In this issue:

Is Greenspan Preparing His Own Monetary 'Shock and Awe'?

Investors Continue To Flee Wall Street; No Sign of Return

America's Pension System in Crisis; Savings Shrink as Boomers Face Retirement

New York's Mayor Issues 2004 Budget, Contingency Plan Threatening Huge Layoffs, Firehouse Closings

Bill Introduced To Repeal California Electricity Dereg

Nation Needs Railroads, Rep. Rothman Tells Committee

Airlines Unravel; Congress Offers Band-Aids

Machine-Tool Consumption by U.S. Industry Plummets, Again

Industrial Production Reaches New Lows; Auto Hit Hard

New Unemployment Claims Jump; Mid-Atlantic Manufactures Fall

Former Top IT Execs Hit the Skids; Take Low-Pay Jobs

'Mis-Fortune 500' Announces Job Cuts, Plant Closings


From Volume 2, Issue Number 16 of Electronic Intelligence Weekly, Published Apr. 21, 2003

U.S. Economic/Financial News

Is Greenspan Preparing His Own Monetary 'Shock and Awe'?

The New York Post ran a column by Fox-TV financial correspondent Terry Keenan on April 13, warning that Federal Reserve Board chairman Alan Greenspan is preparing his own version of "shock and awe," should the U.S. and global economic situation continue to disintegrate, once the dust has settled in Iraq. "As Saddam's regime toppled ... Wall Street returned its attention to an enemy closer to home: the stubbornly weak economy," Keenan began. "The generals in this war are hunkered down at Fed headquarters on Constitution Avenue, but, make no mistake, Greenspan and Company are readying a 'shock and awe' campaign of their own."

She elaborated, "Such a plan would include an array of weapons seldom, if ever, used in the central bank's 90-year history—including the direct purchase of long-term Treasuries—in a bid to stave off another recession or dreaded deflation." While hoping that "this mother of all rescue plans" will never be needed, Keenan quoted ISI economist Ed Hyman that it will be clear within the next two months whether the end of the Iraq war will kick-start the U.S. economy. "That Fed officials have been openly discussing such drastic measures has Wall Street on edge."

Keenan suggested that one sign that Greenspan has decided that the Fed must launch a new "wall of money" systemic bailout, will be a decision, perhaps even prior to the May 6 FOMC meeting, to cut Fed fund rates by 0.5%. Keenan concluded by invoking the legendary Rothschild bankers: "Meanwhile, most investors seem to be following the advice Baron Rothschild gave nearly 200 years ago: 'Buy at the sound of cannons, sell at the sound of trumpets.' "

Investors Continue To Flee Wall Street; No Sign of Return

Accompanying the Terry Keenan column (see above), the Sunday New York Post ran a full page of coverage, on individual investors' pullout of the stock market. In 2002, investors dumped a total of $27.1 billion worth of stocks, over and above losses in stock values that people suffered. In the first two months of 2003, another $11.5 billion fled the equity markets for safer, albeit low-yield investments in bonds, money-market funds and other assets, according to the Post's Suzanne McGee.

"That investors, burned by the financial implosion of the last three years, have fled the stock market in droves surprises no one," McGee began. "Whether and when they'll return, however, is the question all of Wall Street is pondering." One New Jersey broker told the Post, "Fear is everything for my clients these days. My clients seem to have lost the 'greed' motivation. They just don't want to hear about stocks from me."

Patrick McGurn of Institutional Shareholder Services in Rockville, Maryland added that another massive flight from the market is almost imminent. "If that happens, McGurn adds, the U.S. stock market might even end up looking like it did in the post-Depression years—with individual investors clinging to the sidelines." McGurn concluded, "I think we're facing the possibility of a 'lost generation' of investors."

America's Pension System in Crisis; Savings Shrink as Boomers Face Retirement

The widening gap between the pension and retirement packages provided to corporate CEOs and the miserable state of affairs for average workers, who have been forced to take the hit for pension-fund losses on the stock market, and revised retirement packages, has left more and more workers to fend for themselves, according to the lead story in the Washington Post Business section April 13.

On the same day, the New York Post featured an article on the looming retirement of the Baby Boomer generation, beginning in 2011. The Post cited statistics released by the American Association of Retired Persons indicating that four in 10 retirees wind up living below the poverty level at some point. The AARP data also showed that the 20% of Baby Boomers who earn the least, have a median net worth of $7,000 (including real-estate holdings), while the top 20% average $555,000. "And those who have the least money stashed away are also the least likely to have an employer-provided pension plan."

New York's Mayor Issues 2004 Budget, Contingency Plan Threatening Huge Layoffs, Firehouse Closings

As New York City Mayor Michael Bloomberg announced his 2004 fiscal budget, he raised the specter of the 1970s Big MAC "planned shrinkage" policy of fascist austerity imposed on the city by a bankers' cabal headed by Lazard Freres. The decline in tax revenues has led to a $3.8-billion budget hole. The cuts, including of immunizations and sanitation jobs, will open the door to disease epidemics amidst a collapsing physical and social infrastructure.

