FedUpUSA

My fellow Americans;

Four years ago, on this day in 2008, Bear Stearns stood on the edge of collapse.  We did not know this, of course, as other than their two hedge funds’ failure their internal condition was hidden — by the company and by the regulators who were charged with keeping our financial system safe.

Over the next six months we came close to losing America.

Today, we’re not in much better shape.

We have failed to address the first, and only, reason we find ourselves mired in an economic situation where we cannot grow and we cannot prosper.  Where The Senate has failed to pass a budget for nearly three years.  Where The House has proved unable to put forward a set of spending and revenue bills that balance.

The reason for our economic malaise, for the near-collapse in our economy in 2008 and the inability to exit the job recession of the last four years is that those who you vote for are incapable of telling you the truth.

The truth of a nation’s financial situation is no different than that of your household.  You cannot spend more than you earn in your household for a long period of time.

We all have short-term challenges in life; a sudden illness, the loss of a job, a leaking roof.   The wise family socks away some percentage of their earnings — their personal economic surplus — to buffer itself from these ordinary and expected calamities.  The less-wise depends on the ability to pull out a credit card and charge that new refrigerator when the need arises.

It is a time-honored practice in America for politicians to make promises they cannot keep.  We promise to build a gleaming new school, brimming with high technology, but we did not put aside the tax money to construct it in advance.  We promise that you will have medical care in retirement, but we never funded that program.  We promise that you have a “lock box” in Social Security, but then we raid it to make the budget deficit look smaller.  And we all want to drive cars, but we don’t want oil rigs off our shores, we don’t want pipelines and refineries across our land, and we don’t have either the money or the moral right to invade all those nations in the world that have the energy resources we need.

Our medical system has increased in cost at a compounded 8% rate for the last 30 years.  In 1980 the Federal Government spent $53 billion on all medical programs combined.  Last year it spent over $800 billion.  Politicians on both sides of the aisle have taken the  “gold-standard” position that nobody over the age of 50 will see their Medicare tampered with, as they know that you, the voter, will fire them if they tell you the truth.

The truth is that Medicare cannot be fixed and neither can Medicaid, standing alone.  Instead we must repair the medical system itself.  EMTALA, which mandates that hospitals must treat everyone irrespective of the ability to pay, must be revisited and either modified or abolished.  The practices of cost-shifting, where what you pay for a medical procedure, drug or device is set based only on how you pay for it or where you live, all exempted from laws that make this conduct illegal in other lines of business, must end.  The provision of taxpayer-funded medical care to those who are in this nation illegally must be abolished.  These changes must take place now, not tomorrow and definitely not “somewhere down the road.”  If they do not our medical costs will double in another six years, and we do not have the money to pay that cost.  The result of inaction today, as a matter of mathematical certainty, will be rationing of medical care and collapse of these programs.

The same rot that has infested our medical system must be excised from the rest of our Federal Budget.  The simple fact of the matter is that we are borrowing more than one third of every dollar the federal government spends.  This will double the national debt in less than a decade — again.  We have added more than 50% to our federal debt in three years, and we cannot continue on this path.  Eventually, foreign and domestic creditors who have lent the government that money will go on strike, dramatically raising the cost of financing.  When this occurs we will be forced to cut the size of government by more than 50% in an afternoon, instantly collapsing all of our federal social programs.

There are people on the right side of the aisle who say that we have to “grow the economy” to get out of the current fiscal mess.  They’re lying.  This mantra has been repeated for 30 years, and yet not once has this actually produced economic growth that exceeds the growth in debt through the economy.  The economic bubble in Internet stocks in the 1990s and the housing bubble of the 2000s were both caused by outrageously-fraudulent acts — first through making of knowingly-false statements about exponential growth of the Internet that could not possibly be true for more than a couple of years, and then again through the making of “fog-a-mirror” loans that were packaged up and sold as “solid AAA credits” through the financial system.  Both bubbles were driven by knowing lies.

The tax system at the corporate and personal level favors debt instead of equity, leverage over thrift and industry.  This must end.  The Fair Tax is one such way to do so; by zeroing the corporate tax and rendering all taxes on consumption it removes the preference for debt over equity, makes lobbying for special preferences impossible and makes the cost of government instantly visible and transparent to everyone in the nation.  The Internal Revenue Code should be burned to ash and replaced with The Fair Tax tomorrow morning.

The right also says that we need to return to “sound money.”  But sound money means no more fiscal deficits — period — and no unbacked credit emission.  Yet none of the people on the right side of the aisle — or the left — are actually proposing to cut off that fraudulent emission of credit nor are they proposing a balanced budget.  Yet this is a necessary condition in order to have “sound money.”

