U.S. Economic/Financial News
Stock Market Woes Threaten Pension Funds
"It's like the equivalent of a fiscal atom bomb for all of us," said Bingamton, N.Y. Mayor Richard Bucci, following a meeting of mayors from across New York State, as reported Feb. 25 in the New York Democrat and Chronicle. The mayors were told by the New York State and Local Retirement System Fund assistant director that continued stock-market losses will not provide the rates of return required to maintain the pension-fund system. As much as $1 billion may need to be paid into the fund this year. Losses already sustained by the system led to State Comptroller Alan Hevesi's Feb. 7 announcement that state and local governments will have to pay an estimated 11% of their payroll into the pension fundup from 1% or less in 2002! The City of Rochester's pension bill would increase nearly tenfold, from $2.7 million in 2002, to $24 million this year.
Even before this meeting, many mayors responded to Hevesi's notice by saying they would have to raise taxes, cut services, or both, and in some cases, the increase could force troubled cities into bankruptcy, the Democrat and Chronicle said. Desperate for relief, the mayors are pressing state leaders to spread out payments over years, let cities borrow to cover costs, or even re-estimate how much the pension funds need to remain solvent.
Greenspan Warns U.S. Banks Will End, Not with a Bang, But a Whimper
Testifying before the U.S. Senate Banking Committee, Federal Reserve Chairman Sir Alan Greenspan, while acknowledging that no U.S. bank is "too big to fail," babbled that the banks "will be liquidated slowly," so that, rather than a sudden collapse, they "will just fail more slowly."
In other words, the Fed would be able to unwind the banks' derivatives contracts, he claims, to manage the blowout of the bankrupt financial system.
Natural Gas, Oil Prices Reach New Levels
U.S. natural-gas prices jumped 39% from a year ago, to $9.14 per million BTU in futures trading in New York, on Feb. 24, the highest level in more than two years. Spot natural-gas prices at Henry Hub, the wholesale benchmark price point in Louisiana, on Feb. 25, shot up above $18 per million BTU, an all-time high. Residential heating oil prices soared 50%, compared to a year ago, to a record-high of $1.15 per gallon, breaking the previous record set in December 1979. The increase in natural-gas prices hits industrial users, as well as gas and electric companies, in addition to the more than 50% of U.S. homes heated by natural gas.
At the same time, crude oil prices soared to a 12-year high, with April delivery prices trading as high as $38 per barrelthe highest level since October 1990on the futures market of the New York Mercantile Exchange, and closed at $37.70 per barrel.
More Government Fakery on Price Inflation
Echoing Lyndon LaRouche, New York Post columnist John Crudele blasted the government's fakery on energy-price inflation. The Federal Bureau of Labor Statistics says you're not paying much more for gas, Crudele noted on Feb. 25. But Washington, "is using a statistical trick that even some of its own [analysts] ... can't explain ... called 'intervention analysis'.... If something unusual, like a war, happens that causes the cost of oil to rise, the government simply takes it out of the calculation for the consumer price index...." That is, even before all the other massages, such as seasonal adjustment. In other words, the BLS doesn't count the extra energy cost due to unusual occurrences, in its inflation statistics. The real rise in gasoline prices at the pump is 12%, Crudele asserts, but the government has been counting it at 6% for the last two months.
Food Assistance Spending Jumped to Near-Record High in Fiscal 2002
In a sign that the lower 80% of family income brackets are being hammered by the economic collapse, spending by the U.S. Department of Agriculture for food assistance programs (such as food stamps) in fiscal 2002 shot up by 10.6%the largest annual increase since fiscal 1992to $37.8 billion, slightly below the record set in 1996. About one in five Americans received help from the USDA's 15 domestic food assistance programs, at some point during October 2001-September 2002. Each of the five core food assistance programs expanded, due to increasing poverty and unemployment, according to the USDA's Economic Research Service's report, "The Food Assistance Landscape, March 2003."
