THE FRAUD & THEFT WILL CONTINUE UNTIL MORALE IMPROVES

The BEA reported the latest figures for personal income, personal consumption expenditures and the savings rate last week. The government mouthpieces in the mainstream media obediently reported that personal income and expenditures reached an all-time high in March. The chart below shows the ever increasing level of expenditures by consumers since this supposed economic recovery began in the 4th quarter of 2009. All good Keynesian economists know that consumer spending is always good for America, no matter how it is achieved. We must be in a recovery if income and spending are reaching new highs, right? That is the fraudulent storyline being propagandized to the non-questioning lapdog public. A false storyline and data that has been massaged harder than a Secret Service agent by a Columbian hooker will not lead to a happy ending. Some critical thinking, a calculator, and some common sense reveal the depth of the fraud and expose the theft being committed by the avaricious governing elite at the expense of the prudent working middle class.

Digging into the data on the BEA website to arrive at my own conclusions, not those spoon fed to a willfully ignorant public by CNBC and the rest of the fawning Wall Street worshipping corporate media, is quite revealing. It divulges the extent to which Ben Bernanke and the politicians in Washington DC have gone to paint the U.S. economy with the appearance of recovery while wrecking the lives of senior citizens and judicious savers. Only a banker would bask in the glory of absconding with hundreds of billions from senior citizen savers and handing it over to criminal bankers. Only a government bureaucrat would classify trillions in entitlement transfers siphoned from the paychecks of the 58.4% of working age Americans with a job or borrowed from foreigner countries as personal income to the non-producing recipients. How can taking money from one person or borrowing it from future generations and dispensing it to another person be considered personal income? Only in the Delusional States of America.

If you really want to understand what has happened in this country over the last forty years, you need to analyze the data across the decades. This uncovers the trends over time that has led us to this sorry state of affairs. The chart below details the major components of personal income over time as a percentage of total personal income. It tells the story of a nation in decline and on an unsustainable path that will ultimately result in a monetary collapse.


	1970	1980	1990	2000	Apr-08	2010	Mar-12
Total Personal Income	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%
Wages & Salaries	66.1%	60.2%	56.7%	56.2%	52.7%	51.9%	51.8%
Interest Income	8.3%	12.1%	15.5%	11.6%	11.2%	8.2%	7.4%
Dividend Income	2.9%	2.9%	3.5%	4.5%	6.5%	5.8%	6.2%
Government transfers	8.5%	11.3%	11.7%	12.2%	14.3%	17.9%	17.3%

It is always fascinating to compare data from 1970, prior to Nixon closing the gold window and allowing bankers and politicians to print and spend to their hearts delight, to present day. The chart above paints a picture of a nation of workers and savers descending into a nation of parasites and spenders. Any rational person knows that income comes from one of two methods: working or investing. A country can only grow by working, saving, investing and living within its means. Money taken from workers and investors and transferred to the non-working and spenders is NOT INCOME. It is just redistribution from producers to non-producers. The key takeaways from the chart are:

Working at a job generated two-thirds of personal income in 1970 and barely half today. This explains why only half of Americans pay Federal taxes.
One might wonder how we could be in the third year of a supposed economic recovery and wages and salaries as a percentage of total personal income is lower than pre-crisis and still falling.
Government transfers have doubled as a proportion of “income” in the last forty years. The increase since 2000 has been accelerating, up 122% in 12 years versus the 55% increase in GDP. The slight drop since 2010 is the result of millions falling off the 99 week unemployment rolls.
Luckily it is increasingly easy to leave unemployment and go on the dole for life. The number of people being added to the SSDI program has surged by 2.2 million since mid-2010, an 8.5% increase to 28.2 million people. Applications are swelling with disabilities like muscle pain, obesity, migraine headaches, mental illness (43% of all claims) and depression. Our leaders have set such a good example of how to commit fraud on such a grand scale that everyone wants to get a piece of the action. It’s like hitting the jackpot, as 99% of those accepted into the SSDI program (costing $132 billion per year) never go back to work. I’ve got a nasty hangnail. I wonder if I qualify. I’d love to get one of those convenient handicapped parking spaces. Once I get into the SSDI program I would automatically qualify for food stamps, a “free” government iPhone, “free” government cable and a 7 year 0% Ally Financial (85% owned by Timmy Geithner) auto loan for a new Cadillac Escalade. The SSDI program is now projected to go broke in 2016. I wonder why?

A nation that rewarded and encouraged savings in 1970 degenerated into a country that penalizes savers and encourages consumption. The government, mainstream media, and NYT liberal award winning Ivy League economists encourage borrowing and spending as the way to build a strong nation. Americans have been convinced that borrowing to appear successful is the same as saving and investing to actually achieve economic success.
Americans saved 7% to 12% of their income from 1960 through 1980. As Wall Street convinced delusional Boomers that stock and house appreciation would fund their luxurious retirements, savings plunged to below 0% in 2005. Why save when your house doubled in price every three years? Americans rationally began to save again in 2009 but Bernanke’s zero interest rate policy put an end to that silliness. Why save when you are being paid .15%? Buying Apple stock at $560 (can’t miss) and getting in on the Facebook IPO (PE ratio of 99) is a much better bet. The national savings rate of 3.8% is back to early 2008 levels. I wonder what happens next?

The proportional distribution between interest and dividends which had been in the 3 to 4 range for decades is now virtually 1 to 1, as Ben Bernanke has devastated the lives of millions of poor senior citizen savers while continuing to subsidize his wealthy stock investors buddies on Wall Street.

Now for the bad news. The Baby Boom generation has just begun to retire en masse. Government transfers will automatically accelerate over the next decade as Social Security and Medicare transfer payments balloon. Government transfer payments have already increased by 3,250% since 1970, while wages and salaries have increased by 1,250%. The non-existent inflation touted by Ben Bernanke accounts for 590% of this increase. We have passed a point of no return. As the number of Americans receiving a government EBT into their bank account grows by the day and the number of working Americans remains stagnant, the chances of a politician showing the courage to address our un-payable entitlement liabilities is near zero. Americans choose to deal with problems in a reactive manner rather than a proactive manner. Until the next inescapable crisis, the fraud and looting will continue until morale improves.

*Billions of $*	1970	1980	1990	2000	Apr-08	2010	Mar-12
Total Personal Income	$835	$2,257	$4,852	$8,548	$12,457	$12,361	$13,328
Wages & Salaries	$552	$1,358	$2,750	$4,800	$6,565	$6,413	$6,905
Interest Income	$69	$272	$753	$989	$1,397	$1,012	$984
Dividend Income	$24	$65	$169	$381	$810	$723	$821
Government transfers	$71	$256	$570	$1,041	$1,786	$2,217	$2,312

A Few Evil Men

“Every effort has been made by the Federal Reserve Board to conceal its powers, but the truth is the FED has usurped the government. It controls everything here (in Congress) and controls all our foreign relations. It makes and breaks governments at will… When the FED was passed, the people of the United States did not perceive that a world system was being set up here… A super-state controlled by international bankers, and international industrialists acting together to enslave the world for their own pleasure!” – Rep. Louis T. McFadden

The largest fraud and theft being committed in this country is being perpetrated by the Central Bank of the United States; its Wall Street owners; and the politicians beholden to these evil men. The fraud and theft is being committed through the insidious use of inflation and manipulation of interest rates. The biggest shame of our government run public education system is their inability or unwillingness to teach even the most basic of financial concepts to our children. It’s almost as if they don’t want the average person to understand the truth about inflation and how it has slowly and silently destroyed their livelihood while enriching the few who create it. Converting the chart above into inflation adjusted figures reveals a different picture than the one sold to the general public on a daily basis. Even using the government manipulated CPI figures from the BLS, the ravages of inflation are easy to recognize.

*Billions of Real $*	1970	1980	1990	2000	Apr-08	2010	Mar-12
Total Personal Income	$4,937	$6,261	$8,569	$11,374	$13,304	$13,007	$13,328
Wages & Salaries	$3,264	$3,767	$4,856	$6,387	$7,011	$6,748	$6,905
Interest Income	$408	$754	$1,330	$1,316	$1,492	$1,065	$984
Dividend Income	$142	$180	$298	$507	$865	$761	$821
Government transfers	$420	$710	$1,007	$1,385	$1,907	$2,333	$2,312
CPI	38.8	82.7	129.9	172.4	214.8	218	229.4

Total wages and salaries have risen by only 112% on an inflation adjusted basis over the last 42 years. This is with U.S. population growth from 203 million in 1970 to 313 million people today, a 54% increase. On a real per capita basis, wages and salaries rose from $16,079 in 1970 to $22,060 today, a mere 37% increase in 42 years. That is horrific and some perspective will reveal how bad it really is:

The average new home price in 1970 was $26,600. The average new home price today is $291,200. On an inflation adjusted basis, home prices have risen 85%.
The average cost of a new car in 1970 was $3,900. The average price of a new car today is $30,748. On an inflation adjusted basis, car prices have risen 33%.
A gallon of gasoline cost 36 cents in 1970. A gallon of gas today costs $3.85. On an inflation adjusted basis, gas prices have risen 81%.
The average price of a loaf of bread in 1970 was 25 cents. The average price of a loaf of bread today is $2.60. On an inflation adjusted basis, a loaf of bread has risen 76%.

In most cases, the cost of things we need to live have risen at twice the rate of our income. This data is bad enough on its own, but it is actually far worse. The governing elite, led by Alan Greenspan, realized that accurately reporting inflation would reveal their scheme, so they have been committing fraud since the early 1980s by systematically under-reporting CPI as revealed by John Williams at www.shadowstats.com:

The truth is that real inflation has been running 5% higher than government reported propaganda over the last twenty years. This explains why families were forced to have both parents enter the workforce just to make ends meet, with the expected negative societal consequences clear to anyone with two eyes. The Federal Reserve created inflation also explains why Americans have increased their debt from $124 billion in 1970 to $2.522 trillion today, a 2000% increase. Wages and salaries only rose 1,250% over this same time frame. Living above your means for decades has implications.

The country, its leaders, its banks and the American people should have come to their senses after the 2008-2009 melt-down. Politicians should have used the crisis to address our oncoming long-term fiscal train wreck, the recklessly guilty Wall Street banks should have been liquidated and their shareholders and bondholders wiped out, the bad debt rampant throughout the financial system should have been purged, and American consumers should have reduced their debt induced consumption while saving for an uncertain cloudy future. These actions would have been painful and would have induced a violent agonizing recession. It would be over now. We would be in the midst of a solid economic recovery built upon reality. Iceland told bankers to screw themselves in 2008. They accepted the consequences of their actions and experienced a brutal two year recession.

The debt was purged, banks forced to accept their losses, and the citizens learned a hard lesson. Amazingly, their economy is now growing strongly. This is the lesson. Wall Street is not Main Street. Saving Wall Street banks and wealthy investors did not save the economy. Stealing savings from little old ladies and funneling it to psychopathic bankers is not the way to save our economic system. It’s the way to save bankers who made world destroying bets while committing fraud on an epic scale, and lost.

Despite the assertion by the good doctor Krugman that there are very few Americans living on a fixed income being impacted by Bernanke’s zero interest rate policy, there are actually 40 million people over the age of 65 in this country that might disagree. There are another 60 million people between the ages of 50 and 64 years old rapidly approaching retirement age. We know 36 million people are receiving SS retirement benefits today. We know that 49 million people are already living below the poverty line, with 16% of those over 65 years old living in poverty. Do 0% interest rates benefit these people? Those over 50 years old are most risk averse, and they should be. Despite the propaganda touted by Wall Street shills and their CNBC mouthpieces, the fact is that the S&P 500 on an inflation adjusted basis is at the same level it was in 1996. Stock investors have gotten a 0% return for the last 16 years. The market is currently priced to deliver inflation adjusted returns of 2% over the next ten years, with the high likelihood of a large drop within the next year.

