American Debt Crisis: Charts, real causes, etc (is it really 202 trillion?)

Charting the American Debt Crisis

> Economic, Financial and Budget Crisis – what goes around comes around

 Economic Collapse, debt bondage, etc

 Economic Collapse, debt bondage,

deficient spending against future taxes, job loss, inflation/deflation, audit threats, etc

Super Rich Bankers and Corporate Elites, with Government Collusion, leading us into Massive Global economic and Financial Crisis, to further their super elite class agenda for their wealth creation& preservation

In my doctorate thesis in the 1990’s I had researched and wrote about how usury-interest based debt, the major aspect of the modern economic system with its fraudulent “National Bank” fractional banking system of “creating” and printing so called “money” and perpetuating the system by mortgages and personal and commercial  lending, etc,  essentially by debt bondage, and those usury-interest based “financial instruments” like bonds, junk bonds, etc,  [latter adding along the way the role of  Brent Woods institutions IMF WB etc], was leading the global economic system into massive financial collapse, all for the benefit of a super rich elite class  of bankers and government collaborators  (read fascism by definition), at the expense of the poor, working poor, and the middle class. Indeed it was a monumental claim, but backed by solid research and numerous economic and financial indicators. I clearly predicted (by many of these indicators) that the massive deception and fraud built into the interest-usury based debt system, the backbone of this global economic and financial system, is all a HUGE Anglo-USA financial asset bubble of debt instruments, and that, by all definitions, mathematics, logic and historical reality, the system will eventually collapse since it was not sustainable, like house  of cards, and line of dominoes, and a huge ponzi scheme.   The boom-bust debt and commercial cycle had to end in huge collapse when the inherent contradictions and inevitable unsustainable reaches the tipping point. This has been prophetically foretold by the Prophet Muhammad, peace and blessings be upon him and his family and followers, in many texts of scriptures of Islam, but we will here indicate one like when he said:

مَا أَحَدٌ أَكْثَرَ مِنْ الرِّبَا إِلَّا كَانَ عَاقِبَةُ أَمْرِهِ إِلَى قِلَّةٍ

There is no one that does a lot of “Riba” (usury and interest transactions, fraudulent borrowing and debt schemes etc) except that their final affair will be ruin and utter loss (i.e. including total collapse. bankruptcy, insolvency, etc). Reported by Ibn Majah (6/53) and authenticated by the scholars of Hadeeth sciences scholars (Historical Prophetic Narrations) like Sheikh al-Albani. This Muslim Ummah’s has a special trial, and one of the many forms of the trial of these times is in wealth, and following  behind this fraudulent globalinterest based debt structures, and in this also the Prophet Muhammad prophesized  in a specific warning, may the peace and blessing of Allah be upon him:

إِنَّ لِكُلِّ أُمَّةٍ فِتْنَةً وَفِتْنَةُ أُمَّتِي الْمَالُ

“For every Ummah (nation and community) there is a trial, and the trial of my Ummah is wealth.” [Reported by Tirmidhi, and authenticated by Sheikh al-Albani] Now it is really happening, with all the ugly global consequences. See some interesting news items below, for further investigation, reflection and repentance: a return to truth and justice. In the book This Time Is Different Eight Centuries of Financial Folly authors Carmen M. Reinhart and Kenneth Rogoff, meticulously looked at Eight Centuries of Financial Data, and proved conclusively that debt fueled expansions, based on usury (interest based) loans almost always end in financial ruin. As one review astutely observed: “… The common theme is that excessive debt accumulation by government, banks, corporations, or consumers often brings great risk. It makes government look like it is providing greater growth than it is, inflates housing and stock prices beyond sustainable levels, and makes banks seem more stable and profitable than they really are. Large-scale debt buildups make an economy vulnerable to crises of confidence … What did the authors learn from their data digging? Severe financial crises share three characteristics: 1) Declines in real housing prices … 2) The unemployment rate rises … 3) Government debt tends to explode … the biggest driver of this debt explosion is the collapse in tax revenues…” Sounds familiar? It should, because that’s the exact description of today’s debt crisis. Of course we know that it has its roots in the greed of the elite Bankers and Corporate leaders in collusion with the government, and that they have engineered the economy since WWII as a Brentwood’s (IMF –WB) Anglo-American petro-dollar driven economy, sustained by the great Ponzi scheme called the Federal Reserve System, and other factors. Now the roosters are coming home to roost.  As they say what goes around comes around. Just as the racism of imperial Europe came back to haunt Europe with the racism of “Aryanism” and the Nazis which imploded upon Europe with devastating results, the “Washington Consensus” and “Bilderberg ” and  “Davos” elites have set debt traps all over the third world for decades, which the elites of those counties have happily gotten themselves entrapped into by their own greed at the treacherous expense of their counties’ sovereignty and real local development for the working masses of citizens.  But now this debt trap is returning upon these elites of WC and B and D with the Greek Debt fiasco of the European Union, and with the Debt Crisis of the USA, all with devastating results upon the working masses and poor, so much devastation of the middle and working classes that the whole system is unsustainable. Is there a reason that this 30 year periods is the largest historical transfer of wealth from the middle classes and workers to the super rich, as documents and proven by many studies, starting roughly with Reagan and Thatcher trickle down thesis’s (help to make richer richer and it will trickle down to the others) and culminating in Bush tax breaks for the rich, and so many other aspects of this systemic fraud and theft made legal by the plutocracy (rule of rich) some people call democracy.         Sort of like the environment disaster: eventually there is a tipping point of pollution, over which, when tipped, the self cleaning mechanisms of the natural system begin to fail, and massive chemical changes begin to take place, and the system is eventually devastated from within. Who are the massive polluters in the system?  Sort of like the massive fish decline and who to blame: the fisherman on subsistence levels, or the corporate fishing fleets with gigantic fleets of ships and huge nets and tracking systems overfishing some species, for simple greed and disregard for the consequences on us all.      See also > HERE <><><>

Above a real picture of 207 million dollars horded

What is true wealth?

And here we have below what one billion and one trillion on 100 dollar bills looks like

1 Billion US Dollars
Now we’re getting serious! You’ll need some serious help if you think you can rob a bank for this much.

US one trillion dollars debt

One Trillion Dollars
Not a single person in the world that has this much money for themselves, and if they cashed out there probably isn’t even a bank that could. Besides, where would you keep it, it’s the size of a grid iron field!

US 15 trillion dollar debt

15 Trillion Dollars

One Trillion Dollars
Not a single person in the world that has this much money for themselves, and if they cashed out there probably isn’t even a bank that could. Besides, where would you keep it, it’s the size of a grid iron field!

US 15 trillion dollar debt

15 Trillion Dollars


 Robert Fisk: Bankers are the dictators of the West

Saturday 10 December 2011
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Writing from the very region that produces more clichés per square foot than any other “story” – the Middle East – I should perhaps pause before I say I have never read so much garbage, so much utter drivel, as I have about the world financial crisis.

But I will not hold my fire. It seems to me that the reporting of the collapse of capitalism has reached a new low which even the Middle East cannot surpass for sheer unadulterated obedience to the very institutions and Harvard “experts” who have helped to bring about the whole criminal disaster.

Let’s kick off with the “Arab Spring” – in itself a grotesque verbal distortion of the great Arab/Muslim awakening which is shaking the Middle East – and the trashy parallels with the social protests in Western capitals. We’ve been deluged with reports of how the poor or the disadvantaged in the West have “taken a leaf” out of the “Arab spring” book, how demonstrators in America, Canada, Britain, Spain and Greece have been “inspired” by the huge demonstrations that brought down the regimes in Egypt, Tunisia and – up to a point – Libya. But this is nonsense.

The real comparison, needless to say, has been dodged by Western reporters, so keen to extol the anti-dictator rebellions of the Arabs, so anxious to ignore protests against “democratic” Western governments, so desperate to disparage these demonstrations, to suggest that they are merely picking up on the latest fad in the Arab world. The truth is somewhat different. What drove the Arabs in their tens of thousands and then their millions on to the streets of Middle East capitals was a demand for dignity and a refusal to accept that the local family-ruled dictators actually owned their countries. The Mubaraks and the Ben Alis and the Gaddafis and the kings and emirs of the Gulf (and Jordan) and the Assads all believed that they had property rights to their entire nations. Egypt belonged to Mubarak Inc, Tunisia to Ben Ali Inc (and the Traboulsi family), Libya to Gaddafi Inc. And so on. The Arab martyrs against dictatorship died to prove that their countries belonged to their own people.

And that is the true parallel in the West. The protest movements are indeed against Big Business – a perfectly justified cause – and against “governments”. What they have really divined, however, albeit a bit late in the day, is that they have for decades bought into a fraudulent democracy: they dutifully vote for political parties – which then hand their democratic mandate and people’s power to the banks and the derivative traders and the rating agencies, all three backed up by the slovenly and dishonest coterie of “experts” from America’s top universities and “think tanks”, who maintain the fiction that this is a crisis of globalisation rather than a massive financial con trick foisted on the voters.

The banks and the rating agencies have become the dictators of the West. Like the Mubaraks and Ben Alis, the banks believed – and still believe – they are owners of their countries. The elections which give them power have – through the gutlessness and collusion of governments – become as false as the polls to which the Arabs were forced to troop decade after decade to anoint their own national property owners. Goldman Sachs and the Royal Bank of Scotland became the Mubaraks and Ben Alis of the US and the UK, each gobbling up the people’s wealth in bogus rewards and bonuses for their vicious bosses on a scale infinitely more rapacious than their greedy Arab dictator-brothers could imagine.

I didn’t need Charles Ferguson’s Inside Job on BBC2 this week – though it helped – to teach me that the ratings agencies and the US banks are interchangeable, that their personnel move seamlessly between agency, bank and US government. The ratings lads (almost always lads, of course) who AAA-rated sub-prime loans and derivatives in America are now – via their poisonous influence on the markets – clawing down the people of Europe by threatening to lower or withdraw the very same ratings from European nations which they lavished upon criminals before the financial crash in the US. I believe that understatement tends to win arguments. But, forgive me, who are these creatures whose ratings agencies now put more fear into the French than Rommel did in 1940?

Why don’t my journalist mates in Wall Street tell me? How come the BBC and CNN and – oh, dear, even al-Jazeera – treat these criminal communities as unquestionable institutions of power? Why no investigations – Inside Job started along the path – into these scandalous double-dealers? It reminds me so much of the equally craven way that so many American reporters cover the Middle East, eerily avoiding any direct criticism of Israel, abetted by an army of pro-Likud lobbyists to explain to viewers why American “peacemaking” in the Israeli-Palestinian conflict can be trusted, why the good guys are “moderates”, the bad guys “terrorists”.

The Arabs have at least begun to shrug off this nonsense. But when the Wall Street protesters do the same, they become “anarchists”, the social “terrorists” of American streets who dare to demand that the Bernankes and Geithners should face the same kind of trial as Hosni Mubarak. We in the West – our governments – have created our dictators. But, unlike the Arabs, we can’t touch them.

The Irish Taoiseach, Enda Kenny, solemnly informed his people this week that they were not responsible for the crisis in which they found themselves. They already knew that, of course. What he did not tell them was who was to blame. Isn’t it time he and his fellow EU prime ministers did tell us? And our reporters, too?


“It’s A Bought Tax Code. We’re Harvesting Trillions To Benefit Corporations Through Trade Agreements And We’ve Built A System That Allows These Same Corporations To Avoid Paying Taxes”


Raising the ceiling

In 30 years, the national debt has gone from just under $1 trillion to $14.3 trillion, and is projected to reach just under $21 trillion by 2016. Congress has passed new debt limits over the years that allow the government to keep running, and is currently preparing to debate whether to raise the ceiling this year.

A look at the national debt and the debt ceiling for the past 30 years.
SOURCE: Office of Management and Budget, White House. GRAPHIC: Tobey/The Washington Post. Published on April 18, 2011, 10:59 p.m.

What’s the debt ceiling, and why is everyone in Washington talking about it?

By Ariana Eunjung Cha, Monday, April 18, 7:18 PM

What’s the debt ceiling? The legal limit on borrowing by the federal government. Before 1917, Congress had to approve borrowing each time it came up. In order to allow for more flexibility as the nation entered World War I, lawmakers agreed to give the federal government blanket approval for most types of borrowing — as long as the total was less than an established limit.

A look at the national debt and the debt ceiling for the past 30 years.

A look at the national debt and the debt ceiling for the past 30 years.


SOURCE: Office of Management and Budget, White House. GRAPHIC: Tobey/The Washington Post. Published on April 18, 2011, 10:59 p.m.

What’s the debt ceiling, and why is everyone in Washington talking about it?

By Ariana Eunjung Cha, Monday, April 18, 7:18 PM

What’s the debt ceiling? The legal limit on borrowing by the federal government. Before 1917, Congress had to approve borrowing each time it came up. In order to allow for more flexibility as the nation entered World War I, lawmakers agreed to give the federal government blanket approval for most types of borrowing — as long as the total was less than an established limit.

A look at the national debt and the debt ceiling for the past 30 years.

A look at the national debt and the debt ceiling for the past 30 years.

Debate the budgetDebate the budgetWhich cuts, if any, go too far? Join the discussion
Why is this an issue now? The nation’s debt is inching closer to the legal limit of $14.3 trillion. According to Treasury Secretary Timothy F. Geithner, the ceiling could be breached as soon as May 16, though the government could take unconventional measures such as halting contributions to pension funds to delay that point until July 8. What happens if the debt ceiling is breached? If Congress does not increase the limit, borrowed funds would not be available to pay bills and the United States may be forced to default on its debt obligations. There’s no precedent for this situation. Treasury has never been unable to make payments as a result of reaching the debt limit. With a fragile global recovery counting on U.S. economic stability, the debt limit issue could roil international financial markets. Democrats and Republicans agree that if the debt limit is not raised we would be inviting economic catastrophe. So if both parties agree, why not just raise the limit? What is everyone arguing about? In the past, raising the debt ceiling has mostly been a perfunctory matter. The ceiling has been raised almost 100 times since it was established and has gone from less than $1 trillion in the 1980s to $6 trillion in the 1990s. The most recent time the ceiling was boosted was in February 2010. Legislation to raise the debt limit usually prompts partisan posturing about fiscal responsibility, but little real drama. This time is different. With the national debt at its highest point in 50 years compared with the size of the U.S. economy, the debate about the ceiling has become entwined in the larger issue about slashing the budget. The budget debate is shaping up around trying to balance two perhaps equally unpopular remedies: sharp cuts to popular government-funded programs and major tax increases. Republican lawmakers say that if they raise the limit they need a commitment from the White House for more spending cuts. The Obama administration has resisted the idea of including spending caps or other budget-process reforms in legislation to raise the debit ceiling, arguing that ensuring the government’s solvency is too important to be held hostage to other issues. How much money are we talking about? Under the spending plan President Obama submitted to Congress in February, lawmakers would have to raise the limit by nearly $2.2 trillion just to see the nation through next year. Under the more austere blueprint that House Republicans approved last week, the government would require about $1.9 trillion in fresh debt by October 2012 — a month before the next presidential election. Why does the United States have so much debt anyway? There are numerous reasons. Here are some major ones: Under President George W. Bush, the national debt soared to $4.36 trillion because of the cost of wars in Iraq and Afghanistan and new tax cuts, and again under Obama, an additional $3.9 trillion, because of the economic stimulus and decreased tax revenue during the recession.


The Chart That Should Accompany All Discussions of the Debt Ceiling

By James Fallows Jul 25 2011, 10:58 AM ET It’s this one, from yesterday’s New York Times. Click for a more detailed view, though it’s pretty clear as is. 24editorial_graph2-popup.gif It’s based on data from the Congressional Budget Office and the Center on Budget and Policy Priorities. Its significance is not partisan (who’s “to blame” for the deficit) but intellectual. It demonstrates the utter incoherence of being very concerned about a structural federal deficit but ruling out of consideration the policy that was largest single contributor to that deficit, namely the Bush-era tax cuts. An additional significance of the chart: it identifies policy changes, the things over which Congress and Administration have some control, as opposed to largely external shocks — like the repercussions of the 9/11 attacks or the deep worldwide recession following the 2008 financial crisis. Those external events make a big difference in the deficit, and they are the major reason why deficits have increased faster in absolute terms during Obama’s first two years than during the last two under Bush. (In a recession, tax revenues plunge, and government spending goes up – partly because of automatic programs like unemployment insurance, and partly in a deliberate attempt to keep the recession from getting worse.) If you want, you could even put the spending for wars in Iraq and Afghanistan in this category: those were policy choices, but right or wrong they came in response to an external shock. The point is that governments can respond to but not control external shocks. That’s why we call them “shocks.” Governments can control their policies. And the policy that did the most to magnify future deficits is the Bush-era tax cuts. You could argue that the stimulative effect of those cuts is worth it (“deficits don’t matter” etc). But you cannot logically argue that we absolutely must reduce deficits, but that we absolutely must also preserve every penny of those tax cuts. Which I believe precisely describes the House Republican position. After the jump, from a previous “The Chart That Should…” positing, an illustration of the respective roles of external shock and deliberate policy change in creating the deficit. UPDATE: Many people have written to ask how the impact of the “Bush-era tax cuts,” enacted under George W. Bush and extended under Barack Obama (with the help, as you will recall, of huge pressure from Senate Republicans), is divided between the two presidents. I don’t know and have written the creators of the chart to ask. (They have responded to say: it indicates the legacy effects of the changes made by each Administration. For instance, neither Bush nor Obama is credited with the entire cost of Pentagon spending or entitlements, but only the changes his Administration made, up or down. By this logic the long-run effect of tax cuts initiated by Bush is assigned to him, as any long-run effect of savings he initiated would be too.) But to me it doesn’t matter. As I said above, the point of the chart really isn’t partisan responsibility. It is the central role of those tax cuts in creating the deficit that is now the focus of such political attention. Call them the “Obama-Extended Tax Cuts” if you’d like: either way, a deficit plan that ignores them fails a basic logic, math, and coherence test. ___ <><><>

10 Myths That Politicians Want You to Believe

NEW YORK (TheStreet) — The financial system is on the brink of collapse after trillions in bad loans were issued by greedy bankers. If you were a U.S. political figure, would you:

A.) Tell everyone to suck a lemon, and (maybe) let the economy implode. B.) Fire the bankers who made the bad loans, prosecute the guys who broke the law and guarantee a portion of the loans in a grin-and-bear-it show of good faith. C.) Reward the bankers who made the bad loans with billions of dollars in bonuses and guarantee every loan with U.S. taxpayer money (with interest, because we borrowed the money from China). If you answered C, then maybe you should run for office, support laws that funnel billions to insolvent companies, retire from politics and start working for one of the companies you helped bail out. Heck, that’s what former Republican-senator Judd Gregg did (newly hired by Goldman Sachs). But don’t worry, the revolving door between Wall Street and government is just a “myth”, and here are 10 actual myths that politicians want you to believe:

Yes, quantitative easing is “printing” money. No, it won’t help the economy.

10. Quantitative Easing Helps the Economy

Make no mistake, quantitative easing is a gift to bankers and nothing else. Let’s take a deeper look: Quantitative easing is when the United States’ central bank, the Federal Reserve, buys U.S. Treasury bonds.

  • Treasury bonds are a future obligation of the United States, paid out with Federal Reserve notes (dollars).
  • Federal Reserve notes are a current obligation of the United States, redeemable for goods and services.

If the Federal Reserve purchases bonds directly from the United States Treasury, they are electronically creating dollars (current obligations) in exchange for future obligations. This is inflationary if the amount of obligations (money) is increasing faster that the amount of capital (goods, services, products and ideas). But the Federal Reserve doesn’t buy bonds from the Treasury, it buys them from “primary dealers.” Primary dealers are a network of banks (including Goldman Sachs(GS_), JPMorgan Chase(JPM_) and Citigroup(C_)) that are obligated to buy bonds from the U.S. and serve as a trading partner with the Federal Reserve. So Goldman Sachs can buy a bond from the Treasury on Monday and sell it to the Federal Reserve on Tuesday (at a profit) — the blog ZeroHedge has named this game “Flip That Bond.” Bottom Line: If Americans weren’t already saddled in debt, quantitative easing mightwork. But as things stand, the Federal Reserve is giving bankers risk-free trading profits and causing food and gas prices to surge (making it even harder for Americans to get out of debt).

9. Republicans Are Fiscal Conservatives

Since 1968, the U.S. national debt accelerated fastest under President Ronald Reagan until President Obama claimed this distinction. The national debt does not take inflation into account, so perhaps we should look at inflation-adjusted deficits instead. According to research by Dave Manuel, From 1946-2010: Democratic President

  • Total Years: 29
  • Average Inflation Adjusted Deficit: $150.73 billion

Republican President

  • Total Years: 36
  • Average Inflation Adjusted Deficit: $202.28 billion

A president is not solely responsible for the nation’s deficit, but he does sign the budget into law. And Republicans have put their John Hancock on some really short-sighted budgets while preaching conservatism.

8. President Obama Is an Enemy of Wall Street

When he was on the campaign trail, then-candidate Obama had some tough words for those who repealed Glass-Steagall (the law that prevented banks from acting like hedge funds), calling the process of deregulating banks a “legal but corrupt bargain.” But get a load of this:

President Obama is the best friend Wall Street could have.

7. The Financial System Is Safer Today Than in 2008

The Federal Reserve, which neglected to use regulatory powers to rein in the last crisis,has been awarded more regulatory powers. The majority of “too big to fail” banks are even bigger. And while the government is guaranteeing fewer mortgages through Fannie Mae(FNMA_) and Freddie Mac(FMCC_), it’s made up the difference by guaranteeing mortgages through the Federal Housing Authority. “Good as cash” money market funds are full of mortgage-backed securities backed by the government (who needs to borrow money to back them up). Meanwhile, high-frequency trading is alive and well and the causes of the Flash Crash have not been addressed. In fact, the solution of stock-specific “circuit breakers” (the percentage a stock can plummet before it stops trading) will guarantee future crashes. Here’s why: Having a defined breaking point provides high-frequency traders with an arbitrage window: If they can create an event that causes a stock to temporarily plummet, they can use “sweep to fill” orders (a special type of order used to buy stock rapidly, in small increments) to buy the stock back up to fair value. The size of the circuit breaker limits the size of the profit, but this removes the uncertainty of what trades will be honored or killed.

6. The ‘Bush Tax Cuts’ Increased Tax Revenue

Washington has always had a spending problem, but since the “Bush Tax Cuts,” we have a revenue problem as well. From 1990 to 2000, U.S. tax revenue had a period of exceptional growth. Following the 2001 tax cuts, revenue plummeted — then recovered — then plummeted again. You can attribute the sustained revenue growth of the 1990s to the fact that the decade didn’t have a recession, but if you expand the timeline to 1965, we’ve had numerous recessions without substantial drops in revenue.

5. ‘No One’ Could Have Seen the Financial Crisis Coming

No one — except for everyone who did. TheStreet has interviewed numerous economists and money managers who have been pounding the table for years.

4. If You Support Capitalism, You Support Big Business

Does capitalism ensure meritocracy? Well, let’s analyze an unnamed company: A small, centrally located corporate management of fewer than 50 people plans the operations of hundreds of thousands of “associates.” Corporate managers can make more money in one hour than an associate makes in one year. The majority of corporate managers have never worked as an associate. The benefits of corporate managers and associates are very, very different. Corporate managers are trained to respond to dissent by using propaganda to turn one associate against another. Corporations and governments are very similar entities — if a politician praises a centrally-planned business while chastising a centrally-planned government, or the other way around, be skeptical. Author’s Note: I have edited point #4 to remove references to “socialism,” instead, using the phrases: “meritocracy” and “central planning.” As originally written, I confused concepts found within a political system with the system itself.

3. Republicans Are a Bunch of Fat-Cat Millionaires

Well, this is true — but a “half-truth” in the context it is usually told: Both Republicans and Democrats are a bunch of fat cats. The average congressperson is a millionaire, and if you break down the 50 richest members of Congress by political party, here’s the split: Republican: 22 Democrat: 28 When it comes to political contributions, Wall Street gives both parties lots of love (recently favoring the Democratic party).

2. The U.S. Has the Highest Standard of Living in the World

According to the United Nations’ most recent Human Poverty Index (from 2008), the U.S. standard of living ranks 17 of 19 among developed countries. The ranking is a composite of life expectancy, literacy, long-term unemployment and income equality — while this data is over three years old, it’s not unthinkable that our situation has worsened in the aftermath of the Great Recession.

1. U.S. GDP Is Growing

U.S. GDP has increased by 4.26% from 2007 to 2010, according to data compiled by theU.S. Bureau of Economic Analysis. In the same period of time, the U.S. national debt has increased by 61.6%, according to the U.S. Treasury. Looking at these numbers, you don’t need to be an economist to see that something is very, very wrong. Charles Hugh Smith makes an excellent case that questions the viability of a debt-fueled U.S. recovery, you can read his article here.

How You Can Fight for the Truth

America is still a great place to live — we’ve just lost our way, misled by Republicans and Democrats alike. If you’re fed up with the way things are and you want to make a real change, don’t buy into the hype around political parties. Political parties are like unions:They do the absolute minimum to keep constituents happy while doing everything they can to raise money and hold on to power. In the days of the Internet and free-flowing information, there is never a good reason to vote along party lines. Vote for the best man or woman — he or she might be a Democrat, Republican or independent. When people say things that make you uncomfortable, they might be onto something and are at least worth listening to. Bill Bernbach, one of America’s most innovative businessmen, used to carry a slip of paper in his pocket. It read: “Maybe he’s right.” — Written by John DeFeo in New York City


Posted at 12:44 PM ET, 04/18/2011

Lawmakers seize on Standard & Poor’s outlook in debt-ceiling debate

By Felicia Sonmez
A stock trader works on the floor of the New York Stock Exchange on March 18, 2011. (Anonymous – AP) Democrats and Republicans reacted swiftly on Monday to the news that Standard & Poor’s had downgraded its outlook on America’s long-term credit rating from “stable” to “negative,” with each party seizing on the warning to back up its position in the escalating debt-ceiling debate. Republicans argued that the news illustrates the gravity of the country’s debt crisis and the need for any debt ceiling vote to be accompanied by a plan to tackle the country’s longer-term fiscal problems. “Serious reforms are needed to ensure America’s fiscal health, and today S&P sent a wake-up call to those in Washington asking Congress to blindly increase the debt limit,” House Majority Leader Eric Cantor (R-Va.) said in a statement. “Today’s announcement makes clear that the debt limit increase proposed by the Obama administration must be accompanied by meaningful fiscal reforms that immediately reduce federal spending and stop our nation from digging itself further into debt.” Sen. Mark Kirk (R-Ill.), a former five-term House member who won election last fall to Obama’s former Senate seat, argued that the coming debt-limit vote “offers the chance to save the dollar and our economy.” “If we miss this chance or if congress sends the president a blank check, then the following quote from S&P is a stark warning for our future: ‘We believe there is a material risk that U.S. policymakers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013; if an agreement is not reached and meaningful implementation is not begun by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns,’” Kirk said in a statement. Meanwhile, a group of more than 100 House Democrats led by Rep. Peter Welch (D-Vt.) on Monday reiterated its call for a “clean” debt limit vote, or a vote with no conditions attached. In a statement, Welch contended that the New York Stock Exchange’s sharp drop in reaction to the Standard & Poor’s ratings change Monday morning could be a harbinger of worse things to come if a political showdown on the debt limit raises doubts about whether the country will fulfill its financial obligations. “America pays its bills,” Welch said. “I hope Majority Leader Cantor and those in Congress seizing upon debt ceiling pressure as a ‘leverage opportunity’ are listening to the markets today and thinking twice about their risky strategy. … By playing brinksmanship with the debt ceiling, he is willfully risking the full faith and credit of the United States of America. The markets have doubts about America’s ability to get its fiscal house in order. And they are right. If Mr. Cantor persists in playing politics with the debt limit he will be held accountable for unleashing the financial hounds of hell.” The group of 114 House Democrats, comprised of mostly liberal members, sent a letter Monday to House Democratic leaders urging them to convene a party caucus to establish a Democratic position in favor of a clean debt limit extension. Even if House Democrats stake out a firm position on a clean debt limit vote, it’s not certain Obama would join them. House Speaker John Boehner (R-Ohio) told reporters last weekafter a meeting at the White House that Obama said he’d be open to proposals that would not include a clean vote. The Treasury Department estimates that the country will reach its debt ceiling by mid-May, although the government could take measures to extend to early July the drop-dead date for a vote.

By Felicia Sonmez  |  12:44 PM ET, 04/18/2011 <><><> <><> <> Deutsche Bank: The Global Sovereign Debt Crisis Will Last The Entire Decade, And The US Will Cap It Off Joe Weisenthal | Apr. 19, 2011, 10:43 AM | 2,511 | 8

Image: David Blackwell via Flickr The reactions to S&P’s downgrade continue to be interesting and varied. Deutsche Bank’s Jim Reid speaks in particularly dramatic terms about it: Yesterday may never quite make it as a “where were you when you heard the news ….” type of day but in economic history it may eventually prove to be an important landmark. April 18th 2011 was the day that a super cycle of 30 years of private and then public sector leverage across the Developed World finally reached arguably the highest quality part of its capital structure as the US saw its AAA rating put on negative outlook by S&P. For the record S&P have rated the US at AAA since 1941 with the outlook stable since such a system was introduced in the early 1990s. Yesterday’s action now leaves us with 18 AAA rated Sovereigns with a Stable outlook. Technically speaking, the US’s AAA rating has been here before but very briefly when the Clinton-Gingrich shutdown incident back in 1995/1996 saw Moody’s place some US government bonds on review for downgrade. Fitch’s AAA rating on the US was also on Negative Watch in November 1995 until Spring 1996. This was largely due to a budget impasse rather than a structural bigger picture problems such as the one today. The reality is that this story is more about headlines, in our view, than a story with particularly great immediate consequences. However we believe the pressure will increasingly build on the US until a convincing fiscal plan is laid out and acted upon. As we discussed in yesterday’s EMR, the Global Sovereign crisis in probably still in the early stages and is likely to run through most of this decade, and we will be looking at the US for a possible denouement to the unfolding Sovereign issues still to play out globally. Pretty good, though we still like UBS’ take better Read more:  <> <><>

Global Insiders Warned:  U.S. Debt Crisis Could Explode at Anytime

Economic Policy Journal ^ | 1/25/2011 | Robert Wenzel

Posted on Tuesday, January 25, 2011 8:26:31 PM by FromLori Global insiders are starting to gather in Davos, Switzerland for this week’s World Economic Forum. JPMorgan Chase’s Jamie “Obama’s Favorite Banker” Dimon will be there, as will be Treasury Secretary Geithner. When attendees arrive and check in, they will be given their badges and a copy of a special Davos magazine, prepared especially for the event. In the magazine will be an article by Robert Rubin. He is an insider’s insider. Participants will read the article. Rubin is so wired in that when insiders think of the people who are operating behind a president, it is names like Rubin’s that come to mind. Jacob Lew the new director of the Office of Management and Budget is connected to Rubin. The old director of OMB, Peter Orszag, was connected to Rubin. The new head of the National Economic Council, Gene Sperling, is connected to Rubin, as was the previous NEC head, Larry Summers. It goes on. Rubin served as Treasury Secretary under Bill Clinton. He was former co-CEO of Goldman Sachs. He is co-Chairman of the Council on Foreign Relations. Got the idea? Insiders will read what he has written. The first part of the article is about what the United States needs to do to get the economy going. It is a desperate shot taken at the buzzer from beyond half court. Rubin knows this. He is also a Keynesian, so his recommendations call for more spending that he hopes can be reversed in two or three years, once the economy “gets going”. It won’t work. The shot will fall short of the rim. The second part of the article is much more significant. It is the breakdown of what is going wrong in the United States. An abbreviated version of the “Davos Warning” has been printed in FT. Rubin wrote (my emphasis): The risks of our fiscal position are serious and multiple. And while these risks become more severe over time as our debt position worsens, all of these either have begun to materialise or could do so in the near term, so we should act now. What multiple shapes could the crisis take? Rubin writes to the Davos insiders (My emphasis): To be specific about the risks, deficits could crowd out private investment, which could choke off a private investment recovery. Moreover, the capacity for public investment is already diminishing, and could be exacerbated by growing entitlement costs and mounting interest payments… Most dangerously, there is a risk of disruption to our bond and currency markets from the fear of much higher interest rates due to future imbalances or from fear of inflation because of efforts to monetise our debt. The result could be significant deficit premiums on bond market interest rates, seriously impeding private investment and growth or, worse, acute bond market declines that cause an economic crisis. This could also start in the currency markets. While the likelihood of major market disruptions is greater in the intermediate and longer term, the shorter-term risks are also real. Market psychology can change unexpectedly and dramatically – either on its own or because of some catalyst – when underlying conditions are unsound. Possible catalysts are a debt ceiling confrontation, currency market problems, and state deficits… For emphasis, I remind you this is a former Treasury Secretary of the United States writing. One of President Obama’s top outside advisers. So does Rubin think there is an easy solution to the debt problem? He writes: Growing out of our fiscal morass over time without policy action would require inconceivable rates of growth. Muddling through with unexpectedly favourable developments is extremely unlikely. The strong probability is that either we make the hard decisions so vital to our future, or we will be forced at some point to act more harshly and with less time to thoughtfully set priorities. Our long history of political and economic resilience should augur well. But these decisions are extremely difficult, and the question is whether we have the political will to face up to what we must do. There you have it, from a man as inside as you can get: …our structural fiscal trajectory is unsustainable with multiple, serious risks (while at the same time, our large cyclical deficits are exacerbating debt levels and interest costs)… Bottom line: The United States is in serious financial and economic trouble. It is only a matter of time before the crisis explodes. Don’t take my word for it, just re-read what the former Treasury Secretary has to say. It’s all there.

TOPICS: Business/EconomyGovernment KEYWORDS: davosdebtdeficiteconomyrubin<> <><>

Is Compounding Debt Mankind’s Kryptonite?

Economics / Global Debt CrisisApr 10, 2011 – 10:28 AM By: Submissions Economics Best Financial Markets Analysis ArticleSilverDoctors writes: Throughout history, mankind has struggled to end the boom/bust economic cycle, and usher in a new age of economic prosperity.  The middle ages saw monarchy/ feudal/ serf systems.  Marx and Lenin believed economic prosperity could be achieved through socialism or communism- complete sharing of economic wealth and resources.  The modern Western world-influenced by the likes of Adam Smith, Keynes, and Friedman, has tried to achieve this through capitalism- the private ownership of goods with the incentive for personal profit.   The Chinese have developed a modern hybrid of capitalism and communism.  Hard money advocates believe fiat currency is the issue, and a return to sound money such as gold and silver will finally usher in the era of economic prosperity. Each of these economic systems has been used numerous times, and all have miserably failed at creating uninterrupted growth and prosperity.   The end result is always a concentration of wealth and capital among a small percentage of elite at the expense of the rest of the population.   This wealth and capital inequality fueled by debt continues to build until a tipping point is reached, and the economy collapses.  This endgame always develops in one of two scenarios.

  1. Deflationary collapse- the debtors reach a point where they can no longer service their debt payments, and they default on their obligations.
  2. Hyper-inflationary collapse- the debtors lose confidence in the value of their currency, and rush to dump their currency holdings.  A positive-feedback loop is initiated, and the panic continuously intensifies until a complete collapse is reached.The system then resets and the process begins again.The reason no economic system ever developed by mankind has been able to eliminate these cycles can be summed up in two words: Debt, and Interest. Let’s look at a simple example of why debt and compounding interest result in an unsustainable increase in debt, which must eventually default or be inflated away.Suppose you lived 4600 years ago when the pyramids at Giza were being built, and you loaned Pharaoh  $1 at 1% interest to complete his tomb (for simplicity’s sake we’ll think in terms of dollars instead of the ancient Egyptian currency unit).  By 2011, the compounded debt would have reached 128,092,932,174,404,630,000.00. So after 4600 years, $1 at 1% interest compounds to a debt of 128 quintillion, 92 quadrillion, 932 trillion, 174 billion, 404 million, 6 hundred 30 thousand dollars.  The total value of every asset in the world is roughly $140 Trillion. In other words, in only 4600 years, $1 at 1% interest compounds to 91,500x the value of the entire earth. Clearly, even at only 1%, compounding interest is unsustainable.  It does not matter if the currency is fiat, gold/silver, floating, or any other devisable currency. It does not matter if the economic model is capitalism, socialism, communism, fascism, or any other.  Compounding interest makes every currency and system unsustainable over the long term.Is debt and interest mankind’s kryptonite? Are we cursed to forever continue the wealth disparity, boom/bust credit cycles due to compounding interest? Is there no solution to prevent the inevitable collapse that compounding interest ensures?There is only one solution to the boom/ bust credit cycle: the economic system developed by our Creator.The Creator’s system? Gold and silver based money to be lent without interest, with a debt jubilee every 50 years.In Leviticus (Old Testament), our Creator describes the only stable and prosperous economic system ever known to mankind.Silver (money) was not to be lent at interest

Every 50th year was commanded to be a Jubilee year, in which: -All debts were to be forgiven -All slaves were to be freed -All farmland was to revert back to its original owner (or family) -The land was to rest, no crops were to be planted or harvested This marvelous economic model is the only system known to man in which debt and overconsumption will not build to the point of an unsustainable collapse.  The expectation of the coming Jubilee year forces constraint by lenders.  The Jubilee freedom and debt forgiveness prevents an unsustainable rise of debt.  It prevents an elite class of citizens from continually increasing their wealth, power, and influence over the rest of the population through the tool of debt and interest.  It automatically eliminates the “Vampire Squid” bankster class’ ability to control the economy through debt.   The Creator’s economic model achieves the goal of communism with the freedom of a laissez-faire system. While a return to a gold and silver standard would be a vast improvement from our current fiat monetary system, a pure hard money currency alone cannot end the boom/bust credit cycle and the associated debt collapse.  A return to our Creator’s perfect monetary system of hard money, no interest, and Jubilee debt forgiveness every 50th year could usher in a true golden era, and provide sustainable prosperity for the entire nation. Compounding debt does not have to be mankind’s kryptonite. SilverDoctors SilverDoctors specializes in precious metals commentary and trading, found at © 2011 Copyright SilverDoctors – All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors. © 2005-2011 – The Market Oracle is a FREE DailyFinancial Markets Analysis & Forecasting online publication. <><>

The Great Global Debt Shift

Interest-Rates / Global Debt CrisisJan 24, 2011 – 03:56 PM By: John_Browne Interest-Rates If one were asked to describe the major global economic changes that have unfolded since the financial crisis began, a good starting place would be the massive shift of debt from the private to the public sector. Attempting to arrest a deepening crisis, governments all around the world have bailed out businesses and companies by transferring bad debts to the public books. Although these moves have provided some current stability (after all, governments are much less likely to default), the long-term consequences may be dire. Two of the world’s largest economies, the EU ($16 trillion) and the US ($14 trillion), have become the leading practitioners of private-to-public debt shifting. The US has assumed the debts of banks, insurers, mortgage holders, and even entire industrial sectors. The European Union has done the same for entire states. The resulting public debt levels are, predictably, placing strains on both the dollar and the euro. Worse still, the bailouts have created a spirit of apathy toward debt accumulation. Western governments have embarked on a debt binge for the ages. Already, the credit ratings of the United States and some of the EU’s core countries, such as France and the UK, are being questioned. While this socialization of private debt has created deep citizen resentment, it remains to be seen whether political pressure is enough to hold back the tide. In the US, the forces of fiscal restraint appear to have the upper hand at present; but, this late in the game, it is far from certain that the newly elected fiscal hawks will be able to avert civil unrest and debt default. It is worth noting that the debt shift has offered some near-term benefits. Relieved of repayment anxiety, many companies have posted very promising earnings reports in recent months (one needs to only glance at Detroit). Despite continued demand weakness, these companies have worked hard to improve their balance sheets and raise operating margins. The resulting rally in share prices has given rise to a belief that recovery is at hand. However, despite buoyant share prices, unemployment continues at dangerously high levels, depressing tax revenues and leading to much greater entitlement spending. This has made public debt levels rise even faster. Total world direct sovereign debt, excluding guarantees and unfunded medical and pension obligations, is some $41.6 trillion dollars. When the $2.9 trillion owed by global municipalities is included, total direct public sector debt is over $50 trillion. Against this total, even the wealth of cash-rich nations such as China ($2.85 trillion in foreign-exchange reserves) and Japan ($1.1 trillion in reserves) pale into insignificance. With so little credit to soak up the future financing needs of the US and the EU, it is no wonder that both their currencies are coming under pressure. It should be no surprise that Chinese President Hu began his state visit to the US by warning that the debased dollar was causing much of the world’s monetary problems – and was thus no longer credible as the world’s reserve. Once unshielded by that great privilege, I forecast that the US dollar will plummet. In many ways, the euro may fare little better. The EU has organized a $1 trillion rescue package for its smaller members, but, in practice, there is not enough money for all the troubled peripherals, let alone a core state like France or Spain. Last week, the EU suggested that Greece should be allowed to default and restructure much of its debt. The Irish Times reported that the EU has allowed Ireland to print its own euros to settle the debts of its banks. Will it allow Portugal, Spain, Belgium, Italy and France to do the same? If so, what credibility will remain for the euro? Possible because a major currency collapse is unprecedented in living memory, investors have been slow to react. While the markets are calm at present, we mustn’t forget that the nature of panic is that it is sudden. It can erupt quickly and overwhelm the unprepared. When it does, even supposedly rock-solid assets like Treasury bonds may be discounted severely. In such a climate, gold and silver are as faithful as Old Yeller. For a more in depth analysis of the inherent dangers facing the U.S. economy and the implications for U.S. dollar denominated investments, read my new book “Crash Proof: How to Profit from the Coming Economic Collapse.” Click here to order a copy today. By John Browne Euro Pacific Capital John Browne is the Senior Market Strategist for Euro Pacific Capital, Inc.  Mr. Brown is a distinguished former member of Britain’s Parliament who served on the Treasury Select Committee, as Chairman of the Conservative Small Business Committee, and as a close associate of then-Prime Minister Margaret Thatcher. Among his many notable assignments, John served as a principal advisor to Mrs. Thatcher’s government on issues related to the Soviet Union, and was the first to convince Thatcher of the growing stature of then Agriculture Minister Mikhail Gorbachev. As a partial result of Brown’s advocacy, Thatcher famously pronounced that Gorbachev was a man the West “could do business with.”  A graduate of the Royal Military Academy Sandhurst, Britain’s version of West Point and retired British army major, John served as a pilot, parachutist, and communications specialist in the elite Grenadiers of the Royal Guard. More importantly make sure to protect your wealth and preserve your purchasing power before it’s too late. Discover the best way to buy gold at , download my free research report on the powerful case for investing in foreign equities available at , and subscribe to my free, on-line investment newsletter at<><> <><><>

“Deficit Terrorism” and Economic Warfare

All the Perks are going to Wall Street, while Main Street slips into Debt Slavery

by Ellen Brown Global Research, June 30, 2010 Web of Debt Wall Street banks have been saved from bankruptcy by governments that are now going bankrupt themselves; but the banks are not returning the favor.  Instead, they are engaged in a class war, insisting that the squeezed middle class be even further squeezed to balance over-stressed government budgets.  All the perks are going to Wall Street, while Main Street slips into debt slavery.  Wall Street needs to be made to pay its fair share, but how? The financial reform bill agreed to on June 25 may have carved out some protections for consumers, but for Goldman Sachs and the derivatives lobby, the bill was a clear win, leaving the Wall Street gambling business intact.  In a June 25 Newsweek article titled “Financial Reform Makes Biggest Banks Stronger,” Michael Hirsh wrote that the bill “effectively anoints the existing banking elite. The bill makes it likely that they will be the future giants of banking as well.” The federal government and Federal Reserve have advanced literally trillions of dollars to save the big Wall Street players, to the point where the government’s own credit rating is in jeopardy; but Wall Street has not had to pay for the cleanup.  Instead, the states and the citizens have been left to pick up the tab.  On June 17, Time featured an article by David von Drehle titled “Inside the Dire Financial State of the States,” reporting that most states are now facing persistent budget shortfalls of a sort not seen since the 1930s.  Unlike the Wall Street banks, which can borrow at the phenomenally low fed funds rate of .2% and plow that money back into speculation, states don’t have ready access to credit lines.  They have to borrow through bond issues, and many states are so close to bankruptcy that their municipal bond ratings are collapsing.  Worse, states are not legally allowed to default.  Unlike the federal government, which can go into debt indefinitely, states must balance their budgets; and they cannot issue their own currencies.  That puts them in the same position as Greece and other debt-strapped European Union countries, which are forbidden under EU rules either to issue their own currencies or to borrow from their own central banks. States, of course, don’t even have their own state-owned banks, with one exception — North Dakota .  North Dakota is also the only state now sporting a budget surplus, and it has the lowest unemployment and mortgage delinquency rates in the country.  As von Drehle observes, “It’s a swell time to be North Dakota .” But most states are dealing with serious, chronic defaults, putting them in the same debt trap as Greece : they are being forced to lay off workers, sell public assets, and look for ways to squeeze more taxes out of an already over-taxed populace.  And their situation is slated to get worse, since the federal government’s stimulus package will soon be cut, along with assistance to the states. The federal government is not only leaving the states high and dry but is threatening to impose even more taxes on their beleaguered citizens.  Paul Volcker, former Federal Reserve Chairman and current White House economic adviser, said in April that Congress needs to consider a Value Added Tax (VAT) – a tax on various stages of production of consumer goods.  A VAT of 17.5% is now imposed in Britain , and 20% is being proposed; while some EU countries already have a VAT as high as 25%.  In Europe, at least the citizens get something for their money, including federally-funded health care; but that is not likely to happen in the U.S., where even a “public option” in health care is no longer on the agenda.  The VAT hits the lower and middle classes particularly hard, since they spend most of their incomes on consumables.  The rich, on the other hand, put much of their money into speculative trades, and those sales are not currently taxed. Business Cycle or Class War? Ismael Hossein-Zadehi, who teaches economics at Drake University in Iowa , calls the whole economic crisis a class war.  What is being billed as public debt began as the private debt of financial speculators who offloaded it onto the public.  The governments that bailed out these insolvent speculators then became insolvent themselves; but the bailed-out banks, rather than lending a helping hand in return, have demanded their pound of flesh, with payment in full.  The perpetrators are blaming the victims and insisting on “fiscal responsibility.”  Wall Street bankers are dictating the terms of repayment for debts they themselves incurred. “Fiscal responsibility” means cutting spending, something that is inherently deflationary during a recession, as seen in the disastrous Depression-era policies of President Herbert Hoover.  Not that it was solely a Republican error.  In 1937, President Franklin Roosevelt also cut public spending, tipping the economy back into recession.  Spending cuts cause tax revenues to shrink, which results in more spending cuts.  Contrary to what we have been told, national governments are not like households.  They do not have to balance their budgets and “live within their means,” because they have the means to increase the money supply.  They not only have the means, but they must engage in public spending when the private economy is shrinking, in order to keep the wheels of the economy turning.  Virtually all money now originates as bank-created credit or debt; and today the money supply has been shrinking at a rate not seen since the 1930s, because the banking crisis has made credit harder and harder to get. Instead of “reflating” the collapsed economy, however, national governments are insisting on “fiscal responsibility;” and the responsibility is all being put on the states and the laboring and producing classes.  The financial speculators who caused the debacle are largely getting off scot free.  They not only pay no tax on the purchase and sale of their “financial products,” but they pay very little in the way of income taxes.  Goldman Sachs paid an effective income tax rate of only 1% in 2008.  Prof. Hossein-Zadehi writes: “It is increasingly becoming clear that the working majority around the world face a common enemy: an unproductive financial oligarchy that, like parasites, sucks the economic blood out of the working people, simply by trading and/or betting on claims of ownership. . . . The real question is when the working people and other victims of the unjust debt burden will grasp the gravity of this challenge, and rise to the critical task of breaking free from the shackles of debt and depression.” Working people don’t rise to the task because they have been propagandized into believing that “fiscal austerity” is something that needs to be done in order to save their children from an even worse fate.  What actually needs to happen in a deflationary collapse is to spend more money into the system, not pull it back out by paying off the federal debt; but the money needs to go into the real economy – into factories, farms, businesses, housing, transportation, sustainable energy systems, health care, education.  Instead, the stimulus money has been hijacked, diverted into cleaning up the toxic balance sheets of the financial gamblers who propelled the economy into its perilous dive. Evening Up the Score While Congress caters to the banks, the states have been left to fend for themselves.  Where is the money to come from to pull off the impossible feat of balancing their budgets?  Bleeding a VAT tax out of an already-anemic working class is more likely to kill the patient than to alleviate the disease.  “Unlike EU countries, where the VAT is the largest single source of tax revenue,” notes Professor Randall G. Holcombe in a recent study, “the states of the United States already tax the VAT tax base with their sales taxes.”  This doubling down on the same base would not only reduce the amount of money states are able to raise, but it would seriously hinder VAT’s role as a money generator.  By 2030, says Prof. Holcombe, this effect would have offset any increase in government revenue from the VAT. A more viable and more equitable solution would be to tap into the only major market left on the planet that is not now subject to a sales tax – the “financial products” that are the stock in trade of the robust financial sector itself.  A financial transaction tax on speculative trading is sometimes called a “Tobin tax,” after the man who first proposed it, Nobel laureate economist James Tobin.  The revenue potential of a Tobin tax is huge.  The Bank for International Settlements reported in 2008 that total annual derivatives trades were $1.14 quadrillion (a quadrillion is a thousand trillion).  That figure was probably low, since over-the-counter trades are unreported and their magnitude is unknown.  A mere 1% tax on $1 quadrillion in trades would generate $10 trillion annually in public funds.  That is only for derivatives.  There are also stocks, bonds and other financial trades to throw in the mix; and more than half of this trading occurs in the United States . A Tobin tax would not generate these huge sums year after year, because it would largely kill the computerized high-frequency program trades that now compose 70% of stock market purchases.  But that is a worthy end in itself.  The sudden, thousand-point drop in the Dow Industrial Average on May 6 showed the world how vulnerable the stock market is to manipulation by these sophisticated market gamblers.  The whole high-frequency trading business needs to be stopped, in order to protect legitimate investors using the stock market for the purposes for which it was designed: to raise capital for businesses.  As Mark Cuban observed in a May 9 article titled “What Business Is Wall Street In?”: “Creating capital for business has to be less than 1pct of the volume on Wall Street in any given period. . . . My 2 cents is that it is important for this country to push Wall Street back to the business of creating capital for business. Whether it’s through a use of taxes on trades, or changing the capital gains tax structure so that there is no capital gains tax on any shares of stock (private or public company) held for 5 years or more, and no tax on dividends paid to shareholders who have held stock in the company for more than 5 years. However we need to do it, we need to get the smart money on Wall Street back to thinking about ways to use their capital to help start and grow companies. That is what will create jobs. That is where we will find the next big thing that will accelerate the world economy. It won’t come from traders trying to hack the financial system for a few pennies per trade.” Besides protecting legitimate savers and investors by exempting stock held five years or more, they could be exempted from a Tobin tax on total stock purchases of under $1 million per year.  That would make the tax literally a millionaire’s tax — and a small one at that, at only 1% per trade. At the G20 summit in Toronto last weekend, a financial transaction tax was discussed and supported by France and Germany but was opposed by the U.S. and Canada , although nothing binding was resolved.   However, the states do not have to wait for the federal government or the G20 to act.  They could levy a Tobin tax themselves.  Objection might be made that the Wall Street speculators would take their revenues and go elsewhere, but big banks and brokerages have branches in every major city in every state.  They are hardly likely to pack up their tents and leave lucrative centers of business.  Nor can it be argued that we should cater to the pirates who are looting our stock markets because they are paying us a nice bribe, because they aren’t even paying a bribe.  Financial trades do not currently generate tax revenues. Two Green Party candidates for governor, Laura Wells in California and Rich Whitney in Illinois, have included a state-imposed Tobin tax in their platforms.  Both are also campaigning for state-owned banks in their states, on the model of the Bank of North Dakota.  People around the world look to the United States for boldness and innovation, and California and Illinois are two of the hardest hit states in the nation.  If those states manage to turn their economies around, they could establish a model for economic sovereignty globally. Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles . In Web of Debt, her latest of eleven books, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are , , and . Ellen Brown is a frequent contributor to Global Research.  Global Research Articles by Ellen Brown <><><>

The US Economy is Stuck in Misery

by Joel S. Hirschhorn Global Research, July 2, 2010 Email this article to a friend Print this article The middle class is dead.  The US has produced a self-sustaining two-class society.  Most Lower Class Americans are in bad or uncertain economic shape but the rich and powerful Upper Class crowd keeps making and spending money as if there has been no recession. Talk about a possible double-dip recession misses the larger reality: For many millions of Americans the first recession is still here; there has been no recovery for them.  Too bad President Obama cannot comprehend that.  Nice that only 23 percent of people believe that his policies have made economic conditions better.  Maybe they got the change they were waiting for. A new survey by the Pew Research Center provides disturbing data that no amount of lies from politicians can refute.  Without a lot more consumer spending, remember, the US economy will not regain lasting health.  The scope of the economic shock is shown by the 60 percent of Americans that have cut down on borrowing and spending.  And nearly 50 percent are in worse financial shape because of the economic downturn.  Forty percent of adults have tapped savings and retirement accounts to make ends meet.  Nearly 25 percent have had to borrow money from someone.  Ten percent have moved back with their parents to survive the economic tsunami, and that rises to 24 percent for workers between 18 and 29 years old. More and more Americans now recognize that retirement will have to wait.  For those 62 and older and still working, 35 percent have postponed retirement.  That jumps to 60 percent as a likely action for working adults between ages 50 and 61.  Replace the golden years with the disappointment years, especially when inevitable reduced Social Security and Medicare benefits hit hard. For those still lucky enough to have jobs, the Commerce Department reports that the personal savings rate in May — the part of wage income that goes unspent — rose to 4 percent, the highest amount in nearly a year, as anxious consumers faced continued economic woes, such as fears about losing jobs or homes, affording food and health care, and a tumbling stock market. And always remember that the official jobless rate of just under 10 percent is pure bunk; it really is close to 20 percent nationally, and a lot worse in many places and for African-Americans and Hispanics.  The average time for being without a job is now six months, with many more people jobless for a whole lot more, often several years.  All this means suppressed consumer spending and continued high home foreclosure rates.  No big surprise that consumer confidence crashed almost 10 points between May and June.  Welcome to high anxiety. Also keep in mind that even as the general consumer spending shows little life, the Upper Class keeps on living it up.  Gallup reported “Upper-income Americans’ self-reported spending rose 33% to an average of $145 per day in May — up from $109 per day in April 2010 and May 2009, and the highest monthly average since November 2008.”  The rest of the population’s self-reported spending averaged $59 per day in May.  So, rich Americans are spending nearly twice as much as the vast majority of Americans every day.  Indeed, Tiffany reports sales up 17 percent in the jeweler’s most recent quarter.  Overall US luxury sales, says MasterCard SpendingPulse, jumped 22.7 percent in March, over the previous year.  The increase in luxury buying appears to be coming almost totally from the “ultra-affluents,” those households making over $250,000 a year.  Their first-quarter spending increased 22.6 percent, meaning that they have returned to spending at pre-recession levels. And here is a gem of a new statistic.  In 2009, the Economic Policy Institute reports that the typical working American with a four-year college degree took home $1,025 per week, $5 a week less than Americans with a four-year degree took home, after adjusting for inflation, in the year 2000.  How’s that for progress? Meanwhile, almost half of U.S. companies that reduced or suspended their contributions to employee retirement plans during the recession haven’t restored them The ultra ugly truth is that there is very little hope for the US economy providing true prosperity for the vast majority of people in the foreseeable future.  Unemployment will remain high and consumer spending will remain low except for the wealthy.  Economic inequality is terrible and punishing most Americans who should forget about that fabled American dream.  To visualize America ‘s staggeringly unequal distribution of wealth, suggests University of Tennessee at Martin historian David Barber, envision a 100-seat auditorium filled with 100 people.  If seating in that auditorium reflected our current wealth distribution, the single richest person in the hall “would be able to spread out smartly” over nearly 43 seats.  The poorest 60 would have to squeeze into just one. As government deficits continue at historic high levels there will be even more pain as local and state governments cut employment and services.  All the economic impacts of the BP oil spill in the Gulf region will continue to expand and reverberate and it is doubtful that enough money will come from BP to those in pain soon enough to prevent catastrophes for millions of people. Some impacted people may turn to religion as if God has not already shown total disdain for humanity.  Some will delude themselves that voting for certain candidates in the coming midterm elections will help.  Others will bury themselves in various distractions or choose to believe the political lies of President Obama and other politicians.  [How did all that federal stimulus spending work for you?]  Perhaps far more Lower Class people [Are you in denial about your Lower Class status?] should consider the advice of the deeply cynical: Kill Yourself.  If only politicians would take that advice. Happy Fourth of July.  Time to try and remember the good old days. Contact Joel S. Hirschhorn at Joel S. Hirschhorn is a frequent contributor to Global Research.  Global Research Articles by Joel S. Hirschhorn Gerald Celente Predicts Economic Armageddon by 2012 trends forecaster <><><>

Coming Economic Collapse – Greater than Great Depression just printing money government suck way to top … fail way to top Gov’t hijacked by Wall Street Too big to fail – Like titanic – rich given lifeboats while poor left to die Criminal at the highest level politicians new kings and queens of commerce

Gerald Celente: US Economic Collapse by 2012

Posted by admin in Uncategorized on Mar 30th, 2009 | View Comments UPDATE: Make sure you see my new post: Gerald Celente Predicts Greatest Depression Gerald Celente is apparently the guy who is always right, and is telling us that by 2012 the U.S. will be in full economic collapse.  Celente is the CEO and trend forecaster of The Trends Research Institute.  He has, according to the video, accurately forecasted everything from the stock market crash in the 80’s to the ‘08 mortgage bubble burst.  ABC gives this guy alot of credence. One of my favorite lines from the video:  ”You can’t print money based on nothing. It’s not even Economics 101, it’s Economics for dummies.”  Hear that Pres. Obama?  Spending/printing a trillion that you don’t have isn’t that great. Just ask Zo. If you think Celente seems just a little too apocalyptic for your tastes, then you should also bear in mind the oh so competent government we have running the show right now.  They are so good at wasting money.  Just imagine how well they are spending those stimulus dollars. Also, Celente was also on the Glenn Beck Show in February during Beck’s War Room Scarathon. <><><>The problem is that the wealth was not created due to an increase in products and services that benefit society but thru speculation and a fake money system supported by govt intervention and cooperation between wall street and Washington. I would support a tax on the rich to bring back balance, but the whole big govt – big business monopoly has to be broken

America will Collapse Jim Rogers,Gerald Celente,Max Wolf,David Walker,David Vickers,Jack Cafferty

‘ Worst economic collapse ever’ <><><> Gerald Celente Obamageddon <><><> Gerald Celente, Fascism In The USA in 2010 Through Terror Event (NWO SERIES/ The State Of The State) corporate and government = fascism <><><> ‘America lives in a fascist state’ – Gerald Celente <><><>

‘America lives in a fascist state’ – Gerald Celente Gerald Celente: Youre Seeing a Global Meltdown. Theres No Way Out of This 0diggsdigg Powered by Translate Contributed by (Editor) Thursday, July 01, 2010 4:28 View: Editor’s biography | More stories This story has been viewed 1,081 times (146 times in the past 24 hours, 5 times in the past hour) 1 person on this page right now Trend Researcher Gerald Celente joins Russia Today on July 1, 2010 to discuss the US dollar and the IMF’s proposed solution to replace the world’s sole reserve currency: You’re seeing a global meltdown. There’s no way out of this. Everyone knows that Greece isn’t going to be able to pay of its debt. And we just saw today Spain’s bonds being downgraded once again. No, there’s a global financial currency crisis. They’re coming up with another scheme. Just as the Euro didn’t work, now the IMF is going to come to the rescue, put together a basket of currencies for everyone to draw from, and that going to work? We can see a devaluation of the dollar. That’s what we’re looking for, rather than a high inflation. And we believe it is going to happen whether they call a bank holiday or not. In some way or another we’re going to see a dollar devaluation down the line. Why replace one printing press with ten? All fiat currencies are eventually doomed to fail, as they have always done throughout history. The Dollar, the Euro and any proposed IMF currency basket will end the same way, because the person and/or people in charge of the printing presses always lose control. The dollar is not yet ready to completely fall apart. There is a strong indication currently that as assets around the globe are liquidated, capital is flowing back to the US dollar for, ironically, safety. That capital, upon realizing the US is rapidly moving towards autocratic policies that restrict free trade (i.e. taxes and government regulation) and that US debt has become unserviceable, will just as quickly depart the dollar. It will be around this time that we may very well see a blanket dollar devaluation, essentially wiping out the purchasing power of anyone left holding Federal Reserve Notes. Watch the video: <><><>

Can We End the American Empire Before It Ends Us?

