FedUpUSA

Archive for October 15th, 2011

There’s ignorant and then there’s willfully and intentionally lying.

One is excusable, although regrettable.  The other, well, it’s not.

There have been a number of vitriolic attacks that have circulated of late since I showed up on RT the other day in regard to Occupy Wall Street.  I guess people have a problem with a media outlet that lets its guests actually speak their minds even if they might not agree with you.

See, in the US when you do that, they cut your mic off or simply talk over you.  That’s “how it’s done” with most of them.  Or they wait until you leave the set and then take a cheap shot behind your back.  I’ve seen both although there are certainly exceptions (Dylan Ratigan being one of the notable ones.)

But then there are those who invite you back even when they disagree.  RT is one of those.  For those who have the attention span of an ADHD sufferer, or perhaps they simply smoked too many bong hits when they were younger (or perhaps they’re even high now) it wasn’t that long ago that I showed up on RT when they scheduled me to ask about Obama’s health care plan and how it would be “more fair” and “more reasonable.”

I disagreed, and went into a nice little explanation of how we can write checks with our scientific ability we cannot cash with our tax system, and that this was utterly impossible to perform “as claimed.”

They didn’t cut me off, like a US outfit would have.  And they let me see the segment in front of me, so I knew it was an ambush (I had suspected as much) and was ready for them.  Heh, that’s actually “fair and balanced.”

See, all media outlets have bias.  I know what RTs is; they wear it on their sleeve, which as far as I’m concerned is just fine.  That’s how it should be; I wear my bias in the open too and have never tried to hide it.

Well, if you didn’t watch the interview, you should.  It’s here.

Today I traveled to Occupy Pensacola.  Yes, folks, it’s spreading.  I went for two reasons: I wanted to see this so-called progressive stack in action that I had heard was all the rage (and was basically reverse-discrimination) and I also was very interested in seeing what the composition of the crowd was like.  Full disclosure: I went with two officers of the Okaloosa County Libertarian Party, and we had signs too.

Well, here’s one of the first people I ran into:

Hmmm… that doesn’t look much like a young dope-smoking hippie — or a communist for that matter – does it?

Here’s a few more:

Not a lot of love for Obama, it would appear….

Not very hippie-ish there either… looks like some people are interested in…..Democracy?  Wait – I thought we were going to see a bunch of dope-smoking Communists!  Where the hell are they?

Wait!  There’s one…. oh, I was mistaken.  He’s young, but he appears to be rather upset about…. banksters stealing things.  Hmmm….

And then there are those that correctly identified the revolving door in Washington… and that guy’s beard is gray.  He’s not a young hippie, and neither is the woman with him.

A couple of folks waiving signs (also correctly identifying) the offshoring problem, and looking an awful lot like they’d like a (better) job, eh?  Wait….. they’re not kids either, and I haven’t seen a joint yet!

We had the “food, not bombs” people there, yes.  But notice the signs on the bench.  The bottom one is cut off, but is that the “F” word I see….. why it is!

There were, incidentally, the mandatory “Guy Fawkes” masks — well, a couple of them anyway.

I guess those youngsters figured if I could point a camera, so could they.  Fine with me.

There were a couple of signs I thought were a bit misguided.  Here’s one that stood out:

I had a nice conversation with her. I don’t know if I changed her mind or not, but I did give her something to think about, and it was actually a pleasant and educational exchange.  Not exactly the sort of “foam at the mouth” view that many people have of these folks, I might add. (Incidentally the sign is not really red; my camera did that, and I’m not quite sure why.)

Oh, now on that Progressive Stack thing.  While I was there they did the “people’s mic” speaking deal, where people queued to speak and did the “three or four word” deal that was then echoed back through the crowd.  Unlike NYC it’s legal to use a bullhorn, but about half of the speakers decided instead to use the “people’s mic” – myself included.

I’m a white man, the last guy you’d think would get the chance to speak, right?  I’d be asked to “step back”?  Uh, no.  Anyone who stood in line got called in turn without fear or favor.  We were a nice motley crew made up of men and women of all ages, races, colors and sizes, and we all took our turn.  Nobody hogged the floor or said anything that could be reasonably attributed as communist or racist. 

But there was one overwhelming theme: The people have been robbed, the Wall Street and DC people did it, and the people have had enough of the lies, broken promises and outright theft.

