly agreed.

But not today. Both political parties whore for money.

The Republicans believe that the suffering of poor Americans is not helping the rich enough. Paul Ryan and Mitt Romney are committed to abolishing every program that addresses needs of what Republicans deride as “useless eaters.”

The “useless eaters” are the working poor and the former middle class whose jobs were offshored so that corporate executives could receive multi-millions of dollars in performance pay compensation and their shareholders could make millions of dollars on capital gains. While a handful of executives enjoy yachts and Playboy playmates, tens of millions of Americans barely get by.

In political propaganda, the “useless eaters” are not merely a burden on society and the rich. They are leeches who force honest taxpayers to pay for their many hours of comfortable leisure enjoying life, watching sports events, and fishing in trout streams, while they push around their belongings in grocery baskets or sell their bodies for the next MacDonald burger.
The concentration of wealth and power in the US today is far beyond anything my graduate economic professors could image in the 1960s. At four of the world’s best universities that I attended, the opinion was that competition in the free market would prevent great disparities in the distribution of income and wealth. As I was to learn, this belief was based on an ideology, not on reality.

Congress, acting on this erroneous belief in free market perfection, deregulated the US economy in order to create a free market. The immediate consequence was resort to every previous illegal action to monopolize, to commit financial and other fraud, to destroy the productive basis of American consumer incomes, and to redirect income and wealth to the one percent.

The “democratic” Clinton administration, like the Bush and Obama administrations, was suborned by free market ideology. The Clinton sell-outs to Big Money essentially abolished Aid to Families with Dependent Children. But this sell-out of struggling Americans was not enough to satisfy the Republican Party. Mitt Romney and Paul Ryan want to cut or abolish every program that cushions poverty-stricken Americans from starvation and homelessness.
Republicans claim that the only reason Americans are in need is because the government uses taxpayers’ money to subsidize Americans who are unwilling to work. As Republicans see it, while we hard-workers sacrifice our leisure and time with our families, the welfare rabble enjoy the leisure that our tax dollars provide them.

This cock-eyed belief, on top of corporate CEOs maximizing their incomes by offshoring the middle class jobs of millions of Americans, has left Americans in poverty and cities, counties, states, and the federal government without a tax base, resulting in bankruptcies at the state and local level and massive budget deficits at the federal level that threaten the value of the dollar and its role as reserve currency.

The economic destruction of America benefitted the mega-rich with multi-billions of dollars with which to enjoy life and its high-priced accompaniments wherever the mega-rich wish. Meanwhile, away from the French Rivera, Homeland Security is collecting sufficient ammunition to keep dispossessed Americans under control.

Source: Institute for Political Economy

Why the U.S. Drought is Hitting Harder Than Most People Realize

The Market Oracle

Why the U.S. Drought is Hitting Harder Than Most People Realize

Commodities / Agricultural Commodities Sep 06, 2012 - 09:14 AM

By: Money_Morning

 

Chris Martenson writes: This is an important update on the U.S. drought of 2012 and its impact on food prices, water availability, energy, and even U.S. GDP.

Even though the mainstream media seems to have lost some interest in the drought, all of us should continue to be aware of it since its ramifications are far-reaching.


As we discussed in this report, it's all connected to a larger pattern of exponential growth that is simply no longer sustainable. At stake is nothing less than the traditional American way of life.

This monumental drought has already led to sharply higher grain prices, increased gasoline costs (via the pass-through of higher ethanol costs), impeded oil and gas drilling activity in some areas (due to a lack of water), caused the shutdown of a few operating electricity plants, temporarily reduced red meat prices (but will also make them climb sharply later) as cattle are dumped in response to feed- and pasture-management concerns, and blocked and/or reduced shipping on the Mississippi River.

All this and there's also a strong chance that today's drought will negatively impact next year's Winter wheat harvest, unless a lot of rain starts falling soon.Hurricane Isaac certainly helped, but didn't go far enough.

Further, there will be a definite impact to U.S. GDP, which could add to pressures (excuses?) that the Fed may use to justify additional quantitative easing (QE) measures (otherwise known as 'printing more money').

Here's an in-depth look at why the U.S. Drought of 2012 is far from over...

Bigger Than Expected Crop Losses

Certainly the number one story around the U.S. drought centers on its impact on grain production, specifically corn and soybeans. In a minute we'll discuss the other impacts, but we'll start with the one that has the greatest potential to cause both suffering and strife over the coming months (and possibly years), especially for those on limited budgets.

In 2011, the U.S. reaped a corn harvest of some 314 million tons. In 2012, the USDA has estimated a harvest of 274 million tons - a shortfall of 40 million tons - despite record acreage being planted.

While the USDA has been steadily reducing their crop estimates, practically with every passing week, it seems likely that the USDA remains behind the curve today, as it has been every step of the way. A different source for information comes from the Pro Farmer Midwest Crops Tour, which is coming in slightly under the current USDA estimates:

Crop Tour Points to Sharper Drought Impact on Soy, Corn

Aug 21, 2012

Initial reports from the closely watched Pro Farmer Midwest Crop Tour suggested more crop damage than expected from the drought, raising the potential for diminished soybean production this fall and sending futures sharply higher.

