Oil, it’s the lifeblood of our society. It’s given us the freedom and wealth we have today. It’s given us automobiles and machinery and greased the wheels of the industrial revolution. It made old Jed a millionaire. But oil’s in trouble, the price is up and everyone thinks they understand it. But what if the price of oil wasn’t really up? What if it were just an illusion?

“The price of oil is skyrocketing, and that means gas prices are up…”
That’s about the limit of what most Americans know and understand about the whole oil situation. But there are more complex issues at work, and they involve more than just Middle East politics and China.

The American Geological Institute (AGI) recently released a report looking at the price of crude oil in relation to the U.S. dollar and the price per ounce of gold. It highlights a fact that probably makes some folks at the Federal Reserve very nervous.

This graph makes it easier to understand:

The bottom purple line is the price of a barrel of crude oil per ounce of gold (if you wanted to use gold to pay for a barrel of oil). As you can see, that line is stable, and has been for the entirety of the graph, which is about 7 years.
The top two lines are the price of oil in relation to currency (blue is the Dollar and the red is the Euro). Those lines show that the cost of oil has been going up in relation to currency only. What this chart makes obvious is that the value of oil has not been increasing in real terms, currency has just been decreasing in value.

To put it another way, if the US Dollar were still based on gold (as it was until Nixon eliminated the Bretton Woods system in 1971), then the price of oil would be just as stable as that purple line in the chart is.

So oil is worth the same, and the US dollar is just worth less. Maybe we need to shift our focus away from war and drilling; and towards a better economic policy at home.

Here is the AGI data report

And here’s the summary from the AGI report:

The steep increase in the price of crude oil in the United States remains a headline issue, along with the falling US dollar. The drop in the dollar has caused concern in oil-producing countries which use it as the economic basis for the commodity, and often their currency. The chart below shows the spot market price of crude oil per barrel (BBL) in US dollars and in euros from 2001 to today. The price of oil has grown faster relative to the dollar than to the euro. Yet, a portion of the rise in oil prices is due to the fall of the value of the dollar. The graph also shows the number of barrels of crude oil per cost of an ounce of gold, demonstrating the parallel growth in commodity pricing.
If the US dollar had remained strong in the global economy, oil might, in theory, be around $65 per barrel. However, oil is priced in dollars, and oil prices continue to rise. The impact of increased oil prices can not be ignored in the US economy, and, in turn, can further weaken the dollar. Resource economics is a complex feedback loop where today’s resource boom is driven by many external factors. This complex system bears watching by all geoscientists.

If you enjoyed this post, make sure you subscribe to my RSS feed!

Last week, Fannie Mae and Freddie Mac had just announced record losses, and so had most reporting corporations. Unemployment was mounting, the foreclosure crisis was deepening, state budgets were in shambles, and massive bailouts were everywhere. Investors had every reason to expect the dollar and the stock market to plummet, and gold and oil to shoot up. Strangely, the Dow Jones Industrial Average gained 300 points, the dollar strengthened, and gold and oil were crushed. What happened?

It hardly took psychic powers to see that the Plunge Protection Team had come to the rescue. Formally known as the President’s Working Group on Financial Markets, the PPT was once concealed and its very existence denied as if it were a matter of strict national security. But the PPT has now come out of the closet. What was once a legally questionable “manipulator” of markets has become a sanctioned stabilizer and protector of markets. The new tone was set in January 2008, when global markets took their worst tumble since September 11, 2001. Senator Hillary Clinton said in a statement reported by the State News Service:

“I think it’s imperative that the following step be taken. The President should have already and should do so very quickly, convene the President’s Working Group on Financial Markets. That’s something that he can ask the Secretary of the Treasury to do. . . . This has to be coordinated across markets with the regulators here and obviously with regulators and central banks around the world.”

It’s been 75 years since the federal government, on the spurious grounds of fighting the Great Depression, ordered the confiscation of all monetary gold from Americans, permitting trivial amounts for ornamental or industrial use. This happens to be one of the episodes Kevin Gutzman and I describe in detail in our new book, Who Killed the Constitution? The Fate of American Liberty from World War I to George W. Bush. From the point of view of the typical American classroom, on the other hand, the incident may as well not have occurred.

A key piece of legislation in this story is the Emergency Banking Act of 1933, which Congress passed on March 9 without having read it and after only the most trivial debate. House Minority Leader Bertrand H. Snell (R-NY) generously conceded that it was “entirely out of the ordinary” to pass legislation that “is not even in print at the time it is offered.” He urged his colleagues to pass it all the same: “The house is burning down, and the President of the United States says this is the way to put out the fire. [Applause.] And to me at this time there is only one answer to this question, and that is to give the President what he demands and says is necessary to meet the situation.”

