Pending Lawsuit Over Baby DNA

February 24, 2010

Statesman.com

By Mary Ann Roser

An Austin lawyer threatened to pursue a new federal lawsuit Monday after learning that some newborn blood samples in Texas went to the U.S. military for potential use in a database for law enforcement purposes.

The Department of State Health Services never mentioned the database to Jim Harrington, director of the Texas Civil Rights Project, who settled a lawsuit in December with the state over the indefinite storage of newborn blood without parental consent, or to the American-Statesman, which first reported on the little-known blood storage practice last spring. Harrington said he thought another suit was likely unless the health department destroys the information obtained from the blood samples or obtains consent.

“This is the worst case of bad faith I have dealt with as a lawyer,” he said Monday.

Jerry Strickland, a spokesman for the Texas attorney general’s office, which represented the health department, fired back. “During this litigation, Harrington was provided accurate answers to the questions he asked,” he said.

“Once Harrington negotiated $26,000 in attorneys’ fees and costs for himself, accepted a settlement agreement and got his desired headlines, he was satisfied and dropped his lawsuit against DSHS. It appears recent media reports caused Harrington to backtrack in an effort to obscure how he chose to handle this case,” he said

An article Monday by the Texas Tribune, a news Web site, said the state health department sent 800 anonymous samples to the military to help create a national mitochondrial DNA database. The samples were sent in 2003 and 2007, according to the department’s Web site.

Carrie Williams, a health department spokeswoman, said the program wasn’t mentioned because, “We don’t publicize every agency initiative or contract, and obviously this is a sensitive topic.”

Texas agreed to take part in the Armed Forces DNA Identification Laboratory database project because blood spots might help identify “ethnic or ancestral origins of unidentified corpses using mitochondrial DNA,” Williams said. “We believed it was an important research project that could potentially help in missing persons cases.”

The blood samples are taken from the heel during newborn screening tests for genetic disorders.

The blood spots are collected on coded cards, with the names matching those codes kept on file at the health department. Names are not disclosed without parental consent, the department says.

In March, Harrington sued in federal court on behalf of four parents and a pregnant woman who later dropped out, claiming that the state’s collection and indefinite storage of the samples since 2002 amounted to “an unlawful search and seizure.”

The Legislature approved a law in May that requires medical professionals to inform parents or guardians that the blood spots are being collected, stored and could be used for research. Parents who object could opt out.

In December, Harrington settled his suit when the health department agreed to destroy 5.3 million samples.

“I can’t tell you how many times we sat there, and they said no law enforcement,” Harrington said of the lawsuit discussions. “They said, ‘It’s only about medical research, it’s only about medical research.’\u2009″

Williams said the project has been listed on the Web site for weeks and “falls under the broader category of public health research.”

“Our intentions over the years have been good,” she added, “and we are moving forward with the positive changes to the program.”

Click here for the full report.

More on Building 7

February 24, 2010

WashingtonPost.com

By Jennifer Harper

A lingering technical question about the Sept. 11 terrorist attacks still haunts some, and it has political implications: How did 200,000 tons of steel disintegrate and drop in 11 seconds? A thousand architects and engineers want to know, and are calling on Congress to order a new investigation into the destruction of the Twin Towers and Building 7 at the World Trade Center.

“In order to bring down this kind of mass in such a short period of time, the material must have been artificially, exploded outwards,” says Richard Gage, a San Francisco architect and founder of the nonprofit Architects & Engineers for 9/11 Truth.

Mr. Gage, who is a member of the American Institute of Architects, managed to persuade more than 1,000 of his peers to sign a new petition requesting a formal inquiry.

“The official Federal Emergency Management [Agency] and National Institute of Standards and Technology reports provide insufficient, contradictory and fraudulent accounts of the circumstances of the towers’ destruction. We are therefore calling for a grand jury investigation of NIST officials,” Mr. Gage adds.

The technical issues surrounding the collapse of the towers has prompted years of debate, rebuttal and ridicule.