The disappointing crop reports from scouts touring fields on the Pro Farmer crop tour in states such as Ohio and South Dakota make it hard to believe soybean yields will reach current U.S. government crop projections, said Don Roose, president of advisory and brokerage firm U.S. Commodities in West Des Moines, Iowa.

The market is in the "watch and worry" mode on all fronts as shrinking crop forecasts will further tighten supplies already projected to dwindle to precariously tight levels in 2013, Mr. Roose said.

On the annual Pro Farmer tour, analysts and investors walk corn and soybean fields in seven Midwestern states over four days to assess prospects prior to the fall harvest. Pro Farmer is an agricultural advisory firm. The Pro Farmer tour, which wraps up Thursday, reported diminished potential for the soybean crop in both Ohio and South Dakota.

The crop tour doesn't estimate soybean yields, but it reported an average 584.9 pods per 3-foot-by-3-foot square area in South Dakota, down 47% from a year ago. In Ohio, scouts reported soybean counts at an average of 1,033.72 pods per 3-foot-by-3-foot square area, down from 1,253.2 pods a year ago.

Soybeans entered their critical growing phases in recent weeks, and the crop has benefited in some regions from recent rains across the eastern Farm Belt.

Meanwhile, scouts with the Pro Farmer Midwest Crop Tour on Monday reported an average estimated corn yield in Ohio of 110.5 bushels per acre, down from the tour's estimate of 156.3 bushels a year ago. In South Dakota, tour scouts reported an average yield estimate of just 74.3 bushels per acre, down from 141.1 bushels a year ago.

While commodities traders and agronomists have braced for weeks for the prospect of a crop decimated by drought, the estimates were lower than many had expected.

The summary here is that the Pro Farmer Tour is reporting crop yields to be 2% - 3% lower than current USDA forecasts, which is a big deal when it comes to food. We're talking a few tens-of-millions-of-bushels' difference.

The somewhat sour note in this unfolding drama is the fact that 40% of the nation's corn crop goes to ethanol producers, which means that food will be burned in the nation's auto fleet instead of helping to keep prices down for consumers and animal feed. Another 40% goes to animal feed (chicken, cattle, hogs, etc.), and the remaining balance goes to direct human consumption.

However, the ethanol mandate is a congressional requirement for our fuel blenders, so they do not have a choice in the matter. It would literally take an act of Congress to even temporarily suspend the ethanol requirement - and in an election year, that's just not going to happen, given the powerful constituencies invested in preserving that mandate.

Of course, higher input costs will ripple through the entire chain, so perhaps Bernanke will get the inflation he seeks, although it won't be the one he wants. The inflation he wants is simple monetary-driven inflation. The inflation he will get is nothing more than a supply/demand mismatch.

Still, the USDA has a handy calculation for estimating the future impacts:

U.S.'s inferior corn crop has supply-chain ramifications

Aug 13. 2012

The USDA has provided considerable information about how the drought's effects were likely to percolate through the economy. Because of a smaller-than-expected corn crop, the USDA said it can make the general prediction that "we will see impacts within two months for beef, pork, poultry and dairy (especially fluid milk). The full effects of the increase in corn prices for packaged and processed foods (cereal, corn flour, etc.) will likely take 10-12 months to move through to retail food prices."

The USDA has a formula for predicting changes in the rate of inflation caused by gains in prices at the commodity level: if the farm price of corn rises 50%, retail food prices rise by 0.5% to 1% as measured by the Consumer Price Index (CPI).

The price of September corn futures from mid-June until early August advanced 55%, meeting the USDA's criterion for a measurable increase in the CPI Lapp presented a more extreme scenario than the USDA. He predicted that the damage to the 2012 corn crop will translate into a food inflation rate of 4% to 5% in 2013. In his view, the dollar cost of the drought already was $30 billion, which accrued rapidly over the summer.

"This is a cost that somebody has to bear," Lapp said. "Some price hikes are fairly quick and others take a while."

He said high feed costs will have to be absorbed by producers, who will likely liquidate part of their cattle and swine herds and poultry populations. At the retail level, the drought's effects will translate into narrower margins - and expected higher prices - for processed food and soft drink manufacturers among others.

Lapp offered his opinion that legislation that has effectively required 40% of the corn crop be used in making biofuels has made everything worse.

"The situation has been aided and abetted in a negative way by the biofuels mandates," he said. "Shame on us for having mandated so much to corn ethanol" without creating contingencies for a bad crop year.

Because corn is the base unit for so many things (especially in the form of high-fructose corn sweetener), and because it's a primary feed component for finishing cattle and raising chickens and hogs, it tends to have a pretty decent impact on food prices.

However, it takes time for those price hikes to work through the system. So it will not be until 2013 sometime that we really begin to feel it in the U.S. And for the rest of the world that lives more directly on grains? They're not as lucky. The price hikes hit them almost immediately.

It looks like the harvest in Russia will be below expectations as well:

Russia harvest forecasts cut as drought hits crop in east

Aug 20, 2012

(Reuters) - Two leading Russian agricultural analysts cut their forecasts for Russia's grain harvest on Monday after harvest data from two drought-stricken eastern growing regions reduced the outlook for the overall crop.