Among other things, the act retroactively approved the president’s closing of private banks throughout the country for several days the previous week, an act for which he had not bothered to provide a legal justification. It gave the secretary of the Treasury the power to require all individuals and corporations to hand over all their gold coin, gold bullion, or gold certificates if in his judgment “such action is necessary to protect the currency system of the United States.”

The Emergency Banking Act reached back in time to amend the Trading with the Enemy Act of 1917, which had originally been intended to criminalize economic intercourse between American citizens and declared enemies of the United States. One provision of the act granted the president the power to regulate and even prohibit “under such rules and regulations as he may prescribe … any transactions in foreign exchange, export or earmarkings of gold or silver coin or bullion or currency … by any person within the United States.” In 1918, the act was amended to extend its provisions two years beyond the conclusion of hostilities, and to allow the president to “investigate, regulate, or prohibit” even the “hoarding” of gold by an American.

After those two years elapsed, people generally assumed that the Trading with the Enemy Act had passed into desuetude. But the Supreme Court later explained that the act’s provisions were not limited merely to World War I and the two years that followed — it “stood ready to meet additional wars and additional enemies” and could be called into service once again under those circumstances. (Little did anyone suspect in 1917 that these “additional enemies” would turn out to be the American people themselves.) As amended by the Emergency Banking Act of 1933, the Trading with the Enemy Act no longer said that simply “during time of war” could the president prohibit the export of gold or take action against “hoarding” (i.e., holding on to one’s money). Now these actions could be taken during time of war or “during any other period of national emergency declared by the President.”

A month later, claiming authority from the Emergency Banking Act and its amendment to the Trading with the Enemy Act, the president ordered all individuals and corporations in America to hand over their gold holdings to the federal government in exchange for an equivalent amount of paper currency. The paper currency they were receiving in exchange for the gold had always been redeemable in gold in the past, so few saw anything amiss in this coerced transaction, and most trusted the government’s assurances that this was somehow necessary in order to combat the Depression. Only later would they discover that they weren’t getting that gold back, and that the paper dollars they were being given in exchange would be devalued. Soon only foreign governments and central banks would be able to convert dollars into gold — and even that link to gold would be severed in 1971.

On June 5, 1933, at the behest of the president, Congress took the next step, passing a joint resolution making it illegal to “require payment in gold or a particular kind of coin or currency, or in an amount in money of the United States measured thereby.” Any provision in a private or public contract promising payment in gold was thereby nullified. Payment could be made in whatever the government declared to be legal tender, and gold could not be used even as a yardstick for determining how much paper money would be owed.

For the next six months President Roosevelt pursued an erratic monetary course. Every day a new gold price was declared, on a basis no one could figure out. Private lending in effect came to a halt, with the value of the dollar in constant flux amid the prospect of ongoing devaluation. As Senator Carter Glass (D-VA) put it, “No man outside of a lunatic asylum will loan his money today on a farm mortgage.” And thus the government could triumphantly announce that since the private sector was cruelly depriving Americans of credit, it would have to step in and provide relief.

Meanwhile, Senator William Borah was assuring his countrymen that when it came to the nation’s monetary system, “there is no limitation upon the power of Congress. It is not circumscribed in any respect whatever. It is given full and plenary power to deal with that subject; and therefore it is the same as if there were no Constitution whatever.” Borah also tried to argue that “when an individual takes an obligation payable in gold” he does so “with the full understanding that the Government may change its monetary policy at any time and that he must accept whatever the Congress says at a particular time shall constitute money.”

The general rule (to which there are occasional exceptions) that no senator should ever be listened to on anything holds here: the power of Congress over money is in fact very limited. It has the power to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.”

Coining money simply refers to the process of taking a precious metal, converting it into coins, and stamping those coins with an indication of their metal content. The power to regulate the value of money does not involve a power to dilute the value of money by inflation, an absurd and self-serving rendering. Regulation of the value of money is a power of declaration and comparison, whereby some monetary standard is compared to other coins in circulation and an exchange rate for these various kinds of currency established according to the amounts of precious metals (with due allowance for the distinct values of different precious metals) in each. In other words, if Congress were to declare by statute what the prevailing market exchange rate between gold and silver was, and thus to “regulate” gold and silver coins vis-à-vis one another — or, more precisely, vis-à-vis the Spanish silver dollar that constituted the American monetary standard — then it would be properly exercising its constitutional power, which consists of nothing more than this.

That is why this power appears in the same clause with the power to “fix the Standard of Weights and Measures,” which involves the measurement of fixed standards in order to assure uniformity throughout the nation. That power does not give Congress the power to declare that one-tenth of a pound shall now be declared a pound, but to take an already-existing standard and codify it. Every single monetary statute enacted from the ratification of the Constitution until the 1930s understood the congressional power to regulate the “value” of money not in the sense of declaring money to possess some arbitrary value that suits the whims of politicians or central bankers, but in the sense of establishing the relative values of gold and silver coins in terms of the ever-shifting relative values of those metals on the free market. (Needless to say, the market is perfectly capable of doing this on its own.)

