What The Government Cant Do For You: Hard

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Saturday, April 20, 2013

America"s New Math: 1 Wall Street Hour = 21 Years of Hard Work For the Rest of Us

It"s perverse: the top 10 hedge funds managers make as much as 196,000 registered nurses. Here"s how we change that.

The new Rich List is out — yet another example of financial pornography. While nearly 15 million Americans still can"t find jobs due to the 2008 Wall Street-created crash, the top hedge manager, David Tepper, earned $ 1,057,692 an HOUR in 2012 — that"s as much as the average American family makes in 21 years!

America"s new math: 1 Wall Street hour = 21 years of hard work for the rest of us.

Together the top 10 hedge fund managers waltzed off with $ 10.1 billion in 2012, which is more than enough to hire 250,000 entry level teachers or 196,000 new registered nurses.

It"s not just that these financial gurus are filthy rich. It"s that they are the richest of the rich and we don"t even know what they do. Overall, hedge fund managers make 50 to 100 times more than our top athletes, movie stars, CEOs, lawyers, writers, doctors and celebrities. Yet, their activities are treated like state secrets.

So what is a hedge fund? No, it has nothing to do with the wholesale garden supply business. Nor does all that money come from hedging against unforeseen negative economic events. Rather, hedge funds are investment vehicles for the super rich — for “sophisticated” investors and institutions who have the resources to gamble for ultra-high returns.

Are you worth what you earn?

In a capitalist society your value is determined by what the market says you"re worth. The market is not supposed to pay you billions unless you"re producing enormous amounts of value for the economy. Bruce Springsteen makes a good living because people like his songs, buy his records and attend his concerts. We give him money, he gives us entertainment.

But not every market transaction is such an obvious fair exchange of value. Monopolies can jack up prices to make extra profits without increasing the value produced. It is also possible to lie, cheat and steal your way to riches without producing any economic value at all. And as we learned during the Wall Street crash, the creators of toxic assets produced an enormous amount of negative value for society even as the “market” paid them enormous sums.

So do hedge funds produce economic value or are they ripping us off?

Hedge fund managers don"t sing, act, hit baseballs or make movies for a living. Actually, obtaining reliable information about what they do is really hard to come by. (It took nearly two years of research for How to Make a Million Dollars an Hour before I could chase down just a few of the answers.)

When you read media reports it always sounds like top hedge fund managers are just the very best at buying low and selling high. We"re told that investors like Tepper were smart enough to load up on Apple, Inc in 2012 while everyone else was worried that the Euro crisis would crash the markets…and so on. Maybe that"s true. But we have no way to really check out what a particular hedge fund does on a day to day basis. That"s proprietary information. Instead we need to step back to examine the hedge fund business as a whole, and then ask two basic questions:

How is it possible for hedge funds, most with fewer than 100 employees, to make more money than corporations with tens of thousands of employees?

Is there any evidence to suggest that hedge funds succeed in large part because they have found ingenious ways to cheat? If so, how widespread is the cheating?

Hedge funds want to know who wins the race before it is run.

We also are told that these guys (and yes, they are all guys) make big bucks because they"re terrific gamblers, the very best poker players in the financial world. But that"s a misleading analogy. Evidence suggest that many are more like card sharks. They don"t really want to gamble. Instead they always seeking to bet on a sure thing. Better yet, they would prefer to create a rigged bet. Sounds far fetched? I"d wager that the financial maneuvers I"m about to list understate the severity of hedge fund cheating. (For more detailed information please see my workshop on C-Span Book TV.)

1. Insider trading.Many hedge funds (and we don"t know how many) make their money through illegal insider tips. If you know something big is about to happen to a company that no other outsider is supposed to know, you"re betting on a sure thing. So far U.S. Attorney Preet Bharara has nailed about 70 hedge fund honchos for obtaining illegal tips. The billionaire Raj Rajaratnam tried, found guilty and put away for nine years. And the third richest hedge fund earner in 2012, billionaire Steven Cohn, is watching as several of his high-level employees succumb to federal indictments. He could be next.

How endemic are these crimes? We can only speculate, but this much is clear. It"s very hard to nail someone for insider trading. So the odds of ever getting caught are slim given that there are 9,000 hedge funds. But perhaps we should listen to the man closest to the prosecutions:

“Given the scope of the allegations to date, we are not talking simply about the occasional corrupt individual. We are talking about something verging on a corrupt business model.” — U.S. Attorney Preet Bharara, NYT, May 27, 2011

2. Design financial products to fail so you can collect the insurance.This was the game of choice before and during the housing bubble. We know for certain that hedge funds colluded with big banks to create mortgage-related securities that were designed to crash and burn, so hedge fund investors could bet against them. In fact, the hedge fund bettors designed the bets by assembling the worst mortgages they could find to place into the securities.

Sounds strange? It is. In fact, nowhere else in capitalism is something this shoddy permitted. It"s precisely like designing and building a home to fall down in six months so that you, the seller, can collect the insurance. Goldman Sachs, JPMorgan Chase and Citigroup have paid over a $ 1 billion in SEC fines for misleading investors about these shoddy deals. But their hedge fund partners made billions on the insurance and didn"t have to cough up a dime in penalties.