SovEcon narrowed their grain forecast to 71-72.5 million metric tonnes (...)

The government's official grain harvest forecast is 75-80 million tonnes, of which 45 million tonnes could be wheat. The government has put this season's exportable surplus at 10-12 million tonnes, a level seen by traders as an informal cap on exports.

The government has tried to reassure markets there will be no repeat of August 2010, when Russia's government shocked markets with a snap decision to ban grain exports when the scale of losses from major drought became clear.

The government has indicated that protective tariffs could be an option, though only after the end of the calendar year.

But traders widely expect limits to be imposed in some form, perhaps as early as November, after heavy exports in the early months of the season showedRussiacould hit the 10-12 million tonne mark sooner than January.

Russia is still officially projecting 75-80 million tonnes but may only get 71 tonnes. If the projected exportable surplus is 10-12 million tonnes, but Russia actually harvests 9 million tonnes less than their hoped-for projection, then its exports will have to decrease to plug that gap.

Here's the kicker: Russia has already exported a good deal of that amount. That is, the prospect of another Russian export ban this year is quite realistic. If we get one, then we can expect a repeat of the turmoil in the grain markets that we saw in 2010.

But there's another much more fundamental reason why we can expect higher prices going forward.

Need for Even Higher Prices

The good news is that there's still plenty of supply to carry us through to the next harvest. However, demand is going to have to go down some, and the way we accomplish that is through the price mechanism.

Right now, physical grain traders are saying that prices are too low and that unless they rise, we're going to run out of grain before the next harvest. Obviously, that's not truly going to happen - increasing scarcity will cause prices to rise until current demand levels are reduced.

Fall in corn price disguises real picture

Aug 20, 2012

Corn prices surged this monthto an all-time high of $8.4375 a bushel on the back of the worst drought in the US in nearly half a century. But prices have since fallen roughly 5 per cent. The impression is the rally has run out of steam.

This is far from the real picture. Prices need to rise again - probably setting all-time highs - to dampen consumption that is running ahead of supply.

If demand does not slow down, silos will be all but empty before the next harvest arrives in late 2013.

On paper, the balance sheet for corn supply and demand published by the US Department of Agriculture seems good enough. But in practice, the numbers look a bit shaky. The agency, whose figures are closely watched by the market, first estimates supply and, after that, adjusts the demand data to maintain a minimum level of inventories.

This time the USDA is asking for monumental rationing on the demand side. For example, US corn feed and export demand will need to drop to their lowest levels in nearly 20 years.

The USDA is also forecastinglower ethanol production- and thus corn demand. Ethanol output has fallen, but not nearly enough. Worse, therise in wholesale petrol pricesback above $3 a gallon means that ethanol producers are profitable again, even when paying record corn prices.

Corn is now trading just above $8 a bushel - but traders in the physical market say that prices need to rise to $9-$10 to force demand down enough to meet the consumption levels anticipated by the USDA.

The retreat in corn prices over the past couple of weeks has given inflation watchers a false sense of security. The market should not relax, however. More food inflation is just waiting around the corner.

The idea here is that the cash market will have to lead the futures market higher, an odd situation because it is usually the other way around. With so many hedge funds now playing in the commodity space, one explanation is that they are simply playing paper games with each other - those playing the short side will get a lesson in the importance of keeping one eye on reality.

A truly shocking event would be if the U.S. ever gets to the position of limiting exports of corn or even soybeans. That is a very unlikely proposition to consider, but if the silos get drained because we have dysfunctional markets that saw fit to keep prices bizarrely low while our free trade agreements allow the too-low grains to be exported, threatening domestic supplies, then that possibility notches up a little bit.

Dairy, Meat, and Even Higher Gasoline Costs

While it is clear that basic grain prices are heading higher, the knock-on effects into other soft commodities are a little less clear, but are definitely still important to consider.

The most obvious of these are higher grain feed costs that will hit both livestock and dairy producers especially hard:

The withering crops are translating into higher feed costs for livestock producers. "This is different than anything I've ever experienced," said Kent Pruismann, who raises cattle and hogs on a farm in Sioux County, Iowa, and saw his costs for feed jump by 20% in July.

The higher corn, soybean and wheat prices will reach food makers, exporters and eventually consumers. Drivers already have seen fuel costs climb because of higher prices for ethanol, a corn-based fuel that is blended into gas. The drought also has reignited the debate over whether ethanol production is a drain on global food supplies.

(Source)

Some are already turning to, shall we say, other means to keep their herds fed:

Kentucky cows eat candy instead of corn

Aug 14, 2012

LOUISVILLE, KY (WAVE) - When you think of cattle feed, you probably don't think of candy, but due to the drought that's exactly what one farmer chose to do.

At Mayfield's United Livestock in Western Kentucky, owner Joseph Watson feeds his herd second hand candy.

Watson started feeding his cattle the candy because corn prices were so high.

He mixes the candy with an ethanol by-product and a mineral nutrient. He monitors the daily intake and said the cows have had no real health issues.