Moreover, the “dollar” was not an arbitrary term at the time the Constitution was drafted. In the late 18th century, everyone knew what the “dollar” referred to: the silver Spanish milled dollar, which was in widespread use in the United States. The Constitution twice refers to the dollar — in Article I, Section 9, Clause 1 (a clause that everyone understood to involve a tax on the import of slaves), and in the Seventh Amendment (which protected the right to a jury trial in civil cases involving at least twenty dollars). If the dollar had been something that Congress could manipulate at will, or if “dollar” had been merely a generic term to refer to whatever Congress should arbitrarily choose to recognize as currency, the South would never have accepted that clause — or the Constitution itself. Congress might have manipulated the dollar so as to make the tax on slave imports prohibitively expensive. It could also have effectively abolished trial by jury in civil cases by making twenty “dollars” an astronomically high amount of money.

The Court never pronounced upon the constitutionality of the gold seizure (for reasons we speculate on in our book), the legality of which it simply took for granted. The cases it chose to hear involved the cancellation of gold clauses in public and private contracts. Known as the Gold Clause Cases, Norman v. Baltimore & Ohio Railroad Co., Nortz v. United States, and Perry v. United States were argued in January 1935 and decided the following month. In each case Chief Justice Charles Evans Hughes wrote the opinion for the Court; Justice McReynolds composed a single dissent that he applied to all three.

The Court declared in the first two cases that the federal government had been entitled to cancel all private contracts in gold. The perpetuation of gold clauses would have amounted to the “attempted frustration” of “the constitutional power of the Congress over the monetary system of the country…. [T]hese clauses interfere with the exertion of the power granted to the Congress.” Not a stitch of evidence existed for any aspect of this argument.

Perry, the third case, involved a man who had purchased in gold a US bond that was payable in gold, and was seeking payment either in gold or in the equivalent in paper currency. Since the government intended to pay in depreciated dollars, he believed he was receiving far less than he was entitled to under the terms of the bond. The bond’s face value was $10,000 in gold. In the inflated dollars of post-gold-standard America, it would have taken nearly $17,000 in paper currency in order to satisfy what the government had contracted to pay him.

The Court declared that the plaintiff was indeed entitled to his gold, since the government had an obligation to live up to its promises. But in not paying him his gold, the government wasn’t really wronging him, since gold was now illegal to hold. In other words, if the government paid him in gold, it would then have to confiscate that gold from him anyway since holding gold was against the law.

Speaking for the minority, Justice McReynolds declared:

Just men regard repudiation and spoliation of citizens by their sovereign with abhorrence; but we are asked to affirm that the Constitution has granted power to accomplish both. No definite delegation of such a power exists; and we cannot believe that the farseeing framers, who labored with hope of establishing justice and securing the blessings of liberty, intended that the expected government should have authority to annihilate its own obligations and destroy the very rights which they were endeavoring to protect. Not only is there no permission for such actions; they are inhibited. And no plenitude of words can conform them to our charter.

To the argument that the bondholder had suffered no damage in being denied payment in gold since it was now illegal for people to own gold, the dissent replied: “Obligations cannot be legally avoided by prohibiting the creditor from receiving the thing promised…. There would be no serious difficulty in estimating the value of 25.8 grains of gold in the currency now in circulation.” The contract to pay in gold having been broken, the holder was at least morally entitled to receive in currency not just the nominal amount of the bond but an amount in paper dollars equivalent to what he would have earned if the payment could have been made in gold. “For the government to say, we have violated our contract but have escaped the consequences through our own statute, would be monstrous. In matters of contractual obligation the government cannot legislate so as to excuse itself.” Suppose a private individual tried to do the same thing, “secreting or manipulating his assets with the intent to place them beyond the reach of creditors.” Any such attempt “would be denounced as fraudulent, wholly ineffective.”

“Loss of reputation for honorable dealing,” the dissent concluded, “will bring us unending humiliation; the impending legal and moral chaos is appalling.”

By the 1970s the federal government had once again permitted Americans to hold gold coins. But when it came time to actually mint them again, it made sure that gold coins could never circulate and displace the constantly depreciating paper currency printed by the US government: the law required that such coins could circulate with a face value only a tiny fraction of their market value.

$22 $20

The full story of the gold confiscation is actually much worse than this, and we tell it in Who Killed the Constitution? What this episode teaches us is not so much that we need to “return to the Constitution,” though that would be an improvement over what we have now, but rather that pieces of paper that governments themselves interpret cannot be expected to prevent governments from doing what they think they can get away with.

Lysander Spooner once said that he believed “that by false interpretations, and naked usurpations, the government has been made in practice a very widely, and almost wholly, different thing from what the Constitution itself purports to authorize.” At the same time, he could not exonerate the Constitution, for it “has either authorized such a government as we have had, or has been powerless to prevent it. In either case, it is unfit to exist.” It is hard to argue with that.

