You need to be watching the news on this thing with Georgia and Russia. I have been following the Russian escalation, through their surrogates the separatists. I'll try to string together some posts one day next week. No wonder Georgia wants in NATO so bad and what will Russia do to prevent it?
Ok this week is food and water overview. Food you need it to live but also it is a comfort factor. What do I mean? You can live weeks without food, even a month. Probably do most us some good to go on a fast.
But as a comfort, during times of stress or physical exertion you need to fuel your body. If you are in a period of great stress, like a hurricane or what ever easy to make or even no cook food is very important. Also consider a month or so ago there where several articles about food riot’s around the world. What if you have a truckers strike, I hope you understand there is only about three days worth of food on the shelves of a grocery store. During times of troubles there will be less, maybe only hours.
So what kind of foods would be good? Foods that you could eat cold if you had to. The smart thing to do will be to eat leftovers out of the fridge first. Then you’re canned food and the stuff in the freezer as it thaws. But again, you can’t get food unless you have it. If the electric is out, most stores will not be opened. So stock your pantry, deep. Pick up the canned foods you normally get, that is the first step to keeping your family safe or providing for them would be getting at least several extra weeks of food, real meals. Don’t forget getting at least one (two would be better) manual can openers.
Water is a lot harder. You have to have water, you use it for cleaning up, sanitation, drinking and cooking. In an emergency they tell you to fill any extra contains you have plus the bathtubs. If you have a pool or hot tub you can use that water after you have treated it. I live on a well but run the water through a Brita filter before I drink it. They are cheap and easy. Here are some ways to purify water.
Boiling Is Best Short of using a very high-quality water filter, this is the most reliable method for killing microbes and parasites. Bring water to a rolling boil and keep it simmering for at least several minutes. Add one minute of boiling to the initial 10 minutes for every 1,000 feet above sea level. Cover the pot to shorten boiling time and conserve fuel.
Liquid Clorox Bleach In an emergency, think of this (one gallon of Regular Clorox Bleach) as 3,800 gallons of drinking water. When the tap water stops flowing, Regular Clorox Bleach isn't just a laundry-aid, it's a lifesaver. Use it to purify water, and you'll have something to drink. It's the same in any natural disaster. As the shock wears off and the days wear on, the biggest demand is for drinking water. Time after time, relief crews hand out free Clorox Bleach with simple instructions: use it to kill bacteria in your water and you'll have purified water to drink. Here's how: (Store these directions with your emergency bottle of Clorox Bleach.) First let water stand until particles settle. Pour the clear water into an uncontaminated container and add Regular Clorox Bleach per the chart.* Mix well. Wait 30 min. Water should have a slight bleach odor. If not, repeat dose. Wait 15 min. Sniff again. Keep an eyedropper taped to your emergency bottle of Clorox Bleach, since purifying small amounts of water requires only a few drops. See chart* suggestions for storage bottle replacement. Don't pour purified water into contaminated containers. To sanitize water jugs first, see instructions** at right. Without water and electricity, even everyday tasks are tough. In lieu of steaming hot water, sanitize dishes with a little Clorox Bleach. Just follow the directions below to keep dishes clean. Whether you use Clorox Bleach in an emergency or for everyday chores, it's always an environmentally sound choice. After its work is done, Clorox Bleach breaks down to little more than salt and water, which is good news anytime.
*Ratio of Clorox Bleach to Water for Purification 2 drops of Regular Clorox Bleach per quart of water 8 drops of Regular Clorox Bleach per gallon of water 1/2 teaspoon Regular Clorox Bleach per five gallons of water If water is cloudy, double the recommended dosages of Clorox Bleach. (Only use Regular Clorox Bleach (not Fresh Scent or Lemon Fresh). To insure that Clorox Bleach is at its full strength, replace your storage bottle every three months.)
**(Clorox Bleach Sanitizing Solution) Mix 1 tablespoon Regular Clorox Bleach with one gallon of water. Always wash and rinse items first, then let each item soak in Clorox Bleach Sanitizing Solution for 2 minutes. Drain and air dry.
Another source for water is the water trapped in water pipes and your water heater.
Our first articles starts out with the Economy, notice it is a not billion a with a "B", but trillion with a "T". I have said (along with others) that people are living off of credit cards, cash advances and home equity loans, or just re financing the house. The title wave is about to hit the beach.
When credit cards put you in jeopardy
Consumers have racked up more than $2.2 trillion in purchases and cash advances on major credit cards in just the last year. And it's become a habit for them to spend more than they have. The overall credit card debt grew by 315 percent from 1989 to 2006, according to public policy research firm Demos.
To compound the problem, fewer people are paying their credit cards bills on time. The percentage of people delinquent on their credit cards is the highest it's been in three years, according to CardTrack.com.
With banks tightening their standards and the drumbeat of recession getting louder, there's no better time to grab control of your debt than now.First, you have to determine if your credit card spending habits are out of control. Here are some signs:
You find that you can't make your minimum payments on your credit cards.
You realize you've been borrowing money from family members or friends to cover your payments.
You've gone to a lender you wouldn't normally use -- like a payday lender that loans you money at really high rates against your next paycheck.
