Archive for July 22nd, 2011

The Modern Day Version of Aesop’s Fable

One summer day Mr. Grasshopper was singing and chirping and hopping about. He was having a wonderful time. He saw Mr. Ant that was busy gathering and storing grain for the winter.

“Stop and talk to me,” said Mr. Grasshopper. “We can sing some songs and dance a while.”

“Oh no,” said the Mr. Ant. “Winter is coming. I am storing up food for the winter. I think you should do the same.”

“Oh, I can’t be bothered,” said Mr. Grasshopper. “Winter is a long time off. There is plenty of food.” So Mr. Grasshopper continued to dance and sing and chip and the ant continued to work.

When Winter came, Mr. Grasshopper had no food and was starving.  He went to Mr. Ant’s house and asked, “Can I have some wheat or maybe a few kernels of corn. Without it I will starve,” whined Mr. Grasshopper.

“You danced last summer,” said Mr. Ant in disgust. “You can continue to dance.” And they gave him no food.

The government, being quite adept at knowing what all of its people are doing at any given time, saw this exchange and decided this was not good ‘social justice.’  So, they raised the taxes on the ‘rich’ middle-class Mr. Ant, which forced Mr. Ant to sell his food to pay the newly levied taxes.

This left Mr. Ant feeding his children brown-bag lunches, while Mr. Grasshopper’s children received free hot lunches at school paid for by Mr. Ant’s taxes.

Mr. Ant’s taxes also paid for bailouts of the big banks whose fraudulent practices had inflated the prices of homes beyond the reach of the average insect’s wages.  The bailouts caused price inflation in all the things the insects needed to survive, like food, energy and clothing.

Meanwhile, Mr. Grasshopper’s children got to go to college on government grants funded by Mr. Ant’s taxes, leaving Mr. Ant unable to afford the increased college tuition costs for his own children.

Mr. Grasshopper also received “economic assistance” to pay his bills, provide health care and food for his children, and he received a cell phone at no cost to him, all funded with Mr. Ant’s taxes.

Mr. Ant, no longer being able to afford college for his children, gasoline for his car, his cell phone or food, stopped working too; so, the government could no longer take taxes from him.

The government ran out of money and collapsed.

Mr. Grasshopper and his family starved to death.  Mr. Ant started gathering and storing grain for the Winter.

Moral:  Live Free Or Die

From Senator Bernie Sanders:

The Fed Audit

The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression. An amendment by Sen. Bernie Sanders to the Wall Street reform law passed one year ago this week directed the Government Accountability Office to conduct the study. “As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world,” said Sanders. “This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.”

Among the investigation’s key findings is that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland, according to the GAO report. “No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president,” Sanders said.

The non-partisan, investigative arm of Congress also determined that the Fed lacks a comprehensive system to deal with conflicts of interest, despite the serious potential for abuse. In fact, according to the report, the Fed provided conflict of interest waivers to employees and private contractors so they could keep investments in the same financial institutions and corporations that were given emergency loans.

For example, the CEO of JP Morgan Chase served on the New York Fed’s board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed. Moreover, JP Morgan Chase served as one of the clearing banks for the Fed’s emergency lending programs.

In another disturbing finding, the GAO said that on Sept. 19, 2008, William Dudley, who is now the New York Fed president, was granted a waiver to let him keep investments in AIG and General Electric at the same time AIG and GE were given bailout funds. One reason the Fed did not make Dudley sell his holdings, according to the audit, was that it might have created the appearance of a conflict of interest.

To Sanders, the conclusion is simple. “No one who works for a firm receiving direct financial assistance from the Fed should be allowed to sit on the Fed’s board of directors or be employed by the Fed,” he said.

The investigation also revealed that the Fed outsourced most of its emergency lending programs to private contractors, many of which also were recipients of extremely low-interest and then-secret loans.

The Fed outsourced virtually all of the operations of their emergency lending programs to private contractors like JP Morgan Chase, Morgan Stanley, and Wells Fargo. The same firms also received trillions of dollars in Fed loans at near-zero interest rates. Altogether some two-thirds of the contracts that the Fed awarded to manage its emergency lending programs were no-bid contracts. Morgan Stanley was given the largest no-bid contract worth $108.4 million to help manage the Fed bailout of AIG.

A more detailed GAO investigation into potential conflicts of interest at the Fed is due on Oct. 18, but Sanders said one thing already is abundantly clear. “The Federal Reserve must be reformed to serve the needs of working families, not just CEOs on Wall Street.”

The entire GAO report is here.

