Obama Lifts Bush’s Strict Limits on Stem Cell Research

By SHERYL GAY STOLBERG
The NEW York Times
Published: March 9, 2009

WASHINGTON — Pledging that his administration will “make scientific decisions based on facts, not ideology,” President Obama on Monday lifted the Bush administration’s strict limits on human embryonic stem cell research.

At a ceremony in the East Room of the White House, before an audience that included lawmakers, scientists and patients, several of them in wheelchairs, Mr. Obama announced that he was issuing an executive order intended to advance the research. He said he hoped Congress would follow with bipartisan legislation that would ease the existing restrictions even more.

The president acknowledged that studying stem cells extracted from human embryos, which are destroyed in the process, is deeply divisive.

“Many thoughtful and decent people are conflicted about, or strongly oppose, this research,” the president said. “I understand their concerns, and we must respect their point of view.”

But Mr. Obama went on to say that the majority of Americans “have come to a consensus that we should pursue this research; that the potential it offers is great, and with proper guidelines and strict oversight the perils can be avoided.”

In making his announcement, Mr. Obama drew a strict line against human cloning, an issue that over the years has become entangled with the debate over human embryonic stem cell research.

He said that he would ensure that his administration “never opens the door” to cloning for human reproduction, adding, “It is dangerous, profoundly wrong and has no place in our society or any society.”

Mr. Obama paired his executive order with another document, a presidential memorandum directing the head of the White House Office of Science and Technology Policy to “develop a strategy for restoring scientific integrity to government decision-making.”

Taken together, the two actions are the latest in a series of rebukes by Mr. Obama to his predecessor, former President George W. Bush.

Many Democrats criticized the Bush administration for politicizing science on a range of issues, from climate change to protecting endangered species to family planning.

Mr. Obama pledged during his campaign to chart a different course.

Already, abortion opponents are bracing for a battle over the stem-cell policy.

“The administration now steps onto a very steep, very slippery slope,” Douglas Johnson, legislative director for the National Right to Life Committee, said in anticipation of Mr. Obama’s action. “Many researchers will never be satisfied only with the so-called leftover embryos.”

One Republican lawmaker, Representative Christopher Smith of New Jersey, called Mr. Obama “the abortion president,” and organized an event Monday afternoon protesting the new policy. He invited some so-called snowflake children, those born after couples who underwent in-vitro fertilization released their remaining embryos for use by other couples, to attend.

“President Obama has chosen to turn back the clock,” Mr. Smith said in remarks prepared for the event, according to an advance text. “Human-embryo-destroying stem cell research is not only unethical, unworkable and unreliable, it is now demonstrably unnecessary.”

He was referring to progress that scientists have made using adult stem cells derived from nonembryonic sources, such as umbilical cord blood, bone marrow or skin.

Still, the president’s decision drew warm praise from a number of Democratic lawmakers. “Today, an extraordinary medical breakthrough was achieved with the stroke of a pen,” said Senator Edward M. Kennedy of Massachusetts. “With today’s executive order, President Obama has righted an immense wrong done to the hopes of millions of patients.”

The Bush administration, in a careful compromise eight years ago, allowed tax dollars to support studies on a small number of existing lines, or colonies, of stem cells that had already been derived from embryos, though not on creating new lines. That meant that a provision renewed by Congress every year since 1996, banning research in which embryos are destroyed, no longer stood as an absolute barrier to the stem cell work.

Mr. Obama’s new executive order will open the door wider, but not as wide as Congress would if it were to remove its legislative restrictions.

Because embryonic stem cells are capable of developing into any type of cell or tissue in the body, many scientists believe they hold the possibility for treatments and cures for ailments as varied as diabetes, Parkinson’s and heart disease. Some researchers say stem cells may someday be used to treat catastrophic injuries, such as spinal-cord damage.

The promise that these advances might help bring a cure for Alzheimer’s disease and other afflictions made Nancy Reagan an avid supporter of stem cell research. Her husband, the late president, suffered from Alzheimer’s.

Other prominent Republicans who opposed President Bush’s stance included Senator Gordon Smith of Oregon, who lost three family members to Parkinson’s, and Governor Arnold Schwarzenegger of California.

Limitations on federally funded research in American laboratories gave an indirect boost to such work abroad, particularly in Britain, where it received unabashed support.

“The current policy is eroding our national advantage on stem cell research,” Senator John Kerry, Democrat of Massachusetts, said during a congressional debate on the question in July 2006. “We’re tying our scientists’ hands. We’re holding back our doctors.”

Commentary on Embryonic Stem Cell Research

Editor's NOTE:

While several years old the commentary which follows outlines many of the still relevant issues involved in ESCR. The references are included for those who wish to avail themselves of more information.

--Dr. J. P. Hubert


Commentary
Nature Medicine 7, 397 - 399 (2001)
doi:10.1038/86444
Embryonic Stem cell research - The case against...
Michael Antoniou

Division of Medical and Molecular Genetics GKT School of Medicine, Guy's Hospital, London, UK
michael.antoniou@kcl.ac.uk

Although the United Kingdom government has approved the use of human embryonic stem (ES) cell/therapeutic cloning research—a move that was endorsed by the House of Lords on 22 January this year—it may not be apparent to the outside world that the British scientific community as well as the public at large is deeply divided over this issue. In the face of a substantial vote in favor of ES cell research, this division was articulated by some of those who gave evidence at the Lords session.

Despite our government's approval of this technique, some of us within the UK involved in research to develop therapies for debilitating, degenerative diseases agree with John Wyatt (Royal Free Hospital, London) when he says, "The creation and manipulation of living human embryos for the sole purpose of generating therapeutic tissue seems incompatible with respect for vulnerable human life. The redefinition of human embryos as mere biological material, as `totipotent stem cells' in order to allay public concerns, smacks of semantic trickery rather than responsible debate." (House of Lords Hansard, 22 January 2001).