Yes, the higher grain costs are going to hit everything from big cattle feedlot operations to my own two-bags-a-month chicken-feed usage.

However, it will be the cost of and even lack of hay that will really create some big problems later this year. The drought not only harmed the range and pasture lands, forcing greater use of stored hay to offset the decline in forage, but it put a huge crimp in this year's hay production:

Drought Cripples Hay Feed Industry

Aug 19, 2012

Widespread drought has scorched much of the pastureland and hay fields needed to sustain cattle herds in the U.S., forcing many ranchers to find feed alternatives or sell their animals early into what has become a soft beef market.

The shortage has led to higher hay prices, with some farmers saying they have to pay two to three times last year's rates.

Despite farmers setting aside more land to grow hay this year, they are still producing a lot less because of the drought, according to a recent Department of Agriculture estimate.

The harvest of alfalfa, generally considered to make the best hay because of its high nutrient levels, is forecast to be the worst since 1953, according to the USDA.

Pasture grass and hay are what most cattle are fed for the roughly two years they live before being slaughtered, but the drought is threatening to starve the animals.

Illinois rancher Steve Foglesong said that most years he could graze his cattle from spring through November on verdant fields that are now brown, buying them hay bales only in the winter. This year, he and his animals have their eyes on withered corn plants.

"It may not have any ears on it, but it makes pretty good cow feed," he said.

John Erwin, who owns 20 acres of land in Shelbyville, Ill., said he is having trouble growing alfalfa hay, but demand is strong for what he can produce.

"I'm getting calls from ranchers as far away as Wyoming," Mr. Erwin said. "They're desperate."

He said he has been offered $250 a ton for his hay, nearly double the $130 a ton in a non-drought year. His fields didn't produce any hay in July.

A doubling of hay prices is obviously going to create quite a bit of economic hardship for many farming operations, which tend to be marginal profit businesses even when everything is going well.

Here's another view on the hay situation:

spoke with Caldwell [of Indiana horse rescue] and a number of other horse-rescue organizations around the country by telephone this week. The relentlessly hot dry weather, amplified in many areas by wildfire, has been devastating to farmers, ranchers and other horse owners.

"Everybody is using their winter hay now. The pastures are destroyed and they probably won't recover before winter," said Caldwell. "The price of hay has doubled, and the availability is down by 75 percent."

Caldwell is somewhat sanguine about his own lot, but not optimistic about what lies ahead.

"Today the problem is not nearly as bad as it's going to be," he told me. "It's terribly bad today, but it is going to get a lot worse."

(Source)

The drought has done some very serious harm to the nation's hay supply that goes beyond the economics of higher hay costs. First there's the supply of the hay, and then there's the relatively poor quality of hay that was taken from non-irrigated, drought-stricken fields. All in all, it's not a good situation.

To add a bit more difficulty into the situation, it turns out that drought-stricken silage and even the corn itself can be harmful to animals:

Drought makes corn dangerous for livestock

Aug 16, 2012

COLUMBIA, MISSOURI, U.S. - Tim Evans, an associate professor of veterinary pathobiology and toxicology section head at the Veterinary Medical Diagnostic Laboratory at the University of Missouri College of Veterinary Medicine, Columbia, Missouri, U.S., warns U.S. farmers and livestock producers that drought-damaged corn plants can pose a risk to animal health.

"During severe drought conditions, corn plants, especially those heavily fertilized with nitrogen, can accumulate a chemical called "nitrate'," Evans said.

"This chemical can be very harmful to animals, especially cattle, if they eat corn plants or other vegetation containing too much nitrate. Eating plants with too much nitrate can cause damage to red blood cells, resulting in lethargy, miscarriage, and even sudden death."

Evans says that in normal conditions, corn crops typically absorb nitrate into only the lower 12-18 inches of the stalk, which does not have to be fed to animals. However, during severe drought conditions, high concentrations of nitrate can accumulate in the upper portions of the stalk, which cattle and other livestock often eat.

Evans also says that many naturally growing plants and weeds in grazing pastures can accumulate nitrate during drought conditions, as well. These plants include many types of grasses and some weeds, which animals might be forced to eat because of limited pasture or hay available as forage for livestock.

The key here is that nitrates are safe below 2,000 ppm but toxic above 15,000 ppm, and the levels found in the stalks and how high it travels are a function of whether enough rain fell to allow the plant to take it up. Much of the corn crop was so desiccated that the plants could not even manage to draw up this nutrient, and therefore it is safe as a feed product.

While it's hard to get a read on at this early stage, there are enough warning signs here pointing to much, much higher grain, food, and meat prices in the future. The worry is whether there will even be enough feed to sustain the animal populations through the Winter and Spring. Given the damage to the harvestable corn, a lot of it is going to be turned into silage

Many ranchers and farmers are faced with a horrible choice here. Saving their herds may be economically unsound or even impossible where hay and safe silage are not available, and so they are selling their herds, one of the most heart-wrenching decisions anyone could have to make.

So many are doing this that recently the price for cattle has dropped, as everyone is selling into an increasingly soft market. My advice is to enjoy these low meat prices while they last, because the next stage of this story involves much higher meat prices.

