Tag: debt ceiling

FISCAL FARCE, FAILURE, FANTASY & FORNICATION

I’ve put off writing an article about what is likely to happen in 2013 so I could peruse the thousands of other articles by reputable bloggers, paid pundits, Wall Street shills and captured charlatans to gather their wisdom. It’s essential that I make predictions for 2013 so I can write another article in December rationalizing why 90% of my predictions failed to materialize. Reading all of these 2013 prediction articles made things much clearer for me. I now know for sure:

  • The stock market will reach an all-time high.
  • The stock market will fall 42%.
  • The economy will strengthen as the year progresses.
  • The economy will descend into a depression.
  • The USD will strengthen.
  • The USD will collapse.
  • Gas prices will set new highs.
  • Gas prices will fall below 2012 levels.
  • Gold will rise to $10,000 per ounce.
  • Gold will drop below $1,000 per ounce.
  • We will experience hyperinflation.
  • We will experience horrific deflation.
  • Obama will compromise with the Republicans and put the country on a path to prosperity.
  • Obama will create a debt ceiling crisis and assume dictatorial powers as a result.
  • Snooki will be a better mother than Kim Kardashian.
  • Honey Boo Boo will beat I Didn’t Know I Was Pregnant in the Neilson ratings.

The majority of 2013 prediction articles are written to support the agenda of the writer. Many are trying to sell newsletter subscriptions or investment services. Their predictions will match the theme of their newsletter. Others are Wall Street paid shills who will predict what they are paid to predict by their owners. Then there are the political hacks who tow the party line with their predictions. But no one can top the predictive powers of the CBO. They just put out their ten year updated forecast reflecting the fabulous fiscal cliff deal that saved the country. According to the CBO, the “compromise” to reduce our deficits will add a mere $4 trillion to the national debt over the next ten years. I’m sure this will prove to be accurate. Just take a look at their 2002 projection, after passage of the Bush tax cuts:

The CBO predicted the FY2012 surplus would be $641 billion, the national debt would total $3.5 trillion, the debt held by the public would total $1.273 trillion, and GDP would total $17.2 trillion. They missed by that much.

The actual FY12 results were:

  • The true deficit was $1.37 trillion (amount national debt increased – not the phony deficit number reported by the mainstream media).
  • The national debt was $16.1 trillion.
  • The debt held by the public was $11.3 trillion.
  • GDP was $15.8 trillion.

Based on these results, I won’t be asking the CBO for help with my Super Bowl bet. Making ten year predictions is beyond worthless, but public policy in Washington DC is based on these useless CBO projections. The entire fiscal cliff kabuki theater fictitious crisis reveals the politicians and mainstream media pundits to be liars, fools and frauds. The tax the rich to cut the deficit storyline was sold to the public and won the day. Of course, the highly accurate CBO immediately revealed that the Orwellian named American Taxpayer Relief Act of 2012 adds $4 trillion to the national debt over the next ten years. Based on the accuracy of their previous predictions, it’s a guarantee the national debt goes up by $8 trillion, as the rich take advantage of the thousands of loopholes in the IRS code they paid for to avoid paying the taxes expected by the CBO.

Hypocrisy abounds on both sides of the aisle in Washington DC and on the media company propaganda channels. As the national debt soared from $10.6 trillion on the day Obama took office to $16.4 trillion today, I heard shrieking liberal talking heads on MSNBC, CNN, and the rest of the liberal media blame the debt on the Bush tax cuts and the Bush wars. If the Bush tax cuts were so horrific, why did Obama and his minions just make 98% of these tax cuts permanent? Liberals held protest marches across the country against Bush’s wars and burned him in effigy. Obama’s defense budgets have been larger than Bush’s and he doubled down on our miserable failure in Afghanistan. You don’t hear a peep from the liberals about the warmongering Barack Obama who has kill lists and unleashes predator drones, killing women and children across the globe. Liberals pretend to be concerned about the welfare of the citizens, but continue to support a President that uses executive orders to imprison citizens indefinitely without charges, has expanded surveillance on citizens, has kept Guantanamo open, signs the continuation of the Patriot Act, and proposes overturning the Second Amendment by executive order. Liberals shriek about the evils of an unregulated Wall Street, while remaining silent as Obama hasn’t prosecuted a single banker for the greatest financial fraud in world history. You don’t hear a peep about Jon Corzine, who stole $1.2 billion from the accounts of farmers and ranchers. Liberals talk about regulation and then stand idly by while Wall Street lobbyists wrote the Dodd Frank law and insurance and drug company lobbyists wrote the Obamacare law. Liberal hypocrisy knows no bounds and is only matched by Neo-Con hypocrisy.

The Neo-Con controlled Republican Party is a pathetic joke. They have the guts to declare themselves the party of fiscal responsibility, after Bush’s eight year reign of error. He and his fiscally responsible party were handed a budget in surplus and managed to add $4.9 trillion to the national debt by waging undeclared wars, encouraging Wall Street to create the biggest fraudulent financial bubble in history, creating a new $16 trillion unfunded entitlement (Medicare Part D), cutting taxes without paying for them, and creating a massive new government agency (DHS) to take away our liberties and freedom. Federal government spending grew from $1.9 trillion to $3.0 trillion under Bush and the Republicans. Does that sound fiscally responsible?

Does anyone believe the Republican Party is serious about cutting anything? Tough guy Republicans like Big Chris Christie preach fiscal responsibility when going to war with teachers’ unions, but he squeals  like a stuck pig when a $60 billion pork filled, unpaid for, Sandy Relief bill is held up in Congress. The courageous fiscally responsible Congress critters passed the entire pork filled, unfunded, bloated, vote buying joke. It included $28 billion to mitigate future disasters, $3 billion to repair or replace Federal assets, and $6 billion for transportation projects completely unrelated to Sandy damage.   The hypocrisy of politicians who proclaim the $50 billion of 2013 fiscal cliff tax revenue as deficit cutting, and then immediately piss it away by paying people to rebuild their houses yards from the Atlantic Ocean while funding billions of non-disaster related projects is disgusting to behold. There is nothing like compromise to add another $60 billion to the national debt.

Our entire economic and political system is a farce. The American people are being played by the powerful interests that provide them with an illusion of choice. Both parties serve the interests of their masters and the fiscal cliff show and debt ceiling show are a form of reality TV to keep the masses alarmed, fearful, and believing there is actually a difference between the policies of the ruling class. The charade has played out in its full glory in the last few weeks with Obama convincing the masses he had stuck it to the rich, while in reality the working middle class got it good and hard when they got their January paychecks. This chart details the tax changes that went into effect on January 1.

taxbill

The funniest part this fiscal fiasco farce is watching the reaction of the sheep who believed Obama and the mainstream media storyline. Obama was able to raise the published top rate on people making over $400,000. The newly defined “rich” laughed heartily as they know only fools pay anywhere near the top rate. The rich just call their tax advisor and instruct them to use one of the thousands of tax loopholes in the 75,000 page IRS tax code to “legally” avoid the new Obama rates. Meanwhile, both parties and their mainstream media mouthpieces downplayed the 2% payroll tax increase on every working American. This tax increase has been a complete surprise to the reality TV zombies and Facebook aficionados. Even college educated professionals in my office had no idea their next monthly paycheck was going to be $150 to $200 lighter. This will wipe out most, or all, of the annual raise they received. The tax will fall heavily on the 75% of households that make less than the $113,700 Social Security cutoff. For a struggling family of four earning the median income of $50,000, the $1,000 less in their paychecks will mean less food, putting off trips to the doctor, driving on bald tires, or not taking the family on a vacation to the Jersey shore. The $2,274 increase in taxes (.57%) for the Wall Street banker making $400,000 probably won’t put too much of a crimp in his Hamptons lifestyle.

The joke is on the American people as the rich will ante up maybe $50 billion of taxes in 2013, while the working middle class will be skewered for $125 billion. How’s that “Tax the Rich” slogan working out for you?

Only in the Orwellian capital of Washington DC would a bill that was supposed to provide tax relief to the middle class and spending cuts to reduce the deficit, actually increase the tax burden of a median household by $1,000 and perpetuate the pork spending payoffs to campaign contributors and friends of the slimy politicians that slither through the halls of Congress. The list of pork and bribes should be nauseating to hard working Americans across the country:

$30 billion extension of the 99 weeks of unemployment benefits, even though we are supposedly in the 3rd year of economic recovery. Continuing to pay people to not work for two years will surely boost employment.

$14.3 billion for a two-year extension of the corporate research credit benefiting large technology companies like IBM and Hewlett Packard.