Once you've made a list of your debts, it's time to prioritize your payments. Interest rates, on average, can range from 10 to 18 percent, according to Curtis Arnold of Cardratings.com. Tackle your highest-interest credit card first. With rates averaging about 14.5 percent, you really want to knock out the high-interest debts quickly. Try shifting high-interest credit card debt onto cards that have lower interest rates.
The principal is not the only problem, it's also the interest you're accruing. If you have a $2,000 balance at a 14 percent interest rate -- and make just the minimum payments -- it will take you more than 14 years to pay off that debt plus the interest. Try to pay more than the minimum payments on your credit cards whenever you can.
Another tip: Keep a close eye on your card's interest rates and find out if there is room for negotiation
Credit card companies are increasing fees and cutting credit limits, and some are increasing rates, according to Arnold, so be sure to scrutinize your monthly statements. Often the details of these changes are included in the fine print on your statement.
If you've been a good customer and you have good credit, now is a good time to negotiate for a higher credit limit or to knock some points off your interest rate, says John Ulzheimer of Credit.com.
All it takes is a phone call. And it could save you hundreds of dollars in interest payments. Many credit card issuers already have policies in place. These credit card companies don't want to lose your business. Of course, if you don't have a great credit history or you've made a few late payments, you may not get anywhere.
One of the most important steps you can take in tackling debt is improving your credit. Your credit report is being even more closely scrutinized today by credit card issuers, mortgage lenders, auto dealers, insurance carriers and even potential employers.
Also, don't close old credit cards accounts. Even if you don't use them frequently, it looks better for your credit score if you can show a long credit history, said Ulzheimer.
And, he says, delay some spending.
As a rule of thumb, you should try not to use more than 10 percent of your credit limit when making purchases. "The people with the best credit have a utilization rate of no more than 7 percent," he says.
If your credit utilization is 50 percent or more of your credit limit, you are doing some real damage to your credit score, says Craig Watts of Fair Isaac, one of the companies that provides credit scores. When the new FICO '08 scoring model is adapted in May, if you have a utilization of over 50 percent, you'll be penalized even more heavily. http://www.cnn.com/2008/LIVING/personal/02/22/financial.security/
You better buy the food when the price comes down. As long as we are being stupid and turning our food into fuel (ethanol), we can expect the prices to go through the roof. It is a short reprieve, better buy while you can, if it comes down.
Commodities rush could be over
By Barbara Hagenbaugh and John Waggoner, USA TODAY
The commodity price boom is fizzling fast, a development that could ease inflation fears and lead to some relief for consumers at the pump, in grocery aisles and at the jewelers.
After skyrocketing earlier this year, prices for a wide variety of commodities, including oil, corn, wheat and gold, have fallen drastically in recent weeks, thanks to declining demand, a strengthening dollar and emerging signs of weakness in the global economy.
"The rush is definitely over," says Nathan Golz, futures researcher at broker A.G. Edwards.
The Reuters-CRB Continuous Commodity Index, gauging the prices of a range of commodities, is down 16% from its July 2 peak. Still, it's up 25% from a year ago.
The price of a barrel of crude for delivery in September closed at $118.58 on Wednesday, down 59 cents from Tuesday. That's off 18% from its high closing price hit last month but up nearly 24% this year.
"The decline in energy prices should prevent (economic) matters from getting worse, as opposed to restoring growth," says John Lonski, chief economist for Moody's Investors Service.
The decline Wednesday came after the government reported a larger-than-expected increase in oil supplies. It also said gasoline demand in the past four weeks was down 2.6% from a year earlier as consumers found ways to cut back.
The nationwide average price of a gallon of regular was $3.862 Wednesday, or 25 cents lower than the July 17 record. That's still more than a $1 higher than a year ago, says AAA.
Less demand also explains the price drops in other commodities, such as softwood lumber, which fell 4% in the 12 months ended in June. That's because housing starts have fallen by nearly half since their peak, says Gopal Ahluwalia at the National Association of Home Builders. Gypsum, also used in building, has fallen 13.8%. "It's the overall effect of lower demand," Ahluwalia says.
The U.S. economic slowdown has stopped the decline in the dollar, as well. Money flows to developed countries with the highest interest rates, and that pushes up the value of their currencies. A three-month Treasury bill now yields 1.64%, vs. 4.24% for a three-month German bill.
The slowing European economy means it's unlikely that the European Central Bank will raise interest rates when it considers them today. "I think the worst for the dollar is over for a while," says Paul Kasriel, economist for Northern Trust.
