whipsaws


Wall St rebounds as Europe crashes
3.13.03   BBC

"There's one word for it - carnage. It's horrible," said GNI London brokerage's Richard Wright. "Nobody has any confidence. Nobody wants to buy anything. And if they do buy anything they're wrong within about 10 minutes. It's fairly gloomy."
Traders blamed falls in Europe on poor corporate news, high oil prices, and the ever-present fears of war against Iraq. Political moves Wednesday heightened risk of a lone US campaign against Iraq. "It increasingly seems that the US is going to go it alone, which is the least desirable outcome," said independent brokerage E*trade global strategist Rupert Thompson.

Report that US crude stocks unexpectedly slumped prompted a rise in NY oil prices. "People felt relatively comfortable with the idea that the oil price was up, but was coming straight back down again," Mr Thompson said. "But now we know that it isn't going to come down quickly and that will be the basis for more economic weakness."
Poor corporate news worsened sentiment, with UK property firm Canary Wharf reporting sharply lower profits, and a weak letting market. Canary Wharf shares closed down 22%. In Paris, Alstom shares' price halved after the engineering group announced sale of a key business and departure of its chief executive.
In Italy, Telecom Italia shares plunged by 11% as investors derided plans to merge with Olivetti. Analysts at Dresdner Kleinwort Wasserstein said the deal's terms were "grossly unfair" to minority shareholders.

Germany's Dax index for much of Wednesday was below the 2,200 mark which Merrill Lynch analysts believe marks the current bear market as worse than that of the 1930s' Great Depression. "70% drop in equity prices since 3.7.00 now threatens to take historic proportion," Merrill Lynch said in a recent report.
Shares in insurers were in the firing line, as investors worried over solvency in the face of declining share prices. Munich Re stock stood 8.6% down in afternoon trade while, in London, Royal & Sun Alliance shares closed 9.3% lower, and Friends Provident shares plunged 11.4%.

Many analysts urged calm amid sell-off with Christows Stockbrokersdir. David Franklin forecasting imminent revival in share prices. "This represents a final sell-off in this stage of the bear market, panic & capitulation in the valley of death," Mr Franklin said. "The low point, and a starting level for a substantial rally is not far away."

Vienna, Austria   A surge in world oil output last month has left producer countries with too little spare capacity to fully offset a wartime halt in supplies from Iraq, the International Energy Agency warned. Output increased 2.5% worldwide in February and oil inventories tightened in major importing nations, the agency said Wednesday. Fears of a U.S.-led attack on Iraq propelled prices to their highest levels since the 1991 Gulf War International oil markets are "running on empty" as war clouds gather again in the Persian Gulf, the agency said in its monthly oil market report.
"Further supply disruption would tax a system operating at close to capacity," the report said.

The only reliable cushion for consumers may be the 4 billion barrels in strategic stocks of crude that IEA members have amassed for use in an emergency, it added. Tuesday Organization of Petroleum Exporting Countries decided to leave its oil production quotas unchanged at 24.5 million barrels a day. OPEC, which pumps about a third of the world's crude, made clear that it would boost its output to try to cover any shortfall arising from a war.
IEA is the energy watchdog of the Organization for Economic Cooperation and Development, a group of the world's wealthiest oil-importing countries. While highlighting many causes for concern in oil markets, the IEA expects that the end of winter, peak season for heating oil sales, will reduce demand for crude by about 1.6 million barrels a day. Such a decrease would in itself offset a loss of Iraq's current exports under the U.N. oil-for-food program, the report said.

IEA acknowledged efforts by OPEC & independent producers to put additional crude on the market. World production rose Feb. 2003 by 1.96 million barrels a day to 79.41 million barrels, and OPEC contributed more than three-fourths of the increase, the agency said. OPEC member Venezuela boosted its daily production by 850,000 barrels as its oil industry continued to recover from a crippling strike. Saudi Arabia's output grew by 330,000 barrels a day, and of OPEC's 11 members, only Iraq & Indonesia failed to pump at higher levels last month, the report said.
"If the IEA's numbers for OPEC production in February are correct, there's a lot of oil on the water that should be hitting inventories in a few weeks. That's the good news for consumers," said Deutsche Bank oil price strategist Adam Sieminski in London. Sieminski agreed that OPEC's limited amount of spare capacity could be a problem if markets suffer a serious supply disruption. Most producers are pumping all they can, and only Saudi Arabia, with world's biggest oil reserves, has significant room to pump more.

OPEC claims to have 2 million to 4 million barrels in additional production capacity. IEA argued that OPEC's "effective spare capacity", additional crude it could produce on short notice, was much smaller. The agency said OPEC's effective spare capacity fell last month to 1.72 million barrels a day from 2.37 million barrels in January, as the cartel produced more oil to make up for the outage from Venezuela. With OPEC increasing production to cash in on current high prices, this extra capacity has probably diminished in March to fewer than 1 million barrels a day, the report said.
It warned that OPEC would therefore be unable to quickly cover a war-induced shortfall from Iraq, which produced 2.49 million barrels a day in February. If U.S.-led forces attacked Iraq during the second half of March, the IEA suggested that it would be May before OPEC could offset the shortfall.

NYC   Intensifying its claim that MCI compromised national security, AT&T Corp. said Wed. it had new evidence the carrier improperly routed calls placed by the U.S. military through Canada. Meanwhile MCI hailed a bankruptcy court's approval of its record $750 million settlement with federal regulators. Judge Arthur Gonzalez's decision Wednesday was the last of 2 required court approvals for the settlement.
In its latest filing, AT&T told Gonzalez calls diverted by MCI incl some placed by Defense Dept, Army and Navy. AT&T alleged improper routing was occurring weekly, and sometimes daily.
MCI insisted it has not placed sensitive govt calls at risk. "The truth is secure govt traffic travels over MCI's network via a dedicated connection & encryption," MCI spokesman Peter Lucht said. "National security has not been compromised."

Telecommunications analysts have said simply diverting calls to Canada would not necessarily have made them more vulnerable to eavesdropping. The dispute began last week when AT&T said it had evidence that calls from the State Dept and other govt agencies had been routed through Canada. AT&T & other long-distance competitors have been ferociously fighting efforts by MCI, the former WorldCom Inc., to emerge from the largest bankruptcy in U.S. history.

While it has promised to investigate any new information, MCI has repeatedly characterized the new charges by AT&T as no more than a competitive ploy designed to derail the bankruptcy process. Stasia Kelly, named this week as MCI's new general counsel, hailed the judge's ruling on the SEC settlement as a milestone and said the co. was looking forward to finishing its bankruptcy case.
"It represents additional validation of all the positive steps the company has taken over the past year to both put its house in order and establish itself as a leader in good corporate governance," she said. A federal district court judge last month approved the settlement which includes the largest penalty the SEC has ever reaped from a single public co.

Besides the security issue, AT&T contends govt might not have done business with MCI if it knew the carrier was diverting traffic to Canada. Last week, federal govt suspended all new contracts with the co., calling MCI's ethics & internal controls inadequate.
Meanwhile, federal prosecutors are looking into accusations by AT&T, other rival carriers and former MCI executives that the company defrauded phone companies of hundreds of millions of dollars. AT&T claims MCI has used third-party carriers to send calls to Canada, calls sent back into U.S. on AT&T lines, forcing AT&T eventually to pay the local fees where the calls wound up.
MCI has admitted using third-party carriers in an attempt to curb costs, but says the practice is widespread in the telecommunications industry and perfectly legal.

As part of its filing with the bankruptcy court, AT&T submitted a list of sample calls it said had been routed through Canada. It claimed AT&T wound up paying the access fees because of the MCI scheme. The list included 12 calls placed by the Defense Dept, most of them in July and as recently as 7.28.03. AT&T also said MCI had sent 10 calls from the office of Rep. Ron Kind D-WI through Canada.
Brought down by an $11 billion accounting scandal, WorldCom is doing business under the brand name of its MCI long-distance division in a bid to restore its image.

WorldCom Inc. chief exec. Michael Capellas was told by SBC Communications Inc. 3 months ago that his co. was illegally avoiding millions of dollars in access charges, letters exchanged between the companies show. SBC exec. John Atterbury wrote to Capellas 4.15.03 & 6.12.03, informing him WorldCom, second-largest long- distance provider, was rerouting calls to avoid paying tariffs to use SBC's local-phone network. WorldCom atty James Lewis wrote back disputing the claims, according to copies of the letters obtained by Bloomberg News.

The letters show Capellas, who pledged to clean up the co., may have known of wrongdoing before U.S. Justice Dept began probe of co. call-routing practices. They may bolster efforts of WorldCom's competitors to derail its plan to emerge from the largest U.S. bankruptcy and add pressure to the U.S. govt to drop the co. as a supplier. "WorldCom is trying to rebuild trust, and from an ethics perspective this is not necessarily the best decision making," said DePaul Univ. business ethics prof. Laura Hartman in Chicago.
U.S. Atty NY office Friday subpoenaed documents from Ashburn VA based WorldCom as part of probe into tariff evasion. Capellas pledged to undo a culture that allowed $11 billion in profits to be overstated. Capellas said in a statement yesterday that the co. has begun its own internal analysis. "We have a zero-tolerance policy and if any wrongdoing is discovered you can be certain that we will take appropriate action swiftly," Capellas said.

"Michael has a solid track record of doing the right thing and time will prove that he continues to do so," said WorldCom spokesman Brad Burns. He said letters to Capellas were immediately forwarded to co. legal dept. Investigators are focusing on whether WorldCom, changing its name to MCI, avoided paying hundreds of millions of dollars since 1994 by disguising long-distance calls as local calls. Largest long-distance co. AT&T today filed papers in U.S. bankruptcy court alleging WorldCom fraudulently diverted calls to Canada to avoid access charges that were instead paid by AT&T.

Bedminster NJ based AT&T said it will file fraud & racketeering charges against WorldCom. Capellas, who took the position Dec. 2003, planned to steer WorldCom out of bankruptcy by Oct. 2003. 8.5.03 the co. seeks approval from NY bankruptcy court for reorganization plan after reaching $750 million SEC fraud settlement earlier this month.
"You want to be above not only any actual impropriety but any appearance of impropriety," Hartman said. "It doesn't look pretty." #2 local-phone co. San Antonio TX based SBC, AT&T and Verizon Communications Inc., which compete against WorldCom in local &Amp; long-distance service, said the company's assets should be liquidated. Under WorldCom's plan, the co. would exit bankruptcy with about $5 billion of debt, down from $41 billion before it filed for Chapt. 11 a year ago.

Verizon earlier today wrote to General Services Admin. Stephen Perry, urging him to suspend WorldCom's $1 billion of contracts with the govt. Calls made by the U.S. govt, WorldCom's biggest customer, were also routed through AT&T's Canadian network, AT&T said. Perry is reviewing co. contracts.
"The govt will face demands for restitution for benefits received from now on as a result of MCI's fraudulent use of the networks of other phone companies," Verizon's general counsel William Barr wrote in the letter.

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Global finance heads ponder rich-poor gap
9.19.03   AP Dubai, United Arab Emirates   Global economic leaders will discuss rebuilding Iraq and cutting off terror funds at a weekend summit, and an official said Friday the World Bank will push to narrow the gap between rich & poor nations. G8 finance ministers & central bankers also were expected Saturday to discuss concerns about the value of China's currency, viewed by many as too low against the U.S. dollar as China's huge trade surplus continues to grow.

As the top finance leaders hold their first such meeting in an Arab country over the next several days, World Bank pres. James Wolfensohn will urge a stronger commitment to giving developing nations better opportunities to catch up with developed countries, a bank official said. One focus of the money summit will be on rebuilding Iraq after the U.S.-led war, although good estimates for the costs aren't yet available.
U.S. administrator of Iraq L. Paul Bremer was to arrive Saturday, along with 10 other officials & Iraqi ministers, to join the talks, a U.S. Embassy spokesman said in Dubai. World Trade Organization talks' failure a week ago in Cancun, Mexico, highlighted that developing nations are banding together and demanding better deals from the wealthy West in the globalized economy, the World Bank official said.

Wolfensohn will be lobbying for ways to reduce the imbalances, the official said on condition of anonymity. IMF & G8 finance ministers, incl Treasury Sec. John Snow, see the global economy poised for its best growth since the 2001 recession, although some scattered problems, incl fast-growing U.S. budget deficit, could hinder the advance, according to bank forecasts.
New growth will also be affected by the less-secure world that emerged after 9.11.01 and subsequent U.S.-led invasions of Afghanistan & Iraq, IMF chief economist Kenneth Rogoff said Thursday. He cautioned that "this rise in underlying geopolitical uncertainties" could rein in economic growth, albeit slightly, over the next 20 years. G8 ministers are expected to reiterate their commitment to choking off terror funding. A key way forward, bank officials said, will be creating more jobs in MidEast, where unemployment remains chronic in many countries.

G8 ministers were working on a statement that would pledge to "strengthen the dialogue with other major economic areas to promote a smooth adjustment of international imbalances based on market mechanisms," an apparent reference to the Chinese yuan, according to a draft seen by the AP.
Beijing has faced growing calls to let the yuan, also known as the renminbi, or "people's money", appreciate, which might alleviate the threats posed by China's burgeoning trade surplus. The Chinese leadership has thus far balked at any such commitments.

World Bank chief scolds rich nations
9.23.03   AP

Dubai, United Arab Emirates   The World Bank opened its annual meeting Tuesday with a blistering attack on rich countries for spending hundreds of billions more on their militaries & their farmers than they do on helping the poor. "Our planet is not balanced," World Bank President James Wolfensohn told delegates from 184 countries. "Too few control too much, and too many have too little to hope for. Too much turmoil, too many wars. Too much suffering."
The failure of global trade talks this month in the Mexican resort of Cancun highlights the deep divide that must be overcome to create a stable future, Wolfensohn said in an opening address to the joint meeting of his bank & the IMF.

He criticized rich countries for providing just $56 billion a year in development assistance to poor countries, compared with more than $300 billion they spend on agricultural subsidies and $600 billion spent on defense. Nations have committed an additional $16 billion in aid by 2006, but Wolfensohn said poor nations could easily use twice as much. Rich nations balked at greater cuts in farm subsidies in the Cancun meeting and poor nations, who say their farmers suffer as a result, refused to proceed.
U.S. Treasury Sec Snow & other top finance leaders have been lobbying for a quick resumption of the World Trade Organization negotiations, arguing breaking down barriers to global commerce would benefit all. But Wolfensohn said wealthy nations need to do what they say. "It is inconsistent to preach the benefits of free trade then maintain the highest subsidies & barriers for precisely those goods in which poor countries have a comparative advantage," he said.

Finance leaders are worried about the massive American budget deficit, approaching a record $500 billion, but Snow called the spending "understandable" and pledged Tuesday that Washington will bring it down through a combination of economic growth and responsible spending. "It came about because of a recession and efforts to deal with a recession" Snow told delegates. Snow called it "Economics 101" that countries run a deficit to tackle a recession but said U.S. plans to slash its red ink in half over the next 5 years, bringing it below 2% of GDP.
IMF Managing Director Horst Koehler said Tuesday the increased U.S. spending had provided a stimulus to the global economy but called on Washington "to establish a credible framework for a return to a balanced fiscal position." Refusing to lay blame for global troubles entirely on the wealthy West, Wolfensohn said poor countries spend $200 billion on defense, more than they invest in education, which he called "another major imbalance."

The money summit, which wraps up here Wednesday, is the first such event held in an Arab country, and many delegates are calling that a good signal for the troubled region. The host country, United Arab Emirates, opened Tuesday's session with a call on intl community to help rebuild Iraq and to help bring peace in the Palestinian- Israeli conflict.
"The Arab world is a region of tremendous richness, diversity and potential," said Finance Minister Sheik Hamdan bin Rashid Al Maktoum. "This part of the world will not be able to realize its full economic potential until a just & permanent solution to the regional conflict is found and the intl community makes a serious effort," Sheik Hamdan said.
He cited "rays of hope" in Iraq, which is hoping to recover from decades of economic mismanagement under Saddam Hussein and U.N. sanctions that held back its crucial oil industry. Iraq has just announced a plan to establish a market-based economy with access to foreign investors in all segments but oil.