Ben Bernanke’s plan, fully supported by Tim Geithner, Barack Obama and virtually all corrupt politicians in Washington DC, is to force senior citizens and prudent savers into the stock market by manipulating interest rates and offering them no return on their savings. A fixed income senior citizen living off their meager $15,000 per year of Social Security and the $100,000 they’ve saved over their lifetimes was able to earn a risk free 5% in a money market fund in 2007, generating $5,000 or 25% of their annual living income. Today Ben is allowing them to earn $150 per year. From the BEA info in the chart above you can see that Ben’s ZIRP has stolen $400 billion of interest income from senior citizens and prudent savers and dropped it from helicopters on Wall Street. This might explain why old geezers are pouring back into the workforce at a record pace. Maybe Dr. Krugman has an alternative theory.

Another doctor, with a penchant for telling the truth, described in no uncertain terms the depth of the fraud and theft being perpetrated on the American people (aka Muppets) by Ben Bernanke, the Federal Reserve, their masters on Wall Street, and the puppets in Washington DC:

“We are not doing very well. The economy is just coming along at a snail’s pace. The first quarter numbers that we just got last week were not very good at all. The GDP number was 2.2%. That was a disappointment, but you know, it was all automobiles. 1.6 out of the 2.2 was motor vehicle production. So, people were catching up after not being able to buy them the year before. So, this is a very weak economy… I think the real danger is that this is a bubble in the stock market created by low long-term interest rates that the Fed has engineered. The danger is, like all bubbles, it bursts at some point. Remember, Ben Bernanke told us in the summer of 2010 that he was going to do QE2 and then ultimately they did Operation Twist. The purpose of that was to make long-term bonds less attractive so that investors would buy into the stock market. That would raise wealth and higher wealth would lead to more consumption. It helped in the fourth quarter of 2010 and maybe that is what is helping to drive consumption during the first quarter of this year. But the danger is you get a market that is not with the reality of what is happening in the economy, which is, as I said a moment ago, is really not very good at all.” – Martin Feldstein

The entire bogus recovery is again being driven by subprime auto loans being doled out by Ally Financial (85% owned by the U.S. government) and the other criminal Wall Street banks. The Federal Reserve and our government leaders will continue to steer the country on the same course of encouraging rampant speculation, deterring savings and investment, rewarding outrageous criminal behavior, purposefully generating inflation, and lying to the average American. It will work until we reach a tipping point. Dr. Krugman thinks another $4 trillion of debt and a debt to GDP ratio of 130% should get our economy back on track. When this charade is revealed to be the greatest fraud and theft in the history of mankind, Ben and Paul better have a backup plan, because there are going to be a few angry men looking for them.

Henry Ford knew what would happen if the people ever became educated about the true nature of the Federal Reserve:

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

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EVERYTHING IN THE WORLD IS OVERVALUED

This is a must read interview with TBP contributor David Stockman. He holds nothing back. He has no agenda. He just tells it like it is and how it will happen. I believe his scenario is the most likely. This coming Fall could be the tipping point as we hit the debt ceiling and Bush’s tax cuts are scheduled to end. I love his investment advice at the end. Imagine a country with Ron Paul as President, Jim Grant as Federal Reserve Chairman, and David Stockman as Treasury Secretary.

The Emperor is Naked: David Stockman

Source: Karen Roche and JT Long of The Gold Report (5/4/12)

A “paralyzed” Federal Reserve Bank, in its “final days,” held hostage by Wall Street “robots” trading in markets that are “artificially medicated” are just a few of the bleak observations shared by David Stockman, former Republican U.S. Congressman and director of the Office of Management and Budget. He is also a founding partner of Heartland Industrial Partners and the author of The Triumph of Politics: Why Reagan’s Revolution Failed and the soon-to-be released The Great Deformation: How Crony Capitalism Corrupts Free Markets and Democracy. The Gold Report caught up with Stockman for this exclusive interview at the recent Recovery Reality Check conference.

The Gold Report: David, you have talked and written about the effect of government-funded, debt-fueled spending on the stock market. What will be the real impact of quantitative easing?

David Stockman: We are in the last innings of a very bad ball game. We are coping with the crash of a 30-year–long debt super-cycle and the aftermath of an unsustainable bubble.

Quantitative easing is making it worse by facilitating more public-sector borrowing and preventing debt liquidation in the private sector—both erroneous steps in my view. The federal government is not getting its financial house in order. We are on the edge of a crisis in the bond markets. It has already happened in Europe and will be coming to our neighborhood soon.

TGR: What should the role of the Federal Reserve be?

DS: To get out of the way and not act like it is the central monetary planner of a $15 trillion economy. It cannot and should not be done.

The Fed is destroying the capital market by pegging and manipulating the price of money and debt capital. Interest rates signal nothing anymore because they are zero. The yield curve signals nothing anymore because it is totally manipulated by the Fed. The very idea of “Operation Twist” is an abomination.

Capital markets are at the heart of capitalism and they are not working. Savers are being crushed when we desperately need savings. The federal government is borrowing when it is broke. Wall Street is arbitraging the Fed’s monetary policy by borrowing overnight money at 10 basis points and investing it in 10-year treasuries at a yield of 200 basis points, capturing the profit and laughing all the way to the bank. The Fed has become a captive of the traders and robots on Wall Street.

TGR: If we are in the final innings of a debt super-cycle, what is the catalyst that will end the game?

DS: I think the likely catalyst is a breakdown of the U.S. government bond market. It is the heart of the fixed income market and, therefore, the world’s financial market.

Because of Fed management and interest-rate pegging, the market is artificially medicated. All of the rates and spreads are unreal. The yield curve is not market driven. Supply and demand for savings and investment, future inflation risk discounts by investors—none of these free market forces matter. The price of money is dictated by the Fed, and Wall Street merely attempts to front-run its next move.

As long as the hedge fund traders and fast-money boys believe the Fed can keep everything pegged, we may limp along. The minute they lose confidence, they will unwind their trades.

On the margin, nobody owns the Treasury bond; you rent it. Trillions of treasury paper is funded on repo: You buy $100 million (M) in Treasuries and immediately put them up as collateral for overnight borrowings of $98M. Traders can capture the spread as long as the price of the bond is stable or rising, as it has been for the last year or two. If the bond drops 2%, the spread has been wiped out.

If that happens, the massive repo structures—that is, debt owned by still more debt—will start to unwind and create a panic in the Treasury market. People will realize the emperor is naked.

TGR: Is that what happened in 2008?

DS: In 2008 it was the repo market for mortgage-back securities, credit default obligations and such. In 2008 we had a dry run of what happens when a class of assets owned on overnight money goes into a tailspin. There is a thunderous collapse.

Since then, the repo trade has remained in the Treasury and other high-grade markets because subprime and low-quality mortgage-backed securities are dead.

TGR: Walk us through a hypothetical. What happens when the fast-money traders lose confidence in the Fed’s ability to keep the spread?

DS: They are forced to start selling in order to liquidate their carry trades because repo lenders get nervous and want their cash back. However, when the crisis comes, there will be insufficient private bids—the market will gap down hard unless the central banks buy on an emergency basis: the Fed, the European Central Bank (ECB), the people’s printing press of China and all the rest of them.

The question is: Will the central banks be able to do that now, given that they have already expanded their balance sheets? The Fed balance sheet was $900 billion (B) when Lehman crashed in September 2008. It took 93 years to build it to that level from when the Fed opened for business in November 1914. Bernanke then added another $900B in seven weeks and then he took it to $2.4 trillion in an orgy of money printing during the initial 13 weeks after Lehman. Today it is nearly $3 trillion. Can it triple again? I do not think so. Worldwide it’s the same story: the top eight central banks had $5 trillion of footings shortly before the crisis; they have $15 trillion today. Overwhelmingly, this fantastic expansion of central bank footings has been used to buy or discount sovereign debt. This was the mother of all monetizations.

TGR: Following that path, what happens if there are no buyers? Do the governments go into default?

DS: The U.S. Treasury needs to be in the market for $20B in new issuances every week. When the day comes when there are all offers and no bids, the music will stop. Instead of being able to easily pawn off more borrowing on the markets—say 90 basis points for a 5-year note as at present—they may have to pay hundreds of basis points more. All of a sudden the politicians will run around with their hair on fire, asking, what happened to all the free money?

TGR: What do the politicians have to do next?

DS: They are going to have to eat 30 years worth of lies and by the time they are done eating, there will be a lot of mayhem.

TGR: Will the mayhem stretch into the private sector?

DS: It will be everywhere. Once the bond market starts unraveling, all the other risk assets will start selling off like mad, too.

TGR: Does every sector collapse?

DS: If the bond market goes into a dislocation, it will spread like a contagion to all of the other asset markets. There will be a massive selloff.

I think everything in the world is overvalued—stocks, bonds, commodities, currencies. Too much money printing and debt expansion drove the prices of all asset classes to artificial, non-economic levels. The danger to the world is not classic inflation or deflation of goods and services; it’s a drastic downward re-pricing of inflated financial assets.

TGR: Is there any way to unravel this without this massive dislocation?

DS: I do not think so. When you are so far out on the end of a limb, how do you walk it back?

The Fed is now at the end of a $3 trillion limb. It has been taken hostage by the markets the Federal Open Market Committee was trying to placate. People in the trading desks and hedge funds have been trained to front run the Fed. If they think the Fed’s next buy will be in the belly of the curve, they buy the belly of the curve. But how does the Fed ever unwind its current lunatic balance sheet? If the smart traders conclude the Fed’s next move will be to sell mortgage-backed securities, they will sell like mad in advance; soon there would be mayhem as all the boys and girls on Wall Street piled on. So the Fed is frozen; it is petrified by fear that if it begins contracting its balance sheet it will unleash the demons.

TGR: Was there some type of tipping that allowed certain banks to front run the Fed?

DS: There are two kinds of front-running. First is market-based front-running. You try to figure out what the Fed is doing by reading its smoke signals and looking at how it slices and dices its meeting statements. People invest or speculate against the Fed’s next incremental move.

Second, there is illicit front-running, where you have a friend who works for the Federal Reserve Board who tells you what happened in its meetings. This is obviously illegal.

But frankly, there is also just plain crony capitalism that is not that different in character and it’s what Wall Street does every day. Bill Dudley, who runs the New York Fed, was formerly chief economist for Goldman Sachs and he pretends to solicit an opinion about financial conditions from the current Goldman economist, who then pretends to opine as to what the economy and Fed might do next for the benefit of Goldman’s traders, and possibly its clients. So then it links in the ECB, Bank of Canada, etc. Is there any monetary post in the world not run by Goldman Sachs?

The point is, this is not the free market at work. This is central bank money printers and their Wall Street cronies perverting what used to be a capitalist market.

TGR: Does this unwinding of the Fed and the bond markets put the banking system back in peril, like in 2008?

DS: Not necessarily. That is one of the great myths that I address in my book. The banking system, especially the mainstream banking system, was not in peril at all. The toxic securitized mortgage assets were not in the Main Street banks and savings and loans; these institutions owned mostly prime quality whole loans and could have bled down the modest bad debt they did have over time from enhanced loan loss reserves. So the run on money was not at the retail teller window; it was in the canyons of Wall Street. The run was on wholesale money—that is, on repo and on unsecured commercial paper that had been issued in the hundreds of billions by financial institutions loaded down with securitized toxic garbage, including a lot of in-process inventory, on the asset side of their balance sheets.

The run was on investment banks that were really hedge funds in financial drag. The Goldmans and Morgan Stanleys did not really need trillion-dollar balance sheets to do mergers and acquisitions. Mergers and acquisitions do not require capital; they require a good Rolodex. They also did not need all that capital for the other part of investment banking—the underwriting business. Regulated stocks and bonds get underwritten through rigged cartels—they almost never under-price and really don’t need much capital. Their trillion dollar balance sheets, therefore, were just massive trading operations—whether they called it customer accommodation or proprietary is a distinction without a difference—which were funded on 30 to 1 leverage. Much of the debt was unstable hot money from the wholesale and repo market and that was the rub—the source of the panic.

Bernanke thought this was a retail run à la the 1930s. It was not; it was a wholesale money run in the canyons of Wall Street and it should have been allowed to burn out.

TGR: Let’s get back to our ballgame. What is to keep the U.S. population from saying, please Fed save us again?

DS: This time, I think the people will blame the Fed for lying. When the next crisis comes, I can see torches and pitch forks moving in the direction of the Eccles building where the Fed has its offices.