Brilliant historian and essayist Chalmers Johnson argues that unless we face up to the tremendous strain our empire is having on America, we will lose our democracy, and then it will not matter much what else we lose. May 17, 2007 | In politics, as in medicine, a cure based on a false diagnosis is almost always worthless, often worsening the condition that is supposed to be healed. The United States, today, suffers from a plethora of public ills. Most of them can be traced to the militarism and imperialism that have led to the near-collapse of our Constitutional system of checks and balances. Unfortunately, none of the remedies proposed so far by American politicians or analysts addresses the root causes of the problem. According to an NBC News/Wall Street Journal poll, released on April 26, 2007, some 78% of Americans believe their country to be headed in the wrong direction. Only 22% think the Bush administration’s policies make sense, the lowest number on this question since October 1992, when George H. W. Bush was running for a second term — and lost. What people don’t agree on are the reasons for their doubts and, above all, what the remedy — or remedies — ought to be. The range of opinions on this is immense. Even though large numbers of voters vaguely suspect that the failings of the political system itself led the country into its current crisis, most evidently expect the system to perform a course correction more or less automatically. As Adam Nagourney of the New York Times reported, by the end of March 2007, at least 280,000 American citizens had already contributed some $113.6 million to the presidential campaigns of Hillary Rodham Clinton, Barack Obama, John Edwards, Mitt Romney, Rudolph Giuliani, or John McCain. If these people actually believe a presidential election a year-and-a-half from now will significantly alter how the country is run, they have almost surely wasted their money. As Andrew Bacevich, author of The New American Militarismputs it: “None of the Democrats vying to replace President Bush is doing so with the promise of reviving the system of check and balances…. The aim of the party out of power is not to cut the presidency down to size but to seize it, not to reduce the prerogatives of the executive branch but to regain them.” George W. Bush has, of course, flagrantly violated his oath of office, which requires him “to protect and defend the constitution,” and the opposition party has been remarkably reluctant to hold him to account. Among the “high crimes and misdemeanors” that, under other political circumstances, would surely constitute the Constitutional grounds for impeachment are these: the President and his top officials pressured the Central Intelligence Agency to put together a National Intelligence Estimate (NIE) on Iraq’s nuclear weapons that both the administration and the Agency knew to be patently dishonest. They then used this false NIE to justify an American war of aggression. After launching an invasion of Iraq, the administration unilaterally reinterpreted international and domestic law to permit the torture of prisoners held at Abu Ghraib prison in Baghdad, at Guant·namo Bay, Cuba, and at other secret locations around the world. Nothing in the Constitution, least of all the commander-in-chief clause, allows the president to commit felonies. Nonetheless, within days after the 9/11 attacks, President Bush had signed a secret executive order authorizing a new policy of “extraordinary rendition,” in which the CIA is allowed to kidnap terrorist suspects anywhere on Earth and transfer them to prisons in countries like Egypt, Syria, or Uzbekistan, where torture is a normal practice, or to secret CIA prisons outside the United States where Agency operatives themselves do the torturing. On the home front, despite the post-9/11 congressional authorization of new surveillance powers to the administration, its officials chose to ignore these and, on its own initiative, undertook extensive spying on American citizens without obtaining the necessary judicial warrants and without reporting to Congress on this program. These actions are prima-facie violations of the Foreign Intelligence Surveillance Act of 1978 (and subsequent revisions) and of Amendment IV of the Constitution. These alone constitute more than adequate grounds for impeachment, while hardly scratching the surface. And yet, on the eve of the national elections of November 2006, then House Minority Leader, now Speaker, Nancy Pelosi (D-Calif.), pledged on the CBS News program “60 Minutes” that “impeachment is off the table.” She called it “a waste of time.” And six months after the Democratic Party took control of both houses of Congress, the prison at Guant·namo Bay was still open and conducting drumhead courts martial of the prisoners held there; the CIA was still using “enhanced interrogation techniques” on prisoners in foreign jails; illegal intrusions into the privacy of American citizens continued unabated; and, more than fifty years after the CIA was founded, it continues to operate under, at best, the most perfunctory congressional oversight. Promoting Lies, Demoting Democracy Without question, the administration’s catastrophic war in Iraq is the single overarching issue that has convinced a large majority of Americans that the country is “heading in the wrong direction.” But the war itself is the outcome of an imperial presidency and the abject failure of Congress to perform its Constitutional duty of oversight. Had the government been working as the authors of the Constitution intended, the war could not have occurred. Even now, the Democratic majority remains reluctant to use its power of the purse to cut off funding for the war, thereby ending the American occupation of Iraq and starting to curtail the ever-growing power of the military-industrial complex. One major problem of the American social and political system is the failure of the press, especially television news, to inform the public about the true breadth of the unconstitutional activities of the executive branch. As Frederick A. O. Schwarz and Aziz Z. Huq, the authors of Unchecked and Unbalanced: Presidential Power in a Time of Terror, observe, “For the public to play its proper checking role at the ballot box, citizens must know what is done by the government in their names.” Instead of uncovering administration lies and manipulations, the media actively promoted them. Yet the first amendment to the Constitution protects the press precisely so it can penetrate the secrecy that is the bureaucrat’s most powerful, self-protective weapon. As a result of this failure, democratic oversight of the government by an actively engaged citizenry did not — and could not — occur. The people of the United States became mere spectators as an array of ideological extremists, vested interests, and foreign operatives — including domestic neoconservatives, Ahmed Chalabi and his Iraqi exiles, the Israeli Lobby, the petroleum and automobile industries, warmongers and profiteers allied with the military-industrial complex, and the entrenched interests of the professional military establishment — essentially hijacked the government. Some respected professional journalists do not see these failings as the mere result of personal turpitude but rather as deep structural and cultural problems within the American system as it exists today. In an interview with Matt Taibbi, Seymour Hersh, for forty years one of America’s leading investigative reporters, put the matter this way: “All of the institutions we thought would protect us — particularly the press, but also the military, the bureaucracy, the Congress — they have failedÖ So all the things that we expect would normally carry us through didn’t. The biggest failure, I would argue, is the press, because that’s the most glaringÖ. What can be done to fix the situation? [long pause] You’d have to fire or execute ninety percent of the editors and executives.” Veteran analyst of the press (and former presidential press secretary), Bill Moyers, considering a classic moment of media failure, concluded: “The disgraceful press reaction to Colin Powell’s presentation at the United Nations [on February 5, 2003] seems like something out of Monty Python, with one key British report cited by Powell being nothing more than a student’s thesis, downloaded from the Web — with the student later threatening to charge U.S. officials with ‘plagiarism.'” As a result of such multiple failures (still ongoing), the executive branch easily misled the American public. A Made-in-America Human Catastrophe Of the failings mentioned by Hersh, that of the military is particularly striking, resembling as it does the failures of the Vietnam era, thirty-plus years earlier. One would have thought the high command had learned some lessons from the defeat of 1975. Instead, it once again went to war pumped up on our own propaganda — especially the conjoined beliefs that the United States was the “indispensable nation,” the “lone superpower,” and the “victor” in the Cold War; and that it was a new Rome the likes of which the world had never seen, possessing as it did — from the heavens to the remotest spot on the planet — “full spectrum dominance.” The idea that the U.S. was an unquestioned military colossus athwart the world, which no power or people could effectively oppose, was hubristic nonsense certain to get the country into deep trouble — as it did — and bring the U.S. Army to the point of collapse, as happened in Vietnam and may well happen again in Iraq (and Afghanistan). Instead of behaving in a professional manner, our military invaded Iraq with far too small a force; failed to respond adequately when parts of the Iraqi Army (and Baathist Party) went underground; tolerated an orgy of looting and lawlessness throughout the country; disobeyed orders and ignored international obligations (including the obligation of an occupying power to protect the facilities and treasures of the occupied country — especially, in this case, Baghdad’s National Museum and other archaeological sites of untold historic value); and incompetently fanned the flames of an insurgency against our occupation, committing numerous atrocities against unarmed Iraqi civilians. According to Andrew Bacevich, “Next to nothing can be done to salvage Iraq. It no longer lies within the capacity of the United States to determine the outcome of events there.” Our former ambassador to Saudi Arabia, Chas W. Freeman, says of President Bush’s recent “surge” strategy in Baghdad and al-Anbar Province: “The reinforcement of failure is a poor substitute for its correction.” Symbolically, a certain sign of the disaster to come in Iraq arrived via an April 26th posting from the courageous but anonymous Sunni woman who has, since August 2003, published the indispensable blog Baghdad Burning. Her family, she reported, was finally giving up and going into exile — joining up to two million of her compatriots who have left the country. In her final dispatch, she wrote: “There are moments when the injustice of having to leave your country simply because an imbecile got it into his head to invade it, is overwhelming. It is unfair that in order to survive and live normally, we have to leave our home and what remains of family and friends…. And to what?” Retired General Barry McCaffrey, commander of the 24th Infantry Division in the first Iraq war and a consistent cheerleader for Bush strategies in the second, recently radically changed his tune. He now says, “No Iraqi government official, coalition soldier, diplomat, reporter, foreign NGO, nor contractor can walk the streets of Baghdad, nor Mosul, nor Kirkuk, nor Basra, nor Tikrit, nor Najaf, nor Ramadi, without heavily armed protection.” In a different context, Gen. McCaffrey has concluded: “The U.S. Army is rapidly unraveling.” Even military failure in Iraq is still being spun into an endless web of lies and distortions by the White House, the Pentagon, military pundits, and the now-routine reporting of propagandists disguised as journalists. For example, in the first months of 2007, rising car-bomb attacks in Baghdad were making a mockery of Bush administration and Pentagon claims that the U.S. troop escalation in the capital had brought about “a dramatic drop in sectarian violence.” The official response to this problem: the Pentagon simply quit including deaths from car bombings in its count of sectarian casualties. (It has never attempted to report civilian casualties publicly or accurately.) Since August 2003, there have been over 1,050 car bombings in Iraq. One study estimates that through June 2006 the death toll from these alone has been a staggering 78,000 Iraqis. The war and occupation George W. Bush unleashed in Iraq has proved unimaginably lethal for unarmed civilians, but reporting the true levels of lethality in Iraq, or the nature of the direct American role in it was, for a long time, virtually taboo in the U.S. media. As late as October 2006, the journal of the British Medical Association, The Lancet, published a study conducted by researchers from Johns Hopkins University in Baltimore and al-Mustansiriya University in Baghdad estimating that, since March 2003, there were some 601,027 more Iraqi deaths from violence than would have been expected without a war. The British and American governments at first dismissed the findings, claiming the research was based on faulty statistical methods — and the American media ignored the study, played down its importance, or dismissed its figures. On March 27, 2007, however, it was revealed that the chief scientific adviser to the British Ministry of Defense, Roy Anderson, had offered a more honest response. The methods used in the study were, he wrote, “close to best practice.” Another British official described them as “a tried and tested way of measuring mortality in conflict zones.” Over 600,000 violent deaths in a population estimated in 2006 at 26.8 million — that is, one in every 45 individuals — amounts to a made-in-America human catastrophe. One subject that the government, the military, and the news media try to avoid like the plague is the racist and murderous culture of rank-and-file American troops when operating abroad. Partly as a result of the background racism that is embedded in many Americans’ mental make-up and the propaganda of American imperialism that is drummed into recruits during military training, they do not see assaults on unarmed “rag heads” or “hajis” as murder. The cult of silence on this subject began to slip only slightly in May 2007 when a report prepared by the Army’s Mental Health Advisory Team wasleaked to the San Diego Union-Tribune. Based on anonymous surveys and focus groups involving 1,320 soldiers and 447 Marines, the study revealed that only 56% of soldiers would report a unit member for injuring or killing an innocent noncombatant, while a mere 40% of Marines would do so. Some militarists will reply that such inhumanity to the defenseless is always inculcated into the properly trained soldier. If so, then the answer to this problem is to ensure that, in the future, there are many fewer imperialist wars of choice sponsored by the United States. The Military-Industrial-Congressional Complex Many other aspects of imperialism and militarism are undermining America’s Constitutional system. By now, for example, the privatization of military and intelligence functions is totally out of control, beyond the law, and beyond any form of Congressional oversight. It is also incredibly lucrative for the owners and operators of so-called private military companies — and the money to pay for their activities ultimately comes from taxpayers through government contracts. Any accounting of these funds, largely distributed to crony companies with insider connections, is chaotic at best. Jeremy Scahill, author of Blackwater: The Rise of the World’s Most Powerful Mercenary Army,estimates that there are 126,000 private military contractors in Iraq, more than enough to keep the war going, even if most official U.S. troops were withdrawn. “From the beginning,” Scahill writes, “these contractors have been a major hidden story of the war, almost uncovered in the mainstream media and absolutely central to maintaining the U.S. occupation of Iraq.” America’s massive “military” budgets, still on the rise, are beginning to threaten the U.S. with bankruptcy, given that its trade and fiscal deficits already easily make it the world’s largest net debtor nation. Spending on the military establishment — sometimes mislabeled “defense spending” — has soared to the highest levels since World War II, exceeding the budgets of the Korean and Vietnam War eras as well as President Ronald Reagan’s weapons-buying binge in the 1980s. According to calculations by the National Priorities Project, a non-profit research organization that examines the local impact of federal spending policies, military spending today consumes 40% of every tax dollar. Equally alarming, it is virtually impossible for a member of Congress or an ordinary citizen to obtain even a modest handle on the actual size of military spending or its impact on the structure and functioning of our economic system. Some $30 billion of the official Defense Department (DoD) appropriation in the current fiscal year is “black,” meaning that it is allegedly going for highly classified projects. Even the open DoD budget receives only perfunctory scrutiny because members of Congress, seeking lucrative defense contracts for their districts, have mutually beneficial relationships with defense contractors and the Pentagon. President Dwight D. Eisenhower identified this phenomenon, in the draft version of his 1961 farewell address, as the “military-industrial-congressional complex.” Forty-six years later, in a way even Eisenhower probably couldn’t have imagined, the defense budget is beyond serious congressional oversight or control. The DoD always tries to minimize the size of its budget by representing it as a declining percentage of the gross national product. What it never reveals is that total military spending is actually many times larger than the official appropriation for the Defense Department. For fiscal year 2006, Robert Higgs of the Independent Institute calculatednational security outlays at almost a trillion dollars — $934.9 billion to be exact — broken down as follows (in billions of dollars): Department of Defense: $499.4 Department of Energy (atomic weapons): $16.6 Department of State (foreign military aid): $25.3 Department of Veterans Affairs (treatment of wounded soldiers): $69.8 Department of Homeland Security (actual defense): $69.1 Department of Justice (1/3rd for the FBI): $1.9 Department of the Treasury (military retirements): $38.5 NASA (satellite launches): $7.6 Interest on war debts, 1916-present: $206.7 Totaled, the sum is larger than the combined sum spent by all other nations on military security. This spending helps sustain the national economy and represents, essentially, a major jobs program. However, it is beginning to crowd out the civilian economy, causing stagnation in income levels. It also contributes to the hemorrhaging of manufacturing jobs to other countries. On May 1, 2007, the Center for Economic and Policy Research released a series of estimates on “the economic impact of the Iraq war and higher military spending.” Its figures show, among other things, that, after an initial demand stimulus, the effect of a significant rise in military spending (as we’ve experienced in recent years) turns negative around the sixth year. Sooner or later, higher military spending forces inflation and interest rates up, reducing demand in interest-sensitive sectors of the economy, notably in annual car and truck sales. Job losses follow. The non-military construction and manufacturing sectors experience the largest share of these losses. The report concludes, “Most economic models show that military spending diverts resources from productive uses, such as consumption and investment, and ultimately slows economic growth and reduces employment.” Imperial Liquidation? Imperialism and militarism have thus begun to imperil both the financial and social well-being of our republic. What the country desperately needs is a popular movement to rebuild the Constitutional system and subject the government once again to the discipline of checks and balances. Neither the replacement of one political party by the other, nor protectionist economic policies aimed at rescuing what’s left of our manufacturing economy will correct what has gone wrong. Both of these solutions fail to address the root cause of our national decline. I believe that there is only one solution to the crisis we face. The American people must make the decision to dismantle both the empire that has been created in their name and the huge (still growing) military establishment that undergirds it. It is a task at least comparable to that undertaken by the British government when, after World War II, it liquidated the British Empire. By doing so, Britain avoided the fate of the Roman Republic — becoming a domestic tyranny and losing its democracy, as would have been required if it had continued to try to dominate much of the world by force. For the U.S., the decision to mount such a campaign of imperial liquidation may already come too late, given the vast and deeply entrenched interests of the military-industrial complex. To succeed, such an endeavor might virtually require a revolutionary mobilization of the American citizenry, one at least comparable to the civil rights movement of the 1960s. Even to contemplate a drawing back from empire — something so inconceivable to our pundits and newspaper editorial writers that it is simply never considered — we must specify as clearly as possible precisely what the elected leaders and citizens of the United States would have to do. Two cardinal decisions would have to be made. First, in Iraq, we would have to initiate a firm timetable for withdrawing all our military forces and turning over the permanent military bases we have built to the Iraqis. Second, domestically, we would have to reverse federal budget priorities. In the words of Noam Chomsky, a venerable critic of American imperialism: “Where spending is rising, as in military supplemental bills to conduct the wars in Iraq and Afghanistan, it would sharply decline. Where spending is steady or declining (health, education, job training, the promotion of energy conservation and renewable energy sources, veterans benefits, funding for the UN and UN peacekeeping operations, and so on), it would sharply increase. Bush’s tax cuts for people with incomes over $200,000 a year would be immediately rescinded.” Such reforms would begin at once to reduce the malevolent influence of the military-industrial complex, but many other areas would require attention as well. As part of the process of de-garrisoning the planet and liquidating our empire, we would have to launch an orderly closing-up process for at least 700 of the 737 military bases we maintain (by official Pentagon count) in over 130 foreign countries on every continent except Antarctica. We should ultimately aim at closing all our imperialist enclaves, but in order to avoid isolationism and maintain a capacity to assist the United Nations in global peacekeeping operations, we should, for the time being, probably retain some 37 of them, mostly naval and air bases. Equally important, we should rewrite all our Status of Forces Agreements — those American-dictated “agreements” that exempt our troops based in foreign countries from local criminal laws, taxes, immigration controls, anti-pollution legislation, and anything else the American military can think of. It must be established as a matter of principle and law that American forces stationed outside the U.S. will deal with their host nations on a basis of equality, not of extraterritorial privilege. The American approach to diplomatic relations with the rest of the world would also require a major overhaul. We would have to end our belligerent unilateralism toward other countries as well as our scofflaw behavior regarding international law. Our objective should be to strengthen the United Nations, including our respect for its majority, by working to end the Security Council veto system (and by stopping using our present right to veto). The United States needs to cease being the world’s largest supplier of arms and munitions — a lethal trade whose management should be placed under UN supervision. We should encourage the UN to begin outlawing weapons like land mines, cluster bombs, and depleted-uranium ammunition that play particularly long-term havoc with civilian populations. As part of an attempt to right the diplomatic balance, we should take some obvious steps like recognizing Cuba and ending our blockade of that island and, in the Middle East, working to equalize aid to Israel and Palestine, while attempting to broker a real solution to that disastrous situation. Our goal should be a return to leading by example — and by sound arguments — rather than by continual resort to unilateral armed force and repeated foreign military interventions. In terms of the organization of the executive branch, we need to rewrite the National Security Act of 1947, taking away from the CIA all functions that involve sabotage, torture, subversion, overseas election rigging, rendition, and other forms of clandestine activity. The president should be deprived of his power to order these types of operations except with the explicit advice and consent of the Senate. The CIA should basically devote itself to the collection and analysis of foreign intelligence. We should eliminate as much secrecy as possible so that neither the CIA, nor any other comparable organization ever again becomes the president’s private army. In order to halt our economic decline and lessen our dependence on our trading partners, the U.S. must cap its trade deficits through the perfectly legal use of tariffs in accordance with World Trade Organization rules, and it must begin to guide its domestic market in accordance with a national industrial policy, just as the leading economies of the world (particularly the Japanese and Chinese ones) do as a matter of routine. Even though it may involve trampling on the vested interests of American university economics departments, there is simply no excuse for a continued reliance on an outdated doctrine of “free trade.” Normally, a proposed list of reforms like this would simply be rejected as utopian. I understand this reaction. I do want to stress, however, that failure to undertake such reforms would mean condemning the United States to the fate that befell the Roman Republic and all other empires since then. That is why I gave my book Nemesis the subtitle “The Last Days of the American Republic.” When Ronald Reagan coined the phrase “evil empire,” he was referring to the Soviet Union, and I basically agreed with him that the USSR needed to be contained and checkmated. But today it is the U.S. that is widely perceived as an evil empire and world forces are gathering to stop us. The Bush administration insists that if we leave Iraq our enemies will “win” or — even more improbably — “follow us home.” I believe that, if we leave Iraq and our other imperial enclaves, we can regain the moral high ground and disavow the need for a foreign policy based on preventive war. I also believe that unless we follow this path, we will lose our democracy and then it will not matter much what else we lose. In the immortal words of Pogo, “We have met the enemy and he is us.” Chalmers Johnson is the author of Nemesis: The Last Days of the American Republic(New York: Metropolitan Books, 2007). It is the final volume of his Blowback Trilogy. <><><>

Accepting the End of the US Empire

By Ivan Eland February 3, 2009

Editor’s Note: While President Barack Obama searches for a path out of the Bush administration’s economic catastrophe, another painful reality is drawing less attention: America’s imperial over-extension and the unsustainable financial burden it has placed on U.S. taxpayers. In this guest essay, the Independent Institute’s Ivan Eland warns that America’s economic mess is part of the price being paid for the hubris of America’s imperial elite, which — like similar elites in other fading imperial powers – won’t accept that a global empire has its limits:When you stop to think about it, people measure how well their lives are going not by their absolute state of being but by their situation relative to their expectations.

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Email Printer friendly For example, a poor person in a developing country may be ecstatic about getting a pair of shoes for the first time; in contrast, a billionaire may commit suicide after he loses $100 million in a down market. The same is true for nations. The American elite has enjoyed the United States’ dominant status in the world since World War II and became thoroughly drunk with U.S. superiority in the last two decades after the demise of the Soviet Union left the country as the only superpower. This elite is resistant to accepting the reality that a multi-polar world will soon be at hand. This reality will arrive much sooner if the U.S. does not retract its informal overseas empire, reduce the bloated defense budget, and act with more humility overseas. Even before the U.S.-led global financial meltdown, the far-flung U.S. empire of overseas military bases, U.S.-dominated alliances, and profligate military meddling in other nations’ affairs was terribly overextended. The U.S. accounted for 20 percent of the world’s GDP but 43 percent of its defense spending. Yet like the elites of the British and French Empires, which became exhausted by being on the winning side of two world wars, the U.S. elite refuses to realize that the country needs to retract its cost-ineffective empire if it wants to avoid demise as a great power. After being occupied by the Nazis through much of World War II, the French ignored their post-war financial precariousness and tried to rekindle their imperial glory by retaking Indochina. When the spent French were not up to the task in the mid-1950s, Harry Truman and his successors made the foolish commitments for the United States to finance them, assist them, and later take over for them. Reluctant even then to give up their colonial mindset, the French then tried and failed to militarily suppress Algerian independence in the 1950s and 1960s. Similarly, the British attempted to keep their Middle East dominance long after the sun had set on the British Empire. Even after their ill-fated invasion of Egypt in 1956 — with the help of Israel and the irrepressible France — the British didn’t pull back from the Middle East until the early 1970s. Currently, the United States has its finger in the dike in two pointless nation-building quagmires in Iraq and Afghanistan, while Osama bin Laden is most likely in Pakistan and the U.S. is being severely debilitated by an economic meltdown at home. Of course, Barack Obama was not responsible for any of this mess but may become captive of the interventionist U.S. elite in trying to deal with these calamities. Economically, the Bush/Obama period ominously resembles the Hoover/FDR period, when a common recession was converted into a Great Depression by interventionist government policies that refused to let natural market mechanisms bring the country out of the economic slump. Let’s hope the current economic calamity doesn’t get this bad; but that we can no longer afford to maintain an extensive overseas empire hasn’t yet seemed to sink into the minds of the U.S. elite. Another historical parallel is the Vietnam period, when Lyndon Johnson tried to run a guns-and-butter policy — funding the Vietnam War and expanding the government’s reach domestically by funding Great Society programs. Now, the Bush/Obama governments are trying to fund two wars while also spending at least $1.5 trillion to trick American consumers into thinking the government can save them from an inevitable recession — all the while making that downturn worse. On top of that, the bulge of baby boomers will soon begin retiring, thus putting pressure on collapsing Social Security and Medicare systems. During Vietnam and the Great Society, LBJ honestly — if irresponsibly — funded the ballooning government with a 10-percent surtax on corporate and income taxes. No such honesty has come from the Bush administration, as it cut taxes while raising federal spending dramatically. Now that an economic meltdown has occurred, Obama is understandably reluctant to increase taxes — and has proposed lowering them further — while continuing Bush’s spending spree to try to fool the country out of its economic collapse. So we are staring trillion-dollar budget deficits in the face. The federal budget is $3.1 trillion dollars a year but two-thirds of that is on autopilot — that is, guaranteed payments to people regardless of economic conditions under Social Security, Medicare, Medicaid, Food Stamps, and unemployment compensation or interest payments on the already staggering national debt. Of the $1.1 trillion that can be more easily altered (discretionary spending), more than half of that is the monstrous defense budget. Thus, defense spending should and will eventually become a big target for Obama’s promised future fiscal restraint. Obama has good instincts on withdrawing from Iraq but is slowly being co-opted by the foreign policy elites and military bureaucracy. His instincts on Afghanistan are likely to be “unhelpful.” He wants to double down on a nation-building conflict that is stoking Islamist fundamentalism and will be much harder to “win” than Iraq (although the U.S. hasn’t won Iraq by a long shot). Obama needs to wise up, totally withdraw from both Iraq and Afghanistan, focus on finding bin Laden in Pakistan, withdraw from the U.S. Empire, and dramatically slash the U.S. defense budget. The U.S needs to take this revolutionary tack as one step toward renewing what is still the world’s largest economy — that on which all indices of U.S. national power ultimately depend. The U.S. can still be an economic superpower and have much influence in the world, but the days of being a globe-girdling military power are over. The U.S. foreign policy elite just hasn’t accepted it yet. Ivan Eland is Director of the Center on Peace & Liberty at The Independent Institute. Dr. Eland has spent 15 years working for Congress on national security issues, including stints as an investigator for the House Foreign Affairs Committee and Principal Defense Analyst at the Congressional Budget Office. His books include The Empire Has No Clothes: U.S. Foreign Policy Exposed, and Putting “Defense” Back into U.S. Defense Policy. To comment at Consortiumblog, click here. (To make a blog comment about this or other stories, you can use your normal e-mail address and password. Ignore the prompt for a Google account.) To comment to us by e-mail, clickhere. To donate so we can continue reporting and publishing stories like the one you just read, click here. Store: An Independent Institute Book

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Top of Form $24.95 Hardcover 304 pages 6.3 x 9.4 inches ISBN 0-945999-98-4 Bottom of Form New Edition Available in Paperback © 2004 THE EMPIRE HAS NO CLOTHES U.S. Foreign Policy Exposed By Ivan Eland

Most Americans don’t think of their government as an empire, but in fact the United States has been steadily expanding its control of overseas territories since the turn of the twentieth century. Now, through political intimidation and over 700 military bases worldwide, the U.S. holds sway over an area that dwarfs the great empires of world history.

In The Empire Has No Clothes, Ivan Eland, a leading expert on U.S. defense policy and national security, examines American military interventions around the world from the Spanish-American War to the invasion of Iraq. Eland shows that the concept of empire is wholly contrary to the principles of both liberalsand conservatives and that it makes a mockery of the Founding Fathers’ vision for a free republic. Eland also warns that in recent years, “blowback” and the enormous expansion of domestic federal power resulting from this overextended empire have begun to threaten the American homeland itself and curtail the very liberties these interventions were supposed to protect. Public debate of the United States’ role in the world has finally begun in earnest, and Ivan Eland delivers a penetrating argument in this landmark book, exposing the imperial motives behind interventionist U.S. policy, questioning the historical assumptions on which it is based and advocating a return to the Founding Fathers’ vision of military restraint overseas. Detailed Summary Table of Contents

  • Introduction: History of the U.S. Empire
  • Does the United States Really Have an Empire?
  • Why Conservatives Should Be Against Empire
  • Why Liberals Should Be Against Empire
  • Why All Americans Should Be Against Empire
  • An Appropriate Foreign Policy for the Modern Age
  • Conclusion
  • Notes
  • Index
  • About the Author

Praise for The Empire Has No Clothes “I can honestly say I found The Empire Has No Clothes to be factually well grounded and extremely well thought out. The logic is sound as is the scholarship from my perspective. The Independent Institute should be commended for its role is supporting neutral research which is driven neither by the politics of the left or the right.” —RINALDO S. BRUTOCO, President, The World Business Academy “In The Empire Has No Clothes, Dr. Eland shows that the concept of empire is wholly contrary to the principles of liberals and conservatives alike and makes a mockery of the Founding Fathers’ vision for a free republic.” —RON PAUL, U.S. Congressman “In a sound-bite age, few people have the time or inclination to ponder the sweep of history. What is needed then is a primer on the subject, a sort of ‘Empire for Dummies,’ laying out in detail the follies of America’s current course of action, which is taking it steadily further away from its historical roots as a republic. The Empire Has No Clothes is a worthy tome written by Ivan Eland. He has observed imperialistic interventions by both right- and left-wing administrations—from George H. W. Bush through Bill Clinton to George W. Bush himself. His jaundice about their rhetoric and actions is both well documented and well deserved. He is obviously familiar with all the current proponents of American empire—from imports such as British historian Niall Ferguson to home grown pith-helmet and jodhpur-wearing wannabes Robert Kagan and Wall Street Journal essaying Max Boot—and their arguments and smoothly picks them apart. Observations like these are fairly frequent and quite entertaining and it’s worth buying the book for these alone.” —ASIA TIMESThe Empire Has No Clothes is a very important book. There are a lot of books out now about empire, but this is probably the most searching and the most provocative. I do hope you will read it and spread the word, and have all your friends and parents and whatever children you have read it too. The debate extends far beyond just the current situation. This book could have been written even if we had not gone to war two years ago in Iraq. We have had an empire by anyone’s definition. This book will pinpoint some of these issues for all of you.” —C. BOYDEN GRAY, former Chief Counsel to the President of the United States “Is the United States an empire? Yes, writes Ivan Eland of the Independent Institute. Washington dominates the affairs of many allied and client states without occupying them. This wasn’t the vision of America’s Founders. But World Wars I and II and the Cold War transformed Washington’s international role. As Mr. Eland argues in The Empire Has No Clothes, a book bound to irritate and even enrage, today’s expansive foreign policy is not just unnecessarily expensive—think of hundreds of thousands of troops stationed overseas to protect wealthy allies—but dangerous. Unfortunately, argues Mr. Eland, Americans have become the targets of terrorists less because others are jealous of their freedoms, as contended by President George W. Bush, among others, and more because of the U.S. government’s actions. His most important argument is that an interventionist stance makes Americans less secure. The issue has generated heated debate at home. But Mr. Eland is persuasive. Mr. Eland’s argument is not a prescription for putting one’s head in the sand. Rather, he recommends that America look before it leaps. There may be no more important lesson for policymakers in today’s often bloody and uncertain world.” —WASHINGTON TIMES “Transcending partisan biases and trivialities and modern misconceptions, Eland puts current international crises in historical, economic and philosophical context. The Empire Has No Clothes is a must read, accessible and useful to readers across the ideological spectrum, and its lasting importance will be equally compelling regardless of which interventionist candidate of whichever faction of the War Party wins the election this Nov. 2.” —ANTIWAR.COM “This book is the sobering antidote for the imperial wine that has impaired the judgment of American politicians, Republican and Democrats alike, since the end of the Cold War. In it, Ivan Eland catalogs the costs of the existing American Empire that include free riding allies, the growth of government, the erosion of liberties, and the blind hatred of tens of millions across the globe while outlining an alternative foreign policy that is both saner and safer than the foolishly interventionist one that has been the politicians’ consistent preference.” —HARVEY M. SAPOLSKY, Professor of Political Science and Director of the Security Studies Program, Massachusetts Institute of Technology “The Empire Has No Clothes is an extremely sensible book. I agree with Ivan Eland’s argument, though I doubt if it will be much appreciated by Rumsfeld, Wolfowitz and Perle.” —PAUL M. KENNEDY, Dilworth Professor of History and Director of the International Security Studies, Yale University; author of The Rise and Fall of the Great Powers “Those concerned that the Bush administration has unnecessarily overextended this nation’s militarily should read Ivan Eland’s latest book. In The Empire Has No Clothes, Dr. Eland makes a persuasive case that current U.S. national security policy is contrary to the principles of both liberals and conservatives and is actually undermining our security and civil liberties. This book is an excellent contribution to the debate on the Bush Doctrine of waging preventive wars, maintaining hegemony, and spreading democracy by force.” —LAWRENCE J. KORB, former Assistant Secretary, U.S. Department of Defense “Ivan Eland’s book, The Empire Has No Clothes, is a comprehensive history of American imperialism, including a balanced treatment of various schools and definitions of imperialism as used by scholars, politicians, and pundits. More important it contains three long normative chapters on ‘Why Conservatives Should Be Against Empire,’ ‘Why Liberals Should Be Against Empire,’ and ‘Why All Americans Should Be Against Empire.’ These are tours de force and should greatly influence the debate in this country about how to restore a Constitutional foreign policy, one shorn of our rampant militarism. Eland concludes that ‘The Founders’ foreign policy is more relevant than ever,’ a direct challenge to those who would lead the country further into the deadly trap of imperialism. Read this book.” —CHALMERS JOHNSON, author of Blowback and The Sorrows of Empire; President, Japan Policy Research Institute “Ivan Eland said that Iraq would be a debacle before the war began. In his terrific new book, The Empire Has No Clothes, he explains in detail why Iraq and the pursuit of empire will make the United States less safe in the years ahead. Hopefully, more Americans will listen to him now—before we get ourselves into even more trouble at home and abroad” —JOHN MEARSHEIMER, R. Wendell Harrison Distinguished Service Professor of Political Science, University of Chicago “The Empire Has No Clothes: U.S. Foreign Policy Exposed has an engaging title, but Ivan Eland’s new book is a scholarly, compelling and provocative study of where we are, how we got here, and the dangers inherent in the aggressive, imperialist policies we are implementing. It is impressively lucid, filled with careful research, rational analysis and highly insightful commentary, certain to satisfy concerned readers across the political spectrum.” —EDWARD L. PECK, former Chief of U.S. Mission in Iraq, former U.S. Ambassador to Mauritania “The book, The Empire Has No Clothes, is an eloquent and well-researched argument that very much needs to be heard, contending that Americans, conservative as well as liberal, have become ensnared in an imperialism of which they are largely unaware, and of which they should disapprove. The book will play an important role in structuring a major debate about American foreign policy.” —GEORGE H. QUESTER, Professor of Government and Politics, University of Maryland “The Empire Has No Clothes offers a powerful and persuasive critique of recent U. S. foreign policy. It deserves the thoughtful attention of conservatives and liberals alike—indeed, of all Americans disturbed by the imperial pretensions evident in Washington since the end of the Cold War.” —ANDREW J. BACEVICH, Professor of International Relations, Boston University “Think a U.S. empire is desirable and viable? Read Ivan Eland‘s highly insightful, essential book, The Empire Has No Clothes, and you will change your mind.” —EDWARD A. OLSEN, Professor of National Security Affairs, Naval Postgraduate School “Ivan Eland’s provocative and well-researched critique of America’s interventionist foreign policy, The Empire Has No Clothes, makes a powerful case for returning to the practical principles of the Founding Fathers. With convincing examples that range across history to address the concerns of liberals and conservatives alike, he clearly demonstrates that our current democratic empire is a dangerous oxymoron.” —MELVIN SMALL, Distinguished Professor of History, Wayne State University “Victory in the Cold War eliminated the danger that another superpower or ideology could take over the rest of the world. Yet the United States still tries to run the world as much as it ever did. Eland’s book, The Empire Has No Clothes, is a sober, hard-hitting critique of this anomaly and a cogent brief for why liberals and conservatives together should reject an imperial role for America.” —RICHARD K. BETTS, Director, Institute of War and Peace Studies, Columbia University “The Empire Has No Clothes is a powerful critique of American interventionism, focusing on the post-Cold War period. Eland brings together the American actions in Kosovo and Gulf War I & II, in a discussion of the ways in which our ‘nation-building’ has become a new form of empire. And what was disastrous for other ambitious world powers going back to Rome, he suggests, will fall upon us-sooner than we think. The heart of the book, moreover, are the chapters showing how both liberals and conservatives need to rethink their positions, and join in an effort to challenge the empire on grounds of self-interest. It is a great book!” —LLOYD C. GARDNER, Charles and Mary Beard Professor of History, Rutgers University About the Author IVAN ELAND is recognized as one of the leading experts in U.S. defense and foreign policy. He is Senior Fellow and Director of the Center on Peace & Liberty at The Independent Institute. He received his M.B.A. in applied economics and Ph.D. in national security policy from George Washington University. He has been Director of Defense Policy Studies at the Cato Institute, Principal Defense Analyst at the Congressional Budget Office, and Investigator for the House Foreign Affairs Committee. Eland is the author of Putting “Defense” Back into U.S. Defense Policy and The Efficacy of Economic Sanctions as a Foreign Policy Tool, a contributor to numerous volumes, and the author of forty-five in-depth studies on national security issues. His articles have appeared in Arms Control TodayBulletin of the Atomic ScientistsMediterranean Quarterly, and Middle East and International Review, and his popular writings have appeared in such publications as the Los Angeles TimesUSA TodayPhiladelphia InquirerWashington PostNewsdayChicago Sun-Times, and Defense News. He has appeared on ABC, NPR, PBS, Fox News, CNBC, CNN, C-SPAN, MSNBC, Radio Free Europe, and BBC.

Huge Crash Coming

Subprime > altay > Option arms

What do you know about Option Arms and Altay loans, this is what’s next to fail?

First wave of sub-prime mortgage defaults over. Second wave of mortgage defaults coming now to higher quality credit risks. These are people who have bought homes in the last five years and who have taken out home equity loans. Mortgages now going under water owe more than house is worth. This wave of defaults will take upwards of 10 to 12 months to clear. Third wave of mortgage defaults due to begin this year and continue through 2011 are Option Arms and Altay; as payments are automatically resetting to higher rates. We saw some fail last month because of a 3% rate hike, next month is the beginning of the end as rates start to climb even higher. Estimated – 8 million defaults in next four years. As if this is not enough we have the next huge failure to come in the commercial real estate market, that will make the sub-prime fiasco look like kids play! Then comes credit cards and auto loans in the end. Post Published: 30 June 2010 Author: admin Found in section: Commercial Real Estate Financing Questions Tags: 12 monthsaltayauto loansbeginning of the endcommercial real estatecredit cardsfailurefiascofirst wavehome equity loansmortgage defaultsmortgagesoption armsquality creditrate hikereal estate marketsecond wavesub prime mortgagethird wave Previous Topic: How much does it cost to get a merchant account for online order, and which do you recommend? Next Topic: Are there any custom computer websites that can take money order or famous stores that make custom computers?

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Is This the End of the American Empire?

President George W. Bush’s trips to Europe during the month of June attracted significant anti-American demonstrations. At the same time, the United States announced troop withdrawals from Europe and Korea as the handover in Iraq took place. Analysts speculate what would happen if America withdrew from its international role.

by Melvin Rhodes

British historian Niall Ferguson is one of the most prolific historians writing today. He is Herzog professor of history at New York University’s Stern School of Business and senior fellow at the Hoover Institute at Stanford University . In addition to these responsibilities, he has been writing more than one book a year and countless articles for different magazines. He is also refreshingly perceptive about the world in which we live. As an atheist he does not see things through biblical eyes, but, without realizing it, much of what he writes confirms Bible prophecy. In an article in the latest issue of Foreign Policy (July-August, 2004), Mr. Ferguson writes of “A World Without Power.” His introductory paragraph says this: “Critics of U.S. global dominance should pause and consider the alternative. Who would replace America if it retreated from its current role? Not Europe, not China, not the Muslim world—and certainly not the United Nations. Unfortunately, the alternative to a single superpower is not a multilateral utopia, but the anarchic nightmare of a new Dark Age.” Mr. Ferguson gives three reasons for the imminent fall of the American superpower. As he puts it: “The United States suffers from at least three structural deficits that will limit the effectiveness and duration of its quasi-imperial role in the world. “The first factor is the nation’s growing dependence on foreign capital to finance excessive private and public consumption. It is difficult to recall any past empire that long endured after becoming so dependent on lending from abroad.” America is overdrawn As if to emphasize this point, the same issue of Foreign Policy carried an article by Lawrence H. Summers, president of Harvard University and former secretary of the Treasury during the Clinton administration. In the article, titled “America Overdrawn,” Mr. Summers highlights a simple fact: “There is something odd about the world’s greatest power being the world’s greatest debtor…Much has been made of U.S. dependence on foreign energy, but the country’s dependence on foreign cash is even more distressing. In a real sense, the countries that hold U.S. currency and securities in their banks also hold U.S. prosperity in their hands. That prospect should make Americans uncomfortable.” Whereas Mr. Summers looks at the economic consequences of American profligacy, Mr. Ferguson looks at the geopolitical consequences. Mr. Ferguson continues with his second and third reasons for the end of American supremacy. “The second deficit relates to troop levels: The United States is a net importer of people and cannot, therefore, underpin its hegemonic aspirations with true colonization. At the same time, its relatively small volunteer army is already spread very thin as a result of major and ongoing military interventions in Afghanistan and Iraq.” Emphasizing this fact, the Pentagon in June announced troop withdrawals from Europe and Korea, significantly reducing its presence in both areas. “Finally, and most critically,” writes Mr. Ferguson in explaining his third point, “the United States suffers from what is best called an attention deficit. Its republican institutions and political traditions make it difficult to establish a consensus for long-term nation-building projects. With a few exceptions, most U.S. interventions in the past century have been relatively short lived. U.S. troops have stayed in West Germany, Japan and South Korea for more than 50 years; they did not linger so long in the Philippines, the Dominican Republic, Haiti or Vietnam, to say nothing of Lebanon and Somalia. Recent trends in public opinion suggest that the U.S. electorate is even less ready to sacrifice blood and treasure in foreign fields than it was during the Vietnam War.” So who then will replace the United States? Mr. Ferguson’s conclusions about the decline of American power are not new. Professor Paul Kennedy, another British historian who is now lecturing at Yale University, wrote his monumental bestseller The Rise and Fall of the Great Powers in 1987. In his book, Professor Kennedy studied “Economic Change and Military Conflict from 1500 to 2000” and concluded that the same trends that brought down the British, French and Spanish empires, would inevitably also bring down the Soviet and American superpowers. The Soviet Union was to prove him correct very quickly, leaving the United States as the world’s only remaining superpower. If history shows that America’s decline is unavoidable, then the question all should contemplate is, who will replace the United States as the world’s dominant power? Mr. Ferguson, having already stated, “certainly not the United Nations,” in his introductory remarks, looks at three possible contenders. Each is dismissed for various reasons. The three are: Europe (“too old”), China (about to go through a “coming economic crisis”) and Islam (“the Muslim world is as divided as ever”). He then presents a credible alternative—the idea of a power vacuum around the world. In effect, that nobody will replace the United States as a superpower. Nobody alive today can remember such a time. We have to go back a long way in history to see a time when there was such a vacuum, where no single power was dominant. In fact, we have to go back over 1,000 years to the ninth and 10th centuries, part of the so-called Dark Ages, when there was universal anarchy. However, Mr. Ferguson makes the case that there was a more recent time when the world was in a transition period from one superpower epoch to another. That was the period between the two world wars. At the end of World War I, the great continental European empires that had lasted for centuries had all collapsed, as had the Ottoman Empire in the Middle East. The British and French Empires remained intact but had been greatly weakened by over four years of intensive conflict. The United States at this time could have taken over as world leader, but the mood of the American people was to withdraw from the world stage. The British Empire was left to manage the world as best it could. The result of this relative power vacuum two decades later was the rise of national socialism and a second major conflict that finally finished off the British Empire and left the United States sharing global leadership with Moscow. American empire not the same as the British In his latest book, Colossus: The Price of America’s Empire (2004), Mr. Ferguson shows that the American empire suffers from limitations with which its predecessor, the British Empire, did not have to contend, mainly because of the third reason highlighted earlier in this article: “Most U.S. interventions in the past century have been relatively short lived.” Whereas the British would conquer a country and then rule it indefinitely, imposing upon it a variation of the British political system, Americans prefer to go into a country with an “exit strategy” already in mind. This does not put down roots of democracy nor does it ensure long-term American interests. On Britain’s empire going before the American empire, consider the prophetic statement of Genesis 48:20, “He set Ephraim before Manasseh.” (This biblical connection is explored in detail in our free booklet, The United States and Britain in Bible Prophecy.) The American empire took over Britain’s international role at the end of World War II. Instead of directly ruling other nations as the British did, the Americans have military bases all over the world and try to enforce the Pax Americana through its military might. This has effectively delayed the total chaos that would have engulfed the world if the U.S. Congress in 1945 had taken the same approach as at the end of World War I, turning its back on international responsibilities and commitments. Writing in 1940, America’s preeminent historian James Truslow Adams said this of the consequences of the fall of the British Empire, at that time fighting for its life against Hitler’s Third Reich: “Different peoples may have different ideals of government but for those who have been accustomed to freedom of person and of spirit, the possible overthrow of the British Empire would be a catastrophe scarcely thinkable. Not only would it leave a vacuum over a quarter of the globe into which all the wild winds of anarchy, despotism and spiritual oppression could rush, but the strongest bulwark outside ourselves for our own safety and freedom would have been destroyed” (The British Empire, 1784-1939, p. 358). What Mr. Adams did not foresee was that the United States would take over from Great Britain, not the role of international caretaker, but rather that of international policeman. Consequently, the full repercussions of the fall of the British and other European empires have not yet become apparent. However, into many parts of the world where the British once ruled, “the wild winds of anarchy, despotism and spiritual oppression” have definitely rushed, including large swaths of the Middle East, which the British once dominated. An American withdrawal from the rest of the world would likely lead to universal chaos and confusion, a return to the Dark Ages not seen in over a thousand years. Another superpower in the wings The picture Mr. Ferguson paints fits in well with the overall picture presented in Bible prophecy. Scripture shows us that at the time of the end there will be a union of 10 kings, which is a final resurrection of the Roman Empire. No mention is made of the United States at this point in time, but the Beast power prophesied to come clearly does not have the characteristics of the United States or Britain. It would appear that by this time the United States is no longer a major player on the world scene. Perhaps following the demise of American power we will see anarchy and despotism spread around the world, leading in a short period of time to the rise of the Beast power, purportedly to save the world from itself. Mr. Ferguson rules out Europe as the next superpower because it’s “too old.” He is referring to demographics: The white population of Europe is aging rapidly. There is a very low birthrate and there is a corresponding influx of immigrants from Third World countries to make up the deficit. This is all very true, but even experts cannot see the unexpected twists and turns of history. The June 19 issue of The Economist carried a three-page article comparing the economies of Europe and the United States. Comments have often been made of how moribund the euro-area economies are and how much better the American economic system works. ButThe Economist article looked more deeply into the two areas and concluded that they are on a par. This means that the EU economies could sustain a military on a par with that of the United States, if they really wanted to—or needed to. We believe a colossal crisis or crises are coming that will impel Europe to coalesce into that superpower form. For more information, see our booklets, Are We Living in the Time of the End? and The Book of Revelation UnveiledWNP


This the End of the American Empire?

President George W. Bush’s trips to Europe during the month of June attracted significant anti-American demonstrations. At the same time, the United States announced troop withdrawals from Europe and Korea as the handover in Iraq took place. Analysts speculate what would happen if America withdrew from its international role.

by Melvin Rhodes

British historian Niall Ferguson is one of the most prolific historians writing today. He is Herzog professor of history at New York University’s Stern School of Business and senior fellow at the Hoover Institute at Stanford University . In addition to these responsibilities, he has been writing more than one book a year and countless articles for different magazines. He is also refreshingly perceptive about the world in which we live. As an atheist he does not see things through biblical eyes, but, without realizing it, much of what he writes confirms Bible prophecy. In an article in the latest issue of Foreign Policy (July-August, 2004), Mr. Ferguson writes of “A World Without Power.” His introductory paragraph says this: “Critics of U.S. global dominance should pause and consider the alternative. Who would replace America if it retreated from its current role? Not Europe, not China, not the Muslim world—and certainly not the United Nations. Unfortunately, the alternative to a single superpower is not a multilateral utopia, but the anarchic nightmare of a new Dark Age.” Mr. Ferguson gives three reasons for the imminent fall of the American superpower. As he puts it: “The United States suffers from at least three structural deficits that will limit the effectiveness and duration of its quasi-imperial role in the world. “The first factor is the nation’s growing dependence on foreign capital to finance excessive private and public consumption. It is difficult to recall any past empire that long endured after becoming so dependent on lending from abroad.” America is overdrawn As if to emphasize this point, the same issue of Foreign Policy carried an article by Lawrence H. Summers, president of Harvard University and former secretary of the Treasury during the Clinton administration. In the article, titled “America Overdrawn,” Mr. Summers highlights a simple fact: “There is something odd about the world’s greatest power being the world’s greatest debtor…Much has been made of U.S. dependence on foreign energy, but the country’s dependence on foreign cash is even more distressing. In a real sense, the countries that hold U.S. currency and securities in their banks also hold U.S. prosperity in their hands. That prospect should make Americans uncomfortable.”

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American fascism:

by political definition the US is now fascist, not a constitutional republic

Examiner Bio

December 14, 10:55 AMLA County Nonpartisan ExaminerCarl Herman Previous Next 40 comments Subscribe Subscribe Top of Form Get alerts when there is a new article from the LA County Nonpartisan Examiner. Read’s terms of use.

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Include other special offers from Terms of Use Bottom of Form ShareThis We hold these Truths to be self-evident… Look in any textbook or encyclopedia and compare US policy (not rhetoric) to the definitions of fascism and constitutional republic. I’ll explain it here, but check my work. If at the end of your consideration, you agree that the United States of America is now a fascist state, please speak-up about it. Also, consider the policy requests at the end of the article. Please read this article like a prima facie legal argument; that means unless you can refute the facts, they stand as our best understanding of the issue. Here, if you can’t refute the evidence that the US is now a fascist state, then accept this as your best understanding. As time passes, if evidence is brought forward to further the case for fascism or refute it, your comprehensive understanding improves. Here we go: Definitions: The definition of “fascism” has some academic variance, but is essentially collusion among corporatocracy, authoritarian government, and controlled media and education. This “leadership” is only possible with a nationalistic public accepting policies of war, empire, and limited civil and political rights. “Constitutional republic” is a political philosophy of limited government, separated powers with checks and balances to ensure the federal government’s power stays limited within the Constitution, protected civil liberties, and elected representatives responsible to the people who retain the most political power. In the US we also embrace inalienable rights of the Declaration of Independence, and creative independence to cooperatively compete for our nation’s best ideas to move forward and be rewarded. History: The United States was structured as a constitutional republic. Before we consider the US present condition, let us contextualize our concern from the nation’s Founders’ grave admonishments and doubts as to Americans’ ability to retain it. If you honor America at all, give their most serious warnings your full attention for the next 1,000 words spanning from Ben Franklin to Abraham Lincoln. On September 18, 1787, just after signing the US Constitution, Benjamin Franklin met with members of the press. He was asked what kind of government America would have. Franklin: “A republic, if you can keep it.” In his speech to the Constitutional Convention, Franklin admonished: “This [U.S. Constitution] is likely to be administered for a course of years and then end in despotism… when the people shall become so corrupted as to need despotic government, being incapable of any other.” The Quotable Founding Fathers, pg. 39 “The right of a nation to kill a tyrant, in cases of necessity, can no more be doubted, than to hang a robber, or kill a flea. But killing one tyrant only makes way for worse, unless the people have sense, spirit and honesty enough to establish and support a constitution guarded at all points against the tyranny of the one, the few, and the many. Let it be the study, therefore, of lawgivers and philosophers, to enlighten the people’s understandings and improve their morals, by good and general education; to enable them to comprehend the scheme of government, and to know upon what points their liberties depend; to dissipate those vulgar prejudices and popular superstitions that oppose themselves to good government; and to teach them that obedience to the laws is as indispensable in them as in lords and kings.” – John Adams, A Defence of the Constitutions of Government (1787), Ch. 18. “A mere demarcation on parchment of the constitutional limits (of government) is not a sufficient guard against those encroachments which lead to a tyrannical concentration of all the powers of government in the same hands.” – James Madison, Federalist Paper #48, 1788. “Of all the enemies to public liberty war is, perhaps, the most to be dreaded, because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes; and armies, and debts, and taxes are the known instruments for bringing the many under the domination of the few. In war, too, the discretionary power of the Executive is extended; its influence in dealing out offices, honors, and emoluments is multiplied; and all the means of seducing the minds, are added to those of subduing the force, of the people. The same malignant aspect in republicanism may be traced in the inequality of fortunes, and the opportunities of fraud, growing out of a state of war, and in the degeneracy of manners and of morals engendered by both. No nation could preserve its freedom in the midst of continual warfare.” – James Madison, “Political Observations” (179504-20); also in Letters and Other Writings of James Madison (1865), Vol. IV, p. 491. “It is jealousy and not confidence which prescribes limited constitutions, to bind down those whom we are obliged to trust with power… Our Constitution has accordingly fixed the limits to which, and no further, our confidence may go… In questions of power, then, let no more be heard of confidence in man, but bind him down from mischief by the chains of the Constitution.” – Thomas Jefferson, Draft Kentucky Resolution (1798. ME 17:388) “A popular Government without popular information, or the means of acquiring, it is but a Prologue to a Farce or a Tragedy, or perhaps both. Knowledge will forever govern ignorance: And a people who mean to be their own Governors, must arm themselves with the power which knowledge gives.” – James Madison, Letter to W.T. Barry (182208-04) Washington made the topic of the Farewell Address he had printed and distributed as the culmination of his advice to Americans to “guard against the impostures of pretended patriotism.” “All obstructions to the execution of the laws, all combinations and associations, under whatever plausible character, with the real design to direct, control, counteract, or awe the regular deliberation and action of the constituted authorities, are destructive of this fundamental principle, and of fatal tendency. They serve to organize faction, to give it an artificial and extraordinary force; to put, in the place of the delegated will of the nation the will of a party, often a small but artful and enterprising minority of the community; and, according to the alternate triumphs of different parties, to make the public administration the mirror of the ill-concerted and incongruous projects of faction, rather than the organ of consistent and wholesome plans digested by common counsels and modified by mutual interests. However combinations or associations of the above description may now and then answer popular ends, they are likely, in the course of time and things, to become potent engines, by which cunning, ambitious, and unprincipled men will be enabled to subvert the power of the people and to usurp for themselves the reins of government, destroying afterwards the very engines which have lifted them to unjust dominion… Lincoln spoke in honor of the few still-living veterans of the Revolutionary War in the concise power we ascribe as one of history’s most powerful. The following six paragraphs are from Abraham Lincoln in his Lyceum Address, January 27 1838. “At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide… I know the American People are much attached to their Government;–I know they would suffer much for its sake;–I know they would endure evils long and patiently, before they would ever think of exchanging it for another. Yet, notwithstanding all this, if the laws be continually despised and disregarded, if their rights to be secure in their persons and property, are held by no better tenure than the caprice of a mob, the alienation of their affections from the Government is the natural consequence; and to that, sooner or later, it must come. Here then, is one point at which danger may be expected. The question recurs, “how shall we fortify against it?” The answer is simple. Let every American, every lover of liberty, every well wisher to his posterity, swear by the blood of the Revolution, never to violate in the least particular, the laws of the country; and never to tolerate their violation by others. As the patriots of seventy-six did to the support of the Declaration of Independence, so to the support of the Constitution and Laws, let every American pledge his life, his property, and his sacred honor;–let every man remember that to violate the law, is to trample on the blood of his father, and to tear the character of his own, and his children’s liberty. Let reverence for the laws, be breathed by every American mother, to the lisping babe, that prattles on her lap–let it be taught in schools, in seminaries, and in colleges; let it be written in Primers, spelling books, and in Almanacs;–let it be preached from the pulpit, proclaimed in legislative halls, and enforced in courts of justice. And, in short, let it become the political religion of the nation; and let the old and the young, the rich and the poor, the grave and the gay, of all sexes and tongues, and colors and conditions, sacrifice unceasingly upon its altars. While ever a state of feeling, such as this, shall universally, or even, very generally prevail throughout the nation, vain will be every effort, and fruitless every attempt, to subvert our national freedom. …Passion has helped us; but can do so no more. It will in future be our enemy. Reason, cold, calculating, unimpassioned reason, must furnish all the materials for our future support and defence.–Let those materials be moulded into general intelligence, sound morality, and in particular, a reverence for the constitution and laws.” What is the evidence for American fascism in the present? The US brazenly violates our laws of war, both demanded by the Constitution and the UN Charter, with open invasion of Afghanistan in abject violation of UN Security Council Resolution 1373 and their government’s agreement to help extradite Osama bin Laden upon US presentment of evidence that he was involved in any crime of UN and/or international law. The US refused both the Afghan standard legal requirement of extradition and the UN resolution for cooperation under law and attacked. The new administration of Obama does not acknowledge this illegal history, but expands the invasion and attacks Pakistan. This policy is fascist, not limited by US law. The US openly lied about reasons to justify an attack upon Iraq, destroying any semblance of argument of “self-defense.” The Obama administration won’t acknowledge the disclosed history from our own House and Senate investigations, and violates his oath of office to prosecute clear crimes. This policy is authoritarian, fascist, and does not hold equality under just laws. It is an un-American policy by definition. The US tortured, with Obama refusing to prosecute and giving empty rhetoric to end it. The destruction of civil liberties to enforce authoritarian government is fascist, not American. The US lies for more war with Iran, rejecting inalienable and legal rights for Iranians. Obama continues this policy of unlawful aggression, including official policy for first-strike nuclear weapons upon conclusion that Iran poses a possible future threat to the US and/or our allies. Political leaders and corporate media ignore the ignoble history of US vicious domination of Iranian government through coup and backed invasion. Fascist policy; un-American. The US violates numerous treaty law with WMD, and hypocritically asserts our war targets’ alleged violations justify US armed attack. This rejection of limited government under the law is a fascist empire on the loose, not a law-abiding neighbor. Added hypocrisy is the psychopathic front of American political leaders as Christians. American corporatocracy is dominated by Enron-like cartels, headed by banks receiving the transfer of TRILLIONS of our tax dollars to pay-off their gambling debts in exotic derivative markets the federal government regulates only in more empty rhetoric. This socialization of corporate-insiders’ losses is fascist, and fundamentally in opposition of the American ideal of cooperative competition on a level playing field. Obvious financial solutions for the public good are ignored in their corporate and not public policy commitment. While our government’s official line is respect for Islam, their wars betray this analysis. If extremists were the small minority, why not peacefully cooperate to marginalize and arrest those in violation of just laws? Muslims as a group are often demonized in US media, and often the entire group is branded as terrorists. For example, consider this segment from the radio talk show of Michael Savage. The corporate media will not present such disturbing facts and analysis. Their outright lies of commission and omission are prima facie evidence of a controlled media, supported by revealed documentation from whistle-blowers. American freedom of the press is left to independent websites and those few media outlets who tolerate reporting such as you read now. Yeah, but we’re not totally fascist! Saying the US is fascist is just not right!!! Yes, I’ve made the case for fascism only in the area of tens of trillions of our tax dollars in the economy, Wars of Aggression based on objective lies, authoritarian disregard for crucial laws and treaties of war and moral conduct, expansion of new unlawful war into Pakistan with rhetoric leading to more war with Iran, and a corporate press who won’t communicate these “emperor has no clothes” facts until the public breaks free of their cognitive blindness to clearly embrace our new American political reality. We still vote for Republicans and Democrats in elections, yes, in a monied system with a virtual lock against 3rd party candidates given the costs of advertising and breaking the inertia of a two-party system. We still have Internet press where authors such as I can point to the obvious, but withdocumented government-organized opposition in PSYOPS to ridicule challenging voices while counting of public cognitive blindness to keep the fascism unconcealed. Policy responseGandhi and Martin Luther King advocated public understanding of the facts and non-cooperation with evil. I’m among hundreds who advocate:

  1. Understand the laws of war. These were legislated after WW2 and are crystal-clear that only self-defense, in a narrow legal meaning, can justify war. This investment of your time takes less than an hour and empowers you to legally stand for ending these Wars of Aggression.
  2. Communicate. Trust your unique, beautiful, and powerful self-expression to share powerful information as you feel appropriate. Understand that while many people are ready to embrace difficult facts, many are not. Anticipate your virtuous response to being attacked and give it in the spirit of competition, just as you do in other fields.
  3. Refuse and end all orders and acts associated with these unlawful wars andconstant violation of treaties. Those involved with US military, government, and law enforcement have an oath to protect and defend the US Constitution. Unlawful acts only move forward with sufficient cooperation and public tolerance. Stop cooperating with the most vicious crime a nation can commit: war.
  4. Prosecute the war leaders for obvious violation of the letter and spirit of US war laws. You can only understand how these wars are specifically unlawful by investing the time to do so. Because the crimes are so broad and deep, I recommend Truth and Reconciliation (T&R) to exchange full truth and return of stolen US assets for non-prosecution. This is the most expeditious way to understand and end all unlawful and harmful acts. Those who reject T&R either by volunteering their name and/or responding when named are subject to prosecution after the window of T&R closes.

I conclude with the 5-minute powerful video from PuppetGov: Had enough? Please share this article with all who can benefit. If you appreciate my work, please subscribe by clicking under the article title (it’s free). Please use my archive of work to help build a brighter future. <><><>

“America lives in a fascist state” – Gerald Celente

permalinke-mail story to a friendprint version Published 19 April, 2009, 09:47 Edited 30 April, 2010, 12:21 The merger of corporate and government powers in modern America is plain and simple fascism, believes Gerald Celente, the founder of the Trends Research Institute and publisher of Trends Journal. Yahoo StumbleUpon Google Live Technorati Digg Reddit Mixx Propeller

Gerald Celente

Celente takes an in-depth look at what AIG and Goldman Sachs really are and the people behind them; explains the policies of the Obama’s administration, and the moral basis for a forthcoming new American Revolution. RT: I’d like to begin by talking about the Treasury department. They’ve decided to extend bailout funds to a number of struggling life insurance policies. This is in addition to the auto industry and the banks. Do you think Americans are aware of what’s going on? G.C.: They know about it, it’s a new trend. America is going from what used to be the major capitalistic country in the world of free market – a crusader – into what Mussolini would have called fascism: the merger of state and corporate powers. So it is not socialism as people believe, it is socialism’s egalitarianism. It’s not communism where the state controls monopolies – it’s fascism, plain and simple. The merger of corporate and government powers. State-controlled capitalism is called fascism, and fascism has come to America in broad daylight. But they’re feeding them it in little bits and pieces. First AIG was too big to fail. Mortgage companies Fannie Mae and Freddie Mac were too big to fail. Banks too big to fail and auto companies. And now we give money to the people that make the auto parts. And now there’s talk about the technology companies, wanting their piece of the action. The merger of state and government is called fascism. Take it from Mussolini; he knew a thing or two about it. Read more RT: What can Americans do if they are opposed to the road that government officials are bringing them down? G.C.: The people don’t really have a choice, there is no ballot box. I’m of Italian descent and I’ve heard enough of mafia stories for the rest of my life. If you want to look at a mafia, you can call it a republican and democratic party. And if you want to look at the two families, the heads of the mafia, all you have to do is to look at the Bushes and the Clintons. They’ve been running the show now for some 24 years. We heard about Obama who is going to bring in ‘change’. A change you could believe in if he is dumb, stupid and blind. Look who he’s brought in as his chief policy makers. Retreads from the old Clinton administration. It’s a two-headed one-party system. So it’s very difficult for the people to vote in a new administration that isn’t part of the old one. RT: Can you tell me one thing that you like about President Obama? G.C.: In the Trends Journal, the top trends of 2009, one of our trends was that people are going to be putting out ‘recession gardens’. And now as we see the Obamas, they are planting their own garden, and that trend is taking hold. So he is doing that in positive ways, he’s bringing an element of dignity back to society. Those are positives. But now let me look at whether it’s true or the hypocrisy. So, they are talking about planting their own gardens. And they are talking about buying local. Oh, all that is wonderful, but on the other side of the coin they are pushing genetically modified foods while they’re eating organic. So it’s like ‘let them eat Frankenfoods’ – this is the message. So I see hypocrisy at every level. When they show me truth and justice, and the real American way – then I’ll believe. RT: If I revert to our previous interview, I asked you – “what kind of revolution do you think would happen and when, and why would it happen?” and you said there would be a tax revolt. And now we are hearing more and more about these ‘tea parties’. What do you make of that? Do you think that that’s just the first action and many actions to follow from the American public? G.C.: There is going to be a lot more. This is just a beginning. As a Bronx boy, my saying is: ‘when people lose everything and they have nothing left to lose – they lose it’. You’re gonna start see people taking to the streets, like they do in other countries. People have had it, they are fed up. They can’t afford it anymore. Look at what is going on. Ten major states are raising taxes again as people are losing their jobs, income is going down, they are losing their pensions, they are losing their investments – and the government is saying: more taxes, more taxes, more taxes… At the same time, what’s happening is, on the top, they are changing the regulations so the thieves could steal more, just as they did with the new banking act. They call it mark-to-market. So it is now allowing them to do rather than putting the real loss of their assets – the toxic assets that they are holding – they are letting them make up what they want! Come up with fictitious numbers and you are going to start seeing ‘bank stocks going up again’. It is fake, and what they are doing is they’re changing the regulations on the top so the big thieves could steal more, while they clamping down on the little people – and the little people have had it. RT: These stimulus plans, both with former President Bush and with President Obama, were rushed through so quickly and you make a comparison to the way that the US launched the War on Iraq with the same urgency of the plans. G.C.: They push it through so that people are kept off guard – they put fear into the people’s hearts. Remember the mushroom cloud that was going to explode if we did not do it very quickly with Iraq? And remember the financial system was going to collapse if we didn’t save AIG? And who ever knew the AIG was, to begin with?! “What’s an AIG?! I’ve never heard of one before!” most people would say. When the AIG plan was rushed through, the only person outside of the Federal Reserve and Washington to sit on that AIG bailout was Lloyd Blankfein, the CEO of Goldman Sachs. Goldman Sachs got $13 billion of taxpayer money so that they wouldn’t take the loss of the AIG bailout because they bet bad with AIG. And who was the Treasury Secretary at the time? Former CEO of Goldman Sachs Henry Paulson. Oh, and who did Obama bring in to run AIG now for the government? Ed Liddy. And where is Ed Liddy from? Goldman Sachs. The fix is in, the game is rigged. Forget about calling this ‘government’, Wall Street has hijacked Washington. RT: So now what? G.C.: We need a revolution. And we’re going to talk about that more in the future. And we’re going to be announcing our plans for the revolution in the coming weeks. And it is going to be much greater than the tea parties or the tax revolts. My morality, the way I was raised, there are two things in the moral code that are against everything that I was taught. The first is that you don’t kill innocent people, and the US is involved in killing innocent people both in Iraq and Afghanistan. The facts speak for themselves. It has been proven that Saddam Hussein did not have weapons of mass destruction, nor ties to Al-Qaeda. Yet the US is still waging war in Iraq. Number two, this whole thing about Afghanistan, taking over the country for whatever reasons, and the Russians know it even better than the Americans, and the English knew it before the Russians – this has been going on and on. The Afghani people have done nothing to the Americans. And now President Obama has sent another 21,000 troops into Afghanistan. So, killing innocent people is against my morality. The second part of the revolution, why we are calling for revolution is that we are getting robbed in broad daylight. The numbers and facts we have discussed speak for themselves. They’re pick-pocketing the little people to pay off the big guys. This is against everything that has ever been taught to us in this country growing up as a free market society. It’s fascism. RT: When somebody calls you a gloom-and-doomer, somebody that’s scaring the public… what is your response to that? G.C.: My response is suppose you go to a doctor as if you feel that something is really wrong with you and the doctor gives you a diagnosis and this diagnosis is maybe cancer. Do you call the doctor a gloom-and-doomer? It’s the fact, people better grow up. The ship has hit the iceberg and it’s sinking. We are telling people, just as the doctor would tell a patient, “Look, there are ways out of it but first we have to recognize what the disease is. And then we are going to have to be very inventive about trying to attack it in a number of different ways. We could go through complementary medicine, we could go through traditional… we could even go through a combination of things.” But you respect what the doctor is saying, and you don’t call him a gloom-and-doomer. It is a childish response that people have that want to believe that they have a new leader, and that the new leader would lead them down the yellow brick road of happiness. Rather than understanding that there is nobody behind the curtain. It’s the Wizard of Oz. They’d better grow up; nobody is going to save them. So, we put out the information, we’re saying: “This is the direction things are going in. This is where we believe they are going to end up. Here are some strategies to consider so you don’t go down with the ship.”

America Turning Into a Fascist State? It Already Has!

