In this issue:

Enron's Lay May Yet Meet a Guy Named Spike

Lay-Enron-Cheney—A Long History of Corruption

Per-Capita Steel Output Down 50% since 1973

U.S. Submarine-Building Industry Faces Submersion

Kansas Wheat Harvest Down Nearly One-Fourth


From Volume 3, Issue Number 28 of Electronic Intelligence Weekly, Published July 13, 2004

U.S. Economic/Financial News

Enron's Lay May Yet Meet a Guy Named Spike

Former Enron chief executive Kenneth Lay was taken in handcuffs one morning this past week for an appearance in Federal court, to face an 11-count indictment containing one count of conspiracy, two of wire fraud, four of securities fraud, one of bank fraud, and three of making false statements to banks. The counts center on Lay's lying to Enron's creditors, employees, and stockholders in the months before Enron declared bankruptcy in December 2001. Lay said that the company was making a profit, while he was dumping his (increasingly worthless) Enron stock to the tune of $24 million. A parallel civil complaint by the Securities and Exchange Commission charges Lay with insider trading, and seeks the return of $90 million Lay pocketed selling Enron stock. "As Enron's chairman and chief executive, Lay was an engaged participant in the ongoing fraud, and must therefore be called to account for his actions," the SEC stated.

Since indictments began to be handed down against other former Enron execs, Lay has tried to paint himself as a detached corporate executive who knew nothing about what some "rogue" traders (loan assassins?) were illegally doing, supposedly behind his back. Yet Lay had refused to testify before Congress shortly after Enron declared bankruptcy, asserting his right against self-incrimination. In an interview with the San Francisco Chronicle in March 2001, Lay had lied that Enron traders never deliberately manipulated electricity prices, claiming that California officials believed in "conspiracy theories."

California state officials never bought the "rogue traders" theory, and Attorney General Bill Lockyear restated his hope not only of recovering tens of millions of dollars Enron stole from the state, but of seeing Lay face prison time in a cell "shared with a dude" named Spike, if he's convicted. California Senators Dianne Feinstein and Barbara Boxer, both Democrats, expressed confidence that the indictment will have an impact on the lawsuits the state has filed against Enron. That will depend more upon the political fight than anything in the indictment.

Lay-Enron-Cheney—A Long History of Corruption

From the time that Ken Lay turned Houston Natural Gas into Enron in the mid-1980s, to go from producing and selling energy, to making energy supplies hostage to a rigged "market," the Bush family has backed his financial schemes, as they have always been able to count on Ken Lay to help finance their way into public office. From George W's gubernatorial campaigns, to his run for the White House, Lay and Enron contributed millions to put him in office, expecting, in turn, to formulate crucial aspects of energy policy.

Even had there not been an ideological affinity between the Bushes and Ken Lay, there certainly was a practical one—before Halliburton there was Enron. After all, someone had to make a killing from the first Gulf War, so George Sr.'s friends and Cabinet members joined Enron after #41 left office, to "rebuild Kuwait," to reap the benefits of the spoils of war.

Ken Lay must have drooled over the chance to have the more malleable Bush the Younger in the White House, and a corrupt Vice President, who was in the "energy business." Lay, his cronies, and Enron, were the second-largest contributors to W's 2000 campaign. They even kicked in $200,000 to help pay for Inauguration balls, etc. No surprise that it would be to Ken Lay and Enron that the President and Cheney would turn for "advice" on energy policy.

It is well known that Ken Lay met with Cheney during the secret deliberations of the Energy Task Force Cheney headed, and Rep. Henry Waxman (D-Calif) pointed out that 18 of the recommendations in the task force report were proposed or endorsed by Enron, centering on increased deregulation. White House appointments to the Federal agency responsible for regulating energy prices—which could have put a stop to the rape of California two years before it did—were vetted by Ken Lay. Bush-appointed, Lay-backed FERC chairman Pat Wood is a former lawyer in James Baker's Baker and Botts firm. He is now being asked to recuse himself, due to a conflict of interest, from decisions on licenses for liquified natural gas terminals, since he previously represented the interests of the firms involved. LNG is slated to become the next high-priced energy ripoff for American consumers.