To close $600 million of the gap, Bloomberg announced he will lay off 194 Fire Department civilian positions; 100 Fire Marshals; 1,631 non-teacher school employees; close four children services care facilities, which cuts 528 jobs; close 12 of 30 child health clinics; cut 165 school health jobs; end the Hepatitis B immunization initiative; and end the take-home weekend meals for 7,500 senior citizens. These cuts are on top of $3.2 billion having been axed from the budget over the last 16 months resulting in 14,000 lay-offs among other program cuts.

But this is not the worst of it. Bloomberg simultaneously announced a "contingency" plan—dubbed a "doomsday" plan by the local media—necessary if state aid is not forthcoming. It will slash another $1 billion out of the budget. These cuts will include 10,000 layoffs and closure of 30-40 more firehouses. In addition:

*Police: The July 2003 cadet class will be scrapped, severely reducing the police workforce, and 1,700 administrative jobs cut;

*Fire: Reduce overtime payments;

*Sanitation: Layoffs of 1,057 employees impacting core collection, recycling, street-cleaning functions;

*Education: Eliminate all after-school educational programs and summer school;

*Human Resources: Eliminate city-funded HIV/AIDS case management and the emergency food assistance program;

*Parks & Recreation: Close all outdoor pools and City-funded recreation centers; and

*Homeless Services: End outreach programs, and lay off 109 cleaning staff for homeless shelters.

Bill Introduced To Repeal California Electricity Dereg

California State Senator Joe Dunn (D-Santa Ana) and 10 other legislators introduced the Repeal of Electricity Deregulation Act of 2003, Senate Bill 888, on Feb. 21. When introduced, the bill stated simply the intention of the Legislature to repeal California's 1996 deregulation law, AB1890. On April 8, Dunn and colleagues amended the bill, spelling out how the state will regain control of its electric-utility industry and infrastructure.

"Customer choice" will be ended. Utilities will be guaranteed a fair 10% return on investment, charging a "cost-of-service" price, (not a "free-market" steal-as-much-as-you-can price), in return for making the investments to meet the needs of their customers. Incentives would encourage utilities to invest in transmission lines, and the moratorium on companies selling their power-generating assets would be extended from 2005 to 2010.

When introducing the bill, Sen. Dunn declared, in reference to deregulation: "We aren't mending it, we're ending it." The bill was immediately supported by Assembly Speaker Herb Wesson, and Senate President Pro Tem John Burton. So far, only Democrats have supported the bill, with debate scheduled to start in three weeks.

For the past two years, Dunn has chaired a committee investigating price manipulation in the state's energy market.

Nation Needs Railroads, Rep. Rothman Tells Committee

"We cannot live in a modern nation without railroads," declared Rep. Steven Rothman (D-N.J.), during a hearing April 16 of the Transportation Subcommittee of the House Appropriations Committee, on Amtrak's passenger rail system. "[T]he fundamental question for the people of this country and the people of this committee is, do we want a railroad in the United States?" Rothman continued. "If we don't have a national railroad system that works," he warned, "then we are going to be in trouble as a nation."

Rothman blasted as a "disgrace," the failure to subsidize passenger rail service. "I think the whole view of Amtrak is skewed. It's wrong to say that it needs to be self-sustaining when the airlines aren't." He characterized the funding level provided by the Bush Administration and previous ones as "a bread-and-water diet." "It's absolutely obscene, and it is without justification in terms of how we need to function as a country." In particular, the Administration's proposed $900-million Amtrak FY2004 budget, [Amtrak has requested $1.8 billion] "is a joke," he said, "considering the capital money that's been withheld from Amtrak for all these years."

"What will make America stronger, what will improve our economy, will be an investment in our infrastructure: roads, rails, bridges, schools." "I hope that this Administration improves its view of the necessity of rail ... and to rebuild our nation's rail capacity."

Airlines Unravel; Congress Offers Band-Aids

On April 17, Delta Airlines warned of "the greatest financial crisis" in its history, announcing it will furlough 200 more pilots. It posted a first quarter net loss of $466 million. US Airways will lay off 890 flight attendants in May and June, cutting back its staffing on flights to the minimum required by the FAA.

American Airlines, the largest in the world, only averted bankruptcy on April 16 because its flight attendants held an extraordinary "re-vote," and narrowly accepted give-backs they had rejected the day before. American's unions are now furious to learn of a plan to protect the pensions of its executives in the event of a bankruptcy later. The give-back package ratified by the rand and file of AA's three unions means, besides wage cuts averaging 20%, a loss of 5-6,000 jobs. American said it is immediately reducing both its management ranks and its support staff by 5%, with the goal of cutting management by another 5% by July 1.