The left says that the rich must pay their “fair share.”  But what is their “fair share”?  Nobody on their side of the aisle will tell you.  The fact is that the “rich” pay nearly all of the income taxes now and yet the federal government spends all of that money and then more than a third more — which it doesn’t have.  The lesson is simple — no matter how much money we shovel into Washington it will spend every penny and then continue to spend more, even though Congress doesn’t have it.  There can be no fiscal discipline nor a resolution to this problem until the Congress stops spending money that it has not been able to first tax from someone.

Government tax receipts are, in the main, entirely dependent on the employment participation rate.  That rate is back to where it was in the 1970s and has not budged despite the alleged “recovery” since early 2009.  The fact of the matter is that behind this problem is the offshoring of labor; we temporarily made possible the appearance of prosperity through excessive borrowing at all levels of the economy — federal, state, local and personal.

But those days have now come to an end and we must deal with what our fiscal and employment situation is on-balance, not what we would like it to be.

Either our wage and environmental laws are just or they are not.  If they are not then they must be repealed.  If they are then they must be enforced.  Since we cannot police every nation in the world on either a practical or moral basis the only means of policing those laws beyond our borders are through the imposition of tariffs on all goods and services sold in the United States. This is both a lawful and Constitutional means of enforcing our labor and environmental standards.  Companies can either construct their goods and provide their services with labor and materials from the United States, employing Americans, or they can cover the social spending necessitated by exploiting our markets with slave labor and environmental destruction abroad through tariffs imposed on their activity.  The choice is theirs, but this mandate must be ours, without fear or favor.

Companies such as Apple often claim that they cannot fill the jobs they need filled in America, and that our educational system is failing.  More than fifty years of federal involvement in the education of our children has proved to be an abject failure.  “No Child Left Behind” in fact has left all children behind.  In the 1800s and early 1900s we powered ahead with innovation unmatched anywhere in the world, culminating with putting men on the moon.  We did it all, building this nation literally from the ground up, without Title I.  The Education Department must be de-funded and abolished tomorrow morning and Title I must be stricken from the books along with the rest of federal involvement in education.  We have 50 state laboratories on purpose and our federalist system ensures that our population is free to both vote for the state educational system desired in an area and that the people can move to states that fulfill their own individual mandates in this regard.  At the same time federal involvement in post-secondary education is an abomination; we must both remove the non-dischargable status of student loan debt and in fact remove all federal subsidy and support of higher education.  30 years of interference has proved that all of the “benefit” accrues to university bloat rather than educational outcome with costs increasing at more than three times the rate of inflation.  In 1980 you could flip pizzas to put yourself through college; today that is impossible.  This is not due to market forces; rather, it is due to intentional government interference that must be withdrawn.

America was founded on the rule of law.  Yet while it is illegal for you or I to defraud someone and we will be arrested, tried and imprisoned if we do, over a half-million citizens in Jefferson County Alabama were ripped off and had their water and sewer bills quadrupled through a series of fraudulent schemes.  Several county officials and others involved in the scams were tried and imprisoned.  But the banksters and companies who ultimately funded those bribes, and who benefited financially from these schemes and scams, were neither indicted or forced to give back their ill-gotten gains, and the bills have remained at the quadrupled level, effectively stealing from the citizens each and every month.  Other big firms who have made illicit profits through money laundering for Mexican drug gangs or the off-label promotion of prescription drugs have been fined some portion of their “excess profit”, which simply turns the breaking of the law into a business risk.  Again, if our laws are just then they must be enforced evenly against every entity, irrespective of their size or alleged “importance” to the nation.  The CEO and other corporate officers and board members must be held to account through personal liability when they either are aware of such violations of the law or willfully avert their eyes.  Sarbanes-Oxley allegedly addressed this failing in the white-collar world yet not one financial executive has been charged under this law.

America has the ability to be a great capitalist nation.  But today America is not a bastion of capitalism.  Many have claimed that we now have “crony capitalism” but that too is a misnomer.  Capitalism is the premise that one succeeds or fails through the wisdom of one’s investment, predicated on capital formation (that is, the investment of economic surplus into various economic activities.)  While the vestiges of this system remain in America, what has replaced it is a feudalistic system of scams, frauds, allegedly “lent” funds that do not in fact exist and bribery of various forms, both legal and not.