$12.2 billion one-year extension of the production tax credit for wind power.

$11.2 billion two- year extension of the active financing exception, which lets GE, Caterpillar Inc. (CAT) and Citigroup Inc. (C), among others, defer taxes on financing income they earn outside the U.S.

$1.9 billion extension of the Work Opportunity Tax Credit for hiring workers from disadvantaged groups, benefitting mega-restaurant chains like McDonalds.

$1.8 billion extension of the New Markets Tax Credit for investments in low- income areas, benefitting JP Morgan and other Wall Street shyster banks.

$650 million tax credit for manufacturing energy-efficient appliances, benefitting mega-corps like Whirlpool.

$430 million for Hollywood through “special expensing rules” to encourage TV and film production in the United States. Producers can expense up to $15 million of costs for their projects. NBC thanks you.

$331 million for railroads by allowing short-line and regional operators to claim a tax credit up to 50% of the cost to maintain tracks that they own or lease.

$248 million in special expensing rules for films and television programs.

$222 million for Puerto Rico and the Virgin Islands through returned excise taxes collected by the federal government on rum produced in the islands and imported to the mainland.

$78 million for NASCAR by extending a “7-year cost recovery period for certain motorsports racing track facilities.”

$59 million for algae growers through tax credits to encourage production of “cellulosic biofuel” at up to $1.01 per gallon.

$4 million for electric motorcycle makers by expanding an existing green-energy tax credit for buyers of plug-in vehicles to include electric motorbikes.

So when you see the cut in your take home pay, just comfort yourself knowing that JP Morgan, Citigroup, GE and hundreds of mega-corporations were able to retain their tax breaks. As they have done for decades, Congress and the President agreed to address spending cuts at a future date. Of course, a government spending cut isn’t actually a cut. It’s a lower increase than their previous projection. Nothing is ever cut in Washington DC. The austerity storyline is a lie. Not a dime has been cut from the Federal budget. Intellectually dishonest ideologues try to peddle the wind down of the Obama $800 billion porkulus program as a cut in Federal spending. They sold this Keynesian “shovel ready” crap to a gullible public as stimulus to jumpstart the economy. Federal spending was $3.0 trillion before the Obama stimulus. After the two year stimulus was pissed away without helping the economy one iota, the baseline should have been back in the $3.2 trillion range. Instead, FY13 Federal spending will be $3.8 trillion. This hasn’t kept liberal ideologues like Krugman and his minions in the mainstream media from blaming crazy Tea Party Republicans for inflicting horrendous austerity measures on the poor and disadvantaged.

The chart above reveals a few truths:

  • The country has been blessed with two of the worst presidents in U.S. history over the last twelve years.
  • When Federal spending as a percentage of GDP is beyond two standard deviations over the normal range during the last sixty years, your problem is not lack of tax revenue.
  • Obama and the current Congress are spending at a level of 24% of GDP versus the 18% of GDP when Clinton left office. This amounts to a nose bleed altitude $950 billion higher than the level Clinton was spending in his final year in office.

The Op-eds in liberal rags across the land decry the lack of civility in Washington DC and plead for politicians on both sides of the aisle to come together and compromise for the good of the country. This line of bullshit would be laughable if it wasn’t so wretched in its falsity. Compromise is what has left this country with a $16.4 trillion national debt, $200 trillion of unfunded liabilities, and $1 trillion deficits as far as the eye can see. Democrats have compromised and let the Republicans create a warfare state. Republicans have compromised and let Democrats create a welfare state. The two headed monster living in the swamps of Washington DC just voted to increase taxes on all Americans. They voted to hand criminal Wall Street banks $700 billion. They voted to pass the Patriot Act. They voted to pass the NDAA. They’ve allowed the President to wage undeclared wars in Iraq, Afghanistan, Libya, and now Iran. They voted for a $663 billion Defense bill that includes tens of billions the Secretary of Defense doesn’t even want. They will vote to raise the debt ceiling in the next two months. The last thing this country needs is more compromise. We can’t afford any more compromise. The chart above proves what can happen when gridlock ensues, spending restrictions are enforced, and confrontation displaces compromise. After the 1994 Republican takeover of Congress, gridlock ensued for the next six years. PAYGO restrictions in the Omnibus Budget Reconciliation Act of 1990 didn’t allow unfettered spending increases. The result was Federal spending falling from 22% of GDP to 18% of GDP and a budget surplus. The Pay-Go restrictions expired in 2002 and Democrats and Republicans have compromised to the tune of a $10.2 trillion increase in the national debt in ten years. The hypocrisy of pandering deceitful politicians is boundless and shows utter contempt for the intelligence of the American populace.

“Raising the debt ceiling does not authorize more spending. It simply allows the country to pay for spending that Congress has already committed to. If congressional Republicans refuse to pay America’s bills on time, Social Security checks, and veterans benefits will be delayed. We might not be able to pay our troops, or honor our contracts with small business owners. Food inspectors, air traffic controllers, specialist who track down loose nuclear materials wouldn’t get their paychecks. Investors around the world will ask if the United States of America is in fact a safe bet. Markets could go haywire, interest rates would spike for anybody who borrows money – Every homeowner with a mortgage, every student with a college loan, every small business owner who wants to grow and hire. We are not a deadbeat nation.

It would be a self-inflicted wound on the economy. It would slow down our growth, might tip us into recession. And ironically it would probably increase our deficit. So to even entertain the idea of this happening, of the United States of America not paying its bills, is irresponsible. It’s absurd. Republicans in Congress have two choices here. They can act responsibly, and pay America’s bills, or they can act irresponsibly and put America through another economic crisis. But they will not collect a ransom in exchange for not crashing the American economy.” – President Barack Obama – January 14, 2013

“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. The Senate continues to reject a return to the common sense Pay-go rules that used to apply. Previously, Pay-go rules applied both to increases in mandatory spending and to tax cuts.

The Senate had to abide by the common sense budgeting principle of balancing expenses and revenues. But we must remember that the more we depend on foreign nations to lend us money, the more our economic security is tied to the whims of foreign leaders whose interests might not be aligned with ours. Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘‘the buck stops here.’’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.” – Senator Barack Obama – March 16, 2006

I could have shown quotes from George W. Bush during the 2000 Presidential campaign talking about a non-interventionist foreign policy and no need for the U.S. to get involved in nation building and then proceeding to pre-emptively attack sovereign countries while wasting trillions and impoverishing unborn generations trying to create “democracy” in the Middle East at the point of a gun as a cover to protect “our” oil. The point is that we are being given the illusion of choice. Everyone knows the debt ceiling will be raised after another episode of Washington DC Kabuki Theater, presented by the corporate mainstream media in breathtaking detail, because the politicians are beholden to their owners and those owners want more of our money. That is why spending will never be willingly cut by the spineless puppet congressmen, as their strings are pulled by the corporate puppet masters and they dance to the tune of the banking oligarchs that own this country.

After witnessing the fighting of undeclared never ending wars, passage of freedom destroying legislation like the Patriot Act & NDAA, approval of pork barrel spending to the tune of hundreds of billions, rule by Executive Order, using ZIRP to extract hundreds of billions from senior citizen savers and give it to criminal Wall Street banks, forcing the American people at gunpoint to replenish the Wall Street banks with $700 billion after they had committed the greatest financial fraud in history, and a continuing trampling of the U.S. Constitution, the American people continue to remain willfully ignorant of the truth. The American Dream is dead. We’ve allowed a rich, privileged, elite few to achieve hegemony over our economic and political system with their control of the media and manipulation of our financial markets. They will collapse the country because they will never be satisfied with the amount of wealth and power they’ve accumulated. Their voracious greed will be their downfall. The sooner we can channel the anger of George Carlin, the sooner we can put an end to this corporate fascist reign of terror.

“Politicians are put there to give you that idea that you have freedom of choice. You don’t. You have no choice. You have owners. They own you. They own everything. They own all the important land, they own and control the corporations, and they’ve long since bought and paid for the Senate, the Congress, the State Houses, and the City Halls. They’ve got the judges in their back pockets. And they own all the big media companies so they control just about all the news and information you get to hear. They’ve got you by the balls.

They spend billions of dollars every year lobbying to get what they want. Well, we know what they want; they want more for themselves and less for everybody else. But I’ll tell you what they don’t want—they don’t want a population of citizens capable of critical thinking. They don’t want well informed, well educated people capable of critical thinking. They’re not interested in that. That doesn’t help them. That’s against their interest. You know something, they don’t want people that are smart enough to sit around their kitchen table and figure out how badly they’re getting fucked by a system that threw them overboard 30 fucking years ago.