Assertions that ES cells offer the only hope of a treatment for say Parkinson disease are not the case. What is evident from studies conducted to date is that adult stem (AS) cells show as much therapeutic potential as ES cells. Indeed, as Philip Jones (University of Oxford) told the Lords, AS cells offer far greater potential for cures than embryonic stem cells.

The isolation of human ES cells1, 2 and the demonstration of AS cell `plasticity'3 both took place in 1998. ES cells can be induced to differentiate into numerous cell types in culture4. Animal transplantation studies with ES cells are presently more limited, but they have been shown to contribute to the development and regeneration of the nervous system5, 6, 7. AS cell research in animal models is more extensive showing, for example, that bone-marrow−derived AS cells contribute to not only blood cell lineages but to all neuronal cell types8, muscle3, 9 and liver10, 11; neuronal AS cells have also been shown to have a broad differentiation potential12.

The main advantages of ES cells are that they can be propagated almost indefinitely under laboratory conditions; they can be easily genetically modified and, in principle, be induced to differentiate into any desired cell type. However, the wide-scale application of ES cells by necessity involves a `therapeutic cloning' step to overcome problems of tissue rejection after engraftment. This in turn raises major practical considerations. First, a large supply of human eggs will be required as this procedure is very inefficient; and second, the treatment procedure becomes very time consuming, labor intensive and as a result expensive. Moreover, ES cells will need to be induced to differentiate down the desired cell lineage before implantation in order to avoid teratoma (tumor) formation6. This potentially limits ES cell applications in certain circumstances as it renders them incapable of self replication, requiring further rounds of treatment as the original graft progressively ages and degenerates.

AS cells, however, can be readily obtained, grown and if necessary genetically modified from, for example, the patients' own bone marrow. Therefore, problems of rejection after engraftment back to the patient do not arise, thereby negating the need for a therapeutic cloning step. Admittedly, AS cells are, at present, more difficult to propagate en masse under laboratory conditions. The more restricted differentiation potential of AS cells is also seen as a major limitation to their use. However, from a safety point of view this may be advantageous as it reduces the chances of inadvertent AS cell proliferation in a part of the body where it is not desired. Many years' experience within the medical field of bone-marrow transplantation also shows that AS cells are not prone to teratoma formation. In addition, AS cells appear to retain their self-replicating capacity while contributing to tissue development or regeneration8, 9.

It has also recently been claimed, by Ilham Abuljadayel of the Dublin-based company Tristem, that T-cells can be induced to undergo a process of `retrodifferentiation' to generate virtually endless supplies of pluripotent AS cells13. Although this work has yet to undergo the scrutiny of scientific peer review, it has been independently verified in both academic (Adrian Newland, Royal London Hospital, London) and industry (Anthony Lockett, Covance, Harrogate, UK) settings, clearly raising further exciting therapeutic possibilities14.

Regardless as to which option is pursued, the clinical use of either ES or AS cell technology is still many years in the future. As Neil Scolding (Frenchay Hospital, Bristol, UK) warned attendees at the Lords' meeting, that, "there are two fallacies, one that cures from embryonic stem cells are imminent and the other that adult stem cells are unlikely to be as effective." This is a point agreed upon by the UK Chief Medical Officer Liam Donaldson's report of 1998 on ES cell/therapeutic cloning recommendations.

Peter Andrews (University of Sheffield, UK), who hopes to develop ES cell/therapeutic cloning technology, also acknowledged this point when he wrote, "I find it difficult to envisage routine use [of ES cells] on other than selected volunteers in the next 10 years"15. Therefore, there is a risk of raising false hopes within patient groups by giving the general public the impression that ES cell/therapeutic cloning treatments are about to happen once research is given the go-ahead.

As it is widely agreed that the generation of cloned human individuals is highly undesirable, it is important to appreciate that the distinction between `therapeutic' and `reproductive' cloning is slight, as these two options differ only after a viable, cloned human embryo (blastocyst) has been generated. We may find the thought of human clones abhorrent but there are organizations (for example, http://www.clonaid.com and http://www.humancloning.org) and individuals, such as Severino Antinori in Rome16, that are totally committed to this end.

Even scientists who are staunch supporters of ES cell/therapeutic cloning technology within the UK have admitted that reproductive cloning is "inevitable"17. Thus, how will the UK government ensure that ES cell/therapeutic cloning techniques developed in Britain will not be abused by being taken forward to support reproductive cloning in an unregulated part of the world? Is our government prepared to lead the way in the establishment of not only national but also international law prohibiting reproductive cloning? Once in place how will governments police the `global village' to make sure this legislation is not violated? Would it not be wise to at least wait until international law is in place banning reproductive cloning before embarking on a program of ES cell/therapeutic cloning research?

Technical and legal problems can in principle always be overcome, but the major ethical and moral objections to the use of ES cell/therapeutic cloning are much more difficult to address and clearly constitute deep human concerns that can be neither ignored nor lightly dismissed. The issues raised include not only fears that ES cell/therapeutic cloning will ultimately lead to reproductive cloning and genetically engineered human beings, but also whether embryos should be created solely for the purpose of providing `spare parts' for others, reducing human life to a purely utilitarian value.

The UK has already received condemnation from Germany when the deputy chairman of the Reichstag's ethics committee, Hubert Hueppe, said that it was cannibalistic to "breed a human being, only to kill it, disembowel it and impregnate something with it." Such strong statements serve to highlight the fundamental nature of the ethical issues that are raised.