TGR: Let’s talk about timing. On Dec. 31, the tax cuts expire, defense cuts go into place and we hit the debt ceiling.

DS: That will be a clarifying moment; never before have three such powerful vectors come together at the same time— fiscal triple witching.

First, the debt ceiling will expire around election time, so the government will face another shutdown and it will be politically brutal to assemble a majority in a lame duck session to raise it by the trillions that will be needed. Second, the whole set of tax cuts and credits that have been enacted over the last 10 years total up to $400–500B annually will expire on Dec. 31, so they will hit the economy like a ton of bricks if not extended. Third, you have the sequester on defense spending that was put in last summer as a fallback, which cannot be changed without a majority vote in Congress.

It is a push-pull situation: If you defer the sequester, you need more debt ceiling. If you extend the tax expirations, you need a debt ceiling increase of $100B a month.

TGR: What will Congress do?

DS: Congress will extend the whole thing for 60 or 90 days to give the new president, if he hasn’t demanded a recount yet, an opportunity to come up with a plan.

To get the votes to extend the debt ceiling, the Democrats will insist on keeping the income and payroll tax cuts for the 99% and the Republicans will want to keep the capital gains rate at 15% so the Wall Street speculators will not be inconvenienced. It is utter madness.

TGR: It is like chasing your tail. How does it stop?

DS: I do not know how a functioning democracy in the ordinary course can deal with this. Maybe someone from Goldman Sachs can come and put in a fix, just like in Greece and Italy. The situation is really that pathetic.

TGR: Greece has come up with some creative ways to bring down its sovereign debt without actually defaulting.

DS: The Greek debt restructuring was a farce. More than $100B was held by the European bailout fund, the ECB or the International Monetary Fund. They got 100 cents on the dollar simply by issuing more debt to Greece. For private debt, I believe the net write-down was $30B after all the gimmicks, including the front-end payment. The rest was simply refinanced. The Greeks are still debt slaves, and will be until they tell Brussels to take a hike.

TGR: Going back to the triple-witching hour at year-end, if the debt ceiling is raised again, when do we start to see government layoffs and limitations on services?

DS: Defense purchases and non-defense purchases will be hit with brutal force by the sequester. As we go into 2013, there will be a shocking hit to the reported GDP numbers as discretionary government spending shrinks. People keep forgetting that most government spending is transfer payments, but it is only purchases of labor and goods that go directly into the GDP calculations, and it is these accounts that will get smacked by the sequester of discretionary defense and non-defense budgets.

TGR: I would think to unemployment numbers as well.

DS: They will go up.

Just take one example. According to the Bureau of Labor Statistics monthly report, there are 650,000 or so jobs in the U.S. Postal Service alone. That is 650,000 people who pretend to work at jobs that have more or less been made obsolete and redundant by the Internet and who are paid through borrowings from Uncle Sam because the post office is broke. Yet, the courageous ladies and gentlemen on Capitol Hill cannot even bring themselves to vote to discontinue Saturday mail delivery; they voted to study it! That is a measure of the loss of capacity to rationally cognate about our fiscal circumstance.

TGR: In the midst of this volatility, how can normal people preserve, much less expand their wealth?

DS: The only thing you can do is to stay out of harm’s way and try to preserve what you can in cash. All of the markets are rigged or impaired. A 4% yield on blue chip stocks is not worth it, because when the thing falls apart, your 4% will be gone in an hour.

TGR: But if the government keeps printing money, cash will not be worth as much, either, right?

DS: No, I do not think we will have hyperinflation. I think the financial system will break down before it can even get started. Then the economy will go into paralysis until we find the courage, focus and resolution to do something about it. Instead of hyperinflation or deflation there will be a major financial dislocation, which means painful re-pricing of financial assets.

How painful will the re-pricing be? I think the public already knows that it will be really terrible. A poll I saw the other day indicated that 25% of people on the verge of retirement think they are in such bad financial shape that they will have to work until age 80. Now, the average life expectancy is 78. People’s financial circumstances are so bad that they think they will be working two years after they are dead!

TGR: Finally, what is your investment model?

DS: My investing model is ABCD: Anything Bernanke Cannot Destroy: flashlight batteries, canned beans, bottled water, gold, a cabin in the mountains.

TGR:Thank you very much.

David Stockman is a former U.S. politician and businessman, serving as a Republican U.S. Representative from the state of Michigan 1977–1981 and as the director of the Office of Management and Budget under President Ronald Reagan 1981–1985. He is the author of The Triumph of Politics: Why Reagan’s Revolution Failed and the soon-to-be released The Great Deformation: How Crony Capitalism Corrupts Free Markets and Democracy.

Stockman was the keynote speaker at last weekend’s Casey Research Recovery Reality Check Summit. This event featured legendary contrarian investor Doug Casey, high-end natural resource broker Rick Rule, New York Times bestselling author John Mauldin and 28 other financial luminaries. Over the three-day summit, they provided investors with asset-protection action plans and actionable investment advice.

DEBATING A DOUCHEBAG – KRUGMAN CHRONICLES

Krugman’s solution is always the same. Borrow more. Spend more. Driving the National debt up by $5.5 trillion since 2008 has not brought us out of this recession. Krugman believes if we had just borrowed and spent another $3 trillion things would be much better now. His intellectual dishonesty and defending of a failed ideology is pitiful to watch. He belongs with the NYT, another liberal failure.

Whiskey & Gunpowder
by Detlev Schlichter
May 2, 2012
London, England, UK

How to Debate Paul Krugman

Paul Krugman is the high priest of Keynesianism and modern interventionism, of economic improvement through inflation and budget deficits. As such he is bête noir among us libertarians and Austrian School economists.

What makes him so annoying is his unquestioning, reflexive and almost childlike enthusiasm for state intervention, even in the face of its obvious failure, and his apparent unwillingness to probe any deeper into the real causes of our present economic problems or to show any willingness to investigate the effectiveness or ineffectiveness of his particular medicine. His Keynesian convictions are presented as articles of faith that no intelligent person can seriously question.

A Krugmanesque argument is always built on a number of assumptions that are beyond doubt:

1) Recessions, depressions and crises are the result of the unhampered market. We actually do not have to investigate if markets were really free when recessions occurred or what really were the specific causes of whatever threw the economy off track. When there is a recession, depression or crisis, there must have been too much of an uncontrolled market.

2) The Great Depression was caused by uncontrolled markets.

3) Recessions, depressions and crises are practically the result of one problem: a lack of aggregate demand. People, for whatever reason (and who cares about the reason; let’s not get hung up on those details!) don’t spend enough. If everybody were to spend more, people would sell more. Problem solved. It is the role of government to get people spending again. This is done by printing money and causing inflation so that people spend the money rather than save it. Or by the government running up deficits and spending it on behalf of the stupid savers.

4) The Great Depression was solved by the government spending lots of money and the central bank printing lots of money.

5) This explains ALL economic problems.

6) If there are recessions, depressions and crises, they can all be solved by printing money and by deficit spending.

7) If after many rounds of money printing and deficit spending there is still a recession, then only one conclusion is permissible: There was obviously not enough money printing and deficit spending. We need more money printing and deficit spending.

8) If after another round of money printing and deficit spending we still have a recession, then….well, are you stupid, or what? We obviously have NOT PRINTED ENOUGH MONEY and we are NOT ACCUMULATING ENOUGH DEBT!

(And, by the way, remember (7) above.)

Krugman is practicing Keynesianism as a religion. The 8 commandments above are not to be questioned. Whoever questions them is not worthy of debate. Consequently, Krugman has turned down requests to debate people like Peter Schiff or Bob Murphy. Interestingly, he agreed to debate Ron Paul on TV. The link is here.

I have to say that Ron Paul did not do as well as I had hoped he would. He did not sufficiently attack Krugman in my view, for the failure and ultimately disastrous consequences of his policy prescriptions. Krugman is the one who should be made to explain his policy recommendations. After all, t’s policies like the ones he is recommending got us into this mess in the first place Krugman needs to explain why his policy ideas have been implemented for years to no effect.

Yet, Krugman succeeded in putting Paul on the defensive, something in which he was greatly helped by the following: While Krugman may be the most outstanding, unashamed and fundamentalist of the celebrity Keynesians, the attitudes of the general public, the other journalists and thus most of the TV viewers are predominantly shaped by Keynesianism as well, and this means that Krugman, more than Paul or any ‘Austrian’ debater, can rely on some sense of intellectual sympathy.

Maybe the viewers don’t quite share the unquestioning, almost vulgar dedication to the Faith, that Krugman epitomizes. Maybe they feel queasy about printing trillions of paper dollars and running trillion-dollar deficits. Of course, a true believer like Krugman will never allow himself such feelings. But in general, the public, too, believes that the free market (and greedy bankers) caused the financial crisis; that we need low interest rates and other government measures to stimulate the economy; and that inflation is really not our main concern. Krugman, I think, cleverly used these attitudes to present himself as the safe and rational choice, and Paul as the weirdo who wants to pour out the state-policy baby with the crisis bath water.

Ron Paul started strongly by pointing out that Krugman’s policy is based on the idea that a bureaucratic elite can set interest rates and decide how much money should be created, and that this involves an arrogant and dangerous pretence of knowledge. Very good point.
Immediately, the apostle Krugman raised his head. “You cannot get the state out of money.” “The Fed has to set interest rates.” “You cannot go back 150 years.”

I think this is where Ron Paul should have dug in and put Krugman on the defensive:

“Why not? There was no Fed before 1913. That the Fed made things more stable is your assumption. But is it true? People like you and Bernanke tell us that the gold standard was to blame for the Depression. In the run-up to the Depression we had a gold standard but we also had a Fed. How can you say that the gold standard was to blame and the Fed was ultimately the solution?

“Dr. Krugman just said, ‘history told us’. That is nonsense. History doesn’t tell us anything. You need theory to interpret history, and your theory is wrong. You assign blame for the depression according to your Keynesian theory. If that theory is wrong – and I think it is completely wrong – your interpretation of history is hopelessly wrong.

“Dr. Krugman, we do no longer live in the 1930s. Why is it that you are harking back to those days? Are we still solving the Great Depression?

“Fact is that the monetary and economic institutions of America were shaped by people with your beliefs, Dr. Krugman. We have your system today. We have conducted and are conducting your policies. And, Dr. Krugman, do you really want to tell the American public that these policies and these institutions, such as the Fed, are working?

“We have no gold standard. Since 1971, the Fed is entirely free to print as much money as it likes. That is your system, isn’t it? That is what you recommend. – You say the Fed needs to keep interest rates low and print money to stimulate growth. That is what the Fed did in 1998 after LTCM and the Russia default, just as you recommended. That is what the Fed did again after the NASDAQ bubble burst and after 9/11 – surely, that was not an Austrian policy but a Keynesian one. It was straight out of your rule book, Dr. Krugman. You say the uninhibited market is to blame for the financial crisis. I say your policy is to blame. The mortgage bubble was blown by the ‘stimulus’ policy of the Fed – low interest rates and plenty new bank reserves – between 2001 and 2005. That was your recommendation, right? And those of your Keynesian buddies, such as Paul McCulley at Pimco.

“Since 2007, the Fed is conducting your policy. So is the US government. You demanded monetary stimulus and you got it. The Fed created $2 trillion dollars out of thin air. Interest rates have been zero for years. The US government is conducting stimulus policy to the tune of $1trillion-plus every year. Are you telling me, these are not Keynesian policies? What is it, Austrian policy?!

“What you are recommending has in fact been the guiding principle of global economic policy for years. What you are recommending is a systematic distortion of the market place. It is persistent price distortion. That is why we had an unsustainable housing boom. That is why we had a mortgage boom. That is why we had a financial industry boom. And whenever these artificial booms – that you create with your policy – falter, the American public has to pay the price. And what do you suggest then? More of the same. More cheap credit. More government debt. In the hope that you can generate another artificial boom for which a later generation will again have to pay the price.