It’s a big club and you ain’t in it! You and I are not in the Big Club. By the way, it’s the same big club they use to beat you in the head with all day long when they tell you what to believe. All day long beating you over the head with their media telling you what to believe, what to think and what to buy. The table is tilted folks, the game is rigged. And nobody seems to notice, nobody seems to care. That’s what the owners count on, the fact that Americans are and will probably remain willfully ignorant of the big red, white, and blue dick that’s being jammed up their assholes every day. Because the owners of this country know the truth, it’s called the American Dream, because you have to be asleep to believe it.” – George Carlin

I never did get around to making my 2013 predictions. I’ll give it a stab in my next article: Apparitions in the Fog.

THE BEST LOOKING HORSE IN THE GLUE FACTORY

“Believe me, the next step is a currency crisis because there will be a rejection of the dollar, the rejection of the dollar is a big, big event, and then your personal liberties are going to be severely threatened.” – Ron Paul

As usual the MSM did its usual superficial dog and pony show for the American public on Saturday and Sunday. The overall tone on every show (not journalism) was to calm the audience. Every station had a “downgrade special” to explain why you shouldn’t panic over the downgrade of the United States. As we can see, it didn’t work. Worldwide markets went berserk. The reactions of the various players in this saga have been very enlightening to say the least.

As I watched, listened and read the views of hundreds of people over the last few days, I recalled a statement by David Walker in the documentary I.O.U.S.A. This documentary was made in late 2007 before the financial crisis hit. The documentary follows Walker, the former head of the GAO, and Bob Bixby, head of the Concord Coalition, on their Fiscal Wake Up tour.

In the film, Walker tells the audience: “We suffer from a fiscal cancer. If we don’t treat it there will be catastrophic consequences.” He argued the greatest threat to America was not a terrorist squatting in a cave in Afghanistan, but the US debt mountain. He was nervous about the increasing dependence on countries such as China, which are the biggest holders of US Treasury bonds. Bixby explained: “If you knew a levee was unsound and people were moving into that area, would you do nothing? Of course not.” These men were sounding the alarm when our National Debt was $9 trillion. Evidently, no one in Washington DC went to see the movie. They’ve added $5.5 trillion of debt to our Mount Everest of obligations.

After listening to the shills, shysters, propagandists, and paid representatives of the vested interests over the last few days, Mr. Walker’s response to someone pointing out Europe and other countries were in worse shape than the U.S. came to mind:

“What good does it do to be the best-looking horse in the glue factory?”

At the end of the documentary there was a prestigious panel of thought leaders discussing ideas to alter the country from its unsustainable fiscal path. I was shocked when Warren Buffett basically stated there was nothing to worry about:

“I’m going to be the token Pollyanna here. There is no question that our children will live better than we did. But it’s just like my investments. I try to buy shares in companies that are so wonderful, an idiot could run them, and sooner or later one will. Our country is a bit like that.”

Buffett has since turned into a Wall Street/Washington apologist, talking his book. He declared this weekend the US deserves a quadruple A rating. He has tried to protect his investments in GE, Goldman Sachs, Moodys and Wells Fargo by declaring their businesses as sound and their balance sheets clean. He is now just a standard issue sellout spewing whatever will protect his vast fortune. Truth is now optional in Buffett World.

The Oracle of Omaha has continuously bad mouthed gold and pumped up the economic prospects for the U.S. He trashed gold in his March 2011 report to shareholders:

“Gold is a way of going long on fear, and it has been a pretty good way of going long on fear from time to time. But you really have to hope people become more afraid in a year or two years than they are now. And if they become more afraid you make money, if they become less afraid you lose money, but the gold itself doesn’t produce anything.”

I guess the leadership of this country has created a bit of fear in the market, as gold has risen from $1,400 to $1,750 and Warren’s beloved financial holdings have tanked, along with the stock price of Berkshire Hathaway (down 23% since March). There seems to be an inverse relationship between the barbarous relic and lying old men shilling for the vested interests.

Vested Interests

When you watch the corporate mainstream media, or read a corporate run newspaper, or go to a corporate owned internet site you are going to get a view that is skewed to the perspective of the corporate owners. What all Americans must understand is everyone they see on TV or read in the mainstream press are part of the status quo. These people have all gotten rich under the current social and economic structure. Buffett, Kudlow, Cramer, Bartiromo, Senators, investment managers, Bill Gross, Lloyd Blankfein, Jamie Dimon, Jeff Immelt, and every person paraded on TV have a vested interest in propping up the existing structure. They are talking their book and their own best interests. Even though history has proven time and again the existing social order gets swept away like debris in a tsunami wave, the vested interests try to cling to their power, influence and wealth. Those benefitting from the existing economic structure will lie, obfuscate, misdirect, and use propaganda and misinformation to retain their positions.

The establishment will seek to blame others, fear monger and avoid responsibility for their actions. Ron Paul plainly explains why the US was downgraded:

“We were downgraded because of years of reckless spending, not because concerned Americans demanded we get our finances in order. The Washington establishment has spent us into near default and now a downgrade, and here they are again trying to escape responsibility for their negligence in handling the economy.”

The standard talking points you have heard or will hear from the vested interests include:

  • Stocks are undervalued based on forward PE ratios.
  • Ignore the volatility in the market because stocks always go up in the long run.
  • Buy the f$%ing dip.
  • America is not going into recession.
  • The market is dropping because the Tea Party held the country hostage.
  • The S&P downgrade is meaningless because they rated toxic subprime mortgages AAA in 2005 – 2007.
  • The market is dropping because the debt ceiling deal will crush the economy with the horrific austerity measures.
  • The S&P downgrade is meaningless because Treasury rates declined after the downgrade.
  • Foreigners will continue to buy our debt because they have no other options.
  • Foreigners will continue to invest in the U.S. because Europe, Japan and China are in worse shape than the U.S.
  • America is still the greatest economy on the planet and the safest place to invest.

Each of these storylines is being used on a daily basis by the vested interests as they try to pull the wool over the eyes of average Americans. A smattering of truth is interspersed with lies to convince the non-thinking public their existing delusional beliefs are still valid. The storylines are false.

Here are some basic truths the vested interests don’t want you to understand:

  • As of two weeks ago the stock market was 40% overvalued based upon normalized S&P earnings and was priced to deliver 3% annual returns over the next decade. The S&P 500 has lost 17%, meaning it is only 23% overvalued. Truthful analysts John Hussman, Jeremy Grantham and Robert Shiller were all in agreement about the market being 40% overvalued. This decline is not a buying opportunity.
  • The S&P 500 was trading at 1,119 on April 2, 1998. The S&P 500 closed at 1,119 yesterday. In March 2000 the S&P 500 traded at 1,527. By my calculation, the stock market is 27% below its peak eleven years ago. As you can see, stocks always go up in the long run. It is just depends on your definition of long.
  • The talking heads on CNBC told you to buy the dip from October 2007 through until March 2009. The result was a 50% loss of your wealth.
  • The government will report the onset of recession six months after it has already begun. People who live in the real world (not NYC or Washington DC) know the country has been in recession for the last seven months. The CNBC pundits don’t want to admit we are in a recession because they know the stock market drops 40% during recessions on average and don’t want you to sell before they do.
  • The stock market held up remarkably well during the debt ceiling fight. It did not begin to plunge until Obama signed the toothless joke of a bill that doesn’t “cut” one dime of spending. The markets realized  the politicians in Washington DC will never cut spending. The National Debt will rise from $14.5 trillion to $20 trillion by 2015 and to $25 trillion by 2021, even with the supposed austere spending “cuts”.

 

  • The left wing media and the frothing at the mouth leaders of the Democratic Party have conducted focus groups and concluded that blaming the extreme, terrorist Tea Party for the stock market crash and the S&P downgrade plays well to their hate mongering ignorant base. They have rolled out their rabid dogs, Joe “gaffe machine” Biden, Howard “AYAHHHHHH!!!” Dean and John “ketchup” Kerry, to eviscerate the Tea Party terrorists.

  • The mainstream liberal media would like you to believe the Tea Party is an actual cohesive group that wants to throw grandmothers and the poverty stricken under the bus. The neo-cons in the Republican Party and their mouthpieces on Fox News have tried to co-opt the Tea Party movement for their purposes. There is no one Tea Party. It is a movement born of frustration with an out of control government. Ron Paul represented the Tea Party before it even existed and is the intellectual leader of the movement. His is the only honest truthful voice in this debate:

“As many frustrated Americans who have joined the Tea Party realize, we cannot stand against big government at home while supporting it abroad. We cannot talk about fiscal responsibility while spending trillions on occupying and bullying the rest of the world. We cannot talk about the budget deficit and spiraling domestic spending without looking at the costs of maintaining an American empire of more than 700 military bases in more than 120 foreign countries. We cannot pat ourselves on the back for cutting a few thousand dollars from a nature preserve or an inner-city swimming pool at home while turning a blind eye to a Pentagon budget that nearly equals those of the rest of the world combined.”

