If the state can't save us, we need a licence to print our own money

It bypasses greedy banks. It recharges local economies. It's time to think seriously about an alternative currency

In Russell Hoban's novel Riddley Walker, the descendants of nuclear holocaust survivors seek amid the rubble the key to recovering their lost civilisation. They end up believing that the answer is to re-invent the atom bomb. I was reminded of this when I read the government's new plans to save us from the credit crunch. It intends - at gobsmacking public expense - to persuade the banks to start lending again, at levels similar to those of 2007. Isn't this what caused the problem in the first place? Are insane levels of lending really the solution to a crisis caused by insane levels of lending?

Yes, I know that without money there's no business, and without business there are no jobs. I also know that most of the money in circulation is issued, through fractional reserve banking, in the form of debt. This means that you can't solve one problem (a lack of money) without causing another (a mountain of debt). There must be a better way than this.

This isn't my subject and I am venturing way beyond my pay grade. But I want to introduce you to another way of negotiating a credit crunch, which requires no moral hazard, no hair of the dog and no public spending. I'm relying, in explaining it, on the former currency trader and central banker Bernard Lietaer.

In his book The Future of Money, Lietaer points out - as the government did yesterday - that in situations like ours everything grinds to a halt for want of money. But he also explains that there is no reason why this money should take the form of sterling or be issued by the banks. Money consists only of "an agreement within a community to use something as a medium of exchange". The medium of exchange could be anything, as long as everyone who uses it trusts that everyone else will recognise its value. During the Great Depression, businesses in the United States issued rabbit tails, seashells and wooden discs as currency, as well as all manner of papers and metal tokens. In 1971, Jaime Lerner, the mayor of Curitiba in Brazil, kick-started the economy of the city and solved two major social problems by issuing currency in the form of bus tokens. People earned them by picking and sorting litter: thus cleaning the streets and acquiring the means to commute to work. Schemes like this helped Curitiba become one of the most prosperous cities in Brazil.

But the projects that have proved most effective were those inspired by the German economist Silvio Gessell, who became finance minister in Gustav Landauer's doomed Bavarian republic. He proposed that communities seeking to rescue themselves from economic collapse should issue their own currency. To discourage people from hoarding it, they should impose a fee (called demurrage), which has the same effect as negative interest. The back of each banknote would contain 12 boxes. For the note to remain valid, the owner had to buy a stamp every month and stick it in one of the boxes. It would be withdrawn from circulation after a year. Money of this kind is called stamp scrip: a privately issued currency that becomes less valuable the longer you hold on to it.

One of the first places to experiment with this scheme was the small German town of Schwanenkirchen. In 1923, hyperinflation had caused a credit crunch of a different kind. A Dr Hebecker, owner of a coalmine in Schwanenkirchen, told his workers that if they wouldn't accept the coal-backed stamp scrip he had invented - the Wara - he would have to close the mine. He promised to exchange it, in the first instance, for food. The scheme immediately took off. It saved both the mine and the town. It was soon adopted by 2,000 corporations across Germany. But in 1931, under pressure from the central bank, the ministry of finance closed the project down, with catastrophic consequences for the communities that had come to depend on it. Lietaer points out that the only remaining option for the German economy was ruthless centralised economic planning. Would Hitler have come to power if the Wara and similar schemes had been allowed to survive?

The Austrian town of Wörgl also tried out Gessell's idea, in 1932. Like most communities in Europe at the time, it suffered from mass unemployment and a shortage of money for public works. Instead of spending the town's meagre funds on new works, the mayor put them on deposit as a guarantee for the stamp scrip he issued. By paying workers in the new currency, he paved the streets, restored the water system and built a bridge, new houses and a ski jump. Because they would soon lose their value, Wörgl's own schillings circulated much faster than the official money, with the result that each unit of currency generated 12 to 14 times more employment. Scores of other towns sought to copy the scheme, at which point - in 1933 - the central bank stamped it out. Wörgl's workers were thrown out of work again.