This is not the America that anyone over the age of 30 grew up with. The Military Industrial Complex that Eisenhower warned us about in 1954 is already running this country. The democratic rule of the people that has been the lynchpin of our nation is controlled no longer by the people, but by business interests that control our elective officials through campaign funding and lobbyist connections. The American voter has been disenfranchised by a media that has usurped the discourse of normal campaigning by ignoring certain candidates and not allowing them on debates. The system is rigged people. The question is what are we going to do about it? The electronic voting machines that tabulate the votes have no paper trail. The truth is that it doesn’t matter what the vote by the people is, it’s who counts there votes. We have seen many times that voting “irregularities” have popped up in Florida, Michigan, and many other States. Some have been taken to court and by the grace of God, some of these irregularities have been overturned. The Presidential irregularities in the 2000 Presidential contest were decided by the Supreme Court. That was a travesty. This gave us eight years of a man that never once won the popular vote. We are involved in two wars in the middle east, we have our fingers in Columbia, propping up the only far right government in Latin America, we have decided to enter the internal affairs of Bolivia, a poor country that has a secessionist movement that is being fomented by the rich landowners in the east of the country that want no part of President Evo Morales and his populist government. The US in its wisdom has donated over $125 Million Dollars to help this succession. Is this in our national interests? The United States of America is re-forming it’s Fourth Fleet that was disbanded in 1950 and reinstituting it to face “new” challenges in the Western Hemisphere. What are those “challenges”? Is it because the governments of Latin America are cutting their ties to the US and refusing to send its soldiers to the “School of the Americas” at Ft.Benning, Georgia because they are abandoning the US and it’s imperialistic policies that have been raping the Southern Hemisphere for over a century? The US has devalued its money and continues to borrow fro anyone that will lend it to us. We are a debtor nation. We seem not to take that into account when we rattle our sabers to Iran. Iran is no threat to mainland America. It may be a threat to Israel, but Israel is the recipient of Billions of US Aid that we can scarcely afford and has an estimated 300 Nuclear weapons and the means to deliver them. Of what possible help could we give to a megalith of power that has become the State of Israel that has been taken over by the Likud Party of Olmert who preaches the same rhetoric as Bush and his neo-cons that have constantly pushed for war and more war since taking power? The American people for the large part have been stuck on “Stupid” for the last ten years. Our press is censored, we know nothing about what is happening in the world at large, and instead we listen to stories about “celebrities” and events that happen inside our country. We have been dumbed down by the media and the majority of Americans don’t know the difference! We are eating food that is genetically altered without our knowledge. We are building internment camps by the hundreds inside almost every state in the Union! The Constitution has been trashed by The Patriot Act, The Military Commissions Act of 2006, The Warner Defense Bill and countless other bills that had provisions put in them that Congress knew nothing about until they became law. This Congress and The Executive Branch represent business, not the American people. We have precious little liberty left in this country, and in that definition, we are already at the definition of a fascist state, rum by business and not the people. What I’m trying do in this article is wake some of you people up that think Barak Obama or John McCain are going to change things! They are both owned and operated by the business sectors of this The North American Union and the SPP are no longer “ideas” that are being contemplated. There are rail hubs being built in Kansas City that will tie all three Nations together. This is pretty much happening as we speak. Why are detention camps being built in “The Land of the Free and the Home of The Brave”? That’s what I want to know. How does Presidential Directive (PDD51) fit into all of this? For all you doubting Thomas’s, I will painstakingly link everything I have mentioned in this article. It will take time, but it’s my job as a Patriot. Labels: AmericafascismNWO<><><>

Fascist America, in 10 easy steps

From Hitler to Pinochet and beyond, history shows there are certain steps that any would-be dictator must take to destroy constitutional freedoms. And, argues Naomi Wolf, George Bush and his administration seem to be taking them all

Last autumn, there was a military coup in Thailand. The leaders of the coup took a number of steps, rather systematically, as if they had a shopping list. In a sense, they did. Within a matter of days, democracy had been closed down: the coup leaders declared martial law, sent armed soldiers into residential areas, took over radio and TV stations, issued restrictions on the press, tightened some limits on travel, and took certain activists into custody. They were not figuring these things out as they went along. If you look at history, you can see that there is essentially a blueprint for turning an open society into a dictatorship. That blueprint has been used again and again in more and less bloody, more and less terrifying ways. But it is always effective. It is very difficult and arduous to create and sustain a democracy – but history shows that closing one down is much simpler. You simply have to be willing to take the 10 steps. As difficult as this is to contemplate, it is clear, if you are willing to look, that each of these 10 steps has already been initiated today in the United States by the Bush administration. Because Americans like me were born in freedom, we have a hard time even considering that it is possible for us to become as unfree – domestically – as many other nations. Because we no longer learn much about our rights or our system of government – the task of being aware of the constitution has been outsourced from citizens’ ownership to being the domain of professionals such as lawyers and professors – we scarcely recognise the checks and balances that the founders put in place, even as they are being systematically dismantled. Because we don’t learn much about European history, the setting up of a department of “homeland” security – remember who else was keen on the word “homeland” – didn’t raise the alarm bells it might have. It is my argument that, beneath our very noses, George Bush and his administration are using time-tested tactics to close down an open society. It is time for us to be willing to think the unthinkable – as the author and political journalist Joe Conason, has put it, that it can happen here. And that we are further along than we realise. Conason eloquently warned of the danger of American authoritarianism. I am arguing that we need also to look at the lessons of European and other kinds of fascism to understand the potential seriousness of the events we see unfolding in the US. 1. Invoke a terrifying internal and external enemy After we were hit on September 11 2001, we were in a state of national shock. Less than six weeks later, on October 26 2001, the USA Patriot Act was passed by a Congress that had little chance to debate it; many said that they scarcely had time to read it. We were told we were now on a “war footing”; we were in a “global war” against a “global caliphate” intending to “wipe out civilisation”. There have been other times of crisis in which the US accepted limits on civil liberties, such as during the civil war, when Lincoln declared martial law, and the second world war, when thousands of Japanese-American citizens were interned. But this situation, as Bruce Fein of the American Freedom Agenda notes, is unprecedented: all our other wars had an endpoint, so the pendulum was able to swing back toward freedom; this war is defined as open-ended in time and without national boundaries in space – the globe itself is the battlefield. “This time,” Fein says, “there will be no defined end.” Creating a terrifying threat – hydra-like, secretive, evil – is an old trick. It can, like Hitler’s invocation of a communist threat to the nation’s security, be based on actual events (one Wisconsin academic has faced calls for his dismissal because he noted, among other things, that the alleged communist arson, the Reichstag fire of February 1933, was swiftly followed in Nazi Germany by passage of the Enabling Act, which replaced constitutional law with an open-ended state of emergency). Or the terrifying threat can be based, like the National Socialist evocation of the “global conspiracy of world Jewry”, on myth. It is not that global Islamist terrorism is not a severe danger; of course it is. I am arguing rather that the language used to convey the nature of the threat is different in a country such as Spain – which has also suffered violent terrorist attacks – than it is in America. Spanish citizens know that they face a grave security threat; what we as American citizens believe is that we are potentially threatened with the end of civilisation as we know it. Of course, this makes us more willing to accept restrictions on our freedoms. 2. Create a gulag Once you have got everyone scared, the next step is to create a prison system outside the rule of law (as Bush put it, he wanted the American detention centre at Guantánamo Bay to be situated in legal “outer space”) – where torture takes place. At first, the people who are sent there are seen by citizens as outsiders: troublemakers, spies, “enemies of the people” or “criminals”. Initially, citizens tend to support the secret prison system; it makes them feel safer and they do not identify with the prisoners. But soon enough, civil society leaders – opposition members, labour activists, clergy and journalists – are arrested and sent there as well. This process took place in fascist shifts or anti-democracy crackdowns ranging from Italy and Germany in the 1920s and 1930s to the Latin American coups of the 1970s and beyond. It is standard practice for closing down an open society or crushing a pro-democracy uprising. With its jails in Iraq and Afghanistan, and, of course, Guantánamo in Cuba, where detainees are abused, and kept indefinitely without trial and without access to the due process of the law, America certainly has its gulag now. Bush and his allies in Congress recently announced they would issue no information about the secret CIA “black site” prisons throughout the world, which are used to incarcerate people who have been seized off the street. Gulags in history tend to metastasise, becoming ever larger and more secretive, ever more deadly and formalised. We know from first-hand accounts, photographs, videos and government documents that people, innocent and guilty, have been tortured in the US-run prisons we are aware of and those we can’t investigate adequately. But Americans still assume this system and detainee abuses involve only scary brown people with whom they don’t generally identify. It was brave of the conservative pundit William Safire to quote the anti-Nazi pastor Martin Niemöller, who had been seized as a political prisoner: “First they came for the Jews.” Most Americans don’t understand yet that the destruction of the rule of law at Guantánamo set a dangerous precedent for them, too. By the way, the establishment of military tribunals that deny prisoners due process tends to come early on in a fascist shift. Mussolini and Stalin set up such tribunals. On April 24 1934, the Nazis, too, set up the People’s Court, which also bypassed the judicial system: prisoners were held indefinitely, often in isolation, and tortured, without being charged with offences, and were subjected to show trials. Eventually, the Special Courts became a parallel system that put pressure on the regular courts to abandon the rule of law in favour of Nazi ideology when making decisions. 3. Develop a thug caste When leaders who seek what I call a “fascist shift” want to close down an open society, they send paramilitary groups of scary young men out to terrorise citizens. The Blackshirts roamed the Italian countryside beating up communists; the Brownshirts staged violent rallies throughout Germany. This paramilitary force is especially important in a democracy: you need citizens to fear thug violence and so you need thugs who are free from prosecution. The years following 9/11 have proved a bonanza for America’s security contractors, with the Bush administration outsourcing areas of work that traditionally fell to the US military. In the process, contracts worth hundreds of millions of dollars have been issued for security work by mercenaries at home and abroad. In Iraq, some of these contract operatives have been accused of involvement in torturing prisoners, harassing journalists and firing on Iraqi civilians. Under Order 17, issued to regulate contractors in Iraq by the one-time US administrator in Baghdad, Paul Bremer, these contractors are immune from prosecution Yes, but that is in Iraq, you could argue; however, after Hurricane Katrina, the Department of Homeland Security hired and deployed hundreds of armed private security guards in New Orleans. The investigative journalist Jeremy Scahill interviewed one unnamed guard who reported having fired on unarmed civilians in the city. It was a natural disaster that underlay that episode – but the administration’s endless war on terror means ongoing scope for what are in effect privately contracted armies to take on crisis and emergency management at home in US cities. Thugs in America? Groups of angry young Republican men, dressed in identical shirts and trousers, menaced poll workers counting the votes in Florida in 2000. If you are reading history, you can imagine that there can be a need for “public order” on the next election day. Say there are protests, or a threat, on the day of an election; history would not rule out the presence of a private security firm at a polling station “to restore public order”. 4. Set up an internal surveillance system In Mussolini’s Italy, in Nazi Germany, in communist East Germany, in communist China – in every closed society – secret police spy on ordinary people and encourage neighbours to spy on neighbours. The Stasi needed to keep only a minority of East Germans under surveillance to convince a majority that they themselves were being watched. In 2005 and 2006, when James Risen and Eric Lichtblau wrote in the New York Times about a secret state programme to wiretap citizens’ phones, read their emails and follow international financial transactions, it became clear to ordinary Americans that they, too, could be under state scrutiny. In closed societies, this surveillance is cast as being about “national security”; the true function is to keep citizens docile and inhibit their activism and dissent. 5. Harass citizens’ groups The fifth thing you do is related to step four – you infiltrate and harass citizens’ groups. It can be trivial: a church in Pasadena, whose minister preached that Jesus was in favour of peace, found itself being investigated by the Internal Revenue Service, while churches that got Republicans out to vote, which is equally illegal under US tax law, have been left alone. Other harassment is more serious: the American Civil Liberties Union reports that thousands of ordinary American anti-war, environmental and other groups have been infiltrated by agents: a secret Pentagon database includes more than four dozen peaceful anti-war meetings, rallies or marches by American citizens in its category of 1,500 “suspicious incidents”. The equally secret Counterintelligence Field Activity (Cifa) agency of the Department of Defense has been gathering information about domestic organisations engaged in peaceful political activities: Cifa is supposed to track “potential terrorist threats” as it watches ordinary US citizen activists. A little-noticed new law has redefined activism such as animal rights protests as “terrorism”. So the definition of “terrorist” slowly expands to include the opposition. 6. Engage in arbitrary detention and release This scares people. It is a kind of cat-and-mouse game. Nicholas D Kristof and Sheryl WuDunn, the investigative reporters who wrote China Wakes: the Struggle for the Soul of a Rising Power, describe pro-democracy activists in China, such as Wei Jingsheng, being arrested and released many times. In a closing or closed society there is a “list” of dissidents and opposition leaders: you are targeted in this way once you are on the list, and it is hard to get off the list. In 2004, America’s Transportation Security Administration confirmed that it had a list of passengers who were targeted for security searches or worse if they tried to fly. People who have found themselves on the list? Two middle-aged women peace activists in San Francisco; liberal Senator Edward Kennedy; a member of Venezuela’s government – after Venezuela’s president had criticised Bush; and thousands of ordinary US citizens. Professor Walter F Murphy is emeritus of Princeton University; he is one of the foremost constitutional scholars in the nation and author of the classic Constitutional Democracy. Murphy is also a decorated former marine, and he is not even especially politically liberal. But on March 1 this year, he was denied a boarding pass at Newark, “because I was on the Terrorist Watch list”. “Have you been in any peace marches? We ban a lot of people from flying because of that,” asked the airline employee. “I explained,” said Murphy, “that I had not so marched but had, in September 2006, given a lecture at Princeton, televised and put on the web, highly critical of George Bush for his many violations of the constitution.” “That’ll do it,” the man said. Anti-war marcher? Potential terrorist. Support the constitution? Potential terrorist. History shows that the categories of “enemy of the people” tend to expand ever deeper into civil life. James Yee, a US citizen, was the Muslim chaplain at Guantánamo who was accused of mishandling classified documents. He was harassed by the US military before the charges against him were dropped. Yee has been detained and released several times. He is still of interest. Brandon Mayfield, a US citizen and lawyer in Oregon, was mistakenly identified as a possible terrorist. His house was secretly broken into and his computer seized. Though he is innocent of the accusation against him, he is still on the list. It is a standard practice of fascist societies that once you are on the list, you can’t get off. 7. Target key individuals Threaten civil servants, artists and academics with job loss if they don’t toe the line. Mussolini went after the rectors of state universities who did not conform to the fascist line; so did Joseph Goebbels, who purged academics who were not pro-Nazi; so did Chile’s Augusto Pinochet; so does the Chinese communist Politburo in punishing pro-democracy students and professors. Academe is a tinderbox of activism, so those seeking a fascist shift punish academics and students with professional loss if they do not “coordinate”, in Goebbels’ term, ideologically. Since civil servants are the sector of society most vulnerable to being fired by a given regime, they are also a group that fascists typically “coordinate” early on: the Reich Law for the Re-establishment of a Professional Civil Service was passed on April 7 1933. Bush supporters in state legislatures in several states put pressure on regents at state universities to penalise or fire academics who have been critical of the administration. As for civil servants, the Bush administration has derailed the career of one military lawyer who spoke up for fair trials for detainees, while an administration official publicly intimidated the law firms that represent detainees pro bono by threatening to call for their major corporate clients to boycott them. Elsewhere, a CIA contract worker who said in a closed blog that “waterboarding is torture” was stripped of the security clearance she needed in order to do her job. Most recently, the administration purged eight US attorneys for what looks like insufficient political loyalty. When Goebbels purged the civil service in April 1933, attorneys were “coordinated” too, a step that eased the way of the increasingly brutal laws to follow. 8. Control the press Italy in the 1920s, Germany in the 30s, East Germany in the 50s, Czechoslovakia in the 60s, the Latin American dictatorships in the 70s, China in the 80s and 90s – all dictatorships and would-be dictators target newspapers and journalists. They threaten and harass them in more open societies that they are seeking to close, and they arrest them and worse in societies that have been closed already. The Committee to Protect Journalists says arrests of US journalists are at an all-time high: Josh Wolf (no relation), a blogger in San Francisco, has been put in jail for a year for refusing to turn over video of an anti-war demonstration; Homeland Security brought a criminal complaint against reporter Greg Palast, claiming he threatened “critical infrastructure” when he and a TV producer were filming victims of Hurricane Katrina in Louisiana. Palast had written a bestseller critical of the Bush administration. Other reporters and writers have been punished in other ways. Joseph C Wilson accused Bush, in a New York Times op-ed, of leading the country to war on the basis of a false charge that Saddam Hussein had acquired yellowcake uranium in Niger. His wife, Valerie Plame, was outed as a CIA spy – a form of retaliation that ended her career. Prosecution and job loss are nothing, though, compared with how the US is treating journalists seeking to cover the conflict in Iraq in an unbiased way. The Committee to Protect Journalists has documented multiple accounts of the US military in Iraq firing upon or threatening to fire upon unembedded (meaning independent) reporters and camera operators from organisations ranging from al-Jazeera to the BBC. While westerners may question the accounts by al-Jazeera, they should pay attention to the accounts of reporters such as the BBC’s Kate Adie. In some cases reporters have been wounded or killed, including ITN’s Terry Lloyd in 2003. Both CBS and the Associated Press in Iraq had staff members seized by the US military and taken to violent prisons; the news organisations were unable to see the evidence against their staffers. Over time in closing societies, real news is supplanted by fake news and false documents. Pinochet showed Chilean citizens falsified documents to back up his claim that terrorists had been about to attack the nation. The yellowcake charge, too, was based on forged papers. You won’t have a shutdown of news in modern America – it is not possible. But you can have, as Frank Rich and Sidney Blumenthal have pointed out, a steady stream of lies polluting the news well. What you already have is a White House directing a stream of false information that is so relentless that it is increasingly hard to sort out truth from untruth. In a fascist system, it’s not the lies that count but the muddying. When citizens can’t tell real news from fake, they give up their demands for accountability bit by bit. 9. Dissent equals treason Cast dissent as “treason” and criticism as “espionage’. Every closing society does this, just as it elaborates laws that increasingly criminalise certain kinds of speech and expand the definition of “spy” and “traitor”. When Bill Keller, the publisher of the New York Times, ran the Lichtblau/Risen stories, Bush called the Times’ leaking of classified information “disgraceful”, while Republicans in Congress called for Keller to be charged with treason, and rightwing commentators and news outlets kept up the “treason” drumbeat. Some commentators, as Conason noted, reminded readers smugly that one penalty for violating the Espionage Act is execution. Conason is right to note how serious a threat that attack represented. It is also important to recall that the 1938 Moscow show trial accused the editor of Izvestia, Nikolai Bukharin, of treason; Bukharin was, in fact, executed. And it is important to remind Americans that when the 1917 Espionage Act was last widely invoked, during the infamous 1919 Palmer Raids, leftist activists were arrested without warrants in sweeping roundups, kept in jail for up to five months, and “beaten, starved, suffocated, tortured and threatened with death”, according to the historian Myra MacPherson. After that, dissent was muted in America for a decade. In Stalin’s Soviet Union, dissidents were “enemies of the people”. National Socialists called those who supported Weimar democracy “November traitors”. And here is where the circle closes: most Americans do not realise that since September of last year – when Congress wrongly, foolishly, passed the Military Commissions Act of 2006 – the president has the power to call any US citizen an “enemy combatant”. He has the power to define what “enemy combatant” means. The president can also delegate to anyone he chooses in the executive branch the right to define “enemy combatant” any way he or she wants and then seize Americans accordingly. Even if you or I are American citizens, even if we turn out to be completely innocent of what he has accused us of doing, he has the power to have us seized as we are changing planes at Newark tomorrow, or have us taken with a knock on the door; ship you or me to a navy brig; and keep you or me in isolation, possibly for months, while awaiting trial. (Prolonged isolation, as psychiatrists know, triggers psychosis in otherwise mentally healthy prisoners. That is why Stalin’s gulag had an isolation cell, like Guantánamo’s, in every satellite prison. Camp 6, the newest, most brutal facility at Guantánamo, is all isolation cells.) We US citizens will get a trial eventually – for now. But legal rights activists at the Center for Constitutional Rights say that the Bush administration is trying increasingly aggressively to find ways to get around giving even US citizens fair trials. “Enemy combatant” is a status offence – it is not even something you have to have done. “We have absolutely moved over into a preventive detention model – you look like you could do something bad, you might do something bad, so we’re going to hold you,” says a spokeswoman of the CCR. Most Americans surely do not get this yet. No wonder: it is hard to believe, even though it is true. In every closing society, at a certain point there are some high-profile arrests – usually of opposition leaders, clergy and journalists. Then everything goes quiet. After those arrests, there are still newspapers, courts, TV and radio, and the facades of a civil society. There just isn’t real dissent. There just isn’t freedom. If you look at history, just before those arrests is where we are now. 10. Suspend the rule of law The John Warner Defense Authorization Act of 2007 gave the president new powers over the national guard. This means that in a national emergency – which the president now has enhanced powers to declare – he can send Michigan’s militia to enforce a state of emergency that he has declared in Oregon, over the objections of the state’s governor and its citizens. Even as Americans were focused on Britney Spears’s meltdown and the question of who fathered Anna Nicole’s baby, the New York Times editorialised about this shift: “A disturbing recent phenomenon in Washington is that laws that strike to the heart of American democracy have been passed in the dead of night … Beyond actual insurrection, the president may now use military troops as a domestic police force in response to a natural disaster, a disease outbreak, terrorist attack or any ‘other condition’.” Critics see this as a clear violation of the Posse Comitatus Act – which was meant to restrain the federal government from using the military for domestic law enforcement. The Democratic senator Patrick Leahy says the bill encourages a president to declare federal martial law. It also violates the very reason the founders set up our system of government as they did: having seen citizens bullied by a monarch’s soldiers, the founders were terrified of exactly this kind of concentration of militias’ power over American people in the hands of an oppressive executive or faction. Of course, the United States is not vulnerable to the violent, total closing-down of the system that followed Mussolini’s march on Rome or Hitler’s roundup of political prisoners. Our democratic habits are too resilient, and our military and judiciary too independent, for any kind of scenario like that. Rather, as other critics are noting, our experiment in democracy could be closed down by a process of erosion. It is a mistake to think that early in a fascist shift you see the profile of barbed wire against the sky. In the early days, things look normal on the surface; peasants were celebrating harvest festivals in Calabria in 1922; people were shopping and going to the movies in Berlin in 1931. Early on, as WH Auden put it, the horror is always elsewhere – while someone is being tortured, children are skating, ships are sailing: “dogs go on with their doggy life … How everything turns away/ Quite leisurely from the disaster.” As Americans turn away quite leisurely, keeping tuned to internet shopping and American Idol, the foundations of democracy are being fatally corroded. Something has changed profoundly that weakens us unprecedentedly: our democratic traditions, independent judiciary and free press do their work today in a context in which we are “at war” in a “long war” – a war without end, on a battlefield described as the globe, in a context that gives the president – without US citizens realising it yet – the power over US citizens of freedom or long solitary incarceration, on his say-so alone. That means a hollowness has been expanding under the foundation of all these still- free-looking institutions – and this foundation can give way under certain kinds of pressure. To prevent such an outcome, we have to think about the “what ifs”. What if, in a year and a half, there is another attack – say, God forbid, a dirty bomb? The executive can declare a state of emergency. History shows that any leader, of any party, will be tempted to maintain emergency powers after the crisis has passed. With the gutting of traditional checks and balances, we are no less endangered by a President Hillary than by a President Giuliani – because any executive will be tempted to enforce his or her will through edict rather than the arduous, uncertain process of democratic negotiation and compromise. What if the publisher of a major US newspaper were charged with treason or espionage, as a rightwing effort seemed to threaten Keller with last year? What if he or she got 10 years in jail? What would the newspapers look like the next day? Judging from history, they would not cease publishing; but they would suddenly be very polite. Right now, only a handful of patriots are trying to hold back the tide of tyranny for the rest of us – staff at the Center for Constitutional Rights, who faced death threats for representing the detainees yet persisted all the way to the Supreme Court; activists at the American Civil Liberties Union; and prominent conservatives trying to roll back the corrosive new laws, under the banner of a new group called the American Freedom Agenda. This small, disparate collection of people needs everybody’s help, including that of Europeans and others internationally who are willing to put pressure on the administration because they can see what a US unrestrained by real democracy at home can mean for the rest of the world. We need to look at history and face the “what ifs”. For if we keep going down this road, the “end of America” could come for each of us in a different way, at a different moment; each of us might have a different moment when we feel forced to look back and think: that is how it was before – and this is the way it is now. “The accumulation of all powers, legislative, executive, and judiciary, in the same hands … is the definition of tyranny,” wrote James Madison. We still have the choice to stop going down this road; we can stand our ground and fight for our nation, and take up the banner the founders asked us to carry. · Naomi Wolf’s The End of America: A Letter of Warning to a Young Patriot will be published by Chelsea Green in September.

Harper’s Magazine: We Now Live in a Fascist State

Date: Tue, 11 Oct 2005 13:34:38 -0700 The article below appears in the current issue of Harpers and was written by Lewis H. Lapham the source of this piece makes it all the more disturbing. It is not every day that the editor of a respected national magazine publishes an essay claiming that America is not on the road to becoming, but ALREADY IS, a fascist state…. or words to that affect. To help prepare you for what follows, here are the final sentence from this piece…. [I think we can look forward with confidence to character-building bankruptcies, picturesque bread riots, thrilling cavalcades of splendidly costumed motorcycle police.] On message By Lewis H. Lapham Harper’s Magazine, October 2005, pps. 7-9 “But I venture the challenging statement that if American democracy ceases to move forward as a living force, seeking day and night by peaceful means to better the lot of our citizens, then Fascism and Communism, aided, unconsciously perhaps, by old-line Tory Republicanism, will grow in strength in our land.” -Franklin D. Roosevelt, November 4, 1938 In 1938 the word “fascism” hadn’t yet been transferred into an abridged metaphor for all the world’s unspeakable evil and monstrous crime, and on coming across President Roosevelt’s prescient remark in one of Umberto Eco’s essays, I could read it as prose instead of poetry — a reference not to the Four Horsemen of the Apocalypse or the pit of Hell but to the political theories that regard individual citizens as the property of the government, happy villagers glad to wave the flags and wage the wars, grateful for the good fortune that placed them in the care of a sublime leader. Or, more emphatically, as Benito Mussolini liked to say, “Everything in the state. Nothing outside the state. Nothing against the state.” The theories were popular in Europe in the 1930s (cheering crowds, rousing band music, splendid military uniforms), and in the United States they numbered among their admirers a good many important people who believed that a somewhat modified form of fascism (power vested in the banks and business corporations instead of with the army) would lead the country out of the wilderness of the Great Depression — put an end to the Pennsylvania labor troubles, silence the voices of socialist heresy and democratic dissent. Roosevelt appreciated the extent of fascism’s popularity at the political box office; so does Eco, who takes pains in the essay “Ur-Fascism,” published in The New York Review of Books in 1995, to suggest that it’s a mistake to translate fascism into a figure of literary speech. By retrieving from our historical memory only the vivid and familiar images of fascist tyranny (Gestapo firing squads, Soviet labor camps, the chimneys at Treblinka), we lose sight of the faith-based initiatives that sustained the tyrant’s rise to glory. The several experiments with fascist government, in Russia and Spain as well as in Italy and Germany, didn’t depend on a single portfolio of dogma, and so Eco, in search of their common ground, doesn’t look for a unifying principle or a standard text. He attempts to describe a way of thinking and a habit of mind, and on sifting through the assortment of fantastic and often contradictory notions — Nazi paganism, Franco’s National Catholicism, Mussolini’s corporatism, etc. — he finds a set of axioms on which all the fascisms agree. Among the most notable: The truth is revealed once and only once. Parliamentary democracy is by definition rotten because it doesn’t represent the voice of the people, which is that of the sublime leader. Doctrine outpoints reason, and science is always suspect. Critical thought is the province of degenerate intellectuals, who betray the culture and subvert traditional values. The national identity is provided by the nation’s enemies. Argument is tantamount to treason. Perpetually at war, the state must govern with the instruments of fear. Citizens do not act; they play the supporting role of “the people” in the grand opera that is the state. Eco published his essay ten years ago, when it wasn’t as easy as it has since become to see the hallmarks of fascist sentiment in the character of an American government. Roosevelt probably wouldn’t have been surprised. He’d encountered enough opposition to both the New Deal and to his belief in such a thing as a United Nations to judge the force of America’s racist passions and the ferocity of its anti-intellectual prejudice. As he may have guessed, so it happened. The American democracy won the battles for Normandy and Iwo Jima, but the victories abroad didn’t stem the retreat of democracy at home, after 1968 no longer moving “forward as a living force, seeking day and night to better the lot” of its own citizens, and now that sixty years have passed since the bomb fell on Hiroshima, it doesn’t take much talent for reading a cashier’s scale at Wal-Mart to know that it is fascism, not democracy, that won the heart and mind of America’s “Greatest Generation,” added to its weight and strength on America’s shining seas and fruited plains. A few sorehead liberal intellectuals continue to bemoan the fact, write books about the good old days when everybody was in charge of reading his or her own mail. I hear their message and feel their pain, share their feelings of regret, also wish that Cole Porter was still writing songs, that Jean Harlow and Robert Mitchum hadn’t quit making movies. But what’s gone is gone, and it serves nobody’s purpose to deplore the fact that we’re not still riding in a coach to Philadelphia with Thomas Jefferson. The attitude is cowardly and French, symptomatic of effete aesthetes who refuse to change with the times. As set forth in Eco’s list, the fascist terms of political endearment are refreshingly straightforward and mercifully simple, many of them already accepted and understood by a gratifyingly large number of our most forward-thinking fellow citizens, multitasking and safe with Jesus. It does no good to ask the weakling’s pointless question, “Is America a fascist state?” We must ask instead, in a major rather than a minor key, “Can we make America the best damned fascist state the world has ever seen,” an authoritarian paradise deserving the admiration of the international capital markets, worthy of “a decent respect to the opinions of mankind”? I wish to be the first to say we can. We’re Americans; we have the money and the know-how to succeed where Hitler failed, and history has favored us with advantages not given to the early pioneers. We don’t have to burn any books. The Nazis in the 1930s were forced to waste precious time and money on the inoculation of the German citizenry, too well-educated for its own good, against the infections of impermissible thought. We can count it as a blessing that we don’t bear the burden of an educated citizenry. The systematic destruction of the public-school and library systems over the last thirty years, a program wisely carried out under administrations both Republican and Democratic, protects the market for the sale and distribution of the government’s propaganda posters. The publishing companies can print as many books as will guarantee their profit (books on any and all subjects, some of them even truthful), but to people who don’t know how to read or think, they do as little harm as snowflakes falling on a frozen pond. We don’t have to disturb, terrorize, or plunder the bourgeoisie. In Communist Russia as well as in Fascist Italy and Nazi Germany, the codes of social hygiene occasionally put the regime to the trouble of smashing department-store windows, beating bank managers to death, inviting opinionated merchants on complimentary tours (all expenses paid, breathtaking scenery) of Siberia. The resorts to violence served as study guides for free, thinking businessmen reluctant to give up on the democratic notion that the individual citizen is entitled to an owner’s interest in his or her own mind. The difficulty doesn’t arise among people accustomed to regarding themselves as functions of a corporation. Thanks to the diligence of out news media and the structure of our tax laws, our affluent and suburban classes have taken to heart the lesson taught to the aspiring serial killers rising through the ranks at West Point and the Harvard Business School — think what you’re told to think, and not only do you get to keep the house in Florida or command of the Pentagon press office but on some sunny prize day not far over the horizon, the compensation committee will hand you a check for $40 million, or President George W. Bush will bestow on you the favor of a nickname as witty as the ones that on good days elevate Karl Rove to the honorific “Boy Genius,” on bad days to the disappointed but no less affectionate “Turd Blossom.” Who doesn’t now know that the corporation is immortal, that it is the corporation that grants the privilege of an identity, confers meaning on one’s life, gives the pension, a decent credit rating, and the priority standing in the community? Of course the corporation reserves the right to open one’s email, test one’s blood, listen to the phone calls, examine one’s urine, hold the patent on the copyright to any idea generated on its premises. Why ever should it not? As surely as the loyal fascist knew that it was his duty to serve the state, the true American knows that it is his duty to protect the brand. Having met many fine people who come up to the corporate mark — on golf courses and commuter trains, tending to their gardens in Fairfield County while cutting back the payrolls in Michigan and Mexico — I’m proud to say (and I think I speak for all of us here this evening with Senator Clinton and her lovely husband) that we’re blessed with a bourgeoisie that will welcome fascism as gladly as it welcomes the rain in April and the sun in June. No need to send for the Gestapo or the NKVD; it will not be necessary to set examples. We don’t have to gag the press or seize the radio stations. People trained to the corporate style of thought and movement have no further use for free speech, which is corrupting, overly emotional, reckless, and ill-informed, not calibrated to the time available for television talk or to the performance standards of a Super Bowl halftime show. It is to our advantage that free speech doesn’t meet the criteria of the free market. We don’t require the inspirational genius of a Joseph Goebbels; we can rely instead on the dictates of the Nielsen ratings and the camera angles, secure in the knowledge that the major media syndicates run the business on strictly corporatist principles — afraid of anything disruptive or inappropriate, committed to the promulgation of what is responsible, rational, and approved by experts. Their willingness to stay on message is a credit to their professionalism. The early twentieth-century fascists had to contend with individuals who regarded their freedom of expression as a necessity — the bone and marrow of their existence, how they recognized themselves as human beings. Which was why, if sometimes they refused appointments to the state-run radio stations, they sometimes were found dead on the Italian autostrada or drowned in the Kiel Canal. The authorities looked upon their deaths as forms of self-indulgence. The same attitude governs the agreement reached between labor and management at our leading news organizations. No question that the freedom of speech is extended to every American — it says so in the Constitution — but the privilege is one that musn’t be abused. Understood in a proper and financially rewarding light, freedom of speech is more trouble than it’s worth — a luxury comparable to owning a racehorse and likely to bring with it little else except the risk of being made to look ridiculous. People who learn to conduct themselves in a manner respectful of the telephone tap and the surveillance camera have no reason to fear the fist of censorship. By removing the chore of having to think for oneself, one frees up more leisure time to enjoy the convenience of the Internet services that know exactly what one likes to hear and see and wear and eat. We don’t have to murder the intelligentsia. Here again, we find ourselves in luck. The society is so glutted with easy entertainment that no writer or company of writers is troublesome enough to warrant the compliment of an arrest, or even the courtesy of a sharp blow to the head. What passes for the American school of dissent talks exclusively to itself in the pages of obscure journals, across the coffee cups in Berkeley and Park Slope, in half-deserted lecture halls in small Midwestern colleges. The author on the platform or the beach towel can be relied upon to direct his angriest invective at the other members of the academy who failed to drape around the title of his latest book the garland of a rave review. The blessings bestowed by Providence place America in the front rank of nations addressing the problems of a twenty-first century, certain to require bold geopolitical initiatives and strong ideological solutions. How can it be otherwise? More pressing demands for always scarcer resources; ever larger numbers of people who cannot be controlled except with an increasingly heavy hand of authoritarian guidance. Who better than the Americans to lead the fascist renaissance, set the paradigm, order the preemptive strikes? The existence of mankind hangs in the balance; failure is not an option. Where else but in America can the world find the visionary intelligence to lead it bravely into the future — Donald Rumsfeld our Dante, Turd Blossom our Michelangelo? I don’t say that over the last thirty years we haven’t made brave strides forward. By matching Eco’s list of fascist commandments against our record of achievement, we can see how well we’ve begun the new project for the next millennium — the notion of absolute and eternal truth embraced by the evangelical Christians and embodied in the strict constructions of the Constitution; our national identity provided by anonymous Arabs; Darwin’s theory of evolution rescinded by the fiat of “intelligent design”; a state of perpetual war and a government administering, in generous and daily doses, the drug of fear; two presidential elections stolen with little or no objection on the part of a complacent populace; the nation’s congressional districts gerrymandered to defend the White House for the next fifty years against the intrusion of a liberal-minded president; the news media devoted to the arts of iconography, busily minting images of corporate executives like those of the emperor heroes on the coins of ancient Rome. An impressive beginning, in line with what the world has come to expect from the innovative Americans, but we can do better. The early twentieth-century fascisms didn’t enter their golden age until the proletariat in the countries that gave them birth had been reduced to abject poverty. The music and the marching songs rose with the cry of eagles from the wreckage of the domestic economy. On the evidence of the wonderful work currently being done by the Bush Administration with respect to the trade deficit and the national debt — to say nothing of expanding the markets for global terrorism — I think we can look forward with confidence to character-building bankruptcies, picturesque bread riots, thrilling cavalcades of splendidly costumed motorcycle police. <><><>

Rampant Fraud and Financial Collapse

Posted by Zach Carter

April 14, 2010

4 COMMENTS There are two types of financial outrages: acts that are outrageously illegal, and acts that are, outrageously, legal. Yesterday’s Senate hearing on the rise and fall of Washington Mutual was a rare examination of the former outrage, documenting the pervasive practice of fraud at every level of the now-defunct bank’s business. All of Washington Mutual’s sketchy practices can be traced back to rampant fraud in its mortgage lending offices. The company repeatedly performed internal audits of its lending practices, and discovered multiple times that enormous proportions of the loans it was issuing were based on fraudulent documents. At some offices, the fraud rate was on new mortgages over 70%, and at yesterday’s hearing, the company’s former Chief Risk Officer James Vanasek described its mortgage fraud as “systemic.” When most people think of mortgage fraud, they think of a clever borrower conning an unwitting banker into extending him a loan he cannot afford. But this isn’t really how fraud usually works in the mortgage business. According to the FBI, 80% of mortgage fraud is committed by the lender, so it shouldn’t be surprising that WaMu’s internal audits concluded that its widespread fraud was being “willfully” perpetrated by its own employees. The company also engaged in textbook predatory lending across all of its mortgage lending activities–issuing loans based on the value of the property, while ignoring the borrower’s ability to repay the loan. These findings alone are pretty bad stuff in the world of white-collar crime. For several years, WaMu was engaged in fraudulent lending, WaMu managers knew it was engaged in fraudulent lending, and didn’t stop it. The company was setting up thousands, if not millions of borrowers for foreclosure, while booking illusory short-term profits and paying out giant bonuses for its employees and executives. During the housing boom, WaMu Chairman and CEO Kerry Killinger took home between $11 million and $20 million every single year, much of it “earned” on outright fraud. But the WaMu scandal gets much worse. WaMu is routinely referred to as a pure mortgage lender, one whose simple business model can be contrasted with the complex wheelings and dealings of Wall Street titans like Lehman Brothers and Bear Stearns. That characterization is grossly inaccurate. WaMu was very heavily engaged in the business of packaging mortgages into securities and marketing them to investors. This is a core investment banking function, something ordinary mortgage banks like WaMu were legally barred from engaging in until 1999, when Congress repealed the Glass-Steagall Act, a critical Depression-era reform. Securitization is immensely profitable, and under the right circumstances, it allows banks to dump risky mortgages off their books at a profit. That’s exactly what WaMu did. Even after internal audits flagged specific loans as fraudulent, WaMu’s securitization shop still went ahead and packaged those exact same loans into securities, and sold them to investors. Knowingly peddling fraudulent securities is a straightforward act of securities fraud, one made all the more severe by the fact that WaMu never told its investors it had sold them securities full of fraudulent loans. The only question now is whether anyone will be personally held accountable for the act. So far, we’ve got fraud on fraud– but wait! The WaMu saga actually gets worse still. When the mortgage market started falling apart, WaMu ordered a study on the likelihood that one if its riskiest mortgage products, the option-ARM loan, would begin defaulting en masse. The report concluded that, indeed, option-ARMs were about to default like crazy, within a matter of months. Option-ARMs feature a low introductory monthly payment for a few years, often so low that borrowers actually end up going deeper into debt, despite making their regular payments. After a few years, the monthly payment increases dramatically–sometimes by as much as 400 percent. Suddenly this cheap loan is outrageously unaffordable, and if home prices decline, borrowers are immediately headed for foreclosure. Now, most would-be homeowners are not very interested in this kind of loan. It seems dangerous, because it is dangerous. So WaMu actively coached its loan officers to persuade skeptical borrowers into accepting this predatory garbage instead of an ordinary mortgage. This assault on its own borrowers is only half of WaMu’s option-ARM hustle. For a while, Wall Street investors really liked option-ARMs. They were inherently risky, which meant they were much more profitable, if you ignored the risk that they might someday default, and Wall Street was all too happy to engage in this kind of creative accounting. But when WaMu conducted its study on looming option-ARM defaults, the prospect of heavy, imminent losses did not convince the company to abandon the business. Instead, WaMu began issuing as many option-ARMs as it could. The idea was to jam as many of these loans into its securitization machine as it could before investors decided to stop buying option-ARM securities altogether. That means WaMu was knowingly setting up both borrowers and investors for a fall. The company was actually trying to extend loans that it knew would be disastrous for its borrowers–and then selling them to investors that it knew would end up taking heavy losses. Whether or not this constitutes illegal fraud will depend on some technicalities, but it is clearly an act of outrageous deception. When the securitization markets finally froze up, WaMu got stuck with billions in terrible, terrible loans it had issued, and the company failed spectacularly. One of the few good calls the U.S. government made during the financial crisis was the decision not to extend bailout funds to WaMu, not to save the jobs of its executives, and allow the company to fail. It was seized by the FDIC in late September 2008, and immediately sold to J.P. Morgan Chase, at no cost to taxpayers. But WaMu’s story is nevertheless rife with implications here for Wall Street reform. First, regulation matters. Everything WaMu did could have been stopped not only by an engaged regulator who worried about the company’s bottom line, but by a regulator who cared about consumer protection in any degree whatsoever. WaMu’s regulator, the Office of Thrift Supervision, didn’t care about either, but it was particularly uninterested in consumer protection rules, because those often conflict with bank profitability. If we establish a new regulator that is charged only with writing and enforcing consumer protection rules, it won’t worry about how profitable consumer predation might be, it will simply crack down on it. In the process, it could actually protect the company’s bottom line (Salon’s Andrew Leonard has been emphasizing this point for some time). Second, at yesterday’s hearing, former WaMu Chief Risk Officer James Vanasek acknowledged that his bank would not have been able to wreak so much economic destruction without the repeal of Glass-Steagall, which barred any mixing between complex Wall Street securities dealings and ordinary, plain-vanilla banking. He even went so far as to offer a tepid endorsement for reinstating the law. A lot of predatory mortgage firms didn’t run their own securitization shops–they sold their loans directly to Wall Street firms, which handled the securitization on their own. So proponents of the Glass-Steagall repeal (most of them employed at one point or another by a major banking conglomerate) argue that the crisis would have occurred with our without the repeal. That argument is basically a distraction, as the WaMu case reveals. Over the course of just a few years, WaMu’s entire mortgage banking operation transformed from a boring, profitable, plain-vanilla enterprise, into a feeding trough for its risky securitization activities. There is simply no way that transformation could have occurred without the lure of easy in-house securitization profits. It is possible to conceive of a mortgage crisis taking place without the repeal of Glass-Steagall, but it is utterly impossible to imagine a mortgage crisis as severe as the one we are still living through. It will be very surprising if criminal charges are not soon filed against some of WaMu’s former executives. But WaMu isn’t the only bad actor from the financial crisis. This is basically how the entire U.S. mortgage market operated for at least five years. Dozens of lenders who are still active, many of them saved by generous taxpayer bailouts, were engaged in similar activities. There’s only one way to churn out billions of dollars worth of lousy mortgages for several years, and it involves a prolonged campaign of fraud and deception. Zach Carter is AlterNet’s economics editor. His work has appeared in The Nation, Mother Jones, The American Prospect and Salon.<><><>

Reinventing Collapse The Soviet Example and American Prospects

by Dmitry Orlov

Dmitry Orlov was born in Leningrad and immigrated to the United States at the age of 12. He was an eyewitness to the Soviet collapse over several extended visits to his Russian homeland between the late eighties and mid-nineties. He is an engineer who has contributed to fields as diverse as high-energy Physics and Internet security, as well as a leading Peak Oil theorist whose writing is featured on such sites as and

Reinventing Collapse

The Soviet Example and American Prospects

By Dmitry Orlov

In the waning days of the American Empire the US administration finds itself mired in political crisis; foreign policy has come under sharp criticism; and the economy is in steep decline. These trends mirror the experience of the Soviet Union in the early 1980’s. Reinventing Collapse examines the circumstances of the demise of the Soviet superpower and offers clear insights into how we might prepare for coming events.

Rather than focusing on doom and gloom, Reinventing Collapse suggests that there is room for optimism if we focus our efforts on personal and cultural transformation. With characteristic dry humor, Orlov identifies three progressive stages of response to the looming crisis:

  • Mitigation – alleviating the impact of the coming upheaval
  • Adaptation – adjusting to the reality of changed conditions
  • Opportunity – flourishing after the collapse

He argues that by examining maladaptive parts of our common cultural baggage we can survive and thrive and discover more meaningful and fulfilling lives, in spite of steadily deteriorating circumstances. This challenging yet inspiring work is a must-read for anyone concerned about energy, geopolitics, international relations and life in a post-Peak Oil world.About the Contributor(s)Dmitry Orlovwas born in Leningrad and immigrated to the United States at the age of 12. He was an eyewitness to the Soviet collapse over several extended visits to his Russian homeland between the late eighties and mid-nineties. He is an engineer who has contributed to fields as diverse as high-energy Physics and Internet security, as well as a leading Peak Oil theorist whose writing is featured on such sites as and

By Matthew I. Stein “Practical Realist” (Truckee, CA) – See all my reviews

This review is from: Reinventing Collapse: The Soviet Example and American Prospects (Paperback)As an MIT engineer (BSME MIT, 1978) and Author of When Technology Fails, I have read over a hundred books over the past two years, but Dimitri Orlov’s “Reinventing Collapse” is the one that haunts me. Like many Americans, I felt quite smug when the Soviet Union collapsed. At the time, it appeared to be proof that the western world’s way of running its businesses and governments was indeed superior to communism, and that the “free market” would soon deliver oppressed peoples all over the world from the clutches of the remaining totalitarian regimes. Orlov’s analysis, gained through personally experiencing the Soviet collapse, shows us that this collapse was more a factor of economic problems caused by a crash in oil revenues than by the Regan/Breshnev arms race that was credited by so many westerners for fomenting this collapse. When the oil-glut of the 1980’s caused the price of oil to fall radically, the Soviet income from their inefficient state run petroleum industries crashed (it basically cost them about as much to pump and refine their oil as the export price per barrel), and the result was a cash flow crunch that could not sustain the rest of their state-run economy. Now that oil prices have shot past the $100 a barrel mark, the tables have turned. Russia has surpassed Saudi Arabia as the world’s number one oil producer, and the same oil exports that caused the Soviet regime’s cash flow problem when prices were extremely low, is now making the new Russian economy cash-rich. America is seeing the devaluation of our dollar, brought on primarily due to a negative cash flow of billions of dollars a day for petroleum product imports and military ventures to protect our access to the supply of oil in foreign countries (Iraq, etc.), contributing to a large portion of our skyrocketing national debt, bringing the threat of economic collapse ever closer to our shores. Orlov points out a few of the differences between the former Soviet situation and the current US situation that makes our predicament even scarier. When the Soviet Union collapsed, many of its state run systems continued to function. For example, most Soviets lived in public housing, fueled by public utilities, and they got around using public transportation. When their economic system went down, even though few people had much or any usable cash, their homes were still heated and not boarded up, the lights stayed on, and they could still get around using buses and trains. Here in America, the free market and privatization makes ours a very different story. When we stop paying our bills, the lights go out and the banks take our homes. If you don’t have money for gas, or happen to live where trains and buses don’t go where you need to go, your only recourse is to walk or hitch hike. When cash stops flowing, paychecks halt immediately and services screech to a halt (remember Enron and MCI?). When the Soviet Union collapsed, their country still had vast untapped resources to help rebuild after the collapse. America, on the other hand, has already used up most of our steel, natural gas, oil, timber, and so on. What untapped resources do we have to draw upon to pull ourselves out of this predicament? If the American dollar plunges, how will we continue to buy the resources and products from other countries that we no longer make ourselves? So, if you are worried about the future and what you may do to prepare your friends, family, and country for what may lie ahead, I suggest you pick up a copy of “Reinventing Collapse”, and learn from Orlov’s experience. He gives us a clear vision of what to expect, including which strategies worked best for individuals, and what items proved most valuable to stock up for barter use when cash has no value because the economy crashed. What you learn from the past can help you to navigate a course through the future. Highly recommended!

51 of 55 people found the following review helpful:

5.0 out of 5 stars Preparing for Collapse, May 23, 2008

By Anthony Reiner “Anthony” (Annapolis, MD) – See all my reviews (REAL NAME)

This review is from: Reinventing Collapse: The Soviet Example and American Prospects (Paperback)Dmitry Orlov observed the collapse of the Soviet Union first hand during the early 1990s and based on his experience there believes America will be following down the same, sad path sooner rather than later. In this book, he details the many surprising ways that the current United States mirrors many aspects of Soviet life. Orlov believes that one of the main reasons that the Soviet system eventually collpased was because average people couldn’t maintain their standard of living. Sound familiar? Frighteningly, Orlov found the Soviet Union to be much better prepared for collpase than America will be. At least, Russians owned their own homes and had public transportation. They weren’t stuck far away in suburbia with no stores or services nearby. Throughout this book Orlov uses scientific precision to knock down one myth after another about American life. He is very funny in mocking many of the silliest and stupidest aspects of American life. This book doesn’t lay out a blueprint for how to survive the collpase, because Orlov himself makes plain that he doesn’t pretend to know exatly how it will happen, but it does give some useful tips for how to prepare mentally and physically. The book is only 160 pages and I think you’ll be so drawn in by it that you’ll finish it in one evening just like I did. I guarantee it will be an evening well spent.

37 of 42 people found the following review helpful:

4.0 out of 5 stars thought-provoking, insightful, but missed a bit, June 28, 2008

By Charles Hugh Smith (Berkeley, CA United States) – See all my reviews

This review is from: Reinventing Collapse: The Soviet Example and American Prospects (Paperback)Dmitri Orlov has written an entertaining and thought-provoking comparison of the collapse of the Soviet Union and the post-oil end-game here in the U.S. By his own account, “entertaining and thought-provoking” were his goals for the book, and he has succeeded very admirably. I can recommend the book wholeheartedly, even as I respectfully disagree with some of his conclusions. 1. The collapse of the USSR was a political act; the USA is facing a resource-depletion-financial crisis. Now a financial collapse (K-Wave “winter,” or the repudiation of all debts, public and private) certainly could lead to political collapse, but that is by no means set in stone. The cultural and structural differences between the USSR and the USA are significant, and if Orlov had been an anthropologist his book might have drawn somewhat different distinctions. His primary thesis is that the Soviet Union was actually better prepared to weather collapse than the U.S., but I think he missed this critical difference: Russia and the other constituent states of the former USSR were resource-rich. Once they got their politcal house in order, they had immense resources to aid their financial recovery. 2. The Soviet Union was not a nation of immigrants; the U.S. is and has been since its inception. Even the Native Americans came from somewhere else, albeit a long time ago (though 12,000 years is merely a blink in geological time). Now on the surface immigration is driven by a number of things: hunger, poverty, desire for religious freedom, etc. But fundamentally it is a form of natural selection. Among any group of people, there wil be some who look around at the poverty, corruption, hopelessness and lack of opportunity for non-elite people and decide the best way to change their lives is to leave. 3. Religion plays a unique and powerful role in the U.S. in ways which it did not in the USSR. A quick glance at Russian art suggests the central role of the Church in Russian culture. But if Orlov were African-American, I believe his dismissal of religion might not have been so quick and assured. Rather than the non-factor Orlov expects, I would reckon religious institutions will play critical roles in organizing people for their own betterment. People didn’t come here to ignore their religion, they came here to practice it, and that goes for every religion. It’s been said that the black church is the only institution owned lock, stock and barrel by the African-American community, and it will not be a non-factor in that community but a central institution of stability, hope and communal services. 4. Wandering around as a homeless migrant is not a good survival strategy. Orlov suggests at the end of his book that wandering between two or three sources of resources would be a good strategy. My own view is that freeloading is frowned upon in the U.S. and your best bet to is either stay put (yes, even in ghettos and urban neighborhoods) or move to a place where you have some roots (where you grew up is always a good place to start) or where there is some commonality: a church you belong to, an ecosystem you love and will nurture, etc. 5. The U.S. is on par with Sadr City, Iraq in terms of firepower in the hands of citizens. As the most heavily armed society in the developed world, the U.S. can easily go the way of well-armed criminal gangs controlling urban zones or well-armed militia sprouting up to take out the criminals. There is historical precedents for either scenario. A third scenario (common in the 3rd World) is for wealthy enclaves to hire private forces to protect the enclave. While I can’t predict which will play out in various circumstances, we should be aware that the U.S. has millions of military veterans and millions of weapons. The USSR had the vets but not the weapons in private hands. People will eventually choose to support an alternative to anarchy or criminal/mob rule, unless the criminal gang is the only alternative to something worse (i.e. the Sadr City scenario). Or people will pay extra to maintain a top-notch police force and let go of the other city services, performing them communally via volunteer labor. My point is simply that a heavily armed culture with tens of millions of firearm-trained vets is not going to follow the route of a society without those two elements. 6. Orlov underestimates the power of the Web/Internet. Orlov is extending his experience in a pre-Internet Russia, in which you had to stand outside in the cold in order to hitch a ride. Assuming the Internet backbone will be maintained–and why wouldn’t it be placed ahead of every other use except hospitals and the public safety centers?–then virtually everyone will be able to arrange barters of almost unimaginable range via the Web. Despite these points (which are all debatable, of course), it’s a very worthy exercise to read his work and make your own analysis. <><><>

Huge real estate Crash Coming Subprime

i.e. through crash of Alt A and Option arms mortgages

Subprime > Altay > Option arms = CRASH

What do you know about Option Arms and Altay loans, this is what’s next to fail?

First wave of sub-prime mortgage defaults over. Second wave of mortgage defaults coming now to higher quality credit risks. These are people who have bought homes in the last five years and who have taken out home equity loans. Mortgages now going under water owe more than house is worth. This wave of defaults will take upwards of 10 to 12 months to clear. Third wave of mortgage defaults due to begin this year and continue through 2011 are Option Arms and Altay; as payments are automatically resetting to higher rates. We saw some fail last month because of a 3% rate hike, next month is the beginning of the end as rates start to climb even higher. Estimated – 8 million defaults in next four years. As if this is not enough we have the next huge failure to come in the commercial real estate market, that will make the sub-prime fiasco look like kids play! Then comes credit cards and auto loans in the end. Post Published: 30 June 2010 Author: admin Found in section: Commercial Real Estate Financing Questions<><><>

Fraud: The Western Banking Industry’s Fastest Growing Export

|  by: J. S. Kim March 08, 2010  | about: XLF

By this author: Submit an article to Despite the fact that nearly all of the macroeconomic trends I have predicted since 2006 on my blog, the Underground Investor, have come true, the percent of people that disagree with my predictions for 2010 and 2011 still outnumber those that agree by a factor of ten to one. There is a rational explanation why the public still grants a great deal of validity to the opinions of people I like to call the “men who cried wolf” – Ben Bernanke, Timothy Geitner, Gordon Brown, Alan Greenspan, et al. The explanation is that the fastest growing export of the Western banking industry is fraud. This is not to say that the eastern banking industry is not guilty of this same fraud. Off the top of my head and from what I have see in my travels through Asia, I can think of at least three real estate markets in the Pacific Rim region that are bubbles waiting to burst – New Zealand, Thailand, and Hong Kong. If you study the Central Banking monetary policies in these countries in recent years, their present real estate bubbles are undoubtedly the architectural accomplishment of their respective Central Banks as well. However, the roots of this global monetary crisis lie with the most influential Central Banks in the world that include the ECB, the Bank of England and the US Federal Reserve. More than a year ago, I penned an article titled “The Line that Separates Real Money from Counterfeit Money Has Become Nearly Indistinguishable”. In this article, I discussed the enormous irony of a viral story back then about the harm inflicted upon society from an inordinate amount of counterfeit £1 coins that were discovered to be in circulation in the UK. In that article, I stated the following: “The Bank of England is not the only Central Bank to conclude that running the printing presses overtime to pull their domestic economies out of trouble is the preferred solution even though this “solution” will have some serious blowback consequences in the future. The Bank of Japan, the European Central Bank and the US Federal Reserve have all demonstrated a proclivity towards massive expansions of the monetary base, an action that will eventually lead to massive expansions in monetary supply and an ultimate race to the bottom in currency debasement. So with Central Banks literally taking actions that will eventually destroy the purchasing power of all major currencies, it is no stretch of the imagination to conclude that the “real money” they are currently printing will soon have far more deleterious effects on the purchasing power of said money than the comparatively small percentages of “counterfeit money” that leak into the system.” A couple of weeks ago, the UK Financial Times reported an article titled, “Our World Balances on a Sea of Debt”. The byline of this article reads, “The banks that control the world’s supply of money are no better than counterfeiters – and their system of juggling debt has left the global economy teetering on the brink of ruin. Convicted fraudster Darius Guppy offers a provocative personal view.” In this article, a must read in my opinion, Mr. Guppy argues: “These ‘experts’ will tell you that the present difficulties are simply the result of abuses and excesses in a system that is basically sound. All that is required is for some faults to be corrected. Do not believe them. The reality is that the problem is systemic and a little tinkering here or there will achieve nothing in the long term. What is needed is a root-and-branch re‑evaluation of that most curious of cultural inventions, money: how it is created, how it circulates, and how it can best be used to serve the interests of the community.” This is a powerful statement that should lead the majority of the world’s citizens to engage in some serious introspection. There is more truth in that statement than any statement I’ve heard in the last decade issued by any global banker, politician, or the latest Nobel-prize winning economist with whom the media is enamored. If you take the time to understand how money is created, how it circulates, and how it can best be used to serve the interests of the community, I guarantee you will immediately question the integrity of every derivative of our monetary system from carbon credits and taxes to mortgages to credit cards. If a convicted felon understands more about how our monetary system operates than 99% of all Congressman and even Nobel laureates in economics, let alone the common citizen, then we need to not only question why this is, but we also need to ask the following question: “Who controls [aka manufactures] the flow of information so expertly that we now have a grotesque imbalance between the understanding of reality and the acceptance of fantasy?” Consider the immediate dire consequences of what would happen in America if the US government increased the capital requirements of the top 10 US banks tomorrow. Since all of these banking stocks have been manipulated higher over the last 9 months and are severely overvalued, raising new capital through secondary offerings would largely be an unviable pursuit. Thus, many of these banks would have to resort to selling portions of their commercial real estate portfolio to raise the capital to meet increased capital requirements. If so, then true discovery of the real values, not the marked-to-fantasy values, of commercial real estate in the United States would occur. And there is no doubt that true discovery of commercial real estate portfolios held by US banks would have massive negative consequences upon financial stocks, then US stock market indexes, and then global stock markets. But why should true discovery of asset values cause such massive disruption worldwide? Could it be because fraud is upholding many asset valuations today? What is occurring in the US commercial real estate industry would be akin to the following example. In 2008, when the S&P 500 plummeted by nearly 40%, imagine if you knew that every single commercial investment house that was a competitor of the one that managed your money lost roughly 40% in all of their managed stock portfolios that year as well. Now, imagine your surprise when you received a statement at the end of 2008 from your commercial investment firm in which your portfolio, valued at $2 million at the beginning of the year, was still valued at $1.95 million. Wondering how your firm managed to outperform all their rivals when you know full well that they all employ the exact same diversification strategies, you phone your advisor to acquire about this anomaly. Not a minute into your conversation, your advisor stops you mid-sentence and states, “We achieved such exceptional performance because our internal valuation models have determined that the true valuation of your portfolio should be $1.95 million. Furthermore, January 2008 was a really bad month so we excluded that month in our internal valuation models and amended our year to run from February 2008 to February 2009.” Confused by this response, you respond: “Your internal valuation models? Does that mean if I wanted to cash our my portfolio right now, I would not receive $1.95 million less your commission fees?” Your advisor responds, “That is correct. Were you to cash out today, you may only receive $1.2 million, maybe even $1 million, not $1.95 million. But don’t worry, our internal valuation models have determined that the vast majority of stocks you hold are severely undervalued and that the market is not setting a fair price for your stocks were you to sell today. Our internal stock market valuation experts have told us that the true value of your is actually $1.95 million. That is why your statement values your portfolio at $1.95 million.” How would you react to this conversation? Most likely, you would scream fraud and pull your account immediately, right? But this is the scenario that is occurring with the commercial real estate sector in the US today, and this is precisely why banks that are insolvent are declaring themselves solvent. However, this example only illustrates one of a plethora of fraudulent reporting practices of governments and banks today. Changing reporting periods, definitions of bad expense, and altering calculations of Tier 1 capital (as exposed here by Zero Hedge in this article) is now so commonplace that indeed, fraud is, without doubt, the number one export of Western banks today. Politicians and bankers would do well to head the more than 200-year old words of Patrick Henry in his infamous “Give me liberty of give me death” speech: “Mr. President, it is natural to man to indulge in the illusions of hope. We are apt to shut our eyes against a painful truth, and listen to the song of that siren till she transforms us into beasts. Is this the part of wise men, engaged in a great and arduous struggle for liberty? Are we disposed to be of the number of those who, having eyes, see not, and, having ears, hear not, the things which so nearly concern their temporal salvation? For my part, whatever anguish of spirit it may cost, I am willing to know the whole truth; to know the worst, and to provide for it.” Today, if politicians and bankers merely channeled the same amount of energy that they expend in deceiving the people into fixing the monetary system, then perhaps they would have already come up with a viable solution by now. But fraud, and perpetuation of an illusion seems to be their only concern today. And with good reason. As illustrated by a recent Center on Budget and Policy Priorities study, they are the only ones benefiting from this fraud. From 2002 to 2007, the top 1% of Americans captured nearly 70% of the income gains in America. Today, in my opinion, today, the number one reason why the vast majority of people still cannot except the possibility that we will soon enter into a second phase of this global economic crisis that will prove to be far worse than the financial disruptions we experienced in 2008 is the following: Most people alive today have no memory of the Great Depression. For those that do, certainly they are able to identify with much greater clarity, the similarities in the patterns of fraud back then and the patterns of fraud occurring today. There was a reason why Pol Pot, the tyrannical Cambodian despot that murdered more than 1 out of every 5 adults in Cambodia, began his cleansing process by murdering the elderly and the literate. He literally wanted to wipe out his country’s memory of the past so he could create a new history that started with his tyrannical reign. The greatest advantage bankers and politicians have in continuing to perpetuate fraud today in America is the fact that there are very few people still alive that recall the Great Depression. If you have a grandmother or grandfather still alive that lived through the Great Depression, ask them about what happened back then and the similarities to what is happening today. I guarantee you that your eyes will be opened to a much greater extent than they are today. If this is not feasible, then find someone that lived through the economic collapse in Argentina, Poland or Russia and that now lives in your country and ask him or her for their perspective on what is going on today. I assure you that the response you hear will be truly enlightening. In conclusion, even though grassroots movements such as Move Your Money and Sound Money Now! have admirable goals, true change cannot be achieved unless we restore our monetary system to a sound, honest system. Disclosure: No positions About the author: J. S. Kim Since the launch of the SmartKnowledgeU Crisis Investment Opportunities newsletter on June 15, 2007, as of May 12, 2010, it has respectively outperformed the Australian ASX 200, the UK FTSE 100 & the US S&P 500 by 304.41%, 300.89%, and 296.87%.* After earning an undergraduate degree from… More<><><>

Top 1 Percent of Americans

Reaped Two-Thirds of Income Gains in Last Economic Expansion

Income Concentration in 2007

Was at Highest Level Since 1928, New Analysis Shows

PDF of this report (3pp.) By Avi Feller and Chad StoneSeptember 9, 2009

Related Areas of Research

Two-thirds of the nation’s total income gains from 2002 to 2007 flowed to the top 1 percent of U.S. households, and that top 1 percent held a larger share of income in 2007 than at any time since 1928, according to an analysis of newly released IRS data by economists Thomas Piketty and Emmanuel Saez.[1] During those years, the Piketty-Saez data also show, the inflation-adjusted income of the top 1 percent of households grew more than ten times faster than the income of the bottom 90 percent of households. The last economic expansion began in November 2001 and ended in December 2007, according to the National Bureau of Economic Research, which means the Piketty-Saez data essentially cover that expansion. The last time such a large share of the income gain during an expansion went to the top 1 percent of households — and such a small share went to the bottom 90 percent of households — was in the 1920s (see Figure 1). [2]Piketty and Saez’s unique data series on income inequality, based on IRS files, is particularly valuable because it provides detailed information on income gains at the top of the income scale and extends back to 1913. The new data show:

  • 2007 marked the fifth straight year in which income gains at the top outpaced those among the rest of the population. From 2002 to 2007, the average inflation-adjusted income of the top 1 percent of households rose 62 percent, compared to 4 percent for the bottom 90 percent of households (see Table 1).
Table 1: Average Income Gains, Adjusted for Inflation, 2002-2007
Dollar Increase Percent Increase Average Annual Increase
Bottom 90 Percent $1,206 3.9% 0.8%
Next 9 Percent $19,476 13.0% 2.5%
Top 1 Percent $521,127 61.8% 10.1%
Top 0.1 Percent $3,455,384 94.1% 14.2%
Note : In 2007, the bottom 90 percent of households were those with incomes below about $110,000. The next 9 percent were those with incomes between $110,000 and about $400,000, and the top 0.1 percent were those with incomes above about $2,000,000. Calculations are in current 2007 dollars.
  • The share of the nation’s income flowing to the top 1 percent of households increased sharply, from 16.9 percent in 2002 to 23.5 percent in 2007 — a larger share than at any point since 1928 (see Figure 2). In 2000, at the peak of the 1990s boom, the top 1 percent received 21.5 percent of total income.[3]
  • Income gains have been even more pronounced among those at the very top of the income scale. The incomes of the top one-tenth of 1 percent (0.1 percent) of U.S. households have grown more rapidly than the incomes of the top 1 percent of households as a whole, rising by 94 percent — or $3.5 million per household — since 2002. The share of the nation’s income flowing to the top one-tenth of 1 percent of households increased from 7.3 percent of the total income in the nation in 2002 to 12.3 percent in 2007. This is the highest level in the Piketty-Saez data going back to 1913, surpassing even the previous peak in 1928.