So there you have it folks.  The truth in pictures, from the ground.  I don’t know how many of these protesters will be camping as opposed to dispersing come this evening, and I live a goodly way from Pensacola.  If the mood strikes me I may take a drive over there next week and see if anyone’s still there and occupying as opposed to simply showing up and going home.

Oh, one other thing: I did not see one piece of trash anywhere on the ground, nor any sort of unruly or otherwise impolite behavior.

OWS looks like exactly what it appeared to be from 20,000 feet, despite the claims of many in the media and other so-called “punditry.”  It’s a group of very pissed-off ordinary citizens who, as I noted on RT, know damn well they got serially screwed, but they’re not sure exactly how. 

The know who did it though, and have identified the correct targets for their wrath.

Now it’s time to see if the political establishment will Stop the Looting and Start Prosecuting, as they should have four years ago, because it certainly appears that this is not a “one-day” protest, it is a movement, and it’s not going away.

The Market-Ticker

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Hey, have you heard?  The stock market is absolutely soaring right now.  The Dow was up 330 points on Monday, and overall the Dow has risen by more than 10 percent since October 3rd.  So should we all be throwing our money into the stock market in order to take advantage of this tremendous rally?  Well, if you actually believe that the sovereign debt crisis has passed and that we are no longer on the verge of a massive worldwide financial crisis then I have a bridge that I would like to sell you.  The stock market may be soaring, but absolutely nothing has been solved.  The truth is that this stock market rally is for suckers.  The primary reason why stocks rose today was because German Chancellor Angela Merkel and French President Nicolas Sarkozy promised that they would reveal a “comprehensive response” to the European debt crisis by the end of this month.  When pressed for specifics, Sarkozy stated that “now is not the moment to go into the details.“  So do global financial markets really have a legitimate reason to be giddy about the super secret plan cooked up by Angela Merkel and Nicolas Sarkozy, or are Merkel and Sarkozy just blowing a bunch of smoke?

Merkel and Sarkozy have made bold promises in the past, but nothing ever got fixed.

So why should we believe them this time?

If they have real solutions, why don’t they just reveal them now?

Why keep us in suspense?

By making these vague promises, Merkel and Sarkozy certainly did give a boost to global financial markets, but they also seriously raised expectations.

Now many in the financial world are expecting something truly significant from Merkel and Sarkozy.  For example, CNN has quoted economist Scott Brown as saying the following about the announcement by Merkel and Sarkozy….

“The Europe debt crisis cloud has been hanging over the market for a year-and-a-half now,” said Scott Brown, chief economist at Raymond James. “The risks and worries have been intensifying over the last couple of weeks, but after this weekend, the market is expecting something big and concrete that will put the crisis behind us.”

So can Merkel and Sarkozy deliver something big?

Of course not.

Merkel has already gotten all of the bailout money that she is going to get out of the Germans.  The political will for more bailouts is totally gone in Germany, and many of Germany’s top leaders have expressed this in no uncertain terms.

For example, German Finance Minister Wolfgang Schaeuble is publicly admitting that Germany will not be able to contribute any more money to the European bailout fund.

Also, the leader of Bavaria’s Social Christians, Horst Seehofer, said after the recent vote on the Greek bailout package that his party would go “this far, and no further“.

Recent opinion polls in Germany make it abundantly clear that the German people are overwhelmingly opposed to more bailouts.  Squeezing more money out of Germany simply is not going to happen, and that means that squeezing more money out of the rest of Europe is simply not going to happen.

In a recent editorial, Ambrose Evans-Pritchard described the current political situation in Europe in this manner….

Repeat after me:

THERE WILL BE NO FISCAL UNION.

THERE WILL BE NO EUROBONDS.

THERE WILL BE NO DEBT POOL.

THERE WILL BE NO EU TREASURY.

THERE WILL BE NO FISCAL TRANSFERS IN PERPETUITY.

THERE WILL BE A STABILITY UNION – OR NO MONETARY UNION.

Get used to it. This is the political reality of Europe, since nothing of importance can be done without Germany. All else is wishful thinking, clutching at straws, and evasion. If this means the euro will shed some members or blow apart – as it almost certainly does – then the rest of the world must prepare for the day.

