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
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 …
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.
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.
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.”
The Supreme Court handed corporate America a major victory this week when it sharply reduced the amount of money Exxon Mobil has to pay in punitive damages for the 1989 Exxon Valdez oil spill in Alaska. An Alaskan jury had initially ruled Exxon should pay five billion dollars in punitive damages but in 2006, the 9th U.S. Circuit Court cut the award of punitive damages in half. On Wednesday, the Supreme Court cut the amount of punitive damages again and ordered Exxon Mobil to pay just $500 million in punitive damages – one tenth of the original jury’s ruling
The Supreme Court handed corporate America a major victory Wednesday when it sharply reduced the amount of money Exxon Mobil has to pay in punitive damages for the 1989 Exxon Valdez oil spill in Alaska.
The spill has been described as the worst environmental calamity in U.S. history. 11 million gallons of crude oil spilled into the fishing waters of Prince William Sound. It polluted about 1200 miles of Alaska’s shoreline.
An Alaskan jury had initially ruled Exxon should pay five billion dollars in punitive damages but in 2006, the 9th U.S. Circuit Court cut the award of punitive damages in half.
On Wednesday the Supreme Court cut the amount of punitive damages again and ordered Exxon Mobil to pay just $500 million in punitive damages – 1/10th of the original jury’s ruling.
The Supreme Court ruled that in maritime cases punitive damages should be no more than the actual damages. 32,000 Alaskan plaintiffs have been waiting for their compensation since 1994. The Supreme Court’s action will reduce the average award from $75,000 to about $15,000.
Last year Exxon Mobil made just over $40 billion in profits. This means the oil company will be able to pay the punitive damages in about four days. Sen. Patrick Leahy, chair of the Judiciary Committee, accused the court of giving Exxon Mobil a $2 billion windfall
House Democrats who flipped their votes to support retroactive immunity for telecom companies in last week’s FISA bill took thousands of dollars more from phone companies than Democrats who consistently voted against legislation with an immunity provision, according to an analysis by MAPLight.org.
In March, the House passed an amendment that rejected retroactive immunity. But last week, 94 Democrats who supported the March amendment voted to support the compromise FISA legislation, which includes a provision that could let telecom companies that cooperated with the government’s warrantless electronic surveillance off the hook.
The 94 Democrats who changed their positions received on average $8,359 in contributions from Verizon, AT&T and Sprint from January, 2005, to March, 2008, according to the analysis by MAPLight, a nonpartisan organization that tracks the connection between campaign contributions and legislative outcomes.
Retroactive immunity could squash about 40 lawsuits pending against telecommunication companies that helped the government monitor the telecommunications traffic of Americans without warrants. The telecom industry has lobbied hard to insure that the provision is included in the Foreign Intelligence Surveillance Act update Congress is currently considering.
Nick Papas, spokesman for the House Democratic Caucus, said, “Many members of the caucus opposed the earlier version of this legislation and ultimately supported better legislation that was the product of bipartisan negotiations. Months of hard work, not campaign contributions, earned the support of many members.”
MAPLight executive director Daniel Newman agreed that there are many factors that affect a lawmaker’s vote but, unlike pressure from constituents, campaign cash is not a “democratic influence.”
The 116 Democrats who remained opposed to telecom immunity received an average of $4,987 from the telecoms during the three-year period, the analysis showed.
“Regardless which way the legislators’ vote, the fact is most of them get money from the telecom industry and that buys access even if it doesn’t buy a favorable result for telecom,” Newman said.
The members who voted yes on June 20 received, on average, $9,659 from the big three phone companies while those who opposed the bill received an average of $4,810, MAPLight found.
The money provides special interests with a bigger megaphone, Newman said.
“Who’s more likely to get a meeting you or AT&T, which donates million of dollars and has the legislator’s ear?”
A dozen people around the country filed suit in U.S. District Court in Idaho this week demanding the return of all the copper, silver, gold, and platinum coins — more than seven tons of metal in all — that the FBI and Secret Service seized in November during raids of a mint in Idaho and a strip mall storefront in Indiana.
The Justice Department had decided that the coins, many of which bear the familiar symbol of Lady Liberty and the phrase “TRUST IN GOD,” were being illegally marketed as government-sanctioned currency, according to the sworn affidavit of an FBI agent.
The creator of the coins, Bernard von NotHaus, who lives in Miami, claims that the federal government is trying to shut down production of his liberty dollars, as the coins are called, because of the competition they pose to the greenback. In recent years, his precious metal coins have outperformed the dollar, whose value has plunged in relation to gold.
The raids in November were the result of a two-year undercover investigation of Mr. Von NotHaus and how he sold liberty dollars. The Justice Department has not followed up with any criminal charges against Mr. Von NotHaus or the regional distributors of his coins.