The problem with understanding just how bad the hay situation might (or might not) be is that there are no national statistics collected that could tell us whether or not there's even enough hay available to sustain the current commercial and recreational livestock populations.

The Importance of Positioning Yourself

So, with all of these repercussions building during the current drought - to which there's yet no end in sight - what can you do today to minimize their impact on your budget and lifestyle?

Part II: Positioning for the Drought's Aftermath looks at the likeliest outcomes in food prices, food availability, energy prices, and macroeconomic consequences (of which there will no doubt be many from this drought). We have a national food distribution system that runs significantly on a just-in-time basis, which leaves it vulnerable to price and inventory shocks when there are supply disruptions. The reduced water levels caused by the drought are handicapping electrical power generation in growing regions in the country; electrical thermal plants are the number one biggest user of water in the U.S.

The global financial markets are similarly tenuous these days, as resources are already taxed in trying to stimulate the moribund U.S. economy and dig Europe out of its massive credit woes.

This is one of those moments where taking simple, prudent steps now can have an outsized effect on preserving your quality of life.The groundbreaking video I just recorded with the excellent team at Money May Press also addresses the heart the problems written about here.

It focuses on steps we individuals can take to decrease our vulnerability to the myriad of problems that threaten very our way of life. You can see this report by clicking here.
Source :http://moneymorning.com/2012/09/06/why-the-u-s-drought-is-hitting-harder-than-most-people-realize/

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Former GOPer: How Republicans Went Crazy, Dems Lost Their Mojo, and the Middle Class Got Shafted

ECONOMY  

BillMoyers.com / By Bill Moyers

Former GOPer: How Republicans Went Crazy, Dems Lost Their Mojo, and the Middle Class Got Shafted

Bill Moyers talks with Mike Lofgren, a long-time Republican who describes the modern dysfunction of both the Republican and Democratic parties.

September 5, 2012  |  

 

Mitt Romney disembarks from his campaign plane at St. Paul International Airport in Minneapolis, Minnesota this week. A multi-hued line up for next week's Republican party convention is meant to belie its image as the party of middle-aged white men.

 

Bill Moyers talks with Mike Lofgren, a long-time Republican who describes the modern dysfunction of both the Republican and Democratic parties. In Lofgren's view, Republicans have become overly obsessed with obstructing President Obama, and the Democrats suffer from political complacency. Lofgren's new book is The Party is Over: How Republicans Went Crazy, Democrats Became Useless, and the Middle Class Got Shafted.

Bill Moyers: The growing power of the religious right is one reason my guest left the Republican Party and became an Independent. "The mixture of politics and religion," he says, "debases both, and has turned the GOP into an apocalyptic sect." He has his problems with Democrats, too. For one thing, he says, both parties "are captives to corporate loot."

Others may share those opinions, but what gives Mike Lofgren more clout than the rest is decades of insider experience on Capitol Hill. He was a Fulbright scholar with two degrees in history when he went to work in Congress and became a senior staff member of the House and Senate Budget committees. His specialty was the cost of national security. After 28 years of government service, Mike Lofgren retired and sat down to write a powerful manifesto that took off like a rocket when it was posted on the website Truthout.org.

It's now a book: "The Party is Over: How Republicans Went Crazy, Democrats Became Useless, and the Middle Class Got Shafted." As you can tell from the title, he spares no one.

Mike Lofgren, welcome.

Mike Lofgren: Good to be here.

Bill Moyers: The title of your book is "The Party Is Over: How Republicans Went Crazy." How did Republicans go crazy?

Mike Lofgren: I think they went crazy when they started identifying Obama as the Antichrist.

Bill Moyers: Meaning?

Mike Lofgren: Meaning, "He's not a legitimate president. We must do everything we can to obstruct him."

Bill Moyers: The second subtitle, "The Party Is Over: Democrats Became Useless." How did Democrats become useless?

Mike Lofgren: I think they got complacent during the '60s, '70s, and '80s. And then finally after that period, they woke up, found they had lost three straight presidential elections. So they had to retool and make themselves more corporate friendly.

Bill Moyers: Corporate friendly?

Mike Lofgren: Absolutely. And it certainly helped Bill Clinton get elected. And while he did some good things like balancing the budget, he also unleashed Wall Street by repealing Glass-Steagall, and he signed bills that would end regulation on derivatives. So he is at least to some degree responsible for the Wall Street debacle.

Bill Moyers: And that's how, to quote a third of your subtitles, "The Middleclass Got Shafted"?

Mike Lofgren: Both parties don't really seem to care about having a vibrant manufacturing base in this country, regardless of their rhetoric. I remember throughout the '90s the Clinton administration was lobbying relentlessly for free trade deals. And the promise for each one was, it will bring jobs to America. And in every case, the jobs left.

Bill Moyers: The Republican Party now has the super rich and its corporate wing funding it and the religious right provides the ground troops. Why are so many everyday folks out there in the pews defending the prerogatives of the rich?