He is particularly disturbed by Building 7, a 47-story skyscraper, which was not hit by an aircraft, yet came down in “pure free-fall acceleration.” He also says that more than 100 first-responders reported explosions and flashes as the towers were falling and cited evidence of “multi-ton steel sections ejected laterally 600 ft. at 60 mph” and the “mid-air pulverization of 90,000 tons of concrete & metal decking.”

There is also evidence of “advanced explosive nano-thermitic composite material found in the World Trade Center dust,” Mr. Gage says. The group’s petition at www. ae911truth.org is already on its way to members of Congress.

“Government officials will be notified that ‘Misprision of Treason,’ U.S. Code 18 (Sec. 2382), is a serious federal offense, which requires those with evidence of treason to act,” Mr. Gage says. “The implications are enormous and may have profound impact on the forthcoming Khalid Shaikh Mohammed trial.”

Stay tuned for more in this space.

JUST SO YOU KNOW

It’s done broke. But given enough duct tape, Gorilla Glue and a few safety pins, we’ll get by, perhaps.

Only 5 percent of Americans say our system of government is “broken and cannot be fixed,” according to a CNN/Opinion Research Corp. survey of 1,023 adults released Sunday. The vast majority – 81 percent – say, yes, it’s broken “but can be fixed.” An optimistic 14 percent insist the government “isn’t broken.”

Some don’t buy any of it, though.

“With metronomic regularity, we go through these moments in Washington where we complain about the government being broken. These moments have one thing in common: The left is having trouble enacting its agenda,” George Will told ABC’s “This Week” on Sunday. “No one, when George W. Bush had trouble reforming Social Security, said, ‘Oh, that’s terrible – the government’s broken.’ ”

THINK ABOUT IT

“For years, we have had information stands about the war commanders. But the supreme commander was missing. We need to remember the man who led our country in the war.”

- Vladimir Makarov, chief of Moscow’s advertising and information committee, on his decision to decorate the city with posters of Josef Stalin on May 9, which Russia marks as the 65th anniversary of the Soviet defeat of Nazi Germany during World War II.

WHAT WORKS

Political operatives should remember that people still crave viable, timely content and friendly community that has not been sullied by technology’s bells and whistles. Witness conservative goddess Michelle Malkin, who has sold Hotair.com – a spirited political blog she founded in 2006 – to Salem Communications, which syndicates such talk-radio heavyweights as Bill Bennett, Hugh Hewitt and Michael Medved, among other things.

Mrs. Malkin has emerged from her experience with insight about communications in the often chaotic media/political/ideological realm. For one thing, the “clean, simple, user-friendly format” has stayed the same, she says in a farewell message. And the answer to attracting a loyal audience did not lie in a burdensome multiplatform extravaganza, either.

“To survive, we needed to adapt, respond to market forces, and adjust the business focus to meet readers’ revealed preferences. Like the teleprompter reader-in-chief always says, ‘Change is never easy.’ I made the decision to redirect our resources away from original video reluctantly,” Mrs. Malkin says.

“But we looked at the metrics, we looked at the bottom line, and we listened to you. You wanted a 24/7, up-to-the-minute, one-stop, all-purpose conservative blog and aggregator. You wanted an Internet water cooler to hang out with your friends – a place where you could find all the political coverage you needed, but also a place where you could get comic relief, humpbot videos, the latest ‘Duuudes’ and ‘Hmmms’ and ‘Heart-aches,’ and off-beat stories of the day.”

Click here for the full report.

Hackers Use Elvis Picture to Expose Security Flaws

February 24, 2010

CNN

By Atika Shubert

In the name of improved security a hacker showed how a biometric passport issued in the name of long-dead rock ‘n’ roll king Elvis Presley could be cleared through an automated passport scanning system being tested at an international airport.

Using a doctored passport at a self-serve passport machine, the hacker was cleared for travel after just a few seconds and a picture of the King himself appeared on the monitor’s display.

Adam Laurie and Jeroen Van Beek, who call themselves “ethical hackers,” say the exercise exposed how easy it is to fool a passport scanner with a fraudulent biometric chip.