Don’t you think the mainstream media would be interested in talking about this?  Apparently not.  Just think about how far $16 Trillion would go towards solving our government debt/deficit problem.  Someone tell me why it is we are talking about ‘austerity’ programs when we can afford to bailout FOREIGN BANKS!  This is stealing from working, taxpaying middle class (Americans) to bailout the wealthy (foreign) bankers.   Meanwhile our Congress is in DC arguing over how much pain will be inflicted upon the American people because we’re broke.  How long will you stand for this America?

Perhaps now you understand our motto here at FedUpUSA:

STOP THE LOOTING AND START PROSECUTING!

The European Union would like us all to believe that they will be able to continue to shove all the bad debt under the rug.  They’d like the world to believe that government funded, socialist entitlement programs are sustainable forever, despite the fact that more people draw on the funds than pay for them.  They’d also like the world to believe that the answer to the insolvency problems of certain countries (Greece, Ireland, Spain, Portugal) is to just take money from those who are still solvent.  Well, the problem with socialists is eventually they run out of other people’s money – and eventually those who are stolen from get angry.

From The Brink of Total Financial Collapse by Michael Coffman, Ph.D. and Kristie Pelletier:

Other European banks have also loaned Greece tens of billions of dollars. It is extremely difficult to determine the exact amount, but private banks in the U.S., France and Germany all have about a $40 billion exposure (loss) if Greece defaults. They are currently rolling over the debt into new loans, hoping for the impossible – that Greece will recover, or they can shed their debt to some other institution, preferably their government’s central bank.

Then it becomes the liability of the people. (We’ve already seen how that works out with TARP – the banks profit, the people suffer). The central banks will provide unlimited liquidity to the banks suffering runs or default on Greek loans, thereby limiting the damage. However, the world could ride out the storm; albeit with some significant belt tightening. The downside is that if Greece defaults, the PIIG nations fall like dominos. Again, it is hard to estimate total private bank exposure, but Bloomberg estimated in April of 2011 that U.S. private banks held a $236.8 billion exposure. Bloomberg reports that European private banks hold over $1 trillion in Greek and Spanish debt alone.  Ironically, some economists are warning that Spain and Italy are very close to total collapse already. They believe that it may happen this year regardless of what happens in Greece.1 It is impossible to get accurate information from the central banks because they don’t 2 provide an accounting, but the exposure is likely in the many trillions of dollars. In the case of the U.S. Federal Reserve (Fed), American citizens are liable for any bad debt incurred by the Fed.

This is not idle speculation. The Fed recently complied with a Freedom of Information Act request that revealed that all of the $630 billion Second Quantitative Easing (QE2) ending June 30 this year directly, or indirectly went to bailing out defaulting European banks, not to U.S. banks to help the U.S. economy. No wonder small business could not get loans! Tyler Durden, writing for zerohedge.com made this staggering conclusion:

In summary, instead of doing everything in its power to stimulate reserve, and thus cash, accumulation at domestic (US) banks which would in turn encourage lending to U.S. borrowers, the Fed has been conducting yet another stealthy foreign bank rescue operation, which rerouted $600 billion in capital from potential borrowers to insolvent foreign financial institutions in the past 7 months.

QE2 was nothing more (or less) than another European bank rescue operation!  (Original in bold) Durden also provides evidence that the Fed has done this in the past to bail out the European Central Bank as well as many other private European banks. These machinations have saved Europe from going under already. However, there is no way either private or central banks can weather a PIIGS default storm. Trillions of dollars would soon disappear from the balance sheets of hundreds of private and central banks in Europe and the United States. As banks directly affected by the PIIGS’ defaults begin to fail themselves, their failure will set off a domino effect, seriously affecting banks not directly involved.

The competition for jobs in the United States is absolutely brutal right now, and it is about to get worse.  A new wave of layoffs is sweeping across America.  During tough economic times, Wall Street favors companies that are able to cut costs, and the fastest way to “cut costs” is to eliminate employees.  After a period of relative stability, the employment picture in the U.S. is starting to get bleaker again.  New applications for unemployment benefits have now been above 400,000 for 15 straight weeks.  Finding a good job is kind of like winning the lottery in this economy. Our federal government and the state governments have made it incredibly complicated and extremely expensive to have employees on the payroll.  It is getting harder and harder to get a large enough return to justify the time and expense that hiring employees requires.  So many firms now find themselves trying to do more with the employees that they already have.  Other companies are turning to temp agencies as a way to reduce costs and increase workplace flexibility.  A lot of the big corporations are sending as much work as they can overseas where the wages are far lower and where the regulatory environment is much simpler.  All of this is really bad news for American workers that just want good jobs that will enable them to provide for their families.

When we first started seeing huge numbers of layoffs a few years ago, I encouraged people to look into government jobs because I thought that they would be a lot more stable in this economic environment.