Mike Lofgren: That's something of a mystery. The Federal Reserve, in one of their recent reports, found that net household income fell about 40 percent since 2007. That's a tremendous drop. Yet, here we have as the nominee for one of the two major parties, we only have a binary choice in this country, is by all accounts the richest man ever to run for president and was a leverage buyout artist.

The party is really oriented towards the concerns of the rich. It's about cutting their taxes, reducing regulation on business, making things wide open for Wall Street. Now you're not going to get anybody to the polls and consciously pull the lever for the Republicans if they say, "Our agenda is to further entrench the rich and, oh by the way, your pension may take a hit."

So they use the culture wars quite cynically, as essentially rube bait to get people to the polls. And that explains why, for instance, the Koch brothers were early funders of Michele Bachmann, who is a darling of the religious right. They don't care particularly, I would assume, about her religious foibles. What they care about is the bottom line. And these religious right candidates, many of them believing in the health and wealth, name it and claim it prosperity gospel, believe that the rich are sanctified and the poor punished

Bill Moyers: Many of those people on the right would tell you that the fall in the income of middleclass people and others has been because of Obama's economic policies.

Mike Lofgren: I think they're suffering from selective amnesia. They also don't understand that George Bush doubled the national debt, that the original meltdown on Wall Street occurred during George Bush's watch, and by the time Obama became president in 2009, we were already well into the recession. Now I don't defend him in every way. I don't say that everything he's done is right by any means. I have all kinds of issues with him on the health care legislation. For instance, his willingness to play ball with pharma made the bill cost a lot more than it need.

Bill Moyers: The pharmaceutical industry?

Mike Lofgren: Yes. That said, he was legitimately elected. We were in a very, very serious situation in this country. If the economy had fallen any further, it would be comparable to the Great Depression. So what is Minority Leader Mitch McConnell in the Senate, what is his first priority for the country? Is it getting jobs for people? Is it restoring the solvency of the financial system? Is it foreign policy? Is it any of those things? No, it's making sure Obama is a one-term president.

Bill Moyers: It seems that some of these people are willing to see the government go down in order to win.

Mike Lofgren: That would be the case. I grew up in a party that believed in the traditions of Eisenhower, and for that matter, even Reagan. He raised taxes several times when the deficit threatened to get out of control. He pleaded with Congress to send him a clean debt limit extension bill without any extraneous riders on it. He knew what the stakes were.

But now it's basically obstruct. They're no longer a parliamentary loyal opposition. They want to seize up the wheels of government. And to most people that means you don't have federal inspectors of airliners. You don't have federal inspection of food safety. Your national parks will be closed. Federal law enforcement will go home. That's what that means.

Bill Moyers: Why did you leave the party? You'd been a Republican, what, all your life?

Mike Lofgren: I left the party because it was becoming an apocalyptic cult. Because you cannot govern a country of 310 million people that is the greatest economic power on earth and the greatest military power on earth as if it's a banana republic. You can't govern it with people who think that Obama was born overseas or who believe in all manner of nonsense about climate change. They don't even know, apparently, where babies come from, if we're to believe Todd Akin.

Bill Moyers: What do you mean "apocalyptic cult"?

Mike Lofgren: Well, I mean it literally in some cases. There's a very strong element in evangelical or fundamentalist religion that said the apocalypse is coming. And one sort of sees it subliminally in people like Michele Bachmann when the debt ceiling crisis came to a head and people were warning that we would be downgraded. And if we actually defaulted, we would possibly have to lower our standard of living and credit from abroad could dry up. And her attitude was sort of, "Bring it on. If we're all going to abide in the bosom of the Lord, by and by, it really doesn't matter whether we default."

Bill Moyers: Was that just rhetoric we heard on television?

Mike Lofgren: Oh, that's mainly rhetoric. But I think it does carry over into the mentality of maximalist obstruction, no compromise, because of course when you are with the saints and the opposition is with the sinners, you are doing evil if you compromise.

Bill Moyers: You write that we now have a de facto religious test for public office, notwithstanding that the Constitution says we must not have one. How does this play out?

Mike Lofgren: Well, we saw it in 2008, when a pastor brought Obama and McCain before a live audience and quizzed them about their religiosity. That was Rick Warren. We really don't need that sort of religious test. It's banned in the Constitution. We had it play out last year when some preacher in Texas started criticizing Romney because as a Mormon, this man thought he wasn't a Christian.

Pastor Jeffress:  The Southern Baptist Convention, which is the largest Protestant denomination in the world has officially labeled Mormonism as a cult. I think that Romney's a good, moral man, but I think those of us who are born-again followers of Christ should always prefer a competent Christian to a competent non-Christian like Mitt Romney.

Mike Lofgren: The media went off on that for a few days. And as I recall, some of the reporters were badgering the other Republican candidates as to whether they thought Romney was a Christian. So the media actually allowed itself to be used as a tool in this aspect.

Bill Moyers: Candy Crowley kept pressing Herman Cain and, and Michele Bachmann in the primaries on this very issue.

Candy Crowley: Is Mitt Romney a non-Christian?

Herman Cain: I'm not running for theologian-in-chief. I'm a life-long Christian, and what that means is, one of my guiding principles for the decisions I make is I start with, do the right thing. I'm not getting into that controversy.

