FedUpUSA

Archive for December 11th, 2010

Examining the average income for Americans sheds a very troubling light on what has happened to income over a very financially destructive decade.  If we look at the median household income in the U.S. this actually underplays the falling behind of wages because we are looking at households with multiple people working.  Without a doubt the median wage is bolstered by two income families but when we break this out, we realize how challenging things have gotten for most Americans on a very personal level.  You might even be one of these people (the odds are good that you individually make less than $40,000 per year given that 66 percent of individual Americans make this amount or less).  For this article I will be looking at recent income data from the Census, Social Security, and also examine tax receipts for the Federal Government.  What we find is a pooling of money at the top while most Americans have found a smaller paycheck with much less employment security.  One startling fact that I found looking at Social Security information was that 100,000,000+ Americans earn an average of $39,999 or less a year (66 percent of all Americans).  When we break down the cost of daily living and what one would expect out of a middle class lifestyle we get a better understanding of why so many people feel that they are being left behind in a dust cloud of economic verbiage.

I first wanted to break down the average income of individual Americans through examining Social Security data:

Source:  Social Security

For 2009 Social Security had 150,917,733 wage earners.  Keep in mind that in some cases you might have people only working for half a year or part-time work but this data gives us an excellent personal look at the average income of Americans on a very micro level.  One startling reality is that 72,000,000+ Americans earn $25,000 or less each year (almost half the wage earning population).  This is why when we look at the median household income of $50,000 we come to the stark realization that two incomes are necessary just to stay above water.  When only a few decades ago one blue collar income was enough for a middle class way of life (i.e., modest home, a path to a public college, etc) now two incomes are barely enough to pay for the daily necessities.

Another 34 million Americans earn an average of $25,001 to $45,000 per year while 33 million earn between $45,001 and $99,999.  Going up to an average of $99,999 covers 93 percent of all individual wage earners in the country.  This is where the vast majority of Americans reside.  The numbers quickly dwindle as expected when we hit the upper income ranges.  What is interesting is the vast difference between those who earn $20 million and $49 million and those who make over $50 million.  The data reveals that over 353 Americans earned between $20 and $49 million and the average amount was $28 million.  Compare this to the 72 that made more than $50 million with an average compensation of $84 million.  To put this into context, the top 72 Americans earned over $6 billion in 2009.

The lowest paid 24,000,000 Americans earned an average of $2,061.  Again, this is merely to put all the data on the table.  It also shows how tilted things have gotten.  I wanted to see what the top 1 percent earned in total compensation for 2009 and compare this to the bottom half of wage earners:

Source:  Social Security

“The top 1 percent of wage earners in America earned more than the bottom 48 percent of Americans.  If you are wondering where the middle class is evaporating to it is rather clear.”

Substantial income inequality is not the path to a strong and vibrant middle class.  17 percent of Americans are either unemployed or underemployed so the lower end of the curve is dragging more people lower.  Yet the top end remains rather strong.  Some will argue that the very wealthy have also been hit.  This is true and we have seen this in the top wage categories.  But this is the difference between earning $50 million and $40 million.  The marginal impact on lifestyle is minimal.  Losing your income when you have a household making $50,000 combined and suddenly a $25,000 wage earner is gone can throw things into a tailspin.

There is nothing wrong with earning tremendous amounts of money.  In fact, that is the spirit of capitalism.  But how many Wall Street banker types that earned money betting on the failure of Americans while enjoying government handouts as protection made it to the top of the bracket?  This isn’t rewarding capitalism but a modern form of corporatocracy.  The reason the lower end became poorer is because those on the lower end had to shuffle and redistribute wealth to the higher end of the curve in the form of bailouts.  Consider it a form of reverse trickledown theory.