In response to the crisis, Congressional negotiators agreed to give $3.2 billion to the failing airlines, to "help" with their losses from the Iraq war and security mandates. Of that, $2.4 billion will be given within the next 30 days, mainly to allow the airlines to pay debts that would otherwise bankrupt or liquidate them. This was reportedly at the insistence of House Speaker Dennis Hastert (R-Ill.), who is trying desperately to save United, headquartered in his district. The bill gives a 26-week extension of unemployment compensation to airline workers, of whom 15% are now officially unemployed.

In August 2002, Lyndon LaRouche warned that the air transport system would be lost without the emergency measures he proposed.

Machine-Tool Consumption by U.S. Industry Plummets, Again

Machine-tool consumption by U.S. industry fell by 20%, or $133.78 million in February, compared to one year ago. For the first two months of 2003, U.S. machine-tool consumption totalled $265.55 million, down 24.5% compared to January-February 2002—proof of the urgent need for LaRouche's Super-TVA policy.

Ignoring the reality of the manufacturing breakdown collapse, American Machine Tool Distributors' Association President Ralph Nappi said, "the recent developments in Iraq should begin to clear up the uncertainty that has existed for many months."

Machine-tool consumption—the most fundamental aspect of an advanced industrial economy—had already fallen by the end of 2002, to a paltry 37% of the level in 1997.

Industrial Production Reaches New Lows; Auto Hit Hard

According to new figures published by the Federal Reserve April 15, U.S. industrial production dropped by 0.5% in March compared to February. The decline was more than double what economists on average had expected, and it followed on a decline in the previous month.

Among the hardest hit sectors was automobile production, shrinking 1.8% in March after already falling 2.4% in February. According to industry statistics, annualized automobile sales in the first quarter of 2003 amounted to 15.9 million, the weakest since the third quarter of 1998. In spite of new incentive schemes, total inventories reached 4.01 million vehicles in March, a new record.

Overall production of consumer durable goods, including automobiles, furniture, and electronics, fell 0.8% in March after falling 1.7% in February. Utility production was down 4.1% in March, which is being blamed on unusually warm weather in March. It was the biggest drop since January 1998.

New Unemployment Claims Jump; Mid-Atlantic Manufactures Fall

New claims for jobless benefits, shot up by 30,000 to 442,000 for the week ended April 11—the second-highest level in the past year, and the ninth consecutive week that claims exceeded 400,000. The four-week average of new claims, rose to 424,750, the most since May 4, 2002.

The index of manufacturing activity in the Mid-Atlantic region, fell in April to minus 8.8, the first time the index has been negative for two straight months since December 2001, according to the latest monthly survey of firms by the Federal Reserve Bank of Philadelphia. An ominous sign, the index for new orders fell seven points to minus 11.2, with only 25% of manufacturers attributing the decline to the war in Iraq.

Former Top IT Execs Hit the Skids; Take Low-Pay Jobs

The New York Times Magazine ran a lengthy cover-story profile April 13 of a group of computer industry ex-top executives who all lost their jobs during the post-2000 crash of the IT sector, and have only been able to find work in the low-paying retail sector, as sales personnel. The case studies are poignant, but the statistics underlying them are the real shocker: Referring to the computer sector, author Jonathan Mahler reported that, between December 2000 and January 2003, the industry shed 41% of its jobs. Here is an excerpt:

"While the recession of the early '90s took a heavy toll on white-collar workers, this one seems to have institutionalized the phenomenon. Advanced degrees, no matter how prestigious, offer little protection. The economy is grim nationwide, but the picture in New York City is especially bleak. Since the end of 2000, the media-and-communications sector has cut 15% of its jobs, telecommunications 27%, advertising 25%. Eighteen percent of jobs on Wall Street have been slashed, and firms continue to lay people off. Given the delirium with which most high-tech jobs were first created, there's no reason to believe that many of them—and the jobs in other sectors that they generated—will come back anytime soon."

'Mis-Fortune 500' Announces Job Cuts, Plant Closings

Reflecting the manufacturing and airline-industry breakdown, U.S. corporations are slashing payrolls, operations.

*Boeing issued 60-day lay-off notices to 1,060 of its high-skill employees, to take effect June 20, making 2,370 layoffs this year, so far; the aircraft maker has slashed 32,300 jobs since Sept. 11, 2001.

*General Motors will temporarily lay off 1,400 workers due to a shutdown from May 12-June 6 of its Saturn plant in Delaware; then, GM will cut unspecified number of jobs as it slashes production by a whopping 42%.

*General Electric's jet engine division will eliminate up to 800 jobs by the end of June, due to the disintegration of the airline sector; the unit's global employment has fallen by 15% (4,500 jobs) since October 2001.

*Maytag, the third-biggest U.S. home-appliance maker, will cut 500 jobs, or 8% of its workforce, as first-quarter earnings plunged by 39%.

*Corning, the fiber-optics maker, is slashing 1,000 jobs and shutting a Pennsylvania plant that makes cathode ray tube glass used in television sets.

*Motorola, the world's second-largest mobile-phone company, will cut 3,000 additional jobs, as part of a drive to slash $3 billion more in costs in 2003 and 2004.

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