http://www.usatoday.com/money/markets/2008-08-06-commodities-oil-easing_N.htm
Wheat prices jump on bargain buying, crude rise August 7, 2008 - 6:09pm By STEVENSON JACOBS AP Business Writer NEW YORK (AP) - Wheat prices jumped more than 50 cents a bushel Thursday after a big decline the previous day attracted new buyers seeking to lock in cheap supplies of the grain used to make pasta, bread and other food. Other commodities traded mixed, with crude oil rebounding slightly and gold, silver and copper futures falling. A day after a big sell-off, wheat surged almost the daily price limit, carrying corn, soybeans and other agriculture futures with it. Crude oil's late-session rally also boosted wheat buying from investors seeking commodities as an inflation hedge. Wheat for September delivery added 56.5 cents to settle at $8.2225 a bushel on the Chicago Board of Trade, just shy of the 60-cent daily limit. Prices had traded lower earlier in the day. "We ended on a strong note compared to where the market had been," said Vic Lespinasse of Grainanalyst.com. Other agriculture futures also traded higher. Corn for December delivery rose 14.25 cents to settle at $5.42 a bushel on the CBOT, while November soybeans rose 17 cents to settle at $12.39 a bushel. Crude ended higher for the first time in four sessions after Kurdish rebels claimed responsibility for sabotaging a Turkish oil pipeline and key supply link to Western countries. The purported attack caused a fire that was still burning late Thursday, and Turkish state-run media reported the pipeline could be closed for up to 15 days. Light, sweet crude for September delivery rose $1.44 to settle at $120.02 a barrel on the New York Mercantile Exchange, after fluctuating between gains and losses for part of the day. Other energy futures also traded higher. Heating oil futures slipped 0.43 cent to finish at $3.2336 a gallon, while gasoline prices rose 5.34 cents to settle at $3.0027 a gallon. In precious metals, gold prices fell to an almost two-month low after the dollar strengthened against the euro, diminishing the metal's appeal as an inflation hedge. Gold for December delivery fell $5.10 to settle at $877.90 an ounce on the Nymex, after earlier falling to $874.80, the lowest level since June 16. Other precious metals also fell. Silver for September delivery lost 24.8 cents to settle at $16.257 an ounce on the Nymex, while September copper fell about half a penny to settle at $3.418 a pound. http://www.wtop.com/?nid=111&sid=589604
Turning Russia's rich soil into riches
By Daniel Fisher BBC News, Moscow
Heartlands Farm has transformed the landscape
There are almost 100 million acres of farm land lying deserted and unfarmed in one of the world's most fertile areas - land that could feed millions of people.
This is not a doomsday scenario, it is a Russian reality.
At a time when world food prices are causing hunger and poverty for millions of people around the world, it might at first seem criminal. But those high prices could actually see the land once again bearing food for the world's markets.
Two British farmers from Nottinghamshire have been breaking new ground in the southern "chernozem" (black earth) region of Russia, by turning derelict land into prime wheat growing fields.
Their introduction of modern farming methods has boosted production to as much as three times that of local farmers.
Roll that out across Russia and, without touching any virgin land, Russia could be providing the world with up to 300m tonnes of cereals a year - making it the third largest cereal producer behind China and America.
There used to be a great collective farm here with lots of tractors and people, but now there is nothing
Local farmer
In 2002 Richard Willows, a former commodities trader, and Colin Hinchley, a farmer in his own right, came to Russia and bought up land in the Penza region that no-one was farming.
They set up Heartlands Farm and began to apply modern farming techniques with hi-tech equipment.
The results have been astounding - a serious eye opener not just for them, but for the local authorities as well.
Colin Hinchley took us around his 67,000-acre farm and, as we walked through a one of his fields of rippling green wheat, he explained how they did it.
To Russia with ploughs: the British farmers who are heading east
"This land was just scrub land. It's not been farmed for eight or nine years, so we have to cut away the vegetation, the grass and all the trees and begin the cultivation process," he said.
"The soil is very good and very consistent, considered one of the best growing mediums in the world. And the large scale - this field is the size of an average farm in England.
"So far we have managed to double the yields, but this year we expect three times a normal Russian yield - around six tonnes a hectare."
Heartlands have now been followed by many other foreign agro-industrial giants. And not just foreigners but Russians, too, have seen that there is money to be made not just by drilling in the ground but by cultivating it as well.
Deserted landscape
A short drive off the beaten track on the way back to Penza showed a very different story.
At the side of the road we caught sight of a weather-beaten couple using a scythe to cut grass for their horse.
Traditional farming methods continue in rural Russia
The wife told us: "There used to be a great collective farm here with lots of tractors and people, but now there is nothing."
"The bosses drank it all away," her husband added.
There are productive farms run by the state but, with one of the lowest levels of investment in agriculture in the world and a lack of manpower, these are few and far between.
Many of the villages where these people lived are often now deserted.
One village we drove through had only four wooden homes left out of 400. In the centre was a large ruined Orthodox church rising up out of the waist-high weeds. Its frescos were all gone and its cupolas colonised by grass. The only signs of life were the skylarks and cuckoos singing in the trees nearby.
Venturing further outside the village we drove cross-country through what seemed like scrubland, but was in fact an abandoned field.
Trees and meadow flowers competed with each other on the rolling hillside, and even a wild fox came close to see who had intruded on his peace and quiet.
The rumble of tractor wheels had clearly not been heard here for many years.
Over the next three years the same fox will watch Heartlands' satellite-guided tractors transform his hunting ground into a wheat field to feed hungry people.
http://news.bbc.co.uk/2/hi/europe/7528850.stm
Feeling the pinch of rising food prices? SHARE the bill
By Will BrownDEMOCRAT STAFF WRITER• June 17, 2008
If rising food prices are biting you on the billfold, the SHARE (Self Help and Resource Exchange) Florida Food Network may be a cheaper alternative than your neighborhood grocery.
The Tampa-based network guarantees participants will pay 50 percent less for its basic food package, which includes up to five meats and produce items.
In Leon County there are eight places where people can participate. Distribution sites can also be found in Gadsden, Jefferson, Madison, Taylor and Thomas counties. Complete listings featuring addresses and telephone numbers for the Big Bend distribution sites can be found on the network's Web site, http://www.shareflorida.org/.