The uneven distribution of economic gains in recent years continues a longer-term trend that began in the late 1970s. In the three decades following World War II (1946-1976), robust economic gains were shared widely, with the incomes of the bottom 90 percent actually increasing more rapidly in percentage terms, on average, than the incomes of the top 1 percent. But in the three decades since 1976, the incomes of the bottom 90 percent of households have risen only slightly, on average, while the incomes of the top 1 percent have soared. [4] (See Figure 3.) With the latest IRS data, we now have a complete picture of income concentration during the recent economic expansion, which ended in December 2007, although we do not yet have data on the recession’s effects on income concentration. Based on National Account statistics and other indicators, Professor Saez predicts that income concentration will likely fall in 2008 and 2009 as it did following the collapse at the start of this decade. Whether the highest income households will once more capture a highly disproportionate share of income gains as the economy begins to recover is uncertain, but Saez, along with Harvard economist Lawrence Katz, points to previous recessions and notes that only major policy shifts like the New Deal have prevented income concentration from “bouncing back” after a decline. In the absence of significant policy changes, income concentration levels could well return to their previous highs after the current recession ends and resume their 30-year climb. [5] End Notes: [1] Piketty and Saez rely on detailed Internal Revenue Service micro-files for available years, extending the full series to 1913 using aggregate data and statistical techniques. Their August 2009 revision incorporates the detailed micro-files for 2007 that just became available. For details on their methods, see Thomas Piketty and Emmanuel Saez, “Income Inequality in the United States: 1913-1998,” Quarterly Journal of Economics, February 2003, or, for a less technical summary, see Their most recent estimates are available at [2] According to the National Bureau of Economic Research, the last economic expansion began in November 2001 and ended in December 2007. However, the real income of the top 1 percent of households did not reach a trough until 2002 and that of the bottom 90 percent until 2003. For the purposes of this paper we measure income growth between 2002 and 2007. If we had chosen 2001 as the base year, the share of income gains accruing to the top 1 percent would have been 76 percent and that of the bottom 90 percent would have been 2 percent. If we had chosen 2003, those respective shares would have been 59 percent and 20 percent. [3] Piketty and Saez present three different data series, each of which uses a differentincome concept and therefore yields somewhat different estimates of the share of income going to each group. (For example, estimates of the share of income going to the top 1 percent in 2007 range from 18.29 percent in one series to 23.50 percent in the series we rely on here to 20.33 percent in the third series.) We follow the income concept in Saez’s most recent report and focus on the series that includes capital gains income both in ranking households and in measuring the income that households receive. This definition of income corresponds most closely to adjusted gross income (AGI), although it has the disadvantage of fluctuating with the stock market. Piketty and Saez also present a data series that includes capital gains income but ranks households without capital gains, as well as a series that excludes capital gains altogether. All three data series yield similar results. For example, in 2007, under both income concepts that include capital gains income, the share of income flowing to the top 1 percent was at its highest level since 1928. Under the income concept that excludes capital gains, the income share going to the top 1 percent was at the highest level since 1929. [4] Different data series show modestly larger or smaller gains for the bottom 90 percent, but all series show a similar discrepancy between the bottom 90 percent and the top 1 percent. [5] Saez details his prediction for trends in income concentration in the public summary of his work (supra note 1). Katz is quoted in David Leonhardt and Geraldine Fabrikant, “Rise of the Super-Rich Hits a Sobering Wall,” New York Times, Aug. 20, 2009.<><><>

Inside the Dire Financial State of the States

Thursday, Jun. 17, 2010

By David von Drehle

In New Jersey, taxes are high, the budget’s a mess, government is inefficiently organized, and the public pension fund is blown to kingdom come. Which makes New Jersey a lot like most other states in 2010. What makes the state unusual is its rookie governor, a human bulldozer named Chris Christie, who vowed to lead like a one-termer and is keeping his promise with brio. He has proposed chopping $11 billion from the state’s budget — more than a quarter of the total — for fiscal year 2011 (which starts July 1). He’s backing a constitutional cap on property taxes in hopes of pushing the state’s myriad villages and townships to merge into more efficient units. He’s locked in an ultimate cage match with the New Jersey teachers’ union. It may be the bitterest political fight in the country — and that’s saying something this year. A union official recently circulated a humorous prayer with a punch line asking God to kill Christie. You know, New Jersey humor. And in an interview with the Wall Street Journal, Christie didn’t talk about the possibility that his fiscal initiatives might be compromised or defeated; he pictured himself “lying dead on State Street in Trenton,” the state capital. Presumably that was a figure of speech. The tone of the New Jersey budget battle may be distinctive, but many of the same notes can be heard in state capitals across the country. From Hartford to Honolulu, once sturdy state governments are approaching the brink of fiscal calamity, as the crash of 2008 and its persistent aftermath have led to the reckoning of 2010. Squeezed by the end of federal stimulus money on one hand and desperate local governments on the other, states are facing the third straight year of staggering budget deficits, and the necessary cuts will cost jobs, limit services and touch the lives of millions of Americans. Government workers have been laid off in half the states plus Puerto Rico. Twenty-two states have instituted unpaid furloughs. At least 28 states have ordered across-the-board budget cuts, with many of them adding deeper cuts in targeted agencies. And massive shortfalls in public pension plans loom as well. (See a stimulus report card.) Almost no one — and no place — is exempt. Nearly everywhere, tax revenue plummeted as property values tanked, incomes dwindled and consumers stopped shopping. Falling prices for stocks and real estate have made mincemeat of often underfunded public pension plans. Unemployed workers have swelled the demand for welfare and Medicaid services. Governments that were frugal in the past are just squeaking by. Governments that were lavish in the good times, building their budgets on optimism and best-case scenarios, now risk being wrecked like a shantytown in an earthquake. How the Money Ran Out For the first time in four decades of collecting data, the National Governors Association (NGA) reports that total state spending has dropped for two years in a row. In hard-hit Arizona, for example, the state budget has sagged to 2004 levels, despite blistering growth in population and demand for government services. Starting with the 2008 fiscal year, state governments have closed more than $300 billion in cumulative budget gaps, with another $125 billion already projected for the coming years, says Corina Eckl, fiscal-program director at the National Conference of State Legislatures (NCSL). Similar figures aren’t collected for the nation’s counties, villages and towns, but when the National League of Cities surveyed mayors recently, three-fourths of them described worsening economic conditions. (See 10 big recession surprises.) Accustomed to the ups and downs of the ordinary economic cycle, elected officials and budget planners are facing something none of them have experienced before: year after year of shortfalls, steadily compounding. Ordinarily, deficits are resolved mostly through budgetary hocus-pocus. But the length and depth of the recession are forcing governments to go beyond sleight of hand to genuine cuts. And that makes lawmakers gloomy in all but a handful of states. (It’s a swell time to be North Dakota.) According to an NCSL survey, worry or outright pessimism is the reigning mood in the vast majority of capitals. Many taxpayers might say that it’s about time spending dropped. But then they start hearing the specifics. Government budgets contain a lot of fixed costs and herds of sacred cows. K-12 education absorbs nearly a third of all spending from state general funds. Add medical expenses, primarily Medicaid, and it’s over half. Prisons must be maintained, colleges and universities kept open, interest on bonds and other loans paid. Real cuts provoke loud howls, and you can hear them rising in every corner of the country. College students have marched in California, firefighters have protested in Florida, and on June 10, Minnesota saw the largest one-day strike of nurses — some 12,000 — in U.S. history.(Read “Municipal Bonds: The Next Financial Land Mine?”) And don’t count on the shaky economic recovery for relief. After plunging in 2009, tax receipts are stabilizing in many places — but the next big shoe is fixing to drop. Having poured billions of dollars into state coffers through the stimulus act of 2009, the federal government is poised to close the tap. President Obama made an unusual Saturday night request to Congress last week for $50 billion in emergency aid to the states to stave off layoffs of teachers, firefighters and police. But it’s an election year, and there is scant appetite among vulnerable Democrats in Washington for more zeros at the end of the federal deficit. (Only the federal government is allowed to run deficits; states and cities must balance their budgets or face default.) Already, 11 states are projecting major budget gaps — greater than 10% of general-fund spending — well into 2013. Such persistent budget woes are unprecedented in the era of modern American government. You’d have to go back to the 1930s to find a parallel. Crisis in the Statehouses On the grand scale, this fiscal fiasco is playing out in California and New York. Both states boast economies far larger than that of Greece, which so disturbed the world economy this spring. And both are paralyzed by structural deficits far larger than their politicians seem able to grasp. The impasse in California between Republican governor Arnold Schwarzenegger and the Democrats controlling the legislature appears set in concrete. Last year, the Golden State was reduced to issuing IOUs; this year’s budget, some $19 billion in the hole, is once again a shambles. In New York, Democrats control all the levers, but they can’t find a cost-cutting deal acceptable to the public-employee unions that helped elect them. The deficit in Albany is $9.2 billion. Read “How California’s Fiscal Woes Began: A Crisis 30 Years in the Making.” See which businesses are bucking the recession. Or you can picture the crisis through the other end of the telescope, through the eyes of one young lover of books. Not long ago, 9-year-old Campbell Jenkins of Charlotte, N.C., heard from his mom that two-thirds of the library branches in Mecklenburg County might be closed for lack of funds. “We were completely freaked out,” says Campbell’s mother Jessica. So the next day, young Campbell organized a letter-writing protest among his third-grade classmates. Not content with words, the kids also sold lemonade and donated the proceeds — $595 in an empty pretzel jar — to their branch-library manager. “It was really heartwarming,” says Heather Gwaltney, whose son Gavin, also 9, joined the effort. This all comes as a shock to the folks of Charlotte, who long ago grew accustomed to seemingly endless prosperity. The seeds of Bank of America, among other empires, were sown there. “People are asking, ‘We’re Charlotte, North Carolina. We’re big banks. How did we get like this?’ ” says county budget director Hyong Yi. The answer is rooted in that once booming economy. As Charlotte burgeoned, the county approved $1.5 billion in bonds to build a new courthouse and new schools, expand its jails, improve its parks and — irony alert — open state-of-the-art libraries. Then the recession hit. Local unemployment rose to 11.7% in January — twice what it was two years earlier. Homes and commercial real estate lost value, which dried up the county’s chief revenue source, property taxes. The result: a 5% reduction in the upcoming budget, $71 million in cuts on top of $76 million in cuts the year before. Losing nearly $150 million in two years — an eternity of lemonade stands won’t fill that hole. (See how some Americans are facing the prospect of long-term unemployment.) At the last minute, county commissioners allocated an additional $3.5 million for libraries, sparing at least some of those facing closure. Campbell Jenkins’ branch is safe — for now — but budget woes in the Tar Heel State look like an ongoing problem. A spokesperson for North Carolina governor Bev Perdue said the outlook remains grim: “Next year will not be pretty.” When Main Street Acted Like Wall Street The collapse of a Wall Street institution like Lehman Brothers looks nothing like the threatened closing of a branch library in the Charlotte suburbs. But whether the characters are mighty or meek, this unfolding economic disaster story is in fact a series of variations on a single theme. When times were good and the future seemed bulletproof, all sorts of grand ventures were floated on waves of debt. No one cared, because everyone planned to be richer when the bills came due. The arbitrageurs of leveraged derivatives, the cash-strapped subprime home buyers, the government grandees issuing bonds and boosting pensions — all were versions of the same doom-shadowed figure. Only if the bubble burst would the bills become unpayable. How did so many people forget all at once that the bubble always bursts? (See Wall Street’s worst days.) Strapped for cash, state and local governments so far have taken mostly predictable steps. They’ve depleted their rainy-day funds; of all the cash expected to be on hand in state treasuries by the end of the 2010 fiscal year, two-thirds of it will be held by just two states, Alaska and Texas, which enjoy income from vast energy deposits. By comparison, 14 states are expected to have reserves of less than 1% of their annual spending — basically they’re living hand to mouth, hoping their checks don’t bounce. And a majority of states will have reserves well below safe levels recommended by the National Association of State Budget Officers. Leery of broad tax hikes in a bad economy, governments have instead chosen to shake the sofa cushions and punish the naughty, closing loopholes, cracking down on tax evaders and raising levies on tobacco, alcohol, gambling, soda pop and candy — even bottled water in Washington State. Nearly half the states have hiked fees for higher education, court services, park access, business licenses — or all of the above. These are the tried-and-true responses to dips in the business cycle, but as the woes drag on from year to year, the job of closing budget gaps grows more difficult. Now larger issues and harder choices are being laid bare, beginning with the sprawling mess that is Medicaid. Created by Congress, administered by the states and paid for by a patchwork of federal, state and local governments, the health care system for America’s poor is a jumble in the best of times. With enrollments growing rapidly, that jumble is becoming a train wreck. According to the NGA, the number of people covered by Medicaid will grow again next year by an estimated 5.4% on average. Meanwhile, anticipated funding is expected to grow hardly at all. That might not spell disaster for a state like Nebraska, which anticipates just 2% enrollment growth. But in foreclosure-racked Arizona, officials are planning for a jump of more than 17%, and the budgetary pressure is enormous. As Governor Jan Brewer put it in her state-of-the-state address this year, government revenues have sagged to 2004 levels, and “some people … say we should just adopt the 2004 budget.” But Arizona’s Medicaid rolls have grown by 475,000 patients since then. (See pictures of Cleveland’s smarter approach to health care.) What’s going to give? Prepare for a free-for-all. The states are pressing Washington to maintain the emergency Medicaid supplement that was part of the stimulus package. So far, congressional moderates are blanching at the price tag. If the Beltway budget hawks win that battle, states plan to squeeze the patients, who are currently protected by strings attached to the stimulus money. No federal supplement means no more strings. Already various states are contemplating tighter eligibility rules, lower benefits, higher co-pays and other restrictions. And then there’s the ongoing fight between the states and the medical system. Governments are wringing money from doctors and hospitals coming and going: first they are cutting payments for Medicaid services, and then they are raising fees on Medicaid providers. Just as ugly is the issue of public-employee pay and benefits. The mess in New Jersey is just an extreme example of a widespread problem: many state and local governments have made the mistake of courting the votes of public employees by fattening salaries and benefits, all the time imagining that pension-fund investments could only go up. Tales of lavish retirements for relatively youthful public servants have been making a lot of headlines lately. The New York Times reported that some 3,700 retired New York State public employees earn more than $100,000 a year in pension payments, including a former policeman in Yonkers at the ripe old age of 47. California’s pension poster boy is a Bay Area fire chief who, at 51, was collecting more than $241,000 a year in retirement pay. The Pew Center on the States, a nonpartisan research group, estimates that states are at least $1 trillion short of what it will take to keep their retirement promises to public workers. Two Chicago-area professors recently calculated the shortfall at $3 trillion. According to Pew, half the states ran fully funded pension plans in 2000, but by 2008 that number had dwindled to four. See the five big questions about retirement. See 10 perfect jobs for the recession — and after. It’s tough to cut the benefits of police officers, firefighters and schoolteachers. But the long recession has cast a glaring light on the fact that public and private workers increasingly live in separate economies. Private-sector employees face frequent job turnover, relentless downsizing, stagnant wages and rising health-insurance premiums. They fund their own retirement through 401(k)s and similar plans, which rise and fall with the tides of the economy. Many public-sector workers, by contrast, enjoy relative job security, and the number of government jobs rose even as the overall unemployment rate shot just past 10%. B Is for Bankruptcy The crash of 2008 has also left some civic leaders with eggy faces — and possibly worse. In Georgia, at least a dozen Atlanta-area municipalities and agencies embraced the “exotic, high-risk derivative securities” called swaps in hopes of lowering the cost of bond issues, according to an investigation by the Atlanta Journal-Constitution. They paid nearly $300 million in fees for the privilege to such investment banks as Goldman Sachs, JPMorgan and UBS. Then, when the deals went sour, the same governments paid another $100 million to cancel them. (See the top 10 financial collapses of 2008.) Busted swaps led to even more dire consequences in Birmingham, Ala. Former mayor Larry Langford was sentenced in March to 15 years in federal prison for bribery in a pay-for-play scheme involving sewer-bond swaps in 2002 and 2003. That debt was only a part of a municipal spending spree for a domed stadium, transit improvements and a scholarship program — worthy causes, perhaps, but now unaffordable in a city where a sky-high sales tax of 10%, even on food, has failed to produce the anticipated revenue. New mayor William Bell is trying to mop up, proposing a 10% wage cut for city workers, closing libraries and recreation centers and canceling a city program to provide laptops for grade-school students. As for sewer rates: they have quadrupled, and there’s speculation that Birmingham is headed for bankruptcy. In sun-drenched San Diego, meanwhile, a grand jury probing that city’s troubled finances found a recurring practice of skipping required payments to the city’s pension fund while simultaneously awarding ever more generous pensions to public employees. Legal? Apparently. Prudent? Nope. A once solvent system is now billions of dollars in the red. The grand jury raised a scarier question: Is San Diego still a “viable” financial entity? Indeed, the B word has crept into so many conversations in communities around the country that a number of investors are worried that municipal bonds have become the latest debt-fueled bubble ready to burst. California’s public-employee unions are lobbying for a bill to ban government bankruptcies entirely, so worried are they about the possibility of widespread defaults to escape pension obligations. Perhaps more worrisome, though, is the risk that all this calamity will ultimately produce little in the way of lessons learned. States are already barred from formal bankruptcy, so although many of them are broke, somehow — given enough time — they will make ends meet. But will they do it only by tweaking taxes and killing innovative programs like Kentucky’s juvenile drug courts, which spend money up front on aggressive intervention and rehabilitation programs in hopes of saving the long-run expense of ruined lives in costly prisons? “It always will cost us more to remove [addicted criminals] from their communities and incarcerate them for years,” says District Judge Brandy Oliver Brown of Clark and Madison Counties, whose program of intensive drug testing and counseling will be shuttered by budget cuts. In Harrisburg, Pa., the city council needs to make $68 million in debt payments, mostly related to a mismanaged deal to modernize a trash-burning power plant, when the total city budget is about $60 million. A consulting firm has some ideas: freeze pay, furlough workers, double the property tax, sell city landmarks, artifacts and museums. In one Ohio county, a local judge urged citizens to carry a gun because the sheriff’s department was laying off half its deputies. (See the top 10 bankruptcies.) A few leaders have their sights set higher, trying to shape this crisis into a moment for significant government reform. Governor Jennifer Granholm of Michigan, a state devastated by the shrinking of the American auto industry, has called for an efficiency revolution. She has cut unneeded departments, sold excess state property and killed hundreds of obsolete boards and commissions. Having risen to power in 2002 on the shoulders of the state teachers’ union, Democrat Granholm this year successfully pushed a plan to coax thousands of senior teachers into retirement, to be replaced by a smaller number of younger teachers earning less generous but more sustainable benefits. “The 21st century economy is all about speed, access, intelligence and efficiency,” Granholm said in announcing her latest round of restructuring. “A 21st century government needs to be about the same things.” Indiana Governor Mitch Daniels, a budget czar in the free-spending Bush Administration, has proved an efficiency fiend at the state level, privatizing bureaucracies, selling a poorly managed toll road, even harvesting the paper clips from state tax returns for reuse in government offices. Daniels took the controversial step of decertifying Indiana’s public-employee unions, a move that may endear him to Republican voters should he decide to run for President in 2012. Modernizing government is no less painful than globalizing industry has been. Consider the proposal by Nebraska state senator Rich Pahls to merge many of the state’s 93 counties. The idea could mean boarding up stately old courthouses while forcing consolidation of such services as road maintenance, vehicle registration, even sheriffs’ offices — and many of the jobs that go with them. The bill died, in part because it seemed too frank an acknowledgment of the passing of small-town America. Yet surely its time will come: only 16 of the counties have more than 20,000 residents, and two are home to fewer than 500 people each. “I tell these people, You don’t ranch or farm the way they did 100 years ago,” says Pahls. “A ranch might have had 20 hands, and now they have four. They didn’t stay behind the technology.” (See 10 ways your job will change.) The great reckoning of 2010 took us years to create and will be years in the fixing. It’s not as if the economic crisis isn’t plenty painful already. In government, as in life, there are cuts that injure and cuts that heal. As they continue to slog through the wreckage of the Great Recession, state and local leaders have a challenge to be surgeons rather than hacks and make this era of crisis into a season of fresh starts. — With reporting by Hilary Hylton / Austin, Texas; Bonnie Rochman / Charlotte, N.C.; Christopher Maag / Cleveland; Karen Ball / Kansas City, Mo.; and Elizabeth Dias and Katy Steinmetz / Washington See pictures of the recession of 1958. See pictures of the global financial crisis.,8816,1997284,00.html


46 Of 50 States Could File Bankruptcy In 2009-2010

January 30, 2009 John Paul Mitchell Leave a comment Go to comments There is a high chance a majority of the States within the United States of America could file for Chapter 9 bankruptcy. There are currently 46 states with high budget deficits, Arizona being one of them. In fact, Jan Brewer, the newly appointed Governor of Arizona has a major crisis on her hands, one that Arizona and national media isn’t covering. The alarming news is the State of Arizona has 90 to 120 days before they completely run out of money. After that, all bills and tax refunds owed to the citizens will go unpaid. Before Janet Napolitano left for her new Homeland secretary position, she had a stand-off with Arizona Treasurer Dean Martin. The AZ Treasurer forewarned Napolitano about Arizona’s financial crisis, but she refused to heed his words. With neighboring California on the verge of bankruptcy this year, many States will follow in their steps. Many States are already scurrying to cut unwanted costs, cut State-funded programs, raise taxes, not issue tax refunds to their citizens, and borrow money just to survive in 2009. Unfortunately, many banks — the same banks the Fed bailed out — are refusing to loan money to the States and their Treasury agencies. The article, State Budget Troubles Worsen, at the Center on Budget and Policy Prioritieswebsite is an excellent piece to read. It shows where each State currently stands in these challenging economic times, and you see 46 of the 50 States are clearly in the financial red. It’s very possible you’ll see the end of the United States as we know it. If the Fed doesn’t bailout the States when their cash dries up and the banks don’t loan them money, then our States will be left in financial ruin. This would be a tragic and unprecedented event never experienced in the United States. No State has ever filed bankruptcy, but it could be coming to a State near you this year. We are on the brink of something far worse than the Great Depression. UPDATE: Check out the newly published article, Survivalism: How to Prepare for the Economic Collapse. There’s also a printable 4-page newsletter you can download and share with your friends, family, and co-workers. Take action and help spread the awareness of this life-threatening issue. <><><>

Gerald Celente The entire system is collapsing <><><>

I.O.U.S.A. Movie

I.O.U.S.A. – One Nation. Under Debt. In Stress. 1:21:29 – 1 year ago Wake up, America! We’re on the brink of a financial meltdown. I.O.U.S.A. boldly examines the rapidly growing national debt and its consequences for the United States and its citizens. Burdened with an ever-expanding government and military, increased international competition, overextended entitlement programs, and debts to foreign countries that are becoming impossible to honor, America must mend its spendthrift ways or face an economic disaster of epic proportions


Wake up, America! We’re on the brink of a financial meltdown. I.O.U.S.A. boldly examines the rapidly growing national debt and its consequences for the United States and its citizens. Burdened with an ever-expanding government and military, increased international competition, overextended entitlement programs, and debts to foreign countries that are becoming impossible to honor, America must mend its spendthrift ways or face an economic disaster of epic proportions. Throughout history, the American government has found it nearly impossible to spend only what has been raised through taxes. Wielding candid interviews with both average American taxpayers and government officials, Sundance veteran Patrick Creadon (Wordplay) helps demystify the nation’s financial practices and policies. The film follows former U.S. Comptroller General David Walker as he crisscrosses the country explaining America’s unsustainable fiscal policies to its citizens. With surgical precision, Creadon interweaves archival footage and economic data to paint a vivid and alarming profile of America’s current economic situation. The ultimate power of I.O.U.S.A. is that the film moves beyond doomsday rhetoric to proffer potential financial scenarios and propose solutions about how we can recreate a fiscally sound nation for future generations. Creadon uses candid interviews and his featured subjects include Warren Buffett, Alan Greenspan, Paul O’Neill, Robert Rubin, and Paul Volcker, along with the Peter G. Peterson Foundation’s own David Walker and Bob Bixby of the Concord Coalition, a Foundation grantee. Pointedly topical and consummately nonpartisan, I.O.U.S.A. drives home the message that the only time for America’s financial future is now. 8.7 trillion <> GDP = 13.5 trillion Projected to get worst This only fraction of fiscal challenge David walker controller general = Fiscal cancer David Walker: America Faces Fiscal Cancer U.S. Comptroller General David Walker says the retirement of the baby boomers combined with the huge entitlements promised to them are a demographic tsunami and fiscal cancer that could lead to economic disaster for the United States. WASHINGTON — The comptroller general of the United States is explaining over eggs how the nation’s finances are going to hell. “We face a demographic tsunami” that “will never recede,” David Walker tells a group of reporters. He runs through a long list of fiscal challenges, led by the imminent retirement of the baby boomers, whose promised Medicare and Social Security benefits will swamp the federal budget in coming decades. Walker is right of course. I expect this problem to go unaddressed until the boomers start retiring and the budget deficit becomes huge. Walker is touring the United States with a bipartisan group of economists policy specialists in a “Fiscal Wake-Up Tour” to try to alert the American public to the scale of the problem. One of the members of this tour, Alison Fraser, director of economic policy studies at the Heritage Foundation, points out that eliminating the Department of Defense would not save enough money to pay for the entitlements. Project out 75 years, and the magnitude of the problem is stunning. In those projections, “we have gone from $20 trillion to $50 trillion in total liabilities and unfunded commitments in six years, primarily because of unfunded entitlements,” says Walker, the nation’s chief public accountant. That translates to $440,000 per current US household. “If we eliminated the entire Department of Defense, it would not solve this problem,” notes Fraser. The relative power of the United States has peaked and will decline for years to come. The demographic trends due to aging and immigration both will cut into per capita GDP and economic growth. Walker says the Medicare prescription drug bill which George W. Bush signed into law is fiscally irresponsible. Walker talks to 60 Minutes correspondent Steve Kroft this Sunday, March 4, at 7 p.m. ET/PT. “The prescription drug bill is probably the most fiscally irresponsible piece of legislation since the 1960s,” says Walker, “because we promise way more than we can afford to keep.” Expect slower economic growth as the older skilled workers retire and taxes rise to pay for their retirements. A wave of retiring workers will weigh down economic growth in the coming years unless Americans save more and employers take steps to hang on to more of their older employees, experts said. How the nation responds is a “critical question,” said Donald L. Kohn, vice chairman of the Federal Reserve, warning that the costs could “fall entirely on future generations.” A study by Fed economists projected that economic growth would slip toward the 2% range after 2010, about a point lower than the rate of the last decade, largely the result of meager growth in the future labor force, Kohn testified. The slower economic growth could feed a vicious cycle. Increases in taxes could slow growth. That would reduce tax revenue which could lead to higher taxes to make up for the lost revenue. Among the experts there’s bipartisan agreement that the problem is huge.Touring with Mr. Walker are: Alice Rivlin, budget director under President Clinton and now a fellow at the moderate-to-liberal Brookings Institution; Alison Fraser, an economic policy specialist at the conservative Heritage Foundation; and Harry Zeeve, a director of the bipartisan Concord Coalition that advocates fiscal reform and balanced budgets. While the foursome, which spans the political spectrum, doesn’t agree on solutions, its members acknowledge that nothing can be done politically if Americans remain ignorant of the problem. The Clinton and Bush Administrations have been years of tremendous wasted opportunity to deal with America’s demographic problems. The dumbing down and the aging problems are obvious to anyone who doesn’t mind thinking taboo thoughts (i.e. most of the upper half of the IQ Bell Curve when they choose schools and places to live). What should we do about the demographic problems? I have several suggestions:

  • Provide smarter kids with filmed lectures and online tests so they can learn more quickly, start accumulating college credits sooner, and enter the workforce at younger ages. The sooner smart people start working the more total years they’ll work and pay taxes and create goods and services.
  • Start raising retirement ages. Get people to work more years and pay taxes for more years.
  • Put limits on medical spending for those who have few months left to live. Heroic and expensive treatments for people who gain few days of extra life cost the rest of us huge sums of money.
  • End all lower IQ immigration. Set a very high IQ requirement for prospective immigrants. We need workers who have higher productivity and less tendency to commit crimes or cause other problems.
  • Accelerate research into rejuvenation therapies. If we can keep people younger longer they can work more years before they have to retire.
  • Provide big cash prizes for the development of cheaper ways to treat diseases.

We need practical solutions to our huge demographic problems. Do you have any suggestions? By Randall Parker at 2007 March 01 10:59 PM  Economics Demographic<><><>

Market Forecast That Says ‘Take Cover’

By JEFF SOMMER WITH the stock market lurching again, plenty of investors are nervous, and some are downright bearish. Then there’s Robert Prechter, the market forecaster and social theorist, who is in another league entirely. Mr. Prechter is convinced that we have entered a market decline of staggering proportions — perhaps the biggest of the last 300 years. In a series of phone conversations and e-mail exchanges last week, he said that no other forecaster was likely to accept his reasoning, which is based on his version of the Elliott Wave theory — a technical approach to market analysis that he embraces with evangelical fervor. Originating in the writings of Ralph Nelson Elliott, an obscure accountant who found repetitive patterns, or “fractals,” in the stock market of the 1930s and ’40s, the theory suggests that an epic downswing is under way, Mr. Prechter said. But he argued that even skeptical investors should take his advice seriously. “I’m saying: ‘Winter is coming. Buy a coat,’ ” he said. “Other people are advising people to stay naked. If I’m wrong, you’re not hurt. If they’re wrong, you’re dead. It’s pretty benign advice to opt for safety for a while.” His advice: individual investors should move completely out of the market and hold cash and cash equivalents, like Treasury bills, for years to come. (For traders with a fair amount of skill and willingness to embrace risk, he suggests other alternatives, like shorting the market or making bets on volatility.) But ultimately, “the decline will lead to one of the bestinvestment opportunities ever,” he said. Buy-and-hold stock investors will be devastated in a crash much worse than the declines of 2008 and early 2009 or the worst years of the Great Depression or the Panic of 1873, he predicted. For a rough parallel, he said, go all the way back to England and the collapse of the South Sea Bubble in 1720, a crash that deterred people “from buying stocks for 100 years,” he said. This time, he said, “If I’m right, it will be such a shock that people will be telling their grandkids many years from now, ‘Don’t touch stocks.’ ” The Dow, which now stands at 9,686.48, is likely to fall well below 1,000 over perhaps five or six years as a grand market cycle comes to an end, he said. That unraveling, combined with a depression and deflation, will make anyone holding cash “extremely grateful for their prudence.” Mr. Prechter is hardly the only market hand to advocate prudence now, but nearly everyone else foresees a much rosier future, once current difficulties are past. For example, Ralph J. Acampora, a market analyst with more than 40 years of experience, said he moved entirely out of stocks and into cash late last month. Now a partner at Alverita, a wealth management firm in New York, he said recent setbacks suggested that the market would drop another 10 or 15 percent, probably until September or October, before resuming another “meaningful rally.” Over the next several years Mr. Acampora expects an “old normal market,” characterized by relatively short-lived swings that will provide many opportunities for smart investors — one that resembles the markets of the 1960s and 70s. “I’ve lived through it,” he said. Like Mr. Prechter, he is a past president of the Market Technicians Association, the leading organization of technical market analysts, and he said that his colleague has done “some very good work.” But Mr. Acampora doesn’t agree with Mr. Prechter’s long-term theories, either intellectually or emotionally. The “mathematics don’t work,” Mr. Acampora said, because such a big decline would imply that individual stocks would need to trade at unrealistically low levels. Furthermore, he said, “I don’t want to agree with him, because if he’s right, we’ve basically got to go to the mountains with a gun and some soup cans, because it’s all over.” Still, on a “near-term” basis, he said, “We’re probably saying the same thing.” Similarly, Larry Berman, who co-founded ETF Capital Management in Toronto and recently ended his term as the president of the technicians association, says he sees a “classic” short-term negative market trend developing now. But he doesn’t use the Elliott Wave theory, saying Mr. Prechter is trying to “measure the market in decades, which is too long a time frame for practical trading purposes or for risk management.” Mr. Prechter, 61, lives in Gainesville, Ga., where he runs Elliott Wave International, a forecasting and publishing firm. He graduated from Yale as a psychology major in 1971,dabbled as a singer, drummer and songwriter in a rock band and became a technical analyst for Merrill Lynch. He became fascinated by Mr. Elliott’s writings, which suggest that the market moves in predictable if complex patterns. Along with A. J. Frost, Mr. Prechter wrote “Elliott Wave Principle,” a 1978 book that predicted the emergence of a great bull market — a forecast that was largely fulfilled. By 1987, he was widely regarded as an expert in technical analysis. Articles in The New York Times said he was known as “the market’s leading technical guru” — and more. An article in October that year said he had “emerged as both prophet and deity, an adviser whose advice reaches so many investors that he tends to pull the market the way he has predicted it will move.” He has far less day-to-day influence now, after years spent developing a theory he calls “socionomics,” which holds “social moods” as the cause not only of market cycles but also of economic and political events. A grand cycle is ending, he says, and the time for reckoning is near. In 2002, he published “Conquer the Crash,” which predicted misery ahead. Even so, he said in 2008 that the market would soon rally sharply — then said late last year that stocks were about to fall and that the great decline would resume. Since 1980, the advice in his investing newsletters, when converted into a portfolio, has slightly underperformed the overall stock market but has been much less risky, losing money in only one calendar year, according to calculations by The Hulbert Financial Digest. Mr. Prechter said he disagreed with the methodology used in these measurements, but offered none of his own. For his part, Mr. Acampora says that the Elliott Wave has some validity as an indicator but that “it’s only part of the story” of technical market analysis, which also needs to be buttressed by economic and fundamental research. Mr. Prechter says his unifying theory, socionomics, is a “young science.” “We’re quantifying it,” he said. “We’re working on it.” In the meantime, he contends, it has enabled him to “look around the corner” and prepare for a dangerous future. • Here’s an update on the troubles at AXA Rosenberg, the quant unit of the French financial services giant AXA, which were reported in this column two weeks ago. A computer programmer made a “coding error” in AXA Rosenberg’s risk management software, but the company didn’t reveal or fix it for many months. In a letter to clients last week, AXA Rosenberg said a management shakeup had accelerated. Its co-founder, Barr Rosenberg, and its director of research, Tom Mead, resigned from the board of directors and will be leaving the company. A review found that they had violated the firm’s ethics policy and had withheld information about the mistake, the letter said. The executives did not respond to requests for comment. Separately, Agustin Sevilla, global chief investment officer, stepped down from that post and will move to a “senior research” role, the letter said. He didn’t return phone messages last week. The company said it’s bringing in a consultant to help improve risk management controls and reinforce “independent oversight.” It said it is still reviewing the coding error’s effect on investment portfolios.<><><>

Our world balances on a sea of debt

The banks that control the world’s supply of money are no better than counterfeiters – and their system of juggling debt has left the global economy teetering on the brink of ruin. Convicted fraudster Darius Guppy offers a provocative personal view By Darius Guppy Published: 7:14PM GMT 20 Feb 2010 Comment on thisDarius Guppy: Since serving his prison sentence he has slipped, quite deliberately, off the radar Photo: PA In 1994, there resided in the cell next to mine a certain “Tommy”. He had been imprisoned for counterfeiting Dutch Guilders to such a high standard that he had fooled the banks themselves. As was customary among prisoners who became friends, Tommy allowed me to read his legal papers and I became fascinated by the judge’s sentencing speech, the gist of which was that his activities had been parasitical. By creating money out of thin air he had reduced the purchasing power of more deserving members of society. What would happen if everyone behaved like him?

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I thought of arguments used, in a different context, regarding inflation. Like counterfeiting, it dilutes the value of the community’s wealth and constitutes a social evil. Creating too much money – “real” or “fake” – can wreck an economy. Such was the Nazis’ reasoning when they planned to ruin Britain’s economy by flooding the country with near-perfect counterfeit bills. A lot of nonsense has been written about the world’s current economic woes – about how the crash is the fault solely of the banks and, by implication, governments are blameless; and how it could all have been avoided, and can be put right, by greater financial regulation. It is a classic example of what the philosopher Alasdair MacIntyre terms “the fallacy of managerial expertise”: an attempt by “experts” to blind us with science to justify their overpaid existences and mask their confusion. After all, not one of them was able to predict the current debacle. These “experts” will tell you that the present difficulties are simply the result of abuses and excesses in a system that is basically sound. All that is required is for some faults to be corrected. Do not believe them. The reality is that the problem is systemic and a little tinkering here or there will achieve nothing in the long term. What is needed is a root-and-branch re?evaluation of that most curious of cultural inventions, money: how it is created, how it circulates, and how it can best be used to serve the interests of the community. To begin, the experts must explain in the simplest terms how money actually works. Were one to ask the man on the street – or, indeed, most politicians and bankers – who creates the money that rules our lives they would reply “the State”. They would be wrong. It is true that governments create legal tender – the physical notes and coins that circulate in an economy – but that represents, at its highest, only 3 per cent of the total money in circulation in the global economy. It is the commercial banks, largely unaccountable and privately owned, that create the world’s money. Indeed, even if Tommy were responsible for printing every note in circulation throughout the world his power to dilute the rest of our wealth would amount to only a tiny fraction of that of the real manufacturers of money. His activities and the activities of the bankers are, in essence, identical: the creation of money out of nothing. Without knowing it, therefore, Tommy’s judge punished him for usurping not so much the role of the State as the role of the banks. The same mistake – the mis-identification of where money truly originates – has been made by virtually all of our politicians, economists and financial commentators. Consider the contradiction at the heart of neo-liberal, monetarist economics that has constituted the Western orthodoxy for the past few decades: to emphasise on the one hand that the money supply should be brought under control while simultaneously allowing banking – where the money is actually manufactured – to run riot. To grasp how the global fraud works we need to step back in time and imagine ourselves next to the original goldsmith?banker. In his vault, 10 of his customers each deposits a bar of gold weighing 1 kilogram – for safekeeping and in the hope of a return. Our banker lends the 10 gold bars to other customers, who embark on profitable ventures that generate a surplus. The vault now contains 11 gold bars, out of which our banker can pay his depositors and himself a reasonable return. Our banker soon questions the wisdom of keeping all the gold bars in his vault. He creates a token that will represent a given quantity of the gold either in his own vault or held to his account at some giant, more secure vault. Such a token can then be exchanged within the economy. Historians credit one of the first examples of such an instrument – the cheque – to the Knights Templar, allowing a pilgrim to cash a cheque drawn on a European preceptory at a Templar branch in the Holy Land. So far, so good – as long as, for the face value of each of the pieces of paper in circulation, there exists a corresponding amount of gold sitting in a vault somewhere in the real world. However, it is at this point that something wondrous and diabolical occurs. For experience has taught our banker that the bearers of the pieces of paper that they have created rarely attempt en masse to claim the gold their paper represents. Our banker reasons: “So long as the pieces of paper that my friends and I have put into circulation are not encashed simultaneously then it is academic how many we create.” The crucial part of the scheme is to create a culture of confidence. The bearers of our pieces of paper must feel secure about our ability to convert their paper back into gold, or real wealth. The beauty of the scheme is that instead of earning interest on a single piece of paper our banker can earn interest on 10 such pieces of paper. Moreover, while charging interest on these 10 pieces of paper, he has only to pay out a reduced rate of interest on the single gold bar that has been deposited with him. And this is exactly what happens. Currently, the average fractional reserve requirements for banks amount to under 10 per cent, which means that for every dollar the banks have on deposit they can lend out at least 10 such dollars – virtual dollars summoned from nowhere – on which they charge interest. Yet this fact – the key to understanding how the international financial system operates and why the world is in such a mess – is discussed virtually nowhere in mainstream circles. Governments do not control the single most important mechanism when it comes to their economies: the production and distribution of money. That role has been diverted to the banks, which manufacture money out of nothing and charge interest on that conjured-up money. Beyond an interest rate cut or a token change in VAT rates our politicians have no real power to direct their country’s economy. The picture has become a great deal more complicated. Soon pieces of paper are no longer required and instead entries on a bank’s ledger will suffice. Eventually, a further layer of virtuality is added when computers emerge and with them credits in cyberspace. Likewise all sorts of financial instruments and “products” are devised by the experts – collateralised mortgage obligations, put and call options, floating rate notes, preference shares, convertible bonds, semi-convertible bonds and endless other “derivatives” – but in essence they are mere variations of the same basic three?card trick. Moreover, the illusion becomes self-reinforcing. Those involved in the process, sitting behind their computer screens, no longer control the beast they have created. Now, it may be argued that while it is true that money is manufactured in the manner I have described – in other words by creating loans to the banks’ clients – surely just as much money is destroyed every time a loan is repaid? This is true to an extent. However, the point to be grasped is that while money is indeed created and destroyed in vast amounts every second of the day, the interest on that money remains un-destroyed and accumulates within the system – and at a compounded rate, moreover. The process is far more inflationary and parasitical than the activities of all the Tommys in the world put together. For while that money, which by now has mutated into a vast monster of mutual indebtedness, grows exponentially, the wealth it is supposed to represent cannot grow at the same pace for very long. While there is no limit to the number of zeros we can create on a computer, there is a limit to the amount of oil in the ground, the wheat in the fields and the livestock in our farms. Capitalism, banking and growth become inseparable, but logic dictates that the virtual economy must eventually peel away from the real one and sooner or later the day of reckoning arrives – when the gulf separating these two economies is too large to be sustained – for no power on earth can match the power of compound interest in the ether. Consider the tale of the Chinese emperor and his chess opponent. The emperor asks what reward would satisfy him if he wins; the opponent replies that a single grain of wheat, doubled for each of the 64 squares on the chess board, would suffice. The emperor, imagining that he has a good deal, loses, only to learn that he now owes his adversary the equivalent of 2,000 times the current annual worldwide production of wheat. Such are the miracles of compound growth; and the reason why financiers have been able to award themselves astronomical sums. For their virtual printing presses are calibrated to an exponential production while no such calibration applies to Mother Earth. Frederick Soddy, the 1921 winner of a Nobel Prize for chemistry (not economics), was among the first to articulate the mechanism by which money is created by the banks and how it mutates into debt. His arguments have been developed by thinkers such as Herman Daly and Richard Douthwaite. The reasoning can be extended to cover the financial sector as a whole. A company makes a certain profit; a multiple of many times can be applied to that figure to arrive at a “value” for the company – based on the assumption of future growth. That value can then be leveraged yet further for it to raise debt against its share price and so on. Such super-ovulation can mean that a single company with nothing more than an idea to be applied to the internet can create yet more tokens – share certificates – worth several times the entire annual production of diamonds for the continent of Africa, a process known, retrospectively, as the dotcom bubble. It constitutes a redistribution mechanism from the poor to the rich – which is precisely why the banks and Western governments are so desperate to ensure its survival. Money breeds more money. Indeed, the banks never really want their loans to be repaid. So long as the interest is funded it is to their benefit for the capital to remain outstanding on their books as “assets” and for the debts to be rolled over. Every time the IMF or World Bank extends a line of credit to some impoverished nation, are they being “charitable” or simply perpetuating the enslavement? But the system relies entirely, as do all Ponzi schemes, on the assumption of continued growth, hence its inherent instability. Once that growth is threatened the edifice collapses. Householders in Britain will appreciate such a phenomenon only too well: put up 10 per cent for a property and borrow the rest from the bank. That property’s value need rise by only 10 per cent and you have doubled your equity; if it falls by only 10 per cent you are wiped out. This explains why a contraction of a mere 2 or 3 per cent in the global economy leads not to a correspondingly minute fall on international stock markets, but to financial Armageddon. Likewise with the banks – lend 10 times more money than you possess and when the economy grows, or at least pretends to grow, it’s Porsches galore, but when the lack of growth is exposed it requires only 11 per cent of the loans on your books (in value terms) to be bad and you are bust. The truth is not that these institutions have suddenly become insolvent but that they were never really solvent in the first place. By rolling over their debts they have been able to keep them on their books as “assets” rather than losses and forestall the evil hour. There is a name for this – “usury” – and our predecessors from the ancient and medieval worlds appear to have appreciated much better than us its ultimate destination: ruin. It is a simple and devastatingly effective swindle, but largely invisible because it has become so deeply embedded in our culture. The consequences of that swindle – the desperate need for economic growth; the environmental and cultural despoliation it engenders – require some radical thinking one encounters nowhere in any of today’s political parties.<><><>

Is the United States Bankrupt?

Laurence J. Kotlikoff financial markets have a long and impressive record of mispricing securities; and that financial implosion is just around the corner. This paper explores these views from both partial and general equilibrium perspectives. The second section begins with a simple two-period life-cycle model to explicate the economic meaning of national bankruptcy and to clarify why government debt per se bears no connection to a country’s fiscal condition. The third section turns to economic measures of national insolvency, namely, measures of the fiscal gap and generational imbalance. This partial-equilibrium analysis strongly suggests that the U.S. government is, indeed, bankrupt, insofar as it will be unable to pay its creditors, who, in this context, are current and future generations to whom it has explicitly or implicitly promised future net payments of various kinds. The world, of course, is full of uncertainty. The fourth section considers how uncertainty changes one’s perspective on national insolvency and methods of measuring a country’s long-term fiscal condition. The fifth section asks whether immigration or productivity improvements arising either from technological progress or capital <><><>

America will Collapse

Jim Rogers,

Gerald Celente,

Max Wolf,

David Walker,

David Vickers,

Jack Cafferty<><><>


New Book from Global Research The Great Depression of the XXI Century By Michel Chossudovsky and Andrew Gavin Marshall URL of this article: Global Research, July 30, 2010 Global Research is pleased to announce the publication of a new book entitled The Global Economic Crisis, The Great Depression of the XXI Century, Michel Chossudovsky and Andrew Gavin Marshall, Editors. “This important collection offers the reader a most comprehensive analysis of the various facets – especially the financial, social and military ramifications – from an outstanding list of world-class social thinkers.” TABLE OF CONTENTS Preface Michel Chossudovsky and Andrew Gavin Marshall PART I THE GLOBAL ECONOMIC CRISIS Chapter 1 The Global Economic Crisis: An Overview Michel Chossudovsky Chapter 2 Death of the American Empire Tanya Cariina Hsu Chapter 3 Financial Implosion and Economic Stagnation John Bellamy Foster and Fred Magdoff Chapter 4 Depression: The Crisis of Capitalism James Petras Chapter 5 Globalization and Neoliberalism: Is there an Alternative to Plundering the Earth? Claudia von Werlhof Chapter 6 The Economy’s Search for a “New Normal” Shamus Cooke PART II GLOBAL POVERTY Chapter 7 Global Poverty and the Economic Crisis Michel Chossudovsky Chapter 8 Poverty and Social Inequality Peter Phillips PART III WAR, NATIONAL SECURITY AND WORLD GOVERNMENT Chapter 9 War and the Economic Crisis Michel Chossudovsky Chapter 10 The “Dollar Glut” Finances America’s Global Military Build-Up Michael Hudson Chapter 11 Martial Law, the Financial Bailout and War Peter Dale Scott Chapter 12 Pentagon and Intelligence Black Budget Operations Tom Burghardt Chapter 13 The Economic Crisis “Threatens National Security” in America Bill Van Auken Chapter 14 The Political Economy of World Government Andrew Gavin Marshall PART IV THE GLOBAL MONETARY SYSTEM Chapter 15 Central Banking: Managing the Global Political Economy Andrew Gavin Marshall Chapter 16 The Towers of Basel: Secretive Plan to Create a Global Central Bank Ellen Brown Chapter 17 The Financial New World Order: Towards A Global Currency Andrew Gavin Marshall Chapter 18 Democratizing the Monetary System Richard C. Cook PART V THE SHADOW BANKING SYSTEM Chapter 19 Wall Street’s Ponzi Scheme Ellen Brown, Chapter 20 Securitization: The Biggest Rip-off Ever Mike Whitney <><><> <><><>

See both films in the links,

and read the transcripts below of




These animated films  expose the fraud of the interest based economy of

fractional banking by which the banksters to create immense wealth for themselves,

extracting that wealth by debt money on the goods and services and labor of the masses,

masses fooled into accepting this frauduant system and counterfeit money supply,

and the manufactured cycles of

inflation and deflation,

boom and bust,

too small to save and too big to fail,

etc etc, ad nausium, which onnly bring more money to the banksters.

But after a good analysis, do not be fooled by the films so called “solution”

on part 7 and part 8 out of 8 sections which is another kind of trickery since the “digital money”

can be manipulated, and what about the billions of people living on a dolar or two a day…

and so on with other obvious criticism.


we need total absolute interest free money, and system of honesty and justice.



Seek it on search engines See the 47 minute animated (carton) film: very good, simple, to the point and informative Money as Debt is a clear and insightful 47min about money,debt and our quite ludicrous  For more information about the film including a full transcript, references,  (Mayer Amschel Rothschild, International Banker…. “We shall have world government whether or not we like it.  <><><> Here is the Transcript below: “‘Since I entered politics, I have chiefly had men’s views confided to me privately. Some of the biggest men in the United States, in the field of commerce and manufacture, are afraid of something. They know that there is a power somewhere so organized, so subtle, so watchful, so interlocked, so complete, so pervasive, that they had better not speak above their breath when they speak in condemnation of it.” ~ Woodrow Wilson, former President of the United States. “Each and every time a bank makes a loan, new bank credit is created – new deposits – brand new money.” ~ Graham F. Towers, Governor, Bank of Canada, 1934-54. “The process by which banks create money is so simple that the mind is repelled.” ~ John Kenneth Galbraith, economist. “Permit me to issue and control the money of a nation, and I care not who makes its laws.” ~ Mayer Anselm Rothschild, banker. Money As Debt Two great mysteries dominant our lives. Love and money. What is love is a question that has been endlessly explored in stories, songs, books, and television. But the same cannot be said about the question what is money. It is not surprising that monetary theory has not inspired any blockbuster movies. But it was not even mentioned in the schools most of us attended. For most of us, the question of where money comes from brings to mind pictures of the Mint printing bills and stamping coins. Money, most of us believe, is created by the government. This is true, but only to a point. Those metal and paper symbols of value we usually think of as money are indeed produced by an agency of the federal government called the Mint. But the vast majority of money is not created by the Mint. It is created in huge amounts everyday by private corporations known as banks. Most of us believe that banks lend out money that has been entrusted to them by depositors. Easy to picture, but not the truth. In fact, banks create the loan, not from the banks own earnings, not from the money deposited, but directly from the borrower’s promise to repay. The borrower’s signature on the loan papers is an obligation to pay the bank the amount of the loan plus interest, or lose the house, the car, or whatever asset was pledged as collateral. That’s a big commitment from the borrower. What does the same signature require of the bank? The bank gets to conjure into existent the amount of the loan and just write it into the borrower’s account. Sound far-fetched? Surely, that can’t be true! But it is. A Brief & Broadly Allegorical History of Banking To demonstrate how this miracle of modern banking came about, consider this simple story, The Goldsmith’s Tale. Once upon various times, pretty much anything was used as money. It just had to be portable and enough people had to have faith that it could later be exchanged for things of real value, like food clothing and shelter. Shells, cocoa beans, pretty stones, and even feathers have been used as money. Gold and silver were, attracted, soft, and easy to work with so some cultures became expert with these metals. Goldsmiths made trade much easier by casting coins, standardised units of these metals whose weight and purity was certified. To protect his gold, the Goldsmith needed a vault and soon fellow townsmen were knocking on his door wanting to rent space to safeguard their own coins and valuables. Before long the Goldsmith was renting every shelf in the vault and earning a small income from his vault rental business. Years went by and the Goldsmith made an astute observation. Depositors rarely came in to remove their actual, physical gold. And they never all came in at once. That was because the claim checks the Goldsmith had written as receipts for the gold were being traded in the marketplace as if they were the gold itself. This paper money was far more convenient than heavy coins and amounts could simply be written instead of laboriously counted one by one for each transaction. Meanwhile, the Goldsmith had another business: he lent out his gold, charging interest. When his convenient claim check money come into acceptance, borrowers began asking for their loans in the form of these claim checks instead of the actual metal. As industry expanded, more and more people asked the Goldsmith for loans. This gave the Goldsmith an even better idea. He knew that very few of his depositors ever actually removed their gold. So the Goldsmith figured he could easily get away with writing claim checks against his depositor’s gold, in addition to his own. As long as the loans would be repaid, his depositors would be none the wiser and no worse off. And the Goldsmith, now more banker than artisan, would make a far greater profit than he could by lending his own gold. For years, the Goldsmith secretly enjoyed a good income from the income earned on everybody else’s deposits. Now a prominent lender, he grew steadily richer than his fellow townsmen. And he flaunted it. Suspicions grew that he was spending his depositors’ money. His depositors got together and threatened the withdrawal of their gold if the Goldsmith didn’t come clean about his new found wealth. Contrary to what one might expect, this did not turn out to be a disaster for the Goldsmith. Despite the duplicity inherent in his scheme, his idea did work: the depositors had not lost anything. Their gold was all still safe in the Goldsmith’s vault. But rather than taking back their gold the depositors demanded that the Goldsmith, now their banker, cut them in by paying them a share of the interest. And that was the beginning of banking. The banker paid a low interest rate on the deposits of other people’s money that he then loaned out at a higher interest, the difference covered the banks cost of operation and its profit. The logic of this system was simple and it seemed like a reasonable way to satisfy the demand for credit. However, this is not the way that banking works today. Our Goldsmith-Banker was not content with the income remaining after sharing the interest earnings with his depositors. And the demand for credit was growing fast as Europeans spread out across the world. His loans were limited by the amount of gold his depositors had in his vault. That’s when he got an even bolder idea. Since no one but himself knew exactly what was in this vault, he could lend out claim checks on gold that wasn’t even there. As long as all the claim check holders did not come to the vault at the same time and demand real gold no one would find out. This new scheme worked very well and the banker became enormously wealthy on the interest paid on gold that did not exist. The idea that the banker would just create money out of was too outrageous to believe. So for a long time the thought did not occur to people. But the power to invent money went to the banker’s head as you can all imagine. In time, the magnitude of the banker’s loan and his ostentatious wealth did trigger suspicions once again. Some borrowers started to demand real gold instead of paper representation. Rumours spread. Suddenly several wealthy depositors showed up to remove their gold. The game was up. A sea of claim check holders flooded the streets outside the closed doors of the bank. Alas, the banker did not have enough gold and silver to redeem all the paper he had put into their hand. This is called a run on the bank and it is what every banker dreads. This phenomenon of a run on the bank ruined individual banks and not surprisingly damaged public confidence in all bankers. It would have been straightforward to outlaw the practice of creating money from nothing. But the large volumes of credit the bankers were offering had become essential to the success of European commercial expansion. So instead the practice was legalised and regulated. Bankers agreed to abide by limits on the amounts of fictional loan money that could be lent out. The limit would still be a number much larger than the actual amount of gold and silver in the vault. Quite often the ratio was nine fictional dollars to one actual dollar in gold. These regulations were enforced by surprise inspections. It was also arranged that in the event of a run, central banks would support local banks with emergency infusions of gold. Only if there were runs on a lot of banks simultaneously would the banker’s credit bubble burst and the system come crashing down. The Money System Today Over the years, the fractional reserve system and its integrated network of banks backed by a central bank has become the dominant money system of the world. At the same time, the fraction of gold backing the debt money has steadily shrunk to nothing. The basic nature of money has changed. In the past the paper dollar was actually a receipt that could be redeemed for a fixed weight of gold or silver. In the present, a paper or digital dollar can only be redeemed for another paper or digital dollar. In the past, privately created bank credit existed only in the form of private bank notes, which people had the choice to refuse, just as we have the choice to refuse someone’s private check today. In the present, privately created bank credit is legally convertible to government issued fiat currency, or the dollars, loonies, and pounds we habitually think of as money. Fiat currency is money created by government fiat, or decree. Legal tender laws declare that citizens must accept this fiat money as payment for debt or else the courts will not enforce the obligation. So now the question is if governments and banks can both just create money than how much money exists? In the past, the total amount of money in existence was limited to the actual, physical quantity of whatever commodity was in use as money. For example, in order for new gold or silver money to be created more gold or silver had to be found and dug out of the ground. In the present, money is literally created as debt. New money is created whenever anyone takes a loan from the bank. As a result the total amount of money that can be created has only one real limit: the total level of debt. Governments place an additional statutory limit on the creation of new money by enforcing rules known as fractional reserve requirements. Essentially arbitrary fractional reserve requirements vary from country to country and from time to time. In the past, it was common to require that banks have at least one dollar worth of real gold in the vault to back ten dollars of debt money created. Today reserve requirement ratios no longer apply to the ratio of new money to gold on deposit but merely to the ratio of new debt money to the ratio of existing debt money on deposit in the bank. Today, a bank’s reserves consist of two things. The amount of government issued cash or equivalent that the bank has deposited with the central bank plus the amount of already existing debt money that the bank has on deposit. To illustrate this in a simple way, let’s imagine that a new bank has just started up and has no depositors yet. However, the bank’s investors have made a reserve deposit of $1,111.12 of existing cash money at the central bank. Your required reserve ratio is nine to one. Step one: the doors open and the bank welcomes its first loan customer. He needs ten thousand dollars to buy a car. At the nine to one reserve ratio the new bank’s reserve at the central bank, also known as high powered money, allows it to legally conjure into existence nine times that amount or ten thousand dollars on the basis of the borrower’s pledge of debt. This ten thousand dollars is not taken from anywhere. It is brand new money simply typed into the borrower’s account as bank credit. The borrower then writes a check on that bank credit to buy the new car. Step two: the seller then deposits this newly created ten thousand dollars at her bank. Unlike the high powered government money deposited at the central bank this newly created credit money cannot be multiplied by the reserve ratio. Instead it’s divided by the reserve ratio. At a ratio of nine to one a new loan of $9,000 can be created on the basis of the ten thousand dollar deposit. Step three: if that $9,000 is then deposited by a third party at the same bank that created it or at a different one it becomes the legal basis for a third issue of bank credit, this time for the amount of $8,100. Like one of those Russian dolls, where each layer contains a slightly smaller doll inside, each new deposit contains the potential for a slightly smaller loan in an infinitely decreasing series. Now, if the loan money created is not deposited at the bank the process stops. That is the unpredictable part of the money creation mechanism. But more likely at every step the new money will be deposited at a bank and the reserve ratio process can repeat itself over and over until almost one hundred thousand dollars has been created within the banking system. All of this new money has been created entirely from debt and the whole process has been legally authorised by the initial reserve deposit of just $1,111.12, which is still sitting untouched at the central bank. What’s more, under this ingenious system the books of each bank in the chain must show that the bank has ten percent more on deposit than it has out on loans. This gives the bank a very real incentive to seek deposits in order to be able to make loans supporting the general but misleading impression that loans come out of deposits. Now unless all the successive loans are deposited at the same bank it cannot be said that any one bank got to multiply its initial high powered money reserve almost ninety times by issuing bank credit out of nothing. However, the banking system is a closed loop. Bank credit created at one bank becomes a deposit at another and vice-versa. In a theoretical world of perfectly equal exchanges the ultimate effect would be exactly the same as if the whole process took place within one bank. That is, the bank’s initial central reserve of a little over eleven hundred dollars allowed it to ultimately collect interest on up to one hundred thousand dollars the bank never had. If that sounds ridiculous, try this. In recent decades, as a result of steady lobbying by the banks, the requirements to make a deposit at the nation’s central bank have all but disappeared in some countries and actual reserve ratios can be much higher than nine to one. For some types of accounts twenty to one or thirty to one reserve ratios are common. And even more recently, by using loan fees to raise the required reserve from the borrower, banks have now found a way to circumvent fractional reserve requirements entirely. So, while the rules are complex, the common sense reality is actually quite simple. Banks can create as much money as we can borrow. “Everyone sub-consciously knows banks do not lend money. When you draw on your savings account, the bank doesn’t tell you you can’t do this because it has lent the money to somebody else.” ~ Mark Mansfield, economist and author. Despite the endlessly presented mint footage, government created money typically accounts for less than five percent of the money in circulation. More than 95% of all the money in existence today was created by someone signing a pledge of indebtedness to a bank. What’s more, this bank credit money is being created and destroyed in huge amounts everyday. New loans are made and old ones are repaid. “I am afraid that the ordinary citizen will not like to be told that banks can and do create money…And they who control the credit of the nation direct the policy of Governments and hold in the hollows of their hands the destiny of the people.” ~ Reginald McKenna, past Chairman of the Board, Midlands Bank of England. Banks can only practice this money system with the active participation of government. First, governments pass legal tender laws to make us use the national fiat currency. Secondly, governments allow private bank credit to be paid out as government currency. Thirdly, government courts enforce debts. And lastly, governments pass regulations to protect the money system’s functionality and credibility with the public while doing nothing to inform the public about where money really comes from. The simple truth is that when we sign on the dotted line for a so-called loan or mortgage our sign pledge of payment backed by the assets we pledge to forfeit should we fail to pay is the only thing of real value involved in the transaction. To anyone who believes we will honour our pledge that loan agreement or mortgage is now a portable, exchangeable, and saleable piece of paper. It’s an IOU. It represents value and is therefore a form of money. This money the borrower exchanges for the bank’s so-called loan. Now, a loan in the real world means that the lender must have something to lend. If you need a hammer my loaning you a promise to provide a hammer I don’t have won’t be of much help. But in the artificial world of money, a bank’s promise to pay money it doesn’t have is allowed to be passed off as money. And we accept it as such. “Thus our national circulating medium is now at the mercy of loan transactions of banks, which lend, not money, but promises to supply money they do not possess.” ~ Irving Fisher, economist and author. Once the borrower signs the pledge of debt, the bank then balances the transaction, by creating with a few key strokes on a computer, a matching debt of the bank to the borrower. From the borrower’s point of view this becomes loan money in his or her account. And because the government allows this debt of the bank to the borrower to be converted to government fiat currency everyone has to accept it as money. Again, the basic truth is very simple. Without the document the borrower signed the banker would have nothing to lend. Have you ever wondered how everyone, governments, corporations, small businesses, and families can all be in debt at the same time and for such astronomical amounts? Have you ever question how there could be that much money out their to lend? Now you know – there isn’t! Banks do not lend money; they simply create it from debt. And as debt is potentially unlimited so is the supply of money. And as it turns out the opposite situation is also true. Isn’t it astounding that despite the incredible wealth of resources, innovation, productivity that surrounds us almost all of us, from governments, to companies, to individuals are heavily in debt to bankers? If only people would stop and think, how can that be? How can it be that the people who actually produce all the real wealth in the world are in debt to those who merely lend out the money that represents the wealth? Even more amazing is that once we realize that money really is debt we realize that if there is no debt there is no money. “That is what our money system is. If there were no debts in our money system, there wouldn’t be any money.” ~ Marrine S. Eccles, Chairman and Governor of the Federal Reserve Board. If this is news to you, you are not alone. Most people imagine that if most debts were paid off the state of the economy would improve. It is certainly true on an individual level. Just as we have more money to spend when our loan payments are finished we think that if everyone were out of debt there would be more money to spend in general. But the truth is the exact opposite: there would be no money at all. There it is – we are totally dependent on continually renewed bank credit for their to be any money in existence. No loans mean no money, which is what happened during the great depression. The money supply shrank drastically, as there was a 27% reduction in the supply of loans from 1929-33. “This is a staggering thought. We are completely dependent on the Commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money, we are prosperous; if not, we starve. We are, absolutely, without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is.” ~ Robert H. Hemphill, Credit Manager, Federal Reserve Bank, Atlanta, Georgia. Perpetual Debt That’s not all, banks create only the amount of the principal. They don’t create the money to pay the interest. Where is that suppose to come from? The only place that borrowers can go to obtain the money to pay the interest is the general economy’s overall money supply. But almost all that overall money supply has been created exactly the same way as bank credit that has to be paid back with more than what was created. So everywhere there are other borrowers in the same situation. Frantically trying to obtain the money they need to pay back both principal and interest from a total money pool which contains only principal. It is clearly impossible for everyone to pay back the principal plus interest because the interest money doesn’t exist. The big problem here is that for long term loans such as mortgages and government debt the total interest far exceeds the principal. So unless a lot of extra money is created to pay the interest it means a very high proportion of foreclosure and a non functioning economy. To maintain a functioning society the rate of foreclosure needs to be low and so to accomplish this more and more new debt money has to be created to satisfy today’s demand for money to service the previous debt. But of course this just makes the total debt bigger and that means more interest must be repaid resulting in an ever escalating and inescapable spiral of mounting indebtedness. It is only the time lag between money’s creation as new loans and its repayment that keeps the overall shortage of money from catching up and bankrupting the entire system. However, as the banks insatiable credit monster gets bigger and bigger the need to create more and more debt money to feed it becomes increasingly urgent. Why are interest rates so low? Why do we get unsolicited credit cards in the mail? Why is the U.S. government spending faster than ever? Could it be to stave off collapse of the entire monetary system? A rational person has to ask can this really go on forever. Isn’t a collapse inevitable? “One thing to realize about our fractional reserve banking system is that, like a child’s game of musical chairs, as long as the music is playing, there are no losers.” ~ Andrew Gause, monetary historian. Money facilitates production and trade. As the money supply increases money just becomes increasingly worthless unless the volume of production and trade in the real world grows by the same amount. Add to this the realization that when we here that the economy is growing at 3% per year it sounds like a constant rate. But its not. This year’s 3% represents more real goods and services than last years 3% because it is 3% of the new total. Instead of a straight line as is naturally visualised from the words, it is really an exponential curve getting steeper and steeper. “The greatest shortcoming of the human race is our inability to understand the exponential function.” ~ Albert A. Bartlett, physicist ( The problem of course is that perpetual growth of the real economy requires perpetually escalating new use of real world resources and energy. More and more stuff has to go from natural resource to garbage every year, forever, just to keep the system from collapsing. “Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.” ~ Kenneth Boulding, economist. What can we do about this downright scary situation? For one thing we need a very different concept of money. Its time more people ask themselves and their governments four simple questions. Around the world governments borrow money at interest from private banks. Government debt is a major component of the total debt and servicing that debt takes a big chunk of our taxes. Now we know that banks simply create the money they lend and the government has given them permission to do this.  So the first question is: Why do governments choose to borrow money from private banks at interest when government could create all the interest free money it needs itself? And the second big question is: why create money as debt at all? Why not create money that circulates permanently and doesn’t have to be perpetually re-borrowed at interest in order to exist. The third question: how can a money system dependent on perpetually accelerating growth be used to build a sustainable economy? Isn’t it logical that perpetually accelerating growth and sustainability are incompatible? And finally: what is it about our current system that makes it totally dependent on perpetual growth? What specifically needs to change to allow the creation of a sustainable economy? Usury At one time charging any interest on a loan was called usury. It was subject to severe penalties including death. Every major religion forbade usury. Most of the arguments made against the practice were moral. It was held that money’s only legitimate purpose was to facilitate the exchange of goods and services. Any form of making money simply by having money was regarded as the act of a parasite or of a thief. However, as the credit means of commerce increased the moral arguments eventually gave way to the arguments that lending involves risk and loss of opportunity to the lender and therefore attempting to make a profit from lending is justified. Today these notions seem quaint. Today the notion of making money from money is held as an ideal to strive for (i.e. loans, mortgages, bonds, stock market trading, currency speculation, real estate flipping, etc). Why work when you can get your money to work for you? However, in trying to envision a sustainable future it is very clear that the charging of interest is both a moral and a practical problem. Imagine a society and an economy that can endure for centuries because instead of plundering its capital stores of energy it restricts itself to present day income. No more wood is harvested than grows in the same period. All energy is renewable (i.e. solar, wind, tidal, hyrdo, biomass, geothermal, etc). This society lives within the limits of its non renewable resources by reusing and recycling everything and the population just replaces itself. Such a society could never function using a money system utterly dependent on perpetually accelerating growth. A stable economy would need a money supply at least capable of remaining stable without collapsing. Let’s say we fix the total volume of this stable money supply to a given amount. Let’s also imagine that money lenders must actually have existing money to lend (i.e. no creating money as debt). If some people within this money supply begin systematically lending money supply at interest their share of the money supply will grow. If they continually re-loan at interest all the money that get’s paid back, what’s the inevitable result? Whether it’s gold, fiat, or debt money it doesn’t matter. The money lenders will end up with all the money. And after the foreclosures and bankruptcies are all filed they will get all the real property too. Only if the proceeds of lending at interest were evenly distributed amongst the population would this central problem be solved. Heavy taxation of bank profits might accomplish this goal. But then why would banks want to be in business. If we are ever able to free ourselves of the current situation we could imagine banking run as a non-profit service to society dispersing its interest earnings as a universal citizen dividend for lending without charging interest at all. “I have never yet had anyone who could, through the use of logic and reason, justify the Federal Government borrowing the use of its own money…I believe the time will come when people will demand that this be changed. I believe the time will come in this country when they will actually blame you and me and everyone else connected with the Congress for sitting idly by and permitting such an idiotic system to continue.” ~ Wright Patman, Democratic Congressman 1928-1976, Chairman, Committee on Banking & Currency 1963-1975. Changing the System If it is the fundamental nature of the system that causes the problem tinkering with the system cannot ever solve those problems. The system itself must be replaced. Many monetary critics call for a return to gold based money claiming that gold has a long history of reliability. They ignore the many scams that can be played with gold: shaving coins, debasing the metals, cornering the all of which were practiced in ancient Rome and contributed to its fall. Some advocate silver as being more abundant than gold and therefore more difficult to corner. Many question the need to bring back precious metals at all since commodity money distorts the value of the commodity, is easily stolen, and the supply cannot be controlled beneficially. It is a certainty that paper, digital, plastic, or more likely bio-metric ID money would be the real medium of trade with the same potential for creating unlimited debt money we have now. Beyond that if gold again became the sole legal basis of money those who had no gold would suddenly have no money. Other monetary reform advocates have concluded that greed and dishonesty are the main problems and that there may be better ways to create an honest and equitable money system than returning to silver or gold. Inventive minds have proposed a variety of alternate ways to create money. Many private barter systems create money as debt much as banks do, but it is done openly and without charging interest (i.e. Local Exchange Trading System – LETS). An example is a barter system in which debt is expressed as pledges of hours of work. All work being valued equally at a dollar figure that then allows hours to be equated with a dollar price of goods. This kind of money system can be set up by anyone who and devise a way to do the accounting and find willing and trustworthy participants. Setting up a local barter money system even if it were little used now would be prudent emergency planning for any community. Monetary reform, like electoral reform, is a big topic and one that requires a willingness to change and think outside the box. Monetary reform again like electoral reform will not come easily because of the enormously powerful interests benefiting from the existing system will do their utmost to maintain their advantage. Now that we have seen that money is just an idea (i.e. symbolic, commodity, receipt for commodity, bogus receipt, fiat (gov’t cash), debt (bank credit), debt (pledge)) and in reality money can be whatever we make it here’s one very simple alternative monetary concept to consider. This model is based on systems that have worked in the past in England and America. Systems that were undermined and destroyed by the goldsmith bankers and their fractional reserve system. To create an economy based on permanent interest free money, money could simply be created and spent into the economy by the government, preferably on long lasting infrastructure that facilitates the economy, such as roads, railroads, bridges, harbours, and public markets. This money would not be created in debt but would be created as value that value being in the form of whatever it was spent on. If this new money facilitated a proportional increase in trade requiring its use it would cause no inflation whatsoever. If government spending did cause inflation there would be two courses of action available. Inflation is equivalent in effect to a flat tax on money. Whether the money goes down in value by 20% or the government takes 20% of the money away from us the effect on our buying power is the same. Viewed this way inflation in the place of taxation might be politically acceptable if well spent and kept within limits. Or, government could choose to counter inflation by collecting tax money that it then takes out of use, thus reducing the money supply and restoring its value. To control deflation which is the phenomenon of falling wages and prices the government would simply spend more money into existence. With no competing private debt money creation, governments would have more effective control of the nation’s money supply. The public would know who to blame if things went wrong. Governments would rise and fall on their ability to preserve the value of money. Governments would operate primarily on tax money as it does now but tax money would go much further as none of it would be required to provide interest to private bankers. There could be no national debt if the federal government simply created the money it needed. Our perpetual collective servitude to the banks through interest payments on government debt would be impossible. “Money is a new form of slavery, and distinguishable from the old simply by the fact that it is impersonal, there is no human relation between master and slave.” ~ Leo Tolstoy. The Invisible Power “None are more enslaved than those who falsely believe they are free.” ~ Goethe. What we have been taught to believe is democracy and freedom has become in reality an ingenious and invisible form of economic dictatorship. As long as our entire society remains utterly dependent on bank credit for its supply of money, bankers will be in the position to make the decisions on whom or what industry gets the money they need and who doesn’t. “The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in iniquity and born in sin. Bankers own the Earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough money to buy it back again…Take this great power away from them and all great fortunes like mine will disappear, and they ought to disappear, for then this world would be a better and happier place to live in. But if you want to continue to be slaves of the banks and pay the cost of your own slavery, then let bankers continue to create money and control credit.” ~ Sir Josiah Stamp, Director, Bank of England 1928-1941 (reputed to be the 2nd richest man in England at the time). “The inability of the Colonists to get power to issue their own money permanently out of the hands of George III and the international bankers was the PRIME reason for the revolutionary war.” ~ Benjamin Franklin. Few people are aware today the history of the United States since the Revolution in 1776 has been in large part the story of an epic struggle (i.e. depressions, inflations, bank panics, war, infiltration, media ownership, mass deception, assassination, “education”) to get free and stay free of control by the European international banks. This struggle was finally lost in 1913 when President Woodrow Wilson signed into effect the Federal Reserve Act putting the international banking cartel in charge of creating America’s money. “I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world, no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.” ~ Woodrow Wilson, President of the United States 1913-1921. The power of this system is deeply ingrained and so is the educational and media silence on the subject. Years ago, Canadian Deputy Prime Minister, Paul Hellyer, surveyed scores of non-economists both highly educated professionals and common sense people on the street and found that not one of them had an accurate understanding of how money is created. In fact it’s probably safe to say that most people, including the front line employees of banks have never given the matter a moment’s thought. Have you? “All of the perplexities, confusion, and distress in America arises, not from the defects of the Constitution or Confederation, not from want of honour or virtue, so much as from downright ignorance of the nature of coin, credit, and circulation.” ~ John Adams, Founding Father of the American Constitution. The modern money as debt system was born a little over three hundred years ago when the first Bank of England was set up in 1694 with a Royal Charter for fractional lending of gold receipts at a modest ratio of two to one. That modest ratio was just the proverbial foot in the door. The system is now world wide and creates virtually unlimited amounts of money out of thin air and has almost everyone on the planet chained to a perpetually growing debt that can never be paid off. Could it have all happened by accident? Or is it a conspiracy? Obviously something very big is at stake here. “Whoever controls the volume of money in our country is absolute master of all industry and commerce…and when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.” ~ James A. Garfield, assassinated President of the United States. “The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. The privilege of creating and issuing money is not only the supreme prerogative of government, but it is the government’s greatest creative opportunity.” ~ Abraham Lincoln, assassinated President of the United States. “Until the control of the issue of currency and credit is restored to government and recognized as its most conspicuous and sacred responsibility, all talk of sovereignty of Parliament and of democracy is idle and futile…Once a nation parts with control of its credit, it matters not who makes the nation’s laws…Usury once in control will wreck any nation.” ~ William Lyon Mackenzie King, former Prime Minister of Canada (who nationalized the Bank of Canada). “We are grateful to the Washington Post, the New York Times, Time magazine and other great publications whose directors have attended our meetings and respected the promises of discretion for almost forty years. It would have been impossible for us to develop our plan for the world if we had been subject to the bright lights of publicity during those years. But, the world is now more sophisticated and prepared to march towards a world-government. The supranational sovereignty of an intellectual elite and world bankers is surely preferable to the National auto-determination practiced in past centuries.” ~ David Rockefeller in an address to Trilateral Commission meeting, 1991. “Only the small secrets need to be protected. The big ones are kept secret by public incredulity.” ~ Marshall McLuhan, media ‘guru’. “Money as Debt” was created & produced as a video documentary by Paul Grignon. “Money as Debt” owes its origin to the work of many dedicated educators and advocates of monetary reform. It is intended as a general introduction to the conceptual basis of money.  To learn more, visit: <><><><> <><><><> <><><><> Money As Debt II – How Modern Banking Has Enslaved Us All – The Money Conspiracy Exposed