Not only did these deals defraud investors, but overall they puffed up the housing boom and then accelerated the crash. Without any exaggeration, these scams had no positive redeeming value for the economy. We"re talking pure rip-off.

3. Manipulating the media — rumor mongering.If you"re really clever you can slip phony tips to gullible reporters; information that is designed to assist your betting strategies. For example, you can set off rumors about a particular bank"s solvency while you"re betting against that bank. If you can help set off a bank run, so much the better, because then you can really win big. However, rumor mongering violates the law…if you"re caught.

What evidence do we have that this really goes on? Ask Jim Cramer, the frenetic star of “Mad Money.” Over a decade ago he ran a very successful hedge fund. Years later he admitted during an online interview (transcript here) that he fed false rumors to his comrades at CNBC so Cramer"s hedge fund could cash in on them. (The statue of limitations had already run when he confessed his sins.) Furthermore, he said point blank if you"re not willing to violate the rules, “maybe you shouldn"t be in this game.”

4. High frequency trading.Here"s a game for fun and profit that is both legal (for now) and foolproof. You set up your ultra-high-speed computers right next to the stock exchanges so that you get the feed a few nanoseconds before the rest of the world. Then with the help of expert programmers you use that information to automatically jump in ahead of normal investors, so that you buy stocks that others want, jack up the price a little bit and then sell them back to these normal speed buyers. This means that when the rest of us hit the buy button on E-Trade, a high frequency algorithm has probably jumped in there before us, bought the stock we want, and is selling it back to us for a few pennies of profit. They do this millions of times a minute, racking up from $ 5 to $ 20 billion a year. It"s like a hidden private sales tax that goes into the pockets of high frequency traders. Our pension funds and 401ks are fleeced as well.

A Tax Break for Hedge Funds

And the list goes on and on. Some maneuvers are ethically challenged but legal. Other"s are borderline. And some are flagrantly in violation of law. But in any event, most Americans would call it cheating. And to add insult to injury, hedge funds have a special tax break called “carried interest” which allows the richest of the rich to pay a lower tax rate than the rest of us.

Halting Runaway Inequality

Not only are we victims of the cheating and the tax breaks, but also, these outrageous incomes distort our entire income distribution. The more these guys make, the more every CEO desires (would Freud call it hedge fund envy?). Corporate compensation committees don"t want to lose their talented executives to hedge funds, do they? So up and up go corporate compensation packages. In 1970 the top CEOs averaged $ 45 for every dollar paid in worker wages. By 2006 the ratio jumped to $ 1,723 to $ 1.

The solutions are straightforward:

1. Get rid of the carried interest loophole. The Obama administration now claims at long last to support the elimination of this outrageous loophole. But don"t hold your breath. Instead of cutting back Social Security, the President should demand an immediate vote on this loophole all on its own. It might prove extremely embarrassing (and revealing) for members of both parties who for so long have quietly blocked its elimination. Voting on this loophole should become a litmus test of whether a politician is for Main Street or Wall Street.

2. Support the Robin Hood Tax. National Nurses United is leading the charge for a small tax on all sales of stock, bonds and derivatives. They aptly call it “A Sin Tax on Wall Street.” Eleven other nations are instituting such a tax which would go a long way toward putting the high frequency vultures out of business, as well as moving significant sums from the bloated financial sector to the rest of the economy. The nurses union is sponsoring a march in Washington on April 20. We all should be there. (See robinhoodtax.org)

3 Full disclosure. We need to shine a bright light on what these hedge funds do. Many are so large they could have an enormous negative impact on the economy if their bets go wrong. We need to know exactly how they make their money. If revealing those “trade secrets” undermine their profitability, so be it.

Of course, none of this will come easy. But sooner or later, the American public will act on what they already sense: we are fleeced each day in a myriad of ways by the big banks and hedge funds.

Get ready.

America"s New Math: 1 Wall Street Hour = 21 Years of Hard Work For the Rest of Us

It"s perverse: the top 10 hedge funds managers make as much as 196,000 registered nurses. Here"s how we change that.

America"s new math: 1 Wall Street hour = 21 years of hard work for the rest of us.

Together the top 10 hedge fund managers waltzed off with $ 10.1 billion in 2012, which is more than enough to hire 250,000 entry level teachers or 196,000 new registered nurses.

Are you worth what you earn?

So do hedge funds produce economic value or are they ripping us off?

How is it possible for hedge funds, most with fewer than 100 employees, to make more money than corporations with tens of thousands of employees?

Is there any evidence to suggest that hedge funds succeed in large part because they have found ingenious ways to cheat? If so, how widespread is the cheating?

Hedge funds want to know who wins the race before it is run.

A Tax Break for Hedge Funds

Halting Runaway Inequality

The solutions are straightforward:

Of course, none of this will come easy. But sooner or later, the American public will act on what they already sense: we are fleeced each day in a myriad of ways by the big banks and hedge funds.

Get ready.

Sunday, April 14, 2013

Disturbing Facts About State Lotteries: They Prey on the Poor and Trash the Economy, and Political Leaders Don"t Care (Hard Times USA)

The following article is part of AlterNet"s series on poverty, Hard Times USA.