*Food Stamp Program: The average number of people requesting food stamps rose to 19.1 million per month, a 10% jump over FY 2001, the largest percentage increase in 11 years. In 11 of the 12 months, food stamp requests were higher than the previous month. The average monthly benefit per person grew by the largest amount in 11 years. Total spending increased by 15%, to $20.6 billion.
*Special Supplemental Nutrition Program for Women, Infants, and Children (WIC): The average number of WIC participants increased to about 7.5 million per monththe largest number everin the program that provides free supplemental food packages as well as health and social service referrals, to low-income women, infants, and children up to age 5 who are at nutritional risk. Children accounted for half of all WIC participants. Spending totalled a record high $4.3 billion.
*National School Lunch Program: Each school day, about 58% of all children attending a participating school, received low-cost or free lunches due to being from low-income families. During the year, 4.7 billion meals were servedalmost half of which were free.
*School Breakfast Program: Participation rose to an average 8.1 million children each school day. Of the almost 1.4 billion breakfasts that were served, almost 75% were provided free.
*Child and Adult Care Food Program: The number of subsidized meals served in adult day-care facilities jumped by 10%, while those served in child care centers increased by 7%.
'Consumer Confidence' Plummets to Near 10-Year Low
The Consumer Confidence Index in February plunged almost 15 points to 64.0its lowest level since October 1993reported the Conference Board Feb. 25, citing worries over lack of job creation, low income growth, rising fuel costs, and a possible war against Iraq.
Outsourcing of 'New Economy' Jobs on the Upswing
Remember those IT jobs that were going to replace the U.S. manufacturing jobs that were outsourced? The IT jobs are being outsourced, too. For example, a Business Week article cited in the Washington Times Feb. 27, described technology parks on the outskirts of India's major cities, where IT work that Americans did three years ago is now done. The same thing is happening in China, the Philippines, Russia, Eastern Europe, Costa Rica, and South Africa.
Another sign of the Roman Empire-style collapse of the once-great U.S. economy.
Wall Street Police Blotter
*Four former Qwest Communications executives were indicted for accounting fraud Feb. 25. The Qwest execs are accused of devising a scheme to inflate revenue by more than $33 million during the second quarter of 2001 (during which time Arthur Andersen was Qwest's accountant), to meet growth targets, at the fourth-largest local U.S. telephone company. The Federal indictment charges the executives with securities and wire fraud, conspiracy, filing false reports with the Securities and Exchange Commission, and making false statements to accountants. If convicted, the defendants could face up to 10 years in prison and fines of $1 million, said U.S. Attorney General John Ashcroft, adding that arrest warrants have been issued. The executives allegedly booked millions of dollars prematurely from a sale to the Arizona School Facilities Board.
The defendants are the former chief financial officer Grant Graham, senior vice president Thomas Hall, vice president John Walker, and assistant controller Bryan Treadway.
In addition, the SEC filed a simultaneous civil lawsuit against the four, plus one current and three other former Qwest executives.
*Two former K-Mart vice presidents were indicted on charges of securities fraud and conspiracy for inflating profit by $42.3 million, prior to the retailer filing for bankruptcy. Enio Montini and Joseph Hofmeister could face up to 10 years in prison and a $1 million fine if convicted of the most serious charges. They were also accused of making false statements to the Securities and Exchange Commission.
*The Dutch company Royal Ahold is being investigated by the U.S. Attorney General's office and the Securities and Exchange Commission (SEC), after the world's third-largest food retailer said its U.S. food-service unit inflated profit by $500 million in 2001 and 2002. Ahold's bank creditors, including Goldman Sachs and JP Morgan Chase, could force asset sales were the company to fall short of earnings targets.
*Fleming Cos., the top U.S. grocery distributor, said that the SEC has launched a formal investigation into its trade practices with suppliers. The head of its wholesale operations resigned. Fleming also said it would cut 1,800 jobs to cut costs and reduce its $1.95 billion debt.
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