Let us now look at the median household income data from the Census:

Source:  Census

The median household income for Americans is $50,221. The above curve seems more balanced out but Census data tops out at “$200,000 or more” so it doesn’t break down data as clearly as the individual Social Security wage data.  3.9 percent of households make more than $200,000 a year.  So the incredible majority of Americans make less than $200,000 and this is for overall household data so we have many with two or even more income earners here.  So why did the media object so loudly for having higher taxes for those making more than $250,000?  Well refer back to the Social Security data.  Also, the line was fed that many of these high income earners are the job providers of Americans.  Of course the implicit and subtle argument meant that if taxes go up on this group they will fire more people.  We can debate the merits of the tax increase at the very top but the amount of rhetoric we heard on mainstream TV shows you that the top 1 percent control much more than just the wealth of the country.

You also need to remember many of those at the top take money in various forms like capital gains which are only taxed at 15 percent.  The vast majority of Americans have small amounts of stock and the bulk of their net worth is stored up in real estate.  The crashing housing market has harmed them the most while the improved stock market has targeted a smaller segment of the population.

Since the peak, Zillow the real estate tracking company estimates that residential values have fallen by $9 trillion.  Yet stock wealth has bounced back since the low in early 2009.  When we look at income figures we see there is some troubling inequality in the system and it has only become magnified in this recession.

While this is happening tax collections for the government are back up yet spending in the form of bailouts, deficit spending, war, and other government expenditures has also increased much quicker and those at the top are the biggest beneficiaries:

In essence the bailouts have gone to the wealthiest and many of the top have argued the uptick in tax revenues is somehow natural.  It isn’t and you can just look at the above data.  This is merely income redistribution but not how most of us would think about it.  After all, why would the wealthiest in the U.S. need to take more money from those at the bottom rung?  We are now back to 2005 levels of revenues.  Yet this in itself is a bit deceptive because the purchasing power of the U.S. dollar has fallen over this decade as well:

The U.S. dollar is down 20 percent from the start of the decade.  What this means is the purchasing power of Americans has eroded over this time.  It is also the case that wages have gone negative over the entire decade with stagnant pay and inflation chipping away as well.

So how much does the average American make?  $38,000 even when we add in billionaires and everyone else.  This is the individual amount.  It would be tough to even come close to a middle class lifestyle with that income.  Let us run a quick scenario:

The average American is taking home roughly $2,500 per month.  We are using Florida as an example here.  Let us just run some quick numbers to see how far that $2,500 will go:

What happens if the car breaks down?  What happens if you get a cavity?  What happens if you lose your job?  You can see how tight the budget is above and we are keeping it basic.  Many are told by financial planners to sock away 9 months of emergency funds.  It will take years for the average American to put away $22,500.  Is it any wonder why millions of Americans rely on Social Security as their main source of income?  Millions of Americans are still on verge of losing their unemployment insurance and are basically one check away from being on the streets conjuring up visions of soup lines of the Great Depression.  The average income doesn’t even come close to paving a way to a middle class lifestyle.  What you have is a shrinking middle class where people are working harder and harder yet being thrown off the treadmill one by one.

My Budget360

Pay attention folks….

Americans want Congress to bring down a federal budget deficit that many believe is dangerously out of control, only under two conditions: minimize the pain and make the rich pay.

The public wants Congress to keep its hands off entitlements such as Medicare, Medicaid and Social Security, a Bloomberg National Poll shows. They oppose cuts in most other major domestic programs and defense. They want to maintain subsidies for farmers and tax breaks like the mortgage-interest deduction. And theyre against an increase in the gasoline tax.

Got it?  Must have this:

Over in Britain an attempt to play a game called “reality” has led to violence:

LONDON Britains coalition government survived the most serious challenge yet to its austerity plans on Thursday when Parliament narrowly approved a sharp increase in college fees. But violent student protests in central London, including an attack on a car carrying Prince Charles and his wife, Camilla, to the theater, provided a stark measure of growing public resistance.

That the word “survived” had to be used in that paragraph is a stark reminder of just how close things are to not surviving “as currently constituted.”

Here’s the problem with the American perspective (and that in Britain, for that matter): There is no means by which playing “tax the rich” can close the gap.