State lotteries amount to a hidden tax on the poor. They eat up about 9 percent of take-home incomes from households making less than $ 13,000 a year. They siphon $ 50 billion a year away from local businesses—besides stores where they’re sold. And they are encouraged by state-sponsored ads suggesting everyone can win, win, win!

State lotteries, which once were illegal, now exist in most states. What many people don’t know about lotteries is that they prey on those who can least afford it; most people never win anything big; and 11 states raise more money from lotteries than from corporate taxes. Beyond the moral, mental health or religious debates over gambling, lotteries are another example of how society preys on the poor and the working-class.

Let’s look at why state lotteries do far more harm than good—especially at the bottom of the economic ladder.

1. Legalized gambling is almost everywhere.Legalized gambling is available in every state except for Utah and Hawaii. This includes state lotteries, which are in 42 states, Puerto Rico and Washington DC. Lotteries were illegal for most of the 20th century, but that changed in 1964 when New Hampshire—a state without an income tax—reinstituted a state lottery. The first lotteries predate the American Revolution, but those mostly privately run efforts were so corrupt they were completely prohibited by every state in 1894.

2. They suck billions out of the economy.In 2009, $ 50.4 billon was spent on state lottery tickets and video kiosks. The government pocketed $ 17.9 billion of this total in 2010, which breaks down to 30 percent in profits and 8 percent in administrative costs, including advertising. The rest went to prizes and commissions to stores selling the tickets. Many corner stores could not remain open without the income from lottery sales.

3. They are a tax from anti-tax politicans. Tax-averse Democrats and Republicans have increasingly been relying on state lotteries to subsidize basic public programs like schools instead of raising taxes for that purpose. In 11 states—Delaware, West Virginia, Rhode Island, Oregon, South Dakota, Georgia, Michigan, Ohio, South Carolina, Texas and Washington—the lottery raised more per person than corporate income taxes. “The long-term shift in tax burdens from capital and corporations to individuals and their activities is perhaps best illustrated by the rise of state lotteries,” wrote tax expert David Cay Johnston, calling lotteries “the most heavily taxed consumer product in America.”

4. They hit the poorest the hardest. “Simply put, lotteries take the most from those who can least afford it,” wrote economist Richard Wolff. “Instead of taking those most able to pay (the principle of federal income tax in the U.S.), state leaders use lotteries to disguise a regressive tax that falls on the middle and even more on the poor.” A 2010 study found that households with take-home incomes of less than $ 13,000 spent on average $ 645 a year on lottery tickets, which is about 9 percent of their income. The reason people play lotteries varies, but it mixes hopes and dreams with desperation: poorer people see it as a slim chance to radically improve their standard of living.

5. Communities of color, less-educated spend the most. Numerous academic studies have found that non-whites spend much more on lotteries than whites, with one study putting the figure at $ 998 for African Americans and $ 210 for whites. Household with incomes under $ 25,000 spent an average of about $ 600 a year, while $ 100,000-plus earners spent about $ 300 year. People who never graduated from college spent the most, about $ 700 a year, while graduates spent under $ 200.

6. They redistribute money up the economic ladder. Most people buy tickets and win little or nothing. This is taking more money from the poor, working and lower middle-classes than from those most able to pay taxes. These billions also are diverted away from local businesses—with the exception of the stores where tickets are sold. “This is exacty the opposite of the kind of economic stimulus a depressed economy needs,” wrote economist Wolff.

7. They give the wrong message about solving poverty. Lotteries reinforce libertarian political messages, suggesting that everyone needs to take individual action in response to socirty’s inequities, even though the government has helped well-connected individuals, businesses and industries become rich for decades. This easy money for states diverts political debate away from society-wide analyses and solutions to what prevents people from moving up the economic ladder. Instead, it pushes individuals in marginal circumstances toward gambling as their hope for gain.

8. They amount to one of the highest investment tax rates. Another way to look at the social policy hypocrisy surrounding state lotteries is to skip the moral dimension—the religious objections to gambling, the mental health costs of gambling addition, the hidden state income tax—and just compare the tax rates on this form of investment with tax rates on other types of inventments, such as stocks. State lotteries impose a 38 percent tax rate on buying tickets, according to Johnston. No taxes are paid when a person buys a stock or bond, a more preferred investment vehicle for wealthier households. Moreover, the current federal tax rate for earnings from short-term investments—held less than a year—ranges from 10 to 35 percent.

9. Hypocritical when compared to state drug laws. One of the rationales for criminalizing drugs is that abuse leads to addiction, which harms individuals, families and society at large. But state-sponsored gambling also feeds addictive behavior—people who are addicted to gaming, including lotteries. “I work in a convenience store and the way some people are addicted to the lottery is downright sickening,” wrote toddpugz, responding to a DailyFinance.com report on the topic. “I see people every day who scrape together their last few pennies to play the lottery. Even worse are the ones who claim the lottery is ‘fixed’ but continue to play it on a daily basis. And let’s not forget those who actually ‘study’ past numbers thinking it will give them some insight into the next day’s numbers.”