Per-Capita Steel Output Down 50% since 1973

Indicative of the process of the "incredible shrinking" physical economy, is the sharp decline in production and consumption of steel in the United States, the U.S. Geological Survey reported in January. In 1973, the U.S. produced 137 million metric tons of steel, or 0.65 metric tons per capita. By 2002, the U.S. production of steel had fallen to only 91.6 million metric tons, or just 0.32 metric tons per capita. This collapse—by more than half in three decades, per capita—marks a collapse of total U.S. industrial capability.

Even if imports are taken into consideration, domestic U.S. steel use has fallen. Total steel consumption, including imports, was 146 million metric tons in 1973, or 0.69 metric tons per capita, dropping to 107 million metric tons, or 0.37 metric tons per person in 2002.

The takedown in domestic steel production is slamming auto parts suppliers, many of whom are facing possible bankruptcy, amid soaring steel prices.

U.S. Submarine-Building Industry Faces Submersion

The industrial base for producing submarines in the U.S. is facing extinction, experts warned at an industry conference sponsored by Sen. Christopher Dodd (D-Conn) in Groton, Conn., for about 150 submarine parts suppliers, the Day of New London reported July 7. Conference speakers said that the nation's ability to build submarines is imperilled by rising costs and a declining military fleet. Budget restrictions have limited the Navy's purchase of submarines to only 60% of the ships it needs. Speakers said the Navy has to build at least two submarines per year to maintain its fleet, but lamented that it is difficult to reach even that low level of production. The Navy plans to order at most just 11 submarines in this decade—down from 42 subs in the 1980s—a rate that threatens the survival of the industry, speakers said.

Ominously, today about 84% of the parts going into nuclear submarines are produced by only one company, since suppliers have gone out of business as the production rate dropped.

Submarine parts makers warned they are in a worse existential crisis than they suffered during the 1990s. "Today we're going to ask you to labor longer and harder.... What's at stake today is nothing less than the future of submarine building in this country," cautioned John P. Casey, president of Electric Boat.

This dire threat to the survival of the submarine industry, like the precarious situation facing auto parts suppliers, is one of the signs of the disintegrating U.S. industrial base, pointing to the urgent need for Lyndon LaRouche's "Super-TVA" approach.

Kansas Wheat Harvest Down Nearly One-Fourth

The wheat harvest in Kansas has collapsed by 23% since 2003, as farmers face the consequences of decades of underpayment and the takedown of the physical economy. Kansas is the top U.S. producer of hard red winter wheat—the kind used for bread flour—and it is the largest exporter state for wheat and wheat flour. This summer's estimated crop of under 369 million bushels will be about 23% less than last year's (which was a decent, not a miracle level). The immediate circumstances of the fall in wheat harvest in Kansas include a prolonged drought in the western area, for the fifth consecutive year. There were also a late freeze and hailstorms.

But harvest fluctuations based on weather, insects, and so on, are to be expected. The problem is that, with the anti-agriculture, anti-industrial policies of globalization, farmers no longer have any margin to tolerate "normal" swings. They have been underpaid for their commodities, energy inflation has pushed up their production costs, the loss of the rail system has crippled transport, etc.

The wheat price per bushel to the farmer at present is in the range of $3.50, which some media note is a fall from the nearly $6 a bushel in 1996—which makes a fallacious, cynical point. In fact, the higher commodities prices received by farmers in 1996 lasted for only the few months during the period of the debate and enactment of the neo-con free-markets "Freedom to Farm" seven-year law ("Freedom to Fail"), signed by President Clinton April 6, 1996! Mysterious "market forces" intervened to push up prices to the farmers, just at that time. Then, within months, wheat and other prices fell back to where they were in 1995, and far lower, even hitting barely $2.25 in 1999—way under cost to produce the commodity.

A western Kansan said of farming today, "We can't do this for another year. If this doesn't turn around by fall, we're going to be looking at extreme measures like getting rid of assets. Folks are about as discouraged as I've ever seen them." (Tim Burr, manager of the St. Francis Mercantile Exchange, to the Billings Gazette July 4.)

Other grainbelts are in the same condition, for example, Western Australia, a leading wheat producer. LaRouche associate Jean Robinson, CEC candidate in Western Australia, said in an EIR interview Feb. 16, 2004, "We've gone from having 300,000 farmers to fewer than 100,000 farmers in just 20 years...."

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