Here, again, is the budget picture in terms of deficits in dollars:

So let’s assume we don’t pass the tax cuts for the “rich.”  Ok, that’s $70 billion a year.  The gap between revenue and spending is over $1,600 billion.

In other words “soak the rich” gets you 4.4% of the problem.

And remember, this change gets rid of the dividend, capital gains, and income tax preferences for the wealthy, defined as “those who make over $250,000 as a couple, or $200,000 as an individual.”

If we “rape the rich” even more, we could probably take another $200 billion off that number.  That still doesn’t matter, simply on the mathematics.

Beyond that level you probably run into “avoidance” – that is, perfectly legal choices to make less. 

There have been plenty of years where I’ve written really big checks to the IRS, and not all of them were related to MCSNet.  The last few years have been pretty good.  But this much I can tell you – if the government was to, for example, tax everything I made at 90% beyond $200,000, I would never make more than $200,000 a year again.  Ever.  I will not work hard to earn that money only to turn 90% of it over to the government.

Those of you who get up and go to work every day simply don’t get it or don’t care to listen.  You get paid time and a half for hours over 40, and double time on weekends and holidays.  The former is actually Federal Law, not employer preference.

I, on the other hand, was literally on-call 24×7 for a decade building what I had with MCSNet.  I didn’t have an actual vacation – a time when I could choose to shut off the pager and phone for so much as 24 hours - for more than five years.  For a decent part of that time I not only ran my own joint I worked for “the man” at the same time.  Today, as an entrepreneur, I still can’t take that vacation.  I had it for a few years when I was effectively ”retired” but now it’s gone again, as I run The Ticker and forum.  I go on “vacation” or have a “nice weekend” and my phone and laptop are always with me, as I have to be able to respond to potential problems with the infrastructure – and if I hired someone to watch the infrastructure I’d have to be able to respond to “business issues.”

The motivation to do this – to take the risk of material loss of one’s capital and to trade one’s personal life off like this instead of being a working drone that works for “the man” from 9-5 and then comes home to watch ”Dancing With The Stars” - is money.  Remove that motivation by confiscating what I earn and I will stop doing it and sit in my hottub drinking Cognac or fishing every day instead – that’s a promise and a fact, and your illusory “tax revenue” will fail to materialize.

Exactly where does that “avoidance” behavior begin?  I don’t know.  But what I do know is that it begins at a lot lower level than you probably think.  And the spiral that this promotes downward in tax receipts is both very real and impossible for the government to stop or prevent.

This isn’t to say that letting the Bush Tax Cuts expire – all of them – shouldn’t be done.  It should, in my opinion, rather than not only extending them but creating a structural decrease in FICA tax that will, in my opinion, never be reversed.  That will cause Social Security to run into actuarial trouble much sooner than it otherwise would.

Never mind that the big problem is in Medicare and Medicaid, two sacred cows.  But while I’ve long written about these, going back to Musings before The Ticker was formed, in point of fact it really doesn’t matter at the rate we’re going – we’re not going to keep this set of plates in the air long enough for that to all play out.

We have no leadership in Congress and worse, we’ve become soft as a nation, demanding handouts and refusing to work for what we have.  We think we have a right to advanced medical technology even though we have no money, simply because we’re alive.  We have a “right” to unlimited unemployment if we can’t – or won’t – find a job.  And make no mistake – much of it is “won’t.”  There are jobs – just not at the rate of pay you expect to support the lifestyle you think you’re entitled to, or that job might be halfway across the country – and you, of course, are “entitled” to live in a particular place, in a McMansion, irrespective of whether a job that pays enough to cover your expenses exists there.

Our sense of hubris has exceeded our willingness to get off our collective fat asses by several orders of magnitude.

I’m sure I’ll get more hate mail for this missive, as I usually do when I write a Ticker like this.

It doesn’t matter.  I deal in the truth folks, and whether you want to hear it or not I’m going to put it in front of you anyway.  I don’t do this because I want to be popular. I do it because it’s right, and because it is impossible for me to sit here with a clean conscience and see polls like that referenced in Bloomberg and say “oh it will all be ok.”