The UK position has also gone against not only the decision of the European Parliament (Strasbourg, 7 September 2000) but also the advice of a report sponsored by the European Commission by the 12-member European Group on Ethics in Science and New Technologies which recommended "prudence" and a precautionary approach saying that, "At present the creation of embryos for somatic cell transfer would be premature"18. John Wyatt expressed the ethical dilemma well when he said, "I and many of my fellow health professionals have a profound disquiet about the introduction of therapeutic cloning."

Eleven religious leaders headed by His Grace, the Archbishop of Canterbury, the Chief Rabbi, the Cardinal Archbishop of Glasgow, the President of the Muslim College, the Director of the Sikh Network and leaders of Christian denominations within the UK took the unprecedented step of cosigning a letter to the UK parliament House of Lords encouraging members not to endorse the British government's position to allow ES cell/therapeutic cloning research but to take time to reflect on the ethical and moral consequences of this work more carefully.

Therefore, despite the Government's vote in favor of allowing ES cell/therapeutic cloning research within the UK, debate and objections are as prevalent here as in those countries that are still undecided as to which route to take. In my view, given the lack of agreement over ES cell research within the scientific community as well as general society both nationally and internationally, governments around the world should back major initiatives in AS cell research which could harbor the same if not a greater and safer therapeutic potential, and avoid the problems of working with ES cell/therapeutic cloning. Moreover, these practical and especially ethical problems associated with the ES cell/therapeutic cloning should not necessarily be viewed as a setback, as they can encourage investigation into AS cell alternatives as has already happened in the USA (ref. 19).

Note: This commentary expresses the personal opinion of the author and does not represent a position statement of either the Division of Medical and Molecular Genetics or the GKT School of Medicine.

REFERENCES

1. Thomson, J.A. et al. Embryonic stem cell lines derived from human blastocysts. Science 282, 1145–1147 (1998). | Article | PubMed | ISI | ChemPort |
2. Reubinoff, B. et al. Embryonic stem cell lines from human blastocysts: somatic differentiation in vitro. Nature Biotechnol. 18, 399–404 (2000). | Article | PubMed | ISI | ChemPort |
3. Ferrari, G. et al. Muscle regeneration by bone marrow-derived myogenic progenitors. Science 279, 1528–1530 (1998). | Article | PubMed | ISI | ChemPort |
4. Lee, S.-H. et al. Efficient generation of midbrain and hindbrain neurons from mouse embryonic stem cells. Nature Biotechnol. 18, 675–679 (2000). | Article | PubMed | ISI | ChemPort |
5. Benninger, Y. et al. Differentiation and histological analysis of embryonic stem cell-derived neural transplants in mice. Brain Pathol. 10, 330–341 (2000). | PubMed | ISI | ChemPort |
6. Liu, S. et al. Embryonic stem cells differentiate into oligodendrocytes and myelinate in culture and after spinal cord transplantation. Proc. Natl. Acad. Sci. USA 97, 6126–6131 (2000). | Article | PubMed | ChemPort |
7. Brüstle, O. et al. Embryonic stem cell-derived glial precursors: a source of myelinating transplants. Science 285, 754–756 (1999). | Article | PubMed | ISI | ChemPort |
8. Brazelton, T.R. et al. From marrow to brain: expression of neuronal phenotypes in adult mice. Science 290, 1775–1779 (2000). | Article | PubMed | ISI | ChemPort |
9. Gussoni, E. et al. Dystrophin expression in the mdx mouse restored by stem cell transplantation. Nature 401, 390–394. | PubMed |
10. Peterson, B.E. et al. Bone marrow as a potential source of hepatic oval cells. Science 284, 1168–1170 (1999). | Article | PubMed |
11. Alison, M.R. et al. Hepatocytes from non-hepatic adult stem cells. Nature 406, 257 (2000). | Article | PubMed | ISI | ChemPort |
12. Clarke, D.L. et al. Generalized Potential of Adult Neural Stem Cells. Science 288, 1660–1663 (2000). | Article | PubMed | ISI | ChemPort |
13. Abuljadayel, IMSS and Dhook, GJ. A method for preparing an undifferentiated cell. UK Patent GB2297558 (1995).
14. Times of London, 15 January 2001.
15. The Daily Telegraph, London, 24 January 2001.
16. The Sunday Times, London, 28 January 2001.
17. The Independent, London, 30 August 2000.
18. Dickson, D. European panel rejects creation of human embryos for research. Nature 408, 277 (2000). | Article | PubMed | ISI | ChemPort |
19. European Ethics Committee. Ethics can boost science. Nature 408, 275 (2000). | Article | PubMed | ISI | ChemPort |

Obama Is Leaving Some Stem Cell Issues to Congress

Editor's NOTE:

If the following article is correct, President Obama will leave it to Congress to decide whether or not to attempt repeal of the so-called Dickey-Wicker amendment--which specifically bans the use of tax dollars used to create human embryos for experimentation/research.

According to the piece below, the President's "order will allow research on hundreds of stem cell lines already in existence, as well as ones yet to be created, typically from embryos left over from fertility treatments that would otherwise be discarded."

This means that it will become legal to utilize any already existent embryonic stem cell lines as well as those subsequently created either from already existent embryos or those "to be created embryos" brought into existence in fertility clinics. If Congress were to repeal the Dickey-Wicker amendment it would also allow federal funds to be spent in order to artificially produce human embryos destined for destruction in the process of removing their stem cells as well.

One of President Obama's science advisors Harold Varmus was quoted as saying the following with respect to the new executive order:

"As a result of lifting those limitations, the president is in effect allowing federal funding of embryonic stem cell research to the extent it's permitted by federal law -- that is work with stem cells themselves, not the derivation of those stem cells,"

The morally significant issue is whether it is morally licit to destroy (read kill) human embryos for any reason. Traditional morality answers a resounding no. A Utilitarian calculus answers yes in essence arguing that the further "end" of potentially providing life-saving treatments for patients justifies the proximate end or "means" of killing innocent embryonic human beings in order to obtain their stem cells. The obvious question then is: what other human beings can be killed in order to serve some identified potentially desirable "further end"?