Money As Debt II – How Modern Banking Has Enslaved Us All – The Money Conspiracy Exposed Transcript “If two parties, instead of being a bank and an individual, were an individual and an individual, they could not inflate the circulating medium by a loan transaction, for the simple reason that the lender could not lend what he didn’t have, as banks can do….. Only commercial banks and trust companies can lend money that they manufacture by lending it.” – Professor Irving Fisher, economist in his book 100% Money (1935) “The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it.” – John Kenneth Galbraith economist, author “The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.” – Lord Acton (1834-1902) English historian Maybe your first experience of putting money in the bank wasn’t quite as heartwarming as this. But odds are, years later, you still refer to the balance showing on your bank account as being your money in the bank. But it isn’t. If we have a deposit box at the bank, the valuables we put in it are still ours. We’re just renting secure space to store them. In common usage, the word “deposit” means to set something down. But the use of the word deposit to refer to a bank account is misleading. A bank deposit is in reality… a loan. What the amount in our bank account really indicates is how much money the bank owes us. It is a record of the bank’s promise to pay us money, not the money we deposited itself. The difference is important. The truth is, when we hand the contents of our piggy bank to the bank teller, our money becomes the bank’s money to do with as it pleases. All of the money in the bank is the bank’s money. None of it is ours. That’s why the bank pays us interest. We have loaned the bank our money. This may seem to be a semantic distinction. We know we can go to the bank at any time and take our money out in cash if we want to. But the distinction is not semantic. Nor is it trivial. The distinction is crucial. What happens in banking affects everyone and yet few of us know anything at all about how banking really works. The entire world economy now runs on a system of credit provided by banks. And when that credit system breaks down, everyone suffers. To make things worse, the explanations for these breakdowns offered by the experts never look at the root cause… namely that, other than cash and coins, which make up just 1-5% of money in circulation, all the money in existence today was created as the principal of a bank loan, with the banks requiring principal plus interest as so-called “repayment”. Not only does this make the existence of money entirely dependent on the existence of bank credit, it makes the system as a whole bankrupt by design, as total debits, principal plus interest exceed total assets, from the moment the first loan document is signed. As the global banking system staggers towards worldwide collapse, more and more people are realizing they can no longer ignore the realities behind banking as it is practiced today. Many have lost their homes and jobs due entirely to the unsustainable practices of moneylenders. It is time people understood money and the pressing need to fundamentally change the way it works. Clarifying what the words used in banking really mean is the first step. Now that we know that a deposit is, in truth, a loan to a bank, the next question is … what is a loan that we take out from a bank? When we sign for a loan, we give the bank a pledge to pay the amount of the loan plus interest. In return, the bank credits our account in the same amount as this so-called loan. While we speak of the bank as having put the loan money into our account, in reality, the only thing the bank puts into our account is its promise to pay the money. What has actually happened is an exchange of promises. Neither party has delivered anything to the other, except matching pledges of debt. So, who is the borrower and who is the lender? The terms loan, lender and borrower are all misleading. The truth is that the two parties have traded promises to pay, and in the process created something called “bank credit” or “checkbook money” that can be legally spent as money. Bank credit can be spent because we, in our innocence, notice that, each time we deposit into our account, it increases our balance by the same amount. In fact, unless we put something in, our account will be empty. Thus it’s a natural assumption that money in an account is money someone put in. Uh-uh. The account is a promise to pay, not the money itself. In fact, a promise always indicates the absence of the item promised. Otherwise why does it need to be promised? Now, because all bank accounts are just promises to pay, the bank and the borrower can simply exchange promises and, in the flash of a few keystrokes, a positive balance appears in the borrower’s bank account without anyone putting existing money in. Now you know the real source of what we call a “bank loan”. “Commercial banks create checkbook money whenever they grant a loan, simply by adding new deposit dollars in accounts on their books in exchange for a borrower’s IOU.” – Federal Reserve Bank of New York, I Bet You Thought, p.19 How different would it be if two parties just got together in a basement with a printing press and created new money that way? We intuitively understand the act of fraud called counterfeiting. In printing fake $100 dollar bills, the counterfeiters also create new money out of thin air. Money gives us the ability to purchase the real goods & services of the world. It’s clear that the counterfeiters have created new ability to purchase real goods & services without giving anything in exchange… except a fancy piece of paper. Counterfeiters get something for nothing, directly at the expense of whoever gets caught with their counterfeit money. And if the counterfeit money is not discovered, it dilutes the money supply, stealing from everyone. Counterfeiting is a serious crime and it is easy to understand why. It’s cheating on a basic social agreement… Thou shalt not steal. But, taking a loan from a bank also creates new purchasing power. However, instead of being considered a form of theft, it is the very basis of our monetary system. How did one form of creating money out of thin air become a crime, and the other become standard business practice and the source of almost all our money? For this is what has happened. To understand how, we need to look at the history of the laws governing commerce, but before that, we need to understand the logic of the loan process itself. The borrower wants to purchase an item but doesn’t have the funds to do so at the present time. However the borrower does have confidence in having sufficient funds over time to pay both the original price of the item and the interest on a loan. So he goes to a bank to arrange a loan. The borrower is capable of making a credible promise of money in the future, but otherwise, at this moment, he comes with empty pockets. That’s why he needs the loan. We’re probably all familiar with what happens next. The bank gets the borrower to sign an agreement in which the borrower promising to pay the bank the amount of the loan plus interest or, in default, surrender to the bank the object that is to be purchased with the loan. This is done countless times every day all over the world, but there’s a problem. How can the borrower pledge as collateral something that the borrower does not yet own? If I wanted to borrow $10,000 from you to go on a luxury cruise to Europe, would you accept my neighbour’s car as collateral? Of course not, because you know very well that I have no legal right to give you my neighbour’s car no matter how much I owe you. But, if instead, I promise to buy my neighbour’s car with the $10,000 you lend me, the situation is different. You might agree to lend me the $10,000 believing I will buy the car and will pledge it as collateral for the loan once I obtain legal title to it. However, until the transaction is completed, your $10,000 loan cannot be secured by title to the car. This sequence of events problem could be very simply avoided. You could buy the car and then sell it to me. The bank could do it this way too. If the borrower commits to the bank to buy the item, why doesn’t the bank just buy it with its own money and then sell it to the borrower on time payments at interest? Well… the answer to that question is also very simple. It’s because the bank, like the borrower, has come to the transaction with empty pockets. The bank fulfills its part of the so-called loan transaction by creating an “account” for the borrower. The truth is… the so-called borrower has funded his own account by fraudulently pledging a car he does not yet own, as collateral. And the bank, the so-called lender, hasn’t put up any existing money at all…and, if all goes well, it never will. The borrower believes the new numbers in his account now represent his money in the bank. He, like the rest of us, doesn’t understand the difference between existing money and a promise of money. If you can spend it, what does it matter? So now the question is will the seller of the item accept the bank’s promise to pay? While some people may hold out for cash, most will say yes to a check or an electronic funds transfer from the buyer’s bank. Why? Because the seller knows from experience that she can “deposit” the check at her bank, and it will increase her account accordingly. So what happens next? Well, obviously the buyer’s bank now owes the seller’s bank the amount of the loan. So you might be thinking, isn’t this where the money comes out of deposits? The bank’s promise to pay the borrower has just been transformed by a transaction into a promise to pay the seller’s bank instead. So now the buyer’s bank has to transfer some of its existing money to the seller’s bank, correct? Yes, but probably only a small proportion. And, over the long term, as long as the bank gets its fair share of deposits, the net amount of existing money the bank needs to cover its loans can theoretically be zero. How? Well, imagine first that the seller has her account at the same bank as the buyer. She deposits the buyer’s check into her account. All the bank has to do to complete the transaction is reduce the buyer’s account by the same amount it increases the seller’s account. As both accounts are just promises, no existing money is involved in doing this. What is the end result? The bank has created bank credit for the borrower to the sum of $10,000. The borrower has bought the car that existed in the world of real things, and the seller now has that bank credit of $10,000. Thus a brand new claim upon $10,000 worth of real goods of value was accomplished with absolutely zero dollars of the bank’s or anybody else’s money! On top of that, the bank gets to have all this so-called money paid back by the borrower’s honest toil, PLUS interest, or the bank gets the car! Magic like this is usually seen on stage. So now let’s examine what happens if the seller deposits her check in a different bank. Won’t that require a transfer of existing bank funds from the buyer’s bank to the seller’s bank? Perhaps. But it will almost certainly never be anywhere near the whole amount because, in effect, the banking system functions as one bank. To illustrate, let’s add another transaction to this scenario. That same day, the seller’s bank made a similar loan to a little old lady who bought a mega home theatre system. The electronics store deposited her check at their bank. The electronics store’s bank made a similar loan that was deposited at the original borrower’s bank. And when all the various balances were settled, the banks didn’t owe each other anything, and even if there were differences, they would have been just a small portion of the total credit created. So, at this point, we can say that, although banks don’t actually lend out their depositors’ money, as most of us imagine, they still need deposits to make loans. This is because banks need incoming credit from other banks to offset their own credit being deposited at those banks. As long as banks keep their outgoing credit balanced with incoming credit, they are free to make new loans and thereby keep creating brand new credit money. None of it will ever have to come out of the bank’s pockets. The bank is free to invest its own funds in corporate and government bonds, and whatever other instruments their charter allows. If one draws a diagram of it all, it looks like this. The interest governments and corporations pay the banks on their bonds, is paid by us. We pay it as a portion of our taxes. And we pay it in the price of all the goods and services that we buy. And there‘s another thing passed onto us as well. And that’s the risk that the bank will go broke and NOT be able to honor its promises to pay. Now, you may wonder ‘how can a bank go broke if it doesn’t put up any money up in the first place’? What have they got to lose? The answer to that question is that banks differ from counterfeiters in that the banks are legally allowed to create new money, but only by certain rules of accounting. Banks can only create money by entering a borrower’s payments and collateral as an asset on the positive side of the ledger, balanced on the negative side by the loan, or what the banks call, the “deposit liability” created by the bank. When the borrower defaults on the payments, the asset pledged as collateral is seized by the bank and sold. In a declining market, when repossession is most common, the new lower value of the asset doesn’t cover the bank’s liabilities, which were based on the previous higher value. This shows up as a loss on the bank’s books. When foreclosures are rampant as in a collapsing real estate market, much of the value of the bank’s collateral simply evaporates as home prices drop, exposing the bank to huge losses. In truth, it’s all just numbers, created out of thin air. But banks must adhere to the dictates of these numbers, and the consequences of bank arithmetic gone wrong can include economic standstill, social disintegration, total financial chaos, lawlessness, starvation and war. “Those who live by numbers can also perish by them and it is a terrifying thing to have an adding machine write an epitaph.” – George J.W. Goodman, The Money Game However, for the purposes of understanding the anatomy of a loan, we shall assume that the system is still functional and all three of the loans we were looking at will get paid. The end result is that not one dollar of existing money has changed hands, but $30,000 of new bank credit has been created and spent into the money supply…and each of the three banks gets to collect interest on $10,000 of it. Is creation of this brand new $30,000 really an act of fraud, like counterfeiting? The obvious difference is that the banking system is legal, regulated by government and disciplined by the courts to follow the rules of accounting. Another difference is that there is no obvious victim, like the person getting caught with a counterfeit bill. Banks argue that the buyer and seller both got what they wanted and agreed to, so where is the fraud? And if there was a fraud, who lost out? Well, to determine that, let us list who got what out of the deal. The borrower did get the item he desired on terms he willingly agreed to. He may curse his decision later as he struggles to make the interest payments, or… he may live happily ever after, thankful he got the loan. the seller got an increase in bank credit, which she’s been conditioned since childhood to think of as her “money in the bank”. She is confident that she‘ll be able to spend it in turn, and she will… so as far as the seller is concerned, she has been paid in full. She’s happy. So who, if anyone, suffered as a result of the deal? Is there another party to this transaction we’ve overlooked? Well, there’s also the bank that gets to collect interest on a promise to pay money. That’s the business they are in and usually do very well by. And anyone else? Well, where did the car come from? It came from the world of real things. Natural resources, energy and labour were expended to produce it. What if we consider the hidden party to be Society at large, and the natural world from which all things ultimately come? Because the brand new bank credit money didn’t just sit there. It got spent into the general circulation in the real world. It’s the real world that ultimately gets the new money in exchange for its car. This new money might stimulate new production, temporarily enlarging the economy, making lots of people happy. In fact it often does, as most bank credit comes into being as a home mortgage, stimulus for the residential construction industry, a big provider of good-paying jobs. However, after its initial productive use, this newly created money will basically just dilute the money supply reducing money’s purchasing power by a very small amount. So, in contrast to counterfeiting where the loss occurs to a specific victim, here the loss is borne by us all, because the real substance of the loan, the car, was extracted from the economy at large by a slight loss in the value of everyone’s money. “The decrease in purchasing power incurred by holders of money due to inflation imparts gains to the issuers of money.” – St. Louis Federal Reserve Bank, Review, Nov. 1975, p.22 To continue our comparison of bank credit with counterfeiting, counterfeit cash eventually gets detected and removed from circulation, causing a direct loss to whoever accepted it. There is, of course, no guarantee of how much will be detected nor any prescribed schedule for its removal. Bank credit is also removed from circulation over time because, as bank credit is paid back, the principal part of every payment is extinguished. Now, remember that almost all the money in existence today is bank credit. Therefore, almost every dollar that passes through our bank accounts has a scheduled appointment to one day be paid as a principal payment on a bank loan and cease to exist. On top of the Principal are the interest payments, which will become bank income, much of which will be recycled into the economy as interest to depositors and other bank expenses. So it’s not immediately apparent that there’s a loss to someone as a result of bank credit being withdrawn from circulation, the way there is with counterfeit cash. But if we look closer we find an interesting situation. We don’t need anything more than fundamental arithmetic to understand the power that lies in controlling the money supply and why, as currently designed, total debt must constantly expand or the system collapses. Whenever the rate of debt money creation falls behind the rate of debt money destruction, the total amount of money in use will shrink. This is called deflation because the money supply is shrinking like a deflating balloon. The result is less money relative to the goods and services available. With less money around to pay for them, the price of goods and services go down. At first this sounds like a good thing and it could be… if money were NOT created as debt at interest. For anyone not in debt, deflation would be like a general dividend on money – paid in goods & services of our choice. It would be as if money were the people’s stock in their own prosperous company, their nation. People wouldn’t have to demand a pay raise. If a nation were more productive as a whole, thus deserving of a raise, everyone would benefit automatically by having their money buy more. However, this is definitely not the effect deflation has in a system where money comes in the form of interest-bearing debt. More than 95% of all money currently in existence is in the form of debt to banks, promises to pay with interest added. As we have seen, the Principal is created, but not the Interest. Due to the time delay between money’s creation and its repayment, and the recycling of interest earnings as bank operating expenses, most of us can keep up our payments while the money supply is increasing. However, if the money supply or total debt is decreasing, money becomes harder to earn due to its scarcity, and fixed payments become harder to meet. For those heavily in debt, the money shortage can become catastrophic. “The entire world economy rests on the consumer; if he ever stops spending money he doesn’t have on things he doesn’t need — we’re done for”. – Bill Bonner, author, publisher and columnist on economics and money Unfortunately, the psychological effects of falling wages and prices rapidly accelerate the process, as borrowers, including large businesses, lose confidence in being able to repay loans. So they don’t sign up for any and, without new loans to replace old loans, the money shortage rapidly gets worse, resulting in a decrease in jobs and purchasing power, even in the midst of abundant resources and productive capacity. This dismal spiraling math makes mass foreclosure inevitable. Prices plummet as no one wants to spend their money. Shrinking values destroy the value of loan collateral, causing banks to write off huge losses. Some even close their doors. Consumer and business confidence is lost. Rampant economic and social dysfunction follows. “With the monetary system we have now, the careful saving of a lifetime can be wiped out in an eyeblink.” – Larry Parks, Executive Director, The Foundation for the Advancement of Monetary Education (FAME) This disastrous spiral cannot be turned around unless someone, usually government, either creates new money itself or goes deeply in debt to private banks in order to create enough new money to re-organize and rejuvenate the economy. The most familiar example of this is the stock market crash of 1929. The psychological fallout of the stock market collapse resulted in less borrowing and thus less new money. The Federal Reserve did nothing to correct the resultant deflation, and by 1932 the money supply had been reduced by a third. Countless people were evicted from their homes because the money to make their mortgage payments simply ceased to exist. Then, in 1932 Franklin Roosevelt became the US President. Roosevelt’s New Deal set out to restore the economy by restoring the money supply. To counter the money shortage, Roosevelt borrowed from the private banking system. Factories started hiring again. But only when the war arrived, was there suddenly no shortage of jobs or funds available to do what was necessary for the war effort. It was the money expanded on World War 2 that ended the Great Depression. The War also resulted in 50 million deaths worldwide and led to a new hostile international balance of power, with its attendant arms races, mounting debts and sweeping social and technological transformations. “When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.” – Napoleon Bonaparte “I wouldn’t go to war again as I have done to protect some lousy investment of the bankers. There are only two things we should fight for. One is the defense of our homes and the other is the Bill of Rights. War for any other reason is simply a racket.” – Major General Smedley Darlington Butler USA(1881-1940) “There is nothing left now for us but to get ever deeper and deeper into debt to the banking system in order to provide the increasing amounts of money the nation requires for its expansion and growth. Our money system is nothing better than a confidence trick… The “money power” which has been able to overshadow ostensibly responsible government is not the power of the merely ultra-rich but is nothing more or less than a new technique to destroy money by adding and withdrawing figures in bank ledgers, without the slightest concern for the interests of the community or the real role money ought to perform therein… to allow it to become a source of revenue to private issuer’s is to create, first, a secret and illicit arm of government and, last, a rival power strong enough to ultimately overthrow all other forms of government. …An honest money system is the only alternative.” – Dr. Frederick Soddy, Nobelist author of Wealth, Virtual Wealth & Debt The cycle of economic boom and bust is commonly called the business cycle, as if it were a natural occurrence like the hydrological or carbon cycle. These natural cycles are ultimately driven by the Sun. But what is it that drives the business cycle? One answer is the supply of money. And, as we have seen, the supply of money is dependent on loans. So let’s look at what happens during the lifetime of an individual loan. We’ve seen how bank credit is nothing more than the bank’s promise to pay which the bank has created on its books to balance the borrower’s promise to pay that it has received. The bank’s promise to pay is usually spent on some real good or service and allowed to circulate making the efficient exchange of goods and services easier to accomplish. As a medium of exchange, today’s promise-to-pay money is unsurpassed in its usefulness and flexibility. However, because no money is created to pay the Interest, a seemingly impossible situation is created. On the face of it, if borrowers had to pay the interest they owe all at once, they would have to fight it out for a limited sum of existing money that was very much less than the total owed. The percentage that would be unable to pay off their loans would be simple to calculate. However, interest is usually paid over time, not all at once. If this interest income is recycled into the general economy as spending, it can be available to be earned repeatedly. Once we understand this, the question of whether interest is actually unpayable becomes more perplexing. Is there such a thing as a sustainable system of lending that does not produce mathematically inevitable defaults? In the Middle Ages, USURY, meaning charging interest or any form of making gains solely from having money was condemned as a sin. While the justification was moral, the reason was practical. In a fixed money supply like gold, anyone systematically rolling over all of their loan money at interest will soon end up with all the money. This problem was a big factor in the ruin of Rome. Private accumulations of gold forced the government to make coins made of base metals instead of the real thing. Debased currency led to failing confidence and ultimate decline. The lesson was well learned. For the next thousand years, the Roman Catholic Church declared collecting interest on a loan to be a sin punishable by excommunication. In some countries, the penalty for practicing usury was death. Is charging interest really a sin? While today it seems very reasonable to charge for the use of money, there’s a simple and unavoidable problem with doing so. Unless moneylenders spend every penny of interest they receive in such a way that the borrowers can earn it again, the borrowers are going to come up short, regardless of their hard work and personal virtues. Someone will default, simply as a result of the arithmetic. This is easy to picture where there’s a fixed money supply like gold coin. As long as all of the coins taken in as interest are spent so that the borrowers can earn them, the same coins can be used to pay the interest over and over. The lender can profit by buying real things with this coin, but the coin itself must be spent not lent nor removed from circulation. Leaving aside any moral considerations, this arrangement would be sustainable. However, if the interest coins are re-lent at interest, or removed from circulation by hoarding, there will be an inherent shortage of coins with which to pay off the aggregate debt. The situation is essentially no different in our current debt-based system. As we have seen, nowadays virtually every dollar comes into existence as debt, with a scheduled appointment to be extinguished as a Principal payment on the loan that created it. Thus, for all borrowers to be able to make their payments of principal plus interest, two things must be true. The dollar created as the principal of the loan must be available to be earned by the borrower in order to make the principal payment that extinguishes that dollar. And… every dollar the borrower pays to the bank as interest must also be available to be repeatedly earned by the borrower so that it can be paid as interest again and again. There is a common theory undoubtedly popular with lenders, that because the banks spend their interest earnings as operating expenses, interest to depositors and shareholder’s dividends, there is, in fact, enough money released back into the community to make all payments. However, like the idea of absolute shortage, this is an oversimplification. Picture what happens if someone else, such as you or I or an institutional non-bank lender obtains this dollar and then lends it out at interest? Well… now that same dollar is simultaneously owed to two lenders and has two simultaneous interest charges attached to it. In addition, if this dollar is loaned, repaid and re-loaned by the secondary lender, it is not available to pay off the principal of the loan that created it, except as another loan. So… can we borrow from Peter to pay Paul and borrow from Paul to pay Peter? This gets inter1sting. We can… however, each time money is borrowed there’s an interest charge added that also must be paid. If all added interest charges can be earned, all payments can be made. On this basis, many economists and defenders of the current system claim there can never be a shortage of money and all payments can be made. But this seems to be a false assurance. For instance, if secondary lenders capture some of the money needed to retire the loan that created that money, the original loan can never be retired. The deficiency will have to be borrowed over and over forever, each time at interest. Each deficiency will be cumulative, adding to an ever-building total of debt that can never be paid off. And, it stands to reason that for each added interest charge in the system as a whole, something extra is demanded of the system as a whole to pay for it. This affects everyone, producers, governments and consumers. For producers that something extra must be raised through higher prices or more sales. However, competition for more sales usually requires lowering prices, necessitating even more sales and leads to overproduction and saturation of the market. The end result can mean job losses, plant closures and bankruptcies. For governments, that something extra is raised by increasing taxes. But increasing taxes drains money from the productive economy, resulting in a reduction in the collective ability to pay taxes, which then necessitates increased government borrowing and additional interest charges. For consumers, something extra can mean getting an additional job, or borrowing to pay past debts, or paying off debt over longer periods of time. However, competition for jobs tends to lower wages and paying over longer periods of time adds enormously to the amount of interest owed. And, of course, borrowing to pay off past debts is like trying to fill a hole with more hole. And that is the situation we find ourselves in today. Producers can’t sell more because consumers can’t afford to buy. Governments are cutting taxes not raising them hoping to stimulate consumer demand. And consumers’ real incomes are limited or even falling due to competition for a limited number of jobs. Therefore, any increase in the total amount of interest charges within the monetary system as a whole, will result in a genuine shortage of money. This is because the real productive economy is limited by the availability of nature’s resources.The productive economy exists to serve actual needs. It simply cannot keep pace with the demands of the artificial financial economy which has an unlimited appetite for profit and which operates with no regard for the natural limitations of the real world. The theory that there’s always enough money to pay the interest has a certain elegant simplicity. However, by the very nature of the assertion, to be true, it has to be 100% true. This is impossible. For one thing, secondary lenders, who are not banks do comprise a significant proportion of lenders. And they add their interest charges to money that already bears an interest burden. Beyond that, we have a cultural expectation. Everyone who has money expects it to generate more. Money that needs to be spent and made available to be earned by its original borrower is, instead, lent at interest or invested for gain. Therefore, we can conclude that the two conditions that must be true for all borrowers to be able to make their payments of principal plus interest, and thus permanently discharge their debt, those conditions are not met by the current system. Nowhere in the current system is there any restriction on re-lending money that was created as a loan. Nor, is there any obligation upon banks to make their profits from interest available to be earned by borrowers, enabling them to extinguish their debts. Quite the opposite, banks invest these profits to make further profits. And it’s not just the banks that cause the problem, anyone who takes their ball of money and starts rolling it like a snowball to make it bigger, does so at the expense of borrowers who will not find that money available to pay their debts, except as more debt. And of course, those rolling the biggest snowballs pick up the most snow. As the saying goes the rich get richer and the poor get poorer. Money needed by borrowers in the lower realms of workaday productive economics moves upstairs to play in the casino world of abstract financial profit. And that’s a world where transactions are little more than gambling on numbers in an effort to achieve higher numbers. They have little or nothing to do with providing the necessities of life. Today the largest volume of money by far is changing hands in what is best described as the gambling economy, the foreign exchange market, the derivatives market and the rest of the financial instruments being played by banks and investment funds for as much profit as possible. For example, the volume of trade on the world’s foreign exchange markets, in just one week, exceeds the total volume of world trade in real goods and services during an entire year. This money is in continuous play by speculators looking to make windfall profits on currency fluctuations. It exists, but only in the gambling economy. So how “unpayable” is the ubiquitous interest burden in actual fact? That could only be determined with certainty, by tracking all the money in the world. With over 6 billion people earning, spending, borrowing and lending, the worldʼs money flows are at least as complex as the flows of the ocean, they are impossible to know. But the direction is pretty clear and simple… and itʼs the “same old story”. The rich are taking increasingly more money into the gambling economy, where ordinary borrowers have almost no chance to obtain it. And, the only way the system can stay solvent is to create more money. And as money is created as debt, the only way to create more money is to create more debt in every way possible, including ridiculously easy credit for unqualified borrowers, massive government expenditures on security and war and bailouts of insolvent banks. How does the individual loan cycle relate to the boom and bust phenomenon known as the business cycle? The individual loan cycle can be described like this: first, there is economic Stimulation because of its initial spending. This is followed by inflation because new money basically just dilutes the money supply. And eventually, inflation is followed by deflation as loan repayments gradually extinguish the Principal, removing that money from circulation. As long as the individual loan cycles don’t match up, these cycles can smooth each other out. This creates a fairly stable money supply that leads to fairly stable prices, although continuous growth of the money supply is required, at least in part, because as you will recall, the money to cover the interest was never created. This is the model on which our economy is currently based. Avoiding deflationary spirals and keeping inflation at a level that doesn’t upset people’s apple carts, constitutes the art of managing the economy, which is rather narrowly defined as achieving so called “price stability”. However a look at the purchasing power of the US dollar in real goods over the last century instantly reveals what this so-called “price stability” has really meant. The dollar has clearly lost almost ALL of its value, 96%, and is continuing to do so at a rapid pace. So price stability is NOT being achieved. And, one hardly needs a degree in psychology to understand how human nature itself would turn the individual loan cycle into the collective phenomenon of the business cycle. The simple reason being, that if one person sees great prospects and is doing well borrowing and expanding, others would have the confidence to do the same. Beyond the merely psychological effects, if one business is expanding on the basis of credit, its suppliers and distributors will find it necessary to do so as well, or lose that business to someone who will. The same herd effect would occur for a gloomy outlook and accompanying credit contraction. Thus, it is entirely predictable that individual loan cycles would have a built-in propensity to line themselves up rather than be randomly distributed. And when they do, we see the larger scale called the business cycle emerging directly from the cumulative effects of individual loan cycles. So, to sum up, one could say that, out of the exchange of promises made by the bank and the borrower, society gets chronic inflation and a dependency on banks for increasing infusions of money to pay ultimately impossible interest payments. This results in an inescapable treadmill of accelerating debt and depreciating money. The only alternative being a deflationary collapse of the economy, followed by social chaos or war. This eminently unhealthy situation filters down through society, wreaking harm on every level. We are like addicts, but the fix is not more and more heroin, it’s more and more credit money, and, eventually our collective ability to borrow and repay so much credit becomes exhausted. This then creates the need for constant expansion of credit into new markets, in essence creating a fiscal imperative to drive everyone in the world further and further into debt forever. In the United States, this constant debt expansion has led to a Total Credit Market Debt in 2008 of more than $53 trillion dollars, which is about five times the total annual income of the entire country. So is the world at large happy about its end of the loan transaction? Probably not. But the world at large has very little awareness of where these problems originate. The elusive system of counterfeiting and hidden control that is modern banking. And how about the banks? How have the banks fared as a result of this system? Well first, by putting up only a small fraction of the money they ostensibly lend, the banks have obtained a river of income from interest payments on consumer loans and mortgages. Second, by using their credit powers to acquire large portfolios of corporate and government bonds, banks collectively appropriate control over government and industry. And, thirdly due to the inevitable defaults and foreclosures, the banks gain legal title to a lot of real property the world over. And finally, if the worst happens, if borrowers default en masse causing the banks large losses, the government is forced to rescue the banks with multi billion dollar bailouts to save the financial system. And what are these bailouts financed with? You guessed it. More taxpayer debt. It is really quite an achievement to pull this off, and without most of the victims even being aware of it. If you’re now thinking “there ought to be a law”, well, there is. There’s a whole body of law that makes all of this legal. So how did a system like this ever become the law? To answer that, we go back to England in the mid-17th century. “When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it.” -Frederic Bastiat, 1801-1850, political economist With the development of better ships, and the new explorations they allowed, trade was expanding rapidly. In order to carry out commerce, especially over great distances and lengths of time, written contracts were becoming more and more important, and more sophisticated. Under English Common Law it had long been established that a contract could only be enforced if something of real substance had changed hands. A transfer of goods or rights in property was the real stuff of the exchange and that was what the court would evaluate for fairness, not just the words on the document. A contract under which there had been no exchange of consideration, meaning real goods or rights in property was deemed to be empty and was therefore not enforceable by the court. So a contract in which a borrower say… pledged a car he does not own in exchange for a bank’s promise of payment would not even qualify as a contract. No Common Law court would enforce it. As well, in the event of a dispute over a contract, under Common Law, only someone who had actually provided consideration to the transaction, in other words, only someone who “delivered the goods”, had the right to sue in court for fulfillment of the contract by the other party. This right was not transferable to a third party. When early traders went off personally on expeditions with trade goods, they bought those goods at home with their local currency and would sell them for foreign currency in the distant destination. They would then buy foreign goods with the foreign money, bring those goods home and sell them for their local currency. Pretty simple. But, as trade became more sophisticated, traders became more inclined to stay home and just hire ships to carry out deliveries. This gave traders the freedom to import cargoes of foreign goods from different sources than the destination to which their home goods had been exported. Thus a problem was created. The exported goods had been paid for with foreign coin, the value of which needed to be spent somewhere else. Moving money as coins entailed a high risk of theft, as well as the near certainty of partial loss by currency conversion in a different land. This problem of payments from a distance was overcome by the use of Bills of Exchange. A Bill of Exchange was a signed order from the payer to an addressee demanding that the addressee pay a certain specified sum of money to the person identified as the payee. These were secured by signature, and they could not be acted upon in court by anyone other than the original parties. Thus, they were of no use to a thief or any other third party. You probably recognize that these were the precursors of cheques. I the payer, instruct the bank, the addressee, to pay the payee, a person named on the cheque, a certain sum of money. This was all well and good for transactions among parties who were known to each other. The bill of exchange was used merely as a way to order payment in coin at a distant location. But merchants soon wanted more flexibility. They wanted to be able to use Bills of Exchange to reconcile payments amongst many merchants in many locations, using Bills of Exchange like money itself. For this to work, bills of exchange had to be assignable to, and enforceable by, third parties. As we shall see, this was the moment in legal history that gave sanction to the banking system we have today. A third party who might have honestly purchased a bill of exchange several steps removed from the original exchange, could not be expected, nor would he have the right, to show up in a Common Law court and defend the validity of the contract and collect on it. This made third party Bills of Exchange an unacceptable risk. So, in order to be able to use bills of exchange as a convenient and guaranteed third party payment system, essentially equivalent to money, the Common Law practice had to be set aside regarding bills of exchange. In England, by a series of legal decisions from 1664 to 1699, this problem for commerce was remedied by making bills of exchange enforceable by third parties. If a third party had purchased a bill for valuable consideration and in good faith, having no apparent reason to suspect fraud or some deficiency in the right of the seller to sell it, then the bill automatically became good and enforceable by the court against the signer. What did this change mean? It meant, essentially, that any Bill of Exchange would be considered legitimate once it was sold. Bills of Exchange and all other subsequent types of signed promises to pay, with the notable exception of cheques, became transferable and enforceable in court, just what the merchants wanted. Now debts contracts could be sold like things and transacting business would be a whole lot easier. Not only that, it opened up a whole new market for profit-seekers, trading in bills of exchange themselves. The marketing of debt was born. The change in the law had another effect as well. It made it possible to trick or even force a person into signing a legally binding promise to pay, and then, if that promise were purchased by a third party for real consideration and in good faith, it would be enforceable against the signer in court. Ultimately, this became one of the foundational principles of the Uniform Commercial Code, which governs the conduct of business in the United States, and by extension, in most of the world. The entire taxing and monetary systems are hereby placed under the U.C.C. (Uniform Commercial Code)” – US Federal Tax Lien Act of 1966 Think about it. If we buy a stolen laptop from a guy on the street, we’re guilty of receiving stolen goods, a criminal offense. It doesn’t matter if we paid honest money and were unaware the goods were stolen. The court will restore the goods to the rightful owner. We as purchasers, innocent or not, lose our money and may even be charged with a crime. But if we buy a loan contract from a banker and give him real value for it “in good faith”, it doesn’t matter that the loan contract may have come into existence under false pretenses. Whoever signed it is required by commercial contract law to pay up, and the courts will enforce the obligation. Today debt contracts come in a myriad of forms, including and especially loans and mortgages. It’s significant to note that, just as these Common Law restrictions were being removed, the brand new Bank of England was being established, the first bank state-authorized to create money out of thin air. The new laws fit in perfectly, making the new bank’s “empty” contracts enforceable against the so-called “borrower”. “The bank hath benefit of interest on all moneys which it creates out of nothing.” – William Paterson, founder of the Bank of England, c1694. Those who have discovered the true nature of their own bank loans and have attempted to challenge the validity of their debt contracts in modern courts have discovered to their dismay that this commercial contract law is still the bedrock defense of money as debt. The bank will have sold the original loan agreement to a third party for value, and even though that third party is often just a sister company of the bank, all that matters to the judge is who possesses the document, what it says, and whose signature is on it. The bank’s failure to inform the borrower about the true nature of the loan contract, and the absence of any actual money loaned on the bank’s part, is not relevant. So, to conclude our investigation, it appears that modern banking practice rests on several distinct violations of Common Law, common sense, and natural justice. The first violation is the fraud the borrower commits by pledging as collateral, property the borrower does not yet own. And the bank is complicit, as it knowingly accepts the fraudulent pledge as backing for the credit it creates. The second violation is the failure of the bank to disclose the true nature of the contract. The bank calls it a loan, leading the borrower to believe that he or she is receiving a loan of existing money. But the bank knows full well it has provided only a brand new promise to pay simply typed in on a computer screen. A promise that the bank knows it will probably never have to fulfill. Thirdly, the loan agreement should be invalid. Because impossible contracts are legally invalid.The bank is creating an impossible contract because the conditions required to guarantee that the borrowers have the opportunity to pay off the Principal plus Interest are not met. Unless the system enforces 100% recycling of both Principal and Interest, which it emphatically does not, some borrowers are going to default and lose their collateral, simply due to the systemic shortage of money. The fourth violation is the violation of natural law by the law of contracts, which confers automatic legitimacy of title on any contract if the contract is sold to a third party for valuable consideration. This violates the principle that one cannot give better title to something than one has. But perhaps the biggest fraud of all is that most of the people who produce the real wealth of the world are in debt, and at risk of losing everything they have worked for, to bankers who fabricate money out of mere promises to pay. And where does this leave us? We are hostages in an economy that must grow faster and faster to keep up with an ever-growing money supply or the entire system collapses in ruin. The money system as currently structured, refuses to recognize that the real economy is limited by the capacity of the planet to provide the raw materials and waste disposal services the economy needs. The planet is finite. And therefore, it should be obvious that the economy cannot grow at an accelerating pace forever. Our current money system runs like the bus in the movie Speed. It could not slow down or the bomb planted on the bus would go off. And, our situation is even worse because the rate of debt creation must forever accelerate or the entire economy crashes. The notion that infinite perpetually accelerating growth is possible is the great fallacy of modern economics. It is a fatal delusion born of greed. An economic, social and environmental crash of unprecedented proportion is surely inevitable, and this monetary system is utterly and hopelessly incapable of adapting to it. No wonder monetary reformers around the world insist that the entire monetary system needs to be rebuilt, from the ground up. “Banking doesn’t involve fraud, banking IS fraud.” -Tim Madden, monetary historian & consumer advocate So… what is the solution? One idea many people suggest is to return to the days when money was backed by gold. Gold, they argue, is the true money because it’s inherently valuable. The underlying principle here, is that money should be a commodity that is valuable due to its scarcity – as gold is scarce. As a general rule, those who hold this view of money also believe that money should exist independent of government. Another school of thought, diametrically opposite, is that the creation of money should be the exclusive prerogative of Government, which represents all the people, should spend money into existence in the public interest, thus backing the currency with what it was spent on. Having taken back the power to simply spend money into existence, government would never need to go into debt or pay interest. Of course, government spending without limit would result in a worthless currency. To prevent inflation, money would also have to be extinguished. This could be accomplished using a wide variety of taxes, resource royalties and user fees. Government spending and government taxes would, therefore, be interdependent and would equal each other in a perfect equilibrium. However, the goal of taxation would be to achieve price stability, as the government would have no need of tax revenues in order to operate. Over the centuries, both the gold-based system and various government credit money systems have been used, with the gold-based system prevailing well into the 20th century. This wasn’t because government credit money didn’t work. It did, within the country itself, where it was accepted in payment of taxes. But until the invention of modern currency exchanges, international trade had to be carried out in gold. In addition, gold has had an almost supernatural fascination for humans for a very long time. We’ve been conditioned for millennia to think of money in terms of portable inherent wealth, as in gold coins. However, this is not the only way to think of money. Nor, in the era of runaway debt-money, is it any longer accurate. Money is, at its root, an idea… an idea that humans invented in order to turn simple subsistence into complex civilization. It’s the development of money that made possible specialization of labor, and the indirect exchange of goods and services. Throughout money’s evolution, from direct barter to standard trade goods, and on to standard coins, to paper promises of precious metal, to digital promises of paper cash, and now to digital promises to pay digital promises – throughout this long evolution, the prevailing idea has always been to achieve greater flexibility by using convenient and secure promises to pay instead of money itself. The problem with promise-to-pay money has always been that it provides a golden opportunity to cheat, to create more promises than there is real stuff to back those promises up. But is there a way to make the exchange of actual money just as convenient and secure as the promise-to-pay system? Now there is. Digital money convenient and secure, is now a possibility because of new encryption technologies. It works like this. Imagine taking the serial number off a dollar bill and dispensing with the paper. What do you have? a digital dollar, a digital dollar that can now be electronically transferred around the world just as easily and securely as a promise-to-pay dollar. However, and this is the big however, the digital money while being entirely electronic, is also like a metal coin: It can never be in two places at once. Thus, the multiplication of promises can be prevented by insisting on actual payment in cash, paper or digital. We don’t even need to keep this digital cash in a bank as it provides its own safekeeping and can be transferred by Internet. And instantly transferable digital money could perform intelligent functions far beyond anything money has been capable of before. For instance, with simple math programmed in, money could be made to calculate its own value, eliminating human speculation, manipulation and error. Wouldn’t that be something? In the meantime, efforts are already underway to reform the monetary system through legislation. Initiatives like the Monetary Reform Act and the American Monetary Institute’s Monetary Act have already been written, prescribing in detail how to return the power to create money exclusively to government, and thus limit banks to lending existing money, just the way most people imagine it works now. While differing in detail, all such reform proposals, in whatever country they originate, always advance the same simple idea. The benefits of money creation belong to the public. At present, money is created not for the benefit of society, but for the profit of private banks. Banks like to create enormous amounts of money from our debt, because the more we borrow into existence, the more interest the bank gets to collect, and the richer the bank becomes. In the process, the banks gain more control over everyone, individuals, industry and government alike. Abundant money too often leads to speculative asset bubbles that make insiders rich. But, as we have witnessed, these bubbles inevitably burst, under the unbearable weight of ever-increasing interest demands. The losers are many, including governments. Already burdened with huge debt and shrinking revenues, governments are forced to add trillions to that debt in order to rescue the banks that are the cause of the problem… Otherwise we would have no money system! It’s an absurd situation, and a tragic one, considering that government could instead, create the money itself, and spend it interest-free on infrastructure, education, or universal health care. And most of that debt-free money would enter the economy as wages, circulating through all levels of society for everyone’s benefit. This kind of abundant money would fund a re-invigorated productive economy, in which the savings of the people could fund honest loans of real, existing money. At its root, money is a means by which we exchange real value. Without real value in the world, money is nothing. As we have seen, it’s the real world that makes the loan, not the bank. We the people, in conjunction with the material blessings of the natural world are the source of all real wealth. Therefore money creation and its benefits belong to the public, not to private bankers. And what about interest? As we have seen, interest poses an arithmetic problem and it’s a problem that can only be solved in three ways. One, defaults and foreclosures, two perpetual growth of the money supply, or the preferable, and only other solution, 100% recycling of interest as spending. But such full recycling could only be accomplished by nationalizing the banking industry in the public interest. For example, interest earnings from public service banking could be paid to all as a citizen’s dividend, or it could be used to fund government in place of taxes, as was done successfully in colonial Pennsylvania. And that’s just one instance of a society that organized its monetary system differently. There have always been alternatives. And there are alternatives now. What the evolution of money really teaches us, is that the real measure of money’s value is, very simple, its usefulness as money. And there are several different ways to create useful money. For instance, money can simply be an individual’s private promise to pay. A pledge of one’s own product or service as in such community currencies as the LETS systems or Time Dollars. Thousands of these community currencies already exist in circles of trust where members can be counted on to honor the credit they issue for themselves. And such community currencies can be a lifesaver in the event of a catastrophic collapse of the conventional banking system. When money shortages or hyperinflation disrupt trade and bring economic standstill, a working community currency can sustain a local economy. Are such proposals radical? You bet. But there are unprecedented challenges before us. No longer can exponential growth allow us to sustain a monumental debt that must ever increase to prevent the house-of-cards collapse of the whole system. Increasing wealth disparity, crushing debt, failing banks and social and environmental catastrophes are what we face unless we radically change course. We must transform our monetary system to one that can adapt to a future we can now clearly foresee. To begin, we must examine monetary system designs that can deal with widespread economic shrinkage, without inducing mass foreclosures and bankruptcies. But, what can you do right now? Well right now, there are people and organizations around the world that understand the problems and the injustice of today’s monetary system and you can join them in their effort to bring about the fundamental changes we need. It’s time to talk to our friends. A financial crisis is the ultimate teachable moment. When bankrupt banks have to be bailed out by the governments the banks were formerly lending to, the contradictions, the fraud, and the fatal flaws of the current system are laid bare for all to see. But the solutions are there to see too, if we look. We cannot afford business as usual. Making adjustments to the current system will not save us. The changes we need to make are radical and dedicated to the good of all, not the profit and control of a few. To make these changes, we must leave behind our outmoded assumptions and misplaced faith. We must face the challenge of a complete transformation. Reality calls. “Money does not pay for anything, never has, never will. It is an economic axiom as old as the hills that goods and services can be paid for only with goods and services.” – Albert Jay Nock, Memoirs of a Superfluous Man, 1943 “Only when the last tree has died and the last river has been poisoned and the last fish been caught will we realize we cannot eat money.” – Cree Indian Proverb Money as Debt II, Promises Unleashed was written & produced by Paul Grignon Narration & Script Editing Bob Bossin General Editing Tsiporah Grignon Music composed & recorded by Paul Grignon 3D Modeling Paul Grignon Additional 3-D Models 3D CAD Browser Delicious 3D 3D Related conspiracies: 1929 US Depression, capitalism, central bank, corporations, depression, economic slavery, education, Federal Reserve, globalism, hyperinflation, income tax, international banking, IRS, monetary reform, Monetary Reform Act, money creation, money supply, Napoleon Bonaparte, national debt, nationalized banks, population control, scarcity, stimulus theft, stock market, US Constitution, US Dollar, USD collapse Related posts The Money Masters – How International Bankers Gained Control of America and the World Global Financial Collapse – Adrian Salbuchi Economic Collapse 2.0 – Conspiracy Theories Start To Play Themselves Out Fall of the Republic End The New World Order With Global Non Compliance – Short Documentary Outlines Entire Global Conspiracy April 15 2008 Strike Against The Federal Reserve, Income Tax, and IRS Ring of Power – Empire of the City – 4,000 Years of Suppressed History Leave a Reply<><><><> <><><><> <><><> <><> <>

The “Disaster Stage” of U.S. Financialization

By Kevin Phillips – April 7, 2009, 3:34PM Thirty to forty years ago, the early fruits of financialization in this country – the first credit cards, retirement accounts , money market funds and ATM machines – struck most Americans as a convenience and boon. The savings and loan implosion and junk bonds of the 1980s switched on some yellow warning lights, and the tech bubble and market mania of the nineties flashed some red ones. But neither Wall Street nor Washington stopped or even slowed down. In August, 2007, the housing-linked crisis of the credit markets predicted the arriving disaster-stage, the Crash of September-November 2008 confirmed the debacle, and now an angry, fearful citizenry awaits a further unfolding. There is probably no need to fear a second coming of nineteen-thirties Depression economics. This is not the same thing; the day-to-day pain shouldn’t be as severe. Indeed, for all that the 1930s evoke national trauma, that decade was in fact a waiting room for national glory and wellbeing. World War Two ushered in American global ascendancy, the “Happy Days” of the 1950s and an unprecedented middle-class prosperity. Today’s disaster stage of American financialization – the bursting of the huge 25-year, almost $50 trillion debt bubble that helped underwrite the hijacking of the U.S. economy by a rabid financial sector — won’t be nearly so kind. It is already ushering in the reverse: a global realignment in which the United States loses the global economic leadership won in World War Two. The ignominy deserved by Wall Street after 1929-1933 is peanuts compared with the opprobrium the U.S. financial sector and its political and regulatory allies deserve this time. My 2002 book, Wealth and Democracy, in its section on the “Financialization of America” noted that the “finance, insurance and real estate (FIRE) sector overtook manufacturing during the 1990s, moving ahead in the national income and GDP charts by 1995. By the first years of the next decade, it had taken a clear lead in actual profits. Back in 1960, parenthetically, manufacturing profits had been four times as big, and in 1980, twice as big.” Hardly anyone was paying attention. By 2006, the FIRE sector, its components mixed together like linguine by the 1999 repeal of the old New Deal restraints against mergers of commercial banks, investment firms and insurance, had ballooned to 20.6% of U.S. GDP versus just 12% for manufacturing. The FIRE Sector, now calling itself the Financial Services Sector, lopsidedly dominated the private economy. A detailed chart appears on page 31 of Bad Money. Some New York publications and politicians try to insist that finance per se is only 8%, but the post-1999 commingling makes that absurd. This represented a staggering transformation of the U.S. economy – doubly staggering now because of the crushing burden of its collapse. You would think that that opinion molders and the national media would have been probing its every aperture and orifice. Not at all. Thus, it was pleasing to read MIT economics professor Simon Johnson’s piece in the April Atlantic fingering financial “elites” who captured the government for the latterday financial debacle. This is broadly true, and judging from my e.mail, even some conservatives accept Johnson’s analysis and indictment. After the furor over the AIG bonuses, the public and some politicians may be ready to start identifying and blaming culprits. This would be useful. Having an elite to blame is a often prerequisite of serious reform. Nevertheless, the extremes of financialization, together with the havoc we now know it to have wrought, represent a much more complicated historical and economic genesis, one which U.S. leaders must be obliged to confront if not fully acknowledge. Elite avarice and culpability has multiple and longstanding dimensions. It has been fifteen years since Graef Crystal, a wellknown employment compensation expert, brought out his incendiary In Search of Excess: the Overcompensation of American Executives. The data was blistering. Over the last decade, New York Times reporter David Cay Johnston has published two books – Perfectly Legal and Free Lunch – describing how the U.S. tax code, in particular, has been turned into a feeding trough for the richest one percent of Americans (especially the richest one tenth of one percent). The backstop to avarice provided by a wealth culture and market mania from the late 1980s through the Clinton years to the George W. Bush administration, prompted another set of indictments that still resonate: William Greider’s Secrets of the Temple: How the Federal Reserve Runs The Country (1987), Robert Kuttner’s Everything For Sale (1997), Thomas Frank’s One Market Under God(2000) and John Gray’s False Dawn (1998). More recently, Paul Krugman’s books have been equalled or exceeded in timeliness by his New York Times columns blasting the perversity of the Obama-Geithner financial bail-out and the malfeasance of the financial sector. James K. Galbraith, in his 2008 book The Predator State, has elaborated the valid point that too many conservatives over last few decades betrayed their free market rhetoric by supporting a relentless use of state power and government financial bail-outs to advance upper-income and corporate causes. On the other hand, some conservative economists of the Austrian school make related indictments of liberal bail-out penchants. This could be a powerful framework. All of these critiques have merit, and ideally they might converge as earlier indictments of elite and governmental abuse did during the Progressive and New Deal eras. But I have to return to whether the public will ever be given full information on the fatal magnitude of financialization, who was responsible, and how it failed and crashed in 2007-2009. So far, political and media discussion has been so minimal that the early 21st century American electorate has much less readily available information on what took place than did the electorates of those earlier reform eras. Towards this end, my initial emphasis in the new material included in the 2009 edition of Bad Money is on what techniques, practices and leverage the financial sector used between the mid-1980s and 2007 to metastasize early-stage financialization into an economic and governmental coup and, ultimately, a national disaster. Perhaps not surprisingly, I found that the principal building blocks that the sector used to enlarge itself from 10-12% of Gross National Product around 1980 to a mind-boggling 20.6% of Gross Domestic Product in 2004 involved essentially the same combination of credit-mongering, massive sector borrowing, highly leveraged speculation, reckless, greedy pioneering of new experimental vehicles and securities (derivatives and securitization) and mega-trillion-dollar abuse of the mortgage and housing markets that became infamous as hallmarks of the 2007-2009 disaster. During Alan Greenspan’s 1987-2006 tenure as Federal Reserve Chairman, financial bubble-blowing became a Washington art and total credit market debt in the U.S. quadrupled from $11 trillion to $46 trillion. To try to put 20-30 pages into a nutshell, the financial sector hyped consumer demand – from teen-ager credit cards to mortgages for the unqualified – to make credit into one of the nation’s biggest industries; nearly $15 trillion was borrowed over two decades to leverage de facto gambling at 20:1 and 30:1 ratios; banks, investment firms, mortgage lenders, insurers et al were all merged together to do almost anything they wanted; exotic securities and instruments that even investment chiefs couldn’t understand were marketed by the trillions. To achieve fat financial-sector profits, the housing and mortgage markets might as well have been merged with Las Vegas. The principal inventors, hustlers , borrowers and culprits were the nation’s 15-20 largest and best known financial institutions – including the ones that keep making headlines by demanding more bail-out money from Washington and giving huge bonuses. These same institutions got much of the early bail-out money and as of December 2008 they accounted for over half of the bad assets written off. The reason these needed so much money is that they government had let them merge, speculate, expand and experiment on dimensions beyond all logic. That is why the complicit politicians and regulators have to talk about $100 billion here and $1 trillion there even while they pretend that it’s all under control and that the run-amok financial sector remains sound. This is a much grander-scale disaster than anything that happened in 1929-33. Worse, it dwarfs the abuses of debt, finance and financialization that brought down previous leading world economic powers like Britain and Holland (back when New York was New Amsterdam). I will return to these little-mentioned precedents in another post this week. But for the moment, let me underscore: the average American knows little of the dimensions of the financial sector aggrandizement and misbehavior involved. Until this is remedied, there probably will not be enough informed, focused indignation to achieve far-reaching reform in the teeth of financial sector money and influence. Equivocation will triumph. This will not displease politicians and regulators leery of offending their contributors and backers. — Kevin Phillips’s 2008 book Bad Money: Reckless Finance. Failed Politics and the Global Crisis of American Capitalism has just been published in a new post-election edition by Viking Penguin. <><><><> The Great Transformationby Karl Polanyi read the complete BOOK Foreword by Robert M. MacIver Beacon Press -Boston <><><> <><> <> A Brief History of Neoliberalism by David Harvey Sun, 12/13/2009 – 12:07 — Emily David Harvey A Brief History of Neoliberalism Oxford University Press, 2005 247 pages $19.99 Reviewed by Kristine Kotecki The catch-term “globalization” appears across social science and humanities discourses, as well as in popular media. In A Brief History of Neoliberalism, David Harvey takes on globalization’s less referenced counterpart, “neoliberalism.” Based on an economic school of thought that prioritizes government non-intervention in the market, in trade and in private property, neoliberal policies involve government deregulation and the privatization of state sectors. While Harvey shows that neoliberal theories do not always line up with the economic and political practices instituted under its name, he nonetheless argues that the neoliberal ideol ogy that arises from these practices has become hegemonic and thus considered to be common sense. He then chal lenges assumptions that neoliberalism and democratic ideals complement each other by showing how the former’s poli cies are often actually at odds with concepts like “freedom” and “democracy.” To expand on his thesis that neoliberal ism and exploitative practices go hand in hand, Harvey invokes a Marxian critical tradition. Essentially “a politi cal project to re-establish the conditions for capital accu mulation and to restore the power of the economic elites,” neoliberalism widens class and social inequality. Harvey’s elite class—the CEOs and the largely successful commer cial entrepreneurs like Wal-Mart’s Walton family—benefit from the redistribution of wealth that occurs via neoliber alism, but little new wealth is created and economic gaps are thus widened. Harvey then challenges neoliberalism’s common-sense-ness by revealing its roots, historicizing its development and analyzing its various manifestations. A Brief History of Neoliberalism begins by demystifying neo liberalism, presenting it as being a constructed ideology that benefits the upper class. The middle chapters include analyses of specific instances of neoliberal policies and then instances of dissent against these policies. In the final chap ter, Harvey calls for alternative economic approaches. In the early chapters, Harvey investigates the connection between “freedom” and neoliberal economic policies. He draws on press releases to demonstrate a popular political assump tion that individual freedoms result from free market and trade policies. He then establishes the Mont Pelerin Society’s 1947 treatise as being a foundational neoliberal theoretical text, whereby beliefs in individual freedom were aligned with beliefs in Adam Smith’s anti-interventionist economics. Neoliberal theories began garnering more attention with the 1970s financial crisis, when rising unemployment and infla tion threatened both political and economic elites. During this time, US governmental and elite Chilean interests in fluenced a “test run” of neoliberal practices in Chile, which then led the way for the US and England to institute modi fied neoliberalisms in their own countries. This shift towards neoliberalism marked a move away from “embedded liberal” economic practices, the regulations that Harvey refers to as “Keynesian” practices instituted by Franklin D. Roosevelt’s New Deal. Harvey also compares US intervention in Chile to their contemporary presence in Iraq, pointing to the former as a foundational neoliberal experiment and the latter as an example of neoliberalism’s current hegemony. Harvey quotes Karl Polanyi, who warns that “freedom” can also mean the freedom to exploit or to abuse. He then moves into an investigation of how “freedom” developed into a common-sense value, although one not necessarily implying social justice. Basing his analysis on Antonio Gramsci’s work on consent-building, Harvey traces the development in the US of valuations of freedom. He critiques the student move ments at Berkeley and elsewhere in 1968 for prioritizing in dividual freedom over the social justice concerns of the tra ditional “Left” and argues that the ensuing identity politics and diversity rhetoric obscure the dangers of an idealized “freedom” that Polanyi warns about. Harvey also describes how the Republican Party built consent for its neoliberal practices with members of the evangelical Christian com munity by showing how Republican religious leader Jerry Falwell equated neoliberalism with moral righteousness. Harvey follows these foundational chapters with case stud ies showing the varying ways that neoliberal theories and neoliberal practices differ. His primary conclusion for each instance he describes is that financial gain for the economic elite ultimately takes priority over any ideologically ground ed economic policies. He also devotes an entire chapter to a case study on neoliberalism’s rise and fall in China, and points to this as an example of the other neoliberalisms’ po tential falls. Harvey draws comparisons between its fall in China and its impending fall in the US, and warns against the neoconservative nationalism that replaced neoliberalism in China. Yet Harvey finds the neoconservative alternative no more salient. He ultimately points to the necessity of building alternative social networks to fill in the gap left by the hegemony of neoliberal structuring and of the poten tial power of expanding the discourse of “freedom” and “in dividual rights” beyond its currently limited signification. A Brief History of Neoliberalism provides an easy to follow and well-supported introduction to a history that might other wise seem intimidating to non-economists. It also reinforces a more specifically economic reading of globalization, while maintaining this reading’s relevance for humanities schol ars by incorporating the consent-building role of cultural texts. Figures and graphs throughout the monograph clarify Harvey’s evidence, although their relevance would be dif ficult to understand without Harvey’s accompanying com mentary. In general, the argument is accessible, although Harvey sometimes assumes an audience familiar with eco nomics and international politics—he tosses around terms like “Keynesian” and names like “Deng Xiaoping” without immediately explaining them. Harvey’s introduction also proves somewhat misleading by detracting from the care ful historicization that he provides in the rest of the text. By equating neoliberalism with the powerful politicians involved in establishing its ideological hegemony—Ronald Reagan and Margaret Thatcher, especially—he oversimpli fies the many factors besides these figures that led to neolib eralism’s rise. His discussion of US imperialism also might have been more clearly historicized. He describes neoliberal ism as being the US’s version of imperialism, but does not follow up by historicizing either “imperialism” or how this US version compares and contrasts with other models, again covering over the complex histories behind these terms. Overall, A Brief History of Neoliberalism provides an impor tant introductory overview of “neoliberalism” for scholars interested in economic globalization, and especially in eco nomic interventions and the structural adjustment policies associated with financial institutions like the World Bank and IMF—adjustments whereby lenders can profit with out risk. In light of the recent “1968” conference at The University of Texas at Austin, Harvey’s critique of the in dividual freedom ideology underlying the 1968 student movements also invites further discussion. Finally, Harvey’s predictions about the fall of neoliberalism via a future fi nancial crisis and his emphasis on the importance of de veloping new models for “freedom” as an alternative to the rise of neoconservatism appear especially relevant in light of the current economic problems in much of the world. While the recent outcry against the US government’s inter vention in failing businesses reflects neoliberal ideology, the concurrent distrust of these businesses’ CEOs also points to a reaction against the social inequalities of this system. <><><> <><> <> >

Global economy; behind deadlock in US, a nervous world is on the edge

The IMF has three conditions for a mega recession – and with the American debt crisis, they are all close to being met

map of economic danger zone countriesView larger picture

Map of economic danger zone countries Photograph:
Four years after the start of the credit crunch that prompted the first truly global slump since the 1930s, financial markets were in a state of high anxiety last week that the deadlock in Washington over US debt threatened a second, and even more serious, leg to the crisis. With warnings from the head of the International Monetary Fund (IMF) ringing in their ears, Democrats and Republicans spent last week in a game of chicken with the highest possible stakes. The issue was whether the Obama administration would succeed in raising the US debt ceiling from its current $14.3 trillion, a common and relatively uncontroversial matter in the past that has taken on a hard political edge with the rise of the Tea Party movement. Democrats said the ceiling had to be raised to allow the government to function. Republicans said it was time for the world’s biggest economy (and biggest debtor) to live within its means. In the wings were the three biggest rating agencies, Standard & Poor’s (S&P), Moody’s and Fitch. Although most analysts remained optimistic that the politicians would step back from the brink, markets were convulsed by fears that America might lose its coveted triple-A rating and, in the worst case, even start to default on its debts. Christine Lagarde, newly appointed managing director of the IMF, said a default or downgrade “would be a very, very, very serious event, not just for the United States but for the global economy at large”. Until recently the French finance minister, she is acutely aware that Europe’s sovereign debt crisis is far from over and last week the euphoria that followed the new bailout for Greece proved short-lived. China, the third global economic powerhouse, is slowing as a result of an attempt by Beijing to combat rising inflation. This will have knock-on implications for commodity-rich countries that have provided the raw materials for China’s spectacular growth. The IMF believes there are three conditions for a mega recession: it should affect the core of the global economy, have its genesis in the financial sector and should involve a large number of countries. A budgetary crisis in the US would, according to analysts, fulfil all those criteria, rippling out to the rest of the world and producing a wave of fresh losses for banks. Although the IMF believes the global economy will grow this year, it thinks the risks are skewed to the downside and that potential problems lurk in every continent.

World’s financial health

UNITED STATES A slow-moving economy. Unemployment above 9%. A shattered housing market. Political gridlock. America is beset by problems and is rapidly running out of policy options should things become worse. With short-term interest rates at zero and a high budget deficit, the only means available to stimulate demand would be a third dose of quantitative easing. The one upside for the world’s biggest economy is that its blue-chip corporations – such as Amazon and Ford – are posting healthy profits. But the US remains the hub of the global economy and a crisis there would have far-reaching and immediate effects on both the developed and developing world. GERMANY Europe’s pivotal economy has seen a remarkable turnaround since plunging into recession in late 2008. Lost output has been recouped, with a pick-up in investment reinforcing strong growth in exports. Germany’s capital goods have powered China’s industrial revolution, while capital flows that in the bubble years were financing property speculation in Greece and Spain are now funding projects at home. But Germany is highly vulnerable to events beyond its borders, such as a euro crisis or a marked slowdown in China . JAPAN Industrial production was devastated by the tsunami in March, but the signs are of a classic V-shaped recession, with a plunge in output followed by a swift recovery. Retail sales have bounced back and are now higher than they were before the earthquake, but employment growth looks weak. While unlikely to be the source of global instability itself, Japan’s export dependency means it would be an early victim of contagion. FRANCE As a much more self-contained economy than Germany, France saw a much smaller fall in output during the crisis and has had a slower recovery. The focus on the southern European members of monetary union has meant little attention has been paid to France’s modest performance since the single currency was created. An overvalued property market is the most immediate cause for concern. MEXICO Rising oil prices have underpinned growth in Latin America’s second-biggest economy, which has taken a decade and a half to shrug off the impact of the mid-1990s currency crisis . With inflation low and its current account only just in deficit, Mexico is nNot currently high on the list of concerns for the financial markets. ARGENTINA There is little Argentina could not tell the rest of the world about sovereign debt crises. Since the banks closed their doors after the country defaulted and abandoned its IMF austerity programme in late 2001, Argentina has since enjoyed healthy growth, helped by its natural resources, but inflation is around 10%. Vulnerable to a collapse in commodity prices and a flight of investors out of countries perceived to be high risk. BRAZIL Policymakers have announced measures to prevent the Real appreciating against the dollar, fearful that an overvalued exchange rate will put paid to the country’s strong export-led growth. The equation is simple: if China does well, Brazil does well. INDIA The economy is booming and, social tensions aside, the government is optimistic. But interest rates have risen to 8% to choke off inflation that has jumped to 9.4%. Still largely an enclosed economy, shut off from the world, its stance restricts growth but means it poses few risks for other countries. RUSSIA An important commodities exporter, especially oil and gas, its collapse would only hurt the outside world if it restricted energy supplies. Seen as a big buyer of western goods, but in the future. Not a key global player yet. SOUTH AFRICA President Jacob Zuma has grand plans for Africa’s largest economy, but, like Russia, internal problems would only pose a risk to the rest of the world if it harmed mineral exports, which is unlikely. ETHIOPIA With inflation at 38% in June from a year earlier and millions of its people affected by drought, the country is already in financial trouble. Climate change is a bigger immediate problem than another recession in the west, though restrictions in food aid would be devastating. Poses no wider threat if it goes bust. SOUTH KOREA Supplies much of the world with mobile phone handsets and flat screen TVs. A recession is unlikely and if it happened, from a spike in the price of oil or food, most of which it imports, would affect local Asian economies more than the wider world. Not yet a Japan. EGYPT Rumours earlier this year that Egypt was about to default on its debts sent the World Bank scurrying to Cairo with sufficient bailout funds. A democratic crisis or a sharp rise in food costs, with most wheat imported from Russia, could spark a recession or default, but the sums are small enough for global agencies to handle. CHINA Less plugged into the world financial eco-system than the US, but serious problems in the world’s second-largest economy would nonetheless trigger global recession, such is the importance of its exports and its purchasing of western debt. It is not immune to problems in the west either. Beijing suffered a sharp fall in exports in 2009 and was forced to pump billions of yuan into the economy to keep it from falling over. GREECE Many economists believe Athens could come back to haunt the eurozone, and it will, with GDP contracting by 5.5% over the past year and industrial production down 10%. But for the moment its €109bn of extra loans and €20bn of debt forgiveness reduces the threat of default. CYPRUS Nominally independent of Greece but inextricably linked through its banks. Suffered a downgrade last week, heaping more pain on the eurozone. However, too small to affect deliberations in Brussels. PORTUGAL Has stayed under the radar since an €80bn bailout earlier this year. But a creaking property market and heavy private sector debts could see it cause more headaches. Government debts are small but local businesses and households have amassed loans worth around 240% of GDP. IRELAND The scale of its private debts – equal to 320% of GDP according to research by Morgan Stanley – combines with large government debts to create a timebomb. Only its flexible labour markets and a willingness to suffer painful pay cuts is keeping investors onsideand saving it from further crisis. SPAIN Prime minister José Zapatero is playing the austerity game to stall a bailout, but high public sector and private sector debts make Brussels nervous. Protests could escalate as people rebel against a 40% youth unemployment rate. Only the potential for higher growth next year and beyond is keeping investors at bay. ITALY Lack of growth and falling competitiveness have undermined finance minister Giulio Tremonti’s efforts to keep Rome out of the spotlight. Government debts of 119% of GDP don’t help.


National Government Debt Clocks & Savings Clocks

Who Did It, and Why?

See for yourself. Based on data from Bush’s White House. Why is the debt so huge? What really happened in the Reagan “revolution.” Fully documented, this is the only place you’ll find this story. Also see how American paid down an even greater debt—with both Republicans and Democrats helping out. New YouTube debt video of graph.

We Are in Danger! … but Not from the Debt
September 12, 2010.  The danger is from self-styled radical “conservatives” who ran up the debt during good times and want to pay if off in bad times. (Even more dangerous—a lot of Democrats are buying this too.) Of course, they all mean well. But the road to hell is still paved with good intentions. Close to 10 million Americans are out of work, and tea-party “patriots” want to cut spending—that means cutting jobs. ZFacts was warning about the deficit back when the economy was booming. That was the time to cut, … more


Accumulated Debt/Savings In the last 85 secs.
Borrowed by the General Fund – $ 14,438,297,762,873* $ 3,080,812
   Income: Income taxes.            Outgo: Defense 30%, Interest 19%, …
Saved by the Social Security Trust + $ 2,558,351,201,664 $ 270
   Income: FICA Payroll taxes.    Outgo: Benefits and disability
Saved by all Gov. Trust Funds + $ 4,175,031,152,107 $ -956,673
   Income: FICA & gas taxes.      Outgo: Medicare, highways, etc.

Debt Held by the Public (net debt) – $ 10,263,266,610,766 $ 4,037,485
* Gross National Debt        † Debt Held by the Public        Debt Clock Source Data

Notes on the Debt/Saving Clocks:  $4.5 trillion of the debt is owed to trust funds like the Social Security trust fund. Employees and Employers have have contributed $2.5 trillion and loaned it to the federal government’s general fund, because our income taxes cannot cover the cost of general government services — mostly the military.
Right now Social Security has $2.5 trillion in the “bank” — the most it’s ever had. It has been adjusted to keep in balance many times. The last time in 1983, it was almost completely out of money. There’s no reason it cannot be adjusted again, but it would be better not to let it run so low this time.
Most of the debt held by the public is owed to Americans, getting near half is owed to other countries. By far the largest part of the debt is due to Reagan and the Bushes (based on the treasury and pro-Reagan data).


US National Debt Graph:  What They Never Tell You

Black-out Proof the Pro-Democracy Protesters

Reagan got elected by telling the country the debt was “out of control.” Compared to national income, it was the lowest in 50 years. He probably didn’t know. But his supply-side economists did. They lied to America.
In 1981 Reagan’s supply siders wrote the tax cuts for the rich and his budgets. The Senate was Republican, and Reagan got the Southern Dems in the House to vote for him. All Republicans and a few Dems voted for the budget. The national debt had its worst year since 1945. The next year it got worse, and for 20 out of 20 years, the supply siders raised the debt relative to our ability to pay.
Is this just Republicans vs. Democrats? Not quite, see: voodoo economics.
It’s a terrible thing to scare America about its debt when we’re doing great and then send the debt through the roof for no reason. So the supply siders invented another lie — Congress did. As this graph shows, Congress changed the presidents’ budgets only a tiny bit and more down than up — by $16 billion over Reagan’s eight years. And over those eight years Reagan increased the debt by $1,860 billion. Blaming that on the tiny budget reduction by Congress is just political nonsense.More+Documentation.