The Presley test was carried out at Amsterdam’s Schiphol airport in September 2008 — by Laurie and Van Beek — to highlight potential security shortcomings.

Passports, and the ability to fake them, are back in the spotlight after the apparent use of false documents during the gang assassination of a Hamas militant in Dubai in January.

Van Beek said: “What we did for that chip is create passport content for Elvis Presley and put it on a chip and sign it with our own key for a non-existent country. And a device that was used to read chips didn’t check the country’s signatures.”

Fingerprint scans, eye scans and digital photographs are now frequently used with passports to check a traveler’s biometrics — unique physical characteristics that can identify a specific individual

Biometric passports — with data stored on embedded chip — are now standard issue in Europe, the U.S. and a number of other countries.

Laurie and Van Beek use their knowledge of IT security and hacking to show that biometric passports remain vulnerable to fraud.

“I think [fraud] is 100 percent possible,” said Laurie. “The passport bit is the more difficult. You would have to buy one from a professional forger or some means, but adding the chip is something we could do ourselves using off the shelf equipment using $100 investment.”

The problem, in part, is that each country has its own security signature for verifying its own biometric passports. While some share that information, many countries do not, making it easy to exploit the loopholes, said Laurie.

“I probably couldn’t produce a fake UK passport that would successfully cross into the UK because I’m sure the UK is actually able to check its own signatures,” Laurie said.

“But I may be able to produce a passport from some other country and use it on an automated system to enter the UK and the UK wouldn’t be able to check the signatures because they don’t have them.”

An international system coordinating the various security signatures is needed, said Van Beek.

“If you want to make the system more secure then all countries need to have access to a list of all certificates of all countries all over the world. If that’s in place, if that list is used by all countries and all inspection systems, that might help to detect non-genuine documents and non-genuine chips,” said Van Beek.

“But if that system is not there, it’s really difficult to increase the security level with the technology that’s currently used. So, implementing a central security system with all lists from around the world, that’s something that needs to be done before you can trust the system,” he added.

Most countries rely on a combination of automated passport scanning by computers and border control officers. But Laurie and Van Beek fear an over-reliance on the automated scanning.

“If they [the scanners] are checking a facial image, they look at the picture of the person standing there. They check it against the data stored on the chip and if they match and that person isn’t on a stop list, then they let you through,” explained Laurie. “In the current state, I think they’ve actually made the borders weaker, not stronger.”

But Britain’s Home Office maintains that its biometric passports are some of the most secure in the world.

“We remain confident that the British passport is one of the most secure documents of its kind — fully meeting rigorous international standards,” said a Home Office spokesperson.

“Since 2006 biometric passports issued by the British government biometrically link an individual to their passport through their photograph contained in an electronic chip.

“Even if an individual’s photograph on the document is changed the photograph in the chip cannot be without border control officers becoming aware that the passport chip has been tampered with.”

But Laurie and Van Beek insist that confidence in technology could be misplaced, because biometric passports can be faked, with pictures and chips that match.

Click here for the full report.

Toyota VS Big Pharma

February 24, 2010

Natural News

By Mike Adams

Even as Toyota now finds itself the target of an increasingly hyped-up inquisition about “public safety,” skeptical consumers are asking the commonsense question: If public safety is so important, then why isn’t Congress asking about the dangers of Big Pharma’s deadly drugs?

Toyota’s problems with throttle controls and brakes haven’t actually killed anyone as far as we know. Even if deaths have occurred, their number would be extremely small compared to the number of deaths caused by Big Pharma’s products. FDA-approved pharmaceuticals kill nearly 270 people each day in the United States alone, and that’s according to conservative calculations published in the Journal of the American Medical Association. That’s equivalent to a jumbo jet airliner falling out of the sky and crashing in a giant ball of flame every single day in the U.S.