Similar projects took off at the same time in dozens of countries. Almost all of them were closed down (just one, Switzerland's WIR system, still exists) as the central banks panicked about losing their monopoly over the control of money. Roosevelt prohibited complementary currencies by executive decree, though they might have offered a faster, cheaper and more effective means of pulling the US out of the Depression than his New Deal.

No one is suggesting that we replace official currencies with local scrip: this is a complementary system, not an alternative. Nor does Lietaer propose this as a solution to all economic ills. But even before you consider how it could be improved through modern information technology, several features of Gessell's system grab your attention. We need not wait for the government or the central bank to save us: we can set this system up ourselves. It costs taxpayers nothing. It bypasses the greedy banks. It recharges local economies and gives local businesses an advantage over multinationals. It can be tailored to the needs of the community. It does not require - as Eddie George, the former governor of the Bank of England, insisted - that one part of the country be squeezed so that another can prosper.

Perhaps most importantly, a demurrage system reverses the ecological problem of discount rates. If you have to pay to keep your money, the later you receive your income, the more valuable it will be. So it makes economic sense, under this system, to invest long term. As resources in the ground are a better store of value than money in the bank, the system encourages their conservation.

I make no claim to expertise. I'm not qualified to identify the flaws in this scheme, nor am I confident that I have made the best case for it. All I ask is that, if you haven't come across it before, you don't dismiss it before learning more. As we confront the failure of the government's first bailout and the astonishing costs of the second, isn't it time we considered the alternatives?

Poverty of Imagination

Venturing out each day into this land of strip malls, freeways, office parks, and McHousing pods, one can't help but be impressed at how America looks the same as it did a few years ago, while seemingly overnight we have become another country. All the old mechanisms that enabled our way of life are broken, especially endless revolving credit, at every level, from household to business to the banks to the US Treasury.

Peak energy has combined with the diminishing returns of over-investments in complexity to pull the "kill switch" on our vaunted "way of life" -- the set of arrangements that we won't apologize for or negotiate. So, the big question before the nation is: do we try to re-start the whole smoking, creaking hopeless, futureless machine? Or do we start behaving differently?

The attempted re-start of revolving debt consumerism is an exercise in futility. We've reached the limit of being able to create additional debt at any level without causing further damage, additional distortions, and new perversities of economy (and of society, too). We can't raise credit card ceilings for people with no ability make monthly payments. We can't promote more mortgages for people with no income. We can't crank up a home-building industry with our massive inventory of unsold, and over-priced houses built in the wrong places. We can't ramp back up the blue light special shopping fiesta. We can't return to the heyday of Happy Motoring, no matter how many bridges we fix or how many additional ring highways we build around our already-overblown and over-sprawled metroplexes. Mostly, we can't return to the now-complete "growth" cycle of "economic expansion." We're done with all that. History is done with our doing that, for now.

So far -- after two weeks in office -- the Obama team seems bent on a campaign to sustain the unsustainable at all costs, to attempt to do all the impossible things listed above. Mr. Obama is not the only one, of course, who is invoking the quest for renewed "growth." This is a tragic error in collective thinking. What we really face is a comprehensive contraction in our activities, especially the scale of our activities, and the pressing need to readjust the systems of everyday life to a level of decreased complexity.

For instance, the myth that we can become "energy independent and yet remain car-dependent is absurd. In terms of liquid fuels, we're simply trapped. We import two-thirds of the oil we use and there is absolutely no chance that drill-drill-drilling (or any other scheme) will change that. The public and our leaders can not face the reality of this. The great wish for "alternative" liquid fuels (bio fuels, algae excreta) will never be anything more than a wish at the scales required, and the parallel wish to keep all our cars running by other means -- hydrogen fuel cells, electric motors -- is equally idle and foolish. We cannot face the mandate of reality, which is to do everything possible to make our living places walkable, and connect them with public transit. The stimulus bills in congress clearly illustrate our failure to understand the situation.