Later this year America will go to the polls to select a President and all 435 members of The House, along with one third of The Senate.  A vote for those candidates who are currently in office is a vote to continue the policies of theft, fraud and scam.  Neither major political party has shown any interest in reform or putting a stop to the scams, nor has either been willing to tell the truth.  It is often said that nobody other than a Democrat or Republican can win a major political office, yet this is simply untrue.  I have never in my life voted in an election in which only two names were on the ballot for President, and any of those on the ballot is capable of winning.

That which we vote for and demand we cannot complain about.  That which we refuse to admit to yet which is nonetheless true remains our responsibility.  With the cliff of fiscal insolvency and a forced and disorderly contraction in the size of the Federal Government by more than half now in view before us, we have the choice to either change course or drive straight toward certain government and economic ruin.

The responsibility for our political and economic future is in fact individually ours.  We can either focus on the political minutia such as abortion and gay marriage, or we can demand and vote only for candidates that will stop the deficit spending, put a final and complete end to the offshoring of our labor through the exploitation of the environment and slavery in foreign nations, and imprison the fraudsters in our financial system without regard to who they are, restoring the rule of law.

The choice is yours America, and so are the consequences.

BREAKING: Obama to strike sweetheart deal with big banks: Proposed total restitution for the millions of Americans who lost their home due to illegal foreclosure tactics: $20 billion; 2011 big bank bonuses: $144 billion http://www.npa-us.org/call-obama-today You Can Call The White House at (202) 456-1111

In recent days, the fact that Mitt Romney has millions of dollars parked down in the Cayman Islands has made headlines all over the world.  But when it comes to offshore banking, what Mitt Romney is doing is small potatoes.  The truth is that the global elite are hiding an almost unbelievable amount of money in offshore banks.  According to shocking research done by the IMF, the global elite are holding a total of 18 trillion dollars in offshore banks.  And that figure does not even count any money being held in Switzerland.  That is a staggering amount of money.  Keep in mind that U.S. GDP in 2010 was only 14.58 trillion dollars.  So why do the global elite go to such trouble to hide their money in offshore banks?  Well, there are two main reasons.  One is privacy and the other is low taxation.  Privacy is a big issue for those that are involved in illegal enterprises such as drug running, but the biggest reason why people move money into offshore banks is in order to avoid taxes.  Some set up bank accounts in foreign nations because they want to legally minimize their taxes and others set up bank accounts in foreign nations because they want to illegally avoid taxes.  You would be absolutely amazed at what some large corporations and wealthy individuals do to get out of paying taxes.  Unfortunately, the vast majority of the rest of us don’t have the resources or the knowledge to play these games, so we get taxed into oblivion.

So why do they call it “offshore banking”?

Well, the term originally developed because the banks on the Channel Islands were “offshore” from the United Kingdom.  Most “offshore banks” are still located on islands today.  The Cayman Islands, Bermuda, the Bahamas, and the Isle of Man are examples of this.  Other “offshore banking centers” such as Monaco are actually not “offshore” at all, but the term applies to them anyway.

Traditionally, these offshore banking centers have been very attractive to both criminals and to the global elite because they would not tell anyone (including governments) about the money that anyone had parked there.

These days some governments (particularly the U.S. government) are trying to change this, but we certainly will not see the end of offshore banking any time soon.

The amount of money that goes through these offshore banks is absolutely astounding.

It has been estimated that 80 percent of all international banking transactions take place through these offshore banks.  $1.4 trillion is being held in offshore banks in the Cayman Islands alone.

One article in the Guardian estimated that a third of all the wealth on the entire globe is being held in offshore banks, and others believe that as much as half of all the capital in the world flows through offshore banks at some point.

Obviously, all of this tax avoidance means that governments around the world are missing out on a whole lot of money.

It has been estimated that the U.S. government is missing out on $100 billion a year because of these offshore banks.  Others would put that figure significantly higher.

Avoiding taxes is a game that the global elite have mastered.  They are playing a whole different ballgame than you and I are.  They don’t just sit there like idiots and get blasted with taxes.  Instead, they hire the best experts and they employ every trick in the book to hold on to as much money as they possibly can.

These days, taking advantage of offshore tax havens is not that complicated to do.  The following is from a recent Politico article….

A plausible scenario plays out like this: I hire an accountant. Doing her job, my accountant tells me that if I sign a few legal documents and route my money through a small Caribbean island, I could keep more of my paycheck and pay a lower tax rate. I may have earned my money in the United States, but legally I can claim that it was, in fact, earned in a tax haven.

If it is legal, perhaps more of us should look into this.

After all, if playing these kinds of games is good enough for Mitt Romney, then why isn’t it good enough for all the rest of us?