If you’re concerned about public safety in the United States, there’s no industry that’s more dangerous than the pharmaceutical industry. All the automobile manufacturers combined can’t even begin to approach the body bag count produced by Big Pharma. So why is the U.S. Congress and mainstream media all of a sudden so gung-ho to accuse Toyota of compromising public safety while ignoring the far greater threat posed by Big Pharma? Because Toyota is an easy, convenient target that can distract people from the far worse dangers that no one dares speak of. As long as Americans can be distracted into focusing their fear and anger on Toyota, Big Pharma keeps on committing its crimes without being called to task.

And remember: Toyota is a foreign company while the giants of Big Pharma are American companies. Congress is quick to defend U.S. companies like General Motors and Merck, even if those companies pose a very real danger to public safety.

Just yesterday, NaturalNews.com published a story about the deliberate cover-up of deaths caused by Avandia, a top diabetes drug made by GlaxoSmithKline. According to FDA scientists, this drug is linked to 83,000 heart attacks. The company knew about this increased risk — and so did the FDA! Yet both the FDA and GSK conspired to hide this information from the public, says the U.S. Senate committee report (http://www.naturalnews.com/028233_G…).

As a result of this effort to deliberately mislead the public over the lack of safety for its drug, Avandia remained “FDA approved” and now causes an estimated 500 heart attacks and 300 cases of heart failure every month in the USA alone.

That’s the body count from just one medication. Add up the fatalities from all the other thousands of medications sold by the drug industry and you start to get the picture of just how large this threat to public health really is. People are dying every day in America due to dangerous prescription medications that the FDA knew were dangerous years ago!

To continue reading this report, click here.

Bribes at the Center of Tomato Company

February 24, 2010

FoodNavigator-USA.com

By Caroline Scott-Thomas

Former owner and CEO of SK Foods Frederick Scott Salyer has been charged with running his company as a criminal racketeering enterprise for more than a decade and could face up to 20 years in prison.

According to federal authorities in Sacramento, Salyer is alleged to have ordered payment of $390,000-worth of bribes to company executives in order to ensure they bought tomato products from his company at above-market prices.

An ongoing federal lawsuit was filed against employees at SK Foods in August 2008, accusing them of distributing hundreds of thousands of dollars in bribes, price fixing, and mislabeling offences, following a three-and-a-half year investigation. The California-based company supplied about 15 percent of the bulk tomato paste and diced tomatoes supplied to American manufacturers of salsa, ketchup and juices and it is alleged to have regularly paid bribes to the purchasing managers of many of its customers, including Kraft Foods, Frito-Lay, B&G Foods, and Safeway.

“The investigation has exposed a web of corruption and fraud in the tomato products industry – centered at SK Foods,” US Attorney Benjamin Wagner said in a statement.

Salyer has been charged with racketeering, wire fraud and obstruction of justice. His lawyer Malcolm Segal said that Salyer intends to enter a plea of not guilty and dispute the charges.

Salyer, 54, was arrested by FBI agents at JFK airport in New York on February 4 as he disembarked from a flight from Paris. According to the complaint that led to his arrest, Salyer left the United States in October 2009, after several former SK Foods employees had pleaded guilty, with the intention of relocating permanently overseas.

This is the first time Salyer has been indicted in connection with the case.

The complaint alleged that he had been seeking permanent residence status in Uruguay, Paraguay, Andorra, and France, in the belief that he would not be extradited from those countries, and that he had siphoned millions of dollars from former SK Foods’ accounts into offshore bank accounts in the Caribbean and Lichtenstein.

Salyer had booked a flight to return to Europe on February 5, but instead appeared in court where a federal magistrate denied bail, saying that he had been planning an elaborate scheme to flee the country.

Meanwhile, the company’s vice president of operations Steven King was charged last week with intent to defraud and mislead by mislabeling moldy tomato products and releasing them onto the market. He has pleaded guilty to one count of food adulteration and misbranding, the tenth person to plead guilty in connection with the case.

Click here for the full report.