In the suit filed in Idaho, the various plaintiffs say the federal government has no right to continue holding onto their coins any longer.
While it is common for agents to warehouse property seized during criminal investigations, such as firearms or surveillance equipment, the plaintiffs say coins of precious metal should be off-limits.
The coins “do not constitute contraband or other property subject to seizure,” the legal papers state, adding that the seizures violated the Fourth Amendment rights of the plaintiffs.
For the most part, the plaintiffs had possessed bearer certificates for the silver liberty dollars that were being warehoused in Couer d’Alene, Idaho, at a mint. The mint, Sunshine Minting, is one of the sites that federal agents raided.
In an unusual request, the plaintiffs ask for an order, at the very least, forbidding federal agents from touching or moving the coins so that they are not dirtied in any way.
“Mishandling numismatic material can negatively impact value,” the legal papers say.
A spokesman for the Justice Department, Charles Miller, said that the agency had not yet seen the legal papers and could not comment.
E-mail messages circulating among Liberty Dollar enthusiasts have expressed fears that the federal government intends to publicly auction off the coins. There has been no public announcement indicating that to be the case. The U.S. attorney’s office in Asheville, N.C., which led the investigation that prompted the raids last November, did not return several calls for comment over the last few weeks.
Mr. Von NotHaus markets his coins via the Internet as an inflation-proof currency and claims that between 100,000 and 250,000 Americans own them. They have attracted the interest of coin enthusiasts, as well as critics of the Federal Reserve.
A 1999 report by the Southern Poverty Law Center said that many of the stores that accepted liberty dollars “are run by men and women connected to the radical right.” The coins have caught on particularly well in Asheville, N.C., and Austin, Texas, and are accepted by some merchants there.
More than 50,000 of the coins seized last year bear the likeness of Rep. Ron Paul, whose monetary policies Mr. Von NotHaus supports.
“About a quarter of a million people holding liberty dollars are almost up-in arms — not up in arms yet, but almost — about having their property seized, and rightly so,” Mr. Von NotHaus told The New York Sun yesterday.
The clash between the European Central Bank and the US Federal Reserve over monetary strategy is causing serious strains in the global financial system and could lead to a replay of Europe’s exchange rate crisis in the 1990s, a team of bankers has warned.
“We see striking similarities between the transatlantic tensions that built up in the early 1990s and those that are accumulating again today. The outcome of the 1992 deadlock was a major currency crisis and a recession in Europe,” said a report by Morgan Stanley’s European experts
Just as then, Washington has slashed rates to bail out the banks and prevent an economic hard-landing, while Frankfurt has stuck to its hawkish line - ignoring angry protests from politicians and squeals of pain from Europe’s export industry.
Indeed, the ECB has let the de facto interest rate - Euribor - rise by over 100 basis points since the credit crisis began.
Just as then, the dollar has plummeted far enough to cause worldwide alarm. In August 1992 it fell to 1.35 against the Deutsche Mark: this time it has fallen even further to the equivalent of 1.25. It is potentially worse for Europe this time because the yen and yuan have also fallen to near record lows. So has sterling
Morgan Stanley doubts that Europe’s monetary union will break up under pressure, but it warns that corked pressures will have to find release one way or another.
This will most likely occur through property slumps and banking purges in the vulnerable countries of the Club Med region and the euro-satellite states of Eastern Europe.
“The tensions will not disappear into thin air. They will find fault lines on the periphery of Europe. Painful macro adjustments are likely to take place. Pegs to the euro could be questioned,” said the report, written by Eric Chaney, Carlos Caceres, and Pasquale Diana.
The point of maximum stress could occur in coming months if the ECB carries out the threat this month by Jean-Claude Trichet to raise rates. It will be worse yet - for Europe - if the Fed backs away from expected tightening. “This could trigger another ‘catastrophic’ event,” warned Morgan Stanley.
The markets have priced in two US rates rises later this year following a series of “hawkish” comments by Fed chief Ben Bernanke and other US officials, but this may have been a misjudgment.
An article in the Washington Post by veteran columnist Robert Novak suggested that Mr Bernanke is concerned that runaway oil costs will cause a slump in growth, viewing inflation as the lesser threat. He is irked by the ECB’s talk of further monetary tightening at such a dangerous juncture.
The contrasting approaches in Washington and Frankfurt make some sense. America’s flexible structure allows it to adjust quickly to shocks. Europe’s more rigid system leaves it with “sticky” prices that take longer to fall back as growth slows.
Morgan Stanley says the current account deficits of Spain (10.5pc of GDP), Portugal (10.5pc), and Greece (14pc) would never have been able to reach such extreme levels before the launch of the euro.