Poverty rate rises for second year in row
9.26.03   Genaro C. Armas AP

Wash.D.C.   Poverty rose and income levels declined in 2002 for the second straight year as the nation's economy continued struggling after the first recession in a decade, the Census Bureau reported Friday. The poverty rate was 12.1% last year, up from 11.7% in 2001. Nearly 34.6 million people lived in poverty, about 1.7 million more than the previous year. Median household income declined 1.1% between 2001 & 2002 to $42,409, after accounting for inflation. That means half of all households earned more than that amount, and half earned less.

The poverty rate rose again after having fallen for nearly a decade to 11.3% in 2000, its lowest level in more than 25 years. Income levels increased through most of the 1990s, then were flat in 2000 and fell the last 2 years. National Urban League research & public policy dir. Bill Spriggs said the numbers were frightening. "This may become one of the worst downturns in income in 30 years," he said. "We see that people are digging themselves deeper into poverty because the economy is not generating jobs."
Experts predicted rising unemployment last year and that still shaky economy would increase poverty and lower income for most people, even though the recession officially ended Nov. 2001. Bureau statistician Daniel Weinberg said the changes between 2001 & 2002 were consistent with changes following past recessions.
"The highest point in the cycle of poverty and the lowest point in income tend to come in the year after a recession," he said at a news conference at bureau headquarters in Suitland MD.

At the White House, the numbers were fodder for President Bush's aides to call for enactment of virtually his entire domestic & economic agenda, from increased involvement in federal programs by religious groups to trade policy and legislation limiting personal injury lawsuits. "The economy is moving in the right direction," Bush spokesman Scott McClellan said. "But the president is not satisfied. It's important to create the conditions for job growth and that's why the president continues to say that there's more that we can do."
In 2002, 12.1 million children were in poverty, or 16.7% of all kids, up from 11.7 million, or 16.3%, the previous year. The Census Bureau said the increase in the child poverty rate was not statistically significant. The estimates, calculated annually by the Census Bureau, came from a survey of 78,000 households taken in March. They are the government's official measure of income & poverty.

Comparing poverty rates & income for racial & ethnic groups was more difficult in 2002 because the Census Bureau for the first time allowed survey respondents to report if they were of more than one race. For instance, the poverty rate for blacks in 2002 ranged from 23.9% for those who identified themselves as being black and another race, to 24.1% for those who selected only black. Measured either way, the bureau considered that a significant increase from 2001, when 22.7% of blacks lived in poverty.

Poverty rates remained relatively unchanged for non-Hispanic whites, Asians and Hispanics, the bureau said. Median income fell for blacks & Hispanics, but was relatively unchanged for whites. Income was highest among whites & Asians. Incomes also declined significantly for foreign-born non-citizens, people living in metropolitan areas and for family households. By region, the Midwest experienced a significant decline, while all other regions were relatively unchanged.

The poverty threshold differs by the size & makeup of a household. For instance, a person under 65 living alone in 2002 was considered in poverty if income was $9,359 or less; for a household of 3 including one child, it was $14,480. A separate Census Bureau survey released earlier this month also showed more people living in poverty in 2002, along with a slight increase in median income. However, that survey did not ask as detailed a series of questions on people's financial status.
Even before the data was made public, House Democrats charged the Bush administration was trying to hide bad economic news by releasing the numbers on a Friday when people are paying more attention to the upcoming weekend. In previous years, the estimates were released on a Tuesday or Thursday.
"Sounds like they're trying to bury the numbers where people won't find them," said Rep. Carolyn Maloney D-NY "This is another clear example of political manipulation of data by the Bush administration to avoid the glare of public scrutiny about the country's worsening economy."

Census Bureau spokesman Larry Neal said the time change wasn't politically motivated. It was originally scheduled to be released this past Tuesday, he said, but was moved to Friday because statisticians asked for more time to process the numbers. "These are the official estimates of income & poverty in America and every debate on income & poverty for the next year will rehash them," Neal said. "The notion that we should, could or would suppress these numbers doesn't pass the laugh test."

U.S. poverty likely rose in 2003, income gap wider   8.19.04   Reuters

Wash.D.C.   More Americans likely slid into poverty in 2003 and the gap between the rich & poor widened, economists said on Thursday in a report that could fuel Democrat criticism of President Bush. While the nation's official poverty rate will not be released until next week, the left-leaning Center for Economic & Policy Research estimated 700,000 Americans were added to the ranks of the poor last year, based on early numbers.
That takes the number of poor in U.S. to about 36.4 million, from 35.7 million in 2002. The poverty line is set at an annual income of $9,573 or less for an individual, or $18,660 for a family of four with two children, according to the Census Bureau.

Using Census Bureau data for the first half of 2003, economist Heather Boushey said the%age of the U.S. population living in poverty rose to 12.8%, up from 12.7% in the first half of 2002. Children were even more likely to be poor, the study showed, with poverty rising to 18.8% of children in 2003 from 18.6% in 2002.
The poverty rate tends to track the overall economy, rising during a recession and falling in boom times. It has increased each year since 2000, sparking criticism from Democrats that Bush's economic policies are skewed to benefit the rich. But Bush's economic team has argued he inherited the 2001 recession from former President Bill Clinton, a Democrat, and that three rounds of tax cuts have since spurred the economy's recovery and kick-started job growth.

The official poverty rate is set for release on 8.26.04. Boushey said it will likely be slightly different than her calculation because it will include a full 12 months of data and is taken from a separate but similar Census survey. In past years, there has been only a slight gap between 6 months of one survey and a full year of the second. The study also showed the median household income rose 3.6% to $48,216 in the first half of 2003 from the same period in 2002, though when inflation is taken into account, incomes rose a smaller 1.1%.
Together with the rising poverty rate, the increase in the median household income suggests the gap between rich & poor is widening, Boushey said. "Families above the average are seeing an increase (in income), but the families at the bottom are seeing a drop," she told journalists. The report also found the number of Americans with health care coverage likely fell in 2003 for the third year in a row, as unemployment grew and employers cut back on health benefits.

The rich are getting richer while the poor remain poor. If you doubt it, ponder these numbers from the U.S., a country widely considered meritocratic, where talent & hard work are thought to be enough to propel anyone through the ranks of the rich.
In 1979, top 1 per cent of the US population earned, on average, 33.1 times as much as the lowest 20 per cent. In 2000, this multiplier had grown to 88.5.
If inequality is growing in the US, what does this mean for other countries?

Almost certainly more of the same, if you believe physicists who are using new models based on simple physical laws to understand distribution of wealth. Their studies indicate that inequality in market economies may be very hard to get rid of.
Economists will join physicists to discuss these issues next week in Kolkata, India, at the first ever conference on the "econophysics" of wealth distribution.
"We are interested in understanding whether there is some kind of social injustice behind this skewed distribution," says Sudhakar Yarlagadda of the Saha Institute of Nuclear Physics (SINP) in Kolkata.

It is well known that wealth is shared out unfairly.
"People on the whole have normally distributed attributes, talents and motivations, yet we finish up with wealth distributions that are much more unequal than that," says emeritus economics prof. Robin Marris at Birkbeck, University of London.
In 1897, a Paris-born engineer named Vilfredo Pareto showed that the distribution of wealth in Europe followed a simple power-law pattern, which essentially meant that the extremely rich hogged most of a nation's wealth (8.19.00 New Scientist p 22).

  … number of people having wealth W is proportional to 1/W^E. Pareto found that exponent ^E was always between 2 & 3 for every European country he looked at, from agrarian Russia to industrial England.
Up-to-date statistics show the same thing.

They found that while the income distribution among the super-wealthy, about 3 per cent of the population, does follow Pareto's law, incomes for the remaining 97 per cent fit a different curve, one that also describes the spread of energies of atoms in a gas

The analogy also holds because money is like energy, in that it has to be conserved.
"It's like a fluid that flows in interactions, it's not created or destroyed, only redistributed," says Yakovenko. Yakovenko also found that the total income of those in the poorer part of the distribution did not change significantly with time after accounting for inflation. But incomes for those in the Pareto curve shot up nearly five times from 1983 to 2000, before declining with the US stock market crash of 2001.

This, along with research data from other countries, suggests that there are two economic classes. In one, the rich grow richer while in the other the poor stay poor.
Yakovenko explains this by going back to the analogy of atoms in a gas. The atoms assume an exponential distribution of energy when they are in thermal equilibrium, and pushing the gas away from this state takes a lot of energy and it could prove similarly difficult to shift an economy to a different state.
Randomness in the model does, however, mean that individuals can jump from one class to another.

"It suggests that any kind of policy will be very inefficient," says Yakovenko. It would be very difficult to impose a policy to redistribute wealth "short of getting Stalin", says Yakovenko, who will talk in Kolkata next week.
A more sophisticated model developed by Bikas Chakrabarti of the SINP and his colleagues paints a slightly less bleak picture for the poor. His team adjusted the gas model to allow people to save various proportions of their money.

This model predicts both the wealth classes that Yakovenko found. It also suggests that if you save more you are more likely to end up rich, although there are no guarantees.
Changing people's saving habits could be an effective way of making the wealth distribution fairer, rather than enforcing taxes, says Chakrabarti, who is one of the Kolkata conference organisers.

Macroeconomist Makoto Nirei at Utah State University in Logan, whose own work will be presented at the conference, is supportive of the physicists' work but he has reservations about how they model the exchange of money.
"The model seems to me not like an economic exchange process, but more like a burglar process. People randomly meet and one just beats up the other and takes their money."
Other economists warn it is too early to use such models to inform policies.
"The models are too abstract," says University of Kiel economist Thomas Lux in Germany.
But Santa Fe Institute physicist J. Doyne Farmer in New Mexico points out that these models have their place: "Many economic theories don't even come close to producing the wealth distribution we see, and if you can't produce that you're dead in the water."

Fewer keeping the nation afloat   The income tax bites a shrinking proportion of Americans. That means fewer workers have a stake in the system and its future. 4.15.07   Kathy M. Kristof, Jonathan Peterson L.A. Times

Sue Carpenter pays about $6,100 a year in federal income taxes. But she might owe just half that amount if she had a mortgage, and nothing at all if she had minor children. The fact that Carpenter doesn't have these deductions makes her part of a dwindling group: U.S. taxpayers. An estimated 50 million Americans won't pay any federal income tax this year. That's nearly a third of all adults, up from 18% in 1980.

To many, the shrinking tax base is not a big deal. Most of the people who don't owe Uncle Sam are of modest means. They don't pay because Congress approved tax credits aimed at helping working families and sought to encourage homeownership by making mortgage interest deductible.
But then there are people like Carpenter. She's not rich, making about $58,000 a year working at the Dept of Motor Vehicles office in Commerce. She rents a small apartment in Los Angeles for $1,100 a month, so she doesn't have a mortgage she can use for a deduction.
"I don't think it's fair," said Carpenter, 61. "But we thrifty people don't get much sympathy."

Few would begrudge tax breaks for those who struggle to feed their children and keep a roof over their heads. But at the same time, some fear that the tax-free zone has grown too big and that too many working Americans no longer have a stake in the tax system or efforts to improve it.
"Many people would think if you are a citizen, you ought to have skin in the game, and we have more and more people with no skin in the game," said nonpartisan, conservative-leaning research group Tax Foundation pres. Scott Hodge. "From a social perspective, we ought to be concerned about that."

Still, no one expects a big change in the underlying trend, especially because tax breaks are one of the few things that Republicans and Democrats both embrace. Consider the earned income tax credit for low-income workers, which in some cases allows people to be paid more in "refunds" than they actually paid in taxes.
Republicans like it because it's a tax cut, not a spending program, and it rewards work. But Democrats like it too because the credit provides more than $30 billion in relief to low-income families. To be sure, it helps take millions of wage earners off the tax rolls. But a House Democrat was quick to point out that low-income Americans already shoulder a heavy load of taxes, payroll, sales, excise and others.

"Certainly, they're not keeping pace with people who are taking great advantage of the Bush tax cuts," said Rep. Xavier Becerra of Los Angeles, a member of the House Ways and Means Committee. Focusing on their light income tax payments, he said, gives "a skewed picture."
Indeed, wealthy Americans have benefited more than the poor from the tax cuts implemented under President Bush, said Tax Policy Center dir. Leonard E. Burman, Urban Institute sr fellow.

The very richest Americans, those in the top tenth of 1%, received tax cuts of more than 6% on average, he said. The bottom fifth of earners saw breaks of less than 1%.
"The benefits of the Bush tax cuts have been very tilted toward high-income people," Burman said.
Measures such as the earned income tax credit have been championed as a means of evening things out a bit. But the effect has been a dizzying array of credits and deductions that almost everyone agrees has made paying taxes numbingly complex.

In 2005, a White House advisory panel proposed an array of changes aimed largely at simplification, including scaling back the mortgage interest deduction that for generations had helped persuade renters to become homeowners.
The panel also called for eliminating deductions for state and local tax payments and restricting tax-free health insurance benefits for employees.
Predictably, the real estate industry, healthcare providers and dozens of other special interests rose up in protest. The proposals went nowhere.

"All the individuals and industries who had favored positions in the tax code screamed because they were going to lose all sorts of benefits," said former IRS commissioner Lawrence B. Gibbs who is now a partner at the Washington law firm of Miller & Chevalier.
Although major tax reform is no longer on the agenda, an emerging debate over the alternative minimum tax is intimately tied to the question of who pays taxes and how much.
The alternative tax was approved in 1969 to make sure that millionaires who exploited loopholes at least paid something. But for technical reasons, including the lack of provisions to adjust its formula for inflation, the alternative tax now has a much longer reach.

In the 2007 tax year, it could affect 23 million Americans, some earning as little as $50,000. That's up from about 4 million in 2006. House Democrats hope to shield taxpayers earning less than $200,000 from getting caught in the alternative-tax trap. But there would be a price. Under new budget rules, Congress would have to make up $1 trillion in lost revenue over the next 10 years to carry out such a fix to the alternative tax.
"They've had sort of a picnic in terms of tax cutting, and that picnic may be over soon," said liberal Economic Policy Institute economist Max B. Sawicky.

As one response, House Democrats are likely to scrutinize special tax breaks for business with an eye to weeding out "corporate welfare," Becerra said.
In addition, the Democratic majority has proposed a budget that may let some tax breaks expire when they come up for renewal in 2010, said House Budget Committee deputy chief of staff Chuck Fant. The Democrats are expected to maintain the child tax credit, deductions for state and local sales taxes and some others.

There is no shortage of provisions to examine. The list of credits, deductions and "income exclusions" stands at 146, up from 67 in 1974. The cost of these breaks have tripled over the period, from $240 billion to $730 billion after adjusting for inflation, a 2005 study by the Government Accountability Office showed.
Having a child, for example, once got you a "personal exemption" deduction, which reduces your taxable income by $3,300. That would save someone who paid 30% of their income in tax about $1,100. That same kid is worth far more today. In addition to the personal exemption, parents of young children get a "child credit" worth $1,000 in tax savings. If they send a child to day care so both parents can work, they get a credit to offset a portion of their baby-sitting costs too.

It gets better. If the parents can afford to set aside money to pay for their child's future college bills, they get to exclude the investment income as long as it's in a qualified plan. When that son or daughter goes off to college, the parents can choose one of three breaks, two tax credits and one deduction, to offset the tuition. Plus, there's a write-off for interest on student loans.

Homeowners have long been able to deduct their interest payments, regardless of need, and every decade or so the deal has been sweetened. In 1986, homeowners were allowed to deduct the cost of home equity loans of up to $100,000, no matter the purpose of the loan, even buying a car or taking a vacation.
In 1997, homeowners got the right to exclude up to $250,000 in gains on the sale of their residence. The deduction is for each owner, so a husband and wife who own a home together could exclude a combined $500,000 in gains.
This year, another break goes into effect. Homeowners will be able to write off the cost of private mortgage insurance.