So how can a cooperative promise cheaper prices than grocery stores?
"We go shopping at the same wholesalers that Publix and Winn-Dixie shop," said Kim Avera, field manager for the network. "When we put this together collectively, we're not buying for 30 people. We're buying for 5,000 people. When we have that much quantity, we get (a) better rate than when we buy chicken for 35 people."
That may sound like simple economics, but Avera said having more people participate equates to additional savings that can be passed along. There is a misconception that the network is only open to certain segments of the community, but Avera says that is not the case.
Summer participation typically declines, but this year Avera noted there has been a slight increase because families are trying to extend their budgets as far as possible amid rising food and gas prices. Tallahassee Democrat research noted prices for eight items many families consume have increased 18 percent from May 2007 to the present.
"The best way for us to get the word out is word-of-mouth," said Martha Creel, the program's coordinator in Jefferson County. "When people get the food and they tell their friends 'Look at this great deal I found!' Their friends tell other people about it. . . . We just keep at it, and more people hear about it and try it out.
The next registration period for July's package — registration is mandatory for program participation — will be from June 28 through sometime in mid-July. Cash and food stamps are the only payment methods because there is a quick turnaround in purchasing the food.
Jefferson County has various places in the community with information about the program. That is one reason Creel said there has been an increase in participation since last year.
Tallahassee resident Dennis Nye has been a volunteer with the network for 18 months through a program at his church. As someone who has seen how much the program helps the 15 to 20 families that pick up food there, Nye said it's a good feeling to know there are programs out there to help residents.
"I think we need more because we're barely scratching the surface of people we could help."
Contact business reporter Will Brown at (850) 599-2312 or wbrown@Tallahassee.com.
Jim Goodman: Small farming is the future
Jim Goodman — 7/29/2008 2:49 pm
Napoleon wanted France to be bigger. He wanted more land. Nothing stopped him until Waterloo.
Have we, the human race, met our Waterloo? Have we finally hit the wall with our never-ending desire for "bigness"?
I decided years ago that I didn't want my farming operation to get bigger. I liked milking 45 cows, raising their feed and doing a little direct marketing. I liked being small.
"Hopelessly behind the times," I was told. Local cheese makers were giving up, local meat processing was a thing of the past. Small farming was dead. The developing world couldn't feed itself and needed industrial farming systems.
Who could argue with the Green Revolution? Until the current food crisis. It's not so much a shortage of food, but a shortage of cheap food. The poor can't afford to eat and the middle class feels the pinch. Why wasn't industrial agriculture, farming fence row to fence row, feeding the world?
There's the rub -- feeding the world was never the intention. Back in the '70s well-meaning researchers and eager graduate students, myself included, were convinced we could eliminate hunger in our lifetime. We had good intentions, but the big picture was always about making a profit.
Farmers, using cheap fuel, fertilizer and plenty of chemicals, could plant more acres, produce enough volume and generally make a profit. This, of course, benefited the seed and chemical companies, which long ago figured out that small farmers saving their own seed and tending small acreages didn't spend much money.
The big meat packers and dairy processors anticipated the end of local processing. Their market share increased and they grew larger. By breaking the labor unions, they could pay lower wages, bring in immigrant workers, increase profits and grow even larger.
It was a grand plan. Agribusiness corporations were increasing profit margins quarter after quarter. The bigger they grew, the better it worked. Prices paid for animals, milk and grain fell as farms grew larger and produced more. Small farmers couldn't compete as per unit profit margins fell and only the larger producers could survive.
Oil prices went up and farmers were urged to grow more corn for ethanol. More land went into corn production, wheat acreage fell, speculation pushed prices up and food prices soared. The International Monetary Fund estimates that 50 percent of the increase in food price was due to ethanol production. Instead of feeding the world, industrial agriculture starves it.
While oil companies banked huge profits, people lost their homes, jobs and farms. We have become too dependent on globalization and the big corporations that control it.
Small is the future. We know indigenous farmers can produce more food using traditional farming methods. They have no need of genetically modified seed or chemicals. All they need is an end to wars and, as Frances Moore Lappe would say, "more democracy." The World Bank and the G-8 need to let them make their own decisions and feed themselves.
Western countries need to take a step back. We cannot continue to feed grass-eating animals a diet of grain, nor can we continue to fill our fuel tanks with grain. We cannot continue to encourage and subsidize industrial agriculture at the expense of small local producers.
What we can do is return to local and regional food production. We can allow the rest of the world to feed themselves by reining in the influence of multinational grain and chemical companies. We can redevelop local communities and keep local dollars local, rather than filling the coffers of offshore corporate bank accounts.
Accepting the value of "smallness" and living more locally is the solution. Embracing small and local addresses the failure of systems -- whether it is the failure of the globalized food system to embrace food sovereignty, the failure of capitalism and its penchant to move more wealth to those who already have more than enough, or the failure of an entire society that has based its existence on oil.
Waterloo is synonymous with defeat, but it was also a victory against empire. We need another victory against empire. We need to reclaim our sense of local and realize the necessity of being small and interdependent. We need to end thousands of years of thinking bigger is always better. Jim Goodman is a dairy farmer in Wonewoc and a policy fellow for the Food and Society Fellows Program.
Jim Goodman — 7/29/2008 2:49 pm
They are after your retiremnt plan better watch out.