But today that is no longer true.  In fact, state and local governments all over the United States are responding to massive budget problems by slashing payrolls in an unprecedented fashion.

Sadly, the reality is that the number of “secure jobs” is rapidly declining in America.  If you have a “job” (“just over broke”) right now, you might not have it for long.  That is one reason why everyone should be trying to become more independent of the system.

Once upon a time the U.S. economy produced a seemingly endless supply of good jobs.  This helped us develop the largest and most vibrant middle class in modern world history.

But now employees are regarded as “costly liabilities”, and businesses and governments alike are trying to reduce those “liabilities” as much as they can.

This summer the pace of layoffs seems to be accelerating all over the nation.  Just check out what has been happening over the past few weeks….

-Lockheed Martin has made “voluntary layoff offers” to 6,500 employees.

-Detroit is losing even more jobs. American Axle & Manufacturing Holdings has told the remaining 300 workers at its manufacturing facility in Detroit that their jobs will be ending in early 2012.

-Layoff notices have been sent to 519 employees of Milwaukee Public Schools, and more than 400
open positions are going to go unfilled.

-The Gap has announced that up to 200 stores will be closed over the next two years.

-Cisco has announced plans to lay off 9 percent of their total workforce.

-Chicago Mayor Rahm Emanuel says that 625 city employees will be losing their jobs as a result of
cutbacks.

-Pharmaceutical giant Merck recently dumped 51 workers from an office in Raleigh, North Carolina.

-Perkins has revealed that they will be closing 58 restaurants.

-This week, Goldman Sachs announced that they will be eliminating 1,000 jobs.

-Cracker Barrel is rapidly reducing staff at its headquarters.

-Telecommunications and web marketing firm Crexendo has announced that it will be laying off about 30 percent of its workforce.

-Borders has announced that they will be shutting down their remaining 399 stores and that 10,700 employees will lose their jobs.

-Now that the space shuttle program has ended, thousands of NASA employees will be losing their jobs.

Sadly, there are hundreds of more examples of recent layoffs and job losses.  One website that tracks these layoffs daily is Daily Job Cuts.  It is pretty sad when there are entire websites that are devoted to chronicling how fast our economy is bleeding jobs.

What is worse is that it looks like the pace of layoffs is going to keep increasing.

One report that was recently released found that the number of job cuts being planned by U.S. employers increased by 11.6% in June.

That is not good news.

Things don’t look good for employees of state and local governments either.

State and local governments have eliminated approximately 142,000 jobs so far this year.

That is bad, but this is just the beginning.

UBS Investment Research is projecting that state and local governments in the U.S. will combine to slash a whopping 450,000 jobs by the end of next year.

Ouch.

Barack Obama and Ben Bernanke keep trying to tell us that the economy is improving, but that simply is not the case.  Yes, some of the largest corporations have announced big earnings, but that is not translating into lots of jobs for American workers.

Today, most large corporations only want to have as many U.S. workers as absolutely necessary.  In a world where labor has been globalized, it just doesn’t make sense for corporations to shell out massive amounts of money to American workers when they can legally get away with paying slave labor wages to workers on the other side of the globe.

So if it seems like it is far harder to get a good job in America today than it used to be, the truth is that you are not imagining things.

Our entire system discourages job creation inside the United States.  Every single year, even more ridiculous job-killing regulations are being passed on the federal and state levels.  It has become extremely expensive and ridiculously complicated to hire people.

So how are American families surviving?  Those that still do have jobs are finding that wages are not going up but the cost of living rapidly is.  Many American families are making up the difference by using their credit cards more.

In June, credit card purchases in the U.S. increased by 10.7 percent compared to the same month a year ago.

It looks like a whole lot of people have not learned their lessons about how bad credit card debt is.

Millions of other American families have fallen out of the middle class completely.  Today, one out of every six Americans is enrolled in at least one government anti-poverty program.  The level of economic suffering in this country continues to soar.

In fact, the number of Americans that are now sleeping in their cars or living in tent cities remains at staggering levels.

What we are witnessing in this country is not just a “recession” or an “economic downturn”.  What we are witnessing are fundamental economic changes.

Until there are fundamental policy changes in the United States, there will continue to be huge waves of layoffs and millions of jobs will continue to be shipped out of the country.

In the old days, one could go to college, get a good job with one company for 30 years and retire with a big, fat pension.

Now, that way of doing things is completely and totally dead.

Today, there is virtually no loyalty out there.  It doesn’t matter how long you have been working at a particular job.  When it becomes financially expedient to get rid of you, that is exactly what is going to happen.

It is a cold, cruel world out there right now.  Don’t assume that you will always have a good job.  The world is rapidly changing.

Don’t get caught in the trap of believing that the way that things were is the way that things are always going to be in the future.

The Economic Collapse