Candy Crowley: But it still will beg the question that you dodged a direct question, which is, is Mitt Romney not a Christian?

Herman Cain: He is a Mormon. That much I know. I am not going to do an analysis of Mormonism versus Christianity for the sake of answering that. I'm not getting into that. I am a Christian—

Candy Crowley: Even knowing it will look like you're dodging it [...] And let me just, because I gave Herman Cain the same opportunity, you know that, that by not answering the direct question "Do you think Mitt Romney is a Christian?" you leave open the possibility that people are going to say that you dodged the question, the direct question.

Michelle Bachmann: No, I think what the real focus is here, again, is on religious tolerance.

Mike Lofgren: Well, I'll give them credit. They didn't answer her, because the question didn't deserve an answer. Romney's religion is his own business.

Bill Moyers: What brought you to the moment you decided to make a break, and to issue that cry from the heart if I may say so, that went out on "Truthout"? What was the trigger?

Mike Lofgren: The trigger was the debt ceiling crisis of the summer of 2011. I thought it was so transparently needless, yet they did it. And that was the straw that broke the camel's back. Now it wasn't just a publicity stunt that gave the United States a black eye. Just the transaction costs for having to manipulate all the money and stave off the debt ceiling cost, according to the Government Accountability Office, $1.3 billion.

Bill Moyers: And why did that impasse occur? Why couldn't they solve the deficit crisis? Or why wouldn't they solve the deficit crisis?

Mike Lofgren: Because they believed that they had Obama over a barrel. And that they could force him to do what they wanted, which was to radically downsize all domestic discretionary spending. And he wasn't going to do it. And that's how we got to that situation.

Bill Moyers: What do you think's going to happen after the election, no matter who wins? Because the popular expectation is that we're heading toward a fiscal cliff. Are we going to go through, in those few months between the election and the inauguration, what we went through with the deficit crisis that you just talked about?

Mike Lofgren: I would say the likeliest possibility is that we'll get some sort of short-term extension of the provisions to kick the can down the road a little bit. Now I'm not saying that that will happen. There's also a possibility if past is prologue that the Tea Party faction in the House could dig in its heels and say no, just as they did with the debt ceiling crisis.

Bill Moyers: And what then would be the consequence of that, as you can anticipate it?

Mike Lofgren: The consequence would be immediate and severe spending cuts, both on domestic discretionary, and on national defense

Bill Moyers: Both parties catering, as you write so vividly in here, to their funders, their donors, the billionaires, the Wall Street financiers, the corporations. And yet they, one or the other keeps getting away with it.

Mike Lofgren: It's happened before in our country. It happened after the Civil War with the Gilded Age. So it's not surprising it can occur when money starts infusing into politics. They will capture the governmental mechanism, just as Wall Street has captured it now. Wall Street has captured Washington at its source, the capital.

Bill Moyers: Just give me one example.

Mike Lofgren: One example would be banks that we are bailing out. Why not compensation limits on their CEOs and top executives? We didn't get that. But we did get limits on the compensation and the benefits of U.A.W. employees when we bailed out General Motors and Chrysler.

Bill Moyers: We got from unions what we didn't get from the financiers on Wall Street?

Mike Lofgren: That is correct.

Bill Moyers: How come? How so?

Mike Lofgren: Money from Wall Street into the pockets of campaigns.

Mike Lofgren: If somebody texts $20 to their favorite candidate, okay, that's $20. And they're not really expecting anything other than they like that candidate and they want him to win. But when savvy businessmen like Sheldon Adelson, who've shelled out $36 million so far and expects to spend $100 million before the end of the election cycle, when somebody like that is spending that kind of money, they expect a tangible, monetizable payoff.

BILL MOYERS Another example?

Mike Lofgren: When you see legislation, for instance, having to do with casinos, and I think the key word there is Jack Abramoff, you see these things happening.

Bill Moyers: Did anything about the Abramoff scandal surprise you?

Mike Lofgren: Not at all. It was totally par for the course.

Bill Moyers: What do you mean?

Mike Lofgren: That's the way influence works in Washington.

Bill Moyers: Do you think it's still working now after Abramoff?

Mike Lofgren: I think it's working in a similar fashion. When we see how Ralph Reed and Grover Norquist, they were the two other members of the Three Amigos. They're still out doing their thing

Bill Moyers: But what do we do about it? Nothing seems to tame the power of money in politics.

Mike Lofgren: The only thing that will achieve it is fundamental political reform. And the only way you're going to get that is mass defection from the parties. Because the parties simply do not serve our interests anymore.

Bill Moyers: But the less we pay attention, the more of us who give up, the smaller the base and the number of elites who run those two parties. That's what some of them want.

Mike Lofgren: That may be, but there is a point where if there is mass public outrage at this, just as there was in the prairies in the 1880's and 1890's, eventually they'll get the message.

Bill Moyers: What's your greatest fear?

Mike Lofgren: My greatest fear is that this whole impasse simply carries on. And this country becomes more and more polarized and ungovernable. And we could be faced with a very bad situation, internationally and domestically.

