FedUpUSA

Archive for March 25th, 2010

Understand the Financial Crisis – Knowledge Is Power

The Troy Tea Party is hosting Troy’s own Stephanie Jasky, founder of FedUpUSA in a overview seminar that will give us the knowledge needed to restore the fiscal sanity required by our Constitution.

With the passage of yet another monstrosity called health care reform, we are heading ever closer to the precipice of unstoppable tyranny.

Please set aside 2 hours on Saturday April 3, 2010 and come to the Macomb Fix-It Center located at 13285 Hall Rd., Utica, MI 48315 for this opportunity to regain our financial stability …

(The Fix-It Center is located on the North Side of Hall Road, just West of Schoenherr Road … Target is the anchor store, The Fix-It Center is in the Target strip mall about 3 storefronts north of Target).

This is beyond Party, race or gender. This is WE THE PEOPLE

IF NOT US, WHO?
IF NOT STOPPING TYRANNY, WHAT?
IF NOT NOW, WHEN?
ALL THAT IS NECESSARY FOR EVIL TO FLOURISH IS FOR GOOD PEOPLE TO DO NOTHING, THAT’S WHY.

SO PLEASE JOIN US APRIL 3, 2010 AS Troy’s own Stephanie S. Jasky, Founder and Director of FedUpUSA.org gives us the educational tools that we need to tackle this problem before it is too late.

Seating is limited … please RSVP to Janice with your request for a reserved seat.  Bring friends, family, co-workers and neighbors … just reserve your seats today!!

How the Middle Class Slowly Evaporated in the Last 40 Years – Loss of Manufacturing, Bank Deregulation, Hyper Consumption, and Short-term Profit Seeking from Wall Street.

Posted by mybudget360

Some like to think that the middle class has always been a fixture of American society.  In fact, the rise of a steady and strong middle class didn’t happen until after World War II.  Clearly people can’t look at the economically painful Great Depression, which rampaged the nation from 1929 to 1939 as a good time for average Americans?  In fact, even a few years after World War II the nation hit a few rough patches with price controls and millions of Americans rushing back into the workforce.  But with many of the industrial economies in tatters in Europe and Asia, the U.S. had a well positioned spot for decades of strong growth.  But make no mistake by looking at history that we were producing and manufacturing goods for the world.  And things seemed to work out well for many Americans even with a robust manufacturing base.

The above chart is extremely telling.  There are many reasons and explanations for the Great Depression but World War II clearly got our employment machine going.  That is something that we are struggling with today.  After all, even with the two wars going on today, much of the warfare doesn’t require heavy machinery like fleets of tanks.  What use are thousands of tanks if someone with an improvised explosive can do just as much damage?  So simply saying war is what will drag an economy into production is not necessarily true especially in the modern era.

The middle class today has it very different from the same family in the 1950s.  Back then, one blue collar income was enough for the purchase of a modest house, a car, and a bit of money for savings without going into massive amounts of debt.  That is no longer the case.  Even though in the last year debt loads have fallen (because of bankruptcy and millions of foreclosures) American households are still highly over leveraged with debt:

Here is some stunning data for comparison:

1953 Household Debt (mortgages, auto loans, etc):         $106 billion

1953 GDP:                           $379 billion

2010 Household Debt:   $13.5 trillion

2009 GDP:           $13.1 trillion

*Real US GDP (2000 Constant Dollars)

So we went from household debt being 27 percent of GDP to where we are today where household debt is nearly 100 percent of GDP.  This is clearly unsupportable and as the chart above shows, we can expect more deleveraging in the years to come.  As Stein’s Law will have it “if something cannot go on forever, it will stop.”

Bank Deregulation (No Enforcement)

Since the 1970s, strong regulations that were in place to keep the banking industry in check have come off letting the wild hyena loose.  Those that argue today that we have too much regulation are right but it is weak regulation in agencies that have no power (obviously since this decade was a Wall Street Wild West).  Simple regulations like usury or even checking income before making a loan were all removed.  So in 50 years, we went from very little debt and high levels of production to massive consumption fueled by easy money.  But when things went bust the net was pulled for average Americans while Wall Street racked up trillions in taxpayer money.

