U.S. ECONOMIC/FINANCIAL NEWS
Last 20 Years: 'Worst Economic Failure Since Great Depression'
Writing in the Washington Post Aug. 5, another leading economist echoes LaRouche's views, in an op-ed titled, "Economists in Denial." Mark Weisbrot, co-director of the Center for Economic and Policy Research, lists policies such as free trade, uncontrolled capital flows, privatization of state-owned industries, and other deregulatory measures dictated by the International Monetary Fund (IMF) and World Bank, and supported by the "Washington consensus," have been dead wrong.
The 1980s and 1990s have been the "worst economic failure since the Great Depression," for low- and middle-income countries, writes Weisbrot, typified by an increase in poverty, and reduced progress in life expectancy, infant and child mortality, literacy and education, caused not by a change in income distribution, but by a slowdown in growth due to higher interest rates dictated by the central banks.
"Washington Consensus" policies have led to a number of economic disasters, notes Weisbrot, such as Asia in 1998, followed by Mexico, Russia, Brazil, and Argentina.
"The prolonged economic malfunctioning of the past two decades is the elephant sitting in the middle of their conference rooms, and they are trying to ignore it," concludes Weisbrot, in reference to the IMF, World Bank, and World Trade Organization. "But an honest debate over the causes of this failure is long overdue."
And, speaking of economists in denial, Weisbrot, inexplicably, fails to mention the U.S. economic collapse (about which, see next item).
Commerce Department Fakes Figures To Hide Economic Collapse
On July 31, the U.S. Department of Commerce released a real, inflation-adjusted U.S. Gross Domestic Product growth of 1.1% for the second quarter, relative to the first quarter, and revised downward from 6.1% to 5.0%, the real, inflation-adjusted GDP growth for the first quarter (relative to the fourth quarter of 2001).
Even within the morass of fakery represented by the fraudulent concept of GDP, three tell-tale signs of collapse stand out:
*First, the Commerce Department had originally reported in April, that U.S. GDP had fallen by 1.3% during the third quarter of 2001, but cheerily reported that GDP had risen during the other three quarters of the year. On July 31, the Commerce Department, was, however, forced to eat those words, announcing its revised figures: GDP had fallen by 0.6%, 1.6%, and 0.3%, during the first, second, and third quarters of 2001, respectively.
*Second, the Commerce Department still maintains, after its July 31 revision, that real inflation-adjusted U.S. GDP rose by 2.1% during the second quarter of 2002 compared to the second quarter of 2001. However, of great importance, the investment by business in "non-residential structures" that is, in factory plants, farm buildings, mining and utility structures, etc. fell by a whopping 14.7% during the second quarter of 2002, over the previous year. During the comparable period, the investment by business in industrial equipment fell by 6.1%.
*Third, the Commerce Department relied upon the "hedonic index," which is a critical element of the Quality Adjustment Index fraud. Stated in current dollars, the business sector's actual purchase of "information processing equipment and software" fell from $407.9 billion during the second quarter of 2001, to $397.8 billion during the second quarter of 2002 (on an annualized basis). But, the Commerce Department applied the "hedonic index" as part of alleged inflation-adjustment, and then claimed that the business sector's purchase of "information processing equipment and software" rose from $549.8 billion during the second quarter of 2001, to $556.2 billion during the second quarter of 2002!
Thus, the Commerce Department took a real decline of $10.8 billion, and reported instead an increase of $6.4 billion, based on the fictional "hedonic" index!
Panic Flight out of Stock Mutual Funds in July
Some $55 billion was pulled out of equity mutual funds in July the largest amount ever recorded. This was on top of $18 billion sold off in June, the third-largest dollar amount, according to the Investment Company Institute, the mutual funds industry research and trade association.
Journal Worries that Fannie and Freddie Pose Risk to Economy
The dominant buyers of home-mortgage loans, who buy derivatives to hedge their risk, have more than tripled in size in the past decade, to where Fannie would be the second-largest U.S. company, and Freddie the fifth-largest raising concerns over the risk to the economy, if one of them were to fail. Their growth, much of it generated by buying mortgage-backed securities, is reaching saturation because of the difficulty of finding a market of new homeowners.
Fannie and Freddie could, to continue growing, buy up existing pools of mortgages that currently are held by others, but that would require them to issue a "staggering amount of debt" in order to pay for the loans.
Wall Street Police Blotter
Reflecting the death of the global financial system, as well as the hoax of the "new economy," more revelations appeared this week of corporate fraud, due not to a few corrupt executives, but to a deregulated economy based on financial speculation.
Bankrupt WorldCom has "uncovered" an additional $3.3 billion in fraudulent earnings, during 1999-2000, almost doubling its bogus accounting to $7.15 billion, making it unlikely the telecom giant would emerge intact from bankruptcy or even survive. The second-largest U.S. long-distance phone company, and parent of MCI Group, already under investigation by the Justice Department, said it would restate earnings for 2000 and 1999, on top of previously announced plans to revise financial statements for all of 2001 and the first quarter of 2002. The new charges would effectively erase WorldCom's profits for all of 2000.
The telecom giant, which carries half of the world's Internet traffic, also warned that it may write off $50.6 billion to reflect the declining value of assets, second only to AOL Time Warner's $54 billion writedown in the first quarter of the year.
Most of the $3.3 billion was due to taking money out of reserve accounts (used to cover potential losses) and reporting it as sales revenue.
Samuel Waksal, former ImClone CEO, was indicted on Aug. 7 in Federal court in Manhattan, on new charges of defrauding Bank of America, by forging a signature on a document showing he owned stock that he had actually sold, as collateral for $44 million in loans; and obstruction of justice for ordering destruction of records relating to offshore accounts, and telephone messages. The other charge was previously known: insider trading. If convicted, Waksal faces millions of dollars in fines, and up to 30 years in prison on the bank fraud charge alone.
The once high-flying energy pirates, now in the midst of collapse, are under scrutiny.
The Justice Department probe of Enron has gone international. Federal prosecutors are investigating Enron's alleged bribes of foreign government officials with possible criminal violations of the Foreign Corrupt Practices Act to win a pipeline project in Bolivia, power projects in Poland, the Philippines, and the Dominican Republic, and water projects in Ghana, among others, going back to the mid-1990s, awarded in some cases without competitive bidding, or where assets were acquired at below-market rates.
Enron and Merrill Lynch concocted a sham energy deal, that put $60 million in profits on Enron's books at the end of December 1999, driving up its stock price. After booking the profits, Enron made an $8 million payment to Merrill, then, cancelled the deal.
Enron and the State of Connecticut's trash authority, made a $220 million deal, that looks suspiciously like a loan from the state to the corporation, which is illegal under Connecticut law. Enron booked it as revenue, of course. Sen. Joseph Lieberman (D-Conn.) said he may investigate.
Mirant faces an "informal inquiry" by the Securities and Exchange Commission, after the power merchant disclosed last week that it overstated $253 million in assets and liabilities last year, The probe will also look into Mirant's phony round-trip trades that inflated revenue, and its energy-trading practices in the western U.S., during California's power crisis.
AON, the world's second-largest insurance broker, is under investigation by the Securities and Exchange Commission for accounting irregularities, and may have to restate earnings for the past three years.
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