Critics point out that deductions such as these don't necessarily go to the needy. But then, whoever said that was the intent?
"We have accepted the idea that our tax system is where we pay for welfare through the earned income tax credit," said former IRS commissioner Gibbs. "We pay for child care, for retirement and healthcare, education programs, homeownership, charitable contributions and investments through preferential rates on capital gains and dividends.
"We even collect from deadbeat dads through refund holdbacks," he said. "Nobody is really asking today whether that's fair. It's just the way it's being done."

Two Americans share Nobel prize for economics
Work by Elinor Ostrom and Oliver Williamson focused on how people and organizations make decisions and cooperate outside traditional markets.
10.13.09   Don Lee L.A. Times

Wash.DC   Two Americans on Monday won the Nobel Memorial Prize in Economic Sciences for their seminal work on how people and organizations make decisions and cooperate outside traditional markets, a growing area of research that scholars said was relevant to such pressing issues as climate change and the behavior of financial institutions.
Elinor Ostrom, a Los Angeles native who teaches at Indiana University in Bloomington IN, became the first woman to win the prize for economics since it was first awarded 40 years ago.

She will share the $1.4-million award with UC Berkeley prof. Oliver E. Williamson. Ostrom and Williamson were cited for their research beginning in the early 1970s that helped to expand economics beyond the conventional analysis of market prices. The Royal Swedish Academy of Sciences said the pair established economic governance as a field of study that had "greatly enhanced our understanding of non-market institutions."
Ostrom, who received a doctorate in political science from UCLA in 1965, demonstrated how common natural resources such as pastures, woods and lakes could be successfully managed by user associations and other arrangements outside of govt.

She "has challenged the conventional wisdom that common property is poorly managed and should be either regulated by central authorities or privatized," the Nobel economics committee said. The panel said Ostrom based her conclusion on case studies, including her own fieldwork that began with her doctoral dissertation that studied institutional entrepreneurship and saltwater intrusion into a groundwater basin under the Los Angeles area.
She has conducted laboratory experiments and made use of other case studies, including research on grasslands in Mongolia that showed how nomad-dominated territories were better preserved by group-based governance than neighboring lands in Russia and China under central rule.

Ostrom said Monday that she was "very surprised" to be awakened at 6:30 a.m. by the news. Before her, 62 men had received the economics prize.
"If you have lived through the era that I've lived through, getting into graduate school was a challenge," she said at a news conference at Indiana University. "You can't have received a PhD in 1965 and not be deeply aware. The advice to me when I applied to graduate school was, 'Well, you've got a professional job. Why would you try for a PhD? You can't possibly get a job doing anything but teaching in a city college.' "
Although Ostrom is a political scientist by training, her fieldwork and research have the earmarks of an anthropologist and a behavioral economist. She and her husband, Vincent Ostrom, founded Indiana University's Workshop in Political Theory and Policy Analysis. She is also a professor in the university's School of Public and Environmental Affairs.

In a phone interview, Ostrom said her research suggested that solutions and actions on problems such as global warming could be found at multiple levels. She said decisions by local governments, or even an individual community that built a bicycle path, could make a difference.
"The lesson is that no single level is the only level," said Ostrom, who graduated from Beverly Hills High School. Ostrom said she was familiar with Williamson's work and had attended meetings with him but that they had never written anything together.

Williamson, who was born in Superior WI and received a doctorate in economics from Carnegie Mellon University in 1963, has long been considered a leading researcher of economic institutions, particularly what's known as the boundaries of the firm.
The committee noted that his research offered insights into conflict resolutions at businesses and other organizations. Among his contributions, Williamson advanced the thinking into why firms decide to outsource instead of building the operation in-house. His work also helped to explain how firms are different from markets, and why businesses might seek a merger to drive efficiency, and not necessarily to acquire market power, a point that analysts said had influenced govt thinking on antitrust policies.

Scholars said Williamson looked at institutions and their activities from the perspective of transactions, which has been applied in the analysis of other social sciences including law and politics.
"Before Williamson, you had markets," said Pablo Spiller, a colleague at UC Berkeley. "After Williamson, you have transactions: how parts enter into transactions, how and why, and what are the hazards and risks parties are taking in them."

trust in the firm & commons University of Chicago economics prof. Roger Myerson, 2007 economics Nobel laureate, recalled how reading Williamson's book on economic organizations in 1991 before a visit to Moscow helped him to better understand the nature of organizations and the comparative systems of communism and capitalism.
He said Williamson's research, although not focused on financial institutions, was relevant to the economic question of the day: how to understand the organization of firms and regulation of their behavior so as to avert another financial crisis.
"The theory of the firm is going to be more essential in the future," Myerson said. He added that it was striking that the Nobel judges linked Ostrom's work with that of Williamson's, finding that both shed light on the nature of trust in economic activity and the effects of regulation.
"I think the Nobel prize committee . . . [is] laying out for the public a statement of what's important in economics," he said.

The gap between rich and poor in many U.S. states has broadened at a quickening pace since the last recession, which could make it difficult for low-income families to weather the current economic downturn, according to a report issued today. The result is that the average incomes of the top 5% of families are 12 times the average incomes of the bottom 20%.

Since the late 1990s, average incomes have declined 2.5% for families on the bottom fifth of the country's economic ladder, while incomes have increased 9.1% for families on the top fifth, said the report from the liberal-leaning Center on Budget and Policy Priorities and Economic Policy Institute.

Some have criticized income inequality studies. Writing for the conservative Cato Institute last year, Alan Reynolds said tax-law changes skew the numbers. For example, executives once took stock options that were taxed as capital gains but now take nonqualified stock options that are taxed as salaries. Bernstein said that if the report had considered capital gains, the disparities would have likely been greater, as capital gains generally affect higher-income people.
Even though the study did not include capital gains, Bernstein said the effects of booming wealth on Wall Street for most of this decade did contribute to the spread between incomes, showing up as higher salaries. Meanwhile, the middle class has remained virtually stagnant, with average incomes growing just 1.3% in nearly eight years, the report said.

The report drew from U.S. Census Bureau data collected from 1987 through 2006 and is one of the few to record income inequality on a state-by-state basis.
"The report's bottom line is that since the late 1980s, income gaps widened in 37 states and have not narrowed in any states", said report authors Jared Bernstein. "In fact, we've found that the trend toward growing inequality has accelerated during this decade."

The technology boom and economic expansion of the late 1990s put many lower-income families in better positions at the start of the 2001 economic downturn than they are in now, when many economists say a downturn has begun, Bernstein said.

Elizabeth McNichol, another author of the report, said wages grew before the 2001 recession but have not increased much during the past several years of recovery. In a conference call with reporters, she pointed to Connecticut, which has had the greatest increase in income inequality since the 1980s, according to the report.
In Connecticut, incomes of the wealthiest 20% are eight times those of the poorest 20%, the report said. New York has the greatest disparity, with incomes of the top 20% 8.7 times the bottom ones, followed by Alabama, where the top are 8.5 times the bottom.

Only recently has Connecticut begun recovering from the downturn of six years ago, according to Douglas Hall, the associate director of research for Connecticut Voices for Children, who participated in the call. By August 2007 the state had gained enough jobs to make up for those lost in the last recession, he said, but now it is losing them again.

Time for capitalism to pay its way
The biggest reforms to emerge from the current crisis will be global changes in the ways companies are held accountable for the huge, hidden costs now foisted on the public.
10.6.09   Jim Jubak MSN Money

Most of the time, the structure of our economy seems ruled by inertia. It takes a crisis to change anything significant. What do we have to show for the crisis that has bankrupted the next generation?
Bupkis is the common conclusion. A tweak of CEO compensation. A little gussying-up of bank balance sheets. Maybe, just maybe, some feeble protection against rapacious credit card lenders. Health care reform that is either "the path to socialism" or "useless without a public option," depending on your politics.

Compared with the bar set by the Great Depression, the Great Recession seems to have produced remarkably little change. Not so. We're now engaged in the most far-reaching effort to change the way that capitalism works since Otto von Bismarck invented the old-age pension, reforms that could reshape the economic playing field for generations to come not just in the United States, but globally.
You don't know that this great battle is going on because it involves the dirty secret of capitalism: "externalities". Nobody talks about externalities outside the pages of economics journals, but I'm here to blow the lid off and show you the importance of the changes that could still emerge from this crisis.

Standard definition of an externality:   An externality is a cost or benefit that affects society but is not included in the market price of a good or service. The cost or benefit accrues to a party external to the transaction between parties in the marketplace.
Example reported in the Financial Times. The village of Hengjiang in China is home to a manganese smelter that, according to the 1,800 people who live there, releases vast amounts of lead into the air and water. The villagers say their children are suffering from lead poisoning. The manganese factory sells its product to customers that may be thousands of miles away. The factory and those consumers bargain for the best price that depends on global conditions of supply and demand.
Hengjiang villagers aren't a party to any of that bargaining but are stuck with the cost of treating health problems caused by the factory.

Capitalist markets, incl China with many of the parts of one, are very good at keeping supply and demand in balance. Capitalism and the markets aren't very good at allocating costs when externalities are involved. There is, in fact, no market mechanism to take account of the cost of polluting the air and water in Hengjiang.
To contrary, the market rewards producers and consumers who turn as many costs as possible into externalities.

plutonomics

If you pick up a starving dog
  and make him prosperous,

    he will not bite you.

      This is the principal difference
        between a dog and a man.

Mark Twain   1835-1910

The superrich are different from you and me. It's not just that they have more money. It's that they spend more. Much, much, more. In fact, the superrich spend so much more of their mountains of money, according to a new line of thinking among academics, that they may provide a public service by smoothing out the little dents and valleys in the global economy.
As scads of Russians, Chinese, Indians and South Americans have joined the billionaires club due to the rise of emerging markets' industrial might, worldwide recessions have become much fewer in number and far slighter in severity than in past decades.

Fortunately, there are plenty more than that in Russia alone. The swift rise in the value of natural gas, sometimes called "blue gold", as well as nickel, aluminum and titanium, has helped create at least two dozen Russian billionaires and thousands more multimillionaires who are spreading their wealth around.
Wall St Journal reports that the new "Blingsheviks" are buying castles in Germany, Warhol prints in New York and polo ponies in Argentina. One in five homes in London's exclusive Mayfair district are now owned by a Russian, according to the Journal.

A leader in this category is Roman Abramovich, the 11th richest man in the world, who has three yachts that stretch 161 feet, 282 feet and 377 feet, respectively, and who has commissioned a fourth that will eclipse the world's largest Arab-owned yacht, at 525 feet plus.
Sotheby's sold $3.65 billion worth of fine art at auction last year, 30% more than in 2005, and Russian art is a fast-growing category.

China, meanwhile, is now home to 500,000 millionaires who are proud to show off their gold-plated toilets, Versace-designed bedrooms and driveways loaded with BMWs, Escalades and Ferraris.
In India, where the economy is growing at 8% per year, BusinessWeek reports that 83,000 people are millionaires, up 16% from two years ago. To help them spend their fortunes, Louis Vuitton, Hugo Boss, Valentino, Gucci and Fendi have opened stores in the major Indian cities.

Here in the United States, the share of total income going to the richest 1% of Americans rose to a record 17.4% in 2005. Meanwhile, the average worker's take-home pay, adjusted for inflation, has advanced just 0.3% since 2001 while the economy has swelled by 16%.
If you exclude the value of primary residences, the United States has 2 million people with a net worth of over $1 million, according to Merrill Lynch; including primary residences, the number is around 8 million.

In addition to big yachts and big homes, the superrich are naturally into big jets, big vacations, big jewels, big art and lots of fancy clothes. If you're looking for an investment angle and conclude that you should focus on things that these folks buy, you're on the right track.
Obvious plays are jewelry retailer Tiffany, leather goods maker Coach and auctioneer Sotheby's, and all are trading at all-time highs. They'll all probably continue to do well in this environment, so if you don't already own them, by all means add them to your portfolio on dips.

A less well-exploited way to play the plutonomy is through the rapid advance of the sale and leasing of jet aircraft. What's the point of being a billionaire unless you can zoom from your home in Monte Carlo to a meeting in Berlin without ever scuffing your Ferragamos in a public airport.
In London alone, the number of private jet journeys has reached 300,000 a year and is growing by 10% annually, according to a published report. The king of the skies in the 10-seat category is the Gulfstream 550, complete with sofa, two beds and interior panels made from mahogany. No plastic allowed.

That and numerous cousins are made by a division of General Dynamics, which is a great buy right now at $77. With prospects bright both for private and defense jets, and valuation reasonable, shares should ascend to $100 over the next 12 months.
A much riskier name in the business is Canada-based Bombardier, which makes the Global Express jet owned by director Steven Spielberg and steel magnate Lakshmi Mittal. The plane can fly between any two points in the world with only one stop, and zooms from New York to Tokyo without a break.

A more unusual play on billionaires, and in my opinion potentially the best, are three recently floated companies that own fleets of jets and lease them to fractional ownership service providers, airlines, public companies and cargo haulers. Aircastle, based in Connecticut, sports a $2.3 billion market capitalization, owns 65 planes and pays a 5.6% dividend yield.
Genesis Lease, based in Ireland, is in the process of acquiring 41 aircraft from General Electric and has a commitment to purchase as much as $300 million more. It offers a 7.4% annual dividend yield.AerCap, based in Amsterdam, is a $2.4 billion company that owns around 300 planes and also manages and services planes on behalf of others.
Trading at $36, $26 and $28, respectively, they all have an opportunity to plug into the wave of global wealth and commerce to trade as much as 25% higher, with dividends, over the next 12 months.

New York   The economy is improving for the super rich. After 2 years of declines, total net worth of America's richest people rose 10% to $955 billion this year from 2002, according to Forbes magazine's annual ranking of the nation's 400 wealthiest individuals. Microsoft Corp. founder Bill Gates, who remained in the top spot, personified the trend toward increasing wealth. His fortune increased by $3 billion to $46 billion this year. Microsoft co-founder Paul Allen held third place, with his net worth rising $1 billion to $22 billion. Investor Warren Buffett kept the No. 2 position although his wealth was unchanged at $36 billion.

Forbes said the surge in collective net worth was largely due to gains in Internet stocks & tech fortunes. Amazon.com's Jeff Bezos saw his fortune expand by more than $3 billion to $5.1 billion as the stock of the online retailer skyrocketed. Bezos was the top gainer on the list, and holds spot 32. Yahoo! co-founder David Filo net worth nearly tripled to $1.6 billion, tying him with 13 others for the 126th spot. Yahoo!'s other co-founder Jerry Yang also nearly tripled his fortune, but he shared the 162nd spot on the list with 16 others with a $1.4 billion fortune.
The gains are part of a continuing shift in wealth from the East to the tech-centric West. When the list was first published in 1982, there were 81 members from New York and 56 from California. Today, California boasts 95 Forbes 400 members, while New York has 47. "There's been this enormous shift in the geographic distribution of wealth", Forbes senior editor Peter Newcomb said. Newcomb said the migration of high-tech businesses and their founders to the West is a factor in this change, but he also noted that many wealthy East Coast families such as the du Ponts & Rockefellers have been passing on their fortunes to members of younger generations.

The Walton family was again prominent on the list. 5 members of Wal-Mart founder Sam Walton's family tied for the fourth spot, each with a net worth of $20.5 billion. Rounding out the top 10 were Oracle Corp. chairman Larry Ellison with an $18 billion fortune and Dell Inc. chief executive Michael Dell with a net worth of $13 billion. Dell replaced Microsoft executive Steven Ballmer in 10th place. Ballmer is now No. 11 with a nest egg of $12.2 billion.
Notable drop-offs from the list include Global Crossing Ltd. founder Gary Winnick, whose co. is in bankruptcy, and Motorola Corp. CEO Robert Galvin, whose co. is suffering from the malaise afflicting the wireless & chip-making industry.
Daniel Ziff, 31, is youngest on the list. He inherited his $1.2 billion fortune. His father William Ziff Jr., built and sold a publishing empire. Oldest on the list is 95-year-old Max Fisher, who made his $680 million fortune through investments.

