U.S. Economic/Financial News
Energy Deregulation Blows Up in Texas
July 17 (EIRNS)The deregulation of the power sector in Texas by then-Gov. George W. Bush has caused an explosion in an "Enron"-style binge of speculative looting, with electricity prices up to 40 times the national average. Bush signed the dereg bill in 1998, saying: "Competition in the electric industry will benefit Texans by reducing monthly rates and offering consumers more choices." Within a few years of the bill's implementation, in 2002, the retail companies which were set up to buy electricity from competing producers, and then sell it to consumers, began going bankrupt, and the bottom-feeders were able to move in. Suez Energy Marketing NA (part of the French Suez group) figured out how to offer energy at $170 a mw hour, but end up selling it at $2,250 per mw houra 1400% increase.
The congested power lines in the state, which were not designed for free-market electricity transfers all over creation, helped force buyers into the spot market, where the sky's the limit.
Hundreds of IndyMac Customers Line up to Get Their Money
July 14 (EIRNS)IndyMac depositors were not taking their "soma" and instead of being lulled by false assurances, more than 200 were lined up outside the bank when it opened in Pasadena, California, demanding to get their funds. The LaRouche Youth Movement was there, exposing George Soros's role in bringing about the financial crisis, and presenting Lyndon LaRouche's unique solution to the crisis.
In a hilarious counter-operation, officials of the FDIC were also outside the bank, telling depositors to go home, that their money is safe. Needless to say, the depositors were not willing to take chances.
FDIC spokesman David Barr told reporters outside IndyMac's headquarters, "We have to completely unwind the affairs" of the bank. "We may sell a portion to another bank, sell real estate. There may be lawsuits. There are a lot of different aspects to this," indicating it could take "years" to sort out the mess. Recalling echoes of the Great Depression, IndyMac customer James Sherman who had more than $100,000 deposited in the bank, said, "This is my life savings here," adding that he hoped to get 50 cents on the dollar for his savings that are above the federally insured level. "What do you resort to now, putting money back in the mattress?" he asked.
Youth Face Depression-Era Unemployment Rates
July 15 (EIRNS)The national jobless rate for U.S. youth is the highest in six decades, according to a report by Northeastern University's Center for Labor Market Studies. 51% of the nation's teens were employed in 2000; a mere 37% of teens are employed (about one in three) when the study was made in April, and probably fewer today. According to them, the teen employment rate has been deteriorating for over a year, since the Fall of 2006, and today, an additional 2 million teens are unemployed. Youth today are fighting with immigrants and lay-off victims for the same entry-level jobs. Quoting the report, "Low income blacks, Hispanic teens face the equivalent of a Great Depression." The metropolitan area with the highest unemployment rate is Washington D.C., with 86% unemployed youth, but Chicago, Detroit, and New York were all above 80%.
What the report noted, that coverage in today's Washington Post overlooked, is that the entire job market had shrunk by 30% since the beginning of the year.
GM Cuts Off Arm and Leg To 'Stay Alive'
Trying to keep its de facto bankruptcy from becoming de jure in the worsening economic collapse, General Motors Corp. on July 15 announced large new capacity and workforce cuts, and other self-cannibalization moves it calls "cost-saving." They will mean another reduction of perhaps 20,000 employees in the near future.
The company said that it now expects only a 14 million total of all car and light truck sales in the United States this year (a 13% drop from 2007, and nearly 20% down from 2005), and will accelerate the already announced closing of four pickup truck assembly plants, laying off their 10,000 workers by the Fall. GM's blue-collar production workforce will fall to about 60,000, half of what it was just two years ago. It will offer buyouts to 33,000 white-collar workers in the United States, and by that means or layoffs, plans to get rid of 10,000 of them. And it announced that the United Auto Workers has been forced to agree to "defer" the $1.7 billion GM payment which is due to the company retirees' health-care trust, which in last year's contract was dumped on the union to administer.
GM said it will also eliminate its stock dividends, and try to raise $2-3 billion in cash by selling brand names, overseas subsidiaries, and its remaining stake in GMAC, its former financial arm, which has been losing large amounts on mortgages and mortgage securities.
All of this is supposed to "generate" $15 billion in cash which would get the automaker through 2009, at its present rate of losses.
Lyndon LaRouche declared in February 2005 that GM was on the verge of bankruptcy, and then proposed Emergency Recovery Act legislation which could have saved the U.S. auto/machine-tool sector, had Congress acted on it.