If you enjoyed this post, make sure you subscribe to my RSS feed!

by U.S. Rep. Ron Paul, M.D. (R-TX)

If you enjoyed this post, make sure you subscribe to my RSS feed!

The federal agency insuring bank deposits learned that it can’t afford to ignore the blogs following its seizure this month of IndyMac Bank, the largest bank failure since the 1980s.

“The blogs were a bit out of control,” Sheila Bair, chairman of the Federal Deposit Insurance Corp., told the San Francisco Business Times after a speech in San Francisco this week.

That’s putting it mildly. Following the FDIC’s takeover of Pasadena’s IndyMac on July 11, widely followed blogs were speculating on bank runs on some of California’s largest banks based on nothing more than people waiting for their branch to open or large deposits moving between financial institutions.

The FDIC plans to pay closer attention to the blogosphere in the future.

“We’re very mindful of the media coverage and blogs in controlling misinformation. All I can say is were going to continue to stay on top of it,” Bair said. “The misinformation that came out over the weekend fed a lot of depositors’ fears.”

The FDIC also plans to begin airing public service announcements as part of a public education campaign on the nation’s deposit insurance program.

Although Bair declined to disclose financial institutions on the agency’s troubled-bank list, she said most institutions on the list will survive. Some, though, may decide to team up with healthier institutions. Historically, only 13 percent on the troubled banks list actually fail, she said, adding that disclosing who is on the troubled list would likely boost the failure rate from 13 percent to 100 percent as customers pulled deposits.

Many are watching how some of the nation’s largest banks will cope with their mortgage-lending woes, including Washington Mutual (NYSE: WM), Wachovia (NYSE: WB) and Cleveland-based National City (NYSE: NCC).

“These are challenging times for a number of institutions large and small,” Bair said. “We’ve worked with them as their primary regulator. They’ve raised a lot capital, they’re getting their loan loss reserves up. They’re doing everything they can and should do.”

“The capital is there to absorb the losses,” she added. “Some will have some bad quarters, but still overall they’re quite solvent, healthy institutions, and they’ll get through this.”

If you enjoyed this post, make sure you subscribe to my RSS feed!

Among the seemingly innumerable scandal-worthy stories which have so marked the war in Iraq is one growing tragedy which has been largely ignored: shoddy electrical work by U.S. contractors at military bases leading to numerous electrical fires, troops receiving painful shocks, and even death by electrocution.

In January 2008, Staff Sgt. Ryan Maseth, a 24-year-old weapons expert, was electrocuted while showering in Baghdad’s green zone. According to a criminal investigation by the Army, an electrical water pump on the building’s roof shorted out from not being properly grounded when installed. On March 19 his parents sued the contractor, KBR Inc., for Sgt. Maseth’s death.

According to the Pittsburgh-Post Gazette:

“The Defense Contract Management Agency, we believe, authorized [the contractor] to the tune of millions of dollars to make the repairs. And they never made the repairs,” Mr. Cavanaugh said. “And we don’t know why. A simple repair — just ground the building — and Ryan would be alive today.”

On July 1, New York Times Investigative Reporter James Risen, author of the 2006 book “State of War: The Secret History of the CIA and the Bush Administration,” took up the subject. According to Risen, General David Petraeus stated to Congress that 13 Americans had been electrocuted since the invasion of Iraq: 12 soldiers and one contractor.

As recently as July 11, KBR Inc. electricians told a Senate panel tasked to investigate the deaths that their employer used inexperienced, non-English speaking workers to install electrical systems. Many experienced contractors, they claimed, were dismissed after raising cautions over the work.

According to the Associated Press:

“Time and again we heard, `This is not the states, OSHA doesn’t apply here. If you don’t like it you can go home,’” said Debbie Crawford, a journeyman electrician with 30 years experience.

Army Times reports that the shoddy wiring and electrical risks have brought about the deaths of 11 service members and two U.S. civilians.

However, a follow-up report by James Risen in the New York Times on July 18 states that the problem is far worse than General Petraeus stated, and the military has known about the systemic problems since 2004.

Since the invasion, over 283 electrical fires on US bases have been reported, along with two deaths in 2006 at a base in Tikrit, the death of Sgt. Maseth, and innumerable painful shocks dealt to Americans.

A log of complaints compiled early in 2008 found soldiers living in just one Baghdad building complex were complaining of painful electrical shocks ‘on an almost daily basis.’

In public statements, Pentagon officials have not addressed the scope of the hazards, instead mostly focusing on the circumstances surrounding the death of Sergeant Maseth, who lived near Pittsburgh.

But the internal documents, including dozens of memos, e-mail messages and reports from the Army, the Defense Contract Management Agency and other agencies, show that electrical problems were widely recognized as a major safety threat among Pentagon contracting experts. It is impossible to determine the exact number of the resulting deaths and injuries because no single document tallies them up. (The records were compiled for Congressional and Pentagon investigators and obtained independently by The Times.)

