From Volume 8, Issue 20 of EIR Online, Published May 19, 2009

U.S. Economic/Financial News

Update from the Epicenter of Collapse: California

May 13 (EIRNS)—California's export figures confirm an acceleration of the overall economic disintegration. The figures from March 2009 show an overall 20.9% decrease, compared with March 2008. The total value of exports passing through ports in California fell to $9.8 billion, compared to $12.4 billion in March 2008. A steep drop in manufacturing exports led the way, as they were down 24.8%. These figures underline the problem of a catastrophic decline in revenue to the state, leading to an additional $21+ billion shortfall—after Governor Schwarzenegger and the state legislature had supposedly addressed a $40+ billion shortfall.

The collapse of revenues has far exceeded the forecasts of any of the economists used by the state, thus discrediting economists in the government, the academic institutions, and the private sector. Their forecasts have been repeatedly wrong, disastrously so. These are the same economists who were gleefully declaring the mortgage bubble a new economic paradigm, and missed completely the blowout of that bubble, not to mention the dot-com bubble before it. Only LaRouche PAC, the political action committee headed by Lyndon LaRouche, has been consistently right in its forecasts for California.

In a recent statement, LaRouche declared that the state is bankrupt. Instead of bailing out bankrupt financial institutions, President Obama should provide tens of billions of dollars of Federal credit to California, to fund essential infrastructure projects, which will create jobs. Brain-dead financial institutions, mortgage companies, and insurance companies, instead of being propped up to look as if they were still functioning, should be put through bankruptcy reorganization, with their bad assets frozen.

Obama-Orszag Scheme To Finesse IMF Funding

May 12 (EIRNS)—Office of Management and Budget director Peter Orszag has taken the lead on working the additional $100 billion in IMF funding President Obama agreed to at the London G20 Summit through—or behind the backs of—Congress—in addition to a $108 billion increase in the U.S. IMF quota.

According to a report in Politico, Orszag has tapped all his old contacts at the Congressional Budget Office in the process, even calling and attending a meeting (last month), something he never did when at the CBO. Obama wants all the wheels greased before submitting a formal request, reportedly even going to the extent of calling his friend, Senate Appropriations Committee chairman Daniel Inouye (D-Hi.), about adding the money to a wartime spending bill coming up for a vote May 14.

Politico notes that funding the IMF has always been problematic, evolving into a Byzantine routine only an accountant could understand. IMF contributions are considered as "exchanges of assets," since the U.S. supposedly gets Special Drawing Rights in return for funds, which, therefore, are not a charge against the budget. However, in these days of financial collapse and deficit bulge, questions about the "worth" of the SDRs are being heard more clearly.

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