This graph shows what happened since Oct. 1, 1981, the day Reagan started his first budget. First Reagan increased the debt by $1.9 Trillion (see for yourself). Then Bush brought that to $3.4 Trillion. Then all that started collected interest for the next 17 years, and with compounding that grew to $8.2 Trillion by Sept. 30, 2010. Clinton, Bush II and Obama are not to blame for that interest, and without it, Clinton would have paid off most of the $1 Trillion WWII debt that Reagan scared us with to get elected. And Bush II (and his supply siders) would have run up only $3.8 Trillion — not $6.1T, which is what actually happened under Bush II. (A clear proof of this with document links.)
Before the supply siders, Dems and Repubs brought the debt down relative to our income in 27 out of 35 years. The supply siders (with Reagan and the Bushes) raised it 20 out of 20 years. That’s no accident.
The Supply-Sider’s Hoax: Bush-I called it voodoo economics (but he got stuck with it). Their “theory” is that cutting taxes for the super rich will encourage them to work so much harder and make so much more money that they will pay more taxes, even though their tax rate went down. Well the voodoo didn’t work in 20 out of 20 years. And now they want to try it again. And they’ve scared America again about the debt. It’s easier now that they’ve run it through the roof.

E-Mail a short version of the (3 graphs) to your freinds. It’s easy. Check it out. This is the time your email will go furthest and have the most effect.

The Present Danger

The Great Depression lasted about 12 years with business conservatives scaring people about inflation (there was none) and about government borrowing (negligible until WWII). Now the supply siders are keeping us in the Great Recession the same way.
So What Worked? World War II. Uncle Sam (the U.S. government) borrowed the equivalent of 10.5 Trillion (see top graph) and bought war goods from private industry. Supply siders say this creates no jobs. But industry hired Rosey the Riveter and millions more. Unemployment ended with over-employment. The U.S. had its greatest economic boom ever — by far. It doubled output in six years.
Back then we had real Patriots. They loved Uncle Sam and they bought war bonds to help him borrow to hire people and win the war. Now people, who hate Uncle Sam almost as much as Al Qaeda, call themselves Patriots. They should call themselves Hateriots. But they have just been duped by the Wall Streeters who invented supply-side economics — and who have been telling us lies for 30 years.
America is about to vote the supply siders and hateriots into Congress.
They will give tax cuts to the rich, which is what got us into debt. And though the rich will spend a bit more on gardeners, nannies, and yachts, the country will have nothing to show for this extra debt.
It’s simply immoral to give more tax cuts to today’s rich so the next generation can pay for them. $12 trillion of this voodoo taxing of the future is enough.
But the real patriots of WWII, who borrowed and spent and gave 400,000 lives for their country, showed us the way.
Another lie: Spending now won’t work because it’s not for war. That’s what the Wall Streeters tell us so we’ll give them tax breaks instead. But does it help future generations more to build battle ships or to fix our bridges and dams? Does it help the economy more to put our men to work at home or send them to die in France? It’s hard to imagine a more ridiculous claim than the one that spending for war is more productive than spending on infrastructure and education for our future.
Supply-side “voodoo” economics is an immoral trick of thievery, designed for today’s rich at the expense of the future. It hoodwinks many by offering the middle class some of the booty — the rich get the big tax cuts, but hey, the middle class can have some too, also at the expense of the future. The result of falling for this, is an out-of-control debt that scares us into staying in recession and will soon be used to kill social security and Medicare — which the rich don’t need.
It’s time to put America back to work.
Let’s say thanks to our real patriots who showed us how.


U.S. Debt Ponzi Scheme, Years of the Modern

Politics / US PoliticsApr 18, 2011 – 02:23 AM By: James_Quinn Politics Diamond Rated - Best Financial Markets Analysis ArticleIs humanity forming ….. ……The Federal Reserve, under the “wise” supervision of former Ayn Rand disciple Alan Greenspan, progressively blew one bubble after another through its easy money policies. The Greenspan Put allowed the Wall Street vampire squids to suck the life out of the American economic system without fear of being harpooned for taking financial system endangering leveraged bets. The financial oligarchs used their influence, power and vast wealth to repeal Glass-Steagall, capture and buy off the rating agencies, neuter the SEC and other regulatory agencies and place their executives in high level government positions. The ruling wealthy elite again matched their peak take of the national income, just as they did in 1928. debt, fraud and lack of financial regulation that catalyzed the near collapse of the worldwide financial system in 2008, 63 years after the end of the last Fourth Turning, have not been purged from the system. In fact, those in power have decided more debt, accounting fraud and financial ignorance is the path to recovery for America. The issues which will be the driving forces during this Crisis are clear to anyone with their eyes open:

  • A National Debt the will approach $20 trillion by 2015 and has already surpassed 90% of GDP, the point of no return.
  • Annual deficits exceeding $1.5 trillion and equal to over 10% of GDP.
  • The unfunded promises made by slimy politicians over decades for Medicare, Medicaid and Social Security exceeds $100 trillion and can never be paid.
  • A military industrial complex that controls Congress, is fighting three wars, occupies hundreds of bases throughout the world and spends $1 trillion per year, seven times more than any other country in the world.
  • A financial industry debt peddling complex that has gained control over the government and media to such an extent they have been able to rape and pillage the American people for three decades, convincing regulatory agencies to allow them 40 to 1 leverage, crashing the financial system through a massive mortgage/derivatives fraudulent ponzi scheme, threatening the American people into giving them $4 trillion of taxpayer money, paying themselves hundreds of billions in bonuses for a job well done, and then insisting on lower taxes for their corporations and the rich oligarchs who inhabit these towers of evil in downtown Manhattan.
  • Wealthy elite who use their existing wealth to control Congress, the media and the financial debt peddling industry, abscond with 25% of the national income and control 43% of the financial wealth in the country. At the same time real wages of middle class Americans have been stagnant for 4 decades, real unemployment exceeds 20%, 45 million people need food stamps to make ends meet, and real inflation on the things middle class Americans need hovers around 10%. The gap between the Haves and Have Nots has never been greater.

  • The Federal Reserve has boxed itself into a corner and will be unable to extricate itself with its only weapon – the printing press. It has tripled the size of its balance sheet to $2.7 trillion, with at least half of the “assets” consisting of toxic worthless mortgages bought from their Wall Street masters. 0% interest rates for two and a half years, QE1 and QE2, and allowing banks to fraudulently report the value of their loans have failed to jumpstart the economy. Come June of 2011 they will be faced with a dilemma – PRINT or DIE. If they stop buying U.S. Treasury debt, interest rates will go up dramatically. If they keep printing to buy U.S. Treasury debt, the dollar will continue to fall and inflation will accelerate from its already high level.
  • The biggest wildcard among the Fourth Turning catalysts is Peak Oil. The modern industrial world is completely dependent upon cheap accessible oil. Globalization, consumerism, suburban sprawl, food production and distribution, and all means of transportation are dependent upon cheap abundant oil. Peak world oil production has occurred. Demand will outstrip supply going forward at an ever increasing rate. Various levels of chaos will ensue as the realization of this fact becomes evident to everyone.
  • The peak oil scenario will mix with the toxic brew of religion. The centuries old war between Christianity and Islam has been gaining strength over the last three decades. The revolutions spreading across the Middle East will not die down. They will intensify and create havoc for the existing despotic regimes. The new regimes will not be friendly towards the U.S. The combination of peak oil, with the fact that 56% of the world’s oil reserves are controlled by Muslim countries in the Middle East provides an unsettling backdrop for the U.S., which controls less than 2% of the world’s oil reserves.

  • The technological complexity and interconnectedness of people across the world is a danger and a possible boon to civilization. Our entire world is dependent upon computers and networks to run our infrastructure, defense, commerce, and everyday lives. Armies, naval ships, and massed confrontation will be made obsolete by cyber warfare. Computer hackers will be able to do more damage to a country in minutes than armies could do in years of traditional warfare. The trillions the US spends on aircraft carriers, fighter jets and tanks will be wasted. The positive side of technology has been realized in its ability to organize people to fight oppression and government propaganda. Likeminded people have been able to use technology to seek and reveal the truth.

The initial stage of this Fourth Turning has run its course. The catalyst was easy to recognize. The issues that confront the nation over the next twenty years are clear. What is completely unclear to me is how our fractured society achieves a regeneracy – a new counter entropy that reunifies and reenergizes civic life. The regeneracy usually occurs one to five years after the Crisis era begins. This means that the country would need to reunify and begin to confront our challenges by 2013. Regeneracy began with the Declaration of Independence during the American Revolution. Regeneracy began with Abraham Lincoln demanding the enlistment of 500,000 men after the Battle of Bull Run. Regeneracy began with FDR’s New Deal programs in 1933 during the Great Depression. What will begin the Regeneracy this time? Something Wicked This Way Comes  “Decisive events will occur – events so vast, powerful, and unique that they lie beyond today’s wildest hypothesis. These events will inspire great documents and speeches, visions of a new political order being framed. People will discover a hitherto unimagined capacity to fight and die, and to let their children fight and die, for a communal cause. The Spirit of America will return, because there will be no other choice. Thus will Americans reenact the great ancient myth of the ekpyrosis. Thus will we achieve our next rendezvous with destiny.” – Strauss & Howe – The Fourth Turning storyline promulgated by the mainstream linear thinking opinion leaders is the economy is recovering, the banking system is sound, the stock market is booming, buying a house is a great investment, inflation is below 2%,  jobs are being created, and consumers have regained their confidence and spending power. This message is hammered home on a daily basis by the corporate run mainstream media. It is patently false and the thinking members of the American public know it. The economic condition of the country is rapidly deteriorating. While politicians posture and lie to the citizens, the fissures in our financial system grow wider. As of today, regeneracy and unification behind one common national purpose seems light years away. Strauss & Howe speculated in 1997 about potential events that could spur events during the next Fourth Turning. One of their possible scenarios looms in the near future:

  • An impasse over the federal budget reaches a stalemate. The president and Congress both refuse to back down, triggering a near-total government shutdown. The president declares emergency powers. Congress rescinds his authority. Dollar and bond prices plummet. The president threatens to stop Social Security checks. Congress refuses to raise the debt ceiling. Default looms. Wall Street panics. 

The event necessary to cause a regeneracy in this country will need to be on an epic scale. Based upon a review of the foreseeable issues confronting our society it is clear to me that a worse financial implosion will strike before the 2012 presidential election. It may be triggered by a debt ceiling confrontation, the ending of QE2, a panic out of the USD, hyperinflation, a surge in oil prices, or some combination of these possibilities. The ensuing collapse of the stock and bond markets will remove the last vestiges of trust in the existing financial system and the government bureaucrats who have taken taxpayer dollars and funneled them to these Wall Street oligarchs. The economic chaos will likely lead to a Republican landslide in the 2012 election. A Boomer Prophet with a reputation for fixing financial disasters (aka Mitt Romney) would be given a mandate to fix the economic system. All generations will realize that generational promises made cannot be fulfilled. People of a libertarian mindset, like me, will not be happy with the turn of events. In a chaotic scenario, the Federal government is likely to assume even more power than they have today. The American people will be fearful and angry. If the financial criminals on Wall Street are brought to justice, the chances of a unified populace will increase. A drop in everyone’s standard of living would be acceptable, as long as the rich shared equally in the burden. If the super wealthy oligarchs retain their power, a fracturing along class lines would become a distinct possibility. Social unrest, riots, and violent protests along the lines of the current situation in the Middle East could develop. Then a question of military use against the civilian population becomes paramount to what would happen next. Amidst the financial chaos will be the ever present peak oil issue. The increasingly high prices and imminent shortages of supply will exacerbate the pain for the American people. The current War on Terror is really a cover for keeping American troops in the Middle East as a forward vanguard to keep the oil flowing. The U.S. consumes 7 billion barrels of oil per year and will use all means necessary to keep it flowing. With a Boomer Prophet leader invoking American manifest destiny, it is likely we will intervene to protect Saudi Arabia, Iraq, and Kuwait in the name of democracy. A terrorist incident in the U.S. would provide convenient cover for further intervention in the Middle East. As with most wars the unintended consequences will overwhelm the best laid plans of politicians and generals. Further U.S. intervention into an already exploding Middle East will likely spur a larger conflict between Islam and Christianity. Ground zero could shift to Europe as millions of Muslims have settled there and will not react positively to western powers siphoning oil from Islamic countries in the name of Christianity. History has taught us that Fourth Turnings end in all out war. The outcome of wars is always in doubt.  “History offers more sobering warnings: Armed confrontation usually occurs around the climax of Crisis. If there is confrontation, it is likely to lead to war. This could be any kind of war – class war, sectional war, war against global anarchists or terrorists, or superpower war. If there is war, it is likely to culminate in total war, fought until the losing side has been rendered nil – its will broken, territory taken, and leaders captured. And if there is total war, it is likely that the most destructive weapons available will be deployed.” – Strauss & Howe – The Fourth Turning “Each of the last three American Crises produced moments of extreme danger: In the Revolution, the very birth of the republic hung by a thread in more than one battle. In the Civil War, the union barely survived a four-year slaughter that in its own time was reagrded as the most lethal war in history. In World War II, the nation destroyed an enemy of democracy that for a time was winning; had the enemy won, America might have itself been destroyed. In all likelihood, the next Crisis will present the nation with a threat and a consequence on a similar scale.” – Strauss and Howe – The Fourth Turning It may be 150 years since Walt Whitman foresaw the imminent march of armies, visions of unborn deeds, and a sweeping away of the old order, but history has brought us right back to where we started. Immense challenges and threats await our nation. Will we face them with the courage and fortitude of our forefathers? Or will we shrink from our responsibility to future unborn generations? The drumbeat of history grows louder. Our rendezvous with destiny beckons. Join me at to discuss truth and the future of our country. By James Quinn James Quinn is a senior director of strategic planning for a major university. James has held financial positions with a retailer, homebuilder and university in his 22-year career. Those positions included treasurer, controller, and head of strategic planning. He is married with three boys and is writing these articles because he cares about their future. He earned a BS in accounting from Drexel University and an MBA from Villanova University. He is a certified public accountant and a certified cash manager. These articles reflect the personal views of James Quinn. They do not necessarily represent the views of his employer, and are not sponsored or endorsed by his employer. © 2011 Copyright James Quinn – All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

James Quinn Archive


Ponzi Scheme: The Federal Reserve Bought Approximately 80 Percent Of U.S. Treasury Securities Issued In 2009

The Federal Reserve Bought Approximately 80 Percent Of U.S. Treasury Securities Issued In 2009No, the headline is not a misprint. According to CNBC, the Federal Reserve bought approximately 80 percent of the U.S. Treasury securities issued in 2009.  In other words, the Federal Reserve has been gobbling up the massive tsunami of U.S. government debt that has been created over the past year.  This is absolutely unprecedented, and it is yet another clear indication that the U.S. financial system is on the verge of a major economic collapse. You see, the Federal Reserve is not part of the federal government.  In fact, the Federal Reserve is about as “federal” as Federal Express is. The Federal Reserve is a private bank owned and operated for profit by a very powerful group of elite international bankers. It is this private central bank that controls the money supply and the issuance of currency in the United States. When the U.S. government needs to borrow more money (which happens a lot) they go over to the Federal Reserve and they ask them for some more green pieces of paper called Federal Reserve Notes. The Federal Reserve swaps these green pieces of paper for pink pieces of paper called U.S. Treasury bonds. Now normally the Federal Reserve takes these U.S. Treasury bonds and they sell them all to other buyers. But in 2009 there were not nearly enough buyers. So in 2009 the Federal Reserve sold itself about 80 percent of this debt. This is even being admitted on CNBC.  The video below is from January 8th, and at the 1:45 mark CNBC anchor Erin Burnett drops this bombshell along with a comment about how it is a Ponzi scheme…. So why is it a Ponzi scheme? Well, basically the Federal Reserve is creating money out of nothing, loaning it to the U.S. government and then collecting interest on the loan. That is nice work if you can get it. But also, this intervention by the Federal Reserve is keeping interest rates on U.S. Treasury bonds artificially low. In a true “free market” situation, the interest rates on U.S. treasuries would rise to reflect the rapidly declining economic situation in this nation. Due to the massive explosion in the size of the U.S. government debt and due to the very weak U.S. economy, interest rates on U.S. treasuries should have shot through the roof by now.  Rational investors would normally require an increased return for the increased risk that U.S. treasuries now represent. But that is not happening. Instead when there are no buyers for U.S. treasuries at current interest rates, the Federal Reserve just steps in and buys up all the excess bonds that need to be purchased. But in a normal free market situation, interest rates would rise on U.S. treasuries until they would be attractive enough for investors to buy them all. However, that would create some huge problems. If the U.S. government was not able to borrow all of the money it wanted to at artificially low interest rates, the results would be absolutely disastrous. Much higher interest rates on U.S. government debt would cause the U.S. federal budget deficit to absolutely explode.  Interest rates on everything else throughout the economy would also skyrocket.  As mortgage rates climbed dramatically, the housing market would completely collapse.  The U.S. economy would be totally in flames. But for now (and this situation cannot last forever) the Federal Reserve is keeping interest rates artificially low by lending the U.S. government as much money as it wants at extremely low interest rates.  Of course the Federal Reserve is making an insane amount of money out of the arrangement, so it is working out quite nicely for them as well. But by essentially “printing” a flood of cheap money for the U.S. government to borrow, the Federal Reserve is ultimately going to end up destroying the value of the U.S. dollar. Every fiat currency throughout history has always ended up losing its value, and that is exactly what is going to happen this time too.  The only way to protect the buying power of your money is to put it into something that will hold value (like gold or silver).  Your dollars are never going to be worth more than they are today. The actions taken by the U.S. government and the Federal Reserve have guaranteed the demise of the U.S. dollar.  At this point it is unavoidable.  It is only a matter of how soon it will happen and how bad it will be as things play out. You better get ready.

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Economic Armageddon: Gretchen Morgensen on How Wall Street Broke the Economy

NYT business reporter Gretchen Morgensen discusses her new book and the corruption of the mortgage lending industry.
July 26, 2011  |
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Gretchen Morgensen was awarded the Pulitzer Prize in 2002 for her “trenchant and incisive” coverage of Wall Street and has been on that beat ever since. Her new book, Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon (written with Joshua Rosner), lays out the toxic interplay between Washington, Wall Street and corrupt mortgage lenders that led to the meltdown. It examines how the watchdogs who were supposed to protect us from financial harm were actually complicit in creating the crisis. Gretchen Morgenson is a business reporter and columnist at the New York Times, where she also serves as assistant business and financial editor. Prior to joining the Times in 1998, she worked as a broker at Dean Witter in the 1980s, and as a reporter atForbes, Worth, and Money magazines. Terrence McNally: What do you consider your path to the work you do today? Gretchen Morgensen: I worked on Wall Street for three years, not a long time, but I did get a really good sense of how that place operates. People on Wall Street are extremely smart, aggressive and creative. They are also the intermediary for a lot of companies trying to raise capital, and can be a real facilitator for good. But in this crisis, that got started with a vengeance in the early ‘90s and built up to where we were in 2008 when many of these firms had to be taken over, Wall Street has had more of a pernicious impact. Some of their creativity has been used not to benefit investors, not to benefit Main Street, but simply to benefit themselves. TM: Can you briefly lay out how Wall Street, Washington and the mortgage lenders danced together? GM: One of the crucial parties that we focus on quite a bit in the book is Fannie Mae, the mortgage finance giant created in 1938 by the government to help facilitate lending to borrowers in the midst of the Depression. It was a noble idea, a noble cause. The company then morphed into a private company with shareholders to satisfy. We peg the beginning of the process that led to this crisis to Fannie Mae’s becoming a political animal in the early 1990’s. After the S&L crisis, Congress set about to try to write some legislation that would protect the taxpayer from losses arising at Fannie Mae and [its partner] Freddie Mac. And that process got completely perverted by James Johnson, the chief executive of the company from 1991 to 1998. Mr. Johnson is a powerhouse in Washington. Even now he is head of the compensation committee at Goldman Sachs’ board. He understood that he had to protect the company’s very lucrative, very rich government ties at all costs. That meant that he had to neutralize his regulator. He had to buy off Congress. He had to form “grassroots” organizations across the country promoting home ownership that Fannie Mae could participate in as a do-gooder. It was all wrapped in the American flag of home ownership, but the subtext was to protect the company, protect top executives’ paychecks, and protect at all costs the government tie that was so lucrative. TM: You write that Johnson came up with the game plan for how to neutralize and capture your financial regulator, which we’ve seen spread everywhere since then. GM: Going into this crisis, we had only two companies that were too-big-to-fail and had the implicit — which then became explicit — backing of the U.S. taxpayer: Fannie Mae and Freddie Mac. Now, after the events of 2008, we have many more too-big-to-fail institutions — Citi Group, Bank of America, JP Morgan Chase, Goldman Sachs, all those banks that were rescued by the taxpayer in 2008 we now know are too big to fail. I think that this wrapping oneself in the American flag of home ownership, co-opting Congress, co-opting your regulator — the strategy that Fannie Mae brought to a very high level — was watched and mimicked by many of these institutions. TMListeners to right-wing talk radio might believe Fannie Mae and Freddie Mac are the total cause of the crisis. Clearly, that’s not true. But, according to your book, they played a bigger role than I’d assumed. Could you comment on that and give us the dollar figure of how much we’re in hock on those two? I think that’s a number that might scare people. GM: That number is $150 billion at the moment. Both were taken into conservatorship by the government over Labor Day weekend in 2008, becoming wards of the taxpayer. There is supposed to be discussion this year about what to do with Fannie Mae and Freddie Mac, but it’s a political third rail, and I see no chance of having an honest discussion about housing policy. TM: After the S&L crisis, we were going to fix Fannie and Freddie, but things only got worse. When you ask the fox how to clean the henhouse… GM: You make a good point about who’s to blame. Blame falls on both sides of the aisle in Congress. It’s not an either-or, Democratic or Republican issue, not a liberal or conservative issue — there’s enough blame to go around. Fannie Mae and Freddie Mac were primary movers in the push for home ownership. And there’s nothing wrong with that, owning your own home is a deep-seated wish in the American psyche. The problem was in the execution. You don’t lure people in who are unsophisticated, who don’t understand what they’re doing. You certainly don’t offer them the kinds of poisonous loans that were targeted to minority borrowers; low-income borrowers; first-time home buyers. TMTargeted by Fannie and Freddie or targeted by predatory mortgage lenders? GM: This is where Fannie and Freddie step aside and the mortgage lenders step into the breach. Countrywide was Fannie Mae’s biggest provider of loans. A lot of the losses that taxpayers are footing at this moment came very late in the game, in 2005, 2006, mortgages that were really ugly and really poisonous. Fannie Mae led the way, pushing for home ownership, degrading underwriting standards, pushing for more relaxed lending standards. Then the predatory lenders take the ball and run with it because there’s so much money to be made. TM: And because of Fannie Mae’s initiative, so little risk. GM: So little risk. Fannie Mae was either guaranteeing the loans that Countrywide and other lenders were making or taking them into their own portfolios. The taxpayer was essentially taking on the risk. There is an unholy alliance between Fannie Mae, a government sponsored enterprise, and predatory lenders and Wall Street. Wall Street saw Fannie Mae creating pools of loans that they would sell to others to sell to investors. Wall Street took that ball and ran with it, issuing trillions of dollars in mortgage-backed securities bursting with predatory loans. TM: And they knew that. GM: And they knew that. TM: In 2004, a neighbor of mine, a math PhD at UCLA, asked me if I was paying attention to the mortgage crisis. I said what mortgage crisis? He told me he was reading some blogs and that hell was coming around the corner. At that point, he didn’t mention the “sub-prime” credit default swaps or securitization. He was simply talking about zero interest loans with balloon payments in five years. People might be able to afford what they just got into, but in five years – or sooner — we’re going to have a crisis. So without even talking about sub-prime, these gimmicky loans were going to blow up. Am I correct, that it’s like phase one, then phase two? GM: Absolutely correct and that guy is very prescient. Don’t forget that housing prices were going higher and higher, and many people were shut out of housing by the high prices. So lenders came up with these cockamamie mortgages where you didn’t have to put any money down; or where they would give you the second loan on top of the first; or where you would choose what you would pay each month in interest and principal, and maybe not pay down the principal at all. So you’re perverting the very idea of paying down a debt over time in order to have an asset at the end of the day. TMThe original vision basically works from the Depression until it gets perverted in the 2000s: a home enabled the middle-class to save and obtain an asset to pass on. GM: Almost a forced savings account. You pay down your mortgage, and at the end you have a mortgage-burning party, and you own the asset free and clear. We turned that on its head by creating home equity lines of credit, where you can take the equity out of the home. And now that home prices have fallen, many people are underwater, owing more than their home is worth. TM: In that period even people who could afford the original loan on their house, began to refinance. I didn’t even own a home, and I would get phone calls and emails regularly asking me if I wanted to refi. GM: People would extract equity from their home on a regular basis. A lot of people want to blame those borrowers, because they were taking vacations or putting in Viking stoves, but don’t forget, incomes were stagnant throughout that entire period. People were forced to have two workers in the family, with college education costs rising, health-care costs rising, and incomes stagnant. This became a way for people to live by extracting equity from their homes. TM: When I look at where we are now with the slow pace of the recovery, I can see missteps in Washington and so on, but it seems to me, weren’t we just forestalling the inevitable? A lot of the jobs that aren’t coming back were never going to come back, but we were able to forestall the reckoning because people lived on their credit cards and on the equity in their homes. And as you said, they needed that to live a certain middle-class lifestyle — to have the new DVD player, to have the new big screen, the RV and so on. My sense is, that when you subtract credit card debt and refis — we really don’t have the wealth we thought we had. A lot of our middle class aren’t going to get their jobs back because they don’t really exist. GM: Well, of course the housing industrial complex, which is the sort of realtors, the home builders, the Wall Street financiers, there is a big part of the economy that housing touches in many ways – appliances that you buy when you build a new home, etc. A lot of those jobs aren’t coming back because housing is really still to this day very depressed, so yes, there is a huge problem with unemployment that is directly related to this boom which went far farther than it should have been allowed to go. TMBut I’m saying even jobs that aren’t directly related. Just that there was wealth floating around the country that didn’t really exist. GM: Correct. It was phony, it was paper wealth. TM: So you’re not going to go back to the restaurant as often as you used to, and you’re not going to buy the next gadget the way you bought the last one, because that money you didn’t really have was based on your credit card which was somehow tied to your fantasy that your house was always going to go up in value. GM: And that you could extract money from the house, that the bank was willing to give you a home equity loan of credit because it was rising in value. Yes, those days are over. Maybe if we can learn to be a society that lives within our means, that would be a silver lining, a positive outcome. We don’t live within our means at a government level and that has got to stop. I hope we can have an honest dialogue in Washington about debt. We must learn to live within our means. I think that Main Street has begun to learn that lesson because they’ve been forced to, because they have not been given the bailouts that the major banks got. TMPart of why there’s a recovery on Wall Street and not on Main Street is that Wall Street is investing now in the same mortgage-backed securities that they dumped or where bailed out on, right? GM: Very, very likely and buying them at pennies on the dollar when they issued them at 100 cents on the dollar. Picking up the pieces in a very profitable way. TMBut Main Street is holding onto its money. If the consumer doesn’t come back, the future will look very different than the past. GM: Absolutely. If people think they’re going back to the past, they’re really crazy. Don’t forget we’re also punishing savers right now, because you cannot get a return of any kind in any kind of a safe instrument. A savings account will give you nothing; a Treasury bill will give you nothing. So the very people that were prudent are being punished now. There’s so many paradoxes in this story that really need to be examined. TMOn Fannie and Freddie, we’re out $150 billion. What’s the state of the bailout? Where do we stand including all the interest-free loans? GM: You know, that’s a very difficult question to answer. You will hear Treasury officials come out periodically and say we made money on the bailout, or Morgensen, or AIG. Don’t believe any of it. First of all, we haven’t made a profit until Fannie and Freddie are no longer into us for $150 billion dollars. The final reckoning has not been made, and there are many hidden costs that we cannot attribute yet to this episode. One of the biggest hidden costs is the assumption that we will bail these people out again if they get in trouble. TM: So you’re saying it isn’t simply a question of money out-money in. We changed the rules of the game, and they know the new rules are that we’ll bail them out again. GM: And next time around, what is the cost going to be? TM: There’s a ticking time bomb out there… GM: Our affirmation to them that we will bail them out has a cost. TM: Another cost is that they borrow money cheaper than community banks do. So again the savers get screwed, the banks who were prudent get screwed. GM: Exactly, another paradox of this very sad story. TM: Both political parties are funded by the same big interests, the finance industry being perhaps the biggest. Finance used to be 7 percent of the economy, now it 20 percent. This is a distortion. Because our political campaigns are so much more expensive than other countries, the people with the money ultimately own both parties. Republicans have an advantage. Their principles are in line with their funders, so they go for touchdowns. Democrats claim to have some progressive principles, but when they conflict with their funders, they don’t go for touchdowns, they go for maybe the 20 yard line. Medicare for all was off the table, they opened with a public option, and gave that up. One side goes full out while the other constantly negotiates with themselves. I don’t think the citizens stand much of a chance. GM: I agree 100 percent. The moneyed interests are so powerful in Washington nowadays. I don’t have the historical perspective, because I’m not a Washington reporter, but it does seem to me to be power of moneyed interests in Washington is much more pernicious than it was in the past. After the banks put us into the drink, required bailouts in the hundreds of billions of dollars; ruined lives; forced people from their homes; caused huge job losses; so much pain. The fact that they are lobbying Washington with even more power and arrogance today tells you everything you need to know. Wouldn’t you be embarrassed after you’ve almost wrecked the world economy? But no. The banks are bigger than ever in Washington, swaggering around town asking for what they want — and getting a lot of it. TM: We read about Greece, Spain, Portugal, Ireland, countries in Europe that are in a lot of trouble. How much of that is because they bet with us? GM: We absolutely exported many of these toxic loans to overseas institutions. There is no doubt about that. Two German banks failed because of these. One of America’s most unfortunate exports, toxic mortgage securities. But I think there is a sense overseas of living beyond your means. Greece and some of these countries don’t have the tax revenues to pay for the services they provide. Something’s got to give. TM: I think the biggest problem we’re facing is inequity. The grievous inequity now between the super rich and the corporations on one side and nearly everyone else on the other, means we won’t have the education we need; we won’t have the healthcare we need; our kids will have less; we will not have the country that we imagine we have.GM: Your last point is important, that we don’t have the country we imagined we have. America was supposed to be just; it was supposed to be equal. It has been confirmed by this crisis that there are two sets of rules: one for the big and powerful politically interconnected institutions and one for the rest of us. And as long as that perception is allowed to go on, I think it is extremely pernicious. One of the elements that I think hurts and troubles people immeasurably is that, after this crisis, trillions of dollars lost; jobs lost; homes lost; so much pain — how many people have gone to jail? For being involved in these losses? There’s one criminal prosecution of a mortgage executive at Taylor, Bean and Whittaker. The others are civil cases. That really fuels and feeds this notion of two sets of rules, which is not the America that we know and love.

Interviewer Terrence McNally hosts Free Forum on KPFK 90.7FM, Los Angeles and WBA I99.5FM, New York (streaming at and for podcasts of all interviews and more.

> see especially below: …the U.S. system as socialism for the rich and free enterprise for the poor

and ….

Causes of Debt Crisis?

Bush Tax Policies (ie for super rich, corporations, etc)…

Bush Wars … (i.e. for military industrial complex, contractors, etc) ….

and Bush Drug Plan … (i.e for big corporations, insurers,  etc, …)

IOW, ….. beating around the Bush …


Global economy; behind deadlock in US, a nervous world is on the edge

The IMF has three conditions for a mega recession – and with the American debt crisis, they are all close to being met

map of economic danger zone countriesView larger picture

Map of economic danger zone countries Photograph:
Four years after the start of the credit crunch that prompted the first truly global slump since the 1930s, financial markets were in a state of high anxiety last week that the deadlock in Washington over US debt threatened a second, and even more serious, leg to the crisis. With warnings from the head of the International Monetary Fund (IMF) ringing in their ears, Democrats and Republicans spent last week in a game of chicken with the highest possible stakes. The issue was whether the Obama administration would succeed in raising the US debt ceiling from its current $14.3 trillion, a common and relatively uncontroversial matter in the past that has taken on a hard political edge with the rise of the Tea Party movement. Democrats said the ceiling had to be raised to allow the government to function. Republicans said it was time for the world’s biggest economy (and biggest debtor) to live within its means. In the wings were the three biggest rating agencies, Standard & Poor’s (S&P), Moody’s and Fitch. Although most analysts remained optimistic that the politicians would step back from the brink, markets were convulsed by fears that America might lose its coveted triple-A rating and, in the worst case, even start to default on its debts. Christine Lagarde, newly appointed managing director of the IMF, said a default or downgrade “would be a very, very, very serious event, not just for the United States but for the global economy at large”. Until recently the French finance minister, she is acutely aware that Europe’s sovereign debt crisis is far from over and last week the euphoria that followed the new bailout for Greece proved short-lived. China, the third global economic powerhouse, is slowing as a result of an attempt by Beijing to combat rising inflation. This will have knock-on implications for commodity-rich countries that have provided the raw materials for China’s spectacular growth. The IMF believes there are three conditions for a mega recession: it should affect the core of the global economy, have its genesis in the financial sector and should involve a large number of countries. A budgetary crisis in the US would, according to analysts, fulfil all those criteria, rippling out to the rest of the world and producing a wave of fresh losses for banks. Although the IMF believes the global economy will grow this year, it thinks the risks are skewed to the downside and that potential problems lurk in every continent.

World’s financial health

UNITED STATES A slow-moving economy. Unemployment above 9%. A shattered housing market. Political gridlock. America is beset by problems and is rapidly running out of policy options should things become worse. With short-term interest rates at zero and a high budget deficit, the only means available to stimulate demand would be a third dose of quantitative easing. The one upside for the world’s biggest economy is that its blue-chip corporations – such as Amazon and Ford – are posting healthy profits. But the US remains the hub of the global economy and a crisis there would have far-reaching and immediate effects on both the developed and developing world. GERMANY Europe’s pivotal economy has seen a remarkable turnaround since plunging into recession in late 2008. Lost output has been recouped, with a pick-up in investment reinforcing strong growth in exports. Germany’s capital goods have powered China’s industrial revolution, while capital flows that in the bubble years were financing property speculation in Greece and Spain are now funding projects at home. But Germany is highly vulnerable to events beyond its borders, such as a euro crisis or a marked slowdown in China . JAPAN Industrial production was devastated by the tsunami in March, but the signs are of a classic V-shaped recession, with a plunge in output followed by a swift recovery. Retail sales have bounced back and are now higher than they were before the earthquake, but employment growth looks weak. While unlikely to be the source of global instability itself, Japan’s export dependency means it would be an early victim of contagion. FRANCE As a much more self-contained economy than Germany, France saw a much smaller fall in output during the crisis and has had a slower recovery. The focus on the southern European members of monetary union has meant little attention has been paid to France’s modest performance since the single currency was created. An overvalued property market is the most immediate cause for concern. MEXICO Rising oil prices have underpinned growth in Latin America’s second-biggest economy, which has taken a decade and a half to shrug off the impact of the mid-1990s currency crisis . With inflation low and its current account only just in deficit, Mexico is nNot currently high on the list of concerns for the financial markets. ARGENTINA There is little Argentina could not tell the rest of the world about sovereign debt crises. Since the banks closed their doors after the country defaulted and abandoned its IMF austerity programme in late 2001, Argentina has since enjoyed healthy growth, helped by its natural resources, but inflation is around 10%. Vulnerable to a collapse in commodity prices and a flight of investors out of countries perceived to be high risk. BRAZIL Policymakers have announced measures to prevent the Real appreciating against the dollar, fearful that an overvalued exchange rate will put paid to the country’s strong export-led growth. The equation is simple: if China does well, Brazil does well. INDIA The economy is booming and, social tensions aside, the government is optimistic. But interest rates have risen to 8% to choke off inflation that has jumped to 9.4%. Still largely an enclosed economy, shut off from the world, its stance restricts growth but means it poses few risks for other countries. RUSSIA An important commodities exporter, especially oil and gas, its collapse would only hurt the outside world if it restricted energy supplies. Seen as a big buyer of western goods, but in the future. Not a key global player yet. SOUTH AFRICA President Jacob Zuma has grand plans for Africa’s largest economy, but, like Russia, internal problems would only pose a risk to the rest of the world if it harmed mineral exports, which is unlikely. ETHIOPIA With inflation at 38% in June from a year earlier and millions of its people affected by drought, the country is already in financial trouble. Climate change is a bigger immediate problem than another recession in the west, though restrictions in food aid would be devastating. Poses no wider threat if it goes bust. SOUTH KOREA Supplies much of the world with mobile phone handsets and flat screen TVs. A recession is unlikely and if it happened, from a spike in the price of oil or food, most of which it imports, would affect local Asian economies more than the wider world. Not yet a Japan. EGYPT Rumours earlier this year that Egypt was about to default on its debts sent the World Bank scurrying to Cairo with sufficient bailout funds. A democratic crisis or a sharp rise in food costs, with most wheat imported from Russia, could spark a recession or default, but the sums are small enough for global agencies to handle. CHINA Less plugged into the world financial eco-system than the US, but serious problems in the world’s second-largest economy would nonetheless trigger global recession, such is the importance of its exports and its purchasing of western debt. It is not immune to problems in the west either. Beijing suffered a sharp fall in exports in 2009 and was forced to pump billions of yuan into the economy to keep it from falling over. GREECE Many economists believe Athens could come back to haunt the eurozone, and it will, with GDP contracting by 5.5% over the past year and industrial production down 10%. But for the moment its €109bn of extra loans and €20bn of debt forgiveness reduces the threat of default. CYPRUS Nominally independent of Greece but inextricably linked through its banks. Suffered a downgrade last week, heaping more pain on the eurozone. However, too small to affect deliberations in Brussels. PORTUGAL Has stayed under the radar since an €80bn bailout earlier this year. But a creaking property market and heavy private sector debts could see it cause more headaches. Government debts are small but local businesses and households have amassed loans worth around 240% of GDP. IRELAND The scale of its private debts – equal to 320% of GDP according to research by Morgan Stanley – combines with large government debts to create a timebomb. Only its flexible labour markets and a willingness to suffer painful pay cuts is keeping investors onsideand saving it from further crisis. SPAIN Prime minister José Zapatero is playing the austerity game to stall a bailout, but high public sector and private sector debts make Brussels nervous. Protests could escalate as people rebel against a 40% youth unemployment rate. Only the potential for higher growth next year and beyond is keeping investors at bay. ITALY Lack of growth and falling competitiveness have undermined finance minister Giulio Tremonti’s efforts to keep Rome out of the spotlight. Government debts of 119% of GDP don’t help.


Investors: The $1 Billion Armageddon Trade Placed Against The United States

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Jack Barnes:  Someone dropped a bomb on the bond market Thursday – a $1 billion Armageddon trade betting the United States will lose its AAA credit rating.

In one moment, an invisible trader placed a single trade that moved the most liquid debt market in the world. The massive trade wasn’t placed in bonds themselves; it was placed in the futures market. The trade was for block trades of 5,370 10-year Treasury futures executed at 124-03 and 3,100 Treasury bond futures executed at 125-01. The value of the trade was about $850 million dollars. In simple terms, if that was a direct bond buy, no one would be talking about it. However, with the use of futures, you have to have margin capacity behind the trade. That means with a single push of a button someone was willing to commit more than $1 billion of real capital to this trade with expectations of a 10-to-1 return ratio. You only do this if you see an edge.

This means someone is confident that the United States is either going to default or is going to lose its AAA rating. That someone is willing to bet the proverbial farm that U.S. interest rates will be going up.

I believe what happened is a debt-ceiling deal was done in Washington and leaked to a major proprietary trader. Everyone knows the debt negotiations in Washington have been an extreme game of brinksmanship between political parties, but now someone knows how that game played out. This had the hallmarks of one of the largest bond shops in the world knowing something the rest of the market didn’t. The number of shops or even central banks that can take on this level of market risk is extremely small. Some that come to mind are hedge fund manager John Paulson, Bill Gross’s PIMCO, and the U.S. and Chinese central banks. Paulson already scored big – about $6 billion big – on a similar trade years ago when he bet against subprime mortgages, the investments that helped bring down Lehman Bros. and many other investors. Whoever was behind it wanted a trade on ASAP, and didn’t care about the ripples they would cause. Armageddon trade You can see how this trade caused fear to be unleashed in the market once it got out and the implications hit by looking at U.S. Treasuries. People who were long 30-year Treasuries panicked as they saw the huge short put on the futures market, and started to unwind their long exposure. What you, as investors, should do now is look at the bond exchange-traded funds (ETFs) that provide a positive rate of return when U.S. Treasuries drop in value. Yields are going up sooner rather than later, if the person behind this Armageddon trade is correct. Written by Jack Barnes From Money Morning 


Stop Calling This a “Debt Crisis” – It Isn’t

Friday 29 July 2011
by: Dave Johnson, Campaign for America’s Future | Op-Ed
You have probably been hearing about “the debt crisis.” I can’t open a newspaper or turn on the radio or TV without hearing about “the debt crisis.” Well stop calling it that, because that isn’t what is going on. There is no debt crisis; the only crisis going on is the threat of several members of the House to vote against raising the debt ceiling if they don’t get their way, thereby sending our country into default. They are trying to get around the rules of democracy and force deep cuts in the things We, the People do for each other while keeping taxes really low for the wealthy. The Fight There is a fight going on in Washington over whether we should have a democracy that works for all of us, or a plutocracy that runs things for the benefit of the already-wealthy. Unable to change public opinion, the conservative Republicans are trying to force changes in who our government is for and who gets to have a say in how things are decided. These ideological conservatives say government “takes money out of the economy” by spending on education, infrastructure, health care, etc. for you and me and our small businesses and startups, and they want that money to instead go to the billionaires and large, multinational corporations that fund their campaigns. As you know, they already voted to eliminate Medicare, and voted for cuts in Social Security, education, infrastructure spending, and all the other things We, the People have decided to do for each other, so we know they are serious about this. They say if they can’t have a country that is run their way then we can’t have a country at all. “Debt Crisis” The “mainstream media” has decided to name this fight a “debt crisis.” This leads people to think that somehow the country is in crisis over debt, when the crisis is over a few people forcing default if they don’t get their cuts. There is no debt crisis. There is a lot of debt, the result of tax cuts, increases in military spending, wars and giveaways to large corporations that have occurred under the Bushes and Reagan. But the way to solve a problem that resulted from tax cuts and military spending increases is to put taxes back where they were before Reagan, and cut the military back at least to where it was when we were fighting the Soviet Union, even though the Soviet Union is long gone. Giving In To Hostage-Takers Is A Mistake Last year these conservatives took the unemployed hostage, refusing to keep unemployment benefits going unless we extended the bush tax cuts for the wealthy. The hostage-taking succeeded. So, having succeeded at taking hostages, the conservatives then took another, even bigger hostage. They demanded big spending cuts, outside of the normal budget process and decision-making mechanisms of our democracy, or they would “shut down the government.” The hostage-taking succeeded. So, having succeeded at taking hostages, the conservatives have taken another, even bigger hostage. This one is the big kahuna of hostages. If they refuse to raise the debt limit the country could go into default, destroying our economy and the economy of much of the world. The official policy of the US government on hostage-taking is as follows:

“Based upon past experience, the U.S. Government concluded that making concessions that benefit hostage takers in exchange for the release of hostages increased the danger that others will be taken hostage. U.S. Government policy is, therefore, to deny hostage takers the benefits of ransom, prisoner releases, policy changes, or other acts of concession.”

It says that past experience has shown that giving in to hostage-takers “increased the danger that others will be taken.” We gave in to hostage-takers, and the result was that more and bigger hostages have been taken. During these “negotiations” every single time Democrats have agreed to their demands it has resulted in their asking for even more. It was a mistake to give in then, and it would be a mistake to let them get anything from taking hostages this time. If they get rewarded again next time is guaranteed to be even worse.



Dave Johnson Dave Johnson (Redwood City, CA) is a Fellow at Campaign for America’s Future, writing about American manufacturing, trade and economic/industrial policy. He is also a Senior Fellow with Renew California.Dave has more than 20 years of technology industry experience including positions as CEO and VP of marketing. His earlier career included technical positions, including video game design at Atari and Imagic. And he was a pioneer in design and development of productivity and educational applications of personal computers. More recently he helped co-found a company developing desktop systems to validate carbon trading in the US.

Showing 24 comments

  • Piobair
    This is why you don’t negotiate with hostage takers, you shoot them.
  • Perfectclue1
    Liberals whore for Fascism, militarism, by appeasing the criminal oligarchy, kleptocracy. SMASH CORPORATE FASCISM……SLAVERY IS NOT FREEDOM, “ARBEIT MACHT FREI” , the upside down Orwellian class , ideological thugs who enslaved socialists, Jews and called it Freedom, now enslave the world and calls it “Free trade, Free world”, when it is CLASS TYRANNY/FASCISM.
  • jf rote, Old enough to know better…too young to quit!
    Dave, thank you…I’ve been screaming these sentiments to anyone who would listen. Peace
  • If this was happening on a school ground it would be called bulling! These bullies, like their constituents on the playground, want your lunch money, heck, all your money. Watch out dark-age here we come again.
  • Apwilbers
    We have had a plutocracy for a long time already.
  • henst123
    Nicely explicated. I wish Obama had been articulating these points all along. But that would have required that he be visible instead of quietly capitulating to the pirates behind closed doors. The fallout from whatever bill passes will sink him with more than progressives unless it’s a clean bill raising the limit.
  • coach1640280
    A congressional death-wish serves the wealthy elite and the “10% owns 80%” status-quo of the US economy.The congress has a subconscious, not majority, death wish that is very dangerous and exists on both red and blue sides.Oligarchy congressional rule structures makes this death wish increasingly and seriously more plausible and stakes are increasing.The debt crisis is classic/grandstand “good cop, bad cop” congressional kabuki dance. It only gets bigger and worse.The debt crisis is politically manufactured with fear, dread, crisis, danger, and deadline written all over it for dramatic consumption.The stakes are high, adding more drama and intensity. The inevitable cost of the gambling will be paid, as usual, by middle America.The wealthy elite agenda is tax, spend, debt while ownership, income, and dollar/currency is ignored. 10% gets 80%”Laugh about it, shout about it- When you’ve got to choose- Ev’ry way you look at it, you lose” Simon and Garfunkel, 1968Debt crisis is politics of 1968, upgraded to 2011, more dangerous, higher stakes, and higher cost.
  • steve
    I find all this very interesting, and frustrating… I just wonder what will happen when all of us that receive Social Security checks DONT get them. The snowball effect this will have on our nation is enormous. It has me worried, and wondering why Obama cant use his constitutional rights to raise the debt ceiling all on his own..
  • Liddie
    If he raised the debt ceiling he would be overstepping his authority and he knows if he stops checks he will be a one term president.
  • Guest1
    I have read the 14th Amendment & I agree with President OBama that he really doesn’t have a Constitutional right to raise the debt ceiling on his own. I think some of the Democratic senators are trying just about anything to avoid the default. I don’t blame them for trying, but I just don’t interpret it the way they do.
  • Obama has been giving in to the terrorists since he took office and made sure that the bankers kept their money and bonuses and took no responsibility for anything. That was the first group of terrorists that won with this Congress and administration.
  • Don’t forget to add DINOs to that list of terrorists.
  • Never thought I would have to resort to sleeping pills…and I am not even in the Senate… do THEY sleep at night?
  • Liddie
    No conscience, only self serving egos.
  • We didn’t have to read the TEA LEAVES to see this coming. For those with short memories, perhaps it would be useful to remind you of what we were looking at with less than a week to go before voters headed to the polls in November 2010 here >>
  • Meinkampf Obama
    People in the banking industry are privately advising family and friends to withdraw all funds from banks before monday.
  • What’s Going On
    Again the key question is: why has Obama adopted the deficit language of the Republicans, who in turn give it to the Blue Dog Democrats, who then repeat it ad nauseam? Why are the Democrats and Republicans working together? Why does Obama go along with these Republican agendas, acting so glib, so flippant, to his own progressive and liberal bases? Is it perhaps that this is his agenda also – to kill Social Security? It sure appears to be so! Is Obama a Trojan Horse figure sitting in the White House, a man who has not shown one shred of liberal Democratic lawmaking, but instead ample and repeated conservative and neoconservative lawmaking talents? Wake up, People! You are dealing with a hardcore fascist in the White House, pretending to be one thing and acting in quite another fashion! Why is there such a massive denial by democrats on this forum when it’s as clear as day what’s going on.
  • jordyh
    The first mistake was bending to the mere THREAT of filibuster – Reid should have forced the Republicans to actually carry out that threat. An actual filibuster has some pretty harsh rules…
  • Hartwellanakka
    It is time for a change, time for a revolution. Here in America we want peace, we want a peaceful revolution that results in the restoration f the American People with a government that responds to the peoples wants and desires. We all agree, things are messed up. Our domestic house is a mess. Its time to clean house. You dont want to do this when times are good, but they are not.Its time to take back America one county at a time. One state at a time, and congress all at once. We recall the people in government. I love our government, the structure and the philosophies, I do not however love or even approve of the people in place in the government. The RECALL REVOLUTION is peaceful, it creates jobs and puts money into local economies.Registar of voters have funds just waiting for recalls. They love recalls and are willing to do everything they can to be helpful. They will pull the money for the special election. Recalls are free and easy. We start recalling and reseting our government. We disband the electorial college that was only suppose to be in place until the mail was set up to all the colonies. We are the only country that does not elect our president, he is asigned to us. We need a president that is accontable to the people. Then we will see a free and prospering America. Then we will see the end to all the petrochemical poisoning, media washing, and suffering in our health medical maintentance that accounts for 24.9% of GDP.Its time for a peaceful change. Its time to remove the old and in with the new. ITS TIME FOR THE RECALL REVOLUTION.Anakka Hartwell Author “Look UP,” Cannabis Ambassador for, Serenity Senior and Veterans Centers and collectives NAC3.ORG North American Consortium for Cannabis Cultivators Serenity Organics
  • madhatter
    But, you didn’t propose a new term?
  • Herbie5423
    Agreed. However, there has also been a huge increase in spending and debt during the Obama administration. We have lived in a plutocracy since FDR.
  • The increase has only been 1/3 of the spending increase under Bush/dick.The problem is, all of the spending is going to war, Wall Street, and the wealthy.
  • All politicians are bought and sold by corporation or bound by stupid pledges to the Tea Party. If you are stunned by the the lack of leadership on Obama’s part, read this article posted by Al Jazeera and weep….…
  • Ruthrunner
    Very excellent article! I think the author is right on target. It is a read it and weep…


Who will Uncle Sam pay if there’s no debt deal?

By Jane Sasseen | Exclusive – 3 hrs ago

President Barack Obama delivers a statement on the U.S. debt ceiling talks, from the Diplomatic Reception Room of the White House in Washington, July 29, 2011. REUTERS/Jason ReedPresident Barack Obama delivers a statement on the U.S. debt ceiling talks, from the Diplomatic Reception Room …

By JANE SASSEEN Yahoo! News Come Aug. 3, just who will get paid? That’s the new worry coursing throughout Washington as the contentious debt ceiling negotiations hurtle towards Aug. 2, the deadline beyond which President Barack Obama has warned that the government risks running short of money to pay all of its bills. If the government has to choose which of its many obligations to honor and which to delay, who will it pay — and, more importantly, who will it be forced to cut off? Chinese bondholders?  Social Security recipients? Medicaid beneficiaries? Veterans or FBI agents? With the clock ticking, it’s no longer a theoretical  question. “We are running out of time,” the president said in a statement at the White House Friday morning, little more than 12 hours after House Speaker John Boehner (R-Ohio) was forced to call off a vote on his two-stage bill to trim $2.5 trillion from the budget in the face of stiff opposition from conservatives.  A vote was rescheduled for Friday evening. If it passes, the bill will move to the Senate, where Democratic leaders are preparing their own rival bil; Congressional leaders and the White House are expected to spend much of the weekend wrangling over the competing proposals. Treasury officials have drawn up emergency plans to prioritize payments if Congress doesn’t vote to raise the government’s borrowing ability above the current $14.3 trillion level before the maximum is hit. Without a deal, Treasury will have no choice but to start to triage between its many payments. It won’t be easy. The federal government makes payments to some 80 million individuals, companies and entities every month. While it takes in roughly a couple of hundred billion dollars every month in revenues, it spends tens of billions more.  Some 40% of the current budget is paid with borrowed money. “A de facto shutdown of the government is the real threat, not default, ” says Greg Valliere, chief political strategist for the Potomac Research Group. The key question is what date the government will hit the current debt ceiling. That’s when it will no longer be able to borrow to make up the difference between revenues and expenditures. That’s why Aug. 2 looms as a critical deadline — a big Social Security payment is due the following day.  In mid-July, analysts at Barclays Capital estimated that Treasury would have only $30 billion in cash on hand the morning of Aug. 3 — not enough to pay the $22 billion owed to Social Security recipients plus the additional $10 billion owed to others that day. While higher-than-expected revenues in recent days could give the government a few more days wiggle room beyond that, the trajectory is clear. “Without an agreement, the only question is when, not if, we’ll run short of cash,” says Jay Powell, a former Treasury official under President George H.W. Bush who has analyzed the issue in a report for the Bipartisan Policy Center, a Washington-based think tank.  “There’s just no way to pay for everything.” The triage could begin as early as Aug. 3. One possibility is that Treasury would simply pay the bills in the order they come in. But most observers believe such a move would be too politically risky; the administration is far more likely to make sure Social Security recipients and other politically-sensitive constituencies get paid. So who would be the winners and who would be the losers? Start with the math: between Aug. 3 and the end of the month, the Treasury will pocket an estimated $172 billion in taxes and other revenues, according to Powell. Over that same time, it has to shell out roughly $307 billion in payments for everything from Social Security and veterans’ health care benefits to money for highway construction and federal workers’ salaries.

House Speaker John Boehner of Ohio, right, and House Majority Whip Kevin McCarthy of Calif., left, listen as House Majority Leader Eric Cantor of Va., center, speaks during a news conference on Capitol Hill in Washington, Thursday, July 28, 2011. (AP Photo/Susan Walsh)House Speaker John Boehner of Ohio, right, and House Majority Whip Kevin McCarthy of Calif., left, listen as House …

Given that huge gap, the administration would essentially have to decide who to stiff, at least temporarily. Here’s a look at how the choices could play out:

INTEREST ON US TREASURY BONDS: One thing on which all analysts agree: Holders of U.S. Treasury bonds, whether they are hedge fund managers in New York, retirees in Florida, or central bankers in China, will have first dibs on the remaining cash. They would get paid before all other creditors. That’s the only way the U.S. can avoid a potentially disastrous default on its bonds and a serious downgrading of its credit rating.

So the first $29 billion—the estimated interest payments Treasury owes for the month of August–will go straight to bondholders.  That would leave Uncle Sam with $143 billion in cash to cover another $278 billion in bills coming due in August. SOCIAL SECURITY: Another point of accord between Democrats and Republicans: no one, but no one, wants to see TV screens fill with interviews of outraged seniors. Nor is anyone foolish enough to want to face the political consequences of cutting them off. So count on Social Security payments to take second priority when it comes to cutting checks. For August, Uncle Sam owes Social Security payments of $49 billion. Draw that down, and Uncle Sam would have only $94 billion left to take care of the remaining $299 billion in expenditures. MEDICARE/MEDICAID: Now throw in Uncle Sam’s biggest health care obligations, Medicare and Medicaid. They will account for another $50 billion in August. Some analysts suggest Medicare would be fully funded, while the federal government could try to cut back on the Medicaid payments it owes to the states. But that remains to be seen. If the administration does fund all of those health care obligations, then Uncle Sam would be down to only $44 billion in cash, to divide among the $179 billion needed in August to fund the military, social safety net expenditures such as unemployment insurance and housing aid for the poor—not to mention the entire rest of the federal government. MILITARY SPENDING: Cutting off veterans or soldiers could be just as politically poisonous.  However, those costs are relatively small: $2.9 billion each for Veterans Affairs programs and pay for active duty military members. They are likely to be paid. The big expenditure comes in payments to the thousands of defense contractors across the country: Uncle Sam will owe defense contractors some $31.7 billion in the month of August.  Many of them could see payments delayed until the crisis is resolved. “Treasury will be able to prioritize within defense,” says Daniel Clifton, who oversees policy research for Strategas Research Partners. “They build battleships that take years to complete; can they really argue they need that payment today?” SOCIAL SAFETY NET: Juggling the programs aimed at supporting the unemployed, the poor and the sick will be tough; many could see cuts as the money runs out.  Unemployment insurance benefits will cost some $12.8 billion for the month, while food aid for the poor would run to $9.3 billion. Housing aid programs for August would be another $6.7 billion. Grants for tuition and special education would run another $14 billion. Fund all those programs, on top of Social Security, Medicare and interest payments, the BPC’s Powell points out, and there would be virtually nothing left for the vast majority of defense spending.  The Administration would have to choose: protect the safety net, and much of the military will go unfunded. Pay for defense, and many on the home front will suffer. Moreover, whatever the choices the White House makes to divvy up the dollars between military and social spending, neither leaves much room for funding the rest of the government. Salaries and benefits alone for federal employee would cost another $14.2 billion in August — one reason many could find themselves furloughed if push comes to shove. “There’s just no way to avoid the pain,” says the BPC’s Powell. “If you opt to pay for Social Security, Medicare and a few other priorities, there’s no money left over for a Justice Dept, a Defense Dept., an Energy Dept. or most other things.” Jane Sasseen is the editor-in-chief of politics and opinion at Yahoo! News. What do you think should be cut if the government is forced to set priorities? Let us know in the comments below, or go to Yahoo! Politics on Facebook.


If the debt-limit debate had anything to do with reality, every story about it would include a few basic facts. Starting with: President Obama inherited a $1.2 trillion budget deficit.   And: Republican leaders supported the tax cuts and wars that (along with the recession, another pre-Obama phenomenon) created that deficit. Also: Republicans engineered this crisis by attaching unprecedented ideological demands to a routine measure allowing the U.S. to pay its bills.  Finally, Obama and the Democrats keep meeting those demands—for spending cuts, then for more spending cuts, and even for nothing but spending cuts—but Republicans keep holding out for more. These are verifiable facts, not opinions. But since they aren’t new facts, and re-reporting them would make “GOP claims” about the crisis look, um, non-factual, they’re rarely mentioned, except as “Democratic claims.” This is a real problem for journalism in an era where—now this is an opinion—one of the major parties has abandoned its grip on reality.  I understand why objective reporters aren’t encouraged to contradict political lies with historical truths, but this hostage drama is one of the prices of our era of amnesia. Look, staying in opinion-land, I think this particular hostage drama could conceivably drive budget policy in a good direction. I’d love to see big cuts in spending on agriculture, housing and the military. We do need to restrain long-term Medicare and Medicaid costs, although there are better and worse ways to do that. There’s still a chance to eliminate ludicrous tax breaks for ethanol producers, private jet owners and hedge fund managers, maybe paired with an economy-boosting payroll tax cut to help Republicans honor their no-new-taxes pledges. (MORE: As GOP Debt Plan Faces House Vote, Compromise Brews Behind the Scenes) In other words, it’s at least possible that this crisis the Republicans created could have a beneficial effect. It’s also possible that this crisis the Republicans created could cripple the full faith and credit of the U.S. government, plunge the economy back into recession, and increase borrowing costs for just about everyone. But whatever happens, Republicans created this crisis. They blew up the debt. They refused to raise the debt ceiling without conditions. And because of their internal divisions, they can’t even decide what those conditions should be. They initially demanded a breakdown of 85% spending cuts and 15% revenue increases, before deciding the deal had to be 100% spending cuts. Some initially praised the bipartisan Gang of Six plan—until Obama endorsed it. Now Senate Majority Leader Harry Reid has a proposal for 100% spending cuts, all of which Republicans had already endorsed  –until, of course, Reid proposed them. I’ve made some of these points before.  More than once, I suppose.  But they seem quite relevant to the back-and-forth over the debt ceiling, which goes on every day even though those points don’t get repeated every day. (MORE: With Debt Vote Looming, House GOP Tries to Repair Its Fractured Coalition) I remember back when I was at The Washington Post, a guy named Matt Miller (unsuccessfully) pitched my boss about running a daily front-page feature called “Still True Today,” to inform readers about important facts that didn’t happen to be newsworthy that day. Miller’s plan wouldn’t really address the problem of a major political party creating its own fact-free reality. And I don’t know how many minds would be changed by constant reminders that President Clinton left behind a substantial surplus, that President Bush vaporized it into a gigantic deficit, that President Obama’s health care reforms will actually reduce the deficit. But it does seem to be worth pointing out that those facts are still true today. Not that they seem to matter. (MORE: Ron Paul, the Debt Ceiling and the GOP’s Apocalyptic Wing)
Related Topics: debt ceiling, gop, Viewpoint

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The Biggest Transfer of Wealth in History


07/11/08 With the advent of such enormous amounts of debt and credit, all of the heads on Wall Street seem to be rocking towards the East. Why? Because they’ve got all of our money. Bill Bonner explains… This week began with alarm bells. First Bridgewater Associates broke the glass and pulled the handle; it said the conflagration in the credit markets might lead to losses four times higher than previous estimates – at $1.6 trillion. A lot of money – even for someone who lives in London. Bridgewater helpfully pointed out that this was just the beginning; the world would lose an additional $12 trillion in foregone credit. When the going is good, each ounce of a bank’s share capital grows into as much as a pound of credit available to borrowers. But when the cycle turns, the shrinkage takes your breath away. Remove a dollar from a bank’s balance sheet and you wipe out a ten-spot of credit. Bad news for people in Britain and America who are accustomed to living off of credit. Bad news for their economies, too. Without access to the fire hose of easy credit, the consumer economy goes up in smoke. To give you an idea of the scale of a $12 trillion problem, the entire U.K. economy generates only $2.8 trillion of output annually. The U.S. economy – at $13.8 trillion – is only slightly bigger than the anticipated damage. When the alarums quieted and the flames died down, hopeful analysts sifted the ruins and wondered where the City and Wall Street might find the resources to restock their shelves. Suddenly, all heads rocked towards the East. Visions of myrrh and incense danced before their greedy eyes. Sultans as rich as Croesus…oil sheiks with sand dunes for brains…maharajas of motor industries and mandarins of manufacturing. Enriched by the black gold flowing from deep holes in Arabia…or from commerce on the trade routes between Hong Kong and Long Beach, these princes of modern finance have trillions. Surely they will come to the aid of those who had made them rich? The gist of the following reflection is this: no, they won’t. Just because people are rich doesn’t mean they are stupid. Outside the Bank of England and the U.S. Fed lies some $5.3 trillion in central bank reserves. In foreign government pension reserves and other accounts is another $6.1 trillion. Add $3 trillion more now in the hands of Sovereign Wealth Funds. The IMF says these SWFs will grow to $12 trillion within four years. Morgan Stanley estimates a $17.5 trillion pot by 2017. Altogether, this is enough moolah to buy control of every public company in Britain and America combined. Few people bother to ask where they got all that money. Never mind, we will answer the question anyway: it is the fruit of a monumental hornswoggle. “It is the biggest transfer of wealth in history,” says T. Boone Pickens, speaking of the oil trade. Americans alone import 3.6 billion barrels of oil a year. In 2003, the tab for all that goo was only about $70 billion. At today’s oil price, it is pushing half a trillion. A quarter of oil’s price increase since 2003 was because the dollar skidded against foreign currencies. What about the other 75%? That too, is probably largely a feature of a slippery dollar. For the last 100 years, the oil price has greased along – more or less – with U.S. money supply growth. As M3 increased, so did the price of oil. Currently, the money supply – as measured by M3 – is increasing at an annual rate of about 18%. Oil is going up – on a 10-year moving average basis – about 23% per year. Looked at another way, from 1974 to the present, the price of oil has gone up a bit more than 14 times. The U.S. money supply, meanwhile, has gone up a bit more than 11 times. What does this mean? Oil is probably overpriced. But don’t worry, Mr. Market will sort that out. Just don’t get distracted. This is one of the funniest and most perverse scenes in modern finance; it would be a shame to miss it. In effect, the world’s most sophisticated capitalists are also the dumbest when it comes to money. America and Britain spent too much money. Now, they owe more money to more people than any nations ever did before. Once, they owned the world; now the world owns them. And now, the U.S. central bank inflates in order to try to rescue its errant banks, reckless spenders and condo speculators. But in the global economy, the easy money won’t stay put. Instead, it seeps over to oil sheiks in the Near East to pay for petrol…or over to the sweatshop operators in Far East to pay for electronic gadgets and designer T-shirts. It doesn’t stimulate the U.S. economy, in other words; it stimulates the foreigners’ economies and raises prices for everyone, including themselves. Unfortunately, while the foreigners earn more money and can keep up with rising prices – incomes in India are up 148% since 2001 – the Anglo-saxons’ wages are stagnant. Americans haven’t had a real wage increase in 40 years. And now the lynchpins of leveraged finance are praying that the cash they spent on imports will come back to them. And it will. But it comes back like a young man who got rich in the colonies…with better clothes and a sniffy air. It left a servant; it comes back a master, buying up valuable assets and expecting the indigenes of Wall Street to shine its shoes. Foreign purchases of U.S. assets rose 90% last year. Foreigners are bidding for America’s leading brewery, Britain’s stock exchange, hedge funds, infrastructure projects and technology companies. A Chinese company bought MG. An SWF from the Gulf bought the emblematic Chrysler in New York. A Russian who got rich in fertilizer bought Donald Trump’s Palm Beach mansion for $100 million. And the balance sheet of the U.S. Fed shows $2.3 trillion of US treasury debt held in custody for foreign central banks. The harder the Fed fights the correction…the more money and credit it puts out. This monetary inflation causes prices for oil and imports to rise…and more money goes into foreign reserves and Sovereign Wealth Funds in the East, to be used to buy more assets in the West. Thanks to America’s mad monetary policy, these private assets are being taken into public ownership. Some of America’s most important properties are being nationalized…but by other nations. Enjoy your weekend, Bill Bonner The Daily Reckoning July 11, 2008 — Ouzilly, France Bill Bonner is the founder and editor of The Daily Reckoning. He is also the author, with Addison Wiggin, of the national best sellers Financial Reckoning Day: Surviving the Soft Depression of the 21st Century and Empire of Debt: The Rise of an Epic Financial Crisis. Bill’s latest book, Mobs, Messiahs and Markets: Surviving the Public Spectacle in Finance and Politics, written with co-author Lila Rajiva, is available now.

Read more: The Biggest Transfer of Wealth in History>

The Bush Crisis Plan: Greatest transfer of wealth in world history


What U.S. could learn from China

It’s been called ‘financial socialism’, ‘socialism for the rich’, and ‘lemon socialism’. But whatever it’s called, the Bush administration ‘bailout’ for financial institutions is the greatest transfer of wealth from ordinary working people to the rich in world history.

The proposed program to buy a mountain of non-performing housing loans and other worthless assets from banks and finance companies will cost an estimated $700 billion to $1 trillion U.S. dollars.

This money will come from U.S. taxpayers, most of whom are ordinary workers. It amounts to taking around $2500 U.S. dollars, or 17,000 RMB, from every U.S. citizen – and giving it to the banks and finance companies.

The cost for each family of four is around $10,000 or 68,000 RMB. This money could have been used for health care, for improved education, for scientific research, for social welfare program; for environmental protect; or a myriad of other socially useful purposes.

Alternatively, it could have been used to cut taxes for ordinary people, or even to help them buy their houses. Instead it is being donated to banks and financial companies whose managements and owners are among the richest in the world. These measures represent a massive redistribution of socially -produced wealth from working and poor people to the rich.

Learning from China

The argument of the Bush administration – echoed faithfully by the U.S. media – is that there is ‘no other way’. The claim is that the U.S. system, and the jobs of U.S. workers within it, can only be safeguarded by this transfer of wealth to the banks.

In fact, this argument is incorrect.

Obviously the government must act to protect banking and finance in an economic crisis of this magnitude. But if banks are bankrupt or insolvent, a fair solution would be to buy or nationalize the banks themselves, *not* their bad debts. Then the taxpayers would receive something of value – a stabilized and accountable banking system belonging to the people instead of worthless debts.