Bill Moyers: And what is your greatest hope?

Mike Lofgren: My greatest hope is that we can govern ourselves again in a spirit of bipartisanship.

Bill Moyers: Do you think that's a realistic hope?

Mike Lofgren: We must let our hopes be greater than our fears.

Bill Moyers: Well, I consider "The Party Is Over" must reading. And I hope my audience will spend these days between one convention and the other getting acquainted with your analysis of what's happening. "The Party Is Over: How Republicans Went Crazy, Democrats Became Useless, and the Middleclass Got Shafted." Mike Lofgren, thank you for being with us.

Mike Lofgren: Thank you very much.

Veteran journalist Bill Moyers is the host of “Moyers & Company,” airing weekly on public television. Check your local listings. More at www.billmoyers.com

September 6, 2012 at 05:22:56

Organic Food Debunker was Tobacco Institute Researcher in 1976

By Michael Collins (about the author)

 
A widely publicized study claiming that there is no demonstrated difference in nutritional value between organically and conventionally grown foods just appeared in the Annals of Internal Medicine. Broad mainstream media coverage produced headlines like Stanford Scientists Cast Doubt on Advantages of Organic Meat and Produce. The media failed to mention one point that may be of major interest.
 

The study relied on a statistical technique called meta-analysis. Over 200 plus scientific journal articles were combined as the data set for the study. The article co-author with recognized expertise in meta-analysis, Ingram Olkin, applied for a grant from Council of Tobacco Research (CTR) in 1976.
CTR was part of the infamous Tobacco Institute, an industry group of cigarette manufacturers. Ingram was on the faculty of Stanford University at the time. The authors of the current study diminishing the value of organic foods are also from Stanford University, with Olkin listed as a professor emeritus.

Olkin applied to the CTR to conduct a project on the statistical methods used in the Framingham Heart Study, the landmark project linking cigarette smoking with increased risk of heart disease. From publicly available tobacco industry documents, we find this from cigarette manufacturer lawyers:

"I met with Dr. Olkin and Dr. Marvin Kastenbaum [Tobacco Institute Statistics Director] on December 17, 1975, .at which time we discussed Dr. Olkin's interest in multivariate analysis statistical models. Dr. Olkin is well qualified and is very articulate. I learned, in visiting with Dr. Olkin, that he would like to examine the theoretical structure of the "multivariate logistic risk function."

The Tobacco Documents describe Katzenbaum as knowledgeable of "the tobacco industry's participation in the public disinformation regarding the health hazards of tobacco use ""

According to internal tobacco company documents from cigarette manufacturers, Olkin received a grant from CRT and submitted a final paper in 1979. The paper could not be found online.


Olkin's work for the Tobacco Institute was originally discussed by Robert N. Proctor Golden in his January 2012 Google eBook, Golden Holocaust: Origins of the Cigarette Catastrophe and the Case for Abolition, University of California Press. Columbia University professor Andrew Gelman cited Olkin's work in his September article in the journal Statistics and Ethics, which discusses the ethical challenges of statisticians when working for big business.
 

Objective statistical analysis was central to this study
Professor Olkin's specialty, meta-analysis, was the research technique employed to generate the findings for the study designed to debunk the value of organic foods. Contrary to the conclusion that there's little evidence of a difference in nutritional value, the article notes that "Two studies reported significantly lower urinary pesticide levels among children consuming organic versus conventional diets." The researchers say that they "did not identify clinically meaningful differences" in measures among adults. That's a statistical inference. The study found "phosphorus levels were significantly higher than in conventional produce, although this difference is not clinically significant." Again, the statistical analysis negated a finding in favor of organic produce based on statistical analysis.

The researchers concluded::

"The published literature lacks strong evidence that organic foods are significantly more nutritious than conventional foods. Consumption of organic foods may reduce exposure to pesticide residues and antibiotic-resistant bacteria."

The mainstream media picked up and ran with this relatively obscure research. The New York Times headline reads, Stanford Scientists Cast Doubt on Advantages of Organic Meat and Produce. Fox News had this to say: Study says organic food may not be worth the money. Bucking the tide, the Los Angeles Times editorialized against the study's significance in a major editorial, the case for organic food.

Studies like the one out of Stanford are less about the quality of the research than they are about the headlines when mainstream media gets involved. In this case, the findings prop up conventional foods at the expense of organics by the mere mention of Stanford researchers claiming there's no nutritional difference.
 

This minor article was picked up by media all over the country. No doubt, it raised questions for some who are currently buying organic foods and those who were considering making the switch from conventional to organic.

This value of this type of narrow research was discussed by the Tobacco Institutes legal counsel William W. Shinn when he recommended Professor Olkin's 1976 proposed study on the impact of cigarette smoking on heart disease:

 

"We believe that a modest effort now may stimulate a broader interest in such questions especially among theoretical statisticians at Stanford and elsewhere."

Ironic, isn't it?

END

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The Money Party

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Michael Collins is a writer in the DC area who researches and comments on the corruptions of the new millennium. His articles focus on the financial manipulations of The Money Party, the abuse of power by government, and features on elections and (more...)
 

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