Companies Tap Pension Plans To Fund Executive BenefitsLittle-Known Move Uses Tax Break Meant For Rank and File
By ELLEN E. SCHULTZ and THEO FRANCISAugust 4, 2008; Page A1
At a time when scores of companies are freezing pensions for their workers, some are quietly converting their pension plans into resources to finance their executives' retirement benefits and pay.
In recent years, companies from Intel Corp. to CenturyTel Inc. collectively have moved hundreds of millions of dollars of obligations for executive benefits into rank-and-file pension plans. This lets companies capture tax breaks intended for pensions of regular workers and use them to pay for executives' supplemental benefits and compensation.
The practice has drawn scant notice. A close examination by The Wall Street Journal shows how it works and reveals that the maneuver, besides being a dubious use of tax law, risks harming regular workers. It can drain assets from pension plans and make them more likely to fail. Now, with the current bear market in stocks weakening many pension plans, this practice could put more in jeopardy.
How many is impossible to tell. Neither the Internal Revenue Service nor other agencies track this maneuver. Employers generally reveal little about it. Some benefits consultants have warned them not to, in order to forestall a backlash by regulators and lower-level workers.
The background: Federal law encourages employers to offer pensions by giving companies a tax deduction when they contribute cash to a pension plan, and by letting the money in the plan grow tax free. Executives, like anyone else, can participate in these plans.
But their benefits can't be disproportionately large. IRS rules say pension plans must not "discriminate in favor of highly compensated employees." If a company wants to give its executives larger pensions -- as most do -- it must provide "supplemental" executive pensions, which don't carry any tax advantages.
The trick is to find a way to move some of the obligations for supplemental pensions into the plan that qualifies for tax breaks. Benefits consultants market sophisticated techniques to help companies do just that, without running afoul of IRS rules against favoring the highly paid.
GAUGING THE IMPACT
Qserps can sap the health of a company's pension plan. Flatware maker Oneida Ltd.'s pension plan suffered after the company added a QSERP in 2002. See a chronology and chart showing the liabilities and funding of Oneida's pension plan.
Once a company knows how much "capacity" its pension plan has -- that is, how much bigger it can make executive pensions without having to raise benefits for the rank-and-file -- implementing a Qserp can be remarkably simple. On Nov. 17, 2005, CenturyTel Inc., a Monroe, La., telecommunications company, amended its regular pension plan to spell out additional pension benefits for 18 select individuals, including at least five top executives. Chairman and Chief Executive Glen F. Post III was promised $97,768 a year more than the pension would otherwise have provided. The company said he gave up an equal amount of other benefits, which were unsecured IOUs from the company, for the Qserp benefit, which is backed by pension-plan assets. (Read CenturyTel's filing.)
Companies often disclose little or nothing about Qserps. A few, including chipmaker Intel Corp., provide passing mentions in corporate proxies or other SEC filings, though the references aren't always clear. Read an Intel filing from last spring in which the company's Qserp is discussed. The key section is highlighted, on page 53 of the 75-page document.
Intel's case shows how lucrative such a move can be. It involves Intel's obligation to pay deferred compensation to executives when they retire or leave. In 2005, the chip maker moved more than $200 million of its deferred-comp IOUs into its pension plan. Then it contributed at least $187 million of cash to the plan.
Now, when the executives get ready to collect their deferred salaries, Intel won't have to pay them out of cash; the pension plan will pay them.
Normally, companies can deduct the cost of deferred comp only when they actually pay it, often many years after the obligation is incurred. But Intel's contribution to the pension plan was deductible immediately. Its tax saving: $65 million in the first year. In other words, taxpayers helped finance Intel's executive compensation.
Meanwhile, the move is enabling Intel to book as much as an extra $136 million of profit over the 10 years that began in 2005. That reflects the investment return Intel assumes on the $187 million.
Fred Thiele, Intel's global retirement manager, said the benefit was probably somewhat lower, because if Intel hadn't contributed this $187 million to the pension plan, it would have invested the cash or used it in some other productive way.
The company said the move aided shareholders and didn't hurt lower-paid employees because most don't benefit from Intel's pension plan. Instead, they receive their retirement benefits mainly from a profit-sharing plan, with the pension plan serving as a backup in case profit-sharing falls short.
The result, though, is that a majority of the tax-advantaged assets in Intel's pension plan are dedicated not to providing pensions for the rank and file but to paying deferred compensation of the company's most highly paid employees, roughly 4% of the work force.
On the Hook
And taxpayers are on the hook in other ways. When deferred executive salaries and bonuses are part of a pension plan, they can be rolled over into an Individual Retirement Account -- another tax-advantaged vehicle.
Intel believes that its practices "feel consistent" with both the spirit and letter of the law that gives tax benefits for providing pensions.
Intel may be a model for what's to come. Many companies are phasing out their pension plans, typically by "freezing" them, i.e., ending workers' buildup of new benefits. This leaves more pension assets available to cover executives' compensation and supplemental benefits. A number of companies have shifted executive benefits into frozen pension plans.
Technically, a company makes this move by increasing an executive's benefit in the regular pension plan by X dollars and canceling X dollars of the executive's deferred comp or supplemental pension.