In China, such a solution would seem almost common sense. With its socialist market economy growing at about 10% per year, Chinas’ government banks play a key role in providing a stable foundation for the financing of Chinese economic development,

But the possibility of taking over or nationalizing U.S. banks has not even been mentioned by any mainstream U.S. political figures or mainstream media.

Instead, up to a trillion dollars or taxpayer money is being donated to institutions whose managements have shown themselves incompetent to manage their own funds.

Perhaps the economic interests of the powerful wall street companies, one of whose former CEO’s is U.S. Treasury Secretary Henry Paulson, has something to do with this ‘blind spot’.`

Over the years China has resisted intense pressure from Paulson and other U.S. officials to radically deregulate its financial markets. They have lectured China repeatedly on how deregulation of financial markets, and letting foreign financial capital operate freely in China – as in the U.S. – was in Chinas best interests.

“An open, competitive and liberalized financial market can effectively allocate scarcer resources in a manner that promotes stability and prosperity far better than government intervention,” Paulson said in Shanghai in March last year. “Time is of the essence.”

Now even the U.S. has been compelled to abandon this ‘open financial markets’ approach. With the sub-prime crisis now expanded into a full-blown crisis in the western financial sector, knowledgeable Chinese experts are thankful that China never accepted this laisez fair prescription for financial regulation.

“The U.S. crisis reflects regulatory problems in the U.S. and innovative financial products that ignored basic economic rules,” former Chinese central bank deputy governor Wu Xiaoling told a financial conference in Beijing recently.”

“The U.S. crisis today would be China’s tomorrow if financial products such as securitization are introduced without proper risk-control measures.”

Chinas’ cautious attitude, government banks, and regulatory framework have helped China to restrict its losses and write-downs from the credit-market crisis to less than 1 percent of the massive global total.

The feasibility of bank nationalizations, closer regulation, and banning certain types of transactions, such as derivatives, which carry excessive risk are all lessons which can be learned from China.

Banks, financial companies, and the wealthy should not be allowed to unload their bad debts onto ordinary workers and taxpayers. It’s sheer madness to allow them to transfer a trillion dollars from workers and taxpayers to themselves.

By Eric Sommer China Beijing


Joseph A. Palermo

Author/Associate Professor of History

Posted: September 17, 2008 12:00 PM

Socialism for Wall Street, Capitalism for Main Street

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For twenty-eight years, since the beginning of Ronald Reagan’s first term, we have been subjected to a steady stream of Republican propaganda claiming that if we just got government out of the way and “off our backs,” deregulate the economy, and let the market work its magic, prosperity would “trickle down” to the average American citizen. In the mid-1980s, corporate lobbyists descended on Washington, threw huge amounts of campaign cash around, and told us that deregulating the Savings and Loan industry would be a great idea. John McCain and his good friend Charles Keating from Arizona were big advocates of this scheme that turned out to be a disaster that cost taxpayers $160 billion. Phil Gramm, when he was Senator from Texas (and John McCain’s choice for president in 1996), worked up another “deregulation” bill that President Bill Clinton signed into law in 1999 that repealed the Glass-Steagall Act of 1933, thereby destroying a key firewall between commercial and investment banks. We witness the same over-confident, smug market fundamentalists and laissez-faire devotees, businessmen and women who hate “government” when it provides aid to families with dependent children, or food stamps, or health coverage for poor people — businessmen and women who denounce as creeping “Socialism” any attempt by the government to redistribute some of the nation’s wealth to the working middle class or to the poor — now come to Washington, hat in hand, begging the federal government to fix their self-created problems brought on by their own unbridled greed and recklessness and demanding massive infusions of tax-payer dollars in the form of bail out after bail out. It’s Socialism for the rich and laissez-faire capitalism for everybody else. What Bear Stearns, Lehman Brothers, Merrill Lynch, and now American International Group Corporation have in common is that they all hired Washington lobbyists and lavished campaign donations on politicians to push through with no public support the radical deregulation of the financial sector. Then they proceeded to create entire new categories of “financial products,” derivatives and the like, that amounted to nothing but a giant Ponzi scheme. And when it all collapsed due to their Wild West, shoot ’em up, freebooting, 19th Century-style rapacious business practices, they turn to the government for a hand out to keep the whole goddamned system from descending into another Great Depression. For historians like myself, and for people like Kevin Phillips, William Greider, and other observers, this collapse of our financial sector was like watching a slow motion train wreck. The laissez-faire proponents for the past thirty years have perpetrated the biggest lie ever told to the American people. And George W. Bush, as with everything else, took this lie to its extreme. He gave the financial industry everything it wanted, and he appointed their lackeys and puppets to run the regulatory agencies that were set up in the wake of the Great Depression to avert exactly the kind of catastrophe that we’re witnessing on Wall Street today. George W. Bush spent the first months of his second term on a 60-city tour where he answered prefabricated questions in phony “town hall” meetings claiming that privatizing Social Security — taking $1 trillion out of the trust fund and throwing it to his backers on Wall Street — would be a great idea. And even though the Republicans ran the House of Representatives with Denny Hastert and Tom DeLay, and the Senate with Bill Frist, and the presidency, the American people did not fall for this legalized form of grand larceny. And it’s a good thing they didn’t. Had Bush been able to get his way and throw a third of the Social Security trust fund at these same damaged, greedy firms we would be witnessing with the current financial meltdown the demise of Social Security. The libertarians like Ron Paul, Bob Barr and others tell us that the government should not bail out these Wall Street hucksters and gangsters and should let them go down and pay the price for their own mismanagement and bad investments. I agree philosophically with this point of view. But I don’t think it’s realistic unless one is willing to see the nation enter an economic collapse that would probably look a lot like what Japan and Argentina endured in the late 1990s only worse. The fact is these giant firms, with their billionaire owners and their army of pin-striped men driving Jaguars and flying in private jets to their summer homes to visit their mistresses, have a stranglehold on the nation. They are too big to fail because it would bring on another Great Depression. Everybody knows that what is needed is exactly the opposite from what we’ve had for the past three decades. Instead of a government that is asleep at the switch and filled with cronies and hacks from the industries that are supposed to be subject to oversight, we need an activist state that rebuilds the firewalls between the commercial and investment banks; we need a “re-regulation” of the economy, especially key sectors that the entire nation depends on — finance, energy, health care, food, etc. In short, what we need is a “New” New Deal in this country. We need an IRS and a Justice Department that can strike fear in the hearts of these captains of industry. Ronald Reagan is often looked upon as the Republicans’ Franklin Roosevelt. But Reagan sold the nation a bag of goods. We can finally see clearly the failed results of this three-decade experiment in laissez faire capitalism. It has nearly destroyed the middle class in this country, greatly widened the gap between the super rich and everybody else, destabilized vital sectors of our society, and made the United States a laughing stock abroad. As a historian I always wondered what evidence of the free market utopia people like David Brooks (with his “ownership society”) and the army of ideologues and market fundamentalists marching in lockstep out of the Cato Institute and the Heritage Foundation and the American Enterprise Institute and Gover Norquist’s Americans for Tax Reform, and all the other shills and hucksters who sold this tripe to a naive public like a greasy used car salesman selling a lemon — I always wondered where is their laissez-faire utopia? Are they referring to what America looked like in 1880? A time with nearly zero federal government regulations? With no child labor laws, no limits on the hours worked, no weekend or paid overtime, no minimum wages, no workers’ safety regulations, no Securities and Exchange Commission, no Federal Deposit Insurance Corporation, no worker pensions or Social Security, no right to form independent labor unions, and no vote for women. Is this their laissez faire utopia that deregulation was supposed to produce? Today, we have the worst of both worlds. Government bailouts for the rich — naked capitalism for everybody else. This whole mess could have been avoided if the generation that followed the New Deal had the common sense and decency to understand that you cannot turn over capitalism to the capitalists. Greedy individuals will always figure out clever new ways to make their own piles of money at the expense of their fellow citizens and at the expense of their nation’s wellbeing. Whether it’s the Savings and Loan scandal of the 1980s or the Dot.Com bubble of the 1990s or the Enron collapse or the mortgage meltdown — it’s always the same old story. They pass on the wreckage to the taxpayer as they always do. It’s time to put to rest once and for all the Big Lie that deregulation and privatization of government institutions will bring the nation anything other than calamity after calamity.



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   “Never mind the low wages and harsh living conditions of the early years of capitalism.  They were all that the national economies of the time could afford.  Capitalism did not create poverty — it inherited it.  Compared to the centuries of precapitalist starvation, the living conditions of the poor in the early years of capitalism were the first chance the poor had ever had to survive.  As proof — the enormous growth of the European population during the nineteenth century, a growth of over 300 percent, as compared to the previous growth of something like 3 percent per century.”– Ayn Rand
   “Economic growth was non-existent during the centuries 500-1500 — and per capita GDP rose by merely 0.1 percent per year in the centuries 1500-1700. In 1500, the estimated European per capita income was roughly $215; in 1700, roughly $265.” — Andrew Bernstein
“In a poor country like ours, the alternative to low-paid jobs isn’t well-paid ones; it’s no jobs at all.” —  Jesús Reyes-Heroles, Mexico’s Ambassador to the USA


Separate but unequal: Charts show growing rich-poor gap

By Zachary Roth | The Lookout – Wed, Feb 23, 2011

The Great Recession and the slump that followed have triggered a jobs crisis that’s been making headlines since before President Obama was in office, and that will likely be with us for years. But the American economy is also plagued by a less-noted, but just as serious, problem: Simply put, over the last 30 years, the gap between rich and poor has widened into a chasm. Gradual developments like this don’t typically lend themselves to news coverage. But Mother Jones magazine has crunched the data on inequality, and put together a group of stunning new charts. Taken together, they offer a dramatic visual illustration of who’s doing well and who’s doing badly in modern America. Here are three samples: • This chart shows that the poorest 90 percent of Americans make an average of $31,244 a year, while the top 1 percent make over $1.1 million: • According to this chart, most income groups have barely grown richer since 1979. But the top 1 percent has seen its income nearly quadruple: • And this chart suggests most Americans have little idea of just how unequal income distribution is. And that they’d like things to be divvied up a lot more equitably: Chart showing US attitudes on wealth inequality To see the rest of these fascinating charts, click on over to Mother Jones.


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The latest poverty data available from the Census Bureau is for the year 2007. The official poverty rate in the US was 12.5 % in 2007. Put another way, 37.3 million people were living in poverty, up from 36.5 million the previous year. click to enlarge Poverty-Rate-US-2007 Source: U.S. Census Bureau The 37.3 millions does not include people in institutional group quarters (such as prisons or nursing homes), college dormitories, military barracks and living situations without conventional housing (and who are not in shelters). The poverty threshold in 2007 for a couple with two children was $21,027. The above chart shows that the number of people in poverty has been rising since 2000. The latest population count of the US was 307 million. With the unemployment rate at 9.4% in July and household debt at high levels, more people may be pushed into poverty. When we compare the rising poverty levels to the income distribution, the correlation is interesting. As the charts below clearly show, the rich are getting richer and the poor are getting poorer. Rich-US Income-Distribution-USA Source: Striking It Richer. The Evolution of Top Incomes in the United States, by Emmanuel Saez, UC BerkeleyIn the past few years, the wealth and income inequality in the US has risen to record levels. During the 2000 presidential campaign in New York, gazing at the diamond-studded $800-a-plate crowd, Presidential candidate George W. Bush commented:

“This is an impressive crowd – the haves and the have-mores,” quipped the GOP standard-bearer. “Some people call you the elite; I call you my base.”

This article is tagged with: The Macro View, Economy



The Redistribution of Wealth to the Rich

The following is about the redistribution of wealth from the poor and middle class to the wealthy. There are at least a hundred ways this is accomplished, but just a dozen or so of the more important ways will be covered here. What lead me to do this research was the controversy of the 2008 presidential campaign after Obama made the political mistake of advocating “spreading the wealth around.” Of course, saying that seemed shocking to some, but what false outrage! Virtually all Republicans and Democrats alike believe in certain social programs that “spread the wealth.” I didn’t hear any of them advocating the dismantling of welfare, Medicaid or public education. These certainly help poorer people at the expense of the wealthier who pay most of our taxes. It was called “socialism” when Obama advocated the same thing most Republicans believe in. Why? Because he advocated a bit more wealth be redistributed? That’s not a principled argument. By the way, in 2000, complaining about the Bush tax cuts, McCain said “When you reach a certain level of comfort, there’s nothing wrong with paying a little more.”

A Capitalist Perspective

I don’t much care for labels, but my economic beliefs are closer to a capitalist philosophy than any other. I would prefer less redistribution of wealth (at least through government force), but I also understand why the public thinks there is something wrong with capitalism and free markets. What we have is neither, but if we are to call it capitalism, then I am against capitalism as well. The way things are currently arranged, those who are very wealthy are provided with many legal ways to take from the poor and middle class to enrich themselves further. That isn’t fair, to say the least. It is also ultimately destabilizing for a society. If people ever fully understand the many “reverse Robin Hood” scams out there, the wealthy here will eventually all have to live behind guarded walls like they do in much of the rest of the world. Here are some of the ways the rich get richer unfairly. You can click through the links to read more on each of these. Corporate Welfare – Redistribution From Poor To Rich – At least 100 billion dollars is taken from all of us taxpayers and handed over to corporations in this country every year. Much of that is then handed out in bonuses to wealthy managers of these companies. How The Rich Get Richer – This post on the New Ideas Blog is about a scam that Warren Buffet pointed out at least seven years ago (and nothing has been done about it). It’s a legal way for corporations to raid the pension funds of employees and put the money in the pockets of their wealthiest mangers. Spread The Wealth? – While calling Obama a “redistributionist,” John McCain suddenly announces during a debate that he wants to spend $300 billion to buy bad mortgages and reduce the principle. Those of us who responsibly bought homes we can afford (ours was $65,000) get to have our money redistributed to those with $300,000 homes? A Bailout For The Rich – The “bailout” begins. $10 billion to Morgan Stanley – they hand out $6.44 billion in bonuses. Goldman Sachs gets $10 billion and pays out $6.85 billion in bonuses. I’m not making this up. That $700 billion constitutes a huge transfer of taxpayer money to some of the wealthiest Americans. Tax Loopholes For The Rich – There was a time when I argued that loopholes only allowed the wealthy to keep more of what is their’s to begin with. But what if they paid nothing (or too little) while benefiting from government services paid for by others? Isn’t that an upward redistribution? Millionaire Welfare Farmers – Why should minimum wage workers have their money taken to give more money to millionaire farmers? They shouldn’t, but that’s what is going on. The poor that get hurt the worst don’t live in this country though. Some Corporate Welfare Examples – I hate to focus on the negative, but it’s difficult to understand the magnitude of the transfer of wealth from poor and middle class to the wealthy if we don’t look at a few examples of it. You’ll find five more examples here. Corporate Welfare – A Definition – My definition and a few examples of indirect subsidies. The Working Poor Do Pay Taxes – Contrary to the claims of some conservatives that 40% of Americans pay no taxes, most pay far more than is realized. A guy flipping burgers may even be paying a higher percentage of income in taxes than Warren Buffet, as you will see. Social Security Rip Off – Recent studies showed that some retirees need social security to avoid poverty – 12% of them. The other 88% simply get to improve their lifestyle at the expense of working folk who support this Ponzei scheme. In fact, about $100 billion annually goes to retirees who make more than the average household income – a huge transfer of wealth from young to old and sometimes from the poor to the wealthy. The Poor Side Of Town – Living in a mobile home for years, I watched as the process unfolded. The poor are regulated out of town – another way the poor are taken advantage to make people wealthier. Preying On Poor Countries – Imagine a scheme to make rich bankers richer while making some of the poorest people of the world poorer, and all at U.S. taxpayer expense. You don’t have to imagine it – it has been around for a while. Property Tax Rates Are Higher For The Poor – Unknown to the average person, it is renters who actually pay the property taxes on the homes they rent. And these properties are taxed much more heavily than others. Federal Reserve Fraud – How do you take billions from the people without them knowing? Print money to loan to their government at interest. This is one of the biggest rip-offs you’ll ever read about. Get Rid Of Corporate Taxes – See who really pays these taxes, and what should be done instead. The Rich Get Richer With Government Help – This page tallies up the damage done – far more goes to the rich than the total of all welfare aimed at the poor. Now to clarify some things:1. The primary way the rich get richer is by providing things that benefit society. In other words, they create value. We are not forced to buy Bill Gates products, but we do so because of the great value they have to us. The wealthy do not primarily look for a bigger piece of the pie – they make more pies. 2. There’s nothing wrong with being wealthy, but how you get there matters. In a fair and free society getting rich does not cause anyone’s impoverishment. Historically, we have all benefited from an economy that rewards those who create the most value. 3. The danger of great wealth is that it buys great power, which can be used to take advantage of the poor and middle class. This is what has been happening more and more in recent years. Laws and regulations have been lobbied for and passed which allow the redistribution of wealth from the poor and middle class to the wealthy. 4. Some will rightly point out that the wealthy pay most of the taxes that support our government and all of its programs, but this does not make laws written for the rich more just. Also, some of the ways wealth is moved from poor to rich are not visible in the tax code, nor easily measurable – and all are unfair in any case. 5. Life takes precedence over other values, so if some redistribution to the poor is needed, it is entirely justified (who would honestly allow a child to starve next to a rich man’s banquet?). 6. Even if some us prefer that the redistribution of wealth be kept to the minimum necessary, it is clear that the lesser of evils for a society is a transfer from rich to poor rather than the other way around. >

September 28, 2010 9:42 AM

Income Gap Between Rich, Poor the Widest Ever

(AP)  The income gap between the richest and poorest Americans grew last year to its widest amount on record as young adults and children in particular struggled to stay afloat in the recession.The top-earning 20 percent of Americans – those making more than $100,000 each year – received 49.4 percent of all income generated in the U.S., compared with the 3.4 percent earned by those below the poverty line, according to newly released census figures. That ratio of 14.5-to-1 was an increase from 13.6 in 2008 and nearly double a low of 7.69 in 1968.A different measure, the international Gini index, found U.S. income inequality at its highest level since the Census Bureaubegan tracking household income in 1967. The U.S. also has the greatest disparity among Western industrialized nations.At the top, the wealthiest 5 percent of Americans, who earn more than $180,000, added slightly to their annual incomes last year, census data show. Families at the $50,000 median level slipped lower.”Income inequality is rising, and if we took into account tax data, it would be even more,” said Timothy Smeeding, a University of Wisconsin-Madison professor who specializes in poverty. “More than other countries, we have a very unequal income distribution where compensation goes to the top in a winner-takes-all economy.”The New Normal: What to Expect of Our Economy Warren: Middle Class Has Suffered for 30 YearsLower-skilled adults ages 18 to 34 had the largest jumps in poverty last year as employers kept or hired older workers for the dwindling jobs available, Smeeding said. The declining economic fortunes have caused many unemployed young Americans to double-up in housing with parents, friends and loved ones, with potential problems for the labor market if they don’t get needed training for future jobs, he said.Rea Hederman Jr., a senior policy analyst at The Heritage Foundation, a conservative think tank, agreed that census data show families of all income levels had tepid earnings in 2009, with poorer Americans taking a larger hit. “It’s certainly going to take a while for people to recover,” he said.The findings are part of a broad array of U.S. census data being released this month that highlight the far-reaching impact of the recent economic meltdown. The effects have ranged from near-historic declines in U.S. mobility and birth rates to delayed marriage and the first drop in the number of illegal immigrants in two decades.The census figures also come amid heated political debate in the run-up to the Nov. 2 elections over whether Congress should extend expiring Bush-era tax cuts. President Barack Obama wants to extend the tax cuts for individuals making less than $200,000 and joint filers making less than $250,000; Republicans are pushing for tax cuts for everyone, including wealthy Americans.The 2009 census tabulations, which are based on pre-tax income and exclude capital gains, are adjusted for household size where data are available. Prior analyses of after-tax income made by the wealthiest 1 percent compared to middle- and low-income Americans have also pointed to a widening inequality gap, but only reflect U.S. data as of 2007.Among the 2009 findings:• The poorest poor are at record highs. The share of Americans below half the poverty line – $10,977 for a family of four – rose from 5.7 percent in 2008 to 6.3 percent. It was the highest level since the government began tracking that group in 1975.• The poverty gap between young and old has doubled since 2000, due partly to the strength of Social Security in helping buoy Americans 65 and over. Child poverty is now 21 percent compared with 9 percent for older Americans. In 2000, when child poverty was at 16 percent, elderly poverty stood at 10 percent.• Safety nets are helping fill health gaps. The percentage of children covered by government-sponsored health insurance such as Medicaid and the Children’s Health Insurance Program jumped to 37 percent, or 27.6 million, from 24 percent in 2000. That helped offset steady losses in employer-sponsored insurance.The 2009 poverty level was set at $21,954 for a family of four, based on an official government calculation that includes only cash income. It excludes noncash aid such as food stamps.Arloc Sherman, a senior researcher at the left-leaning Center on Budget and Policy Priorities, noted the effects of expanded government programs in cushioning the impact of skyrocketing unemployment. For example, the Census Bureau estimates that 3.6 million people would have been lifted above the poverty line if food stamps were counted – a number that would have reduced the 2009 poverty rate from the official 14.3 percent to 13.2 percent.Sheldon Danziger, a University of Michigan public policy professor, said while the U.S. has developed policies to combat poverty, it has trouble addressing ever-widening income inequality – even with a growing federal deficit and previous warnings by former Federal Reserve Chairman Alan Greenspan about soaring executive pay.An Associated Press-GfK Poll this month found that by 54 percent to 44 percent, most Americans support raising taxes on the highest U.S. earners. Still, many congressional Democrats have expressed wariness about provoking the 44 percent minority so close to Election Day.”We’re pretty good about not talking about income inequality,” Danziger said. By Associated Press Writer Hope Yen


The Biggest Transfer of Wealth in the History of Mankind; Does Anyone Care?

Florida truly is the epicenter of the foreclosure crisis. Want more proof? While sitting in my hotel room in NYC, I happened upon a New York Times article about foreclosure sales in Miami-Dade County. The point of the article (the author’s “angle,” if you will) was to show that the real estate market is not as bas as some people think because wealthy investors are buying houses and condos in Florida in all-cash transactions. Hence, David Streitfeld titled the article “Affluent Buyers Reviving Market for Miami Homes.” We can debate the veracity of that viewpoint, i.e. the real estate market is improving in Florida all day long – personally, I don’t think it is. The point, though, is that the article glosses over the bigger picture … In fact, everyone is glossing over the bigger picture. Even if you accept (which I don’t) the concept that the real estate market is improving, clearly, the market isn’t improving for everyone. As the article shows, the “deals” in this “buyer’s market” are almost always “cash” transactions. I don’t know about you, but I don’t have hundreds of thousands of dollars, cash, to buy an investment home. Do you? Do you know ANYONE who does? Clearly, it’s only the ultra-rich, the mega-wealthy, the socio-economically elite, who have the means to take advantage of this “buyer’s market.” Remember, banks aren’t lending, so you have to be independently wealthy to buy any of these investments. So what does this mean? The mega-rich have the means to get “in” on these bargains while middle-class Americans stand helplessly on the sidelines and watch, knowing the deals are available but unable to do anything about it. Worse yet, these homes were taken from the middle-class, so it’s basically a double-whammy – the middle-class lost their homes, and they have to watch while the uber-rich buy their homes as investments at bargain-basement prices. Am I the only one disgusted here? Where is the outrage? Why isn’t anyone in our government screaming: THIS IS THE BIGGEST TRANSFER OF WEALTH IN THE HISTORY OF MANKIND … AND IT MUST STOP!! It’s sadly ironic, actually. When he was running for President, Obama was accused by some of being a Socialist – of wanting to divide wealth equally among everyone. In fact, the typical Democratic viewpoint (I realize I’m simplifying) is to take from the rich and give to the poor. Yet during his Presidency, exactly the opposite has transpired – the mega-rich are getting richer while everyone else is getting poorer. Unless something changes, this problem is only going to get worse over the next several years. Homeowners will keep getting foreclosed. Banks will keep unloading REO from their inventory, and they’ll keep doing so to the only people who can afford to pay cash – the mega-rich. Meanwhile, middle-class America will sit idly by, watching their collective wealth be transferred to those who are already wealthy. Many Americans already believe the US government is run by the rich, for the rich. After all, if this is what’s happening on Obama’s watch, what will happen if/when a staunch Republican takes office? My point isn’t to initiate a political debate. Rather, it seems clear that nobody in our government is willing to stand up to the banking industry or the mega-elite because nobody in politics wants to bite the hands that feed them. And that’s the perpetual problem – the politicans are all rich (or depend on the rich for their re-election campaigns), so regardless of party lines, they all cater to the whims of the rich and powerful. If you disagree, you tell me – what is Obama, or anyone else in government, doing to stop/slow the unprecedented transfer of wealth from middle-class America to the uber-wealthy? My solution? Adide from not allowing foreclosures to be processed (at breakneck speed, if at all), I see a few options. First, let’s tax the hell out of all the banks that took bailout money and aren’t lending. I suppose I agree we can’t “make” banks lend, but we can punish them for refusing to do so. Make the punishment steep enough and they’ll start lending again. That way, at least some middle-class Americans will have a chance to take advantage of the low real estate prices, if they so choose. Second, there has to be a way to get typical, middle-class Americans into our government. Our government is supposed to be run “by the people, for the people.” The system can’t work when virtually everyone in politics is rich … All that happens is there is no voice for the majority of Americans. I’m sure there are many other posible solutions. In my view, though, it all starts with acknowledging the problem. The current system isn’t working. It’s not fair that the rich are getting richer at the expense of mainstream America, and it’s appalling that nobody in a position of authority is saying so. Mark Stopa

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It’s not a “Debt Crisis”. It’s “Economic Genocide”
by Larry Chin
Global Research, July 29, 2011
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The grotesque political carnival gripping Washington is being referred to as a “debt crisis”. But the debt and the looming default of the United States are merely symptoms of the wider calamity that remains deliberately unaddressed.

This is a global collapse: the death and controlled demolition of a global capital system built on petroleum, political corruption, institutionalized fraud, the manufactured “war on terrorism”, the wholesale looting of taxpayer funds, and the imminent destruction of state social programs and civil society.

This collapse is thoroughly detailed by the prescient Mike Ruppert in his book Crossing the Rubicon, the book Collapse: The Crisis of Energy and Money in a Post Peak Oil World, and the film Collapse. His web site Collapsenet continues to report on events as they happen.

World collapse is also fully explained, from a different perspective, in the book The Global Economic Crisis, edited by Michel Chossudovsky and Andrew Gavin Marshall.

Chossudovksy writes:

“We are not dealing with a narrow defined economic crisis or recession. The global financial architecture sustains strategic and national security objectives. In turn, the US-NATO military agenda serves to endorse powerful business elite which relentlessly overshadows and undermines the functions of civilian government….The meltdown of financial markets in 2008-2009 was the result of institutionalized fraud and financial manipulation. The “bank bailouts” were implemented on the instructions of Wall Street, leading to the largest transfer of money wealth in recorded history, while simultaneously creating an insurmountable public debt.”

Today’s elite global criminal enterprise finds Washington’s political players—led by the devious corporate appeaser Barack Obama, and the neofascist right-wing Republicans and Tea Party—enthusiastically sharing a common vision of destruction. It is delusional to think these criminals are “racing” to save anything (besides their own rear ends). They are merely scrambling over the best method of securing even more power and wealth for their corporate puppet masters; arguing over the fastest, most effective way to eliminate social programs. And how to exploit the propaganda to their advantage, ahead of elections.

As pointed out by Patrick Martin, the “debate” over default ceilings and government spending cuts is a fraud. He notes that “the Democratic administration and the congressional Republicans are using an orchestrated crisis over the raising of the federal debt ceiling to create the conditions for an unprecedented attack on the living standards and social rights of working people”.

In the view of Paul Craig Roberts, the Washington political theater is “perfectly orchestrated scenario for getting rid of the New Deal and the Great Society [programs] that could be spent on wars and bailouts and tax cuts for the rich.”

This is the definition of genocide. The elimination of remaining social safety nets will result in a systematic long-term extermination of people in a variety of ways. It’s all “on the table”, from what little remains of health care, Social Security, etc. followed by poverty, homelessness, sickness, and death. While the elites remain safe and comfortable, awash in looted cash for generations.

The United States and other governments all over the world have run out of money. Where is the money? That is the question that has been asked for years, by the likes of Catherine Austin Fitts:

Where is the Money?

The missing money (article archive)

Trillions have been looted, and these trillions remain unaccounted for. And trillions more will “disappear”.

What is clear is that there is endless money for endless wars, endless CIA budgets, and endless tax cuts for the wealthy and for corporations. But nothing for anything else.

Criminal aristocracies have increased their plunder, with Washington spearheading the operations. Governments of the capitalist world—each regime a criminal enterprise—are impoverishing their populaces, subjecting citizens to unprecedented suffering under the Orwellian rubric of “sacrifice”. Systematic destruction is taking place from the international down to the local level.

Adding to the insult, the elimination of the social safety net—literally life or death for millions of American citizens—is being callously bandied about like a political volleyball ahead of another idiotic and meaningless election. Obama spews lies and deception, pandering at every step to conservatives and Wall Street. The neofascist right-wing, led by John Boehner, Eric Cantor, Mitch McConnell, Bachman, Palin, the Tea Party, etc., are focused exclusively on the removal of Obama, oblivious to the fact that the “black man in the White House” has been the seamless extension of Bush/Cheney, and the perfect corporate/Wall Street lap dog. In true right-wing fashion worthy of the Third Reich, today’s Republicans and Tea Party “patriots” are genuinely evil and genuinely insane.

There is no leadership whatsoever, as the world tips over the brink.

This global crisis is real, and unprecedented. As Ruppert wrote in Crossing the Rubicon, “As a species and as a planet, we have reached a point of self-imposed crisis that can neither be postponed nor evaded. That crisis and values with which it is addressed are matters of life and death.”

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The Great Wealth Transfer It’s the biggest untold economic story of our time: more of the nation’s bounty held in fewer and fewer hands. And Bush’s tax cuts are only making the problem worse By Paul Krugman 12/22/06 “Rollingstone” — – Why doesn’t Bush get credit for the strong economy?” That question has been asked over and over again in recent months by political pundits. After all, they point out, the gross domestic product is up; unemployment, at least according to official figures, is low by historical standards; and stocks have recovered much of the ground they lost in the early years of the decade, with the Dow surpassing 12,000 for the first time. Yet the public remains deeply unhappy with the state of the economy. In a recent poll, only a minority of Americans rated the economy as “excellent” or “good,” while most consider it no better than “fair” or “poor.” Are people just ungrateful? Is the administration failing to get its message out? Are the news media, as conservatives darkly suggest, deliberately failing to report the good news? None of the above. The reason most Americans think the economy is fair to poor is simple: For most Americans, it really is fair to poor. Wages have failed to keep up with rising prices. Even in 2005, a year in which the economy grew quite fast, the income of most non-elderly families lagged behind inflation. The number of Americans in poverty has risen even in the face of an official economic recovery, as has the number of Americans without health insurance. Most Americans are little, if any, better off than they were last year and definitely worse off than they were in 2000. But how is this possible? The economic pie is getting bigger — how can it be true that most Americans are getting smaller slices? The answer, of course, is that a few people are getting much, much bigger slices. Although wages have stagnated since Bush took office, corporate profits have doubled. The gap between the nation’s CEOs and average workers is now ten times greater than it was a generation ago. And while Bush’s tax cuts shaved only a few hundred dollars off the tax bills of most Americans, they saved the richest one percent more than $44,000 on average. In fact, once all of Bush’s tax cuts take effect, it is estimated that those with incomes of more than $200,000 a year — the richest five percent of the population — will pocket almost half of the money. Those who make less than $75,000 a year — eighty percent of America — will receive barely a quarter of the cuts. In the Bush era, economic inequality is on the rise. Rising inequality isn’t new. The gap between rich and poor started growing before Ronald Reagan took office, and it continued to widen through the Clinton years. But what is happening under Bush is something entirely unprecedented: For the first time in our history, so much growth is being siphoned off to a small, wealthy minority that most Americans are failing to gain ground even during a time of economic growth — and they know it. A merica has never been an egalitarian society, but during the New Deal and the Second World War, government policies and organized labor combined to create a broad and solid middle class. The economic historians Claudia Goldin and Robert Margo call what happened between 1933 and 1945 the Great Compression: The rich got dramatically poorer while workers got considerably richer. Americans found themselves sharing broadly similar lifestyles in a way not seen since before the Civil War. But in the 1970s, inequality began increasing again — slowly at first, then more and more rapidly. You can see how much things have changed by comparing the state of affairs at America’s largest employer, then and now. In 1969, General Motors was the country’s largest corporation aside from AT&T, which enjoyed a government-guaranteed monopoly on phone service. GM paid its chief executive, James M. Roche, a salary of $795,000 — the equivalent of $4.2 million today, adjusting for inflation. At the time, that was considered very high. But nobody denied that ordinary GM workers were paid pretty well. The average paycheck for production workers in the auto industry was almost $8,000 — more than $45,000 today. GM workers, who also received excellent health and retirement benefits, were considered solidly in the middle class. Today, Wal-Mart is America’s largest corporation, with 1.3 million employees. H. Lee Scott, its chairman, is paid almost $23 million — more than five times Roche’s inflation-adjusted salary. Yet Scott’s compensation excites relatively little comment, since it’s not exceptional for the CEO of a large corporation these days. The wages paid to Wal-Mart’s workers, on the other hand, do attract attention, because they are low even by current standards. On average, Wal-Mart’s non-supervisory employees are paid $18,000 a year, far less than half what GM workers were paid thirty-five years ago, adjusted for inflation. And Wal-Mart is notorious both for how few of its workers receive health benefits and for the stinginess of those scarce benefits. The broader picture is equally dismal. According to the federal Bureau of Labor Statistics, the hourly wage of the average American non-supervisory worker is actually lower, adjusted for inflation, than it was in 1970. Meanwhile, CEO pay has soared — from less than thirty times the average wage to almost 300 times the typical worker’s pay. The widening gulf between workers and executives is part of a stunning increase in inequality throughout the U.S. economy during the past thirty years. To get a sense of just how dramatic that shift has been, imagine a line of 1,000 people who represent the entire population of America. They are standing in ascending order of income, with the poorest person on the left and the richest person on the right. And their height is proportional to their income — the richer they are, the taller they are. Start with 1973. If you assume that a height of six feet represents the average income in that year, the person on the far left side of the line — representing those Americans living in extreme poverty — is only sixteen inches tall. By the time you get to the guy at the extreme right, he towers over the line at more than 113 feet. Now take 2005. The average height has grown from six feet to eight feet, reflecting the modest growth in average incomes over the past generation. And the poorest people on the left side of the line have grown at about the same rate as those near the middle — the gap between the middle class and the poor, in other words, hasn’t changed. But people to the right must have been taking some kind of extreme steroids: The guy at the end of the line is now 560 feet tall, almost five times taller than his 1973 counterpart. What’s useful about this image is that it explodes several comforting myths we like to tell ourselves about what is happening to our society. MYTH #1: INEQUALITY IS MAINLY A PROBLEM OF POVERTY. According to this view, most Americans are sharing in the economy’s growth, with only a small minority at the bottom left behind. That places the onus for change on middle-class Americans who — so the story goes — will have to sacrifice some of their prosperity if they want to see poverty alleviated. But as our line illustrates, that’s just plain wrong. It’s not only the poor who have fallen behind — the normal-size people in the middle of the line haven’t grown much, either. The real divergence in fortunes is between the great majority of Americans and a very small, extremely wealthy minority at the far right of the line. MYTH #2: INEQUALITY IS MAINLY A PROBLEM OF EDUCATION. This view — which I think of as the eighty-twenty fallacy — is expressed by none other than Alan Greenspan, former chairman of the Federal Reserve. Last year, Greenspan testified that wage gains were going primarily to skilled professionals with college educations — “essentially,” he said, “the top twenty percent.” The other eighty percent — those with less education — are stuck in routine jobs being replaced by computers or lost to imports. Inequality, Greenspan concluded, is ultimately “an education problem.” It’s a good story with a comforting conclusion: Education is the answer. But it’s all wrong. A closer look at our line of Americans reveals why. The richest twenty percent are those standing between 800 and 1,000. But even those standing between 800 and 950 — Americans who earn between $80,000 and $120,000 a year — have done only slightly better than everyone to their left. Almost all of the gains over the past thirty years have gone to the fifty people at the very end of the line. Being highly educated won’t make you into a winner in today’s U.S. economy. At best, it makes you somewhat less of a loser. MYTH #3: INEQUALITY DOESN’T REALLY MATTER. In this view, America is the land of opportunity, where a poor young man or woman can vault into the upper class. In fact, while modest moves up and down the economic ladder are common, true Horatio Alger stories are very rare. America actually has less social mobility than other advanced countries: These days, Horatio Alger has moved to Canada or Finland. It’s easier for a poor child to make it into the upper-middle class in just about every other advanced country — including famously class-conscious Britain — than it is in the United States. Not only can few Americans hope to join the ranks of the rich, no matter how well educated or hardworking they may be — their opportunities to do so are actually shrinking. As best we can tell, pretax incomes are now as unequally distributed as they were in the 1920s — wiping out virtually all of the gains made by the middle class during the Great Compression. There’s a famous scene in the 1987 movie Wall Street in which Gordon Gekko, the corporate predator played by Michael Douglas, tells a meeting of stunned shareholders that greed is good, that the unbridled pursuit of individual wealth serves the interests of the company and the nation. In the movie, Gekko gets his comeuppance; in real life, the Gordon Gekkos took over both corporate America and, eventually, our political system. Oliver Stone didn’t conjure Gekko’s “greed” line out of thin air. It was based on a real speech given by corporate raider Ivan Boesky — and it reflected what many corporate executives, conservative intellectuals and right-wing politicians were saying at the time. It’s no coincidence that ringing endorsements of greed began to be heard at the same time that the actual incomes of America’s rich began to soar. In part, the new pro-greed ideology was a way of rationalizing what was already happening. But it was also, to an important extent, a cause of the phenomenon. In the past thirty years, right-wing foundations have devoted enormous resources to promoting this agenda, building a far-reaching network of think tanks, media outlets and conservative scholars to legitimize higher levels of inequality. “On average, corporate America pays its most important leaders like bureaucrats,” the Harvard Business Review lamented in 1990, calling for higher pay for top executives. “Is it any wonder then that so many CEOs act like bureaucrats?” Although corporate executives have always had the power to pay themselves lavishly, their self-enrichment was limited by what Lucian Bebchuk, Jesse Fried and David Walker — the leading experts on exploding executive paychecks — call the “outrage constraint.” What they mean is that a conspicuously self-dealing CEO would be forced to moderate his greed by unions, the press and politicians: The social climate itself condemned executive salaries that seem immodest. Lately, however, we have experienced a death of outrage. Thanks to the right’s well-funded and organized effort, corporate executives now feel no shame in lining their pockets with huge bonuses and gigantic stock options. Such self-dealing is justified, they say: Greed is what made America great, and greedy executives are exactly what corporate America needs. At the same time, there has been a concerted attack on the institutions that have helped moderate inequality — in particular, unions. During the Great Compression, the rate of unionization nearly tripled; by 1945, more than one in three American workers belonged to a union. A lot of what made General Motors the relatively egalitarian institution it was in the 1960s had to do with its powerful union, which was able to demand high wages for its members. Those wages, in turn, set a standard that elevated the income of workers who didn’t belong to unions. But today, in the era of Wal-Mart, fewer than one in eleven workers in the private sector is organized — effectively preventing hundreds of thousands of working Americans from joining the middle class. Why isn’t Wal-Mart unionized? The answer is simple and brutal: Business interests went on the offensive against unions. And we’re not talking about gentle persuasion; we’re talking about hardball tactics. During the late 1970s and early 1980s, at least one in every twenty workers who voted for a union was illegally fired; some estimates put the number as high as one in eight. And once Ronald Reagan took office, the anti-union campaign was aided and abetted by political support at the highest levels. Unions weren’t the only institution that fostered income equality during the generation that followed the Great Compression. The creation of a national minimum wage also set a benchmark for the entire economy, boosting the bargaining position of workers. But under Reagan, Congress failed to raise the minimum wage, allowing its value to be eroded by inflation. Between 1981 and 1989, the minimum wage remained the same in dollar terms — but inflation shrank its purchasing power by twenty-five percent, reducing it to the lowest level since the 1950s. After Reagan left office, there was a partial reversal of his anti-labor policies. The minimum wage was increased under the elder Bush and again under Clinton, restoring about half the ground it lost under Reagan. But then came Bush the Second — and the balance of power shifted against workers and the middle class to a degree not seen since the Gilded Age. During the 2000 election campaign, George W. Bush joked that his base consisted of the “haves and the have mores.” But it wasn’t much of a joke. Not only has the Bush administration favored the interests of the wealthiest few Americans over those of the middle class, it has consistently shown a preference for people who get their income from dividends and capital gains, rather than those who work for a living. Under Bush, the economy has been growing at a reasonable pace for the past three years. But most Americans have failed to benefit from that growth. All indicators of the economic status of ordinary Americans — poverty rates, family incomes, the number of people without health insurance — show that most of us were worse off in 2005 than we were in 2000, and there’s little reason to think that 2006 was much better. So where did all the economic growth go? It went to a relative handful of people at the top. The earnings of the typical full-time worker, adjusted for inflation, have actually fallen since Bush took office. Pay for CEOs, meanwhile, has soared — from 185 times that of average workers in 2003 to 279 times in 2005. And after-tax corporate profits have also skyrocketed, more than doubling since Bush took office. Those profits will eventually be reflected in dividends and capital gains, which accrue mainly to the very well-off: More than three-quarters of all stocks are owned by the richest ten percent of the population. Bush wasn’t directly responsible for the stagnation of wages and the surge in profits and executive compensation: The White House doesn’t set wage rates or give CEOs stock options. But the government can tilt the balance of power between workers and bosses in many ways — and at every juncture, this government has favored the bosses. There are four ways, in particular, that the Bush administration has helped make the poor poorer and the rich richer. First, like Reagan, Bush has stood firmly against any increase in the minimum wage, even as inflation erodes the value of a dollar. The minimum wage was last raised in 1997; since then, inflation has cut the purchasing power of a minimum-wage worker’s paycheck by twenty percent. Second, again like Reagan, Bush has used the government’s power to make it harder for workers to organize. The National Labor Relations Board, founded to protect the ability of workers to organize, has become for all practical purposes an agent of employers trying to prevent unionization. A spectacular example of this anti-union bias came just a few months ago. Under U.S. labor law, legal protections for union organizing do not extend to supervisors. But the Republican majority on the NLRB ruled that otherwise ordinary line workers who occasionally tell others what to do — such as charge nurses, who primarily care for patients but also give instructions to other nurses on the same shift — will now be considered supervisors. In a single administrative stroke, the Bush administration stripped as many as 8 million workers of their right to unionize. Third, the administration effectively blocked what might have been a post-Enron backlash against self-dealing corporate insiders. Corporate scandals dominated the news in the first half of 2002 — but then the subject was changed to the urgent need to invade Iraq, and the drive for reform was squelched. With Americans focused on the war, CEOs are once again rewarding themselves at impressive — and unprecedented — levels. Finally, there’s the government’s most direct method of affecting incomes: taxes. In this arena, Bush has made sure that the rich pay lower taxes than they have in decades. According to the latest estimates, once the Bush tax cuts have taken full effect, more than a third of the cash will go to people making more than $500,000 a year — a mere 0.8 percent of the population. It’s easy to get confused about the Bush tax cuts. For one thing, they are designed to confuse. The core of the Bush policy involves cutting taxes on high incomes, especially on the income wealthy Americans receive from capital gains and dividends. You might say that the Bush administration favors people who live off their wealth over people who have a job. But there are some middle-class “sweeteners” thrown in, so the administration can point to a few ordinary American families who have received significant tax cuts. Furthermore, the administration has engaged in a systematic campaign of disinformation about whose taxes have been cut. Indeed, one of Bush’s first actions after taking office was to tell the Treasury Department to stop producing estimates of how tax cuts are distributed by income class — that is, information on who gained how much. Instead, official reports on taxes under Bush are textbook examples of how to mislead with statistics, presenting a welter of confusing numbers that convey the false impression that the tax cuts favor middle-class families, not the wealthy. In reality, only a few middle-class families received a significant tax cut under Bush. But every wealthy American — especially those who live off of stock earnings or their inheritance — got a big tax cut. To picture who gained the most, imagine the son of a very wealthy man, who expects to inherit $50 million in stock and live off the dividends. Before the Bush tax cuts, our lucky heir-to-be would have paid about $27 million in estate taxes and contributed 39.6 percent of his dividend income in taxes. Once Bush’s cuts go into effect, he could inherit the whole estate tax-free and pay a tax rate of only fifteen percent on his stock earnings. Truly, this is a very good time to be one of the have mores. It’s worth noting that Bush doesn’t simply favor the upper class: It’s the upper-upper class he cares about. That became clear last fall, when the House and Senate passed rival tax-cutting bills. (What were they doing cutting taxes yet again in the face of a huge budget deficit and an expensive war? Never mind.) The Senate bill was devoted to providing relief to middle-class wage earners: According to the Tax Policy Center, two-thirds of the Senate tax cut would have gone to people with incomes of between $100,000 and $500,000 a year. Those making more than $1 million a year would have received only eight percent of the cut. The House bill, by contrast, focused on extending tax cuts on capital gains and dividends. More than forty percent of the House cuts would have flowed to the $1 million-plus group; only thirty percent to the 100K to 500K taxpayers. The White House favored the House bill — and the final, reconciled measure wound up awarding a quarter of the benefits to America’s millionaires. That, in a nutshell, is the politics of income inequality under Bush. Oh, one last thing: What about the claim that the Bush tax cuts did wonders for economic growth? In fact, job creation has been much slower under Bush than under Clinton, and overall growth since 2003 is largely the result of the huge housing boom, which has more to do with low interest rates than with taxes. But the biggest irony of all is that the real boom — the one in the 1990s — followed tax changes that were the reverse of Bush’s policies. Clinton raised taxes on the rich, and the economy prospered. A generation ago the distribution of income in the United States didn’t look all that different from that of other advanced countries. We had more poverty, largely because of the unresolved legacy of slavery. But the gap between the economic elite and the middle class was no larger in America than it was in Europe. Today, we’re completely out of line with other advanced countries. The share of income received by the top 0.1 percent of Americans is twice the share received by the corresponding group in Britain, and three times the share in France. These days, to find societies as unequal as the United States you have to look beyond the advanced world, to Latin America. And if that comparison doesn’t frighten you, it should. The social and economic failure of Latin America is one of history’s great tragedies. Our southern neighbors started out with natural and human resources at least as favorable for economic development as those in the United States. Yet over the course of the past two centuries, they fell steadily behind. Economic historians such as Kenneth Sokoloff of UCLA think they know why: Latin America got caught in an inequality trap. For historical reasons — the kind of crops they grew, the elitist policies of colonial Spain — Latin American societies started out with much more inequality than the societies of North America. But this inequality persisted, Sokoloff writes, because elites were able to “institutionalize an unequal distribution of political power” and to “use that greater influence to establish rules, laws and other government policies that advantaged members of the elite relative to non-members.” Rather than making land available to small farmers, as the United States did with the Homestead Act, Latin American governments tended to give large blocks of public lands to people with the right connections. They also shortchanged basic education — condemning millions to illiteracy. The result, Sokoloff notes, was “persistence over time of the high degree of inequality.” This sharp inequality, in turn, doomed the economies of Latin America: Many talented people never got a chance to rise to their full potential, simply because they were born into the wrong class. In addition, the statistical evidence shows, unequal societies tend to be corrupt societies. When there are huge disparities in wealth, the rich have both the motive and the means to corrupt the system on their behalf. In The New Industrial State, published in 1967, John Kenneth Galbraith dismissed any concern that corporate executives might exploit their position for personal gain, insisting that group decision-making would enforce “a high standard of personal honesty.” But in recent years, the sheer amount of money paid to executives who are perceived as successful has overridden the restraints that Galbraith believed would control executive greed. Today, a top executive who pumps up his company’s stock price by faking high profits can walk away with vast wealth even if the company later collapses, and the small chance he faces of going to jail isn’t an effective deterrent. What’s more, the group decision-making that Galbraith thought would prevent personal corruption doesn’t work if everyone in the group can be bought off with a piece of the spoils — which is more or less what happened at Enron. It is also what happens in Congress, when corporations share the spoils with our elected representatives in the form of generous campaign contributions and lucrative lobbying jobs. As the past six years demonstrate, such political corruption only worsens as economic inequality rises. Indeed, the gap between rich and poor doesn’t just mean that few Americans share in the benefits of economic growth — it also undermines the sense of shared experience that binds us together as a nation. “Trust is based upon the belief that we are all in this together, part of a ‘moral community,’ ” writes Eric Uslaner, a political scientist at the University of Maryland who has studied the effects of inequality on trust. “It is tough to convince people in a highly stratified society that the rich and the poor share common values, much less a common fate.” In the end, the effects of our growing economic inequality go far beyond dollars and cents. This, ultimately, is the most pressing question we face as a society today: Will the United States go down the path that Latin America followed — one that leads to ever-growing disparity in political power as well as in income? The United States doesn’t have Third World levels of economic inequality — yet. But it is not hard to foresee, in the current state of our political and economic scene, the outline of a transformation into a permanently unequal society — one that locks in and perpetuates the drastic economic polarization that is already dangerously far advanced.

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 Comments (64) > Jun 7, 2011 by  Daniel R. Cobb18 comments

Op-Ed: The American GOP: Spoon-feeding the rich, bankrupting the nation

The GOP has executed the largest transfer of wealth in U.S. history. Due to unfair tax schemes and an obsession for selling out to corporations while hobbling the middle class, the U.S. has record numbers of billionaires and people living in poverty.
The world’s most powerful political block is the U.S. Republican Party, a party that dominates American politics, is heavily funded by the world’s wealthiest corporations and individuals, and devoutly caters to their class. While progressive nations struggle with efforts to advance the quality of life for the average citizen, the U.S. Republican Party makes little effort to hide its true allegiance. In good economic times and bad, even in the face of dangerously high U.S. deficits, the Republican Party’s decades-old obsession is still to cut personal income taxes for the rich, cut corporate income taxes, cut capital gains taxes, and cut inheritance and estate taxes, all while slashing programs that benefit those truly in need. After decades of fiscal mismanagement, the consequences are clear. Today the effective income tax on the wealthy is the lowest it’s been since 1932, nearly 80 years. The highest personal income tax rate is 35%, but because of numerous loopholes, most of which can only be used by the rich, the wealthiest Americans pay only 17 percent of their income in taxes (Atlantic Wire). The extension of the Bush tax cuts passed in 2010 will, on average, give $146,000 in annual tax savings to each of the wealthiest Americans. This is more than three times the income that the average American will earn in one year. (Mother Jones) And it’s not just wealthy individuals. Despite trillions of dollars in sales, many highly successful of companies doing business in the United States pay no federal income taxes. This is because even though the corporate tax rate is set at 35%, the smorgasbord of Republican-favored loopholes and credits dramatically reduces or even eliminates the corporate tax bill. (Reuters News, New York times) Two glaring examples are General Electric and Exxon-Mobil. In FY 2010 GE globally generated $149 billion in gross income and $13.8 billion in pretax income, with $5 billion of that earned in the U.S, but GE paid no federal income taxes. In fact, it recorded tax credits of more than $3 billion. Yes, American taxpayers gave GE $3.3 billion, almost the same amount that GE paid out in foreign taxes. (New York Times) In 2010 Exxon-Mobil, the most profitable company in the world, earned over $30 billion in profits on gross revenue of over $350 billion and paid no U.S federal income taxes. In fact, the industry receives over $4 billion per year in direct taxpayer handouts to promote drilling – as if the energy industry needs to be motivated to drill. This contradiction is obscene. (New York Times) Corporate taxes accounted for about 9 percent of all U.S federal revenue in 2010. At a paltry $191 billion, this is equal to only 1.3 percent of the nation’s gross domestic product. Other industrial countries collect roughly 2.5 percent of output, or twice what the United States collects. Compared to the rest of the world, corporations in the U.S. are under taxed by roughly half. Yet the Republicans insist on cutting corporate income taxes even more. (New York Times) Consequences Nations are measured by the standard of living of their citizens, by factors like infant mortality, life expectancy, access to health care, income disparity between the rich and the poor, and real wage growth. Americans often claim proudly and naively that the U.S. leads the world in most of these metrics, but what are the facts? Current tax laws, loopholes, and preferential legislation have made the richest Americans stratospherically wealthy, while middle-class wages have stagnated for decades and nearly 50 million Americans have slipped into poverty. Cuts to social programs such as student grants and low interest loans, child nutrition programs, low-income housing programs, and job re-training programs result in millions of lost opportunities to fundamentally change the status quo. In 1987, the average bonus on Wall Street was $30,000 (in today’s dollars). Shockingly, the average Wall Street bonus in 2007 was $180,000, a six-fold increase – while average American wages have stagnated. Over the last 20 years, the average American’s income has remained flat, yet the wealth amassed by the rich has exploded. According to data from the Internal Revenue Service, in 2008, the top 3 percent of Americans earned nearly $25 trillion, equal to 30 percent of the total income earned in America. Additionally, the top 0.6 percent of returns, 1 million filers, accounted for nearly 18 percent of the nation’s total income, or $14 trillion. The income gap between the rich and the poor is more severe today than at any time since the 1920s, just before the start of the Great Depression. According to the American CIA, income disparity is more severe in the United States than in 97 other countries, including China, Iran, Russia, Egypt, and all of Europe. Nearly 1 in 3 American working families is struggling just to meet basic needs. Except for the privileged top 3 percent, the United States is falling behind. Fully 28,000 American children under one year of age die each year in the U.S. The infant death rate declined from 1950 until 2000, but has since remained at around 6.8 deaths per thousand births. In 2005, the U.S. was ranked 30th in the world for infant deaths, equal to Poland and Slovakia, and behind nearly all other industrialized nations including Canada, most of Europe, and Israel. The rate of infant deaths in Japan is 2.9, less than half of the U.S. rate. For the U.S, this is a travesty. (Reuters News) According to data from the American CIA, the U.S. ranks 50th in life expectancy against other nations, down from 11th place 25 years earlier. A person born in the United States in 2011 will live an average of 78.4 years, while the average age at death for a citizen in Macao is 84.4, and 89.7 in Monaco. (CIA World Fact Book) Republican obsessions are not limited to giveaways to the wealthy. Following are some of the most recent examples of the long-term, legislative battle the party has waged on the health and well-being of the middle class and those suffering in poverty. One can go back decades and find hundreds of examples. Senate Republicans Block Boost in Minimum Wage Los Angeles Times, June 2006 Senate Republicans block minimum wage hike Reuters News, Jan 2007 Republicans call for lowering, eliminating federal minimum wageExaminer, Oct 2010 Republicans Block 9/11 Health-Care Bill Wall Street Journal, Dec. 2010 … A bill to provide health care for sick Ground Zero workers failed a Senate vote, as Republicans remained united in opposition… Republicans block child nutrition bill – | The Raw Story, Dec. 2010 … Republicans block legislation to feed more children, improve school lunches. GOP Senator Mike Lee of Utah: Federal ban on child labor is unconstitutional The Raw Story, Jan. 2011 … New Republican senator wants to throw out half-century-old child labor laws that have already been upheld by the Supreme Court. House GOP Block Extension of Jobless Benefits CBS News, Nov. 2011 … Republicans in the House Thursday blocked a bill that would have extended jobless benefits for the long-term unemployed through the 2010 Christmas holiday season. House Republicans want to cut WIC by 10%CNN, Feb. 2011 … In the middle of the worst recession since the Great Depression, Republicans plan to cut funding for mothers in need of food assistance and related services provided by the federal Women Infants, and Children (WIC) nutritional program. House Republicans’ Spending Bill Would Cut Pell Grant The Chronicle, Feb. 2011… For millions of Americans, the only way out of a recession is education. However the Republicans pushed to cut the Pell Grant by $845 to each of the neediest students now, and make 1.7 million students ineligible for Pell Grants. Republicans Move to Block COBRA Benefits Extension Rollcall, Feb. 2010 … GOP denies an extension of unemployment insurance and COBRA health care benefits to millions of unemployed. GOP blocks Senate action on mine safety bill Coal Tattoo, Sept 2010 … Following a decade that saw 70 deaths in six major coal mining disasters in the U.S., the Obama Administration proposed badly needed mine safety reforms. The Republicans quickly moved to block the rules, claiming they were too expensive and would hurt industry profits. White House slams Republican offshore drilling bill Reuters News, May 2011… Following the Deepwater Horizon disaster that killed 11 and injured 17 workers and created the worst oil-related environmental disaster in world history, the Republicans moved to defeat new drilling safety reforms. Republicans block investigation of BP oil spill Youtube, MSNBC, Sept. 2010… In a stunning and grand display of irresponsibility and abuse of power, Senate Republicans blocked the subpoena power of the bipartisan commission investigating the infamous BP Oil spill. What possibly criminal behavior by BP officials did the Republicans not want to have discovered? Republicans block attempt to repeal $21 billion in Big Oil subsidies Think Progress, May 2011… The oil industry is the most profitable in the world, yet the U.S. taxpayer subsidizes the industry to the tune of $21 billion. Republicans block Democratic attempts to eliminate these costly and completely unnecessary subsidies. Republicans block Wall Street reform bill, Apr. 2010 … Following the most destructive meltdown in the American financial system since the Great Depression, senate Republicans worked to block a Democratic effort to bring needed reform and oversight to Wall Street. Who benefits? Possibly criminal bankers and investment houses. Republicans Block Bill to Tax Firms That Export Jobs NPR, Sept. 2010… Unbelievably, American companies are actually given tax breaks by the U.S. for sending job overseas. To correct this costly absurdity, Democrats proposed a Senate bill that would tax companies that send jobs overseas and reward those that bring them back. Republicans promptly blocked it. Republicans block campaign finance disclosure billCNN, July 2010… In the wake of a Supreme Court ruling that gave corporations and wealthy individuals the ability to secretly spend unlimited sums of money on political campaigns – thereby defeating over 100 years of U.S. campaign finance laws – the Democrats proposed the Disclose Act. The Act would have required the disclosure of all political contributors and their amounts. Of course, the Republicans reliably blocked passage of the Disclose Act. Senate Republicans promise to block all legislation until Bush tax cuts are extended – Newsweek, Dec. 2010… Yes, you read it correctly. Republicans refused to consider all other legislation and effectively shutdown the U.S. Congress until the Democrats agreed to extend the Bush tax cuts. President Obama had already agreed to extend tax cuts for the middle class, but for the Republicans, tax cuts for the rich always take top priority. Bachmann plan would cut veterans benefits Air Force Times, Jan. 2011 … Tea party favorite Rep. Michele Bachmann, R-Minn., has unveiled a plan for cutting $400 billion in federal spending that includes cutting veteran’s disability payments. The end of Medicare/Medicaid: Republican cuts target Medicaid, Medicare, Apr. 3, 2011 … The Republican Medicare/Medicaid proposal would move seniors to private insurance carriers and eliminate Medicare and Medicaid as they currently exist. Much of the decade’s increase in health care costs can be blamed on the insurance companies – the five largest carriers earned $11.7 billion in profits in 2010 – a staggering 51% increase since 2008. The Republicans think this is how health care should be managed for the entire country: Give it all to the insurance companies, who cut patient services, cancel policies when patients gets sick, push premiums through the roof, and pocket record profits and CEO bonuses. Republicans Protect Billions in Health Insurance In such a severe recession, the millions of unemployed Americans who have lost health care, are barely living month-to-month, are unable to adequately feed their children, or are trying to advance through education, these millions of people are the least able to absorb cuts to services. Yet, the endless Republican drumbeat is to give away billions in tax cuts to the rich, who do not need the money, by slashing critically important social programs and exploding the federal debt. The stated Republican belief is that somehow, this free wealth will trickle down from the rich to the poor. This logic is not only absurd, it’s a callous expression of contempt for millions of Americans. And this dogma has been proved utterly false in this recession by a few simple facts: Many large corporations are now enjoying record profits but are NOT hiring because they have been able to squeeze even more productivity out of workers frightened of job loss. Businesses only hire when they absolutely must, not when they are moved by benevolence. The giant tax refunds for the wealthy don’t go to purchase the necessities of rent, food, appliances, utilities, clothes, etc., but are simply invested in CDs, tax shelters, stocks, foreign investments, etc. These investments don’t stimulate the economy directly and may actually have a negative effect because money in foreign investments leaves the country. In fact, as reported in the Atlantic, testimony given by the non-partisan Congressional Budget Office found in September of 2010 that the $100 billion in tax cuts given to those with income above $250,000 would no affect on reducing the unemployment at all. None. Based on Republican priorities, we can’t help the poorest among us to lift themselves up, but we can give $21 billion to the wealthiest companies on earth. We can’t help our own young people get through college, but we can give billions in tax cuts to the wealthiest who do not need the money. We can’t provide needed nutritional and medical assistance to unwed mothers or afford to pay full disability to our veterans, but we can buy a new $8 billion nuclear-powered aircraft carrier ( The rationale the Republicans use to keep throwing billions of dollars at the wealthiest while the nation sinks into economic despair is utterly broken, and decades of history prove it. And the message sent to our own fellow American citizens, many of them veterans of our ongoing wars? You don’t matter. This obstructionist, Republican dominated government simply does not work for you. In fact, if you’re lucky enough to be employed, you work for it.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
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How Washington F@#$%! the budget

Since 2001, lawmakers time and again have cut taxes or increased spending without finding ways to pay for their decisions. Both parties share the blame.

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Bush tax cuts: 2001, 2003 and 2006
Bush tax cuts: 2001, 2003 and 2006
After a brief few years of budget surpluses at the end of the Clinton administration, lawmakers opened the new century by blowing a hole in the budget with major tax cuts. The Bush tax cuts carried an initial 10-year cost estimate of $1.35 trillion, according to the Congressional Budget Office. They were reauthorized and expanded in 2003, and then again in 2006. In 2010, President Obama signed another extension. The cost of the latest two-year extension? $544.3 billion. Proponents argued that the tax cuts would spur economic growth. But Democrat Tom Daschle, then the Senate majority leader, warned in 2001 that the cuts were too large and too expensive. “I just know that at some point that reality is going to come crashing down on all of us and we’re going to have to deal with it,” Daschle said.
By Charles Riley, staff reporter

NEXT: War funding: 2001 to present

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War funding: 2001 to present
War funding: 2001 to present
In order to fund wars in Iraq and Afghanistan, Presidents Bush and Obama have spent more than $1 trillion on direct costs alone. On top of that, annual defense spending has just about doubled since 2001, rising to almost $700 billion in 2010. Military spending now accounts for more 20% of the entire federal budget. Obama ordered more troops to Afghanistan in 2009, while he has simultaneously drawn down forces in Iraq. Costs are still sky-high. In February, Obama requested $118 billion to fund the wars just for fiscal year 2012.

NEXT: Medicare drug benefit: 2003

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Medicare drug benefit: 2003
Medicare drug benefit: 2003
Without finding a way to pay for it, Congress passed a law in 2003 that expanded prescription drug benefits for seniors on Medicare. Originally estimated to cost $395 billion over 10 years, costs are now expected to be much higher — and there is no expiration date. Bush characterized the measure as “the greatest advance in health care coverage for America’s seniors since the founding of Medicare.” But there was no corresponding tax increase or spending cuts to pay for it. Now, it’s estimated that Medicare Part D will cost about $1 trillion dollars over the next 10 years.

NEXT: Bush stimulus: 2008

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Bush stimulus: 2008
Bush stimulus: 2008
With economic indicators signaling a slowdown, lawmakers mounted a bipartisan effort to move a $168 billion stimulus package through Congress in hopes of stopping the recession in its tracks. The tax cuts and other incentives — totaling around 1% of GDP — weren’t paid for. Bush praised the quick work of Congress and urged Americans not to “overreact” to the economic troubles. But by the time the nation recovers, the government will have pumped trillions into the economy.

NEXT: TARP bailouts: 2008

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TARP bailouts: 2008
TARP bailouts: 2008
In October 2008, Congress authorized the Treasury Department to spend up to $700 billion to help stabilize financial markets. The money would be used to bail out banks and Wall Street firms, finance General Motors and Chrysler’s trips through bankruptcy and help homeowners modify mortgages they could no longer afford. When lawmakers authorized Treasury Secretary Henry Paulson (right) to tap the aid, it was unknown how much would ever be returned to the Treasury. Turns out, the bank bailouts have turned a small profit, while taxpayers are still holding the bag for bailouts for the auto industry and AIG. According to the latest CBO estimate, TARP — the whole program — will ultimately cost taxpayers $19 billion.

NEXT: American Recovery Act: 2009

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American Recovery Act: 2009
American Recovery Act: 2009
In the face of a deepening recession, Congress put together a massive stimulus package. A combination government spending and tax cuts, the bill included money for infrastructure, energy-related projects and unemployment benefits, among other items. It was originally estimated to cost $787 billion but later revised to $862 billion. Not a single Republican in the House voted for the bill. “Just because Republicans spent too much money after September 11 and lost our way on financial matters doesn’t mean the Democratic Party should be allowed to wreck our ship of state,” said Republican Congressman Zach Wamp. “This is taking us quickly down the wrong road. Vote no.”

NEXT: Obama tax package: 2010

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Obama tax package: 2010
Obama tax package: 2010
Sold as a form of stimulus, this legislation included a reduction in the estate tax threshold, a patch for the alternative minimum tax, a partial one-year payroll tax holiday and some additional tax breaks for businesses that invest in plants and equipment. It also included an extension of the Bush tax cuts through the end of 2012, and is projected to cost $858 billion over ten years. The spending and tax cuts in the bill were, once again, not offset by any increase in federal revenue. With both the annual budget deficit and public debt hitting record levels, and the House now controlled by cut-happy Republicans, the debate has shifted to reducing the size and scope of government.

NEXT: Debt at the breaking point

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Debt at the breaking point
Debt at the breaking point
There is plenty of blame to go around for the nation’s current budget troubles. Democrats and Republicans alike pushed major legislation that increased government spending, without corresponding increases in revenue. Of course, there was also the deep recession, which started in 2007 and caused tax revenue to plummet. Today, the national debt stands at more than $14 trillion, and Washington is gearing up for a brawl over the debt ceiling, which will have to be raised sometime in the next month or so. Both sides agree the debt must be addressed, though there’s little agreement on how to get there. Stay tuned!

see HERE>

you’re reading…

Chart: Bush’s Wars & Tax Cuts Led To Current U.S. Debt Crisis

Click image below to enlarge, or see HERE from Obama’s explanation from his famous debt speech: “….. America’s finances were in great shape by the year 2000. We went from deficit to surplus. America was actually on track to becoming completely debt-free, and we were prepared for the retirement of the Baby Boomers. But after Democrats and Republicans committed to fiscal discipline during the 1990s, we lost our way in the decade that followed. We increased spending dramatically for two wars and an expensive prescription drug program – but we didn’t pay for any of this new spending. Instead, we made the problem worse with trillions of dollars in unpaid-for tax cuts – tax cuts that went to every millionaire and billionaire in the country; tax cuts that will force us to borrow an average of $500 billion every year over the next decade. To give you an idea of how much damage this caused to our national checkbook, consider this: in the last decade, if we had simply found a way to pay for the tax cuts and the prescription drug benefit, our deficit would currently be at low historical levels in the coming years. Of course, that’s not what happened. And so, by the time I took office, we once again found ourselves deeply in debt ….. …..” > Click  image below to enlarge and see who really is behind this immediate debt crisis, [and of course the entire usury based economy, the large corporation dominance, the financialization of commodities, the swaps and derivatives, the federal reserve Ponzi scheme, etc ..etc…etc … all have their role in this mess also. See original HERE >

America has a long history of raising the debt limit to accommodate spending. Below, a look at some of the issues in the debate over the nation’s debt.