So exactly what “big” solution do Merkel and Sarkozy have up their sleeves that does not involve more money?

Can they really produce the goods or are they just blowing smoke?

Perhaps global financial markets should be focusing on what we can see rather than on what we cannot see.

For example, the first major bank bailout in Europe has now happened.  Dexia is being bailed out, and it is going to cost more than 100 billion dollars.

The funny thing is that Dexia actually passed the banking stress test that was conducted a few months ago.

What does that say about all of the major European banks that did not pass the stress test?

Also, perhaps global financial markets should focus on all of the credit ratings that are being downgraded all over Europe.

Lately, we have seen a cascade of credit rating downgrades.

For example, Moody’s slashed Italy’s credit rating by three levels last Tuesday, and the other day S&P slashed the credit ratings of seven different major Italian banks.

The problems in Europe continue to grow worse, and yet the stock market is soaring.

It doesn’t make a lot of sense, does it?

If Greece defaults, it is going to be a major disaster.

If Italy or Spain defaults, it is going to be financial armageddon.

The world truly is on the verge of a massive financial crisis.  If you don’t want to believe me, perhaps you might believe some of the top financial officials in the world….

*Bank of England Governor Sir Mervyn King: “This is the most serious financial crisis we’ve seen at least since the 1930s, if not ever”

*U.S. Treasury Secretary Timothy F. Geithner recently stated that if something is not done quickly, Europe faces “cascading default, bank runs and catastrophic risk.”

*IMF advisor Robert Shapiro: “If they can not address [the financial crisis] in a credible way I believe within perhaps 2 to 3 weeks we will have a meltdown in sovereign debt which will produce a meltdown across the European banking system. We are not just talking about a relatively small Belgian bank, we are talking about the largest banks in the world, the largest banks in Germany, the largest banks in France, that will spread to the United Kingdom, it will spread everywhere because the global financial system is so interconnected.”

For many more shocking quotes about how bad things have gotten in Europe, just check out this article.

Merkel and Sarkozy are holding really weak cards but they have chosen to raise the stakes anyway.

Their bluff may calm financial markets for a month or two, but in the end they will not be able to stop what is coming.

A great financial collapse is coming to Europe.

Try to get out of the way of the coming avalanche while you still can.

The Economic Collapse

Well look at the dichotomy we have here…. both from Bloomberg this morning.

First, on tax policy:

Republican presidential candidate Herman Cain’s plan to create a national sales tax would hurt retailers, threaten economic growth and shift the tax burden onto the middle class and poor, tax experts and business groups said.

Would it?  I’m not sold.  All that matters to the average person is purchasing power.

That is, the number of dollars you have is not particularly material.  What they will buy is what’s important.  And here’s the rub: You pay 15% of your income right now – everyone does that has “wage” income, whether self-employed or working for someone else.

Yes, half of that is “hidden” from you in the form of the payroll tax, but make no mistake, it’s your money being taken.  Your employer calculates the cost of that tax into your hiring decision, just as he does with all the other levies he pays, such as unemployment tax (FUTA and SUTA) and similar.  He may be prohibited by law from itemizing this on your pay stub (he is – I attempted to do it and was told by our accountants that I’d get a date with Bubba for doing so) but that doesn’t mean you don’t pay – you do, and it’s hidden through accounting fictions enforced at federal gunpoint.

So let’s presume you pay the “9 + 9″ – 9% of your gross income (no deductions) and 9% sales tax on what you choose to buy.

If you spend everything you make, what’s your effective federal tax?

That’s easy to calculate.  You start with $100.

You pay 9% in federal income tax, withheld at the point of payment.  You now have $91.

You go to the store.  You spend the entire $91.  How much goods do you buy?

$83.48 worth ($83.48 * 1.09 = $90.99 on the register tape.)

So your actual effective tax rate is approximately 16.5%, or 1.5% more than you pay right now in FICA and Medicare alone!

This assumes you spend every penny you make.

But let’s assume you save 10% of your gross.  That is, instead of spending $83.48 you spend $73.48.  Now the total bill at the register is $80.09, representing $6.61 in tax added to the $9 you have withheld.  Your effective tax rate is now 15.6%, or a full percentage point lower.