CenturyTel, for instance, in 2005 moved its IOU for the supplemental pensions of 18 top employees into its regular pension plan. Chief Executive Glen Post's benefits in the regular pension plan jumped to $110,000 a year from $12,000. A spokesman for the Monroe, La., company, which made more such transfers in 2006, was frank about its motive: to take advantage of tax breaks by paying executive benefits out of a tax-advantaged pension plan.
How They Do It
So how can companies boost regular pension benefits for select executives while still passing the IRS's nondiscrimination tests? Benefits consultants help them figure out how.
To prove they don't discriminate, companies are supposed to compare what low-paid and high-paid employees receive from the pension plan. They don't have to compare actual individuals; they can compare ratios of the benefits received by groups of highly paid vs. groups of lower-paid employees.
Such a measure creates the potential for gerrymandering -- carefully moving employees about, in various theoretical groupings, to achieve a desired outcome.
Much like other benefits-consulting firms, Watson Wyatt Worldwide Inc. markets the Qserp, or "qualified" supplemental executive retirement plan, as a way to give top officers bigger benefits from the regular pension plan "without [necessarily] increasing staff benefits at all." Read a page from Watson Wyatt's Web site on the "quirky executive perk."
Another technique: Count Social Security as part of the pension. This effectively raises low-paid employees' overall retirement benefits by a greater percentage than it raises those of the highly paid -- enabling companies to then increase the pensions of higher-paid people.
Indeed, "it is actually these discrimination tests that give rise to Qserp in the first place!" said materials from one consulting firm, Watson Wyatt Worldwide. "Qserp" means "qualified supplemental executive retirement plan" -- an industry term for a supplemental executive pension that "qualifies" for tax breaks.
Watson Wyatt senior consultant Alan Glickstein said the firm's calculations tell employers exactly how much disparity they can achieve between the pensions of highly paid people and others. "At the end, when the game is over, when the computer is cooling off, you know whether you passed [the IRS nondiscrimination tests] or not," he said. At that point, companies can retrofit the benefits of select executives, feeding some into the pension plan.
They can do this even if they freeze the pension plan, because executives' supplemental benefits and deferred comp aren't based on the frozen pension formula.
Keeping Quiet
Generally, only the executives are aware this is being done. Benefits consultants have advised companies to keep quiet to avoid an employee backlash. In material prepared for employers, Robert Schmidt, a consulting actuary with Milliman Inc., said that to "minimize this problem" of employee relations, companies should draw up a memo describing the transfer of supplemental executive benefits to the pension plan and give it "only to employees who are eligible."
The IRS was also a concern for Mr. Schmidt. He advised employers that in "dealing with the IRS," they should ask it for an approval letter, because if the agency later cracks down, its restrictions probably won't be retroactive.
"At some point in the future, the IRS may well take the position" that supplemental executive pensions moved into a regular pension plan "violate the 'spirit' of the nondiscrimination rules," Mr. Schmidt wrote. In an interview, he confirmed his written comments.
Companies don't explicitly tell the IRS that an amendment is intended to shift supplements executive benefits obligations into the regular pension plan. "They hide it," a Treasury official said. "They include the amendment with other amendments, and don't make it obvious."
With too little staffing to check the dozens of pages of actuaries' calculations, the IRS generally accepts the companies' assurances that their pension plans pass the discrimination tests, the official said.
"Under existing rules, there's little we can do anyway. If Congress doesn't like it, it can change the rules." To halt the practice, Congress would have to end the flexibility that companies now have in meeting the IRS nondiscrimination tests.
A spokesman for the IRS said it has no idea how many such pension amendments it has approved or how much money is involved.
A Way to Pass
Sometimes, the only tipoff that a firm is moving executive benefits into the regular pension is that it provides small increases to some lower-paid groups in the plan, in order to pass the nondiscrimination tests.
Royal & SunAlliance, an insurer, sold a division and laid off its 228 employees in 1999. Just before doing so, it amended the division's pension plan to award larger benefits to eight departing officers and directors. One human-resources executive got an additional $5,270 a month for life.
But to do this and still pass the IRS's nondiscrimination tests, the company needed to give tiny pension increases to 100 lower-level workers, said the company's benefits consultant, PricewaterhouseCoopers. One got an increase of $1.92 a month.
Joseph Gromala, a middle manager who stood to get $8.87 more a month at age 65, wrote to the company seeking details about higher sums other people were receiving. A lawyer wrote back saying the company didn't have to show him the relevant pension-plan amendment.
Mr. Gromala then sued in federal court, claiming that administrators of the pension plan were breaching their duty to operate it in participants' best interests. The company replied that its move was a business decision, not a pension decision, so the fiduciary issue was moot. The Sixth U.S. Circuit Court of Appeals agreed.
PricewaterhouseCoopers declined to comment. A spokesman for Royal & SunAlliance's former U.S. operation, now called Arrowpoint Capital, said the pension plan "wasn't discriminatory." Royal & SunAlliance recently changed its name to RSA Insurance Group.
Pension-plan amendments like the documents Mr. Gromala sought must be filed with the IRS, but the agency normally won't disclose specifics such as who benefits. The IRS says it can't release details of the amendments because they reflect individuals' benefits.
Not So Safe
Employers sometimes tell executives that moving their supplemental pensions or deferred comp into the company pension plan will make them more secure. Normally, supplemental pensions or deferred comp are just unsecured promises; companies don't set aside cash for supplemental executive pensions and deferred comp because there's no tax break for doing so. But the promises will be backed by assets if the company can squeeze them into a tax-advantaged pension plan.