Since you need an army for this kind of fraud, this is what has happened over the decades:

As the manufacturing base slowly drifted away starting in the late 1970s the financial and real estate part of the employment equation exploded.  With massive amounts of deregulation, capital flowed to any industry regardless of the long-term implications to the U.S.  We are seeing some of those longer term trends now hitting us.  At this point, it is like reversing the Queen Mary in the middle of the ocean.  This is actually an important debate to have yet few are exploring this at least at the national level.  Some use the price point argument.  They argue that it is fantastic that we can get cheap goods from other countries.  But they usually ignore the cost (see above).  In an ideal world, there would be a balance between exports and imports for any country.  These are usually your perfect case examples in economics.  But right now, if we look at our trade deficit with China for example it is anything but balanced.  Is it any wonder the U.S. Treasury walks on a fine line when discussing policies with China?

Many multi-national companies are doing well in this recession even though we have an underemployment rate of 20%:

If you would have asked someone if you could envision a 70 percent stock market rally while 20% of Americans were unemployed or underemployed people would have laughed.  But that is the new structure we currently have with the corporatacracy running the system especially when it comes to financial reform.

The Short-Term Fix

Think of all the horrible short-term policies that have led us to this mess.  What benefit did we get by offering zero down toxic adjustable rate no verification mortgages?  The only benefit came from mortgage brokers getting $10,000, $15,000, and even $20,000 commissions by putting Americans into toxic financial time bombs.  The other winner was Wall Street who then packaged this waste and sold it off to investors globally but also found its way into the funds of many American pensions and retirement accounts.  How did this help our economy?  What use did this serve?  Or what about the billions in overdraft fees usually pushed on the poorest in our country?  The notion that anything can go flies in the face of thousands of years of human history.  Wall Street made trillions gambling and making money on short-term instruments that really did not improve the overall economy.  In fact, they were parasites that have now created this deep financial mess we are in.  And here we are with no serious financial reform over two years into the crisis.

One thing that really isn’t talked about is whether we want to protect the middle class.  This is a legitimate debate we should be having and should be priority number one.  So far, the banking angle has been that without the enormous bailouts, the middle class would have suffered.  This was of course merely fear mongering to make sure the financial structure stayed in place.  If we continue on this current path, a Japan like scenario in terms of part-time employment is possible.  A population where a third of their workforce is employed part-time yet headline unemployment is at 4 or 5 percent.  And this notion that we have no money is absurd because that hasn’t stopped Wall Street from getting $13 trillion in bailout funds.  We may not have the money but somehow we were able to funnel that much there way while the middle class is feeling the pinch from every angle.

Do we have another Harry Markopolos here, describing in detail the manipulation of the gold market by J.P. Morgan to the CFTC? How does this square with the testimony today from the CFTC Commissioners, who seem to indicate that the markets are functioning extremely well, and that investor can have full confidence in them?

I am led to understand that Mr. McGuire had offered to testify before the CFTC today, and that he was refused admittance. I do not know him, or the position he is in within the trading community. I cannot therefore assess his credibility or the validity of any evidence which he may present or possess. But I have the feeling that nothing will come of this.

Remember, there was no action on the Madoff scandal until AFTER his fraud collapsed, and the government was forced to acknowledge his existence. Harry Markopolos was dismissed by the arrogant bureaucrats at the SEC for years because of Madoff’s power and standing with the trading establishment, and those who had an interest in his scheme, if nothing else, to be silent to promote ‘confidence’ in the markets.

This is much, much bigger than the Madoff scandal if true. Frankly, I do not expect the facts to ever reach the light of day. The implications are far too political.