The attempt to restart "consumerism" will be equally disappointing. It was a manifestation of the short peak energy decades of history, and now that we're past peak energy, it's over. That seventy percent of the economy is over, especially the part that allowed people to buy stuff with no money. From now on people will have to buy stuff with money they earn and save, and they will be buying a lot less stuff. For a while, a lot of stuff will circulate through the yard sales and Craigslist, and some resourceful people will get busy fixing broken stuff that still has value. But the other infrastructure of shopping is toast, especially the malls, the strip malls, the real estate investment trusts that own it all, many of the banks that lent money to the REITs, the chain-stores and chain eateries, of course, and, alas, the non-chain mom-and-pop boutiques in these highway-oriented venues.

Washington is evidently seized by panic right now. I don't know anyone who works in the White House, but I must suppose that they have learned in two weeks that these systems are absolutely tanking, that the previous way of life that everybody was so set on not apologizing for has reached the end of the line. We seem to be learning a new and interesting lesson: that even a team that promises change is actually petrified of too much change, especially change that they can't really control.

The argument about "change" during the election was sufficiently vague that no one was really challenged to articulate a future that wasn't, materially, more-of-the-same. I suppose the Obama team may have thought they would only administer it differently than the Bush team -- but basically life in the USA would continue being about all those trips to the mall, and the cubicle jobs to support that, and the family safaris to visit Grandma in Lansing, and the vacations at Sea World, and Skipper's $20,000 college loan, and Dad's yearly junket to Las Vegas, and refinancing the house, and rolling over this loan and that loan... and that has all led to a very dead end in a dark place.

If this nation wants to survive without an intense political convulsion, there's a lot we can do, but none of it is being voiced in any corner of Washington at this time. We have to get off of petro-agriculture and grow our food locally, at a smaller scale, with more people working on it and fewer machines. This is an enormous project, which implies change in everything from property allocation to farming methods to new social relations. But if we don't focus on it right away, a lot of Americans will end up starving, and rather soon. We have to rebuild the railroad system in the US, and electrify it, and make it every bit as good as the system we once had that was the envy of the world. If we don't get started on this right away, we're screwed. We will have tremendous trouble moving people and goods around this continent-sized nation. We have to reactivate our small towns and cities because the metroplexes are going to fail at their current scale of operation. We have to prepare for manufacturing at a much smaller (and local) scale than the scale represented by General Motors.

The political theater of the moment in Washington is not focused on any of this, but on the illusion that we can find new ways of keeping the old ways going. Many observers have noted lately how passive the American public is in the face of their dreadful accelerating losses. It's a tragic mistake to tell them that they can have it all back again. We'll see a striking illustration of "phase change" as the public mood goes from cow-like incomprehension to grizzly bear-like rage. Not only will they discover the impossibility of getting back to where they were, but they will see the panicked actions of Washington drive what remains of our capital resources down a rat hole.

A consensus is firming up on each side of the "stimulus" question, largely along party lines -- simply those who are for it and those who are against it, mostly by degrees. Nobody in either party -- including supposed independents such as Bernie Sanders or John McCain, not to mention President Obama -- has a position for directing public resources and effort at any of the things I mentioned above: future food security, future travel-and-transport security, or the future security of livable, walkable dwelling places based on local networks of economic interdependency. This striking poverty of imagination may lead to change that will tear the nation to pieces.

Jobless in America: Stories from the Frontlines of the Economic Crisis

Some among America's millions of newly unemployed vent their frustrations -- and wonder what government can do to help.

On January 27, at the end of a grim week of headlines announcing mass layoffs across the country, Nicholas von Hoffman posted a piece on the Nation website titled "Lost Your Job? Tell Your Story." By turns sad and scathing, frustrated and furious, the testimonials poured in -- what follows is only a sample. Inspired by this approach, AlterNet invites readers to send in their stories of how the recent decline in the economy has affected their lives. Email to: Crisis@alternet.org.