  • S&P’s opinion about any debt should be taken with a grain of salt. They, along with Warren Buffet’s friends at Moodys, were bought and sold by the Wall Street criminal element. Anyone with a smattering of math skill and an ounce of critical thinking would have concluded the U.S. was a bad credit three years ago. A Goldman Sachs trader had this opinion of the brain dead analysts at Moodys: “Guys who can’t get a job on Wall Street get a job at Moody’s.” Michael Lewis, in his book The Big Short, summarized the view of the rating agencies:

“Wall Street bond trading desks, staffed by people making seven figures a year, set out to coax from the brain-dead guys making high five figures the highest possible ratings for the worst possible loans. They performed the task with Ivy League thoroughness and efficiency.”

  • The most laughable storyline spouted by the Democrats and their lapdogs on MSNBC is the extreme austerity measures forced on the country by the Tea Party has caused the stock market to collapse. The plan “cuts” $22 billion in 2012 and $42 billion in 2013. Over this time frame, the Federal government will spend $7.4 TRILLION. The horrific spending “cuts” amount to .86% of spending over the next two years. Meanwhile, we will add at least $3 trillion to the National Debt over this same time frame. Of course, we could listen to Paulie “Spend More” Krugman and add $6 trillion to the national debt with another stimulus package. When a Keynesian solution fails miserably, just declare it would have worked if it was twice the size.
  • Barack Obama, the James Buchanan of our times, gave one of the worst Presidential speeches in the history of our country yesterday. In full hubristic fury he declared the United States of America would ALWAYS be a AAA country. The American Exceptionalism dogma is so very amusing. We are chosen by God to lead the world. Barack should have paid closer attention in history class. The Roman, Dutch, Spanish and British Empires all fell due to their hubris, fiscal mismanagement and overseas military exploits. The American Empire has fallen and can’t get up.

And now we come to the $100 trillion question. The establishment/vested interests/status quo declares the United States as the safest place in the world for investors. They frantically point out that people are pouring money into our Treasuries and interest rates are declining. They hysterically blurt out that Europe has much bigger problems than the U.S. and China’s real estate bubble will implode in the near future. These are the same people who told you the internet had created a new paradigm and NASDAQ PE ratios of 150 in 2000 were reasonable. The NASDAQ soared to 5,000 in early 2000. Today it trades at 2,358, down 53% eleven years later. These are the same people who told you they aren’t making more land and home prices in 2005 were reasonable. They told you home prices had never fallen nationally in our history, so don’t worry. Prices are down 35% and still falling today.

Medicare and Medicaid spending rose 10% in the second quarter of 2011 from a year earlier to a combined annual rate of almost $992 billion, according to the Bureau of Economic Analysis (BEA). The two programs are likely to crack $1 trillion before the end of the year. Medicare’s unfunded liability alone amounts to $353,350 per U.S. household. The National Debt will reach 100% of GDP in the next four months as we relentlessly add $4 billion per day to our Mount Everest of debt. Federal spending in 2007 was $2.7 trillion. Today, they are spending $3.8 trillion of your money. The country does not have a revenue problem. We have a spending addiction and the addict needs treatment. Doctor Ron Paul has our prognosis:

“When the federal government spends more each year than it collects in tax revenues, it has three choices: It can raise taxes, print money, or borrow money. While these actions may benefit politicians, all three options are bad for average Americans.”

The politicians and bankers who control the developed world have made the choice to print money and create more debt as their solution to an un-payable debt problem. Europe, Japan, the U.S., and virtually every country in the world want to devalue their way out of a debt problem created over the last forty years. It has become a race to the bottom, with no winners. Every country can’t devalue their currency simultaneously without blowing up the entire worldwide monetary system. But, it appears they are going to try. The United States will never actually default on its debts. Ben Bernanke will attempt to default slowly by paying back the interest and principal to foreigners in ever more worthless fiat dollars. This will work until the foreigners decide to pull the plug. For now interest rates are low and the U.S. is the best looking horse in the glue factory. But we all know what happens to all the horses in the glue factory – even Mr. Ed.

 “It is true that liberty is not free, nor is it easy. But tyranny – even varying degrees of it – is much more difficult, and much more expensive. The time has come to rein in the federal government, put it on a crash diet, and let the people keep their money and their liberty.” – Ron Paul

BREAD, CIRCUSES, SPENDING CUTS, UNICORNS & THE APPEARANCE OF WEALTH

“Already long ago, from when we sold our vote to no man, the People have abdicated our duties; for the People who once upon a time handed out military command, high civil office, legions — everything, now restrains itself and anxiously hopes for just two things: bread and circuses” – Juvenal – 100 A.D.

 

 

Juvenal makes reference to the Roman practice of providing free wheat to Roman citizens as well as costly circus games and other forms of entertainment as a means of gaining political power through populism. Roman politicians devised a plan in 140 B.C. to win the votes of the poor: giving out cheap food and entertainment, “bread and circuses”. The Roman politicians realized this would be the most effective way to rise to power and stay in power.

With the revolting display of political theater in the last few weeks, I couldn’t help but consider the parallels between the Roman Empire and the American Empire. The entire debt ceiling farce was a circus on an epic scale – The Greatest Show on Earth. The American public was treated to high wire acts of near debt experiences, Senators putting their heads into the mouths of lions, and hundreds of clowns riding tiny bikes with squeaking horns. In the end, American politicians did what they do best – pretended to solve a spending problem without cutting spending. Only in America could politicians put the country on course to increase its national debt from $14.5 trillion to $23 trillion by 2021 and declare they are cutting spending. For those that need to visualize the lies of politicians, take a gander at this chart and try to find the cuts in spending.

You have a better chance of finding a unicorn in your backyard than finding actual cuts in spending from the corrupt clowns inhabiting the halls of Congress. If you are driving your car towards a brick wall at 120 mph and you slow down to 118 mph, the ultimate result will be the same. The only way to avoid disaster is to jam on the brakes. But, the liberal and conservative politicians are both enjoying the ride fueled by millions in corporate, union, Wall Street and a thousand other special interest payoffs.  

The Roman authorities provided free wheat to the peasants as a superficial means of appeasing the masses and distracting them from the fact that public policy and public service had failed, as corruption and decadence engulfed those in control of government. Free bread, chariot races, and feeding Christians to lions kept the small-minded peasants satiated and ignorant of their civic duty. Today, the authorities don’t hand out bread they hand out EBT cards to 45.5 million Americans, or 14.6% of the entire population.

There are almost 5 million Americans on welfare. There are 50 million Americans on Medicaid. There are 8 million Americans receiving unemployment compensation. There are 10.5 million Americans on Social Security disability. This is the symbolic bread being provided to the masses to keep them tranquilized, pliable, satisfied and ignorant of their civic duty. The government has renamed bread as “social benefits” and now distributes $2.3 trillion of bread per year to the “needy”. This constitutes 15% of the country’s GDP and will continue to grow for decades or until the American Empire collapses.

Aldous Huxley in his 1958 assessment of his 1931 novel Brave New World – Brave New World Revisited said that “any bird that has learned how to grub up a good living without being compelled to use its wings will soon renounce the privilege of flight and remain forever grounded. If the bread is supplied regularly and copiously three times a day, many of them will be perfectly content to live by bread alone – or at least by bread and circuses alone. ‘In the end,’ says the Grand Inquisitor in Dostoevsky’s parable, ‘in the end they will lay their freedom at your feet and say to us, make us your slaves, but feed us.” Bread is not the opiate of the masses, it is the cyanide. Huxley saw the Welfare state arising before it really got kick started in the late 1960s. By trying to support the less fortunate by transferring trillions to them, with no strings attached, we have insured the ultimate bankruptcy of our country. Americans have willingly sacrificed liberty, freedom and civic responsibility for safety, security and bread.

Huxley hadn’t lost all hope. He seems to have foreseen the rise of the Tea Party and the coming revolution, led by the youth of this country who are being left with the bill for the bread and circuses promised by myopic politicians over the last four decades:

“When things go badly, and the rations are reduced, the grounded do-dos will clamor again for their wings… The young people who now think so poorly of democracy may grow up to be fighters for freedom. The cry of ‘Give me television and hamburgers, but don’t bother me with the responsibilities of liberty,’ may give place, under altered circumstances to the cry of Give me liberty or give me death.”