--Dr. J. P. Hubert

By SHERYL GAY STOLBERG
The New York Times
Published: March 8, 2009

WASHINGTON — While lifting the Bush administration’s restrictions on federally financed human embryonic stem cell research, President Obama intends to avoid the thorniest question in the debate: whether taxpayer dollars should be used to experiment on embryos themselves, two senior administration officials said Sunday.

The officials, who provided details of the announcement Mr. Obama will make Monday at the White House, said the president would leave it to Congress to determine whether the long-standing legislative ban on federal financing for human embryo experiments should also be overturned.

Yet, people on both sides of the stem cell debate say Mr. Obama’s announcement could lead to a reconsideration of the ban on Capitol Hill, an idea so controversial and fraught with ethical implications that the mere discussion of it would have been unthinkable just a few months ago, when President George W. Bush was in office.

The ban, known as the Dickey-Wicker amendment, first became law in 1996, and has been renewed by Congress every year since. It specifically bans the use of tax dollars to create human embryos — a practice that is routine in private fertility clinics — or for research in which embryos are destroyed, discarded or knowingly subjected to risk of injury.

For a time, the ban stood in the way of taxpayer-financed embryonic stem cell research, because embryos are destroyed when stem cells are extracted from them. But in August 2001, in a careful compromise, President Bush opened the door a tiny crack, by ordering that tax dollars could be used for studies on a small number of lines, or colonies, of stem cells already extracted from embryos — so long as federal researchers did not do the extraction themselves.

On Monday, Mr. Obama will throw open the door much farther with an executive order that will “make clear that the government intends to support” human embryonic stem cell research, said Harold Varmus, the president of Memorial Sloan-Kettering Cancer Center, who advises Mr. Obama on science matters.

To the delight of patients’ groups and scientists, the order will allow research on hundreds of stem cell lines already in existence, as well as ones yet to be created, typically from embryos left over from fertility treatments that would otherwise be discarded.

The order comes just in time for researchers to take advantage of money in Mr. Obama’s economic recovery package and use it for stem cell studies. But because of the Dickey-Wicker amendment, federal researchers would still be unable to create their own stem cell lines.

Mr. Obama has no power to overturn the Dickey-Wicker ban. Only Congress, which attaches the ban to appropriations bills, can overturn it. Mr. Obama has not taken a position on the ban and does not intend to, Melody C. Barnes, his chief domestic policy adviser, said Sunday. The president believes stem cell research “should be done in compliance with federal law,” she said, adding that Mr. Obama recognizes the divisiveness of the issue.

“We are committed to pursuing stem cell research quite responsibly but we recognize there are a range of beliefs on this,” Ms. Barnes said.

Because embryonic stem cells are capable of developing into any type of cell or tissue in the body, many scientists and advocates for patients believe they hold the possibility for treatments and cures for ailments as varied as diabetes and heart disease. Some researchers say stem cells may someday be used to treat catastrophic injuries, like damage to the spinal cord.

Mr. Bush twice vetoed legislation that would have expanded his 2001 policy.

Although Mr. Obama’s action on Monday has broad bipartisan support, it could still be overturned by a successor so House Democrats are expected to draft legislation that would codify the president’s executive order.

But with Mr. Obama revisiting the Bush policy, Representative Diana DeGette, Democrat of Colorado and a leading advocate for embryonic stem cell research, said Sunday in an interview that overturning the embryo experiment ban might not be as far-fetched as some critics imagine.

Ms. DeGette said the first move for lawmakers would be to turn the steps Mr. Obama takes by executive order on Monday into law. But she said she was also talking to her colleagues about overturning the broader Dickey-Wicker restriction.

“Dickey-Wicker is 13 years old now, and I think we need to review these policies,” Ms. DeGette said. “I’ve already talked to several pro-life Democrats about Dickey-Wicker, and they seemed open to the concept of reversing the policy if we could show that it was necessary to foster this research.”

A senior House Democratic leadership aide, who was not authorized to speak publicly about the issue, said overturning the ban “would be difficult, but not impossible,” adding, “It’s not something that we would do right away, but it’s something that we would look at.”

Fertility researchers also believe the climate is ripe to allow federal money for their work, especially in light of the recent controversy over the birth of octuplets in California, said Sean Tipton, a spokesman for the American Society for Reproductive Medicine.

“I think we’re thrilled that the president is going to lift the restrictions on embryonic stem cell research,” Mr. Tipton said Sunday. “It is clear, though, that Congress needs to remove the restrictions it puts on other forms of embryo research.”

Already abortion opponents are bracing for a battle. “The administration now steps onto a very steep, very slippery slope,” said Douglas Johnson, legislative director for the National Right to Life Committee. “Many researchers will never be satisfied only with the so-called leftover embryos.”

One Republican lawmaker, Representative Christopher H. Smith of New Jersey, is calling Mr. Obama “the abortion president,” and is planning his own event on Monday to protest Mr. Obama’s new stem cell policy.

Mr. Smith said in an interview Sunday that he did not think lawmakers would go along with overturning the embryo experiment ban.

“I don’t think it will fly because the movement in the country is in favor of life,” he said. “For Congress to say that the new guinea pig will be human embryos, most Americans will find that highly offensive.”

