U.S. Economic/Financial News

Agro-Scientists Protest USAID Funding Cuts

April 23 (EIRNS)—At a time when many countries are in panic, and relief organizations are warning of a pending calamity brought about by worldwide food shortages, the Bush Administration, behind the scenes, is planning to slash funding for international agricultural research, international agro-researchers report.

Last week, several concerned scientists circulated an online petition seeking to reverse U.S. government cuts to research funds they say are being planned by the USAID, calling them unacceptable mistakes that will damage worldwide food production for many years to come.

Robert Ziegler, the director-general of the International Rice Research Institute (IRRI) in Los Banos in the Philippines, lashed out at the Bush Administration's decision, saying: "You couldn't ask for worse timing. Part of the reason we're having this deterioration of the global agricultural situation is that there has been a steady erosion of support for research."

The scientists, who have garnered some 800 signatures to date, plan to send the petition to key members of the U.S. Congress and USAID administrators. Considering the growing dimensions of the crisis, and the threat it poses to the stability of populous and poor nations, agro-scientists do not think "it should be difficult to communicate that it's a desperate situation."

Bush Commission Claims 'No Speculation in Food Crisis'

April 22 (EIRNS)—U.S. farmers are starting to see the dark side of the bubble in their products' prices—cash margin calls that can run into the many tens of millions of dollars for a single farm cooperative—but the Bush Administration today told them not to worry, there is no speculation in food!

The Commodity Futures Trading Commission (CFTC) held a day-long, packed hearing in Washington today to let farm groups blow off steam about hedge fund speculation in agro-futures markets (wheat, corn, hog bellies, etc). But the CFTC and Agriculture Department chief economists' testimony claimed that only free-trade supply and demand, not futures and derivatives speculation, was driving the food price spiral. The CFTC was sending a signal that the Cheney-Bush White House, rather than take regulatory action, would let food commodity markets stop functioning entirely, amidst the global financial disintegration.

Everyone involved in commodities markets—including the farm producer groups at the CFTC hearing—knows that since the global financial markets crashed last Summer, huge flows of speculative capital managed by hedge funds have flooded the markets for food and metals futures, overwhelming those relatively small markets. The futures price of rice has doubled in two months, for example; futures prices for grains as a whole have doubled since last July.

Very bad for eaters—good for farmers? Not now: Farmers are losing the ability to tell what the price of their produce is. The grain or rice elevator companies through which farmers have sold their produce for generations, are refusing to make future purchases, because of the volatility of prices, and because the elevator companies depend on credit which banks are refusing to extend. Several such "country elevators," as they are called, have shut down in the past few months.

Farm producers are increasingly being forced to wait for harvest and make a cash sale to food-marketing conglomerates like ADM or Cargill. There is no other recourse. And that cash sale price often has no relation to the "futures price" for that month which the farmers looked up on the Chicago Board of Trade or other futures market.

When the farm co-ops try to "hedge" that problem by buying their own futures and options—rather than through the elevator operators—they start to get stiff margin calls, demanding cash, when the prices of their product jump up. Essentially, they wind up buying their own crops at higher prices than they will be able to sell them!

As California Crumbles, Arnie Pushes Green Fascism

LOS ANGELES, April 23 (EIRNS)—From the minute Arnold Schwarzenegger became governor of California, Lyndon LaRouche warned that the state would become a laboratory for the corporatist schemes of London's leading U.S. fascist, George Shultz. In league with Michael "Mouse-olini" Bloomberg and Felix Rohatyn, Arnie is continuing to push privatization schemes for infrastructure; setting up a cabinet-level Office of Volunteerism, to recruit unemployed "volunteers" to replace presently employed state workers, especially in parks; and, in collaboration with environmentalist networks tied to Al Gore, the governor is backing a ballot referendum to mandate 40-50% of the state's energy production to be from "renewable" energy sources by 2020. His soul-mate Bloomberg held a fundraiser for him in New York City last week, to raise funds for his "ballot initiative committee," to which multi-billionaire Bloomberg contributed $250,000.

While Schwarzenegger is popping up everywhere, promoting so-called Green solutions, California continues to head for a complete breakdown crisis. Some features of this include:

* There is no budget plan yet, to deal with the $7 billion deficit that remains in the '08-09 budget. Reports from Sacramento indicate at least another $1 billion will soon be added to the deficit, as the revenue shortfall keeps growing. Schwarzenegger's only proposal is brutal cuts, including 10% across the board for education, social services, and health care.

* Desperate school districts are bracing for massive layoffs of custodial employees, counselors, and teachers. One district is holding bake sales, another asking parents to donate $400 for each student they have in the school district; another is asking parents to volunteer to do work in the school system.

* A dramatic increase in bank repossessions of homes, notices of defaults, and drop in home values. Statewide, there were 113,676 notices of default sent out in the first quarter, compared to 81,550 in the fourth quarter of 2007. In the counties which surround the capital city of Sacramento, there were 5,278 repossessions in the first quarter, and 9,764 new notices of default, while the median home price is down 27% in Sacramento County since March 2007.

* The state's official unemployment rate jumped to the third-highest in the nation, at 6.2% in March. Only Michigan and Alaska have higher rates. Many rural counties have double-digit rates.

In response to this collapse, the City Council of Compton, California passed a resolution endorsing the Homeowners and Bank Protection Act (HBPA) on April 22. The act was proposed by Lyndon LaRouche, and is being circulated widely by the LaRouche PAC.