"I had just come back from attending the inauguration in Washington the day before I was told they were letting me go," a salesman named Robert Hinckley writes to The Nation. "My supervisor called me into his office and asked me if I believed in change. Before I could answer, he said he knew I did, since I was a big Obama supporter. Then he told me that the company thought I needed a change, since I didn't seem to be able to 'make my numbers' anymore."

In Maine there are skilled carpenters knocking on doors, asking for any kind of work, shoveling snow or stacking firewood. In Arizona Roger Barthelson, who has a PhD in biochemistry, says, "I am worried about losing my job, which pays about half of what the bottom-level salary is for someone with my experience--if I had a real job. Underemployment is bad enough. Now my little McJob may go away. Maybe I should retrain?"

Add that question to the one e-mailed to The Nation from "Anonymous" in Miami, who cries out, "Where are other people's stories? I have been looking online and, beyond this forum, they are nowhere to be found. Perhaps without an Internet connection, the worst stories will never be heard. Is that the reason for the silence?"

Every business day brings announcements of new layoffs at the big corporations. Layoffs in the small businesses, which comprise hundreds of thousands of jobs, do not get the publicity, but the consequences are the same--panic, worry, want and family disintegration. Animal shelters report that jobless people are bringing in the pets they no longer can afford to keep.

At the current accelerating rate of layoffs, we will be called on to deal with a catastrophe by the end of June. And at this time next year, the nation could be suffering 6, 7, even 8 million more Americans without jobs in a society singularly ill equipped to take on a disaster that many of the people in power thought could never happen.

Past recessions hit blue-collar workers and farmers the hardest and schooled them psychologically, if not financially, in alternating good times and bad. The white-collar wipeout is something new. We have no experience in handling the huge numbers of college-educated, technically trained unemployed.

Not only does unemployment ruin the lives of the people enduring it; it kick-starts home foreclosure rates and stimulates bankruptcies. The people who still have jobs, fearing that they could be next, stop spending money on cars, houses, clothes or anything else.

The past century of depressions, recessions, slumps, panics, dips, slowdowns, busted bubbles and crashes shows that jobs are the last thing to come back, that employment is the slowest to recover. Every job lost postpones the return of prosperity.

This is the moment for a tourniquet on the job hemorrhage. News of the millionaire class using public bailout money for their bonuses and private airplanes has left people feeling stranded and furious. They are demanding that something be done for them.

Washington should get money out to the states so they don't have to cut payrolls. As the bill stands now, it does that in part with education and health, but it ought to go further and make up the billions in deficits that at least forty-six states are looking at and save the thousands of state and local jobs that otherwise will soon be lost. California is already requiring state employees to take two unpaid days a month; before we can turn our attention to job creation, we need to stop the layoffs.

Appropriation of money that cannot be spent immediately should be put off for another day. Transportation money ought to go into running more trains and buses now. Construction on new infrastructure should be postponed, and work crews should be sent out to do repairs now. If a project is ready to start instantly--be it a research proposal, childcare or a theater group--put money into it now.

There are also some tax schemes that might have an immediate effect on job retention, such as Martin Feldstein's proposals to offer tax credits on the down payments on houses and automobiles. This is the time to make employing people as inexpensive as possible--a temporary suspension of the FICA payroll tax would save employers huge sums and put more money into paychecks. Another step might be to allow employers to double their tax deductions on nonexecutive salaries.

The operative word is "now." We must save the jobs we have and then go on to create new ones. Please send your stories and those of your friends so that the faces of the people whose way of life is collapsing are known and their voices are heard. The talking heads, professors, passing celebrities, politicians, experts, analysts and the barking seals of talk-radio and all-news television must not be the only ones who are heard.

* * *

'People no longer had credit cards that worked'

I lost my job a week ago. I was working for a software company here in Southern California, selling educational programs and expecting people to come up with $170 over the phone and give out a credit card number. My manager assured me every day that our business was recession-proof. He said that people will always want to help their children, especially where their education was involved.