“Dr. Krugman, you just answered the question of this journalist about how much more debt we should accumulate, by saying maybe another 30 percent but that nobody can say for sure. I agree that nobody can say how much debt the system can still take. But tell us, why do you think that the next 30 percent of state debt will magically stimulate the economy and that these 30 percent will thus achieve what the previous 30 percent obviously failed to do.

“Dr. Krugman, you have me worried here. And I think our viewers too. The only response you have to the abject failure of your policies is that we should do more of them. Whatever Keynesian stimulus is being implemented and whatever money the Fed prints, all you ever say is that it is not enough. We need more. Has it ever occurred to you that maybe the problem is the policy itself? Maybe your medicine is making things worse and not better.

“And something else worries me, Dr. Krugman. When do we ever stop printing money and borrowing? I think that you are stuck in a failed paradigm, a failed economic theory and a failed policy program. This has happened to scientists and politicians before. You cannot admit that failure. When you are confronted with the failure of modern central banking, of Keynesian stimulus and of moderate inflationism, your only answer is that nothing is wrong with any of it, it is just not implemented forcefully enough. Dr. Krugman, you remind me of a doctor, who misdiagnosed the disease and prescribed the wrong medicine and who is now unwilling to look at the situation objectively. All you want to do is increase the dosage.

“If the viewers really want to understand what is going on, they should not buy Krugman’s new book but go to the website of the Mises Institute and look for some excellent Austrian School literature, in particular anything written by Ludwig von Mises himself. But if you don’t have time to do this, an excellent start is a book by Detlev Schlichter, with the title Paper Money Collapse.”

Well, I guess this is how it could have unfolded.

Regards,

Detlev Schlichter
Paper Money Collapse

TAX FALLACIES

Trying to come to a consensus on tax policy in this country is futile. The article below addresses a number of things I’ve addressed before. The bullshit about the rich paying all the taxes in this country is a storyline perpetuated by the rich and their media cronies. When payroll, property, and sales taxes are taken into account, the middle class in many cases pays a higher percentage of their income in taxes than the rich. There is one thing that you cannot dispute. The rich and powerful individuals and corporations can afford to buy the politicians that write the tax code. What does the chart below tell you? It tells me that over time those who have the money have arranged for loopholes to be created so that tax rates don’t really matter. No rich person or mega-corporation ever pays anywhere near the top tax rate. They have highly paid tax specialists and Washington DC lobbyists to insure they pay the least possible. This is why my 76 year old mother living on only Social Security paid a higher tax rate last year than GE.

I’m not in favor of raising taxes on the rich or anyone for that matter. We have a spending problem, not a tax revenue problem. I would be in favor of eliminating all deductions, credits, loopholes, subsidies and exemptions for every individual and corporation in the country. I have better chance of seeing God today. The tax code is power to politicians. Obama and Romney love the existing tax code. It’s how they dole out favors and paybacks for contributions. The statists in Congress think they can change the world by tweaking the tax code. The existing oligarchy will do nothing but tweak the current code. The number of pages in the tax code will surpass 100,000 by 2016.

In my perfect world, this is what I would do:

Completely scrap the existing individual and corporate tax code.
I’d replace it with a national consumption tax that excluded food and clothing.
I would not tax income or savings.
I would put a stiff tariff on all foreign imports, even if the company is based in the U.S. If the product is made outside of the U.S. it would be taxed.
I would jump all over the writer’s #5 idea. I’d put a tax on every High Frequency Trade done by Wall Street. These shysters have screwed America and it’s time to screw them back.

And that’s all I have to say about that.

THE POLITICS OF POVERTY

Star Parker cuts through all the left wing political crap about poverty in America. About 46.2 million people are now considered in poverty as of the end of 2010, up 2.6 million from 2009. The government defines the poverty line as income of $22,314 a year for a family of four and $11,139 for an individual. This explains the 46.5 million people on food stamps. All you have to do is drive through West Philly to confirm that poverty is a big problem in this country.

Lyndon Johnson declared a War on Poverty in 1964. We’ve spent over $10 trillion on this war in the last five decades and the chart below shows you the ROI. A higher percentage of Americans are living in poverty today than in 1965.

Obama and his minions like Tavis Smiley and Cornell West think if we spend another $10 trillion we can solve poverty. Star Parker cuts to the chase. It’s about personal responsibility, education and men marrying the women they impregnate. It really is that simple. Of course we should have a safety net for those who got a bad break in life through no fault of their own. There should not be transfers to people who chose not to educate themselves, had kids out of wedlock, and take no responsibility for their actions. Expect the race card to be played over and over in the next 6 months by Obama. It will probably work. The Free Shit Army likes their free shit. I guess I don’t have a heart as I drive through West Philly and see gang bangers driving a Mercedes and talking on their iPhone and using their EBT card at Taco Bell. If I could just be more compassionate and volunteer that my taxes be increased, all would be well in West Philly.

How to keep the poor poor

Sunday, April 29,2012

Media personality Tavis Smiley and Princeton philosophy professor Cornell West have just published their latest contribution to American poverty propaganda, “The Rich and the Rest of Us: A Poverty Manifesto.”

The book should have a second subtitle: “How to keep the poor poor and blacks enslaved to government.” To the extent this book is taken seriously by anyone, the result can only be more, entrenched poverty.

Smiley and West’s message is simple. America today consists of a few powerful, rapacious rich people and a lot of unfortunate, exploited poor people. The rich are rich because they are lucky. The poor are poor because they are unlucky. And the only way to solve the problem is activist government to manage the American economy and redistribute wealth.

It’s as if the wealthy belong to a different species of life with no common thread of humanity linking who they are to those who have less. The idea that “haves” once might have been “have nots”— or that that they did something to become “haves” that today’s “have nots” might consider doing — never enters the equation.

Even if Smiley and West conceded that there might be some element of personal responsibility in how one’s life turns out, their portrait is of an America now so unfair, that personal responsibility is irrelevant. There is no hope for anyone to rise, according to this book, without government boosting them using other people’s money.

A good candidate for one of the more outrageous distortions, in a book filled with them, is No. 1 on their list of “Lies about poverty that America can no longer afford.”

That No. 1 lie is: “Poverty is a character flaw.” No way, according to the authors, is there a chance that poverty has anything to do with one’s behavior. Rather, “The 150 million Americans in or near poverty are there as result of unemployment, war, the Great Recession, corporate greed, and income inequality.”

Given this insight — that there are 150 million poor Americans whose economic condition is the result of extenuating circumstances — it is no wonder that Smiley and West never once mention what many scholars see as the major causes of poverty — poor education and family breakdown.

According to the Bureau of Labor Statistics, in 2011 unemployment for those without a high school diploma was 50 percent higher than those with a high school diploma and almost three times higher than those with a college degree.

According to the Census Bureau, 17.8 percent of American families with children under 18 lived in poverty in 2010. However, in households with children that had married parents, 8.4 percent lived in poverty. In households with children headed by a single mother, 39.6 percent lived in poverty.

The evidence is powerful that getting educated and getting married dramatically reduces the prospects for living in poverty. Yet apparently not sufficiently powerful to interest Smiley and West to note these factors once in their “poverty manifesto.”

Can better government policy expand opportunity for those who actually choose to get educated and live responsible lives? Certainly. But what we need is totally the opposite of what these authors advocate. Evidence abounds that countries with limited government and more economic freedom are far and away the most prosperous.

Despite this book’s message of the inherent hopelessness and unfairness of today’s America, the authors themselves seems to be doing quite well, selling their paperback “poverty manifesto” at $12 a pop. Apparently it’s quite good business to tell Americans that America is unfair.

Perhaps this book can be used to reduce competition for jobs by immigrants.

According to the State Department, there are currently 4.6 million visa applicants wishing to enter the United States under the family and employment preferences immigration program. They apparently haven’t gotten the word that America is no longer a land of opportunity.

Star Parker is an author and president of CURE, Center for Urban Renewal and Education. See www.urbancure.org.

INCOMPREHENSIBLE

When I read stories like the one below and the information about how much people have saved for their retirement, I’m flabbergasted by the delusional, utterly ridiculous behavior of American consumers. We know for a FACT that 60% of all workers in the country have less than $25,000 of total savings. Many have absolutely nothing saved. Even better, over 25% of all 401k participants have borrowed against their 401k plan as of the end of 2010. This data is for people with jobs. How about the 88 million people who aren’t in the labor market? I wonder how much savings they have. In order to retire at 65 and live above the poverty line, people need to have saved at least a couple hundred thousand dollars. Those who retired in the 1980s and 1990s had equity in their homes, many had defined benefit pensions, and could rely on Social Security and their savings.

Today you have 55 year old people with $25,000 of liquid assets earning .15%, underwater homes, no pension plans, and $15,000 of credit card debt. They cannot afford to retire. They will stay in the labor market until the day they die. This is not good news for the Millenials.

What I find incomprehensible is that Americans ramped up their spending in the 1st quarter of 2012 and their savings rate in back at a four year low of 3.9%. With the data about retirement savings being so pitiful consumers SHOULD BE saving 10% of their disposable income like they did in the early 1980s. Going further into debt in order to enjoy going out to dinner two times per week is about the stupidest thing anyone could do. And our leaders, media and Ivy League trained economists actually encourage this delusional foolish behavior. Can this many Americans be this stupid? What are they thinking? Are they counting on the government to come to their rescue when they are 75 years old, broke, homeless, and begging?

I find myself shaking my head and talking to myself when I see this data and watch the behavior of the majority. We’re surely doomed.

Delaying retirement: 80 is the new 65

NEW YORK (CNNMoney) — A quarter of middle-class Americans are now so pessimistic about their savings that they are planning to delay retirement until they are at least 80 years old — two years longer than the average person is even expected to live.

It sounds depressing, but for many it’s a necessity. On average, Americans have only saved a mere 7% of the retirement nest egg they were hoping to build, according to Wells Fargo’s latest retirement survey that polled 1,500 middle-class Americans.

While respondents (whose ages ranged from 20 to 80) had median savings of only $25,000, their median retirement savings goal was $350,000. And 30% of people in their 60s — right around the traditional retirement age of 65 — that were surveyed had saved less than $25,000 for retirement.

As a result, many people aren’t in a hurry to quit their day jobs.

Three-fourths of middle-class Americans expect to work throughout retirement. And this includes the 25% of Americans who say they will “need to work until at least age 80” before being able to retire comfortably.

The 2012 Retirement Confidence Survey: Job Insecurity, Debt Weigh on Retirement Confidence, Savings

March 2012 EBRI Issue Brief #369 Paperback, 36 pp. PDF, 1,585 kb Employee Benefit Research Institute, 2012

Download Issue Brief PDF

Executive Summary

Americans’ confidence in their ability to retire comfortably is stagnant at historically low levels. Just 14 percent are very confident they will have enough money to live comfortably in retirement (statistically equivalent to the low of 13 percent measured in 2011 and 2009).
Employment insecurity looms large: Forty-two percent identify job uncertainty as the most pressing financial issue facing most Americans today.
Worker confidence about having enough money to pay for medical expenses and long-term care expenses in retirement remains well below their confidence levels for paying basic expenses.
Many workers report they have virtually no savings and investments. In total, 60 percent of workers report that the total value of their household’s savings and investments, excluding the value of their primary home and any defined benefit plans, is less than $25,000.
Twenty-five percent of workers in the 2012 Retirement Confidence Survey say the age at which they expect to retire has changed in the past year. In 1991, 11 percent of workers said they expected to retire after age 65, and by 2012 that has grown to 37 percent.
Regardless of those retirement age expectations, and consistent with prior RCS findings, half of current retirees surveyed say they left the work force unexpectedly due to health problems, disability, or changes at their employer, such as downsizing or closure.
Those already in retirement tend to express higher levels of confidence than current workers about several key financial aspects of retirement.
Retirees report they are significantly more reliant on Social Security as a major source of their retirement income than current workers expect to be.
Although 56 percent of workers expect to receive benefits from a defined benefit plan in retirement, only 33 percent report that they and/or their spouse currently have such a benefit with a current or previous employer.
More than half of workers (56 percent) report they and/or their spouse have not tried to calculate how much money they will need to have saved by the time they retire so that they can live comfortably in retirement.
Only a minority of workers and retirees feel very comfortable using online technologies to perform various tasks related to financial management. Relatively few use mobile devices such as a smart phone or tablet to manage their finances, and just 10 percent say they are comfortable obtaining advice from financial professionals online.