No it won’t, and the day of reckoning, when we’re no longer able to play this game, will come here to the United States far sooner than most of you believe.

It is not just our leaders who need to grow a sack – it is also our people.

Is Ron Paul finally in position to really do something about the Federal Reserve?  U.S. Representative Spencer Bachus, the chairman-elect of the House Financial Services Committee, has announced that Ron Paul will chair the domestic monetary policy subcommittee starting next month.  This puts Ron Paul in tremendous position to be able to put significant pressure on the Federal Reserve.  In previous years Ron Paul has introduced legislation to end the Federal Reserve but it never got any traction.  During this most recent session of Congress an effort by Ron Paul to have a full audit of the Federal Reserve conducted gathered quite a bit of momentum for a while, but in the end it did not get passed.  However, a very limited examination of Fed activities during the recent financial crisis was passed, and that examination has revealed some really shocking things.  With so many Tea Party members entering Congress this upcoming session there may be more momentum than ever to hold the Federal Reserve more accountable.  Ron Paul is already talking about how he is planning for a full slate of hearings on U.S. monetary policy and he has indicated that he plans to restart a push to have the Fed audited.

And why shouldn’t the Federal Reserve be fully audited?  The Federal Reserve has more power over the U.S. economy than any other institution and yet it has not been subjected to a comprehensive audit since it was created back in 1913.

So what would an audit accomplish?

Well, it would hopefully expose what is going on inside the Federal Reserve.

A very, very limited examination of Fed transactions that occurred during the recent financial crisis forced the Federal Reserve to reveal the details of 21,000 transactions stretching from December 2007 to July 2010 that totaled more than 3 trillion 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.

These revelations have many members of Congress wondering what else has been going on inside the Federal Reserve.

For example, U.S. Senator Bernie Sanders was absolutely outraged by these “backdoor bailouts” by the Federal Reserve….

“The $700 billion Wall Street bailout turned out to be pocket change compared to trillions and trillions of dollars in near zero interest loans and other financial arrangements that the Federal Reserve doled out to every major financial institution.”

More members of Congress than at any other time in recent memory are openly wondering if it is now time “to pull back the curtain” at the Federal Reserve.  For those who would like to see the power of the Federal Reserve greatly diminished, there should be one primary goal right now.

Expose the Federal Reserve.

The truth is that the more the American people learn about the Federal Reserve and about what it has been doing the more they disapprove.

During his farewell speech on the floor of the U.S. Senate this week, Senator Jim Bunning noted that as the American people become increasingly aware of what the Federal Reserve is doing the less they like it….

“Public awareness of what the Fed is doing is increasing while public opinion of the Fed is falling.”

Unfortunately, the views of Ron Paul and other anti-Federal Reserve members of the Tea Party movement are strongly opposed by many other members of the Republican Party.

In a recent Bloomberg Television interview, Barney Frank noted this division within the ranks of the Republicans….

“I do not believe that Ron Paul’s views on the Fed represent the views of most Republicans.”

However, there is evidence that the tide is turning with the American public.

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.  A majority of Americans now want the power of the Federal Reserve to be reduced or they want it shut down entirely.

If Ron Paul is able to get a comprehensive audit of the Federal Reserve passed, the revelations that would come out of that would certainly turn public opinion against the Fed even more.

So what is so bad about the Federal Reserve?

Well, think of it as a perpetual debt machine.

Did you know that the U.S. national debt is 5,000 times larger than it was a hundred 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.

Since that time, our debt has been endlessly skyrocketing.

Under the Federal Reserve system, the U.S. government cannot just go out and print money.  It is actually the Federal Reserve that issues our currency.

The way our system works, whenever the U.S. government arranges for the Federal Reserve to issue more currency, more government debt is created at the same time.  In fact, as I have written about previously, all of our money is now based on debt.

No debt, no money.

What we desperately need is for the current monetary system to be scrapped.  The federal government should take back the power to issue currency and should implement a new system based on money that is debt-free.