10. Big winners often see their lives unravel. One of the surprises that comes with winning the lottery—for the rare few who win big—is how a fast infusion of money can wreck families, disrupt friendships and even invite violent crime, con-men, and targeting by jealous family members. Some winners spend all their winnings in no time. Others just use it to fuel more gambling binges.

Revenue-strapped state legislatures may see state lotteries as an easy way to bring in the hundreds of millions that they need for basic government services—schools, police, roads and social safety nets. But state lotteries have become an easy way to take from the least wealthy Americans and avoid the harder task of making everyone pay their fair share. State lotteries may be as old as America, but so is the country’s history of economic exploitation.

Fri, 04/05/2013 – 16:36

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Disturbing Facts About State Lotteries: They Prey on the Poor and Trash the Economy, and Political Leaders Don"t Care (Hard Times USA)

Wednesday, April 3, 2013

"Don’t Rush For Gold" - What A Real Hard Currency Mine Looks Like

When it comes to mining for alternative currencies, there is this:

Or this:

Tien Shan mountains, Kyrgyzstan

“Don’t run! Slow down! Just don’t run!” I repeated this non-stop to myself like an incantation. Indeed, it is hard even to pace quickly – let alone run — when you have to breathe in the rarefied air and wear a supplied protective helmet and brand-new rigid boots with steel toes.

I also had to look out for giant trucks the size of three-story houses chugging around. It was difficult to keep my emotions under control during the few hours on this tight assignment. I was at an altitude of over 4,000 meters above sea level near the Chinese border, inside a huge open-pit gold mine at Kumtor, Kyrgyzstan’s largest gold asset, operated by Toronto-based Centerra Gold. Gigantic trucks and excavators worked non-stop in the snow-clad pit, looking like characters from a fantasy movie. As if playing a computer game, an excavator operator elegantly manipulated small joysticks – just five scoops full of ore, and almost 200 tones were loaded into a truck in about one minute.

In line with Centerra Gold’s tough requirements, I passed two medical checks before I started working at these giddy heights. A day before, we had to stay for the night at a guest house located at about 1,700 meters above sea level to get accustomed to high altitudes before ascending to Kumtor. The gold mine is the world’s second highest-altitude gold deposit after Peru’s Yanacocha mine. Some vehicles never even stop their engines in these ferocious conditions of Arctic tundra and permafrost.

Finally, the work of hundreds of workers, dozens of huge machines and the state-of-art gold-extracting mill reached its logical conclusion accomplished by just two workers. Moving like extra-terrestrials in their silvery heatproof overalls and helmets, they slowly poured dazzling, bright orange molten gold from a crucible into molds.

Minutes later, four bars containing around 80 percent pure gold and worth $ 2.6 million were ready for polishing. A worker wearing a mask closed the curtain of his glass booth to polish a 20 kg bar inside.

I saw gold dust shine in the light of bright lamps illuminating the booth. After being photographed as though they were prestigious models on a catwalk, the four shiny bars were then stamped and sealed in massive vaults. I have seen batches of banknotes worth more than $ 2.6 million, but beyond all doubt, gold bars look much more attractive!

When I left the hot melting shop, I saw a crystal clear sky over the Kumtor mine outside. As our team prepared for the 400 km (248 mile) ride back to the Kyrgyz capital Bishkek, I raised my camera to shoot a final general view of the plateau. In the bright sunlight, a few tiny specks of gold dust were still glittering on my lens and camera.

By Shamil Zhumatov, Reuters

Zero Hedge

"Don’t Rush For Gold" - What A Real Hard Currency Mine Looks Like

Thursday, March 28, 2013

Walmart"s Death Grip on Groceries Is Making Life Worse for Millions of People (Hard Times USA)

This article was published in partnership with the Institute for Local Self-Reliance.

When Michelle Obama visited a Walmart in Springfield, Missouri, a few weeks ago to praise the company"s efforts to sell healthier food, she did not say why she chose a store in Springfield of all cities. But, in ways that Obama surely did not intend, it was a fitting choice. This Midwestern city provides a chilling look at where Walmart wants to take our food system.

Springfield is one of nearly 40 metro areas where Walmart now captures about half or more of consumer spending on groceries, according to Metro Market Studies. Springfield area residents spend just over $ 1 billion on groceries each year, and one of every two of those dollars flows into a Walmart cash register. The chain has 20 stores in the area and shows no signs of slowing its growth. Its latest proposal, a store just south of the city"s downtown, has provoked widespread protest. Opponents say Walmart already has an overbearing presence in the region and argue that this new store would undermine nearby grocery stores, including a 63-year-old family-owned business which still provides delivery for its elderly customers. A few days before the First Lady"s visit, the City Council voted 5-4 to approve what will be Walmart"s 21st store in the community.

As Springfield goes, so goes the rest of the country, if Walmart has its way. Nationally, the retailer"s share of the grocery market now stands at 25 percent. That"s up from 4 percent just 16 years ago. Walmart"s tightening grip on the food system is unprecedented in U.S. history. Even A&P — often referred to as the Walmart of its day — accounted for only about 12 percent of grocery sales at its height in the 1940s. Its market share was kept in check in part by the federal government, which won an antitrust case against A&P in 1946. The contrast to today"s casual acceptance of Walmart"s market power could not be more stark.