Unfortunately, the people I was calling no longer had credit cards that worked. It was sad to listen to some of the stories from people who had just lost their jobs, were expecting to or were worried about losing their homes to foreclosure. When I told them this was a very important purchase, they'd tell me they were more concerned with keeping their home or putting food on the table. Every day I went to work it became more difficult to make the sale. Then I was fired--for not getting enough sales each week. My partner is retired and on Social Security. He also gets a small pension. My income, however, was necessary. We do not know how we are going to pay the bills now.

James Kavanagh
San Diego

'Is the George W. Bush Library hiring?'

My original career choice was to be a history professor. After a few years in graduate school, I decided that a career as a librarian or archivist would be more sensible, considering how long it takes to get a PhD and the student loan debt I was racking up. I graduated from library school in the summer of 2007 with $80,000 in debt and had begun my job search months earlier. I moved from Iowa to Oregon to live with my family while I continued to search for a job. Because my mother is also a librarian, she was able to get me a temporary part-time job at her library for five months.

In April 2008, I finally landed what seemed to be a really great job as a corporate archivist in the suburbs of Washington. I knew that this job was risky, as the company provided archival services for corporate clients, and the economy was already faltering. I remember the CEO of the company announcing in a meeting that we always did well during economic downturns due to the fact that we outsourced archives and were cheaper for a company than hiring a full-time archivist. A co-worker also told me not to worry about the economy because we had a financial backer who supported us whether we were profitable or not. I didn't really believe either of these statements because we were rapidly losing clients and not gaining any new ones.

On January 14 I was told that because I was the last one hired in my department, I was to be laid off. I had heard about the procedures for layoffs, but still I was surprised by how I was treated: I had to clear my desk immediately (my computer was already locked), and my co-workers could not even look me in the eye, nor did my boss say goodbye. I have not heard from any of them since that day, and I don't expect to.

It saddens me that so many people of my generation are in the same boat: overeducated, underemployed and in over our heads in student loan debt. It is hard not to be angry at my parents' generation for their years of out-of-control consumerism and lax regulations. Fortunately, a lot of us are ready and willing to work hard to right so many wrongs.

What I need most from the government is health insurance (my coverage ends today) and extended unemployment benefits if I don't find a job within three months. It also wouldn't hurt if libraries and archives received more funding. By the way, is the George W. Bush Library hiring yet? I'll be the first in line.

States' Jobless Funds Run Low

Seven Are Already Borrowing From Washington to Pay Unemployment Benefits

A growing number of states are running out of cash to pay unemployment benefits, a sign of how far social-welfare systems are being stretched by the swelling ranks of the jobless in the deteriorating U.S. economy.

Unemployment filings have soared so high in recent months that seven states have already emptied their unemployment-insurance trust funds, which were supposed to see them through recessionary periods. Another 11 states are in jeopardy of depleting reserves by year's end, according to the National Conference of State Legislatures, which published a January report entitled "The Crisis in State Unemployment Trust Funds." So far, states have borrowed more than $2.3 billion in emergency funds from the federal government, money they are required to pay back.

Employment Rates

• Map: How is your state faring?
• Sortable Chart: City-by-city unemployment

The national unemployment rate is expected to hit 7.5% when January job data are released Friday, and rates are approaching double digits in some hard-hit industrial states. Nearly 4.8 million people collected unemployment insurance last week, the most since federal officials began tracking such data 40 years ago.

New York has already borrowed more than $330 million to pay unemployment claims, according to the U.S. Department of Labor. In the past, New Jersey borrowed from its trust fund to pay for other expenses, and now it has only a few months of payments in reserve.

Even states with relatively flush trust funds such as Tennessee are warning that they could go broke in the next year if unemployment levels stay high. Although West Virginia has relatively high reserves, business leaders already warn they will push for cuts in unemployment benefits to forestall tax increases. Some states like Kentucky have automatic triggers raising employer contributions when the insurance fund falls, but many states do not.

The crisis is most stark in South Carolina, where unemployment has approached 20% in some poor counties, and where the state of the unemployment trust fund, little noticed in boom times, has sparked a standoff involving the governor.