The truth is that it is insane that any sovereign government should have to go into debt just to produce more of its own currency.

Instead, what we have under the Federal Reserve system is a money supply that will forever be expanding, a currency that will forever be deteriorating in value and a national debt that will continue to skyrocket until the entire system collapses.

Since the Federal Reserve was created in 1913, the U.S. dollar has lost over 95 percent of its purchasing power.  This continual debasement of our currency is called “inflation” and it is a hidden tax on every man, woman and child in the United States.

It is absolutely guaranteed that every single dollar that you own will go down in value over the long-term.

But the American people have come to accept that a constantly expanding national debt and a currency that is constantly losing value is the most “rational” economic system that humanity has ever come up with.

So who benefits from all this?

Well, for fiscal year 2010 the U.S. government paid out over 413 billion dollars in interest on the national debt.  In future years that number is projected to rapidly skyrocket even more.

Wouldn’t you like to be getting a nice chunk of that 413 billion dollars?

It turns out that loaning money to the U.S. government is very, very profitable.

That 413 billion dollars is money that was transferred from the American people to the U.S. government, and then transferred from the U.S. government to big financial institutions, foreign countries, and very wealthy bankers.

So what did we get in return for our 413 billion dollars?

Nothing.

Sadly, this is not just going on in the United States.  This is going on literally in almost every nation on earth.

All over the world sovereign governments are drowning in debt and so they have to drain their citizens dry so that they can meet their obligations.

In the book of Proverbs, it tells us that “the rich ruleth over the poor, and the borrower is servant to the lender.”  Americans like to think that they live in “the land of the free”, but the truth is that we have become enslaved to debt.

But even worse, we have consigned our children and our grandchildren to a lifetime of debt.  They will have to work all of their lives to pay trillions of dollars in interest on all of the debt that we have accumulated in this generation.

How would you like to be born into a world where the previous generation had racked up a $13 trillion debt that now you were expected to pay off?

There is a reason why people like Ron Paul are so obsessed with the Federal Reserve.  It is not because they don’t have anything better to do.  It is because the future of our country literally hangs in the balance.

Throughout American history, presidents, top members of Congress and leading business people have warned us about the dangers of having a central bank.  In fact, even though our young people are no longer taught this, the debate over central banking was one of the most important themes in early American history.

But we didn’t listen to the warnings.

We were convinced that we knew better.

Well, now we have an economic system that is dying and a $13 trillion debt that we are passing along to our children and to our grandchildren.

Perhaps we were not as smart as we thought we were.

The Economic Collapse

The growth of the too big to fail bank is something that is modern to this era.  In the 1990s there were fewer than 40 institutions that had total assets above $20 billion.  In the late part of the 1980s and 1990s this number was below 20.  The peak was reached in 2005 with 55 institutions having more than $20 billion in total assets.  That number has fallen in recent years because of the crisis yet we have a handful of banks that control most of the nation’s banking assets.  The total U.S. banking system as of today supports over $13 trillion in total assets.  The FDIC insures these deposits with a deposit fund that is negative so it might as well be supported by pure faith.  What makes up most of these assets are residential and commercial real estate loans.  As we have discussed banks have yet to come to terms with the reality that many of these loans are not worth what they claim they are.  First, let us look at the growth of too big to fail.

The chart is unmistakable in the modern era growth of mega banks:

You can see that in the mid-1990s the growth in too big to fail took off.  It hit its pinnacle in 2005.  There is nothing inherently good about massively giant institutions and we have seen the ramifications of failure with Lehman Brothers and Bear Stearns to mention a couple notable collapses.  Even though the U.S. banking system has 7,760 banks 19 banks make up 50 percent of the asset base:

Source:  FDIC

The more disturbing thing is that most of the bigger banks are the institutions with the weaker balance sheets.  But look at the above chart.  7,095 banks can completely fail and only 15 percent of the total asset base would disappear.  It shouldn’t be surprising that the list of troubled smaller banks is growing:

But didn’t you say smaller banks were doing better than bigger banks?  They are for the most part but many of these smaller banks don’t have the same kind of relationship with the Federal Reserve and don’t have the leverage of say a JP Morgan or Bank of America.  Looking at recent banking profits the bulk of the money being made isn’t on a strong U.S. bank customer, but by speculating through their investment units around the world.  This can take the form of speculating in commodities, stocks in emerging countries, or anything else.  When you can borrow at zero percent it isn’t too difficult to turn a profit but it is certainly not benefitting the American economy especially the working and middle class.