Mr. Obama’s announcement on Monday will be part of a broader initiative to make good on his pledge to separate science and politics. Dr. Varmus, a former director of the National Institutes of Health who is a co-chairman of a panel that advises Mr. Obama on science issues, said the president would issue a memorandum to “restore public confidence in the process by which scientific policy is used to guide government action,” by directing his administration to draft guidelines for the use of scientific information and the appointment of outside science advisers.

In reversing the stem cell policy Mr. Bush put in place in August 2001, Mr. Obama will direct the National Institutes of Health to come up with new stem cell research guidelines within 120 days.

Ms. DeGette said she is already talking to the White House about what legislation codifying the executive order might say.

“It’s a wonderful development tomorrow,” she said, “but it’s really the first step in opening up ethical cell-based research.”

The U.S. Financial System Is Effectively Insolvent: There is a grave risk of a global L-shaped depression

Editor's NOTE:

As regular readers are aware, this site has consistently warned since its inception about the imminent collapse of the US economy given our almost total loss of manufacturing infrastructure a direct result of aggressive outsourcing of jobs and off-shoring of production. Professor Roubini and a few others frequently posted here have been extremely accurate to date in their pronouncements and predictions vis a vis the US economic crisis particularly as concerns the US mega/investment banking system.

--Dr. J. P. Hubert

By Nouriel Roubini

March 07, 2009 "Forbes" March 05, 2009 -- -- For those who argue that the rate of growth of economic activity is turning positive--that economies are contracting but at a slower rate than in the fourth quarter of 2008--the latest data don't confirm this relative optimism. In 2008's fourth quarter, gross domestic product fell by about 6% in the U.S., 6% in the euro zone, 8% in Germany, 12% in Japan, 16% in Singapore and 20% in South Korea. So things are even more awful in Europe and Asia than in the U.S.

There is, in fact, a rising risk of a global L-shaped depression that would be even worse than the current, painful U-shaped global recession. Here's why:

First, note that most indicators suggest that the second derivative of economic activity is still sharply negative in Europe and Japan and close to negative in the U.S. and China. Some signals that the second derivative was turning positive for the U.S. and China turned out to be fake starts. For the U.S., the Empire State and Philly Fed indexes of manufacturing are still in free fall; initial claims for unemployment benefits are up to scary levels, suggesting accelerating job losses; and January's sales increase is a fluke--more of a rebound from a very depressed December, after aggressive post-holiday sales, than a sustainable recovery.

For China, the growth of credit is only driven by firms borrowing cheap to invest in higher-returning deposits, not to invest, and steel prices in China have resumed their sharp fall. The more scary data are those for trade flows in Asia, with exports falling by about 40% to 50% in Japan, Taiwan and Korea.

Even correcting for the effect of the Chinese New Year, exports and imports are sharply down in China, with imports falling (-40%) more than exports. This is a scary signal, as Chinese imports are mostly raw materials and intermediate inputs. So while Chinese exports have fallen so far less than in the rest of Asia, they may fall much more sharply in the months ahead, as signaled by the free fall in imports.

With economic activity contracting in 2009's first quarter at the same rate as in 2008's fourth quarter, a nasty U-shaped recession could turn into a more severe L-shaped near-depression (or stag-deflation). The scale and speed of synchronized global economic contraction is really unprecedented (at least since the Great Depression), with a free fall of GDP, income, consumption, industrial production, employment, exports, imports, residential investment and, more ominously, capital expenditures around the world. And now many emerging-market economies are on the verge of a fully fledged financial crisis, starting with emerging Europe.

Fiscal and monetary stimulus is becoming more aggressive in the U.S. and China, and less so in the euro zone and Japan, where policymakers are frozen and behind the curve. But such stimulus is unlikely to lead to a sustained economic recovery. Monetary easing--even unorthodox--is like pushing on a string when (1) the problems of the economy are of insolvency/credit rather than just illiquidity; (2) there is a global glut of capacity (housing, autos and consumer durables and massive excess capacity, because of years of overinvestment by China, Asia and other emerging markets), while strapped firms and households don't react to lower interest rates, as it takes years to work out this glut; (3) deflation keeps real policy rates high and rising while nominal policy rates are close to zero; and (4) high yield spreads are still 2,000 basis points relative to safe Treasuries in spite of zero policy rates

Fiscal policy in the U.S. and China also has its limits. Of the $800 billion of the U.S. fiscal stimulus, only $200 billion will be spent in 2009, with most of it being backloaded to 2010 and later. And of this $200 billion, half is tax cuts that will be mostly saved rather than spent, as households are worried about jobs and paying their credit card and mortgage bills. (Of last year's $100 billion tax cut, only 30% was spent and the rest saved.)

Thus, given the collapse of five out of six components of aggregate demand (consumption, residential investment, capital expenditure in the corporate sector, business inventories and exports), the stimulus from government spending will be puny this year.

Chinese fiscal stimulus will also provide much less bang for the headline buck ($480 billion). For one thing, you have an economy radically dependent on trade: a trade surplus of 12% of GDP, exports above 40% of GDP, and most investment (that is almost 50% of GDP) going to the production of more capacity/machinery to produce more exportable goods. The rest of investment is in residential construction (now falling sharply following the bursting of the Chinese housing bubble) and infrastructure investment (the only component of investment that is rising).

With massive excess capacity in the industrial/manufacturing sector and thousands of firms shutting down, why would private and state-owned firms invest more, even if interest rates are lower and credit is cheaper? Forcing state-owned banks and firms to, respectively, lend and spend/invest more will only increase the size of nonperforming loans and the amount of excess capacity. And with most economic activity and fiscal stimulus being capital- rather than labor-intensive, the drag on job creation will continue.