The 2007 safety survey was ordered by the top official in Iraq for the Defense Contract Management Agency, which oversees contractors, after the October 2006 electrical fire that killed two soldiers near Tikrit. Paul Dickinson, a Pentagon safety specialist who wrote the report, confirmed its findings, but did not elaborate.
http://www.nytimes.com/2008/07/18/world/middleeast/18contractors.html

If you enjoyed this post, make sure you subscribe to my RSS feed!

House Republicans gave Treasury chief Henry Paulson an earful Wednesday about the administration’s rescue package for mortgage giants Fannie Mae and Freddie Mac.

The two companies will have a chance to make it up to their congressional detractors during a housing industry reception at the Republican National Convention in Minnesota in September.

Fannie and Freddie are sponsoring a reception at the Graves Hotel in Minneapolis on Sept. 2, along with the Independent Community Bankers of America, the National Association of Home Builders and the National Association of Realtors, according to a copy of the invitation.

But while House Republicans can expect to consume their fill of shrimp cocktail and chardonnay at Fannie and Freddie’s expense, don’t expect to see any Republican senators at the shindig. In fact, under the 2007 ethics and lobbying law, senators are prohibited from attending lobbyist sponsored bashes at conventions. The House decided to keep that loophole in place so their members can enjoy the major parties that have been a staple of presidential conventions over the years. This difference between House and Senate ethics has not gone unnoticed by government watchdog groups.

The title of the reception is “Building Stable Communities for America’s Future,” and invitations went to some of the most outspoken opponents of the administration’s plan to temporarily extend credit to Fannie and Freddie and potentially purchase an equity stake in the two private companies.

This could be the most entertaining event of the entire week if the cocktail party is anything like the closed-door session Wednesday between Paulson and his Republican colleagues in the House. It might give loyal conventioneers another chance to watch their Treasury secretary arguing with the top Republican on the House Financial Services Committee about who called whom and when over the weekend …

If you enjoyed this post, make sure you subscribe to my RSS feed!

The The New York Times broke a sensational story about the Pentagon’s involvement in a secret plan to influence Iraq War media coverage through paid military pundits, yet the rest of the media has largely ignored this incredibly important revelation. This video by Free Press helps to expose some of the dishonesty of the cable news networks.
The The New York Times broke a sensational story about the Pentagon’s involvement in a secret plan to influence Iraq War media coverage through paid military pundits, yet the rest of the media has largely ignored this incredibly important revelation. This video by Free Press helps to expose some of the dishonesty of the cable news networks.

If you enjoyed this post, make sure you subscribe to my RSS feed!

By Jason Leopold
Online Journal Contributing Writer

When Dick Cheney was chief executive of Halliburton in the 1990s, he urged Congress to ease sanctions against Iran and enter into diplomatic discussions with the country’s leaders so the oilfield services company could legally do business there.

“Let me make a generalized statement about a trend I see in the U.S. Congress that I find disturbing, that applies not only with respect to the Iranian situation but a number of others as well,” Cheney said at the time. “I think we Americans sometimes make mistakes . . . There seems to be an assumption that somehow we know what’s best for everybody else and that we are going to use our economic clout to get everybody else to live the way we would like.”

In March 1995, Clinton signed an executive order that prohibited “new investments [in Iran] by U.S. persons, including commitment of funds or other assets.” It also restricts U.S. companies from performing services “that would benefit the Iranian oil industry. Violation of the order can result in fines of as much as $500,000 for companies and up to 10 years in jail for individuals.”

Cheney was highly critical of the Clinton administration’s policy toward Iran.

“I think we’d be better off if we, in fact, backed off those sanctions [on Iran], didn’t try to impose secondary boycotts on companies . . . trying to do business over there . . . and instead started to rebuild those relationships,” Cheney said during a 1998 business trip to Sydney, Australia, reported by Australia’s Illawarra Mercury newspaper.

Despite assertions by the vice president that Iran has been trying to build a nuclear weapon since the 1990s, the Bush administration decided it would not punish foreign oil and gas companies that invest in Iran or other countries that allegedly sponsor terrorism.

Recently, Bush administration officials said they would not rule out military action against Iran for allegedly interfering in U.S. interests in Iraq.

Halliburton first started doing business in Iran as early as 1995. According to a February 2001 report in the Wall Street Journal, “U.S. laws have banned most American commerce with Iran. Halliburton Products & Services Ltd. works behind an unmarked door on the ninth floor of a new north Tehran tower block. A brochure declares that the company was registered in 1975 in the Cayman Islands, is based in the Persian Gulf sheikdom of Dubai and is “non-American.” But, like the sign over the receptionist’s head, the brochure bears the Dallas company’s name and red emblem, and offers services from Halliburton units around the world.”