I hope Huxley is right. The welfare state is bankrupt. The rations are going to be cut. There is no choice. The money is gone. The jobs are gone. The do-do’s that haven’t flown in years are unlikely to clamor for their wings. They are already clamoring when even the potential of cuts in their bird feed are mentioned. The Millenial generation is our last great hope to reverse our decline. They have not become addicted to “social benefits” yet. Their parents and grandparents are handing them an un-payable bill as they graduate college with no jobs. A generational war is in the offing. I for one will side with the youth against the Boomers. The future of the country depends upon the outcome of this war.

Striking Similarities to Rome

“There are striking similarities between America’s current situation and the factors that brought down Rome, including declining moral values and political civility at home, an over-confident and over-extended military in foreign lands and fiscal irresponsibility by the central government”. –David Walker

 

David Walker, the former head of the GAO from 1998 until 2008, compared the U.S. Empire to the Roman Empire in August 2007. He has been warning the country about our unsustainable fiscal path for over a decade.

  • Since August 2007 the National Debt has increased from $8.9 trillion to $14.6 trillion, a 64% increase in four years.
  • We’ve increased our cumulative expenditure on our wars of choice in the Middle East to $1.3 trillion since 2001.
  • Our annual military spending rose from $653 billion in 2007 to the current $966 billion, a 48% increase in four years.
  • Federal government transfers for Social Security, Medicare, Medicaid, Unemployment, Veterans, Food Stamps, and Welfare increased from $1.7 trillion in 2007 to the current level of $2.3 trillion, a 35% increase in four years.

It goes without saying that Mr. Walker’s advice was not heeded. And regarding declining moral values and political civility, I would point you to the fine examples of morality displayed by Wall Street since 2007 along with the display of civility seen in Washington DC over the last few weeks. The striking similarities that David Walker acknowledged are in full bloom for the world to see.

English historian Edward Gibbon wrote his masterpiece The Decline and Fall of the Roman Empire in 1776, ironically in the year the American Empire was born. He detailed the societal collapse encompassing both the gradual disintegration of the political, economic, military, and other social institutions of Rome and the barbarian invasions that were its final doom in Western Europe. Gibbon concluded there were five marks of the Roman decaying culture:

  1. Concern with displaying affluence instead of building wealth.
  2. Obsession with sex and perversions of sex.
  3. Art becomes freakish and sensationalistic instead of creative and original.
  4. Widening disparity between very rich and very poor.
  5. Increased demand to live off the state

Gibbon’s analysis captured the essence of what happens to all empires. It subsequently happened to the Dutch, Spanish and British empires and has been eating away at the greatest empire of all over the last several decades. Larry Elliot, writer for the UK Guardian, recently described the rot that has destroyed every empire in history:

“The experience of both Rome and Britain suggests that it is hard to stop the rot once it has set in, so here are the a few of the warning signs of trouble ahead: military overstretch, a widening gulf between rich and poor, a hollowed-out economy, citizens using debt to live beyond their means, and once-effective policies no longer working. The high levels of violent crime, epidemic of obesity, addiction to pornography and excessive use of energy may be telling us something: the US is in an advanced state of cultural decadence.

Empires decline for many different reasons but certain factors recur. There is an initial reluctance to admit that there is much to fret about, and there is the arrival of a challenger (or several challengers) to the settled international order. In Spain’s case, the rival was Britain. In Britain’s case, it was America. In America’s case, the threat comes from China.”

For the last forty years America has shifted from a society that created goods into a society that created debt. Displays of affluence like McMansions, Mercedes, BMWs, Rolexes, summer mansions in the Hamptons, designer clothes, granite and stainless steel kitchens, and 85 inch HDTVs, all purchased with debt provided like candy by the Wall Street banks and their sugar daddy – the Federal Reserve, have trumped true wealth building. The result is a nation with $52.6 trillion of debt outstanding, or 350% of GDP. The basic rule for maintaining a healthy economic system requires the population to spend less than they earn and save the difference. The savings can then be invested in domestic companies, plants and equipment which keep the country growing. Americans bought into the lie that purchasing cheap foreign goods with cheap credit was as valid as actually building wealth. The national savings rate, which exceeded 10% in the 1970s and early 1980s, dropped to less than 1% by 2005. Why save when you could whip out one of your 13 credit cards.

America’s obsession with sex and perversion of sex makes Caligula look like a Boy Scout. There are 4.2 million pornographic websites serving 72 million visitors per month and generating $5 billion of revenue for these fine capitalists. More than 40% of internet users view porn. What passes for art today is a crucifix in the artist’s urine. The true art of the American empire consists of reality TV shows like Jersey Shore and Housewives of NY, OC, NJ, Miami, and Atlanta. America has taken shallow, mindless, and superficial to an empire crushing low.

The disparity in wealth between the super rich and the working class has never been greater. The working middle class that built this country has been systematically destroyed as the super rich have used inflation and debt to lure them into servitude, while the unproductive parasites have learned it is easier to feed off their middle class host than work for a living. It is clear to anyone, except a Republican ideologue, that when the top 10% richest Americans abscond with 50% of the income in the nation through their control of politicians, Wall Street and the few mega-corporations that set the economic agenda, a convulsive change is necessary. It is not a coincidence  the heyday of the American Empire was from 1946 until 1971 when the working middle class was able to advance their station in life through education, hard work and a level playing field.

The playing field got tilted against the working middle class in the late 1960’s with LBJ’s Great Society welfare state and got turned upside down in 1971 when Nixon closed the gold window and allowed bankers and politicians unfettered access to money printing with no immediate consequences. The result has been a slow steady descent into hell as politicians have made $100 trillion of unfunded promises of bread to the masses and bankers have gorged themselves with riches from peddling debt to the same masses, so they could enjoy the circuses. We are now left with the top 1% hoarding 33.8% of the wealth and the top 10% clinging to 71.5% of the wealth in the country. The bottom feeders are thrown scraps of bread in the form of food stamps, welfare, disability payments, and unemployment compensation. They have grown dependent and no longer participate in productive society. With more than 50% of adults paying no income tax, they vote for politicians that promise to not “cut” their social benefits.  

 

When you see your leaders take actions that clearly are not in the long term best interests of the American people, you need to ask why. Since September 2008 your leaders have funneled trillions of dollars to the Wall Street bankers that nearly destroyed the worldwide economic system. They have funneled billions into the coffers of the mega-corporations that outsourced your jobs to Asia. They ramped up their wars in the Middle East to reward their friends in the military industrial complex. And lastly, they handed out a few hundred billion more to the masses to keep them from rioting in the streets.

We know for a fact QE2 was designed to prop up the stock market because Ben Bernanke told us so. And it worked. From the day he announced he was going to do it at the annual meeting of the ruling moneyed classes at Jackson Hole until it ended on July 1, 2011, the market went up 30%. The average American dealt with the 30% to 50% increases in food and energy costs, while the richest 1% partied like it was 1999. Considering they own 50.9% of all the stocks in the country, the last couple years of free money and stock appreciation created by the Federal Reserve have been a windfall for the privileged moneyed class. The bottom 50% who own 0.5% of the stocks in the country haven’t fared so well. 

When you watch the talking heads and contemptible pundits on Fox, CNBC, MSNBC, CNN and the other mainstream corporate media spinning our economic situation in a positive way, remember that every person you are listening to is a member of the top 1% richest Americans. They have large portfolios of stocks and will not let reality or truth interfere with their ambitions of further wealth and power. This country is controlled by the few for the benefit of the few at the expense of the many. Less than ten banks control more than 50% of deposits and 75% of the lending in the country. One private banking organization – the Federal Reserve – controls the currency of the country. A handful of mega-corporations control the commerce of the country. Less than ten arms dealers dictate the war spending in the country. A few media conglomerates control the message fed to the masses. A few hundred corrupt politicians pay off their corporate and banking masters with laws, tax breaks, and pork. These people make up the ruling class of America.

As their messages of “efficiency” and “job creation” have proven to be lies, the financialization of America by the ruling class is almost complete. Real earnings for real people are 10% lower than they were in 1972. They have transformed a productive society based on saving and investment into a hollowed out shell of a society based on financial manipulation and debt. The endgame approaches.

The moneyed interests have gone too far. The debts are too large. The burden placed on the middle class is too great. The Federal Reserve has proven to be the lackeys of the Wall Street fat cats and the slithering political class in Washington DC. QE2 was a miserable failure. The American middle class is angry. Their anger could lash out in many possible directions. Their benefits will be cut. Their home values will fall. Their 401ks will be cut in half. Their standard of living will fall. Will they accept this fate without a fight? I doubt it.

