FedUpUSA

Archive for February 22nd, 2010

CHART OF THE DAY: Banks Continue To Pull The Rug Out From Under The Economy

Joe Weisenthal and Kamelia Angelova

Can the economy revive if banks don’t start to lend again? Let’s hope so.

 Today the St. Louis Fed released its latest monthly look at commercial and industrial loans at major banks — a measure that some would say represents the essence of the US banking system.

 As you can see, this measure is still falling like a knife — a bad sign for the ongoing health of the economy.  (And also not what we were promised when we bailed out the banks.)

Any Questions On Health Care’s True Intent?

Posted by Karl Denninger

This ought to tell you exactly what you need to know:

Note the inverted text (which I did; that’s not Drudge.)

“Health Reform” was never about actually providing health care to anyone.  It has been and is about trying to find a way to obtain more tax revenue to offset the huge budget deficits that President Obama is running and intends to try to continue to run, and he appears to be well-aware that there is no possibility that the market will accept the sort of Treasury Debt sales necessary to do so in the free market.

See, I told you so (again.)

You will get taxed now and health care improvements never.  Believe it.

911 Just Became Worthless

Posted by Karl Denninger

There’s stupid, and then there’s really stupid.

This fits into the second category:

Apparently, the town of Tracy, California (a bit east of the Bay Area) has decided to turn 911 emergency calls into a profit center. Karl Bode points us to the news that the town now wants people to pay $300 for every 911 call. Of course, if you think you might be a frequent 911 caller, they’ve got a plan for that. For the low, low, low price of just $48 per year, you can call 911 as many times as you want. Yes, that’s right folks, there’s a special deal for those of you who regularly have emergencies. Make sure to order now!

There is an update on this – apparently it will only apply if the fire department has to respond to medical emergencies.

You know, like, for example, if you’re driving down the road and see a horrible single-car wreck happen in front of you?

The 911 system has just become worthless folks.

I won’t dial any more when traveling, and I’ve phoned in a couple of really bad single-vehicle accidents that I happened upon “first.”  I have no idea if my doing so saved lives or not, but it is reasonable to assume that it might have.

Those people may now die, because unless I can be assured that I won’t get hit with a $300 bill for calling in an accident everywhere in this nation I’m not going to do it, and this sort of idiocy has a way of spreading – rapidly.

Thanks to the people of Tracy, California, which believes that raping its citizens is the most important aspect of things, I can no longer use my cell phone to call in auto accidents without the risk of being charged $300 for being a good Samaritan.

Will AIG Force The US To Bail Out Greece?

By Gregory White

AIG is the newest name to be linked with Greece as the bailed out insurer has emerged as a source of CDS on the troubled state.

 Two reports this weekend, both based on a German newspaper article, cited the U.S. government owned firm as a key supplier of CDS on Greek debt.

This could pull the U.S. into the Greek bailout as a means of protecting these firm’s assets.

The Middle Class Two Income Trap – Two Breadwinners plus Extra Money to support the Banking Industry. How Middle Class Americans are losing Ground by Supporting the Financial Sector.

Posted by mybudget360

If it isn’t enough that average Americans are contending with the rising cost of healthcare, education, and daily necessities like food now additional funds are going directly to the banking sector to keep them propped up like a money loving puppet.  Since the Great Depression the rise of the middle class has been the envy of many people around the globe.  The ability for hard working Americans to have access to an economy that supported them so long as they worked hard and followed an implicit guarantee with their nation.  With this implicit guarantee it was assumed that the government would also protect people to a certain degree especially when it came to their financial well being.  This did not assure a winning portfolio but it did mean we wouldn’t turn our stock market into a giant game of casino where the connected had a loaded deck.  Much of the strong regulatory arm that came from the Great Depression was because of the speculative gambling during the Roaring 1920s.  Yet as time went on slowly Wall Street took these structures away and now we are finding ourselves once again with the middle class largely at risk in the United States.  It isn’t by accident we are in the situation we are in today.