H.L. MENCKEN WAS RIGHT

“I believe that it is better to tell the truth than a lie. I believe it is better to be free than to be a slave. And I believe it is better to know than to be ignorant.” – H.L. Mencken

H.L. Mencken was a renowned newspaper columnist for the Baltimore Sun from 1906 until 1948. His biting sarcasm seems to fit perfectly in today’s world. His acerbic satirical writings on government, democracy, politicians and the ignorant masses are as true today as they were then. I believe the reason his words hit home is because he was writing during the last Unraveling and Crisis periods in America. The similarities cannot be denied. There are no journalists of his stature working in the mainstream media today. His acerbic wit is nowhere to be found among the lightweight shills that parrot their corporate masters’ propaganda on a daily basis and unquestioningly report the fabrications spewed by our government. Mencken’s skepticism of all institutions is an unknown quality in the vapid world of present day journalism.

The Roaring Twenties of decadence, financial crisis caused by loose Fed monetary policies, stock market crash, Depression, colossal government redistribution of wealth, and ultimately a World War, all occurred during his prime writing years. I know people want to believe that the world only progresses, but they are wrong. The cycles of history reveal that people do not change, just the circumstances change. How Americans react to the undulations of history depends upon their age and generational position. We are currently in a Crisis period when practical, truth telling realists like Mencken are most useful and necessary.

Mencken captured the essence of American politics and a disconnected populace 80 years ago. Even though many people today feel the average American is less intelligent, more materialistic, and less informed than ever before, it was just as true in 1930 based on Mencken’s assessment:

“The Presidency tends, year by year, to go to such men. As democracy is perfected, the office represents, more and more closely, the inner soul of the people. We move toward a lofty ideal. On some great and glorious day the plain folks of the land will reach their heart’s desire at last, and the White House will be adorned by a downright moron.”

You can make your own judgment on the accuracy of his statement considering the last two gentlemen to occupy the White House. His appraisal of U.S. Senators and citizens in our so-called Democracy captures the spirit of the travesty that passes for leadership and civic responsibility in this country today.

“Democracy gives the beatification of mediocrity a certain appearance of objective and demonstrable truth. The mob man, functioning as citizen, gets a feeling that he is really important to the world—that he is genuinely running things. Out of his maudlin herding after rogues and mountebacks there comes to him a sense of vast and mysterious power—which is what makes archbishops, police sergeants, the grand goblins of the Ku Klux and other such magnificoes happy. And out of it there comes, too, a conviction that he is somehow wise, that his views are taken seriously by his betters — which is what makes United States Senators, fortune tellers and Young Intellectuals happy. Finally, there comes out of it a glowing consciousness of a high duty triumphantly done which is what makes hangmen and husbands happy.”

People still read newspapers in the 1930s to acquire credible information about the economy, politics and economy. Today’s corporate owned rags aren’t fit to line a bird cage. The mainstream media is a platform for the lies of their corporate sponsors. Each TV network or newspaper spouts propaganda that supports the financial interests and ideology they are beholden to. Does anyone think they are obtaining the truth from Paul Krugman, Chris Matthews, Sean Hannity or Rush Limbaugh? Evidently the answer is yes. The upcoming presidential campaign will be a nightmare of endless negative advertisements created by Madison Avenue maggots and paid for by rich powerful men attempting to herd the mindless sheeple towards their ultimate slaughter. Whichever corporate controlled party can more successfully scare the masses into pulling their lever in the voting booth on November 6th will get the opportunity push the country closer to its ultimate collapse. This collapse was destined from the time of Mencken when the Federal Reserve was created by a small group of powerful bankers and their cronies in Congress. Fear has worked for 100 years in controlling the masses, as Mencken noted during his time:

“The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.”

In the 1930s you needed to count on newspapers for the truth. The purpose of those who wield power is to keep the masses dumbed down and paranoid regarding terrorist threats and artificial enemies. By convincing the dense public that acquiring material goods on credit was a smart thing to do, they have trapped them in a web of debt. By making life an inexhaustible bureaucratic nightmare or rules, regulations, forms, ID cards, registrations, and red tape, those in power maintain control and accumulate power. H.L. Mencken would be proud:

“Democracy is a pathetic belief in the collective wisdom of individual ignorance. No one in this world has ever lost money by underestimating the intelligence of the great masses of the plain people. Nor has anyone ever lost public office thereby.”

Let’s See How Far We’ve Come

“The worst government is often the most moral. One composed of cynics is often very tolerant and humane. But when fanatics are on top there is no limit to oppression.” – H.L. Mencken

The corporate / government / banking oligarchy started the fire. The world is burning to the ground and politicians have thrown gasoline onto the fire with passage of debt financed stimulus programs, Obamacare, bank bailouts, the Patriot Act, NDAA, and a myriad of other government “solutions”. To anyone willing to think for just a few minutes, the picture is unambiguous. This requires the ability to think critically – a missing gene among the majority of Americans.

Critical thinking is the careful, deliberate determination of whether one should accept, reject, or suspend judgment about a claim and the degree of confidence with which one accepts or rejects it. Critical thinking employs not only logic but broad intellectual criteria such as clarity, credibility, accuracy, precision, relevance, depth, breadth, significance and fairness. Critical thinking requires extensive experience in identifying the extent of one’s own ignorance in a wide variety of subjects (“I thought I knew, but I merely believed.”)

One becomes less biased and more broad-minded when one becomes more intellectually empathetic and intellectually humble. I have observed little or no critical thinking skills in the pompous asses that write daily columns in today’s newspapers and zero critical thinking skills among the vacuous pundits and big breasted brainless fashion models that yap all day long on CNBC, MSNBC, CNN, Fox and the Big 3 dying networks.

Any thinking would be a shocking change of pace from the corrupt corporate owned politicians in Washington DC. Other than Ron Paul and a few other truth tellers, critical thinking from a politician or a government bureaucrat is about as likely as Obama not using a teleprompter. Everything being spewed at the public from the MSM, Wall Street, and Washington DC is intellectually dishonest, manipulated and packaged by pollsters and PR firms. I’ve come to the conclusion that those in power desire that public school systems of the United States churn out ignorant, non-questioning morons. A populace that is incapable or uninterested in critically thinking about the important issues of the day is a politician’s best friend. Half the population doesn’t vote and the other half unquestioningly obeys what they are told by their parties.

Ignorance is the state of being uninformed about issues and unaware about the implications of those issues. It is not about intelligence. A huge swath of America is ignorant due to lack of education and a low class upbringing. But, I know many college educated people who haven’t read a book in 20 years or could care less about economic issues. They made a choice to be ignorant. They prefer being distracted by their latest technological toy to dealing with reality.

Most Americans are incapable of looking beyond a 2 to 3 year time horizon. That is why the median 401k balance in the US is $13,000. That is why the average credit card debt per household is $16,000. That is why 25% of all homeowners are underwater on their mortgage. Politicians, banks, and marketers take advantage of this witlessness to enslave the average American. We’ve come to love our slavery. Appearing successful because you drive the right car, wear the right clothes or live in the right house is more important than actually doing the hard work to actually become successful, like spending less than you make and saving the difference.

An informed, interested, questioning public would be a danger to the government as described by H.L. Mencken:

“The most dangerous man to any government is the man who is able to think things out … without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane, intolerable.”

There were already two fiscal hurricanes of unfunded liabilities and current deficits churning towards our shores before Obama and his non-critical thinking Democratic minions launched a third storm called Obamacare. No matter how many intellectually deceitful mouthpieces like Paul Krugman and Rush Limbaugh misrepresent the facts, the fiscal foundation of the country is crumbling under the weight of unfunded entitlement promises, out of control government spending and far flung military misadventures. Only someone who is intellectually bankrupt, like Krugman, would declare the National Debt at $8 trillion as a looming disaster when George Bush was President, but declare that a $15.6 trillion National Debt headed towards $20 trillion by 2015 isn’t a danger now that Barack Obama is President. The intellectual and moral credentials required to write for a major newspaper have fallen markedly since the days of Mencken.

The combination of educationally uninformed, ignorant by choice, and intellectually dishonest will be fatal for the country. Total US credit market debt as a percentage of GDP is just below an all-time high, exceeding 350% of GDP. It is 25% higher than it was at the depths of the Great Depression. Consumer debt fell in 2010 – 2011 because banks wrote off about a trillion dollars of bad debt, while government debt has skyrocketed to unprecedented levels. Now consumers are back racking up more debt, with government encouragement and subsidies responsible for the surge in student loan and auto debt. With GDP stalling out, government debt accumulating at $1.4 trillion per year and consumers back to their delusional selves again, this ratio will pass 400% by 2014.

The financial crisis was caused by excessive utilization of debt. In order to correct these imbalances, the country needed to undergo a deleveraging and reversion back to a country of savers. Savings equals investment. Instead, our “leaders” have reduced interest rates to 0% and have gone on an unprecedented government borrowing and spending spree. Savers and senior citizens are punished, while gamblers and speculators are rewarded. Anyone who thinks about this strategy for a few minutes will realize it is asinine and hopeless. It enriches the few and impoverishes the many.

Based upon a realistic assessment of our current spending trajectory, The National Debt of the U.S. will exceed $25 trillion by 2019. That is more than double the figure when Bush left office. George Bush almost doubled the National Debt from $5.6 trillion to $11 trillion during his reign of error. It seems one thing Republicans and Democrats can agree on is that spending money they don’t have will have no negative consequences (“deficits don’t matter” – Cheney). When you have a Federal Reserve willing to print to infinity there is no limit to how much you can spend. Only a fool would believe there won’t be consequences. That fool writes an opinion column for the NYT and has a Nobel Prize on his bookshelf.

We add $3.8 billion of debt to this figure each and every day. We add $158 million to this figure each and every hour. The interest on the National Debt reached an all-time high of $454 billion in 2011 with an effective interest rate of about 3%. Much of this interest is paid to foreign governments like China, Japan and OPEC nations. This is $1.2 billion per day of interest paid mostly to foreigners. With just the slightest bit of critical thinking one could easily perceive that with a National Debt of $25 trillion and a likely increase in interest rates to at least 6%, our annual interest costs would increase to $1.5 trillion per year. The United States needed to implement a long-term plan ten years ago to address the impossible to fulfill promises made by its corrupt, mentally bankrupt politicians. Americans’ inability to deal with reality and fondness for not thinking beyond tomorrow has shown them to be an inferior species, as Mencken noted:

“The one permanent emotion of the inferior man is fear – fear of the unknown, the complex, the inexplicable. What he wants above everything else is safety.”

The entire revenue of the US government totaled $2.3 trillion in 2011, with $800 billion of those funds earmarked for Social Security outlays in the future. Does this appear sustainable? President Obama submits budgets of never ending trillion dollar deficits and then gives stump speeches declaring that we must get our deficits under control. He appears on the MSM declaring his dedication to fiscal responsibility and what passes for a journalist these days nods their head like a lapdog and lobs the next softball to the President. You have to be delusional to believe this claptrap. Luckily for the politicians, most Americans are delusional and apathetic. They just got another text message from their BFF. They are consumed by who will get booted this week from American Idol or Dancing With the Stars. The NFL draft is tonight and did your hear that Kim Kardashian is doing Kanye West?

H.L. Mencken understood the false promises of democracy 80 years ago:

“Democracy is also a form of worship. It is the worship of Jackals by Jackasses. It is the theory that the common people know what they want, and deserve to get it good and hard.”

We deserve to get it good and hard, and we will.

HUNGER GAMES & THE FOURTH TURNING

It looks like I’m not the only one who sees parallels between the Hunger Games books and movie and The Fourth Turning. Our good friend Neil Howe just made this post on his blog. I always love to see the insights of the master. He picked up things that I never even considered. Enjoy.

I highly recommend The Hunger Games and The Fourth Turning to anyone who wants to better understand what will happen in the next 15 years.