Newcomb said Forbes compiled its list by estimating the value of stock & other assets held by the wealthiest Americans. Forbes used the stock prices of publicly held companies as of the end of August; for privately held companies, the magazine estimated a fair market value based on the stocks of their publicly traded peers. Real estate & other assets also were included.
Where exact prices were not known, "we try to determine what a prudent shopper would pay for something", Newcomb said. "We try to be conservative with the estimates".

India's superrich get even richer
12.18.07   M.Sappenfield, A.Chopra Christian Sci. Monitor

New Delhi, Pune, India   The mansion of richest man in India Mukesh Ambani is something more than the average dream house. When construction is completed next year, his home will top 570 ft, equivalent of a 60 story skyscraper, and include a helipad, 6 floors of parking, and 600 servants for a family of 6.
Rising from a Bombay (Mumbai) neighborhood where rents run at $2,000 per sq ft, the home is a monument to the enormous wealth generated by India's stock market and how it has created a class of Indian superrich.

(In 10 months) since February 2007, the value of India's stock market has doubled to 20000 points, and the biggest winners have been India's richest. Based on these gains, India's four wealthiest men are now worth more than China's 40 wealthiest combined.
It is, in part, a quirk of South Asian business practices, where even the largest multinationals remain family-run enterprises with almost all their wealth and authority residing in one man. Yet some critics say it is also the result of India's inequitable investing laws, which are forcing small investors to the fringes.

As the stock market becomes a part of Indian cultural parlance, more investors further down the economic chain are finding ways to get involved. Yet the top-heavy distribution of India's stock-market billions is further amplifying the extremes of rich and poor in a country where an estimated 400 million people, more than the population of the United States, live on less than $1 a day.
"Most of the money in the market is still principally owned by the rich and by institutional investors," says research firm studying Indian investment patterns Invest India Market Solutions (IIMS) chair Chris Butel.

The result, he and others say, is that a very small number of people are accumulating fantastic wealth almost overnight. Ambani's fortune, estimated at $49 billion by Forbes, is built largely on the success of the stock of his company, Reliance Industries Ltd., which runs oil rigs and supermarkets, among other things. Last year, when stocks hit 10000, his wealth was one-quarter of its current total.
Likewise, the initial public offering (IPO) of Indian real estate developer DLF Enterprises earlier this year instantly made owner Kushal Pal Singh the world's richest property entrepreneur. Forbes puts his wealth at $35 billion.

All told, India's 40 wealthiest businessmen are worth $351 billion, according to Forbes, easily the most in Asia. Its four richest, steel tycoon Lakshmi Mittal, Ambani, his brother Anil Ambani, and Singh, hold more than half that sum.
It is partly the legacy of out-of-date laws governing stock offerings, says Mumbai-based market-research firm Prime Database founder Prithvi Haldea. When going public, India's largest companies need to make only 10 percent of their stock available to the public. Other Asian neighbors, such as Thailand and Malaysia, usually force a company to make available 25 to 40 percent of its stock.

News reports published in June suggest that at that time, company owners held 57 percent of the shares in India's largest stock market, the Bombay Stock Exchange, known as Sensex. Domestic and foreign companies accounted for a further 30 percent, leaving the remaining scraps for small, retail investors. That, in turn, has stunted the growth of the stock market among India's middle classes, says Haldea.

It is a blow to attempts to spread the wealth being generated by India's economic boom more equitably. Shares for the top 30 companies listed on Sensex gained $219 billion from January through November. By contrast, shares for the top 30 companies listed on Wall Street accumulated only $84 billion.
Yet only 3 million Indians from a working-age population of 321 million hold stocks. A further 3.5 million hold stocks through mutual funds. The numbers are small, and the money invested is also modest, says Butel of IIMS.

Nevertheless, there is evidence of a gradual expansion. The growth of the Indian economy is pushing more households past the threshold where they have enough cash to invest. Stories of Sensex riches are overcoming Indians' traditional fiscal caution. Sensex is a notoriously volatile index. Despite its upward trend, there have been dips, including Monday's 4 percent dip, largest in 4 months.
"This is the heart of the Indian story," says global consulting firm McKinsey and Company Mumbai office economic analyst Anu Madgazkar. "We do see this trend line going up dramatically."

There are currently 4 million households that make more than $10,000 a year, one marker of fitness for investing, she says. In the next 5 years, that number is expected to more than triple. IPO expert Haldea sees pent-up demand in the fact that the listing of Reliance Petroleum elicited 1.9 million applications for shares, the highest number in 5 years.
Such interest is no surprise to Vijay Kumar Stock Market Classes office manager Pradeep Moule in Pune. "The share market used to be back page news until a few years ago," he says, sipping ginger tea in his office. "Now, it's front page news."

He offers a two-week training program to make people Sensex-literate and he is seeing new interest in new places. Statistics suggest that investors are predominately from India's six largest cities; growing numbers of people from smaller cities now have the money but are ignorant of the way the market works.
"A few years ago, the popular perception was that this was only for the highly educated, financially savvy, English-speaking elite," says Mr. Moule. "That perception is now rapidly changing."

4 chief executives have lost their jobs in the last 8 days because of a scandal that, even by the standards of Wall Street, has proved especially hard for Main Street investors to parse. The activity in question, backdating stock options, is arcane and may not even be illegal. In this case, to borrow a phrase from politics, the coverup is worse than the crime.
Stock options were created to give executives and employees an incentive: The higher the company's share price, the more they got paid. In the typical options grant, the recipient receives the right to buy a block of stock one or more years later at whatever the shares are selling for today. The idea is to align the employee's interest with the shareholders'. The value of the grant goes up as the stock rises.

As millions of investors have learned in the last few years, however, stock prices do not always go up. And when they don't, stock options are worthless on paper and as an incentive. So companies hit on a new strategy.
Instead of giving executives the right to buy future shares at today's prices, they offered them the right to buy today's shares at yesterday's prices. The beauty of this policy was that companies could pick whatever yesterday they wanted. They could take the risk out of stock options.
This practice, known as "backdating," is not illegal as long as each grant is properly disclosed and accounted for. What's gotten so many companies in trouble is that they backdated in secret, not in public.

Some say the companies that engaged in backdating, many of which were technology firms, were trying to retain workers in a fiercely competitive job market. But if the goal was to retain employees, there was no need to hide the backdating. In fact, the companies would have been better off advertising the practice e.g. "We'll do whatever it takes to make your stock options valuable!".
More likely, the rationale for backdating was to avoid two hits to the bottom line. Unlike conventional options, which don't eat into co. profit, backdated options count as a charge against earnings. And for executives making more than $1 million, the co. expense of backdated options aren't tax deductible.

More than two dozen executives have lost their jobs in this scandal in recent days, including ones at UnitedHealth Group, McAfee, CNet Networks and Monster Worldwide. The Securities and Exchange Commission is scrutinizing more than 100 companies for options grants during the high-tech boom-and-bust years from 1998 to 2002, before a change in federal law made secret backdating more difficult. Shareholders won't be made whole until the companies and executives who avoided the discipline of the market finally come clean.

E*Trade (ETFC) finally rid itself of its former chief, but his departure didn’t come cheap. Mitchell Caplan, who stepped down as CEO in November as the struggling online broker lined up a huge capital infusion from Citadel, resigned Wednesday from E*Trade’s board.
E*Trade and Citadel booted Caplan after investors fled the stock amid worries about E*Trade’s liquidity, fears brought on largely by Caplan’s ill-considered foray into risky mortgage securities. E*Trade is still looking for a full-time replacement for Caplan and says it hopes to make a decision in the next month or two.

In the meantime, Caplan will be busy counting his money. He will get $10.9 million in cash, plus medical, life and disability insurance coverage, and reimbursement of certain legal fees. All this for a guy who steered the stock to an 84 percent decline last year, third-biggest decline among Fortune 1000 companies that retain their stock exchange listings.
“Mr. Caplan’s resignation from the board,” E*Trade’s press release says, “effectively severs all ties with the company.” Not a moment too soon, obviously.

AIG sues ex-CEO Greenberg for breach of duty
Insurer charges top execs misappropriated $20 billion in stock 3.27.08   Reuters

NYC   American International Group Inc has filed a complaint in New York Supreme Court against former Chief Executive Maurice "Hank" Greenberg and six other former directors and officers, accusing them of breaching their fiduciary duty. In the complaint, filed on Wednesday, AIG alleges Greenberg, former Chief Financial Officer Howard Smith and five others breached their fiduciary duty through "misappropriation of a special block of AIG shares worth approximately $20 billion in 2005."

The shares were held by Starr International Co Inc, a company that had been affiliated with AIG and had been used as a special compensation vehicle for chosen employees of the insurer.
Since Greenberg's 2005 ouster from AIG, amid an accounting scandal, he has retained control of Starr International, running the company as a private investment vehicle. Starr's 9.7 percent stake in AIG makes it the insurer's largest shareholder, according to current Reuters data.

Wash.D.C.   A record number of US chief executives have left office so far this year amid a growing govt investigation into stock options fraud, according to an industry survey. A total 1,347 American CEOs have departed the executive suite so far this year, surpassing the 1,322 chief executives who exited their offices in 2005, according to outplacement consultancy Challenger, Gray and Christmas Inc.

The majority of CEOs left office due to retirement or a resignation, but a rising number are being forced from office due to probes into stock options backdating.
"The options backdating scandal is spreading like a virus," Challenger, Gray and Christmas chief executive John Challenger said in a statement. "The 15 CEOs affected in the last 2 months may be just the tip of the iceberg. The scandal has also taken down chief operating officers, chief financial officers, legal counsels, vice presidents and board members," Challenger said.

8 CEOs left office in November because of stock options probes, compared to 7 who stepped down in October due to options investigations, according to Challenger's monthly CEO report. Justice Dept and SEC investigators are probing over 100 companies for possible stock option fraud violations.
Stock options are commonly granted to CEOs as a performance incentive. Backdating of stock options is not illegal if properly reported. However, it is improper to manipulate the date on which stock options are awarded or to grant such rewards without disclosing them as a proper business expense to shareholders in securities filings.
If options are manipulated to make it appear they were awarded on a date when a company's share price was at its lowest, an executive cashing in such a reward at a higher share price will bank a more lucrative return.

Top executives have been forced from office at computer security firm McAfee and online media group CNET Networks, while former officials at technology firms Brocade Communications Systems and Comverse Technology have been charged with alleged options fraud.
Challenger said it has recorded 54 backdating-related departures so far, including 17 CEOs, 11 CFOs and 8 company lawyers. The last year in which over 1,000 CEOs departed office prior to 2005 was during 2000, when the Internet bubble burst, according to Challenger. It started its survey of CEO departures in 1999.

Big perks put 7 CEOs in a whole 'other' club   Calif. exec. pay rpt : Insurance, forgiven loans, corporate jet travel and 'gross-ups' are key features of their million-dollar packages
6.6.04   E. Scott Reckard L.A. Times

A million bucks isn't a lot for chief executives today. But a million in perks during a single year is still rarefied company. At least 7 chief executives from California's 100 largest public companies pocketed $1 million or more last year in what financial statements classify as "other compensation," according to The Times' annual executive compensation survey. The category excludes salary, bonuses, stock options, restricted stock and other commonplace rewards. But it does include a grab bag of other perquisites such as insurance, forgiven loans, windfalls triggered by companies going private, special retirement payments and personal use of corporate jets.
Another benefit sloshed into the other-comp bucket is the "gross-up", a term applied when co. covers taxes executives otherwise pay on all those perks. Several California CEOs logged millions of dollars in gross-ups, bane of many shareholder & consumer advocates. "The most highly compensated people in the country would appear to me not to need any help settling their tax bills," said Web-based corporate governance research firm Corporate Library sr research associate Paul Hodgson.

As disclosed in their companies' SEC filings:

financialization
traditional industrial economy's
complete securitization

"Aggressive accounting is lying with numbers. This is part of what I see as the financialization of the United States. So much of what's created in this country is a numbers game now.
The United States that was built around making things or moving things or growing things or manufacturing things has become an economy of manipulation"

    9.02   Kevin Phillips The Progressive   interview

The history of American wealth, more specifically the rise of millionaires & billionaires, is a context for national politics and culture. Too rarely is wealth examined through a political and governmental lens (or vice versa).
Storied increase in U.S. millionaire ranks from just one man in 1785 to 4 million in 2000 reflected changing politics and ideologies as well as changing economics, securities markets, and technologies.

Too much wealth hasn't helped democracy and too much democracy hasn't helped wealth. As the number of millionaires jumped from a dozen in 1800 to 300 in 1860, 4,500 in 1902, 30,000 in 1929, 5,000 in 1932, 100,000 in 1966, and 4 million in 2000, the dominant forces in wealth creation can be identified as war, inflation, politics, govt, land-holding, technology, and the stock market.

The principal commercial circumstances underpinning millionaire creation have ranged from maritime privateering (during the Revolution) through real estate (in the 1830s and 1840s), railroads and steel (in the late 19th century), oil and automobiles (in the early 20th century), and high technology (in the late 20th and early 21st centuries).
If politics has not always been favorable to wealth, Jeffersonian, Jacksonian, Progressive, and New Deal periods stand out, biases toward wealth have undercut democratic politics in the Hamiltonian period, the Gilded Age, and arguably over the last two decades.

But in contrast to Theodore Roosevelt's day, we can no longer consider the interplay of U.S. wealth and politics in a purely national context. The United States, as the leading world economic power, can now be viewed as being at or past its zenith, especially against the warning back-drop and decline symptoms of its two most recent predecessors, Holland and Britain.
Unfortunately, the millennial juxtaposition of shrinking prospects for U.S. manufacturing workers and the lower middle class with the golden zenith of a small elite in finance, investments, and international commerce follows the late-stage Dutch and British patterns all too well and raises troubling questions about the longevity of America's current wealth concentration.

  … (an) "invisible network of laws turns assets from "dead" into "liquid" capital.
In the West, standardized laws allow us to mortgage a house to raise money for a new venture, permit the worth of a company to be broken up into so many publicly tradable stocks, and make it possible to govern and appraise property with agreed-upon rules that hold across neighborhoods, towns, or regions.

This invisible infrastructure of "asset management" so taken for granted in the West, though only fully extant in U.S. for the past 100 years, is the missing ingredient to success with capitalism"

per The Mystery of Capital , Hernando De Soto

  … large extralegality, lack of property system are all results of underdevelopment, not the cause


  … de Soto confuses govt with capitalism, suggesting he understands neither.
Maintenance of title database is something well suited to free-enterprise competing companies, obviously with agreements to share data.
Any true capitalist knows that produces a far more efficient, low-cost service. cf. Machinery of Freedom

  … blindspot of "Capitalism" is the question of the design of "capital" or "fiat currency system" itself.
Post colonial world inherited the Western model of colonial capitalism with centralized private commercial banking, why "Capitalism" can only be maintained by perpetuating financial imperialism via War and Reconstruction (massive investment in military, defence, intelligence & their policy support industry). cf. "Billions for Bankers, Debt for people"

exegesis contra H. De Soto

"In authentic conversation, descended to us, held by William (of Orange) at the Hague with one of the prime abettors of the invasion, the prince did not disguise his motives; he said,
"nothing but such a constitution as you have in England can have the credit that is necessary to raise such sums as a great war requires."

The prince came, and used our constitution for his purpose: he introduced into England the system of Dutch finance. The principle of that system was to mortgage industry in order to protect property: abstractedly, nothing can be conceived more unjust; its practice in England has been equally injurious.

In Holland, with a small population engaged in the same pursuits, in fact a nation of bankers, the system was adapted to the circumstances which had created it. All shared in the present spoil, and therefore could endure the future burthen.
And so to this day Holland is sustained, almost solely sustained, by the vast capital thus created which still lingers amongst its dykes.