So without a recovery in the U.S. and global economy, there cannot be a sustainable recovery of Chinese growth. And with the U.S, recovery requiring lower consumption, higher private savings and lower trade deficits, a U.S. recovery requires China's and other surplus countries' (Japan, Germany, etc.) growth to depend more on domestic demand and less on net exports. But domestic-demand growth is anemic in surplus countries for cyclical and structural reasons. So a recovery of the global economy cannot occur without a rapid and orderly adjustment of global current account imbalances.

Meanwhile, the adjustment of U.S. consumption and savings is continuing. The January personal spending numbers were up for one month (a temporary fluke driven by transient factors), and personal savings were up to 5%. But that increase in savings is only illusory. There is a difference between the national income account (NIA) definition of household savings (disposable income minus consumption spending) and the economic definitions of savings as the change in wealth/net worth: savings as the change in wealth is equal to the NIA definition of savings plus capital gains/losses on the value of existing wealth (financial assets and real assets such as housing wealth).

In the years when stock markets and home values were going up, the apologists for the sharp rise in consumption and measured fall in savings were arguing that the measured savings were distorted downward by failing to account for the change in net worth due to the rise in home prices and the stock markets.

But now with stock prices down over 50% from peak and home prices down 25% from peak (and still to fall another 20%), the destruction of household net worth has become dramatic. Thus, correcting for the fall in net worth, personal savings is not 5%, as the official NIA definition suggests, but rather sharply negative.

In other terms, given the massive destruction of household wealth/net worth since 2006-07, the NIA measure of savings will have to increase much more sharply than has currently occurred to restore households' severely damaged balance sheets. Thus, the contraction of real consumption will have to continue for years to come before the adjustment is completed.

In the meanwhile the Dow Jones industrial average is down today below 7,000, and U.S. equity indexes are 20% down from the beginning of the year. I argued in early January that the 25% stock market rally from late November to the year's end was another bear market suckers' rally that would fizzle out completely once an onslaught of worse than expected macro and earnings news, and worse than expected financial shocks, occurs. And the same factors will put further downward pressures on U.S. and global equities for the rest of the year, as the recession will continue into 2010, if not longer (a rising risk of an L-shaped near-depression).

Of course, you cannot rule out another bear market suckers' rally in 2009, most likely in the second or third quarters. The drivers of this rally will be the improvement in second derivatives of economic growth and activity in the U.S. and China that the policy stimulus will provide on a temporary basis. But after the effects of a tax cut fizzle out in late summer, and after the shovel-ready infrastructure projects are done, the policy stimulus will slacken by the fourth quarter, as most infrastructure projects take years to be started, let alone finished.

Similarly in China, the fiscal stimulus will provide a fake boost to non-tradable productive activities while the traded sector and manufacturing continue to contract. But given the severity of macro, household, financial-firm and corporate imbalances in the U.S. and around the world, this second- or third-quarter suckers' market rally will fizzle out later in the year, like the previous five ones in the last 12 months.

In the meantime, the massacre in financial markets and among financial firms is continuing. The debate on "bank nationalization" is borderline surreal, with the U.S. government having already committed--between guarantees, investment, recapitalization and liquidity provision--about $9 trillion of government financial resources to the financial system (and having already spent $2 trillion of this staggering $9 trillion figure).

Thus, the U.S. financial system is de facto nationalized, as the Federal Reserve has become the lender of first and only resort rather than the lender of last resort, and the U.S. Treasury is the spender and guarantor of first and only resort. The only issue is whether banks and financial institutions should also be nationalized de jure.

But even in this case, the distinction is only between partial nationalization and full nationalization: With 36% (and soon to be larger) ownership of Citi (nyse: C - news - people ), the U.S. government is already the largest shareholder there. So what is the non-sense about not nationalizing banks? Citi is already effectively partially nationalized; the only issue is whether it should be fully nationalized.

Ditto for AIG (nyse: AIG - news - people ), which lost $62 billion in the fourth quarter and $99 billion in all of 2008 and is already 80% government-owned. With such staggering losses, it should be formally 100% government-owned. And now the Fed and Treasury commitments of public resources to the bailout of the shareholders and creditors of AIG have gone from $80 billion to $162 billion.

Given that common shareholders of AIG are already effectively wiped out (the stock has become a penny stock), the bailout of AIG is a bailout of the creditors of AIG that would now be insolvent without such a bailout. AIG sold over $500 billion of toxic credit default swap protection, and the counter-parties of this toxic insurance are major U.S. broker-dealers and banks.

News and banks analysts' reports suggested that Goldman Sachs (nyse: GS - news - people ) got about $25 billion of the government bailout of AIG and that Merrill Lynch was the second largest benefactor of the government largesse. These are educated guesses, as the government is hiding the counter-party benefactors of the AIG bailout. (Maybe Bloomberg should sue the Fed and Treasury again to have them disclose this information.)

But some things are known: Goldman's Lloyd Blankfein was the only CEO of a Wall Street firm who was present at the New York Fed meeting when the AIG bailout was discussed. So let us not kid each other: The $162 billion bailout of AIG is a nontransparent, opaque and shady bailout of the AIG counter-parties: Goldman Sachs, Merrill Lynch and other domestic and foreign financial institutions.

So for the Treasury to hide behind the "systemic risk" excuse to fork out another $30 billion to AIG is a polite way to say that without such a bailout (and another half-dozen government bailout programs such as TAF, TSLF, PDCF, TARP, TALF and a program that allowed $170 billion of additional debt borrowing by banks and other broker-dealers, with a full government guarantee), Goldman Sachs and every other broker-dealer and major U.S. bank would already be fully insolvent today.

And even with the $2 trillion of government support, most of these financial institutions are insolvent, as delinquency and charge-off rates are now rising at a rate--given the macro outlook--that means expected credit losses for U.S. financial firms will peak at $3.6 trillion. So, in simple words, the U.S. financial system is effectively insolvent.