This supposed security can prove illusory, as executives at Consolidated Freightways found out.
The trucking firm moved most of its retirement IOUs for eight top officers into its pension plan in late 2001. It said this would protect most or all of their promised benefits, which ranged up to $139,000 a year.
This came as relief to Tom Paulsen, then chief operating officer, who says he knew the Vancouver, Wash., trucking company was on "thin ice."
But the pension plan was underfunded. And Consolidated didn't add more assets to it when the company gave the plan new obligations. Adding the executive IOUs thus made the plan weaker. It went from having about 96% of the assets needed to pay promised benefits to having just 79%.
Losing Benefits
Consolidated later filed for bankruptcy and handed its pension plan over to a government insurer, the Pension Benefit Guaranty Corp. The PBGC commits to paying pensions only up to certain limits. Mr. Paulsen said he and other executives have been told they won't get their supplemental pensions.
Some lower-level people will lose benefits, too. Chester Madison, a middle manager who retired in 2002 after 33 years, saw his pension fall to $20,400 a year from $49,200. Mr. Madison, 62, has taken a job selling flooring in Sacramento, Calif.
He faults those who made the pension decisions. "I look at it as greed and taking care of the top echelons," he says.
It's impossible to know how much the addition of executive pensions to the pension plan contributed to the plan's failure. But in this as in similar companies where a plan saddled with executive benefits failed -- such as at kitchenware maker Oneida Ltd. in upstate New York -- it's clear the move weakened the plans by adding liabilities but no assets.
A trustee for Consolidated's bankruptcy liquidation declined to discuss details of the company's pension plan.
Mr. Madison and five other ex-employees sued Towers Perrin, a consulting firm that had advised Consolidated on structuring its benefits. The suit, alleging professional negligence over this and other issues, was dismissed in late 2006 by a federal court in the Northern District of California. Towers Perrin declined to comment.
Some companies, after moving executives' supplemental benefits into a pension plan, now take steps to protect them. When Hartmarx Corp. added executive obligations to its pension plan last year, it set up a trust that automatically would be funded if the plan failed.
Glenn Morgan, the clothier's chief financial officer, said the trust benefits nine or 10 people. "The purpose is to pay them the benefit they've earned," he said.
Write to Ellen E. Schultz at ellen.schultz@wsj.com and Theo Francis at theo.francis@wsj.com
http://online.wsj.com/article/SB121761989739205497.html?mod=hpp_us_whats_news
Hundreds of banks will fail, Roubini tells Barron's
Sun Aug 3, 2008 3:52pm EDT
NEW YORK, Aug 3 (Reuters) - The United States is in the second inning of a recession that will last for at least 18 months and help kill off hundreds of banks, influential economist and New York University Professor Nouriel Roubini told Barron's in Sunday's edition.
Taxpayers will pay a big price for helping bail out the rest of the financial services industry as well, Roubini said -- at least $1 trillion and more likely $2 trillion.
The banks will become insolvent because of mounting losses as a result of the housing bust and because they have only written down their subprime loans so far, he said. Still in front of them are their consumer-credit losses, for which they lack the reserves, Barron's reported.
He also said there are hundreds of millions of dollars outstanding in home-equity loans that could be worth zero, too.
U.S. consumers, meanwhile, are "shopped out" and saving less, while the Federal Reserve's performance in handling the crisis has been poor, Roubini said, because it failed to see that the problem extended beyond subprime mortgage debt.
Now, Roubini told Barron's, the government is overregulating, bailing out troubled participants and intervening in every market.
"The regulators should investigate themselves for bailing out Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz), the creditors of Bear Stearns and the financial system with new lending facilities. They have swapped U.S. Treasury bonds for toxic securities," he told Barron's. "It is privatizing the gains and profits, and socializing the losses as usual. This is socialism for Wall Street and the rich."
He said that sometimes it is necessary to use public money to rescue institutions, but in a way that does not bail out the people who made the mistakes. "In each one of these episodes, the government bailed out the shareholders, the bondholders, and to some degree, management," Roubini told Barron's.
As for the banks that will go bankrupt, they will include community banks that finance homes, stores, downtown areas, commercial real estate and other mainstays of U.S. towns and cities, Roubini said.
"Of three dozen or so medium-sized regional banks, a good third are in distress," he told Barron's, saying half of the group could go bankrupt. Some big banks could wind up insolvent, he added, but said they might be deemed too big to fail.
Nouriel stressed that he is "quite bullish" about the state of the global economy and that he is positive about the medium and long term.
(Reporting by Robert MacMillan, editing by Martin Golan)
http://www.reuters.com/article/bondsNews/idUSN0344130720080803?sp=true
Ask Dr. Helen: Preparing for Disaster — Prudent or Paranoid?
It's wise to be prepared — just don't lose sight of today as you brace for a potential tomorrow.
August 5, 2008 - by Helen Smith
So when does preparing for the worst shade over from prudence into paranoia? That’s a question that often comes up when people talk about preparing for disasters, financial meltdowns, or confrontation with criminals. How much is enough, and how much is too much?