During a campaign stop recently, Romney said the following….

“I can tell you we follow the tax laws”

I certainly believe him when he says that.  But it is what he said next that is troubling….

“And if there’s an opportunity to save taxes, we like anybody else in this country will follow that opportunity.”

I certainly believe him when he says that too.

ABC News recently revealed that Bain Capital has established an astounding 138 different offshore funds in the Cayman Islands.

Something has got to work pretty well to want to do it 138 times.

But Bain Capital was also very busy over in other offshore banking centers as well.

One of the largest shell companies that Bain set up down in the Caribbean was called Sankaty High Yield Asset Investors Ltd.  It did not have an office in Bermuda and it had no staff in Bermuda.  But it helped clients of Bain Capital avoid a whole lot of taxes.

The following comes from a 2007 Los Angeles Times article….

In Bermuda, Romney served as president and sole shareholder for four years of Sankaty High Yield Asset Investors Ltd. It funneled money into Bain Capital’s Sankaty family of hedge funds, which invest in bonds and other debt issued by corporations, as well as bank loans.

Like thousands of similar financial entities, Sankaty maintains no office or staff in Bermuda. Its only presence consists of a nameplate at a lawyer’s office in downtown Hamilton, capital of the British island territory.

“It’s just a mail drop, essentially,” said Marc B. Wolpow, who worked with Romney for nine years at Bain Capital and who set up Sankaty Ltd. in October 1997 without ever visiting Bermuda. “There’s no one doing any work down there other than lawyers.”

The amount of money being funneled through Sankaty today is absolutely stunning….

Today, Bain Capital manages $60 billion in assets, according to a spokesman. The total includes $23 billion in Sankaty debt and credit funds. Half a dozen Sankaty affiliates now are active in Bermuda, corporate registry records show.

The Sankaty debt hedge funds are organized as partnerships in Delaware that produce taxable business income by investing in fixed-income bonds and other debt instruments. Under tax law, even tax-exempt U.S. institutions may face a 35% tax if they invest directly in such hedge funds. By investing instead through a Bermuda corporation, the taxes are legally blocked, experts say.

Of course all of this is perfectly legal.

So nobody gets into trouble for any of this.

By keeping money offshore, even those managing these kinds of funds can avoid being taxed.

Victor Fleischer, a tax professor at the University of Colorado Law School, recently explained how this works….

“The idea behind some of the Cayman Island strategies was that the income that the fund managers receive for managing the money would be kept offshore in the Cayman Island — and the chief benefit is that you can defer when you recognize that income until a later date and you can reinvest the money from the Cayman islands and none of those reinvested funds get taxed until you bring them back either”

So was Romney doing this?

We may never know unless he shows us his tax returns.

What we do know is that Romney has millions of dollars of his own personal wealth invested in offshore tax havens.

The following comes from ABC News….

In addition to paying the lower tax rate on his investment income, Romney has as much as $8 million invested in at least 12 funds listed on a Cayman Islands registry. Another investment, which Romney reports as being worth between $5 million and $25 million, shows up on securities records as having been domiciled in the Caymans.

But Romney does not just have money invested down in the Cayman Islands.  Apparently his money is invested in a whole host of offshore tax havens.

The following quote comes from a Reuters article….

Bain funds in which Romney is invested are scattered from Delaware to the Cayman Islands and Bermuda, Ireland and Hong Kong, according to a Reuters analysis of securities filings.

So is there anything wrong with this?

Well, it depends on how you define “wrong”.

What Romney is doing is perfectly legal.

But it also stinks.  Washington lawyer Jack Blum recently told ABC News the following about Romney’s finances….

“His personal finances are a poster child of what’s wrong with the American tax system”

So now we may have a few hints as to why Romney may not want to release his old tax returns.

But as noted above, what Romney is doing is just small potatoes compared to what the ultra-wealthy do.

The U.S. Congress has been trying to clamp down on offshore banking, but the ultra-wealthy are always two or three steps ahead of them.

The ultra-wealthy will go to just about any extreme in order to avoid paying taxes.

In fact, the Washington Post has reported that an increasing number of wealthy individuals are actually deciding to renounce their citizenship rather than face the wrath of the IRS.

The ultra-wealthy aren’t really concerned that much with national citizenship anyway.  If they want to influence an election, they can have far more influence by donating a few million bucks to a “Super PAC” than they can by casting the few votes that they have.

In a previous article, I described how the ultra-wealthy use offshore banks as a “shadow banking system” that plays by rules that most people don’t even know exist….