Having gained more say over our food supply than Monsanto, Kraft, or Tyson, Walmart has been working overtime to present itself as a benevolent king. It has upped its donations to food pantries, reduced sodium and sugars in some of its store-brand products, and recast its relentless expansion as a solution to “food deserts.” In 2011, it pledged to build 275-300 stores “in or near” low-income communities lacking grocery stores. The Springfield store Obama visited is one of 86 such stores Walmart has since opened. Situated half a mile from the southwestern corner of a census tract identified as underserved by the USDA, the store qualifies as “near” a food desert. Other grocery stores are likewise perched on the edge of this tract. Although Walmart has made food deserts the vanguard of its PR strategy in urban areas, most of the stores the chain has built or proposed in cities like Chicago and Washington D.C. are in fact just blocks from established supermarkets, many unionized or locally owned. As it pushes into cities, Walmart"s primary aim is not to fill gaps but to grab market share.

***

The real effect of Walmart"s takeover of our food system has been to intensify the rural and urban poverty that drives unhealthy food choices. Poverty has a strong negative effect on diet, regardless of whether there is a grocery store in the neighborhood or not, a major 15-year study published in 2011 in the Archives of Internal Medicine found. Access to fresh food cannot change the bottom-line reality that cheap, calorie-dense processed foods and fast food are financially logical choices for far too many American households. And their numbers are growing right alongside Walmart. Like Midas in reverse, Walmart extracts wealth and pushes down incomes in every community it touches, from the rural areas that produce food for its shelves to the neighborhoods that host its stores.

Walmart has made it harder for farmers and food workers to earn a living. Its rapid rise as a grocer triggered a wave of mergers among food companies, which, by combining forces, hoped to become big enough to supply Walmart without getting crushed in the process. Today, food processing is more concentrated than ever. Four meatpackers slaughter 85 percent of the nation"s beef. One dairy company handles 40 percent of our milk, including 70 percent of the milk produced in New England. With fewer buyers, farmers are struggling to get a fair price. Between 1995 and 2009, farmers saw their share of each consumer dollar spent on beef fall from 59 to 42 cents. Their cut of the consumer milk dollar likewise fell from 44 to 36 cents. For pork, it fell from 45 to 25 cents and, for apples, from 29 to 19 cents.

Onto this grim reality, Walmart has grafted a much-publicized initiative to sell more locally grown fruits and vegetables. Clambering aboard the “buy local” trend undoubtedly helps Walmart"s marketing, but, as Missouri-based National Public Radio journalist Abbie Fentress Swanson reported in February, “there"s little evidence of small farmers benefiting, at least in the Midwest.” Walmart, which defines “local” as grown in the same state, has increased its sales of local produce mainly by relying on large industrial growers. Small farmers, meanwhile, have fewer opportunities to reach consumers, as independent grocers and smaller chains shrink and disappear.

Food production workers are being squeezed too. The average slaughterhouse wage has fallen 9 percent since 1999. Forced unpaid labor at food processing plants is on the rise. Last year, a Louisiana seafood plant that supplies Walmart was convicted of forcing employees to work in unsafe conditions for less than minimum wage. Some workers reported peeling and boiling crawfish in shifts that spanned 24 hours.

The tragic irony is that many food-producing regions, with their local economies dismantled and poverty on the rise, are now themselves lacking grocery stores. The USDA has designated large swaths of the farm belt, including many agricultural areas near Springfield, as food deserts.

***

One might imagine that squeezing farmers and food workers would yield lower prices for consumers. But that hasn"t been the case. Grocery prices have been rising. There are multiple reasons for this, but corporate concentration is at least partly to blame. For most foods, the spread between what consumers pay and how much farmers receive has been widening. Food processors and big retailers are pocketing the difference. Even as Walmart touts lower prices than its competitors, the company"s reorganization of our food system has had the effect of raising grocery prices overall.

As Walmart stores multiply, fewer families can afford to eat well. The company claims it stores bring economic development and employment, but the empirical evidence indicates otherwise. A study published in 2008 in the Journal of Urban Economics examined about 3,000 Walmart store openings nationally and found that each store caused a net decline of about 150 jobs (as competing retailers downsized and closed) and lowered total wages paid to retail workers. Other research by the economic consulting firm Civic Economics has found that, when locally owned businesses are replaced by big-box stores, dollars that once circulated in the community, supporting other businesses and jobs, instead leak out. These shifts may explain the findings of another study, published in Social Science Quarterly in 2006, which cut straight to the bottom line: neighborhoods where Walmart opens end up with higher poverty rates and more food-stamp usage than places where the retailer does not expand.

This year, Walmart plans to open between 220 and 240 stores in the U.S., as it marches steadily on in its quest to further control the grocery market. Policymakers at every level, from city councilors to federal antitrust regulators, should be standing in its way. Very few are. Growing numbers of people, though, are drawing the line, from the Walmart employees who have led a string of remarkable strikes against the company, to the coalition of small business, labor, and community groups that recently forced Walmart to step back from its plans to unroll stores across New York City.

Back in Springfield, as Michelle Obama was delivering her remarks, framed by a seductive backdrop of oranges and lemons, a citizens group called Stand Up to Walmart was also at work, launching a referendum drive to overturn the City Council"s vote and block Walmart from gaining any more ground in the city.