It’s been over a year that I have been writing this column and I happened to take a look recently at the first piece I wrote, entitled “What Kinds of Things Should an Adult Be Able to Do?” The article and your responses got me thinking about being prepared for disasters or incidents in general that require skill and forethought to overcome. Using Heinlein’s quote on generalization, I opined that it was important for adults to be able to do a number of things such as drive a stick shift or swim a reasonable distance. Heinlein’s quote is as follows:
A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects.
What about applying Heinlein’s thoughts to disaster preparedness? In my estimation, it is prudent — within reason — to be able to handle a wide range of situations that call for general skills, just as Heinlein suggests. It is important to be prepared for any number of natural or man-made disasters even though the chances of being the victim of any specific one may be small. I will include self-defense here because being a victim of a crime is not necessarily a rare occurence but one that happens all too often; in 2006, for example, an estimated 1,417,000 violent crimes were committed across the country.
If you bring up preparing for certain disasters such as violent crime, people will often tell you you’re paranoid, particularly if they do not like where you are coming from politically and this is true for both sides of the spectrum, left and right. Try bringing up gun training to someone who doesn’t believe we need self-defense or mistakenly thinks that the police will protect you. They will try to convince you that you don’t need to train because the threat is small or you are paranoid.
Other naysayers will tell you that your preparation is fruitless. For example, I have a post on Krav Maga — an Israeli form of self-defense — and a commenter felt that learning this type of self-defense for me was probably a waste of time because I would be going up against an attacker more savvy and streetwise. Yeah, that’s always a reason to sit back like a wallflower and just hope passively that nothing bad will ever happen.
I think it’s a lot more intelligent to train — both with weapons and without — in order to have some ability to protect oneself. Not because I am paranoid — okay, maybe I am — but because as an adult, it is a good thing to be prepared in the event of a crime. Does this mean you will succeed? No, but nothing is 100%. I would rather have some skills than none. And sometimes preparation is just good for self-sufficiency, like growing one’s own food as I did this year. Sure, the decline of cheap oil and the threat of hard times to come may play a factor in prompting people to grow more food themselves, but if the only result is that I have a healthier snack to eat, is that so bad?
Many of us, from both sides of the political aisle, think that planning for disaster would be helpful but it is hard to know how much of disaster preparation is political and how much realistic. My husband, Glenn, in an article in TCS Daily makes these points:
There’s also a political angle. Back in the 1990s, it was the Soldier of Fortune crowd that was preparing for some sort of apocalyptic scenario. Back then, the Democrats were in power, and much of the apocalypticism we heard was from the right. Now, with the Republicans in power over the past six years, the apocalypticism has shifted leftward. A quick perusal of Amazon demonstrates this: Where once people on the right were worried about the shock troops of the socialist New World Order or the breakup of America into racial enclaves, now it seems like it’s mostly lefties worrying about self-reliance in the face of collapsing unsustainable technology and the dangers of suburban extinction in the face of high oil prices.
I predict that if Democrats do better in coming elections, much of the lefty apocalypticism will diminish. Unfortunately, that may lead to a loss of consciousness about the importance of disaster preparation among the larger populace. But maybe not. It’s a dangerous world out there, and there are lots of reasons, beyond politics, for doing what we can to be ready for it. Perhaps that message will persist, regardless. It should.
The key here to disaster preparedness is to keep an open mind, maintain a balance in your life, and don’t get too extreme one way or another. You want to be prepared, but you don’t want the preparedness to take over your life. In other words, be prepared but don’t be paranoid like this teen (Hat tip: Don Surber):
Psychiatrists have detected the first case of “climate change delusion” — and they haven’t even yet got to Kevin Rudd and his global warming guru.
Writing in the Australian and New Zealand Journal of Psychiatry, Joshua Wolf and Robert Salo of our Royal Children’s Hospital say this delusion was a “previously unreported phenomenon.”
“A 17-year-old man was referred to the inpatient psychiatric unit at Royal Children’s Hospital Melbourne with an eight-month history of depressed mood. … He also … had visions of apocalyptic events.” …
“The patient had also developed the belief that, due to climate change, his own water consumption could lead within days to the deaths of millions of people through exhaustion of water supplies.”
Storing some bottled water in your basement, as the federal government recommends, isn’t paranoid. Being afraid to drink water for fear of climate collapse is.
In conclusion, my advice is that one doesn’t want to take things to an extreme and get overly anxious about certain events taking place, but it is good to have the ability and forethought to have some control should something unpredictable happen. If not overdone, preparedness can even be mentally healthy. A feeling of mastery can help lessen anxiety. In addition, it will be beneficial to society if citizens are equipped to handle problems themselves without turning to the government for all of the solutions. For in the end, self-reliance and self-sufficiency may be the only traits separating those who make it through or even flourish in hard times and those who flounder.
So, what do you think, is preparing for disaster or crime prudent or paranoid? Do you have your own areas of disaster preparedness that you focus on and prepare for and if so, what are they and how do you prepare? Or do you think some disasters are just politically motivated to make people paranoid enough to vote a particular way?
http://pajamasmedia.com/blog/ask-dr-helen-preparing-for-disaster-prudent-or-paranoid/
The site, http://www.saferoadmaps.org/, combines Google Maps technology with federal traffic death statistics. Developed by researchers at the University of Minnesota, enter any address, and the site will show you how many people were killed in traffic deaths near that location in 2006, the most recent year for traffic data available.
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