Pediatrician in Delaware Charged With Multiple Rapes

February 24, 2010

Breitbart

By AFP

A Delaware pediatrician has been charged with multiple acts of child rape and abuse over the course of more than a decade in what may be the worst pedophilia case in US history.

A grand jury indictment unsealed on Monday by Delaware’s Attorney General’s office charges Earl Bradley with sexually assaulting and molesting 102 girls and one boy in the years since 1998.

He faces 471 separate counts, reflecting the multiple times he is alleged to have raped and abused children who visited him as patients at his Baybees pediatric office in Lewes, Delaware.

The charges include first-degree and second-degree rape, unlawful sexual contact, sexual exploitation of a child and continuing sexual abuse of a child.

The indictment cites videos Bradley made of the various abusive incidents, which were seized from his office after investigators began looking into reports of child abuse last year.

In unsealing the indictment, Delaware’s Attorney General Beau Biden said the investigation was continuing and he expected more cases to be uncovered.

He described the case as “unique” in the state’s history, local newspaper The News Journal reported. “I know of no other that has this many victims” in US history, he added.

The case has traumatized the local community and Biden’s office has already moved to strip the outside signage from Bradley’s practice.

“The community should not be faced with the visual reminder of their pain as they go about their daily lives,” Biden said in a statement.

“We hope that removing these outward displays promoting Dr Bradley’s practice… is a small step in helping the Lewes community begin the healing process.”

Biden’s office has faced questions over why reports about Bradley in 2005 were not passed along to the state’s professional regulation official or the Board of Medical Practice.

He has ordered an investigation into whether mistakes were made that allowed Bradley to continue practicing after parent complaints.

Bradley, meanwhile, remains in jail on bail set at 2.5 million dollars. A court date has not yet been set.

Click here for the full report.

U.S. Economy Is In Shambles

February 23, 2010

The Vancouver Sun

By Harvey Enchin

It has been one year since U.S. President Barack Obama signed the $787-billion stimulus bill, the Recovery Act, to lift the U.S. out of recession, and threw an additional $50-billion lifeline to American homeowners facing foreclosure. The package was subsequently enriched and is now estimated at $862 billion, while the pledge to stem foreclosures has risen to $275 billion.

“One year later, thanks to the Recovery Act, we can stand here again and say that a second depression is no longer a possibility,” Obama said in marking the anniversary last week.

Oh no? Take another look at the numbers.

After all that spending — actual and committed (Congress passed an additional $155 billion in aid in December) — claims of job creation and economic growth remain highly suspect. The U.S. economy has shed more than eight million jobs since the recession began, and losses continue with 20,000 fewer jobs in January alone. A White House advisory council forecast that the economy will create 95,000 jobs per month this year. For forecasters, the year is not off to a good start. Unless the job generator shifts into a higher gear, one analysis concluded, it will take more than seven years to replace the jobs lost since 2007.

The U.S. Labor Department recorded 473,000 new jobless claims last week, up from 442,000 a week earlier, while the number of people on extended benefits (those who have exhausted the regular 26 weeks of benefits) rose by 274,000 to six million. The official unemployment rate eased to 9.7 per cent in January from 10.1 per cent in October, but few believe the Obama administration’s boast that the stimulus has generated nearly two million jobs. According to a recent CBS News/ New York Times poll, only six per cent of Americans think the stimulus has created any jobs at all, and public support for the plan has dropped from 55 per cent in June to 38 per cent.

If the stimulus package has created jobs, they are in the public sector, displacing jobs that could have been created more efficiently in the private sector, costing taxpayers far more for each job than the sum of salary and benefits. That’s what happens when capital is diverted from productive endeavours that create wealth to government spending programs that dissipate it.

Beyond the jobs front, things are even worse. Loans in foreclosure now represent 4.6 per cent of all mortgages, and the number of mortgages more than 90 days overdue has climbed to 5.1 per cent.

A Congressional panel reported earlier this month that half of approximately $1.4 trillion in commercial loans coming due over the next four years are under water, and hundreds of small-and mid-sized banks face insolvency. It warned of an impending commercial real estate crisis with property values down 40 per cent since 2007 and 18 per cent of office space sitting vacant.