“Hunger Games” and Fourth-Turning America

Apr 22, 2012

So why has The Hunger Games broken so many box-office records in its first few weeks in theaters? Sure, the trilogy was a huge YA reader hit before it became a movie. But the books weren’t exactly Tolkien, nor did they have the same celebrity status as the Harry Potter series. And even if the books did generate a lot of buzz behind the movie, that just begs another question: Why was the trilogy so popular to begin with?

I have no idea. But I do think there are several themes in the film that strike an obvious resonance with 4T America.

Theme One is the overwhelming imagery of the 1930s. In the film, we see images either of America’s dire want and deprivation—think of dirt-eating Appalachia before the TVA arrived—or we see images of National Socialism triumphant. On the one hand, scenes of semi-starved District 12 are deliberately filmed as a black-and-white evocation of rural America in the middle of the Great Depression. Think of the Time Magazine’s cover picture for October 13, 2008: A stark photo of breadlines in the early 1930s.

On the other hand, the computer-assisted scenes of the Capitol of Panem look like Berlin as it might have been redesigned by Nazi architect Albert Speer. Fortunately, history did not allow him time to complete this task. He did a brilliant job, however, with the Nuremberg rallies, which look like Panem’s Capitol on a smaller scale. And what isn’t directly Nazi-inspired comes from Art Deco or Art Nouveau.

I’m certainly not the first one to point this out: See this article in the Atlantic for example or this very nice blog post. I’ve even seen a youtube video pointing to the striking similarity between the Hunger Games Mockingjay pin and Herman Goering’s Luftwaffe badge. I’ll show a couple of examples here, the most striking of which is the CGI movie image of “Avenue of the Tributes.” The insignia for each district look disturbingly similar to badges handed out by the U.S. National Recovery Administration (NRA). Note btw the task assigned to District One: “Luxury.” Hey, it’s a job and someone’s got to do it.

Why is this important? Because the specter of National Socialism loomed large over America at the depths of the Great Depression. As government aggregated greater authority under FDR, many suggested (both on the populist left and the authoritarian right) that perhaps government should go further. In 1935 Sinclair Lewis wrote the novel It Can’t Happen Here about a fascist take-over of the United States, which was popular enough to be turned into a stage play in 1936. In Lewis’ novel, it was not so much that large numbers of people really wanted a dictator. It was just that no one any longer cared much for the liberal and democratic alternative.

Theme Two is the imagery of a vast gap or distance between the privileged and the subjected. By most calculations, inequality by income in the United States (as measured by the Gini Coefficient) has recently reached the highest levels since the late-1920s and 1930s.

In Hunger Games, the rich are hi-tech and garish. The poor are resilient and plain. In the OWS era, the relevance is clear.

Theme Three is the imagery of a staged yet savage competition among the young for survival. I think Hunger Games can be read as a metaphor for team-working and risk-averse Millennials entering a young-adult economy defined by survivalist Gen-Xers, who are accustomed to competing against each other in a no-holds-barred, winner-takes-all economy without safety nets. Gen-Xers know all about Survival Games. They think nothing of working for businesses governed by the Jack Welch managerial philosophy–which is to fire X percent of your workers every year “pour encourager les autres.” Life is a gigantic Las Vegas casino. ”May the odds be ever in your favor.” How X can you get? If Millennials fear anything, it is this future.

How things have changed. When Boomers were young, William Golding wrote a much-discussed novel about kids killing each other that was quickly turned in a movie. It was called Lord of the Flies. And why were the kids killing each other? Because they wanted to. Because they were accidentally separated from the adults who would otherwise have enforced order and restrained them. Hunger Games turns the story entirely around. In this world, it’s the adults who deliberately stage the teen-on-teen gladiatorial contests. Hunger Games is by no means the first in this genre. During the Gen-X youth era, we’ve seen novels and movies like The Long Walk (Stephen King) and Battle Royale (a ‘90s Japanese classic). And how many Xer “reality shows” have followed this same basic model—with Donald Trump or Simon Cowell or some other middle-aging Boomer yelling “you’re fired” at a young person? The number is beyond counting.

If you’ve seen the film, then you recall the scene where the competition-trained blond jocks chase down and kill an unseen screaming victim. An image came to my mind: Karate Kid I (1984), where the Aryan Cobra Kai kids (dressed in skeleton uniforms) chase down and catch Daniel-san and would have beaten him to a pulp had not Mr. Miyagi intervened. This enormously popular movie persuaded countless millions of young Gen-Xers to practice martial arts, buy a gun, or do just about anything to defend themselves in a friendless world.

But here’s what’s changing. In today’s new 4T era, what felt OK or normal for young Gen-Xers seems outrageous and unacceptable for young Millennials. For a generation of kids so fussed-over and protected—now to be sent out with bowie knives and machetes to eviscerate each other from throat to gut? No, the line has to be drawn somewhere. And this is what adds a whole new edge (so to speak) to the movie.

I originally had a Theme Four in mind, which is the horrifying Oprah-style interviews of young victims about to be sent to their death. Here is a glimpse of modern American decadence that deserves fuller treatment. In the heyday of imperial Rome, gladiators once shouted “morituri te salutamus!” to the clamoring coliseum crowds (we who are about to die salute you). In Hunger Games, the contestants confess personal secrets like they were on Jimmy Fallon’s ever-nice late-night show. The effect is truly chilling.

But the hour is growing late. I’ll come back to this in another post.

EPIC FAIL – PART ONE

“Facts are to the mind what food is to the body.” – Edmund Burke

No wonder one third of Americans are obese. The crap we are shoveling into our bodies is on par with the misinformation, propaganda and lies that are being programmed into our minds by government bureaucrats, corrupt politicians, corporate media gurus, and central banker puppets. Chief Clinton propaganda mouthpiece, James Carville, famously remarked during the 1992 presidential campaign that, “It’s the economy, stupid”. Clinton was able to successfully convince the American voters that George Bush’s handling of the economy caused the 1991 recession. In retrospect, it was revealed the economy had been recovering for months prior to the election. No one could ever accuse the American people of being perceptive, realistic or critical thinking when it comes to economics, math, history or distinguishing between truth or lies. Our government controlled public school system has successfully dumbed down the populace to a level where they enjoy their slavery and prefer conscious ignorance to critical thought.

The next six months leading up to the November elections will surely provide a shining example of the degraded society we’ve become. Both parties and their propaganda machines, SuperPacs, and corporate media sponsors will treat the igadget distracted masses to hundreds of hours of lies, spin, and vitriol, designed to divert the public from the fact that both parties act on behalf of the same masters and have no intention of changing course of the U.S. Titanic to avert the iceberg dead ahead. We will be treated to storylines about race, gun control, the war on women, energy independence, global warming, the war on terror, the imminent threat of Iran and North Korea, Obamacare, Romneycare, and of course the economy, stupid.

There are 240 million voting age Americans. About 130 million will likely vote in the 2012 election based upon recent voter participation results. This means that 110 million Americans don’t give a crap about who runs this country or they’ve come to their senses and realize our votes don’t matter. Between 1840 and 1900 voter participation ranged between 70% and 82% as Americans took their civic duty seriously and believed their vote counted. Since 1913, when the politicians relinquished control of our currency to a private bank controlled by a small group of powerful men, voter participation for President has ranged between 49% and 62%. It hasn’t surpassed 57% since 1968. Now that corporations are people and our candidates are selected by a few rich men, the transformation from a republic to a corporate fascist state is almost complete. During the coming interminable political campaign you will hear about jobs until your ears bleed. I can guarantee that 98% of the rhetoric will be false. Neither party wants the American people to understand the truth about what happened to our economy and jobs over the last 100 years. It has been a bipartisan screw job and ignoring the facts doesn’t change them.

The first fact that can’t be ignored is how many Americans are actually unemployed today. Here is some truth you won’t get from a politician or media talking head:

There are 243 million working age Americans.
There are 142 million employed Americans.
Only 101 million of the employed Americans are working more than 35 hours per week. This means that only 41.6% of all working age Americans have a full-time job.
According to the government drones at the BLS, 88 million Americans have “chosen” to not be in the labor force – the highest level in U.S. history.
The percentage of Americans in the workforce at 63.8% is the lowest since 1980 and down from a peak of 67.1% in 2000. The difference between these two percentages is 8 million Americans.
The BLS reports there are only 12.7 million unemployed Americans in the country, down from 15.3 million in 2009.
The BLS reports the unemployment rate has dropped from 10% in late 2009 to 8.3% today. Over this time frame the working age population grew by 5.7 million, while the number of employed Americans grew by 3.6 million. Only a government drone could interpret this data and report a dramatic decline in the unemployment rate.

Any critical thinking human being would examine the data being reported as fact by our government and regurgitated without question by the corporate mainstream media and conclude it is false, misleading and manipulated. The economy was booming in 2000 and 67.1% of the working age population were in the labor force. Today the economy is in much worse shape. More people NEED to work in order to just make ends meet, but according to the government, 8 million Americans have chosen to not work. Only an Ivy League economist or CNBC bimbo pundit would believe such a blatant distortion of reality. A comparison to prior decades provides all the evidence you need:

In 1980 the working age population was 168 million and the labor force totaled 107 million.
By 1990 the working age population grew by 21 million and the labor force grew by 19 million.
By 2000 the working age population grew by another 23 million and the labor force advanced by 17 million.
Since 2000 the working age population has grown by 30 million, but shockingly the labor force has supposedly grown by only 12 million.

This data is so twisted that there is absolutely no doubt the Federal Government is purposely manipulating the numbers to make the economic situation appear better than the reality. During the Great Depression propaganda and spin had not been perfected. There weren’t multiple definitions of unemployment designed to confuse and mislead the public. The peak level of unemployment in the 1930s was 25%. The current reported level is 8.3%. On a comparable basis to the 1930s, including short-term discouraged workers, those forced to work part-time, and the long-term discouraged workers which were defined out of existence in 1994 by the BLS, the real unemployment rate is 22% today. It feels like a depression for millions of Americans because it is a depression.

The rhetoric from the Obama administration about a jobs recovery is laughable. Full time employment peaked in July 2007 at 122.4 million. Today there are 113.9 million people classified as full-time, with only 101.3 million working more than 35 hours. There are 8.5 million fewer people with full time jobs today than there were in 2007. That fact is even more disheartening considering the working age population has grown by 10.5 million over the same time span. Taking an even longer term view provides the perspective needed to assess our true economic state. Total nonfarm employment hasn’t grown in twelve years, while the working age population has grown by 30 million people.

Obama will tout the fact that we’ve added 3.6 million jobs since the bottom of this recession. What he won’t tout is that hiring of temporary workers surged by 37% and accounted for 25% of all the jobs added since 2009. I’m sure these temporary workers, with no health or retirement benefits, are confident about their future. The facts about jobs and employment are consistent with the 47 million Americans on food stamps (up from 35 million when the recession supposedly ended). It’s a sure sign of recovery when spending on food stamps doubles in the last two years. No depression here, just move along.

Record numbers of Americans being added to the SSDI rolls for depression and other illusory disabilities is surely a positive development pointing to a strong economic recovery. In just the first four months of this year, 539,000 joined the disability rolls and more than 725,000 put in applications. “We see a lot of people applying for disability once their unemployment insurance expires,” said Matthew Rutledge, a research economist at Boston College’s Center for Retirement Research. The number of applications last year was up 24% compared with 2008, Social Security Administration data show. Why participate in the labor market when you can collect a government check for life because you are obese or depressed. These are the people no longer in the labor force. Once they go on SSDI, they rarely go back to work again.

The government reported figure of 12.7 million unemployed Americans is an utter falsehood. There are in excess of 30 million Americans that are either unemployed or working part-time that want full-time jobs. Government propaganda doesn’t change the facts.

“Facts don’t cease to exist because they are ignored.” – Aldous Huxley

Would You Like a Side Order of Facts with That Propaganda?

When you watch the Wall Street scam artists paraded on CNBC declaring the number of people not in the labor force is going up due to Baby Boomers retiring, you should understand they are propagating a falsehood. They are either intellectually dishonest or too lazy to do the most basic of research. They are paid millions to impart false storylines to anyone dumb enough to watch CNBC expecting facts or a smattering of truth. If you want some truth, turn to John Mauldin and John Hussman. CNBC doesn’t invite these outstanding honest analysts on their station when they can roll out a shill like Abbey Joseph Cohen or James Paulson. They wouldn’t want some factual analysis when they can have Becky Quick do one of her frequent handjob interviews with that doddering old status quo fool Warren Buffet.