Tue, 03/26/2013 – 12:24

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Walmart"s Death Grip on Groceries Is Making Life Worse for Millions of People (Hard Times USA)

This article was published in partnership with the Institute for Local Self-Reliance.

***

Tue, 03/26/2013 – 12:24

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Walmart"s Death Grip on Groceries Is Making Life Worse for Millions of People (Hard Times USA)

Saturday, March 23, 2013

Hard Deadline to Hit Cyprus Monday as region Faces Economic Collapse

Cyprus faces a hard deadline of Monday imposed by the European Central Bank to avoid a total banking collapse that could echo throughout the region.

By Shepard Ambellas
Intellihub.com
March 23, 2013

NICOSIA — Cypriots finance minister (Michalis Sarris) stated Saturday that they have made “significant progress toward reaching an agreement” as thing in the presidential sector heated up.

The region now teeters on the brink of economic turmoil as over 1000 bankers marched from the Cyprus Union Bank headquarters to the Presidential Sector in fear of loosing their jobs. The protestors were stopped by police at the presidential compound for sometime but were eventually let by.

The Raw Story reported today that;

The Cypriot authorities are scrambling to raise 5.8 billion euros ($ 7.5 billion) before a Monday deadline set by the European Central Bank or it will cut off emergency financial aid to the island.

Finance Minister Michalis Sarris said “significant progress” has been made in talks with the EU, ECB and IMF aimed at clinching a 10 billion-euro ($ 13 billion) bailout to save the eurozone member from looming bankruptcy.

Some now argue that this bailout is not the solution but rather a mere temporary lifeline. The New York Times reported, “European Union leaders “may conclude that it is best to let Cyprus default, impose capital controls and leave the euro zone,” Nicolas Véron, a senior fellow at Bruegel in Brussels and a visiting fellow at the Peterson Institute for International Economics, said in a recent assessment. “But such a move would violate the promise of European leaders to ensure the integrity of the euro zone no matter what and potentially set off a chain reaction, including possible bank runs in other euro zone member states, starting with the most fragile ones, such as Slovenia and, of course, Greece.”

Sources:

^http://www.rawstory.com/rs/2013/03/23/1000-bank-workers-march-on-cyprus-presidential-palace-to-protest-bank-restructuring/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheRawStory+%28The+Raw+Story%29

^http://www.nytimes.com/2013/03/24/business/global/cyprus-makes-fitful-progress-on-bank-bailout-deal.html?_r=0

^http://www.reuters.com/article/2013/03/23/us-cyprus-parliament-idUSBRE92G03I20130323

*****

Wednesday, March 20, 2013

Sunday, March 17, 2013

Saturday, March 9, 2013

Resource Curse: Why the Economic Boom That Fracking Promises Will Be a Bust For Most People (Hard Times, USA)

The following article is part of AlterNet"s series on poverty, Hard Times USA. This article was published in partnership with GlobalPossibilities.org.

Drillers hit the country’s first oil jackpot in Pennsylvania in 1859. Towns like Titusville and Pithole grew from a few hundred to more than 10,000 nearly overnight. But with the boom, inevitably came the bust. And it’s a history that may repeat itself in the same region soon.

Eastern states like Pennsylvania, New York, Ohio, and West Virginia sit atop the Marcellus Shale. High-volume horizontal hydraulic fracturing, often referred to as “fracking,” has put a bull’s-eye on the region by companies interested in drilling for gas tucked deep into the shale formations.

There’s been controversy over how much havoc fracking will wreak on the environment, with reports of air pollution, water contamination and other abuses from many living near drilling sites. Investigations continue to assess the impacts on human health and the environment.

But what has received less scrutiny are the economic promises made by gas companies and parroted in the media. The question is often posed whether the environmental risks outweigh the economic gains, but the “gains” themselves are far from a given. A report out of Cornell University titled, “A Comprehensive Economic Impact Analysis of Natural Gas Extraction in the Marcellus Shale,” by Susan Christopherson and Ned Rightor found, “The assertion that shale gas drilling will have positive consequences for both New York and Pennsylvania"s economies is based on limited evidence.”

When it comes to long-term economic development, there’s ample evidence to suggest that counties where drilling occurs will be in worse shape down the road, and that even during the drilling and producing phases, there will be a few winners and likely a whole lot of losers, especially among lower-income individuals. Furthermore, the areas targeted for drilling are often the ones already struggling economically, which means less wealthy individuals and communities may become further impoverished.

Christopherson, a professor in Cornell University’s Department of City and Regional Planning, has been studying the economic impacts of fracking in the Marcellus for years. “If those places were rich we wouldn"t be asking these questions because they wouldn"t want it,” she said.

Collateral Damage

A fracking moratorium remains in place in New York, although it could be lifted at any time. If it is, there are concerns that some of the state’s economically hardest hit areas will take the brunt of drilling. The New York Times reported that, “Gov. Andrew M. Cuomo’s administration is pursuing a plan to limit the controversial drilling method known as hydraulic fracturing to portions of several struggling New York counties along the border with Pennsylvania.”