The move last week by the Federal Reserve to raise its emergency loan rate looked more like public relations than economic policy, an attempt to signal that GDP growth — seen at three per cent this year and four per cent in 2011 — is real and that inflation remains a threat. But strip out energy prices and consumer prices fell 0.1 per cent in January, the first month of deflation since 1982.

Underlying the economic gloom is a national debt of $12.4 trillion. Obama, apparently unfazed, signed a law this month that raised the limit on public debt to $14.3 trillion. Government debt now amounts to more than $40,000 for each American, $113,000 for each taxpayer. Given its ballooning budget deficit, which is seen at $1.6 trillion this year, or 10.6 per cent of GDP — a post-Second World War record — it’s difficult to see how the administration can put its fiscal house in order without massive spending cuts. But with soaring health care costs, an aging population, the environmental agenda, military commitments and more Obama-inspired social initiatives, spending cuts are unlikely.

China has indicated its lack of confidence in the crumbling U.S. economy by unloading $34.2 billion in U.S. bonds in December, relinquishing its status as the largest holder of U.S. foreign debt to Japan. As U.S. debt grows, so too does pressure on the interest rate on bills and bonds used to finance it. Rising debt service costs, perhaps accompanied by a downgrade from global ratings agencies, would help expose the phantom recovery for the charade it is.

Click here for the full report

Lawsuit Possible Over DNA From Baby Sent to Military for National Database

February 22, 2010

statesman.com

By Mary Ann Roser

An Austin lawyer threatened to pursue a new federal lawsuit Monday after learning that some newborn blood samples in Texas went to the U.S. military for potential use in a database for law enforcement purposes.

The Department of State Health Services never mentioned the database to Jim Harrington, director of the Texas Civil Rights Project, who settled a lawsuit in December with the state over the indefinite storage of newborn blood without parental consent, or to the American-Statesman, which first reported on the little-known blood storage practice last spring. Harrington said he thought another suit was likely unless the health department destroys the information obtained from the blood samples or obtains consent.

“This is the worst case of bad faith I have dealt with as a lawyer,” he said Monday.

Jerry Strickland, a spokesman for the Texas attorney general’s office, which represented the health department, fired back. “During this litigation, Harrington was provided accurate answers to the questions he asked,” he said.

“Once Harrington negotiated $26,000 in attorneys’ fees and costs for himself, accepted a settlement agreement and got his desired headlines, he was satisfied and dropped his

lawsuit against DSHS. It appears recent media reports caused Harrington to backtrack in an effort to obscure how he chose to handle this case,” he said

An article Monday by the Texas Tribune, a news Web site, said the state health department sent 800 anonymous samples to the military to help create a national mitochondrial DNA database. The samples were sent in 2003 and 2007, according to the department’s Web site.

Carrie Williams, a health department spokeswoman, said the program wasn’t mentioned because, “We don’t publicize every agency initiative or contract, and obviously this is a sensitive topic.”

Texas agreed to take part in the Armed Forces DNA Identification Laboratory database project because blood spots might help identify “ethnic or ancestral origins of unidentified corpses using mitochondrial DNA,” Williams said. “We believed it was an important research project that could potentially help in missing persons cases.”

The blood samples are taken from the heel during newborn screening tests for genetic disorders.

The blood spots are collected on coded cards, with the names matching those codes kept on file at the health department. Names are not disclosed without parental consent, the department says.

In March, Harrington sued in federal court on behalf of four parents and a pregnant woman who later dropped out, claiming that the state’s collection and indefinite storage of the samples since 2002 amounted to “an unlawful search and seizure.”

The Legislature approved a law in May that requires medical professionals to inform parents or guardians that the blood spots are being collected, stored and could be used for research. Parents who object could opt out.

In December, Harrington settled his suit when the health department agreed to destroy 5.3 million samples.

“I can’t tell you how many times we sat there, and they said no law enforcement,” Harrington said of the lawsuit discussions. “They said, ‘It’s only about medical research, it’s only about medical research.