A critical thinker might wonder how could real disposable income be dropping over the last three months and only have risen by 0.3% in the last year if we’ve had the strong job growth touted by Obama. Could it be the jobs being created are extraordinarily low-paying? There are signs of desperation everywhere you look. The two charts below, from one of John Mauldin’s recent articles, reveal the truth about the Baby Boomers retiring storyline. The first chart shows the employment level for those over the age of 55 since 2007. There were 25.3 million people over the age of 55 working in 2007 and there are 30.1 million working today. People over 55 have seen their total employment level rise by 4.8 million jobs since the beginning of the recession, and over 3 million jobs since the 3^rd quarter of 2009. Total employment is down by 4 million since 2007, while employment among those over 55 is up 19%. John Hussman described the reality about employment in his recent weekly article:

“If you dig into the payroll data, the picture that emerges is breathtaking. Since the recession “ended” in June 2009, total non-farm payrolls in the U.S. have grown by 2.32 million jobs. However, if we look at workers 55 years of age and over, we find that employment in that group has increased by 3.04 million jobs. In contrast, employment among workers under age 55 has actually contracted by nearly one million jobs, regardless of which survey you use. Even over the past year, the vast majority of job creation has been in the 55-and-over group, while employment has been sluggish for all other workers, and has already turned down.”

I wonder how Larry Kudlow will spin this.

Now for the really eye opening facts. While the labor participation rate has been plunging, the Boomer participation rate has been skyrocketing. The participation rate for the over 65 age group is now at an all-time high. Do you think this has anything to do with home values dropping 36% since 2005, gasoline prices doubling since early 2009, food prices surging by 25%, the 1.4% annual return of stocks since 1999, or the .15% senior citizens can earn on their money today versus the 5% they could earn in 2007?

Intellectually dishonest ultra-liberal Ivy League defender of the Federal Reserve – Paul Krugman had this to say about Ben Bernanke’s zero interest rate policy on senior citizens:

“Finally, how is expansionary monetary policy supposed to hurt the 99 percent? Think of all the people living on fixed incomes, we’re told. But who are these people? I know the picture: retirees living on the interest on their bank account and their fixed pension check — and there are no doubt some people fitting that description. But there aren’t many of them.”

It must be comforting living in an ivory tower or penthouse suite and looking down upon the ignorant masses while caressing your Nobel Prize. The millions of senior citizens with $100,000 of savings could earn $5,000 of interest income in 2007 to supplement their $18,000 of Social Security income. Today, they can earn $150 while the Wall Street banks receive the benefits of ZIRP by borrowing for free from the Federal Reserve and earning billions risk free. Paulie doesn’t think the $4,850 reduction in income and the 15% increase in inflation since 2007 had a negative impact on senior citizens. They must be pouring into the work force because they are just bored, after working for the last 45 years. John Hussman has a slightly different viewpoint, based upon facts rather than a false disproven ideology:

“Beginning first with Alan Greenspan, and then with Ben Bernanke, the Fed has increasingly pursued policies of suppressing interest rates, even driving real interest rates to negative levels after inflation. Combine this with the bursting of two Fed-enabled (if not Fed-induced) bubbles – one in stocks and one in housing, and the over-55 cohort has suffered an assault on its financial security: a difficult trifecta that includes the loss of interest income, the loss of portfolio value, and the loss of home equity. All of these have combined to provoke a delay in retirement plans and a need for these individuals to re-enter the labor force.

In short, what we’ve observed in the employment figures is not recovery, but desperation. Having starved savers of interest income, and having repeatedly subjected investors to Fed-induced financial bubbles that create volatility without durable returns, the Fed has successfully provoked job growth of the obligatory, low-wage variety. Over the past year, the majority of this growth has been in the 55-and-over cohort, while growth has turned down among other workers. Meanwhile, broad labor force participation continues to fall as discouraged workers leave the labor force entirely, which is the primary reason the unemployment rate has declined. All of this reflects not health, but despair, and helps to explain why real disposable income has grown by only 0.3% over the past year.”

Do you believe Krugman or Hussman? The key takeaway from the data is the desperation exhibited by average Americans, while the political governing elite and Wall Street pigs continue to gorge themselves at the trough of free money provided by the Federal Reserve, while paying themselves obscene bonuses for a job well done buying the corrupt Washington politicians.

Over the next six months we will hear unceasing rhetoric from Obama and Romney about how they are going to create jobs. Neither of these government apparatchiks have a clue about jobs or desire to change the course that was set one hundred years ago with the creation of the Federal Reserve. Obama never worked at a real job in his entire life, while Romney has spent his life firing people and spinning off heavily indebted companies to unsuspecting investors. The current deteriorating jobs picture has been decades in the making and a truly bipartisan effort. The rhetoric about America being an engine of growth and the world leader in innovation and entrepreneurship is laughable when examined with a critical eye. We are an aging empire living in the past as the facts portray an entirely different reality. Our fastest growing industries include:

Solar panel manufacturing (subsidized by your tax dollars)
For-profit universities (diploma mills subsidized by your tax dollars)
Pilates and yoga studios
Self-tanning product manufacturing
Social network game development
Hot sauce production

The “surge” in jobs in the last three months is being driven by these industries:

Food services and drinking places
Administrative and support services
Ambulatory health care services
Credit intermediation
Hospitals

Is this the picture of a world leading jobs machine or a delusional, paper pushing, self-involved, obese, sickly, overly indebted crumbling empire? The job openings in industries that actually produce something are barely identifiable on the chart below. Maybe the University of Phoenix can successfully retrain construction and manufacturing workers to be waiters, waitresses, and Wal-Mart greeters if the Federal government can funnel more of our tax dollars into student loans.

If you thought low wage work was only for Chinese, Indians, and Vietnamese, you haven’t been paying attention. The United States is a world leader. We are by far the world leader among developed countries in percentage of low wage workers at 24.8%. I find it hysterical that the dysfunctional insolvent countries of Greece, Spain, Portugal, and Italy have a much smaller percentage of low wage workers than the great American empire. We have 142 million employed Americans and 35 million are slaving away in low paying thankless jobs. This explains why the half the workers in the country make less than $25,000 per year.

The top three employment occupations in the country are:

Office and administrative support work
Sales & Related
Food preparation and serving related

There are high paying good jobs in America, but there aren’t many and on-line college graduates from the University of Phoenix aren’t going to get them. The highest paying jobs today require a high level of specialization and education, especially in the healthcare and technology industries. This disqualifies the vast majority of government run public school graduates. High paying manufacturing jobs which were the backbone of the country during the 1950s and 1960s are gone forever. The reasons for this transformation are multifaceted and will be addressed in Part Two of this article. It didn’t happen by accident and there are culprits to blame. The conversion of our country from making high quality things other countries needed to a debt driven service economy of paper pushers, hash slingers, and retail “specialists” has slowly but surely destroyed the middle class. The masses are distracted by the latest technological marvel that allows them to waste another two hours per day posting how they feel about the latest episode of America’s Got Something or America’s Top Whatever. We have become a country that glories in our materialism and shallow culture while acting like a thug around the world with our unparalleled military machine.

This result is not an accident. It was set in motion by the actions of a handful of rapacious, wealthy powerful men that have been calling the shots in this country for the last hundred years. It wasn’t a planned conspiracy but the logical result of man-made inflation, a fiat currency not backed by gold, the craving of rich men to become richer, a willfully ignorant populace, and a slow devolution of our society into a corporate fascist state. We praise and honor psychopathic criminals while scorning and ridiculing the middle class workers that built this country. The American dream has become a nightmare for the millions of unemployed and underemployed. The acceleration of debt accumulation and money printing guarantees this rotting carcass of a country will go belly up in the foreseeable future.

“Thus did a handful of rapacious citizens come to control all that was worth controlling in America. Thus was the savage and stupid and entirely inappropriate and unnecessary and humorless American class system created. Honest, industrious, peaceful citizens were classed as bloodsuckers, if they asked to be paid a living wage. And they saw that praise was reserved henceforth for those who devised means of getting paid enormously for committing crimes against which no laws had been passed. Thus the American dream turned belly up, turned green, bobbed to the scummy surface of cupidity unlimited, filled with gas, went bang in the noonday sun.” – Kurt Vonnegut

In Part Two of this article I will examine how we got to this point and what is likely to happen next.

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THE GREAT SSDI SCAM

Obama has a lock on 5.4 million more votes in November. Why am I such a sucker? Why don’t I get myself laid off and collect two years of unemployment? Then when the unemployment ends I just use my diabetes diagnosis to get on SSDI for the rest of my life. It sounds like a can’t miss plan, and it’s only costing the American taxpayer $120 billion per year. It’s nice work if you can’t get it.

5.4 Million Join Disability Rolls Under Obama

By JOHN MERLINE, INVESTOR’S BUSINESS DAILY Posted 04/20/2012 08:02 AM ET

A record 5.4 million workers and their dependents have signed up to collect federal disability checks since President Obama took office, according to the latest official government data, as discouraged workers increasingly give up looking for jobs and take advantage of the federal program.

This is straining already-stretched government finances while posing a long-term economic threat by creating an ever-growing pool of permanently dependent working-age Americans.

Since the recession ended in June 2009, the number of new enrollees to Social Security’s disability insurance program is twice the job growth figure. (See nearby chart.) In just the first four months of this year, 539,000 joined the disability rolls and more than 725,000 put in applications.

As a result, by April there were a total of 10.8 million people on disability, according to Social Security Administration data released this week. Even after accounting for all those who’ve left the program — about 700,000 drop out each year, mainly because they hit retirement age or died — that’s up 53% from a decade ago.

To be sure, disability rolls have grown steadily as a share of the workforce since the 1990s (see nearby chart).

The main causes of this broader trend, according to a study by economists David Autor and Mark Duggan, are the loosening of eligibility rules by Congress in 1984, the rise in disability benefits relative to wages, and the fact that more women have entered the workforce, making them eligible for disability.

Their research found that the aging of the population has contributed only modestly to the program’s growth.

But the big factor in the recent surge is the slow pace of the economic recovery after the severe recession. That has kept the unemployment rate above 8% and created an enormous pool of long-term unemployed and discouraged workers. More than 5 million people have been jobless for 27 weeks or more, nearly twice the previous high set in 1983, according to the Bureau of Labor Statistics.

“We see a lot of people applying for disability once their unemployment insurance expires,” said Matthew Rutledge, a research economist at Boston College’s Center for Retirement Research.

The number of applications last year was up 24% compared with 2008, Social Security Administration data show.

As the Congressional Budget Office explained : “When opportunities for employment are plentiful, some people who could quality for (disability insurance) benefits find working more attractive … when employment opportunities are scarce, some of these people participate in the DI program instead.”

The explosive growth in disability enrollment also “helps explain some of the drop in the labor force participation rate,” noted economist Ed Yardeni on his blog.

In fact, the participation rate — the share of working-age people who have or are looking for a job — has fallen to 63.8% compared with 65.7% at the start of Obama’s term.

Ironically, this drives down the unemployment rate, which simply measures how many people are looking for work but haven’t been able to find it. When people quit looking or sign up for disability benefits, they no longer count as unemployed.

The problem is that few people who get on disability will ever participate in the labor force again. In fact, the vast bulk of those who exit Social Security Disability Insurance do so either because they hit retirement age or died.

As a result, the swelling ranks of the disabled can become a drag on the economy.

A White House report late last year noted that because “workers on SSDI rarely return to the labor force,” this can result “in a loss to society of the economic contribution those workers could have made.”

What’s more, the explosive growth in enrollment is not only increasing the financial strain on the Social Security Disability Insurance trust fund — which is scheduled to go bankrupt in 2018 — it’s boosting costs for Medicare as well, since SSDI enrollees can qualify for Medicare after two years. SSDI now accounts for more than 16% of Social Security’s budget and more than 15% of Medicare’s.