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Layoffs Pile Up

See recent major job cuts in selected industries.

• Sortable Chart: First-Quarter Layoffs

At the same time, proposals to raise payroll taxes to alleviate the crisis are going over like a lead balloon in state legislative sessions that started last month. While the economic-stimulus package being debated in Congress would pump billions of dollars into the unemployment system, it would also increase the amount of benefits paid. It wouldn't solve the core problem of the state trust funds' depleted reserves and balances outstanding.

"You collect money when times are good and pay it out when times are bad, but no one anticipated such bad times," said Diana Hinton Noel, labor analyst for the National Conference of State Legislatures.

Employers argue that raising payroll taxes isn't an option, as they cannot afford to pay more taxes in the midst of an economic crisis. Worker advocates worry that officials will impose some type of shared-sacrifice solution, in which benefits for the unemployed could be cut to lessen a payroll-tax increase.

Like many other states, South Carolina's unemployment trust fund was flush a decade ago. In what was deemed a tax break for businesses, the state lowered the rate that employers paid in payroll taxes for unemployment insurance.

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Job seekers wait to speak with prospective employers at a fair in Chicago Thursday, the day U.S. initial unemployment claims jumped to a 26-year high.

In 2001, the fund had a balance of more than $600 million, according to the governor's office. But the fund balance began to drop precipitously three years ago, as the state began paying out more for jobless benefits. The trust fund went broke last fall.

At the request of the state's Employment Security Commission, Gov. Mark Sanford sought an emergency loan in September from the federal government. But Mr. Sanford balked at signing a second request in December, demanding that the state agency agree to an outside audit and prove the authenticity of its data, which he routinely questions. He relented hours before the New Year's Eve deadline in what became a well-publicized standoff.

"You got 77,000 individuals out of work, and the unemployment check is the only lifeline they have," said Roosevelt T. Halley, executive director of the state agency. "There was this mental anguish that there wouldn't be a check for them."

Gov. Sanford said he is using the only leverage he has to make the agency and its legislatively appointed leaders better stewards of public money. "Who held the unemployed of South Carolina hostage? The agency," he said. "If you watch $600 million disappear over six years, and you have zero elbow room except to ask for an emergency loan, you put them as hostages."

So far, the state has borrowed more than $110 million in emergency funds from the federal government, according to the Department of Labor. But unemployment filings are rising so rapidly that the amount requested just weeks ago for this quarter won't meet the growing need, Mr. Halley said. The amount the state paid in benefits per week reached $20 million in January, compared with $14 million in December, Mr. Halley said.

The impasse continues as Gov. Sanford threatens to fire agency officials unless they provide data by Feb. 9 proving the legitimacy of each unemployment filing, and more details about employers.

While the proposed U.S. stimulus package will likely bulk up unemployment benefits, the focus is on extending benefits to the long-term unemployed and expanding jobless insurance to part-time employees. The package is likely to extend the grace period for interest on federal money loaned to states like South Carolina, but they would probably need to pay it back.

Options include raising the payroll tax, pulling money from other state funds or potentially restricting eligibility, said Ms. Noel of the National Conference of State Legislatures, adding, "Unfortunately, they're all difficult choices to make."

Fewer job openings, more layoffs

Layoffs are up 58% from last year, as quitting rates fall to record low.

NEW YORK (CNNMoney.com) -- Job openings have plummeted and layoffs have accelerated rapidly during a downward trend in employment that continues to spiral, according to a government report released Tuesday.

December 2008 saw 2.7 million job openings, down 35% from July 2007, the starting point of the downward trend, according to the Bureau of Labor Statistics' Job Openings and Labor Turnover Survey.

The report also showed that layoffs in December were up 58% from a year earlier, and the percentage of workers quitting jobs dropped to only 40% of total separations in December.

That's a record-low number: a sign that people are nervous about changing jobs in the current labor market.

Job openings rate: The report included a job openings rate, an indicator that compares the nation's job openings to the total number of jobs plus the number of openings.