It is a shadow banking system that most Americans don’t know anything about. Most Americans don’t have the resources to be able to set up shell companies in half a dozen different countries so that they can “filter” their profits.  Most Americans don’t know a thing about complicated tax avoidance plans that tax lawyers use such as the “Double Irish” and the “Dutch Sandwich”.  Most Americans would have no idea how to eventually have most of the money that they make end up in Bermuda so that it can avoid taxes.

Most among the global elite simply do not care that U.S. debt is climbing into the stratosphere.  All they care about is keeping as much of their own money in their pockets as they possibly can.

Of course there are always exceptions to this rule.  Warren Buffett recently wrote a check to the U.S. Treasury for a little more than $49,000 to help pay off the national debt.

But considering the fact that the U.S. national debt is increasing by more than 100 million dollars an hour, that didn’t exactly do much to help.

Our system is deeply broken and the global elite are getting away with bloody murder.  Over the decades, they have carefully crafted the rules so that as much wealth as possible is funneled into their pockets, and they have carefully crafted the rules so that as much wealth as possible stays in their pockets.

Of course if we got rid of the personal income tax and the corporate income tax entirely and replaced them with a completely new system we could get rid of all of this game playing once and for all.

But what do you think the odds are of that happening?

The Economic Collapse

Oh please Christine….

“It is about avoiding a 1930s moment, in which inaction, insularity, and rigid ideology combine to cause a collapse in global demand,” IMF Managing Director Christine Lagarde said in prepared remarks before the German Council of Foreign Affairs in Berlin. “A moment, ultimately, leading to a downward spiral that could engulf the entire world,” she said.

The dire warning from the IMF’s top executive is designed to spur political action in Europe and within the Group of 20 industrialized and developing economies and avoid the political stagnation she said exacerbated the crisis.

Let’s look at the facts, shall we?

The situation facing Europe and indeed the developed world is much like a gambler who walks into the casino with a bankroll and sits down at the tables.  He loses the first few hands but feels the “old alchemy”, and much like a drug addict he likes the rush that is produced, even as his stack starts to dwindle toward zero.  This is akin go the first political promises made to give handouts to people that have no funding behind them.

As the stack in front of the gambler dwindles, however (and the political promises pile up debts) the level of desperation rises.  Now euphoria is replaced by sweat.  You see, the gambler came to the casino with the mortgage payment and electric bill as his stake, just as the IMF committed billions knowing that the entities involved in the game — in this case Greece — lied to get into the Euro and did so with the explicit support and participation of many of the world’s largest financial institutions.

So now, having lost the original bet, we have the doubling down.  And the doubling down on the doubling down.

Anyone who has gambled knows how this ends — in bankruptcy.  Oh sure, there’s the chance that you will pull off the big hand, that you will get back what you lost.  It’s the nirvana that is always just around the corner, just one more hand, just one more pull of the slot machine handle, just one more hit off the crack pipe and you’ll stop….

There is no stopping other than by force, ladies and gentlemen, and that force needs to be applied to the neck of people like Christine Lagarde by the governments involved.

There is simply no other way.

You cannot solve a debt problem with more debt.  You cannot resolve the issues that face the world economy with more borrowing and you cannot “grow out of it”, as mathematically you must either grow faster than the debt increases or shrink the debt faster than GDP decreases.

This is mathematical fact, not politics or policy.

Lagarde doesn’t want to talk about mathematics and she’s not alone.  The rest of the developed world is likewise unwilling to face facts when it comes to the mathematical certainties that underpin what is going on in the economy on a global basis.  The IMF states that “a collapse in demand” will lead to a global Depression (true) but refuses to admit that “demand” fueled by deficit spending is in fact false; it is “demand” that does not actually exist in the economy as a consequence of actions by people and is instead a reflection of “free stuff” being handed out by those governments.

But “free stuff” is never actually free.  It is only a pull forward of demand into today from tomorrow.  Then, when tomorrow comes, we do it again.  And again.  And again.

For how long can this continue?  Can it contiunue forever, as people like Lagarde claim?  Of course not.

Can we expect productivity and improvement in the economy to lessen and fix sovereign balance sheets?  No, because the deficit spending has not stopped and nobody intends to stop it.

But until it does stop, and until the facts are faced there is no resolution, there is no adjustment in the general price level, there is no recognition that the people of these nations have lived at a standard of living that exceeds their ability to earn.

Until that changes — whether by choice or force — there is no resolution to the underlying problem, and thus all so-called “recoveries” will be both short-lived and false.