ADDITIONAL STATEMENT BY BILL MURPHY, CHAIRMAN OF THE GOLD ANTI-TRUST ACTION COMMITTEE

HEARINGS ON THE METALS MARKETS, MARCH 25, 2010

On March 23, 2010 GATA Director Adrian Douglas was contacted by a whistleblower by the name of Andrew Maguire. Mr. Maguire, formerly of Goldman Sachs, is a metals trader in London. He has been told first hand by traders working for JPMorganChase that JPMorganChase manipulates the precious metals markets and they bragged how they make money doing so.

In November 2009 he contacted the CFTC enforcement division to report this criminal activity. He described in detail the way in which JPM signals to the market its intention to take down the precious metals<. Traders recognize these signals and make money shorting the metals along side JPM. He explained how there are routine market manipulations at the time of option expiry, Non-farm payroll data releases, and Comex contract rollover as well as other ad hoc events.

On February 3 he gave two days advance warning by email to Mr Eliud Ramirez, a senior investigator of the Enforcement Division, that the precious metals would be attacked upon the release of the non-farm payroll data on February 5. Then on February 5 as it played out exactly as predicted further emails were sent to Mr. Ramirez in real time while the manipulation was in progress.

It would not be possible to predict such a market move in advance unless the market was manipulated.

In an email on that day Mr. Maguire said “It is ‘common knowledge’ here in London amongst the metals traders it is JPM’s intent to flush out and cover as many shorts as possible prior to any discussion in March about position limits. I feel sorry for all those not in this loop. A serious amount of money was made and lost today and in my opinion as a result of the CFTC allowing by your own definition an illegal concentrated and manipulative position to continue”

Expiry of the COMEX APRIL call options is today. There was large open interest in strikes from $1100 to $1150 in gold. As always happens month after month HSBC and JPM sell short in large quantities to overwhelm all bids and make unsuspecting option holders lose their money. As predicted in advance by GATA the manipulation started on March 19th when gold was trading at $1126. By last night it traded at $1085.

This is how much the gold cartel fears the enforcement division. They thumb their noses at you because in over a decade of complaints and 18 months of a silver market manipulation investigation nothing has been done to stop them. And this is why JPM’s cocky and arrogant traders in London are able to brag that they manipulate the market.

It is an outrage and we are making available the emails from our whistleblower, Andrew Maguire available to the Press wherein he warns in advance of a manipulative event.

Additionally Mr. Maguire informed us that he has taped recordings of his telephone communications with the CFTC for which we are taking the appropriate legal steps to acquire.

On the Economic Role of Government

By Bill Bonner

03/24/10 Paris, France – Government’s role in an economy has never been properly explained. We will have a go at it ourselves. In a word, government betrays the future.

Government is a profoundly reactionary institution. It always favors its current clients – the present generation of taxpayers – over its clients of the future (who don’t pay taxes and don’t lobby). It provides protection against foreign invaders and domestic troublemakers. It also attempts to give its clients protection against the future.

Taxpayers want government to protect their existing assets…their businesses…their claims…their jobs…their franchises against all threats. In the modern world, most of those threats come in the form of economic and technological change. That’s why taxpayers demand subsidies and bailouts. It’s also why they like regulation. Anything that will keep change from diminishing what they’ve got.

A properly-functioning economy, as Schumpeter described it, is a process of incremental growth and also of creative destruction…in which old industries, old technologies and old institutions are blown up by change. This is what people pay their taxes to avoid. The present generation wants the government to “do something” to protect them from this process. It’s why they are perfectly happy to see the government take over the whole economy, if necessary, in order to prevent capitalism from happening.

What’s more, the current generation of retiring taxpayers in all the welfare states hopes to get something it cannot afford – pension and health care benefits above and beyond what it has saved for. How can it do so? Only by borrowing from future revenues – that is to say, by putting a claim on income that has not been earned yet…much of it by people who do not even exist yet. Government, again favoring live voters over those who are dead or unborn, goes along. In the case of the US, the newborn child in 2010 faces about $170,000 worth of bills – his share of the net financial obligations of the federal government.

Good luck getting him to pay up!

No Greece Solution: Told You So

Posted by Karl Denninger

And Here It Comes: State Pension Systems

Posted by Karl Denninger