EMU has shielded them from punishment by the markets, but this has allowed them to store up serious trouble. By contrast, Germany now has a huge surplus of 7.7pc of GDP.
The imbalances appear to be getting worse. The latest food and oil spike has pushed eurozone inflation to a record 3.7pc, with big variations by country. Spanish inflation is rising at 4.7pc even though the country is now in the grip of a full-blown property crash. It is still falling further behind Germany. The squeeze required to claw back lost competitiveness will be “politically unpalatable”.
Morgan Stanley said the biggest risk lies in the arc of countries from the Baltics to the Black Sea where credit growth has been roaring at 40pc to 50pc a year. Current account deficits have reached 23pc of GDP in Latvia, and 22pc in Bulgaria. In Hungary and Romania, over 55pc of household debt is in euros or Swiss francs.
Swedish, Austrian, Greek and Italian banks have provided much of the funding for the credit booms. A crunch is looming in 2009 when a wave of maturities fall due. “Could the funding dry up? We think it could,” said the bank
At this point it is just a waiting game for the National Bureau of Economic Research to declare that we have been in recession. Of course they work from past data; we all do. But the data will show what has been true for months. Investment is falling. Unemployment is rising. The trends are consistent with every single recession on record.
All that is bad enough. Maybe your job is secure. Maybe you are out of the stock market. Maybe you aren’t waiting for a return on some real estate investment. The problem that hits everyone is inflation, which is roaring out of control in all the sectors we care about. We have entered the double digits, and if producer prices forecast consumer prices, we are in for tougher times ahead.
So what does Washington do? In an act of incredible stupidity, Congress has passed an extension of unemployment benefits. The old rule remains true: if you subsidize something, you get more of it. So this will give us more unemployment. No question about that. It will thereby worsen and prolong the problem.
It takes only a second of economic logic to see why. In a recessionary environment, we need freer, not more socialized, labor markets. Business needs to be able to hire workers at lower prices. You don’t want to increase the cost of hiring; you want to reduce it, especially with unemployment rising. Instead, Congress loots the workers of this country in order to prevent people from entering the job market.
This is not only stupid; it is highly dangerous. Britain tried this in the 1930s, and more than any other action, this contributed to the high unemployment rates that fueled socialist political movements, which led to the destruction of that economy. It could do the same here in the United States.
Moving on to the Fed, here we see a cabal of obsessives that believes that the greatest threat to the country right now is falling prices. And they are wholly dedicated to preventing this from happening – precisely at the time when falling prices would be the best thing that could happen to the country.
And what generates this obsession? A faulty understanding of the Great Depression. Like FDR and his advisors, this bunch is convinced that what caused the downturn was the fall in price of everything. This is what bad economic thinking generates. Low prices were the best thing the 1930s had to offer. Imagine that same depression occurring with inflation roaring! The people’s sufferings would have been immeasurably worse.
So leave it to Washington to make sure that the next experience with any economic phenomenon will always be worse than the last. They are trying to give us the Great Depression with an even worse trend: falling production, rising unemployment, plus soaring prices! (If you haven’t read it yet, please pick up a copy of Rothbard’s America’s Great Depression. Send a few copies to the Fed while you are at it.)
Bernanke’s view of the Great Depression makes no sense of course. But it’s the only explanation I can come up with for why the Fed is doing its best to pump up the economy by inventing ever more tricky ways of getting banks to lend money, as if money and credit will save the world. You might think they would take a look at the economic plight of many African nations with inflation running in the many thousands of percent. Their economies are not performing well. But a person like Bernanke is capable of looking at a place like Zimbabwe and pointing out that at least it is not plagued with deflation!
At this stage in the debate over what to do about the recession, the Bush administration and the Republicans look pretty good by comparison to the Democrats. It is easy to forget that Bush bears most of the direct responsibility for this fiasco. His war has drained the capital stock, diminished oil supplies, and crowded out private investment. He has done nothing to keep gas prices low and specifically rejected proposals early on to try to reduce prices.
He has egged on the Fed with its inflation, by putting a priority on his military adventures over sound economic policies. It is a crude simplification, but it still contains truth: Bush’s warfare state is the cause of this recession. It is simplified in the sense that it would not have happened but for the money machine down the street from the White House that he has demanded go into overdrive.
What is the right response to a recession? The first rule must be to do no harm. When it comes to government, that is asking a lot and enough. Beyond that, in an ideal world, we would shut down the Fed, reduce the cost of employment, reduce taxes, zap environmental controls on exploring for and refining oil – this would be a good beginning. We could expect the recession to last less than a year under these policies. As it is, we could be in for a very long and deep recession.
CAFTA