Reform ideas that would cut the ranks of those on disability have been bandied about for years. They include tightening eligibility rules, giving workers more options other than full-time disability and offering tax incentives for disabled workers to stay in the workforce.

The reforms so far have spurred little action. But with the program’s bankruptcy looming just a few years off, and with the economy showing no signs of producing a surge in jobs, that indifference to reform may soon have to change.

KRUGMAN – THE STAND UP COMIC

This elitist douchebag Ivy League asshole actually declares that there is no inflation and that Bernanke’s zero interest rate policy does not benefit the Wall Street banks while destroying the finances of senior citizens across the land. This is proof that ultra-liberals like Krugman and neo-con scum like Romney believe exactly the same thing. There are no differences among the ruling elite. They are circling the wagons as a small faction of critical thinking Americans reveal their cabal.

Krugman Rebutts (sic) Spitznagel, Says Bankers Are “The True Victims Of QE”, Princeton-Grade Hilarity Ensues

Submitted by Tyler Durden on 04/21/2012 15:54 -0400

At first we were going to comment on this “response” by the high priest of Keynesian shamanic tautology to Mark Spitznagel’s latest WSJ opinion piece, but then we just started laughing, and kept on laughing, and kept on laughing…

As a reminder, on Thursday Universa’s Mark Spitznagel, best known recently for explaining in very vivid ways just how central planning has sown the seeds of its own destruction, wrote the following in the WSJ:

How the Fed Favors The 1%

The Fed doesn’t expand the money supply by dropping cash from helicopters. It does so through capital transfers to the largest banks.

A major issue in this year’s presidential campaign is the growing disparity between rich and poor, the 1% versus the 99%. While the president’s solutions differ from those of his likely Republican opponent, they both ignore a principal source of this growing disparity.

The source is not runaway entrepreneurial capitalism, which rewards those who best serve the consumer in product and price (Would we really want it any other way?) There is another force that has turned a natural divide into a chasm: the Federal Reserve. The relentless expansion of credit by the Fed creates artificial disparities based on political privilege and economic power.

David Hume, the 18th-century Scottish philosopher, pointed out that when money is inserted into the economy (from a government printing press or, as in Hume’s time, the importation of gold and silver), it is not distributed evenly but “confined to the coffers of a few persons, who immediately seek to employ it to advantage.”

In the 20th century, the economists of the Austrian school built upon this fact as their central monetary tenet. Ludwig von Mises and his students demonstrated how an increase in money supply is beneficial to those who get it first and is detrimental to those who get it last. Monetary inflation is a process, not a static effect. To think of it only in terms of aggregate price levels (which is all Fed Chairman Ben Bernanke seems capable of) is to ignore this pernicious process and the imbalance and economic dislocation that it creates.

As Mises protégé Murray Rothbard explained, monetary inflation is akin to counterfeiting, which necessitates that some benefit and others don’t. After all, if everyone counterfeited in proportion to their wealth, there would be no real economic benefit to anyone. Similarly, the expansion of credit is uneven in the economy, which results in wealth redistribution. To borrow a visual from another Mises student, Friedrich von Hayek, the Fed’s money creation does not flow evenly like water into a tank, but rather oozes like honey into a saucer, dolloping one area first and only then very slowly dribbling to the rest.

The Fed doesn’t expand the money supply by uniformly dropping cash from helicopters over the hapless masses. Rather, it directs capital transfers to the largest banks (whether by overpaying them for their financial assets or by lending to them on the cheap), minimizes their borrowing costs, and lowers their reserve requirements. All of these actions result in immediate handouts to the financial elite first, with the hope that they will subsequently unleash this fresh capital onto the unsuspecting markets, raising demand and prices wherever they do.

The Fed, having gone on an unprecedented credit expansion spree, has benefited the recipients who were first in line at the trough: banks (imagine borrowing for free and then buying up assets that you know the Fed is aggressively buying with you) and those favored entities and individuals deemed most creditworthy. Flush with capital, these recipients have proceeded to bid up the prices of assets and resources, while everyone else has watched their purchasing power decline.

At some point, of course, the honey flow stops—but not before much malinvestment. Such malinvestment is precisely what we saw in the historic 1990s equity and subsequent real-estate bubbles (and what we’re likely seeing again today in overheated credit and equity markets), culminating in painful liquidation.

The Fed is transferring immense wealth from the middle class to the most affluent, from the least privileged to the most privileged. This coercive redistribution has been a far more egregious source of disparity than the president’s presumption of tax unfairness (if there is anything unfair about approximately half of a population paying zero income taxes) or deregulation.

Pitting economic classes against each other is a divisive tactic that benefits no one. Yet if there is any upside, it is perhaps a closer examination of the true causes of the problem. Before we start down the path of arguing about the merits of redistributing wealth to benefit the many, why not first stop redistributing it to the most privileged?

And here is how Krugman, who among other pearls of insight references … Joe Wisenthal, responds. This is seriously Princeton-grade humor. We leave it up to readers to enjoy it for themselves unobstructed by our cynical interjections. Fom the NYT (highlights ours)

Plutocrats and Printing Presses

These past few years have been lean times in many respects — but they’ve been boom years for agonizingly dumb, pound-your-head-on-the-table economic fallacies. The latest fad — illustrated by this piece in today’s WSJ — is that expansionary monetary policy is a giveaway to banks and plutocrats generally. Indeed, that WSJ screed actually claims that the whole 1 versus 99 thing should really be about reining in or maybe abolishing the Fed. And unfortunately, some good people, like Daron Agemoglu and Simon Johnson, have bought into at least some version of this story.

What’s wrong with the idea that running the printing presses is a giveaway to plutocrats? Let me count the ways.

First, as Joe Wiesenthal and Mike Konczal both point out, the actual politics is utterly the reverse of what’s being claimed. Quantitative easing isn’t being imposed on an unwitting populace by financiers and rentiers; it’s being undertaken, to the extent that it is, over howls of protest from the financial industry. I mean, where are the editorials in the WSJ demanding that the Fed raise its inflation target?

Beyond that, let’s talk about the economics.

The naive (or deliberately misleading) version of Fed policy is the claim that Ben Bernanke is “giving money” to the banks. What it actually does, of course, is buy stuff, usually short-term government debt but nowadays sometimes other stuff. It’s not a gift.

To claim that it’s effectively a gift you have to claim that the prices the Fed is paying are artificially high, or equivalently that interest rates are being pushed artificially low. And you do in fact see assertions to that effect all the time. But if you think about it for even a minute, that claim is truly bizarre.

I mean, what is the un-artificial, or if you prefer, “natural” rate of interest? As it turns out, there is actually a standard definition of the natural rate of interest, coming from Wicksell, and it’s basically defined on a PPE basis (that’s for proof of the pudding is in the eating). Roughly, the natural rate of interest is the rate that would lead to stable inflation at more or less full employment.

And we have low inflation with high unemployment, strongly suggesting that the natural rate of interest is below current levels, and that the key problem is the zero lower bound which keeps us from getting there. Under these circumstances, expansionary Fed policy isn’t some kind of giveway to the banks, it’s just an effort to give the economy what it needs.

Furthermore, Fed efforts to do this probably tend on average to hurt, not help, bankers. Banks are largely in the business of borrowing short and lending long; anything that compresses the spread between short rates and long rates is likely to be bad for their profits. And the things the Fed is trying to do are in fact largely about compressing that spread, either by persuading investors that it will keep short rates at zero for a longer time or by going out and buying long-term assets. These are actions you would expect to make bankers angry, not happy — and that’s what has actually happened.

Finally, how is expansionary monetary policy supposed to hurt the 99 percent? Think of all the people living on fixed incomes, we’re told. But who are these people? I know the picture: retirees living on the interest on their bank account and their fixed pension check — and there are no doubt some people fitting that description. But there aren’t many of them.

The typical retired American these days relies largely on Social Security — which is indexed against inflation. He or she may get some interest income from bank deposits, but not much: ordinary Americans have fewer financial assets than the elite can easily imagine. And as for pensions: yes, some people have defined-benefit pension plans that aren’t indexed for inflation. But that’s a dwindling minority — and the effect of, say, 1 or 2 percent higher inflation isn’t going to be enormous even for this minority.

No, the real victims of expansionary monetary policies are the very people who the current mythology says are pushing these policies. And that, I guess, explains why we’re hearing the opposite. It’s George Orwell’s world, and we’re just living in it.

It… just… does…. not…. compute…. is this the type of thinking of needs to exhibit to get a Nobel?

Does Krugman seriously still not understand that NIM as a business model for banks died about the time banks stopped making loans and relying exclusively on prop, pardon flow, trading and using infinite rehypothecation leverage to juice their returns into the stratosphere, using the offbalance accounting permitted by shadow banking (really read this Paul – you may finally understand how finance DOES work these days), while doing all their best to limit origination and mortgage lending exposure, thank you Bank of Countrywide Lynch (i.e. the opposite of the NIM business model)?

Well at least Krugman is right about thing: there sure aren’t many people living on fixed income anymore. Most of them have already died. And he is most certainly not referring to the $5 billion on average in capital that is weekly rotated out of stocks and into bonds.

Whatever anyone does, do not point out our previous post that it was none other than the Fed warning that monetization and excess reserves could lead to hyperinflation. Or, that none other than JPMorgan pointed out a month ago that his beloved central planning has destroyed Okun’s Law which makes all Krugman Op-Eds in the past 4 years about the same intellectual quality as one-ply Cottonelle.

We may get a scene straight out of Scanners. And we don’t want that – we just want more Krugman humor and more LSAP, aka Large Scale Asshat Publications. In fact, it is time for the Fed to stop printing money and just print Krugman Op-Eds. Following the laughter-induced genocide, unemployment will indeed finally drop for once naturally, instead of as a result of millions of people dropping out of the labor force on a monthly basis.

RON PAUL RALLY IN PHILLY

The Quinn clan will be headed down to Independence Hall on Sunday to see the only candidate worthy of speaking on this hallowed ground. We’ll be going early because there is an End the Fed march at 11:00 am. The Phila Federal Reserve is a block from Independence Hall. The crowd will march to the Fed and as a group symbolically turn our backs on the building. The Pennsylvania primary is on Tuesday. Avalon has volunteered to hand out lists of Ron Paul delegates to voters as they approach the polls. If you’re from the Philly area, come to the rally on Sunday.

Ron Paul to Hold Campaign Rally on Independence Mall in Philadelphia

Congressman and top-tier presidential candidate to share platform of constitutionally-limited government at birthplace of our modern Republic

LAKE JACKSON, Texas – 2012 Republican Presidential candidate Ron Paul will hold a major campaign rally on Independence Mall in Philadelphia, sharing his platform of constitutionally-limited government at the birthplace of the modern Republic.

The event, which is free and open to the public, will be held on Sunday, April 22^nd beginning at 1:00 p.m. and Dr. Paul is scheduled to speak at 2:30 p.m. At the event, the 12-term Congressman from Texas will discuss his path-breaking ‘Plan to Restore America’ and his agenda as President. Former CIA officer and Bin Laden Unit leader Michael Scheuer, who last December endorsed Ron Paul for the presidency, also will address the crowd.

“Ron Paul’s rally on Independence Mall promises to be an exciting opportunity to hear him discuss his vision for constitutionally-limited government, including the urgent need to restore our economic and civil liberties. The location is highly symbolic, as Philadelphia is the city where our founders conceptualized and established a modest federal government of the kind Dr. Paul has consistently promoted for more than 30 years,” said Ron Paul 2012 National Campaign Chairman Jesse Benton.

Ron Paul’s Philadelphia rally will be followed by an open press avail. Members of the local and major print, broadcast, and online media with particular needs such as the desire to arrange a candidate interview should contact Assistant Press Secretary Arick Stall by emailing him at [email protected]. Please, no exceptions.

Later that night, also in the city often termed the Cradle of Liberty, Ron Paul will host a private fundraising dinner that is closed to all media.

Event details are as follows. Time is Eastern.

Sunday, April 22, 2012

2:30 p.m.*
Ron Paul Major Campaign Rally
Lawn at the Independence Mall Visitors Center
1 N Independence Mall West (b/t Market and Arch Streets)
Philadelphia, PA 19106