In the February 2001 report, the Journal quoted an anonymous U.S. official as saying “a Halliburton office in Tehran would violate at least the spirit of American law.” Moreover, a U.S. Treasury Department website detailing U.S. sanctions against Iran bans almost all U.S. trade and investment with Iran, specifically in oil services. The Web site adds: “No U.S. person may approve or facilitate the entry into or performance of transactions or contracts with Iran by a foreign subsidiary of a U.S. firm that the U.S person is precluded from performing directly. Similarly, no U.S. person may facilitate such transactions by unaffiliated foreign persons.”

Wendy Hall, a spokeswoman for Halliburton, said in an interview with me last year that Halliburton may not agree with Iran’s “policies or actions” and the company makes “no excuses for their behaviors” but “due to the long-term nature of our business and the inevitability of political and social change, it is neither prudent nor appropriate for our company to establish our own country-by-country foreign policy.”

Hall added that “decisions as to the nature of such governments and their actions are better made by governmental authorities and international entities such as the United Nations as opposed to individual persons or companies. Putting politics aside, we and our affiliates operate in countries, to the extent it is legally permissible, where our customers are active as they expect us to provide oilfield services support to their international operations.”

In 1995, Halliburton paid a $1.2 million fine to the U.S. government and $261 million in civil penalties for violating a U.S. trade embargo by shipping oilfield equipment to Libya. Federal officials said some of the well servicing equipment sent to Libya by Halliburton between late 1987 and early 1990 could have been used in the development of nuclear weapons. President Reagan imposed the embargo against Libya in 1986 because of alleged links to international terrorism.

But the fact that Halliburton may have unwillingly helped Libya obtain a crucial component to build an atomic bomb only made Cheney push the Clinton administration harder to support trade with Libya and Iran.

Additionally, while Cheney headed Halliburton the company engaged in secret business dealings with Saddam Hussein’s regime by selling Iraq oil production equipment and spare parts to get the Iraqi oil fields up and running, according to confidential United Nations records.

During the 2000 presidential campaign, Cheney vehemently denied that Halliburton did business with Iraq while he was chief executive. He acknowledged that Halliburton did business with Libya and Iran through foreign subsidiaries, Cheney said, “Iraq’s different.”

“I had a firm policy that we wouldn’t do anything in Iraq, even arrangements that were supposedly legal,” Cheney said on the ABC-TV news program “This Week” on July 30, 2000. “We’ve not done any business in Iraq since U.N. sanctions were imposed on Iraq in 1990, and I had a standing policy that I wouldn’t do that.”

But it turns out that Cheney was not telling the truth.

In 1998, Cheney oversaw Halliburton’s acquisition of Dresser Industries Inc, the unit that sold oil equipment to Iraq through two subsidiaries of a joint venture with another large U.S. equipment maker, Ingersoll-Rand Co.

The Halliburton subsidiaries, Dresser-Rand and Ingersoll Dresser Pump Co., sold water and sewage treatment pumps, spare parts for oil facilities and pipeline equipment to Baghdad through French affiliates from the first half of 1997 to the summer of 2000, U.N. records show. Ingersoll Dresser Pump also signed contracts — later blocked by the United States — to help repair an Iraqi oil terminal that U.S.-led military forces destroyed in the Gulf War, the Post reported in a June 2001 story.

The Halliburton subsidiaries and several other American and foreign oil supply companies helped Iraq increase its crude exports from $4 billion in 1997 to nearly $18 billion in 2000.

U.S. and European officials have argued that the increase in production also expanded Saddam’s ability to use some of that money for weapons, luxury goods and palaces. Security Council diplomats estimate that Iraq may be skimming off as much as 10 percent of the proceeds from the oil-for-food program, according to documents obtained by the United Nations Security Council.

During his tenure as chief executive of Halliburton, Cheney pushed the U.N. Security Council to end an 11-year embargo on sales of civilian goods, including oil related equipment, to Iraq.

Under Cheney, Halliburton and its subsidiaries were one of several American and foreign oil supply companies that helped Iraq increase its crude exports from $4 billion in 1997 to nearly $18 billion in 2000 by exploiting a loophole in the law and selling Iraq spare parts for its oil fields so it could pump more oil. U.S. and European officials have long argued that the increase in Iraq’s oil production also expanded Saddam’s ability to use some of that money for weapons, luxury goods and palaces.

UN documents show that Halliburton’s affiliates have had controversial dealings with Saddam Hussein’s regime during Cheney’s tenure at the company, which played a part in helping the late dictator pocket billions of dollars under the UN’s oil-for-food program. The Clinton administration blocked one deal Halliburton was trying to push through because it was “not authorized under the oil-for-food deal,” according to UN documents. That deal, between Halliburton subsidiary Ingersoll Dresser Pump Co. and Iraq, included agreements by the firm to sell nearly $1 million in spare parts, compressors and firefighting equipment to refurbish an offshore oil terminal, Khor al-Amaya. Still, Halliburton used one of its foreign subsidiaries to sell Iraq the equipment it needed so the country could pump more oil, according to a report in the Washington Post in June 2001.