But applied to a country in which the circumstances were entirely different; to a considerable and rapidly-increasing population; where there was a numerous peasantry, a trading middle class struggling into existence; the system of Dutch finance, pursued more or less for nearly a century and a half, has ended in the degradation of a fettered and burthened multitude.
Nor have the demoralizing consequences of the funding system on the more favoured classes been less decided.

It made debt a national habit; it has made credit the ruling power, not the exceptional auxiliary, of all transactions; it has introduced a loose, inexact, haphazard, and dishonest spirit in the conduct of both public and private life; a spirit dazzling and yet dastardly: reckless of consequences and yet shrinking from responsibility.
And in the end, it has so overstimulated the energies of the population to maintain the material engagements of the state, and of society at large, that the moral condition of the people has been entirely lost sight of."

1845   B.Disraeli   Sybil   ¹ ² ³

  …   The merchants of Amsterdam rose to dominance in European trade in the 17th century on the basis of their role as commission sales agents. Goods from all over Europe, and indeed, the world were shipped to Amsterdam and resold there. Gradually, however, the rold of the Amsterdam merchants shifted to pure finance.

Conservative merchants and public officials in Amsterdam generally frowned on the transformation of the Amsterdam merchants from goods merchants into pure finance houses, believing it important to the prosperity of Amsterdam that the goods actually pass through the Amsterdam warehouses.

Even aside from concerns of public economic policy, a merchant banking house might well want to ensure that it received the commission sales business as well as the acceptance business; commission earned on the sale of goods generally exceeded commission earned for accepting bills.

1949 Ralph Hidy,   "House of Baring
    in American trade & finance"

As London came to rival Amsterdam as a centre of world trade and finance in the 18th century, the acceptance business became a major part of the business of the great merchant banking houses of London that financed Anglo-American and world trade in the 18th & 19th centuries.
  cit. 1969 Norman Sydney Buck,
Development of organization of Anglo-American Trade, 1800-50

Anglo-American securities regulation
cultural & political roots, 1690-1860
9.28.98 Stuart Banner

2 institutional developments in late 17th century England,  

  … rather than cutting down the big govt they claim to hate, conservatives have simply sold it off, deregulating some industries, defunding others, but always turning public policy into a private-sector bidding war.

Washington itself has been remade into a golden landscape of super-wealthy suburbs and gleaming lobbyist headquarters, wages of govt-by-entrepreneurship practiced so outrageously by figures such as Jack Abramoff.

Thomas Frank, auth. The Wrecking Crew

… democratization of the stock market is code for what Mark Lewis called, in "Liar's Poker," "exploding the client".
The smart money rides the early surge and then sells out to the middle class dreamers, who end up losing 80-90% of their value over time"

exegesis   re
  Th.Frank's One Market Under God

According to general clucking of national punditry, my 2004 book "What's the Matter With Kansas?" is supposed to have persuaded Barack Obama to describe the yeomanry of Pennsylvania as "bitter" people who "cling to guns or religion or anti-trade sentiment as a way to explain their frustrations." Custodians of national consensus elevated Obama's offense to "Bittergate".

I have no way of knowing whether some passage of mine inspired Mr. Obama's tactless assertion that the hard-done-by clutch guns and irrationally oppose free-trade deals. In point of fact, I oppose many of those trade deals myself. But I know one thing with absolute certainty. The media flurry kicked up by Mr. Obama's gaffe powerfully confirms an argument I actually did make:

That as they return again to the culture war, what the soldiers on all sides are doing is talking about class without actually addressing the economic basis of the subject. Consider, for example, the one fateful charge that the punditry and the other candidates have fastened upon Obama, "elitism".
No one means by this term that Obama is a wealthy person (he wasn't until last year), or even that he is an ally of the wealthy (although he might be that).
What they mean is that he has committed a crime of attitude, and revealed his disdain for the common folk.

A stereotype you have heard many times before, besotted with latte-fueled arrogance, the liberal looks down on average people, confident that he is a superior being. He scoffs at religion because he finds it to be a form of false consciousness. He believes in regulation because he thinks he knows better than the market.
"Elitism" is thus a crime not of society's actual elite, but of its intellectuals. Obama has "a dash of Harvard disease," proclaims the Weekly Standard. Obama reminds columnist George Will of Adlai Stevenson, rolled together with the sinister historian Richard Hofstadter and the diabolical economist J.K. Galbraith, contemptuous eggheads all. Obama strikes Bill Kristol as some kind of "supercilious" Marxist. Obama reminds Maureen Dowd of an anthropologist.

Hillary Clinton drinks shots of Crown Royal, a luxury brand that at least one confused pundit believes to be another name for Old Prole Rotgut Rye. When the former first lady talks about her marksmanship as a youth, who cares about the cool hundred million she and her husband have mysteriously piled up since he left office? Or her years of loyal service to Sam Walton, that crusher of small towns and enemy of workers' organizations?
Who really cares about Sam Walton's own sins, when these are our standards? Didn't he have a funky Southern accent of some kind? Surely such a mellifluous drawl cancels any possibility of elitism.

It is by this familiar maneuver that the people who have designed and supported the policies that have brought the class divide back to America, people who have actually, really transformed our society from an egalitarian into an elitist one, perfume themselves with the essence of honest toil, like a cologne distilled from the sweat of laid-off workers.
Likewise do their retainers in the wider world, conservative politicians and the pundits who lovingly curate all this phony authenticity, become jes' folks, the most populist fellows of them all.

Read on and find the news item about the hedge fund managers who made $2 billion and $3 billion last year, or the story about the vaporizing of our home equity. Suppose we become a little bitter about this. What do our pundits and politicians tell us then?
That there is no place for such sentiment in the Party of the People. That "bitterness" is an ugly and inadmissible emotion. That "divisiveness" is a thing to be shunned at all costs.

Conservatism, on the other hand, has no problem with bitterness; as the champion strategist Howard Phillips said almost 3 decades ago, the movement's job is to
"organize discontent". They have welcomed it, flattered it, invited it in with millions of treason-screaming direct-mail letters, given it a nice warm home on angry radio shows situated up and down the AM dial. There is not only bitterness out there; there is a bitterness industry.
Consider the shower of right-wing love that descended in February on small-town newspaper columnist Gary Hubbell, who penned this year's great eulogy of the "angry white man," the "man's man" who "works hard," who "knows that his wife is more emotional than rational," and who also, happily, knows how to "change his own oil and build things."

This stock character, unchanged since his star turns in the culture-war battles of the last few decades, is said to be as furious as ever, and still blaming the same villains for his problems: namely intellectuals, in the guise of "judges who have never worked an honest day in their lives".
But what he really wants is a chance to vote against Hillary Clinton, and "make sure she gets beaten like a drum". I guess our angry toiler didn't yet know about the Crown Royal.

If Barack Obama or anyone else really cares to know what I think, I will simplify it all down to this. The landmark political fact of our time is the replacement of our middle-class republic by a plutocracy. If some candidate has a scheme to reverse this trend, they've got my vote, whether they prefer Courvoisier or beer bongs spiked with cough syrup.
I don't care whether they enjoy my books, or would rather have every scrap of paper bearing my writing loaded into a C-47 and dumped into Lake Michigan. If it will help restore the land of relative equality I was born in, I'll fly the plane myself.

The Dutch finance company
international tax planning
circa 5.08   Tax Consultants Intl

The Dutch finance company is a frequently used and reliable tax planning instrument.  There are many companies in The Netherlands which main activity is to provide loans to group companies.
Historically speaking, the main reason for using The Netherlands as the location for a group finance company is the favourable Dutch tax regime for flow through financing activities and the excellent legal and financial infrastructure.
Per 1 January 2007 this is still the case, but also a new regime for group financing activities is introduced; as from 1 January 2007 income from qualifying group financing activities can qualify for a special tax treatment which results in an effective tax rate of five percent (5%).

  It is noted that new finance regime (the 5% rate) does not yet enter into force per 1 January 2007. The entry into force is dependent on the outcome of the discussions with the European Commission.  The legislator did however create the possibility to give the entry into force retroactive effect to the beginning of the book year.
If the new legislation will actually enter into force, The Netherlands will instantly become the most tax efficient regime for group financing activities within the European Union.

    Centralization of activities in a Dutch finance company make the structure as a whole more robust and resistant to the international tendency to deny tax advantages to purely tax driven vehicles. We refer also to the page The Dutch holding company plus.

One of the reasons to use a group finance company may be to create maximum interest expenses in group companies which are established in high tax countries. The international community has become increasingly aware of the phenomenon of treaty shopping.
Many countries incorporated anti-abuse provisions in either their domestic tax legislation or in the tax treaties concluded with other countries, like The Netherlands, to counter the use of purely tax driven conduit companies.

The principles of the new Dutch ruling policy, make the Dutch company quite resistant to foreign anti-abuse provisions. There are no restrictions to bring money into the country or to repatriate funds from the Netherlands. There are however some reporting requirements.

A study commissioned by the Dutch Finance Ministry   …   The most important money laundering channels are real estate investments, export under invoicing and import overpricing and money laundering through special purpose entities.
Within Europe the Netherlands is classified together with Luxembourg and Ireland as engaged in harmful tax practices, according to the study. The United States even compares it with Bermuda and the Cayman Islands.

  …   The report says that the Netherlands is a transit country for crime. Dutch expertise in financial logistics and its excellent location make the Netherlands a perfect place to use existing legal nodes and networks for crime.

One of the most frustrating aspects of the media debate on higher education funding is that it has taken place almost entirely on govt's terms. Even those critical of the existing system of student support and strongly opposed to proposals for top-up fees have accepted a framework in which increased public funding and free post-16 education are utopian ideals, which in any case would benefit only the middle class.
Albeit with nuances & differences of emphasis, this consensus stretches all the way from the most hawkish elements of the Russell Group to much of the leadership of the National Union of Students, which does not make it any less irrational, dishonest or regressive.

It is telling that, even in a liberal paper such as the Guardian, last week's extended discussion of the options for reforming student funding excluded only one: an increase in progressive taxation to cover all our institutions' increasingly desperate needs, from salaries and research costs to student tuition and maintenance.
This may be the option supported by the vast majority of students, the education unions and the public as a whole, but it is so far to the left of the official consensus it has largely been excluded from the media except when it is voiced by a cabinet minister's son and all credit to Will Straw for doing so.

Instead of tackling the issues honestly, govt spokespeople & education commentators have become adept at evading them through extreme vagueness of thought and argument.
Thus we read repeatedly about the limits of general taxation and the reluctance of the taxpayer to furnish new money for higher education. The reality is that general taxation is not a single homogenous source of revenue, any more than the taxpayer is a single, hard-pressed individual.

It would clearly be unreasonable to ask low paid workers, for instance the bus-drivers and cleaning ladies who, in Margaret Hodge's fevered imagination, will pay for any increase in student funding, to pay more tax; it would be anything but unreasonable to demand the same from big business, shareholders and the super rich.
Since 1979, corporation tax has been cut by 23% and the top rate of income tax by 43%; since 1997, corporation tax has been reduced by £8bn and the average ratio between employees' and directors' pay has grown from 1:11 to 1:18.
The total loss to the exchequer from tax cuts for the wealthy now runs to many tens of billions of pounds.

Meanwhile, unsurprisingly, the UK is afflicted by chronic poverty and chronically under-funded public services. We should not allow govt to argue that there are more deserving recipients of public funding than students; this is, after all, exactly what it has told pensioners, and nurses, and firefighters.
Free tuition and a living maintenance grants for every student would not come cheap, but in this context they are clearly affordable. It is not a dearth of resources which prevents govt from taxing wealth to fund public services, but a commitment to Thatcherite economic and public spending policies.

Similarly, we should be sceptical about claims that free higher education would only benefit what is commonly referred to as the middle class.
In the first place, it is no longer accurate to call students, as a group, middle class; today most come from (usually better-off) working class families and go into well paid jobs on finishing their course. If by "middle class" and "working class" one simply means better and worse-off, it is precisely those from the most disadvantaged backgrounds who are most likely to be deterred from applying to university for fear of debt, and who have, in fact, applied in smaller numbers since the introduction of fees and the abolition of grants in 1997.

This is in addition to the problems faced by female, homosexual and some ethnic minority students, who because of discrimination in the labour market are specifically disadvantaged by any system that requires students to rack up significant debt.
There is a logical flaw at the heart of the "middle class subsidy" argument. Govt maintains that, since students are predominantly from a privileged background, free higher education would be a regressive measure; at the same time it claims that, since access to university is no longer limited to the privileged, free education is unaffordable.

As the figures above have hopefully shown, neither of these arguments is tenable. In fact, stagnant applications and soaring drop-out rates mean that the goal of 50% participation will very likely prove a mirage unless it is underpinned by a huge increase in public funding.
That is why the student movement must be brave enough to argue for increased taxation of business and the rich as the progressive alternative to top-up fees.

Men in their 30s lag behind fathers in pay   Researchers report an interruption of 'up escalator' that traditionally lifted successive generations to new financial heights.
5.25.07   Greg Ip Wall St Journal

American men in their 30s today are worse off than their fathers' generation, a reversal from just a decade ago, when sons generally were better off than their fathers, a new study says. The study, the first in a series on economic mobility undertaken by several prominent think tanks, also says the typical American family's income has lagged far behind productivity growth since 2000, a departure from most of the post-World War II period.
The findings suggest "the up escalator that has historically ensured that each generation would do better than the last may not be working very well," says the study, which is scheduled for release today.

The study was written principally by John Morton of the Pew Charitable Trusts, which is leading the series, called the Economic Mobility Project, and Isabel Sawhill of the Brookings Institution. Other participating think tanks are the Heritage Foundation, American Enterprise Institute and Urban Institute.
In 2004, the median income for a man in his 30s, a good predictor of his lifetime earnings, was $35,010, the study says, 12% less than for men in their 30s in 1974, their fathers' generation, adjusted for inflation.
A decade ago, the median income for men in their 30s was $32,901, 5% higher (after adjusting) than 30 years earlier. Sawhill said she isn't sure why men's wages have stagnated.

"It seems there's been some slowdown in economic growth. It's possible that the movement of women into the labor force has affected male earnings, and it's possible that men are not working as hard as they used to."
The study suggests that absolute mobility, rate at which an entire generation's lot improves relative to previous generations, has declined. But within a particular generation, individuals can still get ahead if relative mobility, the rate at which the rich and poor trade places, remains high.

Poor fathers may have rich sons, and vice versa. The report also says that between 1947 & 1974, productivity, or output per hour, and median family income, adjusted for inflation, both roughly doubled.
Between 1974 & 2000, productivity rose 56% while income rose 29%. Between 2000 and 2005, productivity rose 16% while median income fell 2%, challenging "the notion that a rising tide will lift all boats," the report says.

Sawhill said several factors could explain the divergence: a growing share of income going to the highest-paid workers, or to profits; an increased share of labor compensation going toward benefits such as health care; or a decline in the number of wage earners in the typical family.

The anger of the damned   ¹ ²
11.15.01   Orhan Pamuk NY Review of Books

I used to think that disasters strengthened people's sense of community. Right after the great Istanbul fires of my childhood and the earthquake of 2 years ago, my first instinct was to share my feelings, to discuss the disaster with others. But this time, seated facing the TV in a small Istanbul coffeehouse near the quay frequented by carters, tuberculosis patients, and porters as the twin towers in New York blazed & collapsed, I felt desperately alone.
Immediately after the second aircraft hit the tower, Turkish TV channels commenced live broadcasting. A small crowd in the coffeehouse watched the unbelievable images on the screen in detached amazement, astonished but apparently without being deeply affected. At one point I felt like standing up and declaring, "I spent 3 years of my life in Manhattan. I lived among those buildings. I walked those streets without money in my pocket. I kept appointments with people in those towers." But, as in a dream in which one feels increasingly alone, I remained silent.