Consumer and individual loans did spike up in 2010 due to easy money and banks being flush with funds.  Yet this is now tapering off:

At the same time, is this even something to be happy about?  The American consumer is over leveraged so adding more debt doesn’t seem to be the solution here.  Banks can only make these loans because the Fed is determined to dilute the U.S. dollar and hopefully, in their eyes at least, inflate away current debts including horrific bets on commercial real estate.

Even in recent years it has become very clear that bankers are relying on more questionable assets to constitute their investment base:

Many observers agree that the current banking system is insolvent and the only thing keeping it afloat is by suspending accounting laws that require mark to market.  We have seen this translate into banks moving slowly on bigger priced foreclosures on residential properties but also commercial buildings.  The banking system problems of 2007 are still largely present as we end 2010.  The only difference now is that they have managed to link up their failure to the U.S. dollar directly.  This is why the Federal Reserve is embarking on the quantitative easing path.

Mega banks need to be broken up and a separation between investment and commercial banking is an absolute necessity.  It is incredible that no politician (or group of) has taken this up.

“Many Americans are now coming to the stark realization that Washington D.C. and their representatives no longer listen to their voice. They listen to lobbyists and banking interests.”

If you recall, the bailouts were largely opposed and the public railed against their constituents.  The first vote did not pass the bailout and then politicians used fear and went ahead anyway.  This was not the will of the people.  Also, it is insulting that nothing was attached to the bailout funds.  For example, a stipulation could have been put to break up the banks as a condition of the bailouts.  Instead a blank check was given and here we are back with the same system of mega banks and no protection for the people.  If our politicians were in a contest for best negotiator they would come in absolute last.

They say this was necessary or the economy would have been even worse.  Well let us look at the unemployment rate now versus when the bailouts largely took place:

September 2008:                             6.2

November 2010:                              9.8

Then we hear the Federal Reserve saying it would have been 25 percent if it weren’t for the bailouts.  Really?  What would it have been if the Fed actually did its job and prevented the housing bubble from taking place to begin with by regulating and enforcing laws against the banks?  Do people really trust these guys?

MyBudget360

Do not buy stocks. Not for retirement. Not in the coming decade. Don’t. Huge risks.

Wall Street is a loser. Stocks are Wall Street’s ultimate sucker bet. And it’ll sucker you again. You’ll lose, worse than in the last decade. Wake up before Wall Street banks trigger the next meltdown, igniting mass bankruptcy.

Here are 10 more reasons not to bet at Wall Street’s casino … wait till after they implode:

1. American stocks are a high-risk sucker bet

That’s the view of Peter Morici, the former chief economist at the International Trade Commission: that U.S. stocks are a sucker bet. Is Main Street waking up to Wall Street’s con? Maybe. “With corporate profits breaking records, Wall Street anxiously anticipates the return of the individual investors to the stock market. It may be a long wait, because the little guy may have concluded investing in stocks is a sucker bet.”

America’s divided into two stock markets: one for Wall Street’s rich insiders, another for Main Street’s suckers: “Investors, as opposed to traders, buy stocks in companies whose profits they expect to rise. The conventional wisdom says stock prices will follow profits up, but over the last two business cycles, that simply has not happened.”

From 1998 to 2010, profits rose 203%. But the S&P 500 was up just 7%. And still, naive investors buy into Wall Street’s sucker bet.