The Halliburton subsidiaries, Dresser-Rand and Ingersoll Dresser Pump Co., sold water and sewage treatment pumps, spare parts for oil facilities and pipeline equipment to Baghdad through French affiliates from the first half of 1997 to the summer of 2000, UN records show. Ingersoll Dresser Pump also signed contracts — later blocked by the United States, according to the Post — to help repair an Iraqi oil terminal that U.S.-led military forces destroyed in the Gulf War years earlier.

As secretary of defense in the first Bush administration, Cheney helped to lead a multinational coalition against Iraq in the Persian Gulf War and to devise a comprehensive economic embargo to isolate Saddam Hussein’s government. After Cheney was named chief executive of Halliburton in 1995, he promised to maintain a hard line against Baghdad.

But Cheney’s position against Iraq radically changed when he was named CEO of Halliburton. Cheney said sanctions against Iraq took a financial toll on the corporation he headed.

“We seem to be sanction-happy as a government,” Cheney said at an energy conference in April 1996, reported in the oil industry publication Petroleum Finance Week. “The problem is that the good Lord didn’t see fit to always put oil and gas resources where there are democratic governments,” he observed during his conference presentation.

Sanctions make U.S. businesses “the bystander who gets hit when a train wreck occurs,” Cheney said.

“While virtually every other country sees the need for sanctions against Iraq and Saddam Hussein’s regime there, Cheney sees general agreement that the measures have not been very effective despite their having most of the international community’s support. An individual country’s embargo, such as that of the United States against Iran, has virtually no effect since the target country simply signs a contract with a non- U.S. business,” Petroleum Finance Week reported.

“That’s exactly what happened when the government told Conoco Inc. that it could not develop an oil field there,” Cheney told Petroleum Finance Week. Total S.A. “simply took it over.”
Jason Leopold is the author of “News Junkie,” a memoir. Visit www.newsjunkiebook.com for a preview. His new website is The Public Record.

If you enjoyed this post, make sure you subscribe to my RSS feed!

By Richard McCormack

Politicians Don’t Understand: Textile Maker Copland Industries Says Multinationals Are Killing The U.S. Economy

The federal government no longer represents the interest of U.S. manufacturing companies and their workers, instead siding with the Communist Chinese government that is putting hundreds of thousands of Americans out of good paying jobs, according to James Copland, chairman of Copland Industries/Copland Fabrics of Burlington, N.C. “The U.S. government’s policy is creating millions of jobs all right, but it is creating them in the People’s Republic of China and Vietnam at the expense of hardworking Americans here at home,” Copland told a congressional hearing. “Our country should be ashamed — totally ashamed - of what our government has done to working people in America.”

The U.S. government recognized problems with the communist Soviet Union, “but for some reason it fails to see it with China,” Copland told a hearing of the House Science Committee’s subcommittee on oversight and investigations on May 22. U.S. government free trade and manufacturing policies are the reason for the current economic slump and the gloomy attitude Americans have about their economic prospects. U.S. manufacturing “is in the midst of a crisis unprecedented since the Great Depression,” Copland said.

“Deeply flawed U.S. trade policy toward domestic manufacturing is the single most important root cause of the illness. Every American deserves the right to provide for his family, to own a home and to educate his kids, but our flawed manufacturing and trade policies are taking this away,” Copland told members of Congress. “Our Constitutional preamble says ‘a government of the people, by the people and for the people.’ We have forgotten about the words ‘for the people.’ ”

Copland’s company is competing against Chinese companies that don’t have to pay workman’s comp or provide workers with unemployment insurance; that don’t have to deal with EPA or OSHA regulations; that pay no overtime, provide few benefits and abide by no child labor laws; and that receive untold government subsidies and benefit from a currency that is at least 30 percent undervalued. “This is an impossible task,” said Copland. “No manufacturer can compete when your competition is a foreign government determined to spend whatever it takes to force you out of the market, and the U.S. government does nothing about it.”

While Congress and the Bush administration rattle on about the importance of free trade agreements and refuse to adopt anything resembling a pro-American manufacturing policy, millions of Americans’ lives are in economic turmoil. “Their jobs are being moved overseas and they can’t get other jobs,” said Copland. “Don’t think there are high-tech jobs available for those folks, because there aren’t. They are being shipped to China and India too. If those who were laid off are lucky, they have landed jobs flipping hamburgers or as a greeter at some retail store. People are angry now, and when they connect the dots — and they are going to connect them — they are going to know where to focus their anger.”

Copland Industries/Copland Fabrics makes man-made fiber curtains, draperies and blinds. Since 2001, U.S. imports of these products from China have increased by 6,912 percent, from 845,000 kilograms to 59 million kilograms in 2007. This surge of Chinese imports “has been like a nightmare [that] we have had to face,” said Copland.