The first important thing to understand is that yes, the income of middle class families has gone up since the 1950s but a large part of this was the rise of the two income households with women entering the workforce:

The above chart is disturbing in many ways because it bucks the nearly 50 year long-term trend of employment.  Now, even with two income households many with rising job losses are finding they now have to make it with one income while inflation has eroded their buying power over the decades.  In this recession 3 out of 4 job losses have been men.  If you have any doubt regarding the insidious nature of inflation I put together a chart looking at various costs over the last few decades:

Part of this is due to the Federal Reserve and U.S. Treasury trashing the U.S. dollar over the decades.  For example, in 1950 it took the median household income (which was largely a one income household) about 2 times the annual household income to purchase the median priced home.  In 2008, it took the median household income (now largely a two income household) four times annual earnings to purchase the median priced home.  In fact, the two income household has hidden a large part of how much the middle class has fallen behind in this country.  Now with this recession, the deep cracks are now being exposed in the system.

Income inequality has also risen in this country and a large part of it is due to the financial sector.  1 percent of our population control 42 percent of all financial wealth.  In fact, in the last decade the only segment of our population that has seen any sizeable gains in true wealth is the top 1 percent.  Every other category has seen a loss of housing net worth, wage stagnation, and higher costs for daily items that consume a larger part of their budget.  Just take a look at the chart below showing this change:

Source:  CNN

The above is looking at a one income household in 1973 versus the two income household in the 2000s.  It is interesting to note that in the 1970s Nixon took the dollar into a purely fiat system and since that time, the dollar has lost much of its actual value.  This would be expected.  The Federal Reserve with its banking lieutenants has been able to put our country so deep into debt that realistically we are in a position of never paying back all our outstanding obligations.  The only way out is via inflation and with a fiat system that is the path we are heading down.  This is important because when you look at the charts above prices rise for various reasons and inflation is a hidden tax.  No need for higher taxes to bailout the banking sector when you can just destroy the purchasing power of middle class Americans by monetizing enormous amounts of debt as we have done.

That is why in the next decade, Americans are now working for someone else beyond their immediate household.  A large chunk of their money is now going to the banking sector.  This can be in absurd payments to credit card companies, loss of purchasing power because of the Fed, or other hidden methods of taxing the public.  We are really at a crossroads for the middle class.  If we dissect the data further we realize that even though things cost more, much of it has been financed through debt:

Ironically the family in the early 1970s had more discretionary income than the family in the early 2000s even with a dual income.  Yet if you look around, it isn’t immediately apparent because of the massive debt bubble financed by the banking sector.  Sure people bought bigger homes and newer cars but all this was under a phony veneer of success and was financed with debt.  All of it was built around a mountain of debt.  Yet here is where the big divide hits.  Middle class families are now losing their homes through foreclosure.  Many are having their cars repossessed because they can’t make their payments.  Bankruptcy filings are soaring because people cannot service their debt.  So middle class Americans are paying the price with the rules that are setup.  Yet banks are not.  They are sucking the American taxpayer for all their horrible bets and are not dealing with the ramifications of their actions.  In other words, the bill is going to the middle class as the middle class is dealing with their own bad decisions.  This is part of the system built around the corporatacracy model of government.  Losses are socialized while gains are privatized.

And don’t kid yourself, this entire game was financed on debt:

And the small group of banks at the top now control a large portion of all FDIC backed assets in our country:

Source:  FDIC, Bank Financial Statements

Forget about the Republican or Democrat parties, we are being governed by the financial sector of this economy.  It is amazing how hard it is to get sensible legislation even after this great calamity.  To prove this point, in California an insurance company announced they are hiking healthcare premiums by 30 percent in the midst of this recession even though they pulled in billions in profits.  The government will sit back and let the middle class get fleeced because they are part of the problem.  They speak a good game but are bought by the industry.  Prove us wrong if this isn’t the case.  Enough talk, time for action.  From now on we need to focus on who is delivering results.  If you can, take you money out of the big banks and put them in local regional banks.  Let your local representatives know that their number one priority should be focusing on protecting our struggling middle class.  Time to get some real reform or we really risk losing our middle class.