Williams said the project has been listed on the Web site for weeks and “falls under the broader category of public health research.”

“Our intentions over the years have been good,” she added, “and we are moving forward with the positive changes to the program.”

Click here for the full report

America Just Declared The Recovery Over So You’d Better Get Ready For The Double Dip

February 23, 2010

Business Insider

By John Carney

Today’s bleak consumer confidence number is undoubtedly bad news for the economy. The bigger than expected drop suggests that consumers have lost confidence in the recovery, which will drive down home prices and consumer spending.

Consumer confidence is typically our “first look” at the state of the economy. While most government aggregated data come out with a two-month lag, or more, consumer confidence hits with just a one month lag. Studies have shown that consumer confidence is a good predictor of consumer spending numbers. Basically, people surveyed seem to be good at accurately reading their own economic situation, and those surveyed accurately reflect the broader economy. When consumer confidence drops to such deep unexpected levels–today’s were the worst in 27 years–then it is a flashing red-light about the economy.

There wasn’t anything good about today’s numbers. Every part of the survey was awful. On jobs, the optimistic folks who say jobs are plentiful fell to 3.6 percent from 4.4 percent. The pessimistic people who said jobs are hard to get increased to 47.7 percent from 46.5 percent. The gauge of expectations for the next six-months fell to 63.8, from 77.3 the prior month. The share of people who believe their incomes will increase over the next six months fell to 9.5 from 11 percent. The share of those expecting more jobs fell to 12.4 percent from 15.8 percent.

The message: the economy sucks.
The recovery we were supposed to have.
You’ll read a lot about how the consumer confidence numbers are a lagging indicator. Indeed, they are a lagging indicator when measured against the stock market. The real time data conveyed by the stock market is often a better indicator than any survey or government data. But that doesn’t mean you shouldn’t pay attention to the consumer confidence number, especially since stocks have declined for most of this year.

Let’s be clear here. The story-book recovery was dependent on a recovery of the consumer and a decline in the saving rate. If consumers lost some of their apprehension about future income prospects and future employment, they might begin to spend more on both retail goods and to purchase homes again. Anticipating this return of the consumer, businesses would increase capital spending and inventory. 

We got half of that equation. Business spending on new equipment and software reversed course from the sharp drop recorded during the recession. Exports began to grow, as well. The inventory swing–from liquidation of early 2009 to inventory accumulation at the end of the year–automatically boosted GDP.

The idea was that this would create positive feedback loop, with more production necessitating the hiring of new workers, adding to household income. Consumers would respond to increased household income with higher spending. That’s pretty much the textbook end of a recession.

The expectation that we would have a textbook end to the recession informed many of the expectations that were blown away by today’s drop in consumer confidence. We’ve have a historical record of 31 previous recessions in the United States, most of which indicate that the end of the inventory cycle boosts production and therefore employment and incomes. More importantly, the workers who kept their jobs become more confident about their future job and income prospects and begin to spend a larger fraction of their incomes. Deferred spending during a recession usually creates pent-up demand by consumers and businesses that then boosts spending once the recession ends.

The recovery we actually got.
But this cycle seems to be different. Workers who have kept their jobs are not gaining confidence. Boosted production seems to be being built on the backs of the current workers, driving up worker productivity, instead of increasing incomes or employment. The apprehension about future income prospects and employment is growing, not diminishing.

This could have some dire consequences. The inventory build was premised on the idea of the recovering consumer. Since that premise is wrong, businesses will find they have made a mistake. Inventory will have to be discounted and or scrapped. New equipment will remain under-utilized, and some of the new hires will have to be let go. In other words, the half of the recovery equation we got will simply have to be liquidated or put in cold-storage because of the half we didn’t get.

How did we screw up the recovery? Why did businesses get this so wrong that we’re headed back for the double dip instead of slowly climbing out of the recession?