China accounted for almost 107 percent of the total U.S. growth in imports for curtains and draperies between 2001 and 2007, “meaning the rest of the world actually lost U.S. import market share,” Copland noted. China now holds 90 percent of the U.S. market for man-made curtains compared to 7.8 percent market share in 2001. “The total market today is 98 percent offshore goods,” Copland said. “A flood of imports from China in products like the ones for which we used to make fabric is one of the main reasons why my home town of Burlington has lost nearly 40 percent of its manufacturing jobs since 2001.” Chinese finished curtain prices sold in the United States are less than Copland Industries’ cost of materials.

Copland Industries has stayed in business by “picking up the pieces when our competition goes out of business,” said Copland. “We pick up a piece and, believe you me, just as soon as you get into it, here come the Chinese again. We look constantly for something that the Chinese are not doing, that they haven’t focused on yet. We are looking constantly for something that may have some natural barrier to them coming over here, but remember, everybody in our industry is doing the same thing, everybody. There have been 550,000 jobs lost in my industry since 2001 alone.” Copland Industries has reduced employment from 1,000 to less than 300.

Hundreds of mills have been closed in the Carolinas due to the surge of imports from China. “There are small towns where stores are closed with weeds growing up around them,” said Copland. “But you know it is really bad when you see the churches closing. Someone needs to think about the hard working people and what is happening to them. The big multinational companies, the importers and big retailers have exactly what they want. They couldn’t have written a book and had it more perfect for their world: buy at the China price, sell at the U.S. price and don’t worry about whether the average American has a job or he or she can make ends meet. Their world is not what is good for America.

“I will tell you that if this thing doesn’t stop there will be no survivors. We will not have any manufacturing in the United States. When these plants are closed down, they are closed. If you don’t run the equipment and keep it up, it deteriorates to nothing, but the equipment is being sold. Pakistan is buying the equipment. People are selling it for five cents on the dollar. Nobody wants it. And let me tell you what is happening to the buildings themselves. I was just down in Joanna, South Carolina, a huge mill down there has been closed for five years. They are tearing down the mills. Why? Because they are going to sell the bricks, guys. They are going to sell the beams. So don’t think that you are going to be able to say, ‘Oh, boy, as soon as this thing is over, here we come back, it is going to be regeneration.’ ”

Copland told the politicians that they don’t understand how profoundly the economy is being impacted by Chinese imports. Politicians talk about the sagging U.S. economy and home foreclosures, “but what they haven’t realized yet is that people don’t have any money,” said Copland. “The reason they don’t have any money is because they have lost their jobs or they now have jobs making a fraction of what their pay was before their jobs were exported. If people had their manufacturing jobs, they wouldn’t have the economic problems and financial problems we now have.”

Fifty million Americans are without health insurance because so many good jobs that provide health care have been exported due to “our flawed trade agreements,” Copland told the subcommittee. As long as the federal government refuses to adopt a manufacturing policy, “the United States will have much more difficulty ameliorating the pain an economic recession will inflict on its citizenry in a timely manner.”

U.S. government officials talk glowingly about the Central America Free Trade Agreement (CAFTA), but CAFTA is causing the loss of thousands of U.S. jobs, Copland told the Congress. “It sounded like a good idea, everybody is going to be okay, but they left a loophole — and it’s the loopholes that get us so many times. The negotiators don’t even know that the loopholes are there because they are some political appointee that hasn’t done it but for about three or six months or they have been out of college for about a year, and they don’t even know the loopholes are there. If they do know, woe be to them. Let me tell you something” Copland said: “They had a deal in [CAFTA] to where they could take the pocketing for trousers — that doesn’t sound like much. But pocketing is a 180-million-yard business in the United States. They had it in the agreement and then said, ‘Well, you know, we are going to make an exception on pocketing and we are going to let these Central American countries make this stuff out of Chinese cloth.’ The Dominican Republic wanted that. They gave it to them. We pointed it out and said, ‘Look, you are going to destroy the industry.’ ‘Oh, no, don’t worry, we are going to fix it, we are going to fix it.’ That was three-plus years ago, folks. It hasn’t been fixed. There has been nothing done. Let me tell you the end result of that thing. Eighty percent of the market is gone, and it is gone folks. Haines Finishing Company in Winston-Salem closed down 75 percent of its business. Allis Manufacturing Company closed down four plants in South Carolina. Mount Vernon lost 70 million yards worth of business and closed plants in Rome, Georgia, and in Texas.

“We have got to start paying attention to what we are doing with these trade agreements. We have to get some people who know what they are doing with these trade agreements. We are being out negotiated. We better start paying attention to what we are doing because let me tell you something, we are exporting the wealth of this country as fast as we can export it. It is going offshore. We are going to pay one tremendous price in this country.”

If you enjoyed this post, make sure you subscribe to my RSS feed!