In December it fell to 1.9%, the first time it has been below the 2% mark since the report began in 2000. That's a sharp decline from the opening rate of 2.8% the previous year.

The retail trade sector was particularly hard-hit, as job openings fell to 305,000 in December from 386,000 in November. Education and health services openings fell to 553,000, down from 604,000 the previous month.

Hiring rate: New hires were down 900,000, or 19%, from the previous year. The report said no industry or region experienced a significant change in the hires rate in December, as the grim economic outlook continues to weigh on the job market.

Ground zero for rising unemployment

Elkhart, Ind., has one of the highest jobless rates in the country. Now the president is hoping to sell his stimulus package there.

New York (Fortune) -- President Obama spoke at Concord Community High School in Elkhart, Ind., on Monday, trying to make a case for his $827 billion economic stimulus package.

"I am calling on Congress to pass this bill immediately," the president said in a town hall meeting. "Folks here in Elkhart and across America need help right now, and they can't afford to keep on waiting for folks in Washington to get this done."

Why Elkhart? Not because they like him there - they don't really. Obama took Indiana, barely, in November but McCain beat him soundly in Elkhart with 56% of the vote. While a majority of Americans support the economic stimulus bill that Congress is debating, it might be a tough sell in Elkhart.

But if ever a town could use a little help from the federal government right now, it's Elkhart.

According to the latest numbers from the Bureau of Labor Statistics, the Elkhart-Goshen Metropolitan Statistical Area suffered the sharpest unemployment increase in America in 2008. The jobless rate jumped from 4.7% when the year began to a stunning 15.3% when it ended. That leaves Elkhart-Goshen with the third-highest U.S. unemployment rate overall, and the highest outside California.

Elkhart is one of those "traditional manufacturing economies" - a phrase that used to imply stability, but is now code for economic disaster. It's not a place where real estate speculators piled up bad loans, but people are losing their homes anyway.

Elkhart, on the Michigan border, with a population just over 50,000, was once home to the Dr. Miles Medical Company, which brought us Alka-Seltzer and Flintstone Vitamins. Conn-Selmer still makes trumpets for high-school bands there. Elkhart Brass makes firefighting equipment. And many companies in and around Elkhart make RVs and mobile homes (the Recreational Vehicle and Manufactured Housing Hall of Fame is there).

What happened to this "quiet masterpiece of the Midwest," as the Chamber of Commerce calls Elkhart? Higher gas prices led to layoffs in the RV industry, producing widespread devastation. Tax revenues are down. Foreclosures and food stamps, up. Job placement services, swamped.

The scope is hinted at in this scary collection of recent local headlines: "Plastics Manufacturing Company Fortis to Shut Down Elkhart, Indiana Plant." "Dexter Axle to close plant in Elkhart." "Elkhart County to cut back on plowing, paving, filling potholes." "Elkhart Jazz Festival shortchanged in city budget crunch."

Elkhart Mayor Dick Moore went to Washington the day after the inauguration to beg for $92.4 million for infrastructure projects that he says will put 2,300 people back to work. Looks like he may get his wish.

General Motors axes 10,000 jobs on sales fall

General Motors (GM) will 10,000 jobs and slash pay for US executives by 10 per cent as sales at America's largest automaker plummet.

GM said that it would reduce its global workforce from 73,000 to 63,000, with about 3,400 of its 29,500 US staff to go. Most of the redundancies will be completed by May 1.

The number of jobs to disappear in each region will depending on current staffing levels and local market conditions, the Detroit company said.

At the same time, temporary pay cuts of 10 per cent will be introduced for US white-collar employees, while other workers at the automaker will see their pay packets shrink by between 3 per cent and 7 per cent.

The salary reductions will start in May and are likely to continue for the rest of the year.

The cuts are part of a plan to slash costs as worldwide demand for vehicles is hit by the recession.

GM and its smaller rival, Chrysler, must submit restructuring plans to the US Government by February 17 under ther terms of a $17.4 billion bailout provided to the companies by taxpayers.