What went wrong?
The answer will sound familiar to anyone acquainted with the work of Ludwig Von Mises or Friedrich Hayek. Cheap money created an illusion of wealth that businessmen interpreted as pent up demand. They invest money in inventory and equipment on the assumption that the consumer would recovery. And there assumption was based on very good evidence from past recoveries and the notion that loose monetary policy inevitably spurs a recovery.

Why was it different this time? The problem this time is that we’re in what the Keynesians would call a “liquidity trap.” Consumers, having been savaged by the housing bubble and its consequences, continue to be fearful of the future. Government regulation is making consumer spending more difficult by increasing capitalization requirement for banks and squeezing consumer access to credit. Huge debt overhangs from the boom still have many people trying to pay down debts instead of engaging in new spending. To put it briefly, the supply of funds to fuel economic growth is still very low because cautious Americans do not have faith in the recovery.

Economic planners will describe the situation as an “excess liquidity preference” and recommend more government spending to push the economy toward higher employment. Unfortunately, unless we’re really lucky, much of this government spending will likely be long-term destructive because it will direct funds in the wrong directions because it isn’t subject to market discipline. In any case, the current political atmosphere seems particularly unwelcoming to additional deficit spending. So we’d better hunker down and get ourselves adjusted to an economy with a higher than historical liquidity preference.

Click here for the full report

WHO: Pandemic Has Yet to Peak

February 24, 2010

comcast.net

The pandemic of H1N1 swine flu has not yet peaked, a committee of experts advised the World Health Organization on Tuesday.

“The committee advised that it was premature to conclude that all parts of the world have experienced peak transmission of the H1N1 pandemic influenza and that additional time and information was needed to provide expert advice on the status of the pandemic,” WHO spokesman Gregory Hartl said by e-mail.

WHO planned a news conference for Wednesday.

The United Nations agency declared last June that the new virus was causing the first influenza pandemic in more than 40 years after it spread around the world from Mexico and the United States in just six weeks.

Under WHO rules the emergency committee, composed of 15 experts and headed by Australian John MacKenzie, makes confidential recommendations to WHO director-general Dr. Margaret Chan.

She is then required to inform the health ministries of WHO’s 192 member states and the Vatican of her decision. The WHO’s decision will be announced formally by the WHO’s top flu expert Dr. Keiji Fukuda on Wednesday at 1000 GMT.
WHO has confirmed the virus has killed 16,000 people but notes this is a gross underestimate, as hardly any patients are diagnosed or tested. It will take a year or two after the pandemic ends to establish the true death toll, the WHO says.

The Centers for Disease Control and Prevention does projections based on testing and patterns of disease reports and projects that H1N1 has killed up to 17,000 people in the United States alone, and put as many as 370,000 into the hospital with serious illness.

In contrast, seasonal influenza kills 250,000 to 500,000 people globally but most are frail and elderly. H1N1 has attacked young adults and children.

SUBSTANTIAL OUTBREAKS

The pandemic sparked a race to develop new vaccines by drug makers including GlaxoSmithKline and Sanofi-Aventis but has proved to be of moderate severity, and many people failed to take the new vaccine.

Previous influenza pandemics have had waves of disease activity spread over months, meaning the post-peak period could last quite a while, according to the WHO.

The final stage, called the post-pandemic period, is when disease activity returns to levels normally seen for seasonal influenza, it says.

“There is no on and off switch for a pandemic. It’s not a single event. What we have to see is that the behavior of the H1N1 virus becomes like the behavior of other seasonal viruses,” Hartl said earlier on Tuesday.

“At the moment, it is still causing substantial outbreaks of disease outside the normal influenza seasons and affecting groups who are not normally affected by seasonal influenza. So as long as that continues, it does not behave like seasonal influenza.”

Younger people, especially those with chronic medical conditions, and pregnant women continue to be at a higher risk of infection and viral pneumonia from the H1N1 virus, Fukuda told reporters last week.

The WHO has cautioned that the H1N1 virus could still mutate or mix with the more deadly bird flu virus, which remains endemic in poultry in many Asian countries.

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