I went out into the streets because I could not bear to see what was happening, and even more because I wanted to share what I had seen with other people. A short while later I saw a woman on the quay weeping as she stood in the crowd waiting for a ferryboat. From her expression and the faces of those around her, I saw immediately that she was not weeping because she had a relative in Manhattan but because she thought the end of the world was approaching.
In my childhood, when it was feared that the Cuban crisis would give rise to a third world war, I had seen similarly distraught women weeping, as middle-class Istanbul families stocked up with packets of lentils & macaroni. I went back to the coffeehouse, and resumed watching the scenes on TV with the same irresistible obsession as the rest of the world.

Later, as I walked the streets again, I met one of my neighbors. "Sir, have you seen, they have bombed America," he said, and added fiercely, "They did the right thing." This angry old man is not religious at all. He struggles to make a living by doing minor repair jobs and gardening, and gets drunk in the evening and argues with his wife. He had not yet seen the appalling scenes on TV, but had only heard that some people had done something dreadful to America.
I listened to many other people express anger similar to his initial reaction (which he was subsequently to regret). At the first moment in Turkey, many spoke of the brutality of terror, and how despicable & horrifying the attack was. Still, they followed up their denunciation of the slaughter of innocent people with a "but," making restrained or resentful criticism of America's political & economic power.

To debate America's role in the world in the shadow of terrorism that is based on hatred of the "West" and brutally kills innocent people is both extremely difficult and perhaps morally questionable. But in the heat of righteous anger at vicious acts of terror, and in nationalistic rage, some will find it easy to speak words that might lead to the slaughter of other innocent people. In view of this, one wants to say something.

Everyone should be aware that the longer the recent bombing lasts, and the more innocent people die in Afghanistan or any other part of the world in order to satisfy America's own people, the more it will exacerbate the artificial tension that some quarters are trying to generate between "East" & "West" or "Islam" & "Christian civilization"; and this will only serve to bolster the terrorism that military action sets out to punish. It is now morally impossible to discuss the issue of America's world domination in connection with the unbelievable ruthlessness of terrorists responsible for killing thousands of innocent people.

At the same time, we should try to understand why millions of people in poor countries that have been pushed to one side, and deprived of the right to decide their own histories, feel such anger at America. We are not always obliged, however, to look with sympathy at such anger. Moreover, in many 3rd world & Islamic countries, anti-American feeling is not so much righteous anger as an instrument employed to conceal their own lack of democracy and to reinforce the power of local dictators.
Forging close relations w/ America by insular societies like Saudi Arabia that behave as if they were determined to prove to the world that Islam & democracy are mutually irreconcilable is no encouragement to those working to establish secular democracies in the Islamic countries.

Similarly, superficial hostility to America, as in the case of Turkey, allows the country's administrators to squander, through corruption & incompetence, money they receive from international financial institutions and to conceal the gap between rich & poor that in Turkey has reached intolerable dimensions.

There are those in U.S. today who unconditionally support military attacks for the purpose of demonstrating America's military strength and teaching terrorists "a lesson." Some cheerfully discuss on TV where American planes should bomb, as if playing a video game. Such commentators should realize that decisions to engage in war taken impulsively, and without due consideration, will intensify the hostility toward the West felt by millions of people in the Islamic countries and poverty-stricken regions of the world, people living in conditions that give rise to feelings of humiliation and inferiority.
It is neither Islam nor even poverty itself that directly engenders support for terrorists whose ferocity & ingenuity are unprecedented in human history; it is, rather, the crushing humiliation that has infected the third-world countries. At no time in history has the gulf between rich & poor been so wide.

It might be argued that the wealth of the rich countries is their own achievement and should not affect the concerns of the poor of the world; but at no time in history have the lives of the rich been so forcefully brought to the attention of the poor through TV & Hollywood film.
It also might be said that tales of the lives of kings are the entertainment of the poor. But far worse, at no other time have the world's rich & powerful societies been so clearly right, and "reasonable." Today an ordinary citizen of a poor, undemocratic Muslim country, or a civil servant in a third-world country or in a former socialist republic struggling to make ends meet, is aware of how insubstantial is his share of the world's wealth; he knows that he lives under conditions that are much harsher and more devastating than those of a "Westerner" and that he is condemned to a much shorter life.

At the same time, however, he senses in a corner of his mind that his poverty is to some considerable degree the fault of his own folly & inadequacy, or those of his father & grandfather. The Western world is scarcely aware of this overwhelming feeling of humiliation that is experienced by most of the world's population; it is a feeling that people have to try to overcome without losing their common sense, and without being seduced by terrorists, extreme nationalists, or fundamentalists.
This is the grim, troubled private sphere that neither magical realistic novels that endow poverty & foolishness with charm nor the exoticism of popular travel literature manages to fathom. It's while living within this private sphere that most people in the world today are afflicted by spiritual misery.
The problem facing the West is not only to discover which terrorist is preparing a bomb in which tent, which cave, or which street of which city, but also to understand the poor & scorned and "wrongful" majority that does not belong to the Western world.

War cries, nationalistic speeches, and impetuous military operations take quite the opposite course. Instead of increasing understanding, many current Western actions, attitudes, and policies are rapidly carrying the world further from peace. These include the new visa restrictions imposed by many Western European countries on travelers from outside the EU; law enforcement measures aimed at impeding the movement of Muslims and of people from poor nations; suspicion of Islam and everything non-Western; and crude and aggressive language that identifies the entire Islamic civilization with terror & fanaticism.
What prompts an impoverished old man in Istanbul to condone the terror in New York in a moment of anger, or a Palestinian youth fed up with Israeli oppression to admire the Taliban, who throw nitric acid at women because they reveal their faces?
It is not Islam or what is idiotically described as the clash between East & West or poverty itself. It is the feeling of impotence deriving from degradation, the failure to be understood, and the inability of such people to make their voices heard.

Members of wealthy, pro-modernist class that founded the Turkish Republic reacted to resistance from poor & backward sectors of society not by attempting to understand them, but by law enforcement measures, prohibitions on personal behavior, and repression by the army. In the end, the modernization effort remained half-finished, and Turkey became a limited democracy in which intolerance prevailed.
Now, as we hear people calling for war between East & West, I am afraid that much of the world will turn into a place like Turkey, governed almost permanently by martial law. I am afraid that self-satisfied & self-righteous Western nationalism will drive the rest of the world into defiantly contending that two plus two equals five, like Dostoevsky's underground man, when he reacts against the "reasonable" Western world.
Nothing can fuel support for "Islamists" who throw nitric acid at women's faces so much as the West's failure to understand the damned of the world.

Poll: Majorities say income gap too wide
7.6.07   AP

Wash.D.C.   Income differences in the U.S. are too stark, and the govt should provide jobs & training for those having a tough time, according to majorities in a national poll released Thursday. About seven in 10 said discrepancies between income levels are too large, a sentiment voiced by nearly two-thirds of those from households earning at least $80,000 a year, the survey said. Three-fourths of people earning less than $80,000 agreed.
Eight in 10 said the gap between the rich and the middle class has worsened over the last 25 years, said the survey by the University of Connecticut's Center for Survey Research and Analysis.
  [ Likely not least because their govt annually tells them so. ]

The poll comes in the early stages of a 2008 presidential campaign in which several Democratic candidates have discussed a widening distance between the country's rich and poor. Former North Carolina Sen. John Edwards has made "two Americas" one of his favorite themes. Sens. Hillary Rodham Clinton of New York and Barack Obama of Illinois have also touched on the topic.
 

Moscow   In a city mad for the automobile, even a tiny downtown showroom was a license to print money. Selling Chevrolets, Cadillacs and Opels, Trinity Motors was raking in $1 million a month. A group of Canadian and British investors operated the dealership on tony Tverskaya Street for 13 years. Until one morning late in May, when Trinity Motors ceased to exist.
Shortly before noon, about 30 men, some dressed as security guards, some in jeans and shorts, swarmed into the showroom, forced Trinity's managers and employees out of the building and proceeded to paint over the windows. The dealership's lease, Trinity was told, had not been renewed by the Kremlin property administration.

The truth was more complicated, and ultimately much more worrying for anyone who has money invested in Russia, said Trinity spokesman Rudy Amirkhanian. Trinity managers were told that the new lease on the property was being awarded to a little-known company with friends at the Kremlin.
"Somebody at the presidential administration wants this facility. I have my hands tied behind my back," an agent from the property administration told Amirkhanian in a tape-recorded conversation a week before the bouncers showed up.
"Are you telling me the presidential administration is above the law?" Amirkhanian queried.
"The president is above the law, of course above the law. We do not live in a law-governed state, though the actions we're taking are strictly legal," the federal property services agent replied. "Bandits? OK, we're federal bandits. And if you want to see who's stronger, you're welcome."

In the 1990s, when Russian capitalism was young and the law was pliable, business disputes routinely were settled by teams of thugs and showers of bullets. It's not supposed to be that way in 2005. Now, contract laws are in place; uniformed bailiffs deliver eviction notices; courts mediate disputes. Most of the time.
In the new, "normal" Russia, which concluded a strategic partnership agreement on key economic issues with Europe in May and hopes to join the World Trade Organization by next year, business disputes are still sometimes settled by fleets of SUVs showing up at the curb. Men with buzz cuts and big neck muscles get out, and property abruptly changes hands in favor of the guy who hired the neck muscles.

Last year, operators of the Aerostar Hotel, one of Moscow's longest-operating four-star hotels, found themselves thrown out onto the street by 30 security toughs after their landlord suddenly demanded a $30-million rent increase for their long-term lease, after the Canadian managers had invested $40 million of their own money in upgrading the hotel. Registered guests were ejected 36 hours later.
A few months earlier, the Moscow office of billionaire philanthropist George Soros' Open Society Institute was raided at midnight by the landlord and 50 men in camouflage outfits, who burst through a window, shocked the organization's guards with electric prods, covered up surveillance cameras and then proceeded to lock up the building and all its contents, including files and computers.

A few days later, 20 masked men bearing clubs swooped into the building in an apparently unsuccessful attempt to take it back. Such transactions are often wryly referred to by lawyers in Moscow as "self-help", the act of advancing a troublesome legal case by swiftly establishing new facts on the ground.
"You can't legally throw the other party out if you have a rental dispute, but it happens here all the time," said Jamison Firestone, an attorney who represents business clients in Russia. "The other party can't get to their possessions, they can't run their business, so they capitulate because by the time they get it back, there'll be nothing left."

The point, many businessmen say, is not who is right or wrong in these often-murky contract disputes, but the frequency with which they are decided by physical force. Of particular concern, said Firestone, is in a case like Trinity's, where the govt uses muscle.
"With Trinity Motors, there should have been a court case, and even then, only the bailiffs can throw somebody out of possession. They just didn't bother to wait," he said. "Actions like that don't give investors warm, fuzzy feelings.
"It sets a horrible precedent, and it's one of the reasons that capital flight out of this country is estimated to be $14 billion over the next 2 years."

The number of such cases is far fewer than in past years but seems to be experiencing a minor upsurge, some business leaders said.
"In the early '90s, this was very commonplace. It was the Wild West. And then, it seemed like the country was stabilized. But suddenly it seems like, in the last 18 months, things have gotten worse," said Andrew Ivanyi, who managed the Aerostar for AeroIMP, a joint venture of a Halifax, Nova Scotia-based investment group, IMP Group, and Aeroflot Airlines.
"If this can happen to the Soros foundation, can you imagine what can happen to the little businessman?"
And not just the little businessman. In October 2003, Yukos Oil Chief Executive Mikhail Khodorkovsky found his private jet surrounded by masked law enforcement agents in commando gear, and the oil executive, then Russia's richest man, was arrested on fraud and tax evasion charges.

Yukos was gutted when its main production unit, Yuganskneftegaz, was seized by the tax authorities and sold for a fraction of its value to a state-controlled oil company whose chairman happens to be a senior Kremlin official. Yukos shares, many of them held by foreign investors, plummeted, and the company is on the verge of bankruptcy.
In the case of the Aerostar Hotel, AeroIMP was forced out in August 2004 by a Russian company known as Aviacity, which AeroIMP alleged had illegally acquired property rights to the building. Aviacity jacked up the rent by millions of dollars and ordered a halt to all subleases at an adjoining office complex. IMP had by then sunk $40 million in the complex.

AeroIMP alleged that Aviacity was trying to seize a valuable piece of central Moscow real estate. Aviacity went to court, alleging that AeroIMP was in violation of its long-standing lease by subleasing the office property without Aviacity's permission.

The court initially agreed. But instead of allowing the issue to be fully litigated or waiting for court bailiffs to execute any court orders, Aviacity's attorneys showed up with what Ivanyi described as "about 30 goons" outside his office.
"Their lawyer said, 'I would advise you to leave quietly. It would be better for you.' The words he used were, 'Or we'll carry you out,' " Ivanyi recalled. "We picked up the papers on our desks and left."
That was a Friday afternoon. Hotel guests were given until Sunday morning to decamp, while Ivanyi and his managers retreated to a room of a competing hotel across town.

The Russian legal system, notorious for corruption and government interference, was of little help. AeroIMP lost its first round in court, won on appeal, then lost again. Finally, the Supreme Arbitration Court issued an injunction, upholding the management's right to possession of the hotel while the legal case played out.

Without explanation, the court reversed itself 7 days later.
"I'm not going to say the obvious," said the hotel management's lawyer, Alexander Skoblo.
Aviacity officials said they were merely executing valid rulings of the court. "We did everything legally," said Marina Khvostova, general director of the company.
"Do you think if they had a lease [that was] valid … the courts could have ignored that? Now they are declaring to the entire world that they were evicted illegally. I can tell you, it's not true."

In the Trinity car dealer case, presidential property department spokesman Viktor Khrekov said the dealership's lease on the federally owned property expired March 30, well before the eviction in May.
"They were directed to free the premises. They did not do so. The whole procedure was taped. It is clear no violence took place. So why they are making a big thing out of a small one, I do not understand," Khrekov said.
One of the main sore points for Trinity was that the company had spent $860,000 renovating the building after assurances they would be allowed to renew their lease. Then they were told by Izvestia, the govt controlled firm administering the building, that the lease would be awarded to another company.

Trinity believed it had a legal right of first refusal. Then, during a conversation that Trinity spokesman Amirkhanian tape-recorded, an Izvestia official told Trinity that it would be fruitless to try to hold on to the property.
"You can hear on the tape where he says, 'Go ahead and record,' " Amirkhanian said. "Either he didn't believe we were really recording it, or he was so arrogant that he didn't care."
Corruption in its many forms is something foreign businesses have to deal with all over Europe, observed Andreas Romanos, head of the Assn. of European Businesses in Russia. The difference, he suggested, is that corruption elsewhere may be "more refined" than the Russians who show up in SUVs.

Despite the rough stuff, he said, most investors have decided that the potential returns in Russia outweigh the obvious risks.
"If you're willing to bite your lips and go to work in Russia," Romanos said, "your payback's going to be faster and your growth is going to be larger." Ivanyi agreed. After all, nearly 10 months after he was thrown out of his office, he's still in Moscow, ready to work.
"Despite all the difficulties and potential dangers, if you look at the number of multinationals working in this country, the answer is, we have to be here. It's a country with a future," he said. "It's a country of 150 million people. The customers are here."

The great wealth transfer   Biggest untold economic story of our time: more of nation's bounty held in fewer & fewer hands, Bush's tax cuts only making the problem worse.   11.30.06   Paul Krugman Rolling Stone

Why doesn't Bush get credit for the strong economy? That question has been asked over and over again in recent months by political pundits.
After all, they point out, the gross domestic product is up; unemployment, at least according to official figures, is low by historical standards; and stocks have recovered much of the ground they lost in the early years of the decade, with the Dow surpassing 12,000 for the first time.