Who’s pocketing the huge profits? Rich insiders. “Because most of the increased value created by higher profits,” says Morici, “has been captured by hedge funds, electronic traders, private equity funds, and aggressive M&A shops, free standing and at major investment banks, which have multiplied over the last two decades.”

Warning: With the resurrection of the GOP and Reaganomics, Wall Street will skim more from Main Street, get even richer. And yes, you’ll lose more.

2. New ‘big short’ dead ahead: Derivatives con game will crash again

In a Bloomberg story, “Big Short” author Michael Lewis asks: “Why are the same Wall Street banks that lobbied so hard to dilute the passages in the Dodd-Frank financial overhaul bill banning proprietary trading now jettisoning their proprietary-trading groups, without so much as a whimper?”

The answer’s simple: Wall Street’s sneaky and will do anything to keep the derivatives casino running hot. Insiders “have no intention of ceasing their prop trading,” according to Lewis. “They are merely disguising the activity, by giving it some other name.”

3. Hedge funds shorting China: Warning — U.S. faces collateral damage

Get it? China may well crash first. Fortune’s Bill Powell interviewed hedge-fund kingpin Jim Chanos of Kynikos Associates, who’s “betting that China’s economy is about to implode in a spectacular real estate bust.” China is “an economy on steroids.” In a Charlie Rose interview, Chanos said “China’s on an economic treadmill to hell.” If so, then all of Wall Street’s highly promoted emerging markets are also sucker bets.

Another hedge-fund player warned: Chanos “is shorting the entire country,” including a company “Goldman Sachs recommended as a buy … the listing for the Hong Kong Stock Exchange … China’s Merchants Bank, one of Beijing’s largest.”

Back in the 1980s, Japan “grew largely on the back of capital investment” and then turned into “a capital-destruction machine, and that’s what China is now. You have an economy that’s 60% fixed-asset investment, and not even in the developing world is that sustainable.”

Chanos won’t pinpoint the timing or the trigger: “He just believes it’s coming,” and he is betting on it. Reminds us of Henry Paulson shorting Goldman Sachs’ crooked deals before the 2008 crash.

4. New insider-trading indictments killing Main Street confidence

Investor distrust of Wall Street’s casino will skyrocket in 2011. Before the elections in November, an AP-CNBC poll found 61% of investors had already lost confidence in the market, thanks to extreme volatility; 55% believe the market’s rigged to favor insiders.

It’ll get much worse as the FBI/DOJ investigations of insider trading add indictments and perp walks. As more facts surface, this could get bigger than Enron and the SEC mutual-fund fraud suits combined: more proof of Wall Street’s rigged game.

5. Banksters’ perfect gambling record proves stocks a rigged game

Last year we reported that Goldman Sachs made more than $100 million in profit a day for 23 days in one month. This year the con game has gotten bolder.

Morici says “J.P. Morgan and Bank of America went through the entire third quarter without a negative trading day, no losing days on proprietary trades. Unless you believe in perfection, something stinks about the information they are using. If someone is winning all the time, then someone else is losing. That’s the ordinary investor. Stocks have become a rigged game.”

Yes, America’s 95 million average investors are suckers in a rigged game.

6. Wall Street is socially worthless, existing only to make insiders rich

In the New Yorker, John Cassidy writes: “Much of what investment bankers do is socially worthless.” Wall Street exists solely “to make itself very, very rich.”

Yes “worthless,” but “for a long time, economists and policy makers have accepted the financial industry’s appraisal of its own worth, ignoring the market failures and other pathologies that plague it.”

Worse, continues Cassidy, “even after all that has happened, there is a tendency in Congress and the White House to defer to Wall Street.” Why? Wall Street’s huge lobbying war chest. Soon all this will come to a disastrous climax, Wall Street will implode on blind greed.

7. The Fed is America’s worst nightmare, a $3.3 trillion moral hazard

Moral hazard simply means no consequences for Wall Street’s complicity in triggering the 2008 catastrophe. As a result, Wall Street insiders came away believing they can take bigger and riskier bets in the future because they will get away with it next time, too.