Democracy Never Lasts Long 

The decline of the American Empire may be a surprise to those who cling to the laughable American Exceptionalism dogma, but every previous empire in history has declined. The Dutch Empire lasted for just over a century. The Spanish Empire survived for just over two centuries. The British Empire reigned for just over three centuries. And the Great Roman Empire ruled for almost five centuries.

The American Empire has been expanding for over 220 years, but based on all indications has peaked. Were we destined to implode as all previous democracies have done, as described by Greek historian Polybius?

“Monarchy first changes into its vicious allied form, tyranny; and next, the abolishment of both gives birth to aristocracy. Aristocracy by its very nature degenerates into oligarchy; and when the commons inflamed by anger take vengeance on this government for its unjust rule, democracy comes into being; and in due course the licence and lawlessness of this form of government produces mob-rule to complete the series.” –The Histories 6.4.7-13

As a democracy this country was supposed to be governed by the people, for the people. We were supposed to have an equal say in how we were governed and participation in adopting the laws of the land. Over time civic duty was outsourced to politicians that promised the masses safety and security at the expense of liberty and responsibility. The general population has grown accustom to the bread and circuses provided by their “protectors”. The fledgling democracy has degenerated into a corporate fascist oligopoly that benefits the few in control. Recent events prove beyond a shadow of doubt the privileged few are losing control of the situation. A worldwide upheaval is brewing as the toxic debt is strangling the economic systems of the world. Confidence in this ponzi finance system is waning. The American population is beginning to realize their fatal mistake in trusting bankers and politicians to do what was right for the country.

Polybius believed that democracies always killed themselves:

“And hence when by their foolish thirst for reputation they have created among the masses an appetite for gifts and the habit of receiving them, democracy in its turn is abolished and changes into a rule of force and violence. For the people, having grown accustomed to feed at the expense of others and to depend for their livelihood on the property of others, as soon as they find a leader who is enterprising but is excluded from the houses of office by his penury, institute the rule of violence; and now uniting their forces massacre, banish, and plunder, until they degenerate again into perfect savages and find once more a master and monarch.” – The Histories 6.9.7-9

The average American does not understand what is swirling around them. They have a sense of unease, but they are still receiving their government issued bread and their 52 inch TV is providing 24 hours of circuses. The monetary system upon which that bread and those circuses are based is collapsing as we speak. Ernest Hemingway captures what is happening to the American Empire in one brief quote from his novel The Sun Also Rises:

“How did you go bankrupt?” “Two ways, gradually and then suddenly”

As the political theater of the absurd played out last week in Washington DC, it became clear to me the ruling class has no intention of changing our path. Politicians will keep spending and central bankers will keep printing more money. There are people like David Walker that will continue to sound the alarm:

“We are less than three years away from where Greece had its debt crisis as to where they were from debt to GDP. With the recent increase in the debt ceiling and continued higher budget deficits at the federal level, the US is on course for its own crisis. We are not exempt from a debt crisis. We’re never going to default, because we can print money. At the same point in time, we have serious interest rate risk, we have serious currency risk, we have serious inflation risk over time. If it happens, it will be sudden and it will be very painful.”

But, it appears we are destined to commit suicide as a nation. I doubt the American Empire will linger on for centuries. The world moves rapidly. The Vandals (Goldman Sachs) and the Huns (JP Morgan) are at the gates. The final battle is underway – the battle for the soul of America. When the existing social structure is swept away by the tsunami of un-payable debt, who and what will replace it? Will the American people turn to someone that promises them liberty and freedom with no promises of bread and circuses? Or will they turn to a strong demagogue that promises them more safety and more security?

What do you think?

“Democracy never lasts long. It soon wastes, exhausts and murders itself. There was never a democracy that did not commit suicide.”  – John Adams, Letter, April 15, 1814

THIS COUNTRY DEFAULTED LONG AGO

“There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved.” – Ludwig von Mises

The final collapse of our credit expansion boom approaches. We have a choice over the next week. We could voluntarily abandon further credit expansion by voting for a Balanced Budget Amendment to the Constitution or we can raise the debt ceiling, pretend to cut spending far in the future, and allow our currency system to experience a catastrophic final collapse.

We’ll take what’s behind door #2 Johnny. The vested interests in Washington DC and Wall Street only care about power and wealth. They will never abandon credit expansion. It’s their drug. They must have it. They are addicted to it. They will keep injecting it into our system until they overdose America.

The mainstream media acts as if not raising the debt ceiling by next Tuesday will result in America defaulting. This is a crock. America chose to proceed on a path to default decades ago. We are just finally reaching our destination. Below are the choices we made as a people and a country to default on our obligations and eventually destroy our country:

  • The enactment of the 16th Amendment to the Constitution in 1913 allowing the government to impose a tax on your income, thereby opening Pandora’s Box to a 60,000 page tax code and allowing politicians to sell their votes to the highest bidder.
  • The signing into law of the Federal Reserve Act by Woodrow Wilson in 1913, transferring control of our currency system to Wall Street banks. The man made inflation created by the Federal Reserve has reduced the purchasing power of the USD by 97% since 1913 and has allowed politicians to promise $100 trillion of benefits to Americans, that can never be delivered.
  • The Social Security Act signed into law by Franklin Delano Roosevelt in 1935, supposedly to help widows and orphans, morphed into a giant ponzi scheme used by politicians to make Americans think it was a retirement plan and the money was in a lockbox. The scam continues, but ponzi schemes always collapse.
  • Fannie Mae was created in 1938 as a government agency and Freddie Mac was created in 1970 as a quasi-government agency. By promoting home ownership and subsidizing loans to people who should have never gotten loans these agencies caused hundreds of billions in mal-investment. As tools of politicians, they were used to push social agendas. The result will be in excess of $300 billion in losses to the American taxpayer.
  • The Korean War set a precedent where the President did not need to seek Congress to declare war as required under the Constitution. This has allowed the President the freedom to fight undeclared wars around the world for decades, while spending trillions, with no approval from Congress.
  • LBJ’s Great Society programs such as Medicare and Medicaid were sold to Americans as cost saving programs that would improve healthcare for all Americans. We now spend 17% of our GDP on healthcare and these two programs have an unfunded liability of almost $100 trillion.

  • Nixon closing the gold window in 1971 removed all restraint on the Federal Reserve, banks and politicians. With a fiat currency backed by nothing but promises, it was only a matter of time before the greed and corruption of bankers and politicians overcame any self imposed fiscal responsibility. The result has been the National Debt going from $400 billion in 1971 to $14.4 trillion today, a 3,600% increase in 40 years. Meanwhile, GDP only increased 1,350% over this same time frame.
  • The embrace of consumer debt by the Baby Boom generation beginning in 1980 created an atmosphere of living for today and not worrying about the future. This attitude has left 50% of all the households in the country with a net worth of $70,000 or below.
  • The repeal of the Glass Steagall Act in 1999 unleashed the hounds of hell upon America, as the soulless blood sucking vampires on Wall Street proceeded to rape and pillage the American economy with their financial derivatives of mass destruction and marketing of debt to the clueless masses. The housing bust and impoverishment of the middle class can be laid at the feet of these evil greedy bastards.
  • Bush’s unpaid for wars of choice, his reckless tax cuts, and his foolish expansion of a bankrupt Medicare program in the midst of two wars turbo charged the country on its path to default.
  • By bailing out Wall Street on the backs of the middle class in 2008/2009, the politicians in this country showed their hand. They will protect their fellow power brokers and contributors and throw the American people under the bus. Wall Street controls Congress.
  • The Keynesian schemes rolled out by Obama and his minions have just added trillions of debt while depressing the economic system and doing nothing to help the average person. The Fed created inflation has inflamed revolution through out the world and further impoverished the middle class who need to eat and fill up their cars.
  • In the midst of a Depression Obama chose to create a brand new healthcare bureaucracy, add 30 million people into the government controlled system, and commit the US taxpayer to trillions of future healthcare costs.

As you can see, next Tuesday means nothing. The debt ceiling means nothing. We chose to default as a nation many years ago. The destination was certain, only the timing was in question. Time to step on the gas.

“Credit expansion is not a nostrum to make people happy. The boom it engenders must inevitably lead to a debacle and unhappiness.” – Ludwig von Mises

WHO ARE THE EXTREMISTS?

