From Volume 7, Issue 2 of EIR Online, Published Jan. 8, 2008

U.S. Economic/Financial News

Greenspan Admits Economic Crash—And His Role

Dec. 31 (EIRNS)—Former Federal Reserve chairman Alan Greenspan's warned today that "something unexpected" will happen soon, which will "knock us all down." Greenspan said in his interview with National Public Radio, "What I have to forecast is that something will happen which is unexpected, which will knock us down.... The odds of that happening, I think, are rising, because we are getting in vulnerable areas."

Greenspan added, "What I point out is that we're in a turning phase, and that the extraordinary improvements that have occurred in the world economy in the last 15 years are transitory, and they're about to change.... So, I think this whole process will begin to reverse." Interest rates, Greenspan said, "now are set by the supply of investment money worldwide; a force much larger than the concerted efforts of central banks, including the Fed.... We and all other central banks lost control of the forces directing higher prices in homes."

Greenspan admitted his own miserable record at forecasting, despite sitting at the helm of the Fed for nearly two decades: "The record of forecasting not only of myself and of companies I have developed, but of the profession as a whole, is not particularly spectacular," Greenspan said. "I've been forecasting since the early 1950s. I was as bad then as I am now."

National City Bank in Trouble, in Need of Protection

Jan. 2 (EIRNS)—Ohio-based National City Bank is a prime example of a regional U.S. bank needing protection from insolvency due to the mortgage-securities blowout. National City, federally chartered and the tenth-largest bank headquartered in the United States, cut its dividend in half, the first cut since 1935, and announced that its loan loss provisions for 2007 would mount to over $1.3 billion, including $700 million in just the fourth quarter. These losses come from both mortgage loans, which National City continues to make through 1,400 branches in nine states, and mortgage-backed securities. The bank also announced layoffs of 900 more employees, on top of 2,500 it had already eliminated from September through November; in all, it has laid off about 12% of its workforce.

The bank said the dividend cut was "to overcome the near-term challenges facing the industry and our company." Those challenges include potentially closing down and damaging the economy and households throughout the Midwest, without the Federal protection outlined in Lyndon LaRouche's Homeowners and Bank Protection Act.

'We've Crashed': Northern Virginia County Official

Jan. 1 (EIRNS)—"Instead of having a soft landing, we've crashed," said Edward L. Long Jr., a Fairfax, Va. deputy county executive. Property values were jumping 20% a year in Fairfax, one of the nation's wealthiest counties, but now values are flat or falling. The number of foreclosures has exploded, from fewer than 200 two years ago to about 4,000 in 2007. The resulting $220 million budget shortfall has officials warning of significant cuts in services, including to schools.

This is but one example given in a Dec. 31 Los Angeles Times piece on the budget crises state and local governments are facing as a result of the collapse of property tax and related revenue. "We're talking about a pretty tough fiscal environment for the next four or five years," said Christopher W. Hoene, the director of policy and research for the National League of Cities. "Libraries, parks, after-school programs ... you'll see lots of questions raised about cities' abilities to fund them."

Globalization: 7.7 Million Unemployed Americans

Jan. 4 (EIRNS)—Depression reality is showing through the massaged statistics released by the Federal government. Even the Consumer Price Index, though so "adjusted" as to be fraudulent, is reporting 9.6% annual inflation—as is the Producer Price Index. And the Bureau of Labor Statistics' (BLS) job figures, released today, reveal the speeding collapse of what remains of the U.S. productive economy, especially the vital auto/machine-tool sector. The "real economy" is being hit hard by the financial and banking crisis.

According to the BLS, from December 2006 to December 2007, the loss in goods-producing jobs was 445,000, accelerating a seven-year loss that now reaches 2.6 million productive jobs. The 2007 fall included 220,000 jobs lost in construction (49,000 is the preliminary figure for December 2007, the biggest monthly loss yet). Then, 212,000 jobs were lost in manufacturing (31,000 in December 2007), meaning that under Cheney-Bush, 3.33 million American manufacturing jobs have been lost, 20% of the United States' total when they took office.

Within the manufacturing sector, 2007 saw 75,000 jobs lost in the auto industry; some 350,000 auto/machine-tool jobs have been lost in seven years of Cheney-Bush, and 2007 was the worst year.

During 2007, according to the BLS, the number of unemployed Americans increased by 900,000 to 7.7 million, and the number forced to work only part-time, increased by 456,000 to 4.7 million. Add in the discouraged workers, who dropped out of the labor force during the year, and real unemployment is 13 million, nearly 10% of the non-farm workforce. The fraction of the American working-age population which is employed, fell 0.7% over the year, to 62.7%, about 3% below the levels of the early 1980s.

Consumer Bankruptcy Filings Rose 40% in 2007

Jan. 4 (EIRNS)—Despite the stringent new bankruptcy rules in place since 2005, there were 801,840 filings in 2007, 40% more than in 2006, when there were 573,203 filings. This "presages even higher filings this year, as the heavy consumer debt load is made worse by the home mortgage crisis," said Samuel Gerdano, from the American Bankruptcy Institute, as reported by The figure still doesn't approach the 2,039,214 filings in 2005, when the new bankruptcy rules went into effect.

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