Why? Because America’s suckers will be dumb enough to bail them out the next time, too, with no consequences when they fail miserably again.

Last week the Fed made the moral-hazard risks more obvious by releasing 21,000 documents showing how an arrogant Ben Bernanke approved $3.3 trillion in cheap-money taxpayer bailouts to incompetent Wall Street banks, blue chips and even banks in Switzerland, France, etc. Bernanke’s making fiscal policy, and he’s a tragic disaster. When President Obama reappointed him last year, we echoed author Nassim Nicholas Taleb, calling it Obama’s worst domestic-policy blunder.

But it can get worse: Caving in to the GOP on Bush tax cuts to the rich will funnel billions more of our tax dollars into the rigged game. Final proof Obama is Wall Street’s co-conspirator in the class war against 300 million average Americans.

8. Wake up to a new normal: no growth, deflation

In his latest newsletter, economist Gary Shilling, a longtime Forbes columnist, warns: “Real economic growth rates of 2% or less are likely through 2011.” But we need 3.3% just to keep up with population growth.

So “high unemployment remains a political problem … with weak economic growth, looming deflation, and the dollar and Treasurys remaining the safe havens in a sea of global trouble.”

Warning: America’s new era, featuring no growth, deflation and a jobless recovery, will continue for years, resembling Japan over the past two decades. Worse, brutal deficit cuts will trigger riots, as in England, France.

9. Privatize Social Security: New GOP Congress loves dumb ideas

Here’s political Reaganomics at its numbest. Alan Sloan writes in Fortune: “Privatizing Social Security: Still a Dumb Idea.” The idea was “slaughtered when George W. Bush proposed it.” Yet many GOP millionaires in the new Congress campaigned on privatization.

“You’d think,” Sloan posits, “that the stock market’s stomach-churning gyrations — two 50%-plus drops in just over a decade — would have shown conclusively the folly of retirees having to bet their eating money on the market. But you’d be wrong.” They’re about to resurrect it. Why? Simple. Because the GOP is the party of the rich.

Yes, it’s that simple: Wall Street’s casino would love to get their hands on another $20 trillion of your retirement money, to gamble in their derivatives casino.

“Why is privatizing Social Security such a turkey?” asks Sloan. “Because retirees shouldn’t have to depend on the market’s vagaries for survival money. More than half of married couples over 65 and 72% of singles get more than half their income from Social Security.” And “for 20% of 65-and-up couples and 41% of singles, Social Security is 90% or more of their income.”

Imagine if our Social Security had been privatized in the 2008 meltdown: It would have done more damage than nuclear warheads, totally wiping out the American economy.

10. Warning: Wall Street will lose another 20% of your money by 2020

We have been making these same arguments for a long time: Wall Street has lost trillions in the stock market since 2000, a year in which the Dow Jones Industrial Average peaked at 11,722. It’s barely at 11,000 today. Adjusted for inflation, Wall Street has lost 20% of your money in the past decade.

Wall Street’s a loser. And, worse, Wall Street will do it again by 2020. That’s right: It will lose another 20% of your retirement money.

Warning: Stocks are a sucker bet at Wall Street’s rigged casino. Buy stocks and lose. In fact, you’ll probably lose more that 20% when the third meltdown of the 21st century explodes. Bigger losses than in 2000 and 2008 combined. When Wall Street’s too-greedy-to-fail banks finally collapse. When they cannot push the second Great Depression downhill one more time. When taxpayers revolt, refusing to bail out our corrupt banking system. When the American people force Congress to return to tough 1930s regulation.

Folks, Wall Street is suicidal. It’s kamikaze. A deadly game of Russian roulette with America’s future. Wall Street’s self-destructive greed is driving America to the edge of total failure. Yet Wall Street’s behavior is so predictable — like a blind addict trapped in denial, unable to see the deadly consequences of his behavior.

And unfortunately, Wall Street will not wake up until we bottom out … until it’s too late … until it takes America down with it. It cannot see … cannot stop … because Wall Street has lost its moral compass.

MarketWatch