Yet the public remains deeply unhappy with the state of the economy. In a recent poll, only a minority of Americans rated the economy as "excellent" or "good," while most consider it no better than "fair" or "poor." Are people just ungrateful? Is the administration failing to get its message out? Are the news media, as conservatives darkly suggest, deliberately failing to report the good news?
None of the above. The reason most Americans think the economy is fair to poor is simple: For most Americans, it really is fair to poor. Wages have failed to keep up with rising prices. Even in 2005, a year in which the economy grew quite fast, the income of most non-elderly families lagged behind inflation.

The number of Americans in poverty has risen even in the face of an official economic recovery, as has the number of Americans without health insurance. Most Americans are little, if any, better off than they were last year and definitely worse off than they were in 2000.
But how is this possible? The economic pie is getting bigger; how can it be true that most Americans are getting smaller slices? The answer, of course, is that a few people are getting much, much bigger slices. Although wages have stagnated since Bush took office, corporate profits have doubled.

The gap between the nation's CEOs and average workers is now ten times greater than it was a generation ago. While Bush's tax cuts shaved only a few hundred dollars off the tax bills of most Americans, they saved the richest one percent more than $44,000 on average.
In fact, once all of Bush's tax cuts take effect, it is estimated that those with incomes of more than $200,000 a year, the richest 5% percent of the population, will pocket almost half of the money. Those who make less than $75,000 a year, eighty percent of America, will receive barely a quarter of the cuts. In the Bush era, economic inequality is on the rise.

Rising inequality isn't new. The gap between rich and poor started growing before Ronald Reagan took office, and it continued to widen through the Clinton years. But what is happening under Bush is something entirely unprecedented:
For the first time in our history, so much growth is being siphoned off to a small, wealthy minority that most Americans are failing to gain ground even during a time of economic growth and they know it. America has never been an egalitarian society, but during the New Deal and the Second World War, govt policies and organized labor combined to create a broad and solid middle class.

The economic historians Claudia Goldin and Robert Margo call what happened between 1933 and 1945 the Great Compression: The rich got dramatically poorer while workers got considerably richer. Americans found themselves sharing broadly similar lifestyles in a way not seen since before the Civil War.
But in the 1970s, inequality began increasing again, slowly at first, then more and more rapidly. You can see how much things have changed by comparing the state of affairs at America's largest employer, then and now. In 1969, General Motors was the country's largest corporation aside from AT&T, which enjoyed a govt-guaranteed monopoly on phone service.

GM paid chief executive James M. Roche a salary of $795,000, equivalent of $4.2 million today, adjusting for inflation. At the time, that was considered very high. But nobody denied that ordinary GM workers were paid pretty well. The average paycheck for production workers in the auto industry was almost $8,000, more than $45,000 today.
GM workers, who also received excellent health and retirement benefits, were considered solidly in the middle class.

Today, Wal-Mart is America's largest corporation, with 1.3 million employees. H. Lee Scott, its chairman, is paid almost $23 million, more than 5 times Roche's inflation-adjusted salary. Yet Scott's compensation excites relatively little comment, since it's not exceptional for the CEO of a large corporation these days.
The wages paid to Wal-Mart's workers, on the other hand, do attract attention, because they are low even by current standards. On average, Wal-Mart's non-supervisory employees are paid $18,000 a year, far less than half what GM workers were paid 35 years ago, adjusted for inflation.
Wal-Mart is notorious both for how few of its workers receive health benefits and for the stinginess of those scarce benefits. The broader picture is equally dismal. According to the federal Bureau of Labor Statistics, the hourly wage of the average American non-supervisory worker is actually lower, adjusted for inflation, than it was in 1970. Meanwhile, CEO pay has soared from less than 30X average wage to almost 300x typical worker's pay.

The widening gulf between workers and executives is part of a stunning increase in inequality throughout the U.S. economy during the past 30 years. To get a sense of just how dramatic that shift has been, imagine a line of 1,000 people who represent the entire population of America. They are standing in ascending order of income, with the poorest person on the left and the richest person on the right. Their height is proportional to their income; the richer they are, the taller they are.

Start with 1973. If you assume that a height of 6 feet represents the average income in that year, the person on the far left side of the line, representing those Americans living in extreme poverty, is only 16 inches tall. By the time you get to the guy at the extreme right, he towers over the line at more than 113 feet.
Now take 2005. The average height has grown from 6 feet to 8 feet, reflecting the modest growth in average incomes over the past generation. The poorest people on the left side of the line have grown at about the same rate as those near the middle, the gap between the middle class and the poor, in other words, hasn't changed.

But people to the right must have been taking some kind of extreme steroids: The guy at the end of the line is now 560 feet tall, almost 5 times taller than his 1973 counterpart. What's useful about this image is that it explodes several comforting myths we like to tell ourselves about what is happening to our society.
  MYTH #1: INEQUALITY IS MAINLY A PROBLEM OF POVERTY.
According to this view, most Americans are sharing in the economy's growth, with only a small minority at the bottom left behind. That places the onus for change on middle-class Americans who, so the story goes, will have to sacrifice some of their prosperity if they want to see poverty alleviated.
But as our line illustrates, that's just plain wrong. It's not only the poor who have fallen behind, the normal-size people in the middle of the line haven't grown much, either. Real divergence in fortunes is between the great majority of Americans and a very small, extremely wealthy minority at the far right of the line.

  MYTH #2: INEQUALITY IS MAINLY A PROBLEM OF EDUCATION.
This view, which I think of as the 80/20 fallacy, is expressed by former Fed chair Alan Greenspan. Last year, Greenspan testified that wage gains were going primarily to skilled professionals with college educations, "essentially," he said, "the top 20 percent".
The other 80 percent, those with less education, are stuck in routine jobs being replaced by computers or lost to imports. Inequality, Greenspan concluded, is ultimately "an education problem".

It's a good story with a comforting conclusion: Education is the answer. But it's all wrong. A closer look at our line of Americans reveals why. The richest 20 percent are those standing between 800 and 1,000. But even those standing between 800 and 950, Americans who earn between $80,000 and $120,000 a year, have done only slightly better than everyone to their left.
Almost all of the gains over the past 30 years have gone to the 50 people at the very end of the line of 1000. Being highly educated won't make you into a winner in today's U.S. economy. At best, it makes you somewhat less of a loser.

MYTH #3: INEQUALITY DOESN'T REALLY MATTER.
In this view, America is the land of opportunity, where a poor young man or woman can vault into the upper class. In fact, while modest moves up and down the economic ladder are common, true Horatio Alger stories are very rare.
America actually has less social mobility than other advanced countries: These days, Horatio Alger has moved to Canada or Finland. It's easier for a poor child to make it into the upper-middle class in just about every other advanced country including famously class-conscious Britain than it is in the United States.

Few Americans hope to join the ranks of the rich, no matter how well educated or hardworking they may be; their opportunities to do so are actually shrinking. As best we can tell, pretax incomes are now as unequally distributed as they were in the 1920s, wiping out virtually all of the gains made by the middle class during the Great Compression.
There's a famous scene in the 1987 movie Wall Street in which Gordon Gekko, the corporate predator played by Michael Douglas, tells a meeting of stunned shareholders that greed is good, that the unbridled pursuit of individual wealth serves the interests of the company and the nation. In the movie, Gekko gets his comeuppance; in real life, the Gordon Gekkos took over both corporate America and, eventually, our political system.

Oliver Stone didn't conjure Gekko's "greed" line out of thin air. It was based on a real speech given by corporate raider Ivan Boesky. It reflected what many corporate executives, conservative intellectuals and right-wing politicians were saying at the time.
It's no coincidence that ringing endorsements of greed began to be heard at the same time that the actual incomes of America's rich began to soar. In part, the new pro-greed ideology was a way of rationalizing what was already happening.

But it was also, to an important extent, a cause of the phenomenon. In the past 30 years, right-wing foundations have devoted enormous resources to promoting this agenda, building a far-reaching network of think tanks, media outlets and conservative scholars to legitimize higher levels of inequality.
"On average, corporate America pays its most important leaders like bureaucrats," the Harvard Business Review lamented in 1990, calling for higher pay for top executives. "Is it any wonder then that so many CEOs act like bureaucrats?"

Although corporate executives have always had the power to pay themselves lavishly, their self-enrichment was limited by what Lucian Bebchuk, Jesse Fried and David Walker, leading experts on exploding executive paychecks, call the "outrage constraint".
What they mean is that a conspicuously self-dealing CEO would be forced to moderate his greed by unions, the press and politicians: The social climate itself condemned executive salaries that seem immodest.

Lately, however, we have experienced a death of outrage. Thanks to the right's well-funded and organized effort, corporate executives now feel no shame in lining their pockets with huge bonuses and gigantic stock options. Such self-dealing is justified, they say: Greed is what made America great, and greedy executives are exactly what corporate America needs.
At the same time, there has been a concerted attack on the institutions that have helped moderate inequality, unions in particular. During the Great Compression, the rate of unionization nearly tripled; by 1945, more than one in three American workers belonged to a union.

A lot of what made General Motors the relatively egalitarian institution it was in the 1960s had to do with its powerful union, which was able to demand high wages for its members. Those wages, in turn, set a standard that elevated the income of workers who didn't belong to unions.
Today, in the era of Wal-Mart, fewer than one in eleven workers in the private sector is organized, effectively preventing hundreds of thousands of working Americans from joining the middle class.

Why isn't Wal-Mart unionized? The answer is simple and brutal: Business interests went on the offensive against unions with hardball tactics, not gentle persuasion. During the late 1970s and early 1980s, at least one in every twenty workers who voted for a union was illegally fired; some estimates put the number as high as one in eight.
Once Ronald Reagan took office, the anti-union campaign was aided and abetted by political support at the highest levels.

Unions weren't the only institution that fostered income equality during the generation that followed the Great Compression. The creation of a national minimum wage also set a benchmark for the entire economy, boosting the bargaining position of workers.
Under Reagan, Congress failed to raise the minimum wage, allowing its value to be eroded by inflation. Between 1981 and 1989, the minimum wage remained the same in dollar terms but inflation shrank its purchasing power by 25 percent, reducing it to the lowest level since the 1950s.

After Reagan left office, there was a partial reversal of his anti-labor policies. The minimum wage was increased under the elder Bush and again under Clinton, restoring about half the ground it lost under Reagan. But then came Bush the Second and the balance of power shifted against workers and the middle class to a degree not seen since the Gilded Age.
During the 2000 election campaign, George W. Bush joked that his base consisted of the "haves and the have mores." Not only has the Bush administration favored the interests of the wealthiest few Americans over those of the middle class, it has consistently shown a preference for people who get their income from dividends and capital gains, rather than those who work for a living.

Under Bush, the economy has been growing at a reasonable pace for the past 3 years. But most Americans have failed to benefit from that growth. All indicators of the economic status of ordinary Americans, poverty rates, family incomes, the number of people without health insurance, show that most of us were worse off in 2005 than we were in 2000, and there's little reason to think that 2006 was much better.
Economic growth went to a relative handful of people at the top. Earnings of the typical full-time worker, adjusted for inflation, have fallen since Bush took office. Pay for CEOs, meanwhile, has soared from 185 times that of average workers in 2003 to 279 times in 2005. After-tax corporate profits have also skyrocketed, more than doubling since Bush took office.

Those profits will eventually be reflected in dividends and capital gains, which accrue mainly to the very well-off: More than three-quarters of all stocks are owned by the richest ten percent of the population.
Bush wasn't directly responsible for the stagnation of wages and the surge in profits and executive compensation: The White House doesn't set wage rates or give CEOs stock options. But the govt can tilt the balance of power between workers and bosses in many ways. At every juncture, this govt has favored the bosses.
There are four ways, in particular, that the Bush administration has helped make the poor poorer and the rich richer. First, like Reagan, Bush has stood firmly against any increase in the minimum wage, even as inflation erodes the value of a dollar. The minimum wage was last raised in 1997; since then, inflation has cut the purchasing power of a minimum-wage worker's paycheck by twenty percent.

Second, again like Reagan, Bush used govt's power to make it harder for workers to organize. The National Labor Relations Board, founded to protect the ability of workers to organize, has become for all practical purposes an agent of employers trying to prevent unionization.
Spectacular example of this anti-union bias came just a few months ago. Under U.S. labor law, legal protections for union organizing do not extend to supervisors. But the Republican majority on the NLRB ruled that otherwise ordinary line workers who occasionally tell others what to do such as charge nurses, who primarily care for patients but also give instructions to other nurses on the same shift, will now be considered supervisors.
In a single administrative stroke, the Bush administration stripped as many as 8 million workers of their right to unionize.

Third, the administration effectively blocked what might have been a post-Enron backlash against self-dealing corporate insiders. Corporate scandals dominated the news in the first half of 2002 then the subject was changed to the urgent need to invade Iraq, and the drive for reform was squelched.
With Americans focused on the war, CEOs are once again rewarding themselves at impressive and unprecedented levels.
Finally, there's govt's most direct method of affecting incomes: taxes. In this arena, Bush has made sure that the rich pay lower taxes than they have in decades. According to the latest estimates, once the Bush tax cuts have taken full effect, more than a third of the cash will go to people making more than $500,000 a year, a mere 0.8 percent of the population.

It's easy to get confused about the Bush tax cuts. For one thing, they are designed to confuse. The core of the Bush policy involves cutting taxes on high incomes, especially on the income wealthy Americans receive from capital gains and dividends.
You might say that the Bush administration favors people who live off their wealth over people who have a job. But there are some middle-class "sweeteners" thrown in, so the administration can point to a few ordinary American families who have received significant tax cuts.

Furthermore, the administration has engaged in a systematic campaign of disinformation about whose taxes have been cut. Indeed, one of Bush's first actions after taking office was to tell the Treasury Dept to stop producing estimates of how tax cuts are distributed by income class, information on who gained how much.
Instead, official reports on taxes under Bush are textbook examples of how to mislead with statistics, presenting a welter of confusing numbers that convey the false impression that the tax cuts favor middle-class families, not the wealthy. In reality, only a few middle-class families received a significant tax cut under Bush.

Every wealthy American, especially those who live off of stock earnings or their inheritance, got a big tax cut. To picture who gained the most, imagine the son of a very wealthy man, who expects to inherit $50 million in stock and live off the dividends. Before the Bush tax cuts, our lucky heir-to-be would have paid about $27 million in estate taxes and contributed 39.6 percent of his dividend income in taxes.
Once Bush's cuts go into effect, he could inherit the whole estate tax-free and pay a tax rate of only 15 percent on his stock earnings.

It's worth noting that Bush doesn't simply favor the upper class; it's the upper-upper class. That became clear last fall, when the House and Senate passed rival tax-cutting bills. (What were they doing cutting taxes yet again in the face of a huge budget deficit and an expensive war? Never mind.) The Senate bill was devoted to providing relief to middle-class wage earners.
According to the Tax Policy Center, two-thirds of the Senate tax cut would have gone to people with incomes of between $100,000 and $500,000 a year. Those making more than $1 million a year would have received only 8 percent of the cut.

The House bill, by contrast, focused on extending tax cuts on capital gains and dividends. More than 40 percent of the House cuts would have flowed to the $1 million-plus group; only thirty percent to the 100K to 500K taxpayers. The White House favored the House bill and the final, reconciled measure wound up awarding a quarter of the benefits to America's millionaires.
As to claim that the Bush tax cuts did wonders for economic growth, job creation in fact has been much slower under Bush than under Clinton, and overall growth since 2003 is largely the result of the huge housing boom, which has more to do with low interest rates than with taxes.

Biggest irony of all is that the real boom in the 1990s followed tax changes that were the reverse of Bush's policies. Clinton raised taxes on the rich, and the economy prospered. A generation ago U.S. distribution of income didn't look all that different from that of other advanced countries.
We had more poverty, largely because of the unresolved legacy of slavery. But the gap between the economic elite and the middle class was no larger in America than it was in Europe. Today, we're completely out of line with other advanced countries.