“Deficits mean future tax increases, pure and simple. Deficit spending should be viewed as a tax on future generations, and politicians who create deficits should be exposed as tax hikers.” – Ron Paul

 

The Debt Ceiling Reality Show approaches its grand finale in the next week. The world breathlessly awaits the shocking conclusion. The debt ceiling will be raised. The world will be saved. Wall Street will rejoice. Americans can focus on the important stuff again, like Casey Anthony’s upcoming book, who will win this week’s Toddlers and Tiaras pageant, and the latest app created for their iPads. Based on my observations over the last few weeks, I’m absolutely sure that 90% of the politicians in Washington DC would lose on Are You Smarter than a 5th Grader?

Still, the mainstream media and the performing puppet politicians need to create a fearful frenzy among the masses to insure maximum public relations exposure for their lies, misinformation, and mistruths. Wall Street will exert their control over the debate by threatening to crash the market if they don’t get what they want (aka TARP). I generally ignore the talking heads on Fox, MSNBC, CNN, and CNBC, as I could learn more from watching Cash Cab than listening to ideologues spouting their talking points. But, last night I happened to see an hour or so of Fox, CNN and MSNBC. I saw the full spectrum of right wing and left wing rhetoric and fear mongering. These stations should be ashamed to call themselves news organizations. They do not even purport to report the news. They spew talking points generated by the left and right, depending on the station’s bias. Truth is unavailable on the mainstream media.

What the public doesn’t see is the rooms filled with PR maggots in the bowels of Congress generating talking points and testing them in over night polls of the public. Their sole purpose is to generate a message that will convince the public the fiscal debacle is the fault of the other party. The goal is to gain an advantage in the next elections. The long term future of our country is unimportant to the soulless autobots that get paid to misinform and mislead the masses. Leaving unborn generations with an un-payable debt so we can selfishly cling to benefits promised to us by corrupt politicians who only made the promises so they could be elected, is the ultimate in egocentric myopia.

The deceptive talking points created in smoky backrooms in Washington DC and vetted by Madison Ave maggots are easy to detect. Each side pounds home the exact same phrases on every “news” station:

Republican Talking Points

  • We refuse to increase taxes on all Americans to fix a spending problem.
  • Spending has been out of control since Obama took control of the White House (reference $800 billion stimulus package, home buyer tax credit, and Obamacare).
  • Say that Obama doesn’t have a plan and mention his ten year budget.
  • Tell the American people Republicans are fiscally responsible and the real party of change.
  • The people told them to change Washington with the 2010 election.

Democratic Talking Points

  • The Tea Party EXTREMISTS have hijacked the Republican Party and want to destroy the country by forcing the country to default on its debt.
  • The Bush tax cuts and the Bush wars are to blame for the entire increase in debt and deficits.
  • The Republicans want to protect the richest Americans while cutting Medicare and Social Security benefits for the poor.
  • The Democratic Party will never cut Medicare or Social Security.
  • The Democrats are willing to compromise and act like adults, while the evil Republicans resist all offers to strike a deal.

Depending on your ideology, you will find yourself agreeing with the talking points that strike your fancy. Don’t worry; they’ve all been tested on sample groups of ignorant Americans in order to strike the right nerve. As I listened to that bald headed prick – James Carville – screeching on CNN last night about Bush’s wars and tax cuts causing our economic peril today, I wanted to reach into the TV screen and throttle the weasel faced demagogue. The National Debt on the day Bush took office was $5.7 trillion. On the day he left office the National Debt was $10.6 trillion, a $4.9 trillion increase in eight years. Today, the National Debt stands at $14.4 trillion, a $3.8 trillion increase in two and a half years. That sounds bipartisan to me.

Bush certainly did get the U.S. into two wars of choice and his tax cuts, tax rebate checks and expansion of Medicare have contributed trillions to our deficits. He deserves scorn and contempt. But, I do recall that Democrats supported the invasion of Afghanistan and Iraq. I do recall that Democrats voted for the tax cuts. I do recall that Democrats were gaga about expansion of the Medicare program. A funny thing didn’t happen when Obama was elected. Defense spending did not go down. He increased spending on our war machine. His war budgets put Bush’s to shame. He doubled the war effort in Afghanistan. He upped the ante from two wars to three wars in Libya. The difference between most Bush and Obama policies has been indecipherable.   

Carville’s shrill diatribe against the Tea Party freshman in Congress was the most humorous piece of misinformation of his entire rant. He inadvertently struck upon the most revealing point of this entire debt ceiling farce. He said:

“These Tea Party congressmen act as if they don’t care if they are re-elected in 2012.”

And there you have it. These people are not doing what is in their own best interest to get re-elected. They have shocked the vested interests in Washington by sticking to their principles and not playing the games that left the country bankrupt. This is an outrage to non-principled shills like Carville and Rove. This behavior is declared EXTREMIST by the liberal pundits and self interested Washington hacks. People acting in the long- term best interests of the country are seen as EXTREME by neo-cons like Charles Krauthammer and moderate RINOs like John “Crash” McCain. The entrenched Washington ruling class is uncomfortable with any change. The establishment would prefer to lie to the American public again and let future generations worry about the $100 trillion unfunded obligations they’ve created.

Only in America would people trying to balance the national budget be branded extremists. Is the average American who spends less than they make an extremist? In the eyes of Washington politicians and mainstream media talking heads, you would be an extremist. Let’s peruse some facts and judge who the extremists are:

  • Federal government spending has risen from $1.9 trillion in 2001 to $3.8 trillion in 2011, a 100% increase. Federal government revenues grew from $2.0 trillion in 2001 to $2.5 trillion in 2008, before collapsing to $2.2 trillion today. GDP over this same time frame has grown 47%.
  • The annual Federal budget deficit in 2007 was $160 billion. Annual deficits between 2002 and 2008 ranged between 1% and 4% of GDP. Since 2009, annual budget deficits have exceeded $1.1 trillion and will continue to exceed $1 trillion as far as the eye can see. Annual deficits now exceed 10% of GDP.
  • The Federal government spends in excess of $1.2 trillion per year on the cost of present and past wars, or 55% of all tax revenues.
  • With a gun to their head from Wall Street banks, Congress handed over $700 billion of taxpayer money to the criminal banks that had just crashed the worldwide economic system with their casino gambling. These banks have been getting free money from the Federal Reserve since 2008 and have rewarded themselves with in excess of $70 billion in bonuses since 2008.
  • Obama handed $800 billion of pork to his constituents across the country in order to create 3.5 million jobs. The $800 billion is gone and we’re still waiting for the jobs.
  • The home buyer tax credit scheme cost Americans $22 billion, or $100,000 per additional home sold, and home prices are now 5% lower than they were before this worthless Keynesian scam. And prices continue to fall.
  • The Cash for Clunkers debacle cost Americans $3 billion, or $24,000 per junked car, as a payoff to Government Owned Motors and Obama’s union backers.
  • The taxpayer bailout of Fannie Mae and Freddie Mac has cost Americans $160 billion so far, with at least another $150 billion to go.
  • The Federal Reserve tripled their balance sheet to $2.7 trillion and is now leveraged 55 to 1, twice the leverage of Bear Stearns and Lehman Brothers when they failed. A 2% decline in the value of their assets wipes out their capital.
  • The government and Federal Reserve threatened the FASB into changing the accounting rules so the Too Big To Fail Wall Street banks could fraudulently report the value of the assets on their books, to appear solvent.
  • Obamacare will add 30 million people to the government controlled healthcare system, while adding mountains of new bureaucracy, and trillions of added costs.
  • And last but not least, the country goes $4 billion further into debt every day. Or for further perspective: $166 million per hour; $2.8 million per minute; $46,000 per second.

These are the facts of our current economic situation and the liberal mainstream media and slimy politicians like Chuck “I Love Wall Street” Schumer brand the Tea Party congressmen as EXTREMISTS for demanding an end to this out of control Roman orgy of spending. It would be hilarious if it wasn’t so utterly disgusting and sad. The only serious proposal to reverse our course and steer away from the approaching iceberg was made by Tom Coburn a couple weeks ago. It was scorned by the ideologues on both sides of the aisle, as it slashed military spending, closed corporate and individual tax loopholes, ended subsidies, and really addressed Medicare and Social Security rather than changing the CPI index. It was DOA and so is this country.