"Outlaw the Shadow Banking System!" Guess Who Said It?

by Matthias Chang

Global Research
March 7, 2009

When I read the remarks of President Obama and Prime Minister Gordon Brown after their meeting at the Oval Office on March 3, 2009 and the speech of the latter to the Joint Session of Congress on March 4, 2009, I realized that a growing antagonism has emerged between certain factions of the ruling elites in the City of London and in Washington DC.

The first warning of the acute differences was sounded by President Obama himself and it was most surprising that the mass media paid hardly attention to it. In his weekly address on February 28, 2009, President Obama said:

“I realize that passing this budget won’t be easy. Because it represents real and dramatic change, it also represents a threat to the status quo in Washington. I know that the insurance industry won’t like the idea that they’ll have to bid competitively to continue offering Medicare coverage, but that’s how we’ll help preserve and protect Medicare and lower health care costs for American families. I know that banks and big student lenders won’t like the idea that we’re ending their huge taxpayer subsidies, but that’s how we’ll save taxpayers nearly $50 billion and make college more affordable. I know that oil and gas companies won’t like us ending nearly $30 billion in tax breaks, but that’s how we’ll help fund a renewable energy economy that will create new jobs and new industries. In other words, I know these steps won’t sit well with the special interests and lobbyists who are invested in the old way of doing business, and I know they’re gearing up for a fight as we speak. My message to them is this:

“So am I.”

Read the underlined words again.

It is clear something is definitely amiss within the ruling elites and President Obama has thrown the gauntlet to his adversaries. The skeptics may say that we should not read too much into this above quoted paragraph, as it could be mere spin to rally the troops in times of crisis. Time will tell.

I take the view that it is inevitable that the members of the ruling elites would go for each other’s throats because those who were given the charge to ensure that the money-machine keeps running have screwed up big time. Someone must answer for the fiasco.

The Blame Game

It would be naïve to assume that the status quo would remain, when the Global Trillion Dollar Casino is for all intents and purposes broken down beyond repair.

Confirmation that the blame game has started in earnest can be found in the aforesaid remarks of President Obama and Prime Minister Gordon Brown on March 3, 2009 given after their meeting at the Oval Office and Brown’s speech to Congress on March 4, 2009.

Let us come back to the issue of the money-lenders. For some strange reason, many people are put off by the term “money-lenders” but are ever so comfortable with bankers.

But are not bankers, money-lenders?

In fact I would say that money-lenders are more honourable than your high street bankers, as they can only rob you in the millions. The global bankers, they rape and plunder in the trillions!

Is it any wonder that Gordon Brown and President Obama, the political representatives of the Power Elites have decided that it is about time that these financial harlots are to be brought under control before they wreck the entire global power structure?

Let us have no illusions about Obama and Gordon Brown. They are going after these financial harlots not because they want to protect us from these criminals, but because for too long the political faction had to play second fiddle to the financial faction in the overall scheme of global one world government.

Until lately, money power triumphed over political power. However, when the entire financial system broke into pieces, it was time to settle scores!

Read for yourself:

Prime Minister Gordon Brown’s remarks at the White House, March 3, 2009

“Well, there's got to be deep regulatory change. We've just been talking, Barack and I, about the need for proper supervision of shadow banking systems, of areas where there was bank practices that were unacceptable, where remuneration policies got out of hand and weren't based on long-term success, but on short-term deals. And these are the changes that we've already announced that we are going to make.”

“We've had a global banking failure, and it's happened in every part of the world. It's almost like a power cut that went right across the financial system. And we have got to rebuild that financial system. We've got to isolate the bad assets.”

“You don't want shadow banking systems. You don't want regulatory tax havens. So we've got to act as a world together to deal with that. And that's one of the things we'll be talking about in April in London.”

President Obama’s response at the White House, March 3, 2009

“Now, having said that, the banking system has been dealt a heavy blow. It has to do with many of the things that Prime Minister Brown alluded to: lax regulation, massive over-leverage, huge systemic risks taken by unregulated institutions, as well as regulated institutions. And so there are a lot of losses that are working their way through the system. And it's not surprising that the market is hurting as a consequence. In fact, I think what we're seeing is that as people absorb the depths of the problem that existed in the banking system, as well as the international ramifications of it, that there's going to be a natural reaction.”

“We are cleaning up that mess. It's going to be sort of full of fits and starts in terms of getting the mess cleaned up, but it's going to get cleaned up.”

Prime Minister Gordon Brown’s Speech to Congress, March 4, 2009

“And we need to understand what went wrong in this crisis, that the very financial instruments that were designed to diversify risk across the banking system instead spread contagion across the globe. And today's financial institutions are so interwoven that a bad bank anywhere is a threat to good banks everywhere.”

“And you are also restructuring your banks. So are we. But how much safer would everybody's savings be if the whole world finally came together to outlaw shadow banking systems and offshore tax havens?”

Blink and read again the underlined words. You have just read that Prime Minister Gordon Brown has made the call to “outlaw the shadow banking system and offshore tax havens!”

Wow!

Even if you are a skeptic and holds the view that the quotes are mere spin to delude the people, you cannot deny that Prime Minister Brown has let the genie out of the bottle!

Whether there are any follow through actions by President Obama and Prime Minister Brown, the global citizens must take action independently, if they want to save their children, and their children’s children from decades of impoverishment and extreme hardship.

The most powerful leader of the Western world and his side-kick has openly and unreservedly acknowledged that we are having a global financial melt-down. And that the cause for this catastrophe is the shadow banking system!

There is now an open warfare between the political factions and the financial factions of the global power elites. This will be ugly. And as President Obama warned, “they are gearing for a fight…” He has also responded to the challenge: “So am I.”