The share of income received by the top 0.1 percent of Americans is twice the share received by the corresponding group in Britain, and three times the share in France. These days, to find societies as unequal as the United States you have to look beyond the advanced world, to Latin America. If that comparison doesn't frighten you, it should.
The social and economic failure of Latin America is one of history's great tragedies. Our southern neighbors started out with natural and human resources at least as favorable for economic development as those in the United States. Yet over the course of the past two centuries, they fell steadily behind.

trade balance

  … "Globalization is neither inevitable nor efficient. It has flaws just like that of communism, fascism (of which globalization is a spin-off of) and mercantilism"

  … "in another ten years it will be Brazil"

exegesis   re 3 Billion New Capitalists by China nee Japan lamenting Reagan Commerce undersecretary Clyde Prestowitz

America's for sale. Just ask Treasury Secretary Henry Paulson.
With the U.S. economy in shambles, Paulson just spent 4 days touring the Middle East, hat in hand, looking for investors to bail us out. Specifically, on Monday, Paulson met with heads of the Abu Dhabi Investment Authority, the world's largest "sovereign wealth fund" with roughly $875 billion in assets, and encouraged them to buy American businesses.

Of course, it's nothing new for U.S. officials to reach out to the deepest pockets in the world in times of crisis. Just a century ago, J.P. Morgan became an American icon by single-handedly rescuing the financial markets during the stock market panic of 1907.

What is new, however, is that our economic problems have become so big that they no longer can be remedied by a few affluent individuals or investment firms. Only extremely wealthy countries have the resources to clean up this mess. So Paulson is forced to visit flush, oil-slicked Arabian emirates from Qatar to Abu Dhabi and beg for help.
This is economic globalization in its most raw form and a dramatic change in the way the worldwide economy operates. Today, the real power in international finance is held by rich countries, not wealthy institutions, corporations or private investors. These countries are flexing their increasingly bulging muscles through investment vehicles known as sovereign wealth funds.

SWFs basically are mutual funds that invest the excess capital generated by a region or country. The first one was established by Kuwait when it still was a British territory. After World War II, as Kuwait was negotiating independence, its leader, Sheik Abdullah al Salem al Sabah, asked the British to help him create a fund that would invest the nation's oil profits. The Kuwait Investment Board, which eventually became the Kuwait Investment Authority, today has about $250 billion in assets and is one of the largest sovereign wealth funds in the world.

As the British Empire crumbled, the govt created similar funds for many of its territories and colonies including the islands of Kiribati, which profitably exported guano for fertilizer. Meanwhile, other countries with growing wealth started setting up similar funds, such as the oil-rich nations of Saudi Arabia, the United Arab Emirates, Norway and Russia, as well as China, Singapore and South Korea, which had highly productive economies that also generated lots of excess capital.
Only recently that SWFs have become major players on the financial stage. In 1990, the funds held just $500 billion in assets combined. Today, that figure is about $3.5 trillion. For comparison purposes, that's more than all of the assets controlled by all of the hedge funds in the world. And by 2012, the figure will be at least $10 trillion, according to estimates by the International Monetary Fund.

The primary reason for this explosion is oil. As its price has soared from less than $25 a barrel in 2002 to more than $125 a barrel today, the value of sovereign wealth funds held by oil-rich nations has skyrocketed. This trend isn't expected to change any time soon.
The new power of SWFs has been on graphic display during our recent mortgage crisis. They've essentially rescued the international financial system by injecting tens of billions of dollars into troubled banks. Citigroup, for instance, raised about $20 billion from a consortium of SWFs from Abu Dhabi, Kuwait and Singapore. UBS secured nearly $10 billion from a Singapore fund that now controls 9% of the bank. Merrill Lynch took in about $11 billion from SWFs from Kuwait, Singapore and South Korea. Morgan Stanley got $5 billion from China's SWF.

These investments are steadying global financial markets by ensuring that none of these key banks goes under. But there are important questions to ask about the increasing influence that sovereign wealth funds have over our economy. As SWFs grow in size, they will be in a position to control large swaths of the global business world. That means foreign govts, which control the funds, will increasingly own sizable stakes in companies in such important industries as computer technology, aerospace and biotechnology.
These kinds of investments raise "profound questions" of geopolitical power, as former Treasury Secretary Lawrence Summers pointed out a few months ago at the World Economic Forum in Davos, Switzerland. Summers' essential complaint is that there is no way of knowing if there is a political agenda behind a country's investment in these essential industries.

To that end, the International Monetary Fund is trying to draft a code of "best practices" that SWFs can adopt voluntarily. The funds generally have been resistant to the idea, although Abu Dhabi and Singapore have signed an agreement with the Treasury Dept that lays out principles for the countries' funds to be more transparent and not politicize their investments.
But on a practical level, the growing influence of SWFs really brings up much more basic concerns. What does it mean for Americans to have decisions about our jobs, our home loans, our school loans and so on to ultimately rest with foreign govts? What does it mean to surrender this level of control over our own economy?
We don't know. What if the cure to our mortgage crisis is more deadly than the disease itself?

Bush defends economic policies
6.20.04   Jesse J. Holland AP

Wash.D.C.   Fresh off Western campaign swing, Pres. GWBush told Americans the economy is growing stronger and more jobs are being created despite Democrats' claim that he presided over a downturn for the country. "Time & again, our economy has defied the gloomy predictions of pessimists," Bush said Saturday in his weekly radio address. "Because of the hard work of so many Americans, and because of the good policies in Washington, D.C., our economy is strong, and it is getting stronger," the president said in remarks taped while he was in Washington state.
"America has added more than 1.4 million new jobs since last August. Our economy has grown at the fastest pace in almost 2 decades. And the recession was one of the shortest & shallowest in modern American history." Bush also said 46 states saw falling unemployment rates over the last year, and many of the new jobs are being created in industries that pay above-average wages, such as construction, education and manufacturing.

But to keep America on the right track, Bush said the Senate needs to make his tax cuts permanent, pass an energy bill, keep the policies of open trade going and improve schools and worker training programs. "Our nation is ready to face the economic challenges that lie ahead," he said. "We have millions of confident entrepreneurs who work hard and take risks and create opportunities for others. We have a culture of innovation where people are encouraged to come up with new solutions to old problems. We have a great work force. With these strengths, there is no limit to how much we can accomplish."

Rep. Nick Lampson D-TX in Democrats' weekly radio address, said Bush's term has seen more & more jobs heading overseas with little done by the president to stop it. "No matter how hard some of our friends & neighbors work; no matter how much training or retraining they've gotten; the opportunities before them are shrinking," he said. "America's jobs are being sent overseas; even accounting & computer jobs that we once thought were secure are now disappearing."
Democrats have the better plan to turn the economy around and bring more jobs back to the people, Lampson said. "The 'American Jobs Plan' would invest in our work force, helping those who have suffered under the existing policies, and those who will lead us into the global marketplace of the future," he said. "Our proposal would put over 2 million people back to work almost immediately, rebuilding the highways, transit systems, and other infrastructure that are the backbone of our wonderful nation."

Democratic presidential candidate John Kerry's campaign also weighed in with a critique of Bush's economic record and his speech. "George Bush is touting an economy that has seen health costs, bankruptcies, tuition, energy prices, child care and other vital household expenses hit record highs while family incomes have declined," the campaign said in a statement.
Meanwhile, the Kerry camp argued, employment growth has lagged under Bush, the hourly wage of new jobs created is below the national average and the administration has filed few unfair-trade complaints with the World Trade Organization.

SEC eases rules for non-U.S. corporations
11.16.07   UPI

Wash.D.C.   The U.S. Securities and Exchange Commission has decided to ease accounting rules for non-U.S. corporations, a report says. The SEC, after meeting in Washington Thursday, said corporations from other countries that use international accounting standards will no longer have to adjust to comply with U.S. rules, the New York Times said.
European companies had sought the move, which opens the door for rules approved by the International Accounting Standards Board in London to be used in most parts of the world.It also makes more likely the standards will eventually be adopted everywhere, the report said.

For now, American companies will still follow the Generally Accepted Accounting Principles promulgated by the U.S. Financial Accounting Standards Board. The new rule is effective for the fiscal year that ended Thursday or after.

NYC   U.S. current account deficit grew to a new record in the first quarter of 2004, reaching 5.1% of size of U.S. economy, as Americans' insatiable appetite for foreign goods continued to grow, govt figures showed on Friday. Even though U.S. exports to the rest of the world have been growing at a fast clip as global economic activity accelerates, imports of items like Japanese cars are growing even more quickly, thanks to surging consumer demand and higher energy prices.
The gap in the current account balance, the broadest measure of the nation's trade with the rest of the world, widened by a larger-than-expected $17.9 billion to $144.9 billion in the first quarter, Commerce Dept said. This amounts to 5.1% of the total U.S. economy, up from 4.6% in the fourth quarter.

The report renewed downward pressure on the dollar, with the euro gaining about 0.74% against the U.S. currency. Against the yen , the dollar touched a 6 week low. "Although the U.S. remains the world's primary economic growth engine, the rest of the world is financing a substantial portion of that spending," said Insight Economics chief economist Steven Wood.
Other economic reports on Friday pointed to a slowdown in the pace of economic growth in the latest week, and forecasts of a moderate slowdown heading into 2005. The current account deficit has been blamed for weakening the dollar against other currencies as Americans import more than they export and borrow from the rest of the world to make up for the shortfall in their domestic savings. Insight's Wood pointed out U.S. needs to borrow nearly $1.5 billion daily in order to finance this shortfall.

Much of this gap has been filled by official foreign purchases of U.S. govt bonds, as countries like China & Japan snapped up dollar-denominated assets during massive intervention campaigns to weaken their currencies against the U.S. currency. Official foreign purchases of U.S. assets rose $125.2 billion in the first quarter following an increase of $83.7 billion in the fourth.
Some economists worry that if foreigners eventually slow their purchases of U.S. assets, stock prices could fall and U.S. interest rates be pushed higher. U.S. owned assets abroad climbed $289.3 billion, after a $61.6 gain in the previous quarter, the report showed. Gap between goods imports & exports widened to $150.8 billion in the first quarter, from $139.4 billion in the fourth quarter as the U.S. economy picked up steam.

Weaker U.S. dollar has helped boost exports, making U.S. goods cheaper overseas. The dollar fell 3% in the first quarter on a trade-weighted basis. Surprisingly, the weaker dollar has yet to make a dint in imports, which have become more expensive as a result of the weaker currency. But higher prices have not put off consumers, yet.
A separate report on Friday by the independent Economic Cycle Research Institute said the pace of growth in the U.S. moderated to a 13-month low last week. "These are very clear signs of deceleration on the horizon," said the group's research dir. Anirvan Banerji.
A third report released by the Philadelphia Federal Reserve Bank showed the U.S. economy is forecast to slow down slightly next year, and inflation is also expected to ease from this year's pace. The semiannual survey of 26 private-sector & academic economists predicted the world's largest economy will grow by 3.8% in the first half of 2005, down from 4.1% in the second half of this year.
If that slowdown in the overall economy also dampens demands for imports, the trade deficit could narrow in the year ahead.

Gymnastics gold evens the U.S. w/ China
8.19.04   Reuters

Athens Greece   American swimmer Michael Phelps grabbed a fourth gold at the Athens Olympics Thursday with a clear victory in 200m medley and gold for 16-year-old gymnast Carly Patterson leveled the U.S. with China at 14 each.
19 year old Phelps led from the start and finished almost a body length ahead of compatriot Ryan Lochte. With 2 bronze also won, he could be the first swimmer to win eight medals at a single Olympics, equaling a record for all sports. Patterson captured the all-round individual gymnastics title, ending Russian veteran Svetlana Khorkina's, age 25, … (who took) silver in the teen-dominated sport.

Two earlier golds in the pool had raised U.S.' gold medal haul to 13, one behind China in the overall medals race. Phelps's team mate Aaron Peirsol was dramatically stripped of his gold in the men's 200 backstroke because of an alleged illegal turn. But his victory was quickly restored on appeal and Austria's Markus Rogan had to be content with his silver. American world champion and world record holder Amanda Beard seized the top honors in the 200m breaststroke.

China's shrinking medals lead was defended by weightlifting phenomenon Liu Chunhong, also 19, who took the title and set a world record in the women's 69 kg class with lifts totaling 275 kg, giving China its fourth weightlifting gold of the Games. Zhang Jun and Gao Ling of China gold at the mixed doubles badminton and Zhang Ning, age 29, gold in individual competition at a badminton. "Being more mature means playing better and I've never looked at my age as a big factor," said Zhang.

On Day Six, 28th Olympiad was annoyed by a bomb hoax, disappointed by more doping cases and buffeted by Middle East politics. Olympic officials backed away from sanctioning Iran for its judo world champion's failure to fight an Israeli and five new doping cases in weightlifting were reported. Iran had publicly boasted that its judo world champion Arash Miresmaeili, disqualified for showing up over the maximum weight, was told not to go to the mat with Ehud Vaks last Sunday because of Tehran's political boycott of Israel.
But the International Judo Federation (IJF) said that after investigation it had determined that it was not politics that kept Miresmaeili from fighting Vaks, but a digestive problem. He was fully 5 kg over the 66 kg limit at the weigh-in.
"The commission concluded that since Miresmaeili stated that he had no pre-planned intention for not competing … the only point that remained was that Miresmaeili was overweight on the weigh-in day," the IJF said in a statement.

… Noriko Anno landed a record sixth judo gold medal for Japan and Manfred Kurzer of Germany won gold in probably the last Olympic 10 meter running target shoot. The event is being axed as part of a drive to trim the Olympics.
In an unseemly row in a gentlemanly sport, France, Britain and U.S. lodged a challenge to Germany's gold medal in the equestrian team three-day event. The three, dropped a peg by Germany's gold, united in an appeal to the Court of Arbitration for Sport (CAS).

World weightlifting officials said 7 lifters from Morocco, Moldova, Hungary, India, Turkey and Myanmar had tested positive for performance-enhancing drugs in pre-Olympics tests and had been kept out of the Games.
Anarchists claimed responsibility for a bomb threat at the Greek Athletics Federation's HQ, but police said they found only a bag filled with minced meat and syringes. The little-known "Anarchists' Intervention" group said "commercialized sports serving records, profits, sponsors and medals at any cost cannot but be covered in anabolics."
Unsurprisingly for many Greeks, state investigators were reported to have grave doubts about the alleged motorcycle crash that put Greece's top two sprinters in hospital last week just as Olympic officials were hunting them for a doping test. They withdrew from the Games Wednesday, maintaining their innocence. A judicial source told Reuters police could not find the oil patch on a street where they said they gone into a skid.

NFL boss full of hot air
Politicians come to rescue of fans in Pats-Giants TV flap
12.28.07   Jay Posner SD UT

2 two weeks ago, a spokesman said there was “zero chance” of the NFL making tomorrow night's telecast of the potentially historic Patriots-Giants game available to anyone without NFL Network. According to USA Today, he even paraphrased lyrics from singer Carrie Underwood, saying there was as much chance of anything being changed as there was of “raindrops going back into clouds".
We will be able to see NFL Network's telecast of the Patriots-Giants game on CBS and NBC at 5:15 p.m.
“We have taken this extraordinary step because it is in the best interest of our fans,” NFL Commissioner Roger Goodell said Wednesday in a statement announcing the change. “What we have seen for the past year is a very strong consumer demand for NFL Network. We appreciate CBS and NBC delivering the NFL Network telecast on Saturday night to the broad audience that deserves to see this potentially historic game. Our commitment to the NFL Network is stronger than ever.”

A week ago, Sens. Patrick Leahy D-VT., and Arlen Specter, R-PA, top-ranking members of the Senate Judiciary Committee, wrote a letter to the NFL threatening to reconsider the league's antitrust exemption if the game was not available in more homes.
On Monday, Sen. John Kerry, D-MA, wrote his own letter in which he said if more than 60 percent of the United States remained unable to see the game (NFL Network is available in about 39 percent of TV homes), he would “ask the Senate Commerce Committee to hold hearings on how the emergence of premium sports channels are impacting the consumer.”