The economics of extractive industries like gas drilling are pretty simple. As Philip Bump writes for Grist about Cuomo’s plan:

The areas that will be opened to fracking are those areas over the Marcellus shale formation. That makes sense. But unfortunately, they’re also areas of the state with some of the highest rates of poverty.

But one of the challenges of the fossil fuel economy is that its facilities, refineries, and extraction points are dirty, messy, and rife with pollution. Such things don’t go in the wealthier parts of town — or, often, the wealthier parts of a state.

For residents who are economically struggling, the offer of money for a gas lease can be too good to ignore – some may not realize the risks, while others are willing to incur them because they lack other options.

But if something does go wrong, many feel that they have little recourse because of their economic position. “If they end up with pollution on their own land, they don’t want to talk about it because then they are afraid the gas drillers will go away,” said Alison Rose Levy, a journalist who has been covering fracking in the Marcellus Shale since 2009. “They are in such financial duress that they will sacrifice the water quality on their land, and deny that pollution has occurred even to the point of making themselves or their family members ill because they are afraid of the companies — they are afraid the company will withdraw the opportunity for some kind of financial benefit.”

Christina and Wayne Woods, residents of Doddridge County, West Virginia have found that many people in their community are unwilling to speak up because they depend on the oil and gas industry for employment. They have neighbors living with water contamination but, “They don’t want to say anything because it’s part of the culture of intimidation by other members of the community,” said Wayne.

The more economically strapped communities are, the more likely that oil and gas companies will find little resistance.

Resource Curse

Pennsylvania has a long history of resource extraction, and so does West Virginia, an epicenter of coal mining. The West Virginia Center on Budget and Policy took a look at how the state has fared in a report called, “Boom and Busts: The Impact of West Virginia’s Energy Economy.”

Report co-authors Sean O’Leary and Ted Boettner assessed whether or not development in the Marcellus Shale underlying the state will be an economic blessing or a curse. “Although coal and natural gas contribute millions of dollars in revenue to the state"s budget, it also appears that communities in West Virginia that historically have relied heavily on natural resource extractive industries have underperformed economically in the long term compared to the state as a whole,” they write.

While energy development boomed in the ‘70s, after it went bust in the ‘80s mining counties suffered in the short- and the long-term. They explain:

They did worse than the state average on a range of factors, such as earnings and personal income growth, population growth, and employment. Today, these counties have higher poverty rates, lower median incomes, and worse health outcomes than the state average. Despite the rebounds in the energy sector in the 2000s, mining counties continue to struggle in comparison with the rest of West Virginia.

Although communities can rely on energy development for economic growth in the short-term, the boom is unsustainable. If trends hold, the boom ultimately leads to a bust, followed by decades of underperformance.

The same could hold true for the fracking boom as research thus far in Pennsylvania suggests.

A report by the Keystone Center foundthat claims of job creation were hyped. “The Marcellus Shale is making a small positive contribution to recent job growth in Pennsylvania,” they found. “The size of that contribution, however, has been substantially inflated based on a basic misunderstanding of the difference between ‘new hires’ and job creation. The modest contribution of the Marcellus Shale to job growth must also be balanced against the impact of drilling on other industries, such as tourism and the Pennsylvania hardwoods industry.”

Inaccurate job creation numbers aren’t the only problem – there is also an issue of how many jobs may be lost. Fracking of this kind, Christopherson says, is incompatible with tourism and with agriculture because fracking has a heavy industrial footprint on the landscape: “You have not just the well pad, which are big things, but you have 1,000 truck trips per well multiplied by the number of wells, you have compressor plants, you have the pipelines, you have water extraction sites, you have chemicals and gravel that have to be brought in. In the Eastern part of the US you also have to bring in people — you have man camps. It drives out other kinds of industry.”

One industry that may be affected is agriculture. A study by Penn State Extension looked at counties with at least 10,000 dairy cows. In those counties that had at 150 wells or more in the Marcellus Shale, there was an 18.5 percent decrease in milk production, while counties without Marcellus wells saw a slight increase in production.

And there are other implications. “Dairy farmers in Northern Pennsylvania and the Southern Tier of New York, who are already in a marginal economic situation, are being further squeezed because of rising costs for transporting their milk to the dairies,” Christopherson and Rightor write. “These businesses may go under during the drilling phase, leaving the region with fewer businesses outside of gas drilling, and thus a less diverse and more volatile economy.”

All this industrialization impacts areas that may not be getting drilling revenue, also. As Christopherson and Rightor report, “These elements of the industrial landscape will be located where geologic or logistical factors dictate, but not necessarily in the jurisdictions where drilling is currently taking place or production (and therefore tax revenue) is being generated.”

Communities may end up with air, water and noise pollution — and no economic payback. And it doesn’t just drive out industry, it drives out people who live there, especially those at the bottom of the economic ladder.

If you"re a low-income person, says Christopherson, “you"re in deep trouble” because the cost of living goes up. “In some places in Pennsylvania a gallon of milk costs $ 7,” she said. “Costs for housing will go skyrocketing because they can rent to drillers. Lower-income people generally get pushed out of their lower-cost housing and they have to leave the area. The economics term for it is "crowding out" — the process of intensive natural resource development drives out, crowds out other industries by raising the costs. Companies don"t want to move into that area because the labor costs are too high, there is a high cost of living.”