Given the above scenario, we must first take out the financial elites, and thereafter the political faction, failing which we will all plunge into the black hole of financial Armageddon!

FDA Approves Embryonic Stem Cell Research Trials on Humans Despite Concerns

by Steven Ertelt
LifeNews.com Editor
January 23, 2009

Washington, DC (LifeNews.com) -- Despite grave concerns that problems such as the causing of tumors and immune system rejection issues haven't been solved, the FDA has approved the use of embryonic stem cells for human trial. Embryonic stem cell research has never cured or helped any patients to this point.

Only the use of adult stem cells and treatments derived from them have cured or reduced the effects of any diseases or conditions afflicting patients.

That efficacy reason, combined with the fact that embryonic stem cells can only be obtained by destroying early human life, has prompted the pro-life movement to oppose their use.

But now, the Food and Drug Administration has given biotechnology company Geron Corp., based in California, permission to conduct the first-ever human trial for a treatment derived from the controversial cells.

The trial will involve 10 spinal cord patients with injuries the company hopes to treat with an experimental drug containing embryonic stem cells.

"This is the dawn of a new era in medical therapeutics," Thomas B. Okarma, Geron's president and chief executive officer, told the Wall St. Journal. "The hope that stem-cell therapy will repair and regenerate diseased organs and tissue goes beyond what pills and scalpels can ever do."

The timing of the announcement appears suspicious to some pro-life advocates who note that Obama campaigned on a pledge to overturn the funding limits President Bush put in place.

Bush limited spending on embryonic stem cells to existing cells and would not fund the destruction of more human lives to advance science. Instead, he spent hundreds of millions on adult stem cells because of these ethical concerns and because they were the only cells to help patients.

Karen Riley, an FDA spokeswoman, denied that politics had anything to do with the timing of the decision.

"The FDA looks to the science on these types of issues, and we approve [such applications] based on a showing of safety," she told the Journal. "Political considerations have no role in this process."

Though the FDA approved the trial, that doesn't mean the political battle over embryonic stem cell research funding is over.

President Obama will either have to issue an executive order to overturn the Bush protections from making taxpayers fund life-destroying research or he will have to rely on Congress to do so -- which seems more likely.

In a recent interview with CNN, he indicated he may rely on Congress to overturn the limits.

"I like the idea of the American people's representatives expressing their views on an issue like this," he said.

However, the reason may be more political in nature as a Congressional bill would have the force of law and be harder for a pro-life president to overturn, as legislation would be needed to reverse the decision.

Approval of the study is no guarantee that the treatment will work or that drugs based off of it will enter the market and be available to patients on a national basis.

That's in part because embryonic stem cell researchers have yet to overcome all of the problems that have plagued the drug in use with animals.

The cells have had two main scientific problems in that they tend to cause tumors after they are injected and the body's immune system rejects the foreign cells. These problems are not seen in use with adult stem cells.

The patients in the trial will be ones who can receive treatment within 14 days after a spinal cord injury has left them paralyzed. They will need to be followed for a year to determine if the treatments had any effect.

World's First Embryonic Stem Cell Study In Humans

Editor's NOTE:

Apropos the pending Obama administration announcement which will purportedly legalize federal funding for embryonic stem cell research is the following ESCR trial to be conducted at UC Irvine in humans.

To date, there have been no successful ESC treatment applications in humans. Complications have included destructive tumor formation (teratomas) and problems relating to systemic immunity. As is well-known, there have been myriads of successful clinical applications/treatments utilizing adult stem cells and those procured from fetal cord blood.

--Dr. J. P. Hubert

Article Date: 26 Jan 2009 - 0:00 PSTA
Medical News Today

A therapy developed at UC Irvine that made paralyzed rats walk again will become the world's first embryonic stem cell treatment tested in humans.

The U.S. Food and Drug Administration has approved the therapy, based on work by a research team led by Hans Keirstead, co-director of the UCI Sue and Bill Gross Stem Cell Research Center, for a clinical trial in patients with acute spinal cord injury.

Geron Corp. of Menlo Park, Calif., will conduct the clinical trial.

"This trial was approved only after rigorous safety testing and consultation of countless experts in the field," Keirstead said. "Any benefit to the patient, even an incremental one, would be a resounding victory."

The therapy contains human embryonic stem cells destined to become spinal cord cells called oligodendrocytes. These are the building blocks of myelin, the biological insulation for nerve fibers that is critical for maintaining electrical conduction in the central nervous system. When myelin is stripped away, through injury or disease, paralysis can occur.

In laboratory tests, Keirstead and his colleague, Dr. Gabriel Nistor, developed a technique for prompting human embryonic stem cells to develop into oligodendrocyte cells.

Injected into rats with spinal cord injuries, the precursor cells turned into oligodendrocytes and migrated to the injured area of the spinal cord. As the cells wrapped around damaged neurons, new myelin tissue formed, allowing electrical conduction to resume and the rats to walk again.

This success, published in the Journal of Neuroscience in 2005, was the subject of dozens of media stories, including a "60 Minutes" segment.

According to Geron, patients eligible for the phase-one trial must have a certain type of spinal cord damage and be willing to receive injections 7-14 days after injury. Geron has selected up to seven U.S. medical centers that may participate in the study.

UCI has a robust stem cell research program that has received more than $52 million from the California Institute for Regenerative Medicine. UCI's scientists are pioneers in regeneration, large-scale production of specialized cells with very high purity, and methods for treating damaged tissues.

UCI recently broke ground for a four-story building dedicated to stem cell research. When finished in 2010, the building will house the stem cell center, dozens of laboratory-based and clinical researchers, a stem cell techniques course, a master's program in biotechnology with an emphasis on stem cell research, and programs and activities for patients and public education.