The Boehner plan and the Reid plan are absolute jokes. The Boehner plan cuts $900 billion over ten years with, shockingly, a whole 2.5% of the savings in 2012. Why cut today when you can pretend to cut in the future? We are on track to add $10 trillion of debt over the next ten years and Boehner’s plan will only add $9.1 trillion to the national debt. That is cutting in Washington DC speak. Harry Reid’s plan is even funnier. His $2.2 trillion in “cuts” includes $1 trillion for wars that won’t be fought and the $375 billion of interest expense that won’t be expended for the wars that won’t be fought. No smoke and mirrors in that proposal. These revolting excuses for leaders have both proposed new commissions to recommend spending cuts that won’t be implemented. These brilliant ideas never grow tiresome and old.

The chart created by Mike Shedlock after Paul Ryan offered an alternative ten year budget three months ago shows you everything you need to know about who the real extremists in Washington DC are. The Ryan budget included much deeper cuts than anything proposed by Boehner or Reid and would still add $9 trillion to the National Debt by 2021. After examining this chart it is clear the establishment of both parties in Washington DC have no plan to cut anything. The good news is the national debt will never reach $23 trillion because our economic system will implode long before we approach that figure.  

When you see the old time party hacks and the shrill pundits declare that an agreement must be reached on these fake distant theoretical cuts, you know they just want to protect the status quo. These people have gotten rich from keeping the status quo intact. If EXTREMISM is living within your means, spending less than you bring in, addressing unfunded liabilities, and leaving a country where our children have a fair chance to have a decent future, then count me in the extremist camp. The time is approaching when we need to stand up and be counted. What kind of country shall we be? Do you care? 

“The issue boils down to this: do we care about freedom? Do we care about responsibility and accountability? Do we care that our government and media have been bought and paid for? Do we care that average Americans are being looted in order to subsidize the fattest of cats on Wall Street and in government? Do we care? When the chips are down, will we stand up and fight, even if it means standing up against every stripe of fashionable opinion in politics and the media? Times like these have a way of telling us what kind of a people we are, and what kind of country we shall be.” – Ron Paul

NAUSEOUS, GASEOUS, IMAGINARY & DELUSIONAL

Mike Shedlock http://globaleconomicanalysis.blogspot.com/ reveals in sarcastic detail the absolute ridiculousness of both the Boehner and Reid deficit “cutting” plans. Boehner cuts a whole $4 billion from the $1.4 trillion 2012 deficit. Those Republicans sure are fiscally responsible. Reid’s plan is a fucking joke. His theoretical cuts in military spending that weren’t going to occur make up the majority of his “savings”. Then he has the balls to calculate interest savings on his theoretical savings and call that spending cuts. These pieces of shit should be strung up by their balls from the Capitol building.

I bet these corrupt slime balls long for the good old days in the 1970s before the internet. Now their lies and misinformation are revealed within hours and debunked by the critical thinking bloggers. This Debt Ceiling Reality Farce is proceeding as expected. The government and MSM are ratcheting up the fear index by dropping stocks and warning about social security checks not going out to grandma. Oh the horror!!!

It’s nothing but lies. August 2 is a fake deadline created out of thin air, just like the prior three fake deadlines. Bennie can create $150 billion of fiat with the press of a button.

Sell the fucking gold Timmy. I dare you.

Rating the Obama, Reid, and Boehner Deficit Reduction Plans on Mish’s 10-Point Credibility Scale

Many people have asked where they can find details of what the budget cuts proposed by President Obama and House Speaker John Boehner.

Because the plans have been in a constant state of flux, and because President Obama did not release details of ongoing discussions, it has been difficult to properly analyze the credibility of the recent proposals.

However, on Monday the CBO chimed in on Boehner’s latest phased-in proposal.

Dear Mr. Speaker:

As you requested, the Congressional Budget Office has estimated the impact on the
deficit of the Budget Control Act of 2011, as posted on the Web site of the Committee on Rules on July 25, 2011.

…

In total, if appropriations in the next 10 years are equal to the caps on discretionary spending and the maximum amount of funding is provided for the program integrity initiatives, CBO estimates that the legislation would reduce budget deficits by about $850 billion between 2012 and 2021 relative to CBO’s March 2011 baseline adjusted for subsequent appropriation action.

As requested, CBO has also calculated the net budgetary impact if discretionary savings are measured relative to its January baseline projections. Relative to that baseline, CBO estimates that the legislation would reduce budget deficits by about $1.1 trillion between 2012 and 2021.

There you have it. Boehner has proposed a $850 billion reduction over 10 years, a minuscule $85 billion a year on a deficit of $1.4 trillion.

Bear in mind it is far worse than it looks because it is heavily back-loaded. The 2012 reduction is only $4 billion.

ZeroHedge Comments As CBO Scores Boehner’s (Laughable) Deficit Cut Plan, Jay Carney Admits Obama Still Does Not Have An Actual Plan

Boehner’s plan is an abysmal joke, with $4 billion in discretionary spending cuts in 2012 growing mysteriously to $111 billion by 2021, and $0 billion in debt service reduction for 2012 and 2013 (growing to $37 billion in 2021), for a combined cumulative deficit impact of $850 billion, which on a NPV basis is more like $50 billion, but at least it is a plan.

In the meantime, here is what is going on on the other side of the spectrum.

From the NRO: After bobbing-and-weaving for nine minutes, Carney [Obama’s Press Secretary] finally says what everybody knows: the president won’t put his plan on paper because he doesn’t want it to become “politically charged” before a compromise can be reached. In other words, you’ve got to pass it to find out what’s in it.

$1 Trillion Budget Gimmick

House Budget Chairman Paul Ryan writes about Senator Reid’s Trillion-Dollar Gimmick

The $2.7 trillion debt-limit increase proposal offered by Senate Majority Leader Harry Reid contains a $1 trillion gimmick meant to disguise the plan’s shallowness on spending cuts. Supporters of the Reid plan are measuring their savings against a baseline that assumes the continuation of surge-level spending in Iraq and Afghanistan, even though the President has neither requested this funding nor signaled that he might request it. Instead, the President has signaled the opposite: a troop drawdown over the next few years. In other words, the Reid plan is claiming credit for “savings” that were already scheduled to occur, and for “cutting” spending that no one has requested.

Ryan’s article included a humorous flashback to a March 12, 2009 article at Washington Post, Paved With Magnificent Intentions.

Writing on the credibility of Obama’s budget assumptions in 2009, George Will concludes …

Although only a small fraction of the supposedly countercyclical stimulus will be spent by the end of the year, the budget assumes that by then the economy will have perked up, and that it will grow robustly — 3.2 percent, 4 percent and 4.6 percent — in the next three years. Growth supposedly will cut the deficit in half — growth and the $1.6 trillion “saved” by first assuming, and then “canceling,” a 10-year continuation of the surge in Iraq.

Why, one wonders, not “save” $5 trillion by proposing to spend that amount to cover the moon with yogurt and then canceling the proposal?

Obama’s Growth Estimates

  • 3.2% 2009
  • 4.0% 2010
  • 4.6% 2011

How credible was that?

Veto Credibility

The president has vowed to veto deficit cutting legislation if it contains a balanced budget amendment or if it does not go past the 2012 elections.

How credible is that threat? The correct answer is not at all. The veto threat is nothing but hot air because Reid will see to it that such bills will never make it out of the Senate.

Whatever does make it out of the House and Senate, Obama will sign. Thus, a veto is an imaginary threat.

With that backdrop, it’s time to rate the Obama, Reid, and Boehner Deficit reduction plans on a credibility scale.

10-Point Credibility Scale

  1. Golden
  2. Rock Solid
  3. Fudge
  4. Jello
  5. Marshmallow
  6. Cream Puff
  7. Nauseous
  8. Gaseous
  9. Imaginary
  10. Delusional

Scoring the Proposals

  • Given a $1.4 trillion deficit, the latest plan from Boehner to cut a minuscule $85 billion a year (and back-loaded at that) is somewhere between nauseous and gaseous. It’s no wonder that various Tea-Party members will not vote for it.
  • Obama’s plan is imaginary or delusional depending on whether or not the President actually believes he has a plan, when he doesn’t.
  • Parts of Senator Reid’s plan are gaseous and the rest is clearly imaginary.
  • In contrast, the gang-of-six $4 trillion deficit cutting plan has something of the consistency of Jello, fudge, or marshmallow depending on details that were never disclosed.

$4 trillion sounds like a lot but it is only $400 billion a year, while the deficit is $1.4 trillion. Thus it’s tough to give that plan a rating higher than Jello, and impossible to give it a rating higher than fudge.

At this late juncture, the best one can reasonably hope for is a nauseous resolution. Unfortunately, the odds now favor something between gaseous and imaginary with delusional a distinct possibility.

The higher the score, the lower the credibility, and the better for gold.

Mike “Mish” Shedlock
 http://globaleconomicanalysis.blogspot.com