Fracking’s massive industrial footprint means that there are far-reaching consequences for communities, not just at drilling sites. The 37 families that lived at the Riverdale Mobile Home Village in north-central Pennsylvania found out firsthand what “crowding out” is all about.

The park, sitting aside the Susquehanna River suddenly became a hot commodity when gas companies came to town. The families in the park, many of whom were elderly or on fixed incomes, found out they had two months until the land they lived on was being sold. The buyer, writes Walter Brasch of Counterpunch, was Aqua PRV, part of water company Aqua America. “Aqua had received permission from the Susquehanna River Basin Commission (SRBC) to withdraw three million gallons of water a day from the Susquehanna; the 37 families of the mobile home village would just be in the way,” Brasch explains. “The company intends to build a pump station and create a pipe system to provide water to natural gas companies that use hydraulic fracturing.”

While residents of the park owned their trailers, picking up and moving to another location was no easy task. The cost of moving a trailer can range from $ 6,000 to $ 11,000 and that’s if you can move the trailer at all. Many of the Riverdale residents had older trailers with tin roofs or siding that couldn’t be moved. And that’s only one part of the problem; the other part is that there was nowhere for them to go.

Brasch writes:

Because the natural gas companies are bringing in thousands of employees to frack the land, there is a shortage of apartments, most with inflated prices to take advantage of the well-paid roustabouts, drivers, and technicians who moved into the area, and spend their money on local businesses eager to improve their own profits. During the past two years, rents have doubled and tripled. …The current mobile home owners paid $ 200 a month for their lot.

Not only are there few lots available and apartments are too expensive, but most residents don’t qualify for a house mortgage; and there are waiting lists for senior citizen and low-income housing.

The story is the same across the Marcellus region where drilling has taken place. “The natural gas boom has made affordable housing as obsolete as the anthracite coal that once drove the region’s energy economy,” concludes Brasch.

Ripple Effect

Individuals who sign big leases and some businesses, like hotels, bars and retail shops, along with drilling-related companies (trucks, waste disposal, etc. ), will inevitably have short-term gains, but Christopherson cautions, “The rising tide is not likely to lift all boats: there will be losing communities, and individuals who are displaced or left behind. Moreover, the experience of many economies based on extractive industries warns us that short-term gains frequently fail to translate into lasting, community-wide economic development.”

In Pennsylvania, research has found that many of the jobs go to skilled out-of-state workers. “Drilling crews usually arrive from places like Tulsa,” said Christopherson. “They fly in for three weeks, drill and fly home.”

Community members lose out in other ways, too. One of the biggest impacts, and one of the most costly to taxpayers, is truck traffic that has caused accidents and damaged roads. In the report, “The Economic Consequences of Marcellus Shale Gas Extraction: Key Issues,” authored by Christopherson for Cornell University Department of City and Regional Planning, she found that communities are getting shortchanged.

After severe damage to roads, Pennsylvania transportation districts had to post weight limit signs on thousands of miles of roads since fracking began. She writes:

Yet bond security costs for overweight truck travel on a posted road there – the financial incentive for a company to repair road damage — are limited to a maximum of $ 6,000 per mile for unpaved roads and $ 12,500 per mile for paved roads. This is adequate to cover only 10- 20% of the damage; road reconstruction can easily exceed $ 100,000 per mile. Additional public costs for protecting roads — pre-bonding surveys, road condition surveys, new data collection systems, and posting roads — are also significant.

In the Northern Tier of Pennsylvania, she found that trucks were carrying weight over the legal limit. More than 5,800 roadside inspections were performed on trucks working for the drilling industry, and “42 percent of those resulted in pulling either the driver or vehicle out of service,” she reported. The cost to the state for enforcement has reached over $ 550,000.

Communities also face increased pressure on schools, police, and healthcare services with the influx of workers. Hospitals have complained of rising debt because of the large number of uninsured workers they have started caring for since drilling began.

Because of political maneuvering, fracking is exempt from major national environmental laws like the Clean Water Act and the Safe Drinking Water Act. But even state regulations are not adequately enforced; some states and counties lack the political will and other simply lack the resources, which has led some companies to take advantage, to the detriment of residents.

In Sun Valley, West Virginia it is believed oil and gas companies (or a company) are to blame for millions of gallons of water stolen from fire hydrants – a tab ratepayers may be forced to pick up. Tankers are able to fill up thousands of gallons in less than five minutes, so the culprits haven’t been apprehended.

In Ohio, a company was recently caught dumping 20,000 gallons of toxic fracking wastewater into a local river. In 2011, another company was caught dumping millions of gallons of fracking wastewater into rivers, streams and sewers, with economic and environmental consequences for the communities impacted. The owner got a slap on the wrist.

The longer Marcellus drilling goes on, the more stories communities are collecting about the various impacts. All of these should be taken into consideration when calculating what an area stands to gain or lose from fracking.

“When the economic waters recede, the flotsam left behind can look more like the aftermath of a flood than of a rising tide,” wrote Christopherson.

Wed, 03/06/2013 – 11:00

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