If you manage to save 15% of your gross you pay almost exactly the same tax rate you pay now for Medicare and Social Security alone!  In other words if you spend every nickel you pay an effective income tax rate of 1.5% and if you save 15% of your pre-tax income your effective income tax rate is zero.

So who gets “screwed” with this plan?  Well, nobody.  It forces everyone to have “skin in the game.”  Refundable tax credits disappear which means that everyone pays social insurance taxes.  This is how it should be!

What Cain is missing (and perhaps intentionally; if so he’s a jackass, not a savior) is that saving 15% of your income is more than sufficient, along with a modest help from Social Security and Medicare, to self-fund your entire retirement from savings alone.  That is, it requires no risk-taking in the “capital markets.”  There’s only one condition on this: The Federal Government and The Fed must be forced to stop debasing the currency — that is, they must run a zero inflation policy under penalty of imprisonment (or worse.)  If Cain supports this, then he’s a reformer.  If he does not, he’s simply playing politics and intends to screw you blind via hidden taxation.

There are others who bleat about the impact on financial services.  If I’m understanding Cain’s proposal correctly, they’re wrong: You would pay sales tax on the service of brokering a trade.  If you pay $8 a trade at a brokerage the tax would be 9% on the $8, not on the value of the securities.

The 9% income tax on corporations would redress the double-taxation of dividends, again, if I’m understanding the proposal correctly.  This would go a long way toward fixing the abortion that is found in the current tax code that provides incentives for corporate borrowing and makes the payment of income to shareholders prohibitively expensive through double-taxation of capital return.  That, more than anything else in the corporate tax code, is responsible for the abuse of leverage in business.  Cain has this part of the plan exactly right.

I also want to look at another part of his pronouncements:

Herman Cain’s self-described “bold” 9-9-9 tax proposal has received most of the attention in his campaign for the Republican presidential nomination. His plans for the federal budget are more radical.

Cain this week pledged at a debate to balance the government’s books in a single year if elected. This would require the elimination of what the Congressional Budget Office projects may be a more than $800 billion deficit in 2013.

Erasing the deficit that quickly would mean a more than 20 percent cut in spending, which could force reductions in politically sensitive programs such as Social Security, Medicare or defense, since they make up more than half the budget.

Actually, it’s more than that.  $800 billion is a fanciful number; we ran $1.7 trillion in deficits in calendar 2010, and are going to be well over $1 trillion in 2011.  To believe we will get under that number by 2013 presumes forward economic conditions that are, on balance, pure fantasies.

The complaint that this would require “massive” budget cuts is in fact accurate.  The bad news is that due to the nature of compound growth in any economic system the longer we wait the worse the problem gets and the more pain we must endure to correct it.

In other words while Cain’s proposal is “radical” it is only as radical as it is because we intentionally ignored this idiocy for 30 years, and in the last three years we went from a ~20% cut in federal spending that was required (from nearly zero a decade before!) to a 43% one.  Before another decade passes we will reach the point that achieving balance will require a default, not a cut in government programs.  At that point we are literally Greece.

Republicans in Congress have had to settle for promising to put the government “on the path” toward balance and calling for a constitutional amendment that would require the government to balance its books. While the amendment has little chance of being approved, it does allow lawmakers to underscore their desire to cut spending.

No they don’t.  And it doesn’t matter whether the people are “ready” to hear this or not.

Mathematics does not care if you’re politically correct or “politically willing” to hear what it proscribes.  It just is.

Cain’s plans are not “radical”, they’re mathematically sound.  I understand the screaming that is coming from the left and right on the issue, but the fact that politicians are trying to find yet another Unicorn that craps out pretty colored candies will not make it so.  These same politicians produced this:

And now wish to argue that the consequences of having done so should not be theirs.

I’m very sorry folks but there is no avoiding the inevitable, and the longer you put off accepting it the worse the outcome will be.

After a month in lower Manhattan, ‘Occupy Wall Street’ is going global. Having already spread to other major cities in the U.S. and Europe, major protests are expected Saturday “around the globe from New Zealand to Alaska via London, Frankfurt, Washington and, of course, New York,” Reuters reports.

“Social unrest goes with bought and paid for politics, which is what we have,” says Howard Davidowitz of Davidowitz & Associates. “Everybody is a bold-faced liar — Republicans and Democrats.”

Read more at Business Insider