Published: July 28

How the U.S. Got $14 Trillion in Debt and Who Are the Creditors

Who Holds the Debt
$14.3 trillion
When the Debt Was Accumulated
The PublicForeign CountriesU.S. Gov’tIncludes debt held by individuals, corporations, banks and insurance companies, pension and mutual funds, state and local governments.ChinaJapanBritainOil-exporting countriesOther countriesFederal Reserve System Includes collateral for U.S. currency and store of liquidity for emergency needs.Social Security Trust Funds Surpluses generated by the program that have been invested in government bonds.Other gov’t trust fundsPresident Obama (2009-11) Stimulus spending, tax cuts, and the effects of 2007-9 recession in lost revenues and automatic spending, like unemployment compensation.George W. Bush (2001-9) Tax cuts, the wars in Iraq and Afghanistan, economic downturn in 2001 and recession starting in 2007.Bill Clinton (1993-2001) Despite two years of on-budget surpluses, deficit spending in other years added to the debt.George Bush (1989-93) The first gulf war and lower revenue from a recession.Ronald Reagan (1981-89) Peacetime defense spending and permanent tax cuts.Before Reagan (1981 and earlier) Deficit spending from wars and economic downturns.

Sources: Department of the Treasury, Financial Management Service, Bureau of the Public Debt; Federal Reserve Bank of New York; Office of Management and Budget

Published: July 27

Estimates of When the U.S. Will Run Out of Money

If Congress does not raise the debt ceiling, the U.S. Treasury will run out of cash reserves to pay for obligations like Social Security, Medicare and Medicaid, and defense contracts. The chart below shows the amount of the nation’s cash reserves and estimates for when it will run out if the debt ceiling is not raised. Related Article »

May 16 As the U.S. reached its debt limit, the U.S. Treasury instituted what Secretary Geithner called “extraordinary measures” to provide $232 billion while a budget deal was negotiated.
Aug. 3 Obama administration estimate for when it will exhaust its borrowing authority.
Aug. 10 Estimate by many Wall Street and Washington analysts.

Source: Bipartisan Policy Center

Published: April 10

How Often the Debt Limit Has Been Raised

By the Treasury Department’s count, Congress has acted 78 times since 1960 to raise, extend or alter the definition of the debt limit — 49 times under Republican presidents, and 29 times under Democratic presidents. Related Article »

In 1940, the debt limit was about $43 billion. It was raised as high as $300 billion during World War II.
The debt limit has been increased 140 percent since 2000, when it was $6 trillion.
Proposals would raise the limit of $14.3 trillion by $2.5 to $2.7 trillion.

U.S. Debt Limit Since 1940

Debt Limit as a Percentage of G.D.P.

Sources: Office of Management and Budget; Bureau of Economic Analysis

Published: July 26

How Bond Rates Could Rise If the U.S. Rating Is Lowered

If the AAA rating of the United States was lowered, bond rates would most likely rise, making it costlier to pay the interest on its debt. Related Article »

Standard & Poor’s Sovereign
Rating Outlook 10-Year Government Bond Yield
Switzerland AAA Stable 1.5 %
Hong Kong AAA Stable 2.3
Sweden AAA Stable 2.7
Germany AAA Stable 2.7
Canada AAA Stable 2.9
United States AAA Watch Neg. 3.0
Denmark AAA Stable 3.0
Britain AAA Stable 3.1
Netherlands AAA Stable 3.1
Finland AAA Stable 3.1
Norway AAA Stable 3.2
Austria AAA Stable 3.3
France AAA Stable 3.3
Australia AAA Stable 4.9
Belgium AA+ Negative 4.3 %
New Zealand AA+ Negative 5.1
Slovenia AA Negative 4.3 %
Spain AA Negative 6.0
Japan AA– Negative 1.1 %
China AA– Stable 4.1
Slovak Republic A+ Stable 4.2 %
Italy A+ Negative 5.6
Czech Republic A Positive 3.9 %
South Korea A Stable 4.2
Israel A Stable 5.2
Malaysia A– Stable 3.9 %
Poland A– Stable 5.8

Sources: Standard & Poor’s; Bloomberg


Causes of Debt Crisis?

Bush Tax Policies,

Bush Wars

and Bush Drug Plan,

By Lawrence Spaulding

By admin, on July 11th, 2011
First off, I think this issue of the debt ceiling has revealed again and maybe more starkly than others a severely bad habit of the press to need to understand their role as non-partisan as always necessitating their taking the view that both sides of the debate are equally valid or equally a cause of a problem. In this case, both the creation of the gargantuan national debt, and the contributors to the on-going deficit need to be characterized as the fault of both both the Dems and the Rep. While the polices of each may have each have contributed to these problems, there can be little doubt the majors contributors have been policies Republican s have proposed, passed and largely supported. The many phases of the W. Bush’s tax policies, the war in Iraq, the Medicare part D prescription drug plan, being the primary examples. This graph tells you all you need to know about that Next, each side seems somehow to be equally characterized at fault for the partisan mess we are in; that is each side is blamed for being unwilling to compromise. But tell me, on what hasn’t President Obama been willing to at least tip his toes in the water and suffer the slings and arrows of his progressive caucus? Social Security? check. Medicare? check. Medicaid? check. Major budget cuts to domestic programs? Check. Now, name one area in which Republicans have been willing to compromise? (crickets chirping) For criminy how is it socialist apostasy to have tax rates roughly what Ronald Reagan signed into law in 1982? Or the tax rates that G.H.W. Bush signed into law in 1991 that along with Clinton’s budget bills produced budget surpluses by the time G.W.Bush took office with a projected 6 trillion (got it?) budget surplus over ten years? One thing president Obama does recognize is that this is a political problem, appropriately to be solved by political branches. I mention this because some circles have considered that the 14th Amendment might hold the answer: the Debt Limit ceiling is unconstitutional!! Pres. Obama should just ignore the debt ceiling and continue along with business as usual. Why, because Section 4 states: “The validity of the public debt of the United States, authorized by law,…shall not be questioned.” Now I am no Constitutional lawyer, but Barry O is, and he has (at least for now) taken this off the table. Why? I can only guess he sees this as a win-win-win for Republicans. They don’t have to vote for raising the debt limit (WIN), the debt limit gets raised avoiding economic catastrophe (WIN), and they get to pillory the President for avoiding the law, perhaps take him to the Supreme Court, all the time having shirked their responsibility to deal with the issue. No, President Obama will not fall for this, at least not without having long pushed past the debt ceiling point of no return. But back to the way this is being discussed, what astounds me is that the Republicans are listened to as if they are serious, when clearly they are not. What is their economic plan? The Ryan plan? Pass it, and he debt ceiling needs to be raised? Is the deficit the issue? Why not include raising taxes? they claim is will hurt the economy and jobs, but if that is the issue, the who cares about the deficit? Clearly not the bond markets or factors that affect inflation? I cannot say (or rant) this better than Kevin Drum did a week or two ago: “But then, for about the thousandth time, my mind wanders over the past ten years. Republicans got the tax cuts they wanted. They got the financial deregulation they wanted. They got the wars they wanted. They got the unfunded spending increases they wanted. And the results were completely, unrelentingly disastrous. A decade of sluggish growth and near-zero wage increases. A massive housing bubble. Trillions of dollars in war spending and thousands of American lives lost. A financial collapse. A soaring long-term deficit. Sky-high unemployment. All on their watch and all due to policies they eagerly supported. And worse: ever since the predictable results of their recklessness came crashing down, they’ve rabidly and nearly unanimously opposed every single attempt to dig ourselves out of the hole they created for us.” – Lawrence Spaulding [Updated 7/12/2011] – Here are two other people who made a similar argument today about false equivalency in the press:>

The Real Cause of the U.S. Debt Crisis: Spiralling Defense Spending
by Bruce Arnold
Global Research, July 3, 2011
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Contrary to Kleptocracy-scripted CNN newsbytes, the United States Debt Debate is NOT just the false choice between raising taxes on the few and rich versus lowering Medicare for the many and poor:  What always goes unmentioned is MILITARY PORK.Here’s what the Department of Defense (DoD) paid out in just one day on 30 June: here’s what they paid out in just the last month: here’s what they paid out since 7 October 1994:$4 trillion for Iraq and AfPak alone: of that going to multinational corporate giants that pay little if any taxes: of whom have a long history of defrauding the taxpayers: Lockheed-Martin:  First in funding … First in fraud: Boeing Corporation, who charges taxpayers 71 dollars for a 4-cent pin:
Global Research Articles by Bruce Arnold
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Let us not put too fine a point on it: Thursday’s House vote on Speaker John Boehner’s debt ceiling proposal is a joke. If it passes the House, Harry Reid has said it is dead on arrival in the Senate. If it somehow passes the Senate, which it won’t, President Obama will veto it. It is, therefore, a symbolic act that is wasting precious time. It follows last week’s Republican theatrics, the passage of the Cut and Demolish Act (or whatever they called it), which also was a waste of time. These are the actions of a party that has completely lost track of reality–and of a leader, John Boehner, who has lost the support of his party. And so I have a proposal: the Cut the Crap Act. It will have to be passed by Monday, to avoid default. And it will require an act of statesmanship from Boehner: he will have to modify his proposal and cut loose the Tea Party robots who are opposed to a deal of any kind. He will have to find common cause with Harry Reid and, yes, Nancy Pelosi, who are now willing to propose bills that should make any Teasie happy–bills without “revenue increases,” bills with a trillion dollars in budget cuts, more or less. He will have to find 160 sane members of his caucus and Pelosi will have to find 60 extremely tolerant members of hers to get us past this ridiculous moment. The Cut the Crap Act isn’t actually my invention. It is the White House’s best case scenario for the next five days. This has been an exhausting process–one that might have resulted in an exhilarating triumph, if the Republican party were not led by nihilists like Rush Limbaugh and Grover Norquist. But one senses that the President is feeling the exhaustion and frustration. He is preparing himself for the worst of all possible scenarios: the uncertainty caused by the Republican anarchy has already damaged the economy, businesses are waiting to see what the interest rates will be and therefore delaying plans to expand. That uncertainty, added to the higher oil prices caused by Arab Spring, the European Debt crisis and the Japanese earthquake could well bring us a double-dip recession. (LIST: Top 10 Government Shutdowns) But the President also seems absolutely intent on forcing this issue because the Republicans have used the debt ceiling weapon to upend the traditional balance of power in Washington. It is the ultimate nuclear option, creating a bigger bang than abuse of the filibuster in the Senate. If this Republican ploy succeeds, this nuclear option can be deployed again on other issues–surgical nuclear strikes directed at the funding of individual government programs and agencies. (Indeed, if she were less scrupulous, Pelosi could have used a debt ceiling vote to force President Bush to defund the war in Iraq.) And so, here we are. Our nation’s economy and international reputation as the world’s presiding grownup has already been badly damaged. It is a self-inflicted wound of monumental stupidity. I am usually willing to acknowledge that Democrats can be as silly, and hidebound, as Republicans–but not this time. There is zero equivalence here. The vast majority of Democrats have been more than reasonable, more than willing to accept cuts in some of their most valued programs. Given the chance, there was the likelihood that they would have surrendered their most powerful weapon in next year’s election–a Mediscare campaign–by agreeing to some necessary long-term reforms in that program. The President, remarkably, proposed raising the age of eligibility for Medicare to 67. (MORE: The Weak Speaker: How a Failed Debt Vote Disarmed the Nation’s Top Republican) The Republicans have been willing to concede nothing. Their stand means higher interest rates, fewer jobs created and more destroyed, a general weakening of this country’s standing in the world. Osama bin Laden, if he were still alive, could not have come up with a more clever strategy for strangling our nation. Updated, 2:07 p.m.

> > July 29, 2011

TIME’s Klein: GOP Debt Strategy Same as Bin Laden’s

AP File
By Joe Klein Let us not put too fine a point on it: Thursday’s House vote on Speaker John Boehner’s debt ceiling proposal is a joke. If it passes the House, Harry Reid has said it is dead on arrival in the Senate. If it somehow passes the Senate, which it won’t, President Obama will veto it. It is, therefore, a symbolic act that is wasting precious time. It follows last week’s Republican theatrics, the passage of the Cut and Demolish Act (or whatever they called it), which also was a waste of time. These are the actions of a party that has completely lost track of reality–and of a leader, John Boehner, who has lost the support of his party. And so I have a proposal: the Cut the Crap Act. It will have to be passed by Monday, to avoid default. And it will require an act of statesmanship from Boehner: he will have to modify his proposal and cut loose the Tea Party robots who are opposed to a deal of any kind. He will have to find common cause with Harry Reid and, yes, Nancy Pelosi, who are now willing to propose bills that should make any Teasie happy–bills without “revenue increases,” bills with a trillion dollars in budget cuts, more or less. He will have to find 160 sane members of his caucus and Pelosi will have to find 60 extremely tolerant members of hers to get us past this ridiculous moment. …The Republicans have been willing to concede nothing. Their stand means higher interest rates, fewer jobs created and more destroyed, a general weakening of this country’s standing in the world. Osama bin Laden, if he were still alive, could not have come up with a more clever strategy for strangling our nation.


Osama’s Strategy Almost Worked

John Ellis and Grace Wyler | May 4, 2011, 1:07 PM | 3,680 | 16
osama bin laden

The question that lingers after the raid on Abbottabad is what, if anything, did Osama bin Laden accomplish?  The honest answer is: more than anyone would care to admit.Counterterrorism expert Daveed Gartenstein-Ross argues that bin Laden’s fundamental goal was to bankrupt the United States by means of asymmetrical warfare. Mr. Gartenstein-Ross, writing in Foreign Policy magazine, notes how specific bin Laden was about his strategy: [Bin] Laden (spoke) of how he used “guerrilla warfare and the war of attrition to fight tyrannical superpowers, as we, alongside the mujaheddin, bled Russia for ten years, until it went bankrupt.” He has compared the United States to the Soviet Union on numerous occasions — and these comparisons have been explicitly economic. For example, in October 2004 bin Laden said that just as the Arab fighters and Afghan mujaheddin had destroyed Russia economically, al Qaeda was now doing the same to the United States, “continuing this policy in bleeding America to the point of bankruptcy.” Similarly, in a September 2007 video message, bin Laden claimed that “thinkers who study events and happenings” were now predicting the American empire’s collapse. He gloated, “The mistakes of Brezhnev are being repeated by Bush.” In the U.S. case, Bin Laden never quite achieved his goal. But he came very close. As Ezra Klein points out, the 9/11 attacks led to two long and very expensive wars, a costly homeland security buildup and a decade of loose monetary policy. Which in turn caused collateral economic damage (higher oil prices, subprime lending, etc). The truth is: bin Laden wrote the playbook for doing battle with superpowers.  The next generation of terrorist leaders will follow it closely.  And, unlike bin Laden, they will likely have biological weapons in their arsenal.

Please follow Politics on Twitter and Facebook. Follow John Ellis on Twitter Read more:>

Osama Bin Laden to Cause U.S. Hyperinflation

NIA is very pleased that Osama Bin Laden has been neutralized and is no longer a threat to American citizens. During a White House press event yesterday, counterterrorism adviser John Brennan was answering reporters questions and made the comment that al Qaeda “is becoming increasingly bankrupt”. Unfortunately, Mr. Brennan got this backwards. The United States is becoming increasingly bankrupt as a result of al Qaeda. Although America has been safe since 9/11, we need to look at what the cost has been. The U.S. military is currently spending just as much as all other militaries around the world combined. If the U.S. experiences hyperinflation as a result of our military spending, we will no longer be able to protect ourselves from terrorism in the future. The U.S. is currently spending about $1 trillion annually on maintaining a military empire around the world. This is unsustainable, as we are relying on borrowing and printing money to fund this, and Americans are now paying the price with massive inflation in food and energy prices. The U.S. military captured Bin Laden in Pakistan using a special team comprised of about two dozen navy seals. In other words, the trillions we have spent fighting wars in Iraq and Afghanistan were all for nothing. We could have captured Bin Laden without our operations in Iraq and Afghanistan, and have much smaller annual budget deficits and a much lower national debt today, with a much stronger U.S. dollar. NIA believes that with the capture of Bin Laden, now is the time to bring our troops home from Afghanistan. There is also no reason for the U.S. to be supporting the war in Libya, when Libya presents no threat to the U.S. In recent U.S. led NATO strikes in Libya, we killed Muammar Gadhafi’s son and several of his grandchildren who were under the age of 12. There was absolutely no reason for us to take the lives of Gadhafi’s innocent young grandchildren. Yes, Libya did kill some of their own citizens who were protesting the government, but it is possible that U.S. led NATO forces have now killed more innocent civilians in Libya than the Libyan government. Syria has been killing a lot more anti-government protesters than Libya. If our military is currently occupying Libya, it only makes sense for the U.S. military to invade Syria as well, but NIA believes there is no reason for us to attack either. We can’t police the entire world when we simply don’t collect enough tax revenues to fund it. We hate to say it, but if the U.S. experiences hyperinflation within the next few years, it will be what Bin Laden wanted. If the incomes and savings of Americans no longer have enough purchasing power to put food on the table and heat homes, many more Americans will die from hyperinflation than were killed on 9/11. Yes, we finally got him, but we had to borrow and print trillions of dollars over nearly a decade and there are no signs of our military spending slowing down. The success of killing Bin Laden could potentially be used as an excuse to increase military spending to all new record highs. The purchasing power of the U.S. dollar is crashing to new all time lows on a daily basis. This is not an “orderly” collapse. The dollar is falling off of a cliff and a worldwide rush out of the dollar could be imminent. A weak U.S. dollar as a result of our massive budget deficits, largely from military spending, is the worst possible thing for the homeland security of our country.


How much did bin Laden cost us?

The numbers are murky, but there’s enough information to conclude that the toll is astronomical.

May 7, 2011 07:52

Osama bin laden legacy

An Amtrak police officer and a sniffer dog patrol Union Station in Washington on May 6, 2011, five days after al-Qaeda head Osama bin Laden was killed by US Navy Seals in Pakistan. Intelligence seized from bin Laden’s compound showed his al-Qaeda network pondered strikes on US trains on the 10th anniversary of the September 11 attacks, US officials said. (Stephane Jourdain/AFP/Getty Images)

BOSTON — Osama bin Laden is dead. Or is he? That’s a debate that may go viral, birther-style, among segments of the Muslim world unless the Obama administration releases images of his corpse — or better yet, video of the Islamic rights bestowed on him aboard the USS Carl Vinsson. But one thing is for certain: as evil as Osama bin Laden was, he was also a brilliant strategist. Even with his body at the bottom of the Arabian Sea, he remains a fearsome foe. Beyond the wars that he triggered and the deaths he wrought, he is among the most influential people of our time, having changed the world — for the worse — in ways big and small. Bin Laden reshaped the American psyche and landscape. Some of the changes are as subtle as they are seemingly banal: the massive planters and jersey walls that have cropped up since 9/11 surrounding office towers and public buildings; the striptease expected of us before we board planes. Other changes are as sweeping as they get: the government’s shadowy, far-reaching national security and intelligence apparatus “so big, so complex and so hard to manage, no one really knows if it’s fulfilling its most important purpose: keeping its citizens safe,” according to last year’s haunting Washington Post investigation. All he had to do was inspire a half-witted extremist to stuff a crude bomb in his shoe or underpants, and he could change our standards of decency. You can imagine him basking in news of car bombings in Baghdad and drone killings in Pakistan, knowing that these reports would bring further anguish and alienate the United States from the Muslim world. But scaring us was only part of bin Laden’s mission. Terror — as American policymakers largely failed to realize — was a tactic rather than an objective. Although many Americans bought into the logic that bin Laden wanted nothing more than to kill and destroy, the spectacular telegenic mass murder — as staged on 8/7/98 at the U.S. Embassies in Nairobi and Dar es Salaam; on 9/11/01 in New York and Washington; on 10/12/02 in Bali nightclubs; on 3/11/04 in Madrid’s train system; on 7/7/05 in London’s underground, among others — was in fact a means to an end.

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“Green Revolutionary” suggested:

Let’s have an update on Iran. It’s been two years since the Green Revolution. What’s changed? And what’s the status of… This week’s winner revisits Iran’s revolution. Check the membership site in early August for a link to completed piece.

It is curious that bin Laden was killed at this moment, when citizens across the Middle East are rebelling against oppressive rulers, and when U.S. lawmakers are confronting America’s budget problems. One of bin Laden’s primary political objectives was to eliminate infidel Americans from the Muslim soil, and to liberate Muslims from oppressive and (in his view) apostate regimes supported by the West. In recent years, his movement has lost support in the Islamic world, according to the Pew Research Center, due largely to the widespread carnage that it perpetrated on fellow Muslims. But in the tumultuous years ahead, as the Middle East struggles to reinvent itself, time will tell whether his message will catch on again, the same way extremism has clamored for a foothold in other newly liberated societies, such as Indonesia a decade ago. Now, with the charismatic tyrant out of the way, this is less likely to happen. As for America’s dire financial situation, as Daveed Gartenstein-Ross points out in Foreign Policy, bin Laden’s strategic objective was to bankrupt the United States, just as he had helped it bleed the Soviet Union by miring it in a long and costly conflict in Afghanistan. It was the only way a small group of poorly-funded extremists could hope to defeat a super-power. “One lesson bin Laden learned from the war against the Soviets was the importance of his enemy’s economy,” Gartenstein-Ross writes. “The Soviet Union didn’t just withdraw from Afghanistan in ignominious defeat, but the Soviet empire itself collapsed soon thereafter, in late 1991. Thus, bin Laden thought that he hadn’t just bested one of the world’s superpowers on the battlefield, but had actually played an important role in its demise.” Bin Laden obviously hasn’t bankrupted the United States. But how much has he cost us? The numbers are murky, given the secrecy that shrouds post 9/11 national security. But there’s enough information to conclude that the toll is astronomical. The material costs to the United States of bin Laden’s attacks are only a small part of the total, but they are by no means insignificant. The embassy bombings in Africa led to a multi-billion dollar increase in diplomatic security. The repair for the USS Cole was estimated at nearly $250 million. The 9/11 attacks are estimated to have cost New York’s economy $27 billionin the 15 months following the attack, rising to $50 billion to $100 billion if broader economic harm is included. > FINAL NOTE:

Interesting quote about the beginning of the end of the Ottoman Empire: DEBT and the Interest payments to foreign banks. A well known fact, but to be especially remembered in these times.

“…. the first Ottoman loans were contracted in 1854, and henceforth, Ottoman economic development depended on European loans for railroads, mining, and public utilities. Foreign capital also financed military expenditures and the formation of Ottoman banks. By 1882 the Ottoman state could no longer pay the interest on its debts and was forced to accept a foreign debt administration.  Henceforth the foreign bankers controlled the Ottoman economy.  … This foreign-stimulated and foreign-regulated economy  had important consequences for the social structure of Ottoman society. It favored the prosperity of Greek, Armenian, Jewish, and other minority groups involved in international trade….”

See this and related content in:

Lapidus, Ira M: A History of the Islamic Societies, Cambridge, 1988: pp. 606-607.


Ponzi Scheme: The Federal Reserve Bought Approximately 80 Percent Of U.S. Treasury Securities Issued In 2009

The Federal Reserve Bought Approximately 80 Percent Of U.S. Treasury Securities Issued In 2009No, the headline is not a misprint. According to CNBC, the Federal Reserve bought approximately 80 percent of the U.S. Treasury securities issued in 2009.  In other words, the Federal Reserve has been gobbling up the massive tsunami of U.S. government debt that has been created over the past year.  This is absolutely unprecedented, and it is yet another clear indication that the U.S. financial system is on the verge of a major economic collapse. You see, the Federal Reserve is not part of the federal government.  In fact, the Federal Reserve is about as “federal” as Federal Express is. The Federal Reserve is a private bank owned and operated for profit by a very powerful group of elite international bankers. It is this private central bank that controls the money supply and the issuance of currency in the United States. When the U.S. government needs to borrow more money (which happens a lot) they go over to the Federal Reserve and they ask them for some more green pieces of paper called Federal Reserve Notes. The Federal Reserve swaps these green pieces of paper for pink pieces of paper called U.S. Treasury bonds. Now normally the Federal Reserve takes these U.S. Treasury bonds and they sell them all to other buyers. But in 2009 there were not nearly enough buyers. So in 2009 the Federal Reserve sold itself about 80 percent of this debt. This is even being admitted on CNBC.  The video below is from January 8th, and at the 1:45 mark CNBC anchor Erin Burnett drops this bombshell along with a comment about how it is a Ponzi scheme…. So why is it a Ponzi scheme? Well, basically the Federal Reserve is creating money out of nothing, loaning it to the U.S. government and then collecting interest on the loan. That is nice work if you can get it. But also, this intervention by the Federal Reserve is keeping interest rates on U.S. Treasury bonds artificially low. In a true “free market” situation, the interest rates on U.S. treasuries would rise to reflect the rapidly declining economic situation in this nation. Due to the massive explosion in the size of the U.S. government debt and due to the very weak U.S. economy, interest rates on U.S. treasuries should have shot through the roof by now.  Rational investors would normally require an increased return for the increased risk that U.S. treasuries now represent. But that is not happening. Instead when there are no buyers for U.S. treasuries at current interest rates, the Federal Reserve just steps in and buys up all the excess bonds that need to be purchased. But in a normal free market situation, interest rates would rise on U.S. treasuries until they would be attractive enough for investors to buy them all. However, that would create some huge problems. If the U.S. government was not able to borrow all of the money it wanted to at artificially low interest rates, the results would be absolutely disastrous. Much higher interest rates on U.S. government debt would cause the U.S. federal budget deficit to absolutely explode.  Interest rates on everything else throughout the economy would also skyrocket.  As mortgage rates climbed dramatically, the housing market would completely collapse.  The U.S. economy would be totally in flames. But for now (and this situation cannot last forever) the Federal Reserve is keeping interest rates artificially low by lending the U.S. government as much money as it wants at extremely low interest rates.  Of course the Federal Reserve is making an insane amount of money out of the arrangement, so it is working out quite nicely for them as well. But by essentially “printing” a flood of cheap money for the U.S. government to borrow, the Federal Reserve is ultimately going to end up destroying the value of the U.S. dollar. Every fiat currency throughout history has always ended up losing its value, and that is exactly what is going to happen this time too.  The only way to protect the buying power of your money is to put it into something that will hold value (like gold or silver).  Your dollars are never going to be worth more than they are today. The actions taken by the U.S. government and the Federal Reserve have guaranteed the demise of the U.S. dollar.  At this point it is unavoidable.  It is only a matter of how soon it will happen and how bad it will be as things play out. You better get ready.


19 Reasons Why The Federal Reserve Is At The Heart Of Our Economic Problems

Published: Mar. 30, 2011 – The Economic Collapse Most Americans do not understand what the Federal Reserve is or why it is at the heart of our economic problems.  When Americans get into discussions about the economy, most of them still blame either the Democrats or the Republicans for inflation, for the housing crash, for our rampant unemployment and for the national debt.  But the truth is that the institution with the most power over our economic system is the Federal Reserve.  So exactly what is the Federal Reserve?  Most people would say that it is an agency of the federal government.  But that is absolutely not true.  In fact, the Federal Reserve itself has argued in court that it is not an agency of the federal government.  Rather, the Federal Reserve is a privately-owned banking cartel that has been given a perpetual monopoly over our monetary system by the U.S. Congress.  This privately-owned central bank has been destroying the value of the U.S. dollar for decades, it has run our economy into the ground and it has driven the U.S. government to the brink of bankruptcy.  The Federal Reserve operates in great secrecy, it has never been subjected to a comprehensive audit and it is not accountable to the American people.  Yet the decisions that the Federal Reserve makes have a dramatic impact on the lives of every single American citizen. If you really want to understand what is causing our economic problems, it is absolutely crucial that you understand exactly what the Federal Reserve system is and how it is systematically destroying our economy.  Once you understand the truth about the Federal Reserve, you will view economic issues a whole lot differently. The following are 19 reasons why the Federal Reserve is at the very heart of our economic problems…. #1 The Federal Reserve system is a debt-based financial system. The way our system is designed, normally no money comes into existence without more debt being created. But this creates a huge problem, because when a new dollar is created, the interest owed to the banking system on that dollar is not also created at the same time. Therefore, the amount money that is created is not equal to the larger amount of debt that is also created. This is a Ponzi scheme that is designed to drain wealth from the American people and transfer it to the banking system. Today, the amount of debt in our economic system is far, far, far greater than the total amount of money. The only way to keep the game going is to create even more money which creates even more debt. #2 The Federal Reserve and the bankers have a monopoly on the creation of this debt-based money. In the United States today, the only people that can create money are the bankers. You cannot create money. You would go to jail if you tried. Even the U.S. government cannot create money. Although the U.S. Constitution specifically gives Congress the power to create money, the U.S. Congress has given that power to the Federal Reserve and to the banking system. This gives them an enormous amount of power. So how does money creation actually work? Most Americans don’t understand this. As I have written about previously, the way our system is designed is that all money is supposed to originally come into existence as government debt….

When the government wants more money, the U.S. government swaps U.S. Treasury bonds for “Federal Reserve notes”, thus creating more government debt.  Usually the money isn’t even printed up – most of the time it is just electronically credited to the government.  The Federal Reserve creates these “Federal Reserve notes” out of thin air.  These Federal Reserve notes are backed by nothing and have no intrinsic value of their own. The Federal Reserve then sells these U.S. Treasury bonds to investors, other nations (such as China) or sometimes they “sell” them back to themselves.  In fact, the Federal Reserve has been gobbling up a whole lot of U.S. Treasuries lately.  Some refer to this as “monetizing the debt”, but that is not quite an accurate statement. When the Federal Reserve creates money this way, it does not also create the money to pay the interest on the debt that has been created.  Eventually this puts pressure on the U.S. government to borrow even more money to keep the game going.  So what this creates is a spiral where the U.S. government must keep borrowing increasingly larger amounts of money, where the money supply is endlessly expanding and where the value of the U.S. dollar is destined to continue going down forever.

Once “Federal Reserve Notes” are in circulation, there is another way that money is created. It is called “fractional reserve lending”. Once you or I deposit money into a bank, the bank is only required to keep a very small amount of it actually in the bank.  The rest of it the bank can loan out to others (at interest of course).  This process can be repeated over and over and over, creating more money and an even larger amount of debt. But the important part to take away from all this is that normally money is only created when debt is created, and the amount of debt to be paid back is always larger than the amount of money created. This entire system is designed to drain our wealth and to put it into the hands of the bankers. #3 The power of money creation and debt creation is in the hands of private individuals – not the government. The Federal Reserve claims that it is an “entity within the government, having both public purposes and private aspects.” That sounds so reasonable, but the truth is that the Federal Reserve is a legalized banking cartel that is privately-owned. In fact, the Federal Reserve is about as “federal” as Federal Express is. In defending itself against a Bloomberg request for information under the Freedom of Information Act, the Federal Reserve objected by declaring that it was “not an agency” of the U.S. government and therefore it was not subject to the Freedom of Information Act.  It is kind of funny how Fed officials are always talking about how important their “independence” is, but whenever anyone starts criticizing them for being private they start stressing their ties with the government. So who owns the Federal Reserve? As the Federal Reserve’s own website describes, it is the member banks that own it….

The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation’s central banking system, are organized much like private corporations–possibly leading to some confusion about “ownership.” For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.

In particular, as we will see below, the banks of the New York Federal Reserve have the most influence over the system. So who owns the member banks? Well, when you trace the ownership of the member banks to the very top you find that the international banking elite are very strongly represented. #4 The Federal Reserve itself is not much of a profit-making institution.  Rather, it is a tool that enables others to make obscene amounts of money. There are many that think of the Federal Reserve as an evil profit-making machine.  But the truth is that the Fed doesn’t make that much money.  Rather, the system was set up so that others could make an obscene amount of money from U.S. government debt. Many of those opposed to the Federal Reserve point to the record $80.9 billion in profits that the Federal Reserve made last year as evidence that they are robbing the American people blind.  But then those defending the Federal Reserve will point out that the Fed returned $78.4 billion to the U.S. Treasury. In the end, those numbers are not nearly as important as the hundreds of billions of dollars in interest that are made off of U.S. government debt each year. If the U.S. government had been issuing debt-free money all this time, the U.S. government would likely not be spending one penny on interest payments.  Instead, the U.S. government spent over 413 billion dollars on interest on the national debt during fiscal 2010.  This is money that belonged to U.S. taxpayers that was transferred to the U.S. government which in turn was transferred to wealthy international bankers and other foreign governments. This is where the magic of the Federal Reserve system is.  It is in getting the U.S. government enslaved to debt and using that debt to transfer hundreds of billions of dollars of our wealth into the hands of others. As interest rates go up, this phenomenon is going to become even more brutal.  Right now it is being projected that the U.S. government will be paying 900 billion dollars just in interest on the national debt by the year 2019. As you fill out your tax return this year, just keep in mind that vast quantities of our money is going to pay interest on debt that the U.S. government never needed to become enslaved to. There are some very happy people out there that are becoming fabulously wealthy at our expense. What a system, eh? #5 The Federal Reserve is a perpetual debt machine. As mentioned above, the U.S. government is enslaved to debt. So how did it get enslaved? Well, instead of printing up and spending the money that it needs, the U.S. government borrows it through the Federal Reserve system at interest. In fact, as noted above, the U.S. government cannot create a single new dollar without borrowing it. But each new dollar that the U.S. government borrows creates more than a dollar of new debt. As a result, the government eventually has to collect more in taxes than what it has borrowed. This phenomenon creates an endless debt spiral. And is that not what we have in the United States today?  In fact, you see this in almost every nation on earth where a similar central banking system has been established. Did you know that the U.S. national debt is more than 5,000 times larger than it was 100 years ago? That’s right – back in 1910, prior to the passage of the Federal Reserve Act, the national debt was only about $2.6 billion. The only way that the U.S. government can inject more money into the economy is by going into more debt.  But when new government debt is created, the amount of money to pay the interest on that debt is not also created.  In this way, it was intended by the international bankers that U.S. government debt would expand indefinitely and the U.S. money supply would also expand indefinitely.  In the process, the international bankers would become insanely wealthy by lending money to the U.S. government. However, things did not have to turn out this way. If the Federal Reserve had never been created, and the U.S. government had been issuing debt-free currency all this time, it is entirely conceivable that we would have absolutely no federal government debt at this point. Unfortunately, we are now trapped in a debt-based system. The U.S. national debt simply cannot ever be paid off.  U.S. government debt has been mathematically designed to expand forever.  It is a trap from which there is no escape. Sadly, we have now gotten to a terminal phase of the debt spiral.  The Congressional Budget Office is projecting that U.S. government debt held by the public will reach a staggering 716 percent of GDP by the year 2080.  Remember when I used the term “debt spiral” earlier?  This is what a debt spiral looks like…. #6 The Federal Reserve system is designed to cause inflation. As U.S. government debt expands at an exponential pace, it inevitably causes inflation. Most Americans believe that inflation is a fact of life, but the truth is that the United States has only had a major, ongoing problem with inflation since the Federal Reserve was created back in 1913. Sadly, the U.S. dollar has lost well over 95 percent of its value since the Federal Reserve was created. If the Federal Reserve did not exist, it is theoretically conceivable that we could have an economy with little to no inflation.  Of course that would greatly depend on the discipline of our government officials (which is not very great at this point), but the sad truth is that our current system is always going to produce inflation.  In fact, the Federal Reserve system was originally designed to be inflationary.  Just check out the inflation chart posted below.  The U.S. never had massive problems with inflation before the Fed was created, but now it is just wildly out of control…. #7 The Federal Reserve has decided to play bizarre games with our money supply. In a desperate attempt to revive the dying U.S. economy, the Federal Reserve has resorted to chucking gigantic quantities of cash into the financial system. Remember how earlier I explained that normally whenever new money is created that more debt is created? Well, lately the Fed has been resorting to a trick called “quantitative easing”.  What “quantitative easing” means is that the Federal Reserve zaps massive amounts of money into existence out of thin air and starts spending it on anything that it wants to buy.  Lately, this has primarily been done to buy up U.S. government debt. But isn’t that “monetizing the debt”? Of course it is, and it is a blatant Ponzi scheme. However, what is even more alarming is what this is doing to our money supply. Just look at what has happened to our monetary base since about mid-2008…. Does anyone in their right mind believe that this is not going to cause horrible inflation? Right now most of the new cash is tied up in the financial system, but once it gets out into the regular economy watch out! #8 The Federal Reserve is undemocratic. In a previous article, I asked the following question:

“So what makes the central economic planning that the Federal Reserve does different from the central economic planning that communist China does?”

In both cases, a bunch of unelected elitists run the economy and make important economic decisions for the rest of us. So what really is the difference? #9 The Federal Reserve runs the U.S. economy. Most Americans want to blame Obama or Bush or the U.S. Congress for the state of the economy. But the truth is that it is the Federal Reserve that sets interest rates, it is the Federal Reserve that determines the money supply, it is the Federal Reserve that sets the “target rate” of inflation, it is the Federal Reserve that determines if unemployment is too high or too low and it is the Federal Reserve that watches over all of our banks. Yes, Obama, Bush and the U.S. Congress all have things to answer for as well. But none of them have the direct power over the economy that the Federal Reserve does. #10 The Federal Reserve favors the big banks. Not all financial institutions are treated equally by the Fed. The truth is that the big banks (particularly those on Wall Street) are treated with great favor by the Federal Reserve. If the Federal Reserve did not exist, the big Wall Street banks would not have such an overwhelming advantage.  Most Americans simply have no idea that over the last several years the Federal Reserve has been giving gigantic piles of nearly interest-free money to the big Wall Street banks which they turned right around and started lending to the federal government at a much higher rate of return.  I don’t know about you, but if I was allowed to do that I could make a whole bunch of money very quickly.  In fact, it has come out that the Federal Reserve made over $9 trillion in overnight loans to major banks, large financial institutions and other “friends” during the financial crisis of 2008 and 2009. Wouldn’t you like to be able to zap trillions of dollars into existence and loan it out to your friends at very favorable terms? Sadly, most of the “help” from the Federal Reserve always seems to go to the big boys. When “small enough to fail” banks need assistance, they are usually told to go sell themselves to one of the big banks. #11 The worse the debt problems caused by the Federal Reserve become, the more money the IRS needs to collect from the rest of us. If the U.S. government could issue debt-free money, it is conceivable that we would not even need the IRS.  You doubt this?  Well, the truth is that the United States did just fine for well over a hundred years without a national income tax.  But about the same time the Federal Reserve was created a national income tax was instituted as well.  The whole idea was that the wealth of the American people would be transferred to the U.S. government by force and then transferred into the hands of the ultra-wealthy in the form of interest payments. If the Federal Reserve was shut down, it is entirely possible that we would be able to shut down the IRS as well. But the only way that the current system works is if massive amounts of wealth continue to be drained from the American people. #12 The Federal Reserve creates artificial financial bubbles. When you look back over the last several decades, you will find financial bubble after financial bubble. So who created all of those bubbles? It was the Federal Reserve. The ridiculous policies of Greenspan and Bernanke have wrought disaster after disaster and yet most of our politicians still will not even consider major changes to the Federal Reserve. #13 The Federal Reserve is anti-free market. In a true free market system, the marketplace would determine what interest rates are. In a true free market system, the marketplace would determine which financial institutions survive. In a true free market system, artificial financial bubbles would be far less likely. But we don’t have a true free market system. #14 The Federal Reserve tells the rest of the our banks what to do. Most Americans don’t understand just how much power the Federal Reserve actually has over our local banks. For example, just last year Federal Reserve officials walked into one bank in Oklahoma and demanded that they take down all the Bible verses and all the Christmas buttons that the bank had been displaying. #15 The people currently running the Federal Reserve pretty much have no idea what they are doing. In case anyone has not noticed, Federal Reserve Chairman Ben Bernanke has a very long track record of incompetence.  Nearly every major judgment that he has made since taking over that position has been dead wrong. If one of us could go down the street and appoint the manager of the local Dairy Queen as the Chairman of the Federal Reserve, it is very doubtful that person would do a worse job than Bernanke has done. #16 Even though the Federal Reserve has such extraordinary power over the financial system, the American people are not permitted to examine their books. The Federal Reserve claims that they are regularly audited, but when some members of Congress attempted to push through a true comprehensive audit of the Fed last year Federal Reserve officials threw a hissy fit. The truth is that the Federal Reserve has never undergone a true comprehensive audit since it was created back in 1913. Whenever the subject of an audit comes up, Bernanke and others at the Fed keep repeating the mantra of how important “the independence of the Federal Reserve” is. Sadly, Ron Paul’s proposal to audit the Federal Reserve last year, which had previously been co-sponsored by 320 members of the U.S. House of Representatives, ultimately failed by a vote of 229-198. Instead, a very, very limited examination of Fed transactions that occurred during the recent financial crisis was approved. So what did that limited examination reveal? Well, the Federal Reserve was forced to reveal the details of 21,000 transactions stretching from December 2007 to July 2010 that combined were worth trillions of dollars.  It turns out that the Federal Reserve was just handing out gigantic piles of nearly interest-free cash to their friends at the largest banks, financial institutions and corporations all over the globe. Many members of Congress were absolutely stunned by these revelations. So what would a more comprehensive audit reveal? #17 The Federal Reserve has way too much power. If the Federal Reserve did not exist, we would not have an unelected, unaccountable “fourth branch of government” running around that has gotten completely and totally out of control.  Even some members of Congress are now openly complaining about how much power the Fed has.  For example, Ron Paul told MSNBC last year that he believes that the Federal Reserve is now more powerful than Congress…..

“The regulations should be on the Federal Reserve. We should have transparency of the Federal Reserve. They can create trillions of dollars to bail out their friends, and we don’t even have any transparency of this. They’re more powerful than the Congress.”

#18 The Federal Reserve is dominated by Wall Street and the New York banks. The New York representative is the only permanent member of the Federal Open Market Committee, while other regional banks rotate in 2 and 3 year intervals.  The former head of the New York Fed, Timothy Geithner, is now U.S. Treasury Secretary.  The truth is that the Federal Reserve Bank of New York has always been the most important of the regional Fed banks by far, and in turn the Federal Reserve Bank of New York has always been dominated by Wall Street and the major New York banks. The cold, hard reality of the matter is that the Federal Reserve is just another one of the tools that the Wall Street banking elite use to dominate all the rest of us. #19 The Federal Reserve has brought us to the brink of economic collapse. If the Federal Reserve had never been created, the American people would not be so enslaved to debt.  At the very core of our economic problems is debt.  American consumers are swamped with debt, state and local governments are facing horrific debt problems from coast to coast and the federal government has piled up the biggest mountain of debt in the history of the world. We are living in an absolutely massive debt bubble, and when it bursts the world is going to experience financial chaos like it has never seen before. Things did not have to turn out this way.  We did not have to adopt a debt-based financial system.  We did not have to allow the bankers to enslave us with debt. But that is what happened. Sadly, most Americans and the vast majority of our politicians are still clueless about these issues. In 1922, Henry Ford wrote the following….

“The people must be helped to think naturally about money. They must be told what it is, and what makes it money, and what are the possible tricks of the present system which put nations and peoples under control of the few.”

Hopefully this article will help people understand our debt-based financial system a little bit better. Until we fundamentally change our system, many of the economic and financial problems we are currently experiencing will never go away. Thankfully, it does appear that some Americans are waking up. According to a recent Bloomberg National Poll, the number of Americans that would like to see the Federal Reserve held more accountable or even completely abolished is increasing….

Asked if the central bank should be more accountable to Congress, left independent or abolished entirely, 39 percent said it should be held more accountable and 16 percent that it should be abolished. Only 37 percent favor the status quo.

Those are very exciting numbers. Hopefully we can awaken many more Americans to the dangers of a debt-based economy. In the book of Proverbs, it tells us the following….

The rich ruleth over the poor, and the borrower is servant to the lender.

Well, by allowing ourselves to become enslaved to debt, we have become the servants of the international banking system. Not only that, we have also sold our children and our grandchildren into perpetual debt slavery. Thomas Jefferson tried to warn us about this. He believed that when the government borrows money in one generation which must be paid back by future generations it is equivalent to stealing….

And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.

In fact, Thomas Jefferson said that if he could add one more amendment to the U.S. Constitution it would be a ban on all government borrowing….

I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government to the genuine principles of its Constitution; I mean an additional article, taking from the federal government the power of borrowing.

Where would we be today if we had listened to Thomas Jefferson? The amount of government debt that we have racked up is a great evil.  We have stolen the future away from our children and our grandchildren.  We have put them in a position where they will spend the rest of their lives paying off our debts to the bankers. We owe it to future generations to fix the problems that we have created. That is why so many of us believe that it is time for the U.S. Congress to shut down the Federal Reserve.  Our current financial system is a complete and utter failure and we need to start over. Source: Related: The Federal Reserve Cartel: Part 1: The Eight Families The Federal Reserve Cartel: Part II: The Freemason BUS & The House of Rothschild DOCUMENTARY – The Money Masters: How International Bankers Gained Control of America Auditing The Federal Reserve: What Are The Banksters So Afraid Of…? (With Videos) Crisis as a Means to Building a Global Totalitarian State Rothschilds & Rockefellers: Trillionaires Of The World VIDEO – Economic Armageddon and You DOCUMENTARY – Monopoly Men, Federal Reserve Fraud, 1999 Who Are The Illuminati? People Of Earth: Prepare For Economic Disaster VIDEO – David Icke – World Financial System The Council on Foreign Relations (CFR) and The New World Order<>

Sovereign Debt Crisis Is Never Going To End Until There Is A Major Global Financial Collapse

In the past, there certainly have been governments that have gotten into trouble with debt, but what we are experiencing now is the first truly global sovereign debt crisis.  There has never been a time in recorded history when virtually all of the governments of the world were drowning in debt all at the same time.  This sovereign debt crisis is never going to end until there is a major global financial collapse.  There simply is no way to unwind the colossal web of debt that we have constructed in an orderly fashion.  Right now the EU and the IMF have been making “emergency loans” to nations such as Greece, Ireland and Portugal, but that is only going to buy those countries a few additional months.  Giving more loans to nations that are already drowning in red ink may “kick the can down the road” for a little while but it isn’t going to solve anything.  Meanwhile, dozens more nations all over the globe are rapidly approaching a day of reckoning. All of the bailouts that you are hearing about right now are simply delaying the pain.  The reality is that when the “emergency loans” for Greece stop, Greece is going to default.  Greece is toast.  The game is over for them.  You can stick a fork in Greece because it is done. One of the big problems for Greece is that since it is part of the euro it can’t independently print more money.  If Greece cannot raise enough euros internally Greece must turn to outside assistance. Unfortunately, at this point Greece has accumulated such a mammoth debt that it cannot possibly sustain it.  By the end of the year, it is projected that the national debt of Greece will soar to approximately 166% of GDP. The financial collapse of Greece is inevitable.  If they keep using the euro they will collapse.  If they quit using the euro they will collapse.  When the rest of Europe decides that it is tired of propping Greece up the game will be over. At this point very few people are interested in lending Greece more money. As I wrote about yesterday, many of the nations around the world are only able to keep going because they are able to borrow huge amounts of money at low interest rates. Well, nobody wants to lend money to Greece at a low rate of interest anymore. Today, the yield on 2 year Greek bonds is back over 28 percent. Fortunately for the rest of the world, Greece is just a very, very small part of the global economy, but when interest rates start spiking like that on U.S. debt or Japanese debt the entire world financial system will be thrown into chaos. So why is there so much of a focus on Greece right now? Well, there is a real danger that the panic will start to spread. The other day, Moody’s Investors Service slashed the credit rating on Portuguese government debt by four notches. Portuguese debt is now considered to be “junk”. But even more alarming is that Moody’s stated that what is going on in Greece played a role in reducing the credit rating of Portugal. The following is a portionof what Moody’s had to say when they cut the credit rating of Portugal by four notches….

Although Portugal’s Ba2 rating indicates a much lower risk of restructuring than Greece’s Caa1 rating, the EU’s evolving approach to providing official support is an important factor for Portugal because it implies a rising risk that private sector participation could become a precondition for additional rounds of official lending to Portugal in the future as well. This development is significant not only because it increases the economic risks facing current investors, but also because it may discourage new private sector lending going forward and reduce the likelihood that Portugal will soon be able to regain market access on sustainable terms.

Do you understand what is being said there? Basically, Moody’s is saying that the terms of the Greek bailout make Portuguese debt less attractive because Portugal will likely be forced into a similar bailout at some point. If the EU is not going to fully guarantee the debt of the member nations, then that debt becomes less attractive to investors. The downgrade of Portugal is having all kinds of consequences.  The cost of insuring Portuguese government debt set a new record high on Wednesday, and yields on Portuguese bonds have gone haywire. If you want to get an idea of just how badly Portuguese bonds have been crashing, just check out this chart. But it is not just Portugal that is having problems. Just recently, Moody’s warned that it may downgrade Italy’s Aa2 debt rating at some point within the next few months. Spain is also on the verge of major problems and Ireland may need another bailout soon. Things don’t look good. Unfortunately, if the dominoes start to fall the entire EU is going to go down. Big banks all over Europe are highly exposed to sovereign debt and they are leveraged to the hilt. It is almost as if we are looking at a replay of 2008 in many ways. When Lehman Brothers finally collapsed, it was leveraged 31 to 1. Today, major German banks are leveraged 32 to 1, and major German banks are currently holding a tremendous amount of Greek debt. Anyone with half a brain can see that this is going to end badly. So how is the European Central Bank responding to this crisis? They are raising interest rates once again. That certainly is not going to help the PIIGS much. But Europe is not the only one facing a horrific debt crunch. In Japan, the national debt is now up to about 226 percent of GDP.  So far the Japanese government has been able to handle a debt load this massive because the citizens of Japan have been willing to lend the government gigantic mountains of money at interest rates so low that they are hard to believe. When that paradigm changes, and it will, Japan is going to be in a massive amount of trouble.  In fact, an article in Forbes has warned that even a very modest increase in interest rates would cause interest payments on Japanese government debt to exceed total government revenue by the year 2019. Of course the biggest pile of debt sitting out there is the national debt of the United States.  The U.S. is so enslaved to debt that there is literally no way out under the current system.  To say that America is in big trouble would be a massive understatement. In fact, the whole world is headed for trouble. Right now government debt around the globe continues to soar at an exponential pace.  At some point a wall is going to be hit. The Wall Street Journal recently quoted Professor Carmen Reinhartas saying the following about what we are facing….

“These processes are not linear,” warns Prof. Reinhart. “You can increase debt for a while and nothing happens. Then you hit the wall, and—bang!—what seem to be minor shocks that the markets would shrug off in other circumstances suddenly become big.”

That is the nature of debt bubbles – they keep expanding and expanding until the day that they inevitably burst. Governments around the world will issue somewhere in the neighborhood of 5 trillion dollars more debt this year alone.  Debt to GDP ratios all over the globe continue to rise at a frightening pace. Because the world is so interconnected today, the collapse of even one nation will devastate banks all over the planet.  If even one domino is toppled there is no telling where things may end. The combination of huge amounts of debt and huge amounts of leverage is incredibly toxic, and that is what we have all over the globe today.  Almost every major nation is drowning in a sea of red ink and almost all of our major financial institutions are leveraged to the hilt. There is only one way that the sovereign debt crisis can end. Very, very badly. I hope you are ready for what is coming.

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Bankers, Economists: Mass Centralization At Heart Of Euro Bailout

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Huge Euro rescue is latest step on the road toward a monolithic globalist federal union

Steve Watson
Monday, May 10th, 2010

Bankers, Economists: Mass Centralization At Heart Of Euro Bailout 100510EUroRelated: Bankers Destroy Global Economy by Design to Consolidate Power

The unprecedented €750bn EU bailout represents part of an ongoing program of mass centralization of governance in Europe according to the world’s leading bankers and economists.

Under the headline “Towards a United States of Europe” the Financial Times quotes key players who conclude that the bailout is part of an overall consolidation in Europe and represents a giant step toward a fiscal union in the eurozone.

Morgan Stanley’s European Chief Economist, Elga Bartsch notes:

Like the ERM crisis in the early 1990s spurred on political initiatives to bring about the long-planned monetary union in Europe, it seems that the sovereign debt crisis could be acting as a catalyst for an ever closer union of European countries. The decisions taken this weekend first by European leaders and then by finance ministers mark a big leap towards a fiscal union in the euro area, we think.

Not only have countries agreed to stand in for each other in an unprecedented extent, they have also agreed to foregoing some of their fiscal sovereignty and submit to rigorous fiscal consolidation programmes should they require financial assistance.

In other words, European states are literally signing over their independence to a monolithic centralized system under the threat of economic obliteration.

Marco Annunziata, chief economist of Italian megabank UniCredit concurs with this analysis:

The new stabilization fund represents another step towards “passive” fiscal integration, that is member countries explicitly assuming joint responsibility for each other’s obligation. To avoid the risk of violating the no-bailout clause, this is done in the form of a pooling of resources to rescue member countries in stress and not formally shouldering their existing debt obligations; moreover, financial support would be extended only based on tough conditionality on adjustment measures. However, the substance is the same: member countries have to jointly put their resources at stake to support the weaker members.

Annunziata also states that the IMF’s contribution to the bailout fund indicates a “depressing confirmation that at this stage that the EU is unable to design and enforce conditionality on its own.”

“The true decisions needed for the longer-term survival of the Eurozone still need to be taken.” Annunziata adds, echoing German premier Angela Merkel’s call to “address the root of the problem”

“We have to fight the causes of the difficulties, so budget consolidation in all member states is increasingly important,” Merkel said. “The access to the guarantees … will be linked to countries presenting budget consolidation programs to the IMF and the EU, which will then be regularly inspected.”

Financial commentator Gregory White of The Business Insider further explains how the Euro rescue represents a move towards a Federal European setup:

Like the United States prior to revolution and under the Articles of Confederation, the eurozone exists within the context of a weak, decentralized government. Policies of taxation and budgets are primarily controlled at state level. But other key issues, likeprice stability and inflation, are controlled by the European Central Bank. There is therefore a divergence of interests that needs to be rectified.

Bailing out its fringe repeatedly is not a long-term solution to this problem. Forming a eurozone treasury, which can issue its own debt to support the area and manage the budgets of its member states, is.

In other words, the sovereign nation state as viable economic entity is being jettisoned in favour of a vastly empowered European Central Bank and European Union.

Of course, this has been the idea all along, we were presented with the problem, for the past 3 years we have witnessed a reaction of great destabilization and now we are being presented with the solution – more mass centralization in the name of stability.

Americans should prepare for the same thing to happen to state independence as soon as the crisis really hits on their side of the pond.



US debt really $202 trillion (?)(!)

[hint – derivatives + fraud)


US National Debt $202 Trillion: the real number

(-[??] – searching for truth behind the multiple falsehoods)


CHART SHOCK – The Real National Debt Is $202 Trillion

Graphing the national debt and unfunded liabilities thru 2009.  Dr. Kotlikoff, economics professor at Boston University, has the 2010 numbers below.


Kotlikoff: U.S. Is Bankrupt And We Don’t Even Know It

Bloomberg Video:  Dr. Laurence Kotlikoff economics professor at Boston University, discusses the national debt and unfunded liabilities – Aug. 11, 2010

Kotlikoff estimates the real national debt is $202 trillion.

In case you’re keeping track, the official deficit numbers for July were released last night – $165 billion — that’s just for 1 month.  Once upon a time – as in 2002 – $165 billion covered the deficit for the entire fiscal year.

Reprinted with permission.

Source – Bloomberg

Let’s get real. The U.S. is bankrupt. Neither spending more nor taxing less will help the country pay its bills.

What it can and must do is radically simplify its tax, health-care, retirement and financial systems, each of which is a complete mess. But this is the good news. It means they can each be redesigned to achieve their legitimate purposes at much lower cost and, in the process, revitalize the economy.

Last month, the International Monetary Fund released its annual review of U.S. economic policy. Its summary contained these bland words about U.S. fiscal policy: “Directors welcomed the authorities’ commitment to fiscal stabilization, but noted that a larger than budgeted adjustment would be required to stabilize debt-to-GDP.”

But delve deeper, and you will find that the IMF has effectively pronounced the U.S. bankrupt. Section 6 of the July 2010 Selected Issues Paper says: “The U.S. fiscal gap associated with today’s federal fiscal policy is huge for plausible discount rates.” It adds that “closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.”

The fiscal gap is the value today (the present value) of the difference between projected spending (including servicing official debt) and projected revenue in all future years.

Double Our Taxes

To put 14 percent of gross domestic product in perspective, current federal revenue totals 14.9 percent of GDP. So the IMF is saying that closing the U.S. fiscal gap, from the revenue side, requires, roughly speaking, an immediate and permanent doubling of our personal-income, corporate and federal taxes as well as the payroll levy set down in the Federal Insurance Contribution Act.

Such a tax hike would leave the U.S. running a surplus equal to 5 percent of GDP this year, rather than a 9 percent deficit. So the IMF is really saying the U.S. needs to run a huge surplus now and for many years to come to pay for the spending that is scheduled. It’s also saying the longer the country waits to make tough fiscal adjustments, the more painful they will be.

Is the IMF bonkers?

No. It has done its homework. So has the Congressional Budget Office whose Long-Term Budget Outlook, released in June, shows an even larger problem.

‘Unofficial’ Liabilities

Based on the CBO’s data, I calculate a fiscal gap of $202 trillion, which is more than 15 times the official debt. This gargantuan discrepancy between our “official” debt and our actual net indebtedness isn’t surprising. It reflects what economists call the labeling problem. Congress has been very careful over the years to label most of its liabilities “unofficial” to keep them off the books and far in the future.

For example, our Social Security FICA contributions are called taxes and our future Social Security benefits are called transfer payments. The government could equally well have labeled our contributions “loans” and called our future benefits “repayment of these loans less an old age tax,” with the old age tax making up for any difference between the benefits promised and principal plus interest on the contributions.

The fiscal gap isn’t affected by fiscal labeling. It’s the only theoretically correct measure of our long-run fiscal condition because it considers all spending, no matter how labeled, and incorporates long-term and short-term policy.

$4 Trillion Bill

How can the fiscal gap be so enormous?

Simple. We have 78 million baby boomers who, when fully retired, will collect benefits from Social Security, Medicare, and Medicaid that, on average, exceed per-capita GDP. The annual costs of these entitlements will total about $4 trillion in today’s dollars. Yes, our economy will be bigger in 20 years, but not big enough to handle this size load year after year.

This is what happens when you run a massive Ponzi scheme for six decades straight, taking ever larger resources from the young and giving them to the old while promising the young their eventual turn at passing the generational buck.

Herb Stein, chairman of the Council of Economic Advisers under U.S. President Richard Nixon, coined an oft-repeated phrase: “Something that can’t go on, will stop.” True enough. Uncle Sam’s Ponzi scheme will stop. But it will stop too late.

And it will stop in a very nasty manner. The first possibility is massive benefit cuts visited on the baby boomers in retirement. The second is astronomical tax increases that leave the young with little incentive to work and save. And the third is the government simply printing vast quantities of money to cover its bills.

Worse Than Greece

Most likely we will see a combination of all three responses with dramatic increases in poverty, tax, interest rates and consumer prices. This is an awful, downhill road to follow, but it’s the one we are on. And bond traders will kick us miles down our road once they wake up and realize the U.S. is in worse fiscal shape than Greece.

Some doctrinaire Keynesian economists would say any stimulus over the next few years won’t affect our ability to deal with deficits in the long run.

This is wrong as a simple matter of arithmetic. The fiscal gap is the government’s credit-card bill and each year’s 14 percent of GDP is the interest on that bill. If it doesn’t pay this year’s interest, it will be added to the balance.

Demand-siders say forgoing this year’s 14 percent fiscal tightening, and spending even more, will pay for itself, in present value, by expanding the economy and tax revenue.

My reaction? Get real, or go hang out with equally deluded supply-siders. Our country is broke and can no longer afford no- pain, all-gain “solutions.”

(Laurence J. Kotlikoff is a professor of economics at Boston University and author of “Jimmy Stewart Is Dead: Ending the World’s Ongoing Financial Plague with Limited Purpose Banking.” The opinions expressed are his own.)

To contact the writer of this column: Laurence Kotlikoff at


Laurence J. Kotlikoff

Image of Laurence J. Kotlikoff
  • From the Author
  •  |
  • From Wikipedia

Laurence J. Kotlikoff is a William Fairfield Warren Professor at Boston University, a Professor of Economics at Boston University, a Fellow of the American Academy of Arts and Sciences, a Fellow of the Econometric Society, a Research Associate of the National Bureau of Economic Research, and President of Economic Security Planning, Inc., a company specializing in financial planning software. Professor Kotlikoff received his B.A. in Economics from the University of Pennsylvania in 1973 and his Ph.D. in Economics from Harvard University in 1977.
From 1977 through 1983 he served on the faculties of economics of the University of California, Los Angeles and Yale University. In 1981-82 Professor Kotlikoff was a Senior Economist with the President’s Council of Economic Advisers.
Professor Kotlikoff is author or co-author of14 books and hundreds of professional journal articles. His most recent… Read more

This biography was provided by the author or their representative.

Books by Laurence J. Kotlikoff (See all books)



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Extremely important clip.  Please share it anywhere and everywhere across the net.  Our only hope to stop the heist will come from greater awareness.

The Federal Reserve Is A Ponzi Scheme

Special request from the publisher of The Daily Bail.  I am asking each and every one of you to send this video to 2 people.  This is a rare instance in life where just 60 seconds of your time can help change the course of history in the fight against the Fed.  Either we win, or Wall Street wins.  It’s that simple.  PLEASE click here to pass it on to the next person.  That’s all I politely ask.

Thank you so much!

An outstanding discussion, primer and visual lesson on toxic assets, failed banks, the Federal Reserve, HR 1207, auditing the Fed, and the cost to taxpayers.

Dylan puts on his Banker hat and swaps a (literal) bag of trash, on-air, for $13.9 Trillion worth of Monopoly money from a guy wearing a “Fed” hat.

  • “The Federal Reserve just extended $14 Trillion of our money, our children’s money, America’s future…and now they don’t want to talk about what’s in the bag. And they did it because the banks created a garbage bag full of bad debts.” (4:45)
  • “I feel as if America has suffered the greatest theft and cover-up — ever, … where banks created a pile of garbage, that they paid themselves billions of dollars in personal compensation, and then stuck the trillions of dollars worth of garbage with the American taxpayer. That, to me, is stealing.” (7:05)

The Federal Reserve — the quasi-autonomous body that controls the US’s money supply — is a “Ponzi scheme” that created “bubble after bubble” in the US economy and needs to be held accountable for its actions, says Eliot Spitzer, the former governor and attorney-general of New York.

In a wide-ranging discussion of the bank bailouts on MSNBC’s Morning Meeting, host Dylan Ratigan described the process by which the Federal Reserve exchanged $13.9 trillion of bad bank debt for cash that it gave to the struggling banks.

Spitzer — who built a reputation as “the Sheriff of Wall Street” for his zealous prosecutions of corporate crime as New York’s attorney-general and then resigned as the state’s governor over revelations he had paid for prostitutes — seemed to agree with Ratigan that the bank bailout amounts to “America’s greatest theft and cover-up ever.”

Advocating in favor of a House bill to audit the Federal Reserve, Spitzer said: “The Federal Reserve has benefited for decades from the notion that it is quasi-autonomous, it’s supposed to be independent. Let me tell you a dirty secret: The Fed has done an absolutely disastrous job since [former Fed Chairman] Paul Volcker left.

  • “The reality is the Fed has blown it. Time and time again, they blew it. Bubble after bubble, they failed to understand what they were doing to the economy.
  • “The most poignant example for me is the AIG bailout, where they gave tens of billions of dollars that went right through — conduit payments — to the investment banks that are now solvent. We [taxpayers] didn’t get stock in those banks, they didn’t ask what was going on — this begs and cries out for hard, tough examination.
  • “You look at the governing structure of the New York [Federal Reserve], it was run by the very banks that got the money. This is a Ponzi scheme, an inside job. It is outrageous, it is time for Congress to say enough of this. And to give them more power now is crazy.
  • “The Fed needs to be examined carefully.”

Spitzer resigned as governor of New York in March, 2008, after news reports stated Spitzer had paid for a $1,000-an-hour New York City call girl.

At the time, Spitzer had been raising the alarm about sub-prime mortgages. In the wake of the economic meltdown triggered last fall by sub-prime loans, some observers have suggested that Spitzer may have been targeted by law enforcement because of his high-profile opposition to Wall Street financial policies.

Investigative reporter Greg Palast wrote that federal agents’ revealing of Spitzer’s identity as a call-girl customer was no coincidence.

Palast wrote that the principle of “prosecutorial discretion” is often used to keep the names of high-profile persons out of the media when they are tangentially linked to a criminal investigation. In the case of Spitzer, the Justice Department chose not to invoke prosecutorial discretion.

Funny thing, this ‘discretion.’ For example, Senator David Vitter, Republican of Louisiana, paid Washington DC prostitutes to put him in diapers (ewww!), yet the Senator was not exposed by the US prosecutors busting the pimp-ring that pampered him.

Naming and shaming and ruining Spitzer – rarely done in these cases – was made at the ‘discretion’ of Bush’s Justice Department.

Spitzer recently told Bloomberg News that President Obama’s regulatory reforms of the financial sector are “irrelevant” because regulatory agencies have not been enforcing corporate laws to begin with.

“Regulatory agencies already had the power to do everything they needed to do,” he said. “They just affirmatively chose not to do it.”

Video:  Spitzer says the Fed is a Ponzi scheme — Short version

MSNBC Video:  Same complete clip as the one at the top of the story — stored here in case the youtube version gets pulled.

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Could $12 Trillion Really Be Right?  Absolutely!

See Proof with simple calculation and documentation below.


The debt went up during Clinton’s years only because of $2.2 Trillion interest on the Reagan-Bush debt. Otherwise Clinton would have paid off most the remaining WWII debt.

Complete Proof of the $12 Trillion Republican Debt

Just below you can see the calculation and the documentation links for the Reagan-Bushes $12 Trillion ($12,049 Billion) national debt as of September 30, 2010. You can download this as an excel spreadsheet by clicking: Download as XLS.
Their debt has 4 parts, but the bulk of it is calculated from 4 inputs (yellow and tan) that you can check with the color coded links to the treasury at the bottom. This will verify the $3.4 Trillion Reagan-Bush debt and the $6.1 Trillion G.W. Bush debt. Together that’s $9.5 Trillion. Now some of G.W. Bush’s debt is really interest on the Reagan-Bush debt, so he is not as bad as he looks, and Reagan-Bush are lot worse because of all their interest. You can see that in the graph above.
Interest is calculated on the second sheet (tab at bottom). But you know that 17 years of compound interest on 3.4 Trillion is going to add a lot. So a $12 Trillion total is very believable, and if you want to spend 10 minutes you can check it easily.
And if you think Congress did it, you better have a look here. Under Reagan and Bush-I, Congress actually made the debt a tiny bit smaller than what both presidents asked for. And G.W. Bush passed his supply-side tax cuts with a Republican Congress. There is just no wiggle room. The Republicans did it.

Reagan Told Us How to Track the Debt
October 30, 2010. From Reagan’s first speech as President: “A trillion dollars would be a stack of thousand-dollar bills 67 miles high. The interest on the public debt this year we know will be over $90 billion, and unless we change the proposed spending for the fiscal year beginning October 1st, …”
Well he changed it all right, and when he left office the stack of $1000 bills was 191 miles high.
So what did Reagan tell us about calculating his debt? (1) Start on October 1, 1981, and (2) Don’t forget the interest costs of the debt.
October 1, 1981 is the beginning of his first budget year (fiscal year). He’s right. He is not responsible for Carter’s last budget year that runs until Oct. 1. But Reagan is responsible for his own last budget year, which ran until Sept. 30 1989. That’s eight years, which is right for two terms. Reagan was right and fair about this, and that’s what the spreadsheet above does.
And, like he said, the interest on the debt matters. And since he and Bush-I left us $3.4 Trillion of extra debt when Bush-I’s last budget year ended on Sept. 30, 1993, that debt started collecting interest, and it still is. Clinton, G.W. Bush and Obama are not responsible for that interest. So the spreadsheet actually over-states G.W. Bushes debt because quite a bit of that was interest on the Reagan-Bush-I debt. But shifting that responsibility to Reagan-Bush (as the graph shows) does not affect our total for Reagan and the Bushes.
G.W. Bush took control of the budget on Oct. 1, 2001, when the debt was $5.8 Trillion and his last budget year ended Oct. 1, 2009, with the debt at $11.9 Trillion. During that last year, Obama got a stimulus bill passed, but that’s the only significant change he was able to make in federal spending. (You can see it subtracted above.) Spending the stimulus money was slow, so only $36 Billion ($0.036 Trillion) contributed to Bush’s deficits. So instead of raising the debt $6.10 Trillion, he only raised it $6.06 Trillion.
About $0.2 Trillion is still left from WWII, and Obama has $1.25 Trillion that̵