FedUpUSA

Archive for October, 2011

I’m not surprised, of course.  After all, it was Paul Kanjorski’s effective extortion of FASB that literally marked the bottom in the market in 2009.  All you have to do is put a gun to someone’s head (and have the power to pull the trigger, as Congress does) and voila – it’s all ok, right?

Well, as we saw, no, it’s not ok.  But it is good for 100% rally in the stock market.

This morning we’re going to see big moves in US banks – BAC is up pre-market something like 8% and the others are also up big.  Europe is up huge across-the-board and our futures are up about 2% as well.

Why?  Because “Greece is Fixed!”

Wait: It’s not.

The “agreement” is that bondholders will take a 50% chainsaw, er, “haircut” on their Greek debt.  In yet another stunning “agreement”, this will somehow not trigger credit default swaps – in other words, they’re not really default swaps any more, now they’re “whatever we call thems when we want them to be whatevers.”

This is a huge problem up and down the line; if you bought this “protection” you now got nothing for it, which means this market’s functional purpose is now a zero.

Here’s the hint folks: Watch the spreads.

I don’t think this is going to work.  Drinking yourself sober never has, and this will be no different.  It obviously has and will, however, provide a short-term lift, exactly as we got one in the US after the first “go-around” with TARP and such.

If spreads do not come in and stay in, however, this will be short-lived.  I expect we’ll have some more ups and downs, but the the principle of gravity has not been repealed, and what goes up on the slow boat will come down on the express elevator.  It will not be long before the speculators attack Portugal or (more likely) Italy, and it will be quite interesting when they do, as there’s nowhere near enough firepower to repeat this game with them.

For today (and perhaps for a few more days) enjoy the rally.  Oh, and while you’re at it pay attention to oil and the bonds – there goes BenDover’s “Twist” effectiveness (incidentally that’s thrice now he’s said he’d “keep” bond yields low, and that’s thrice he’s been wrong.  Why do people put up with him again?)

This video says it all.  Every single American needs to understand this right NOW:

A protestor's sign expresses the sentiment of the Occupy Wall Street movement at a Occupy Wall Street protest in London.

I was at an event on the Upper East Side last Friday night when I got to talking with a salesman in the media business. The subject turned to Zucotti Park and Occupy Wall Street, and he was chuckling about something he’d heard on the news.

“I hear [Occupy Wall Street] has a CFO,” he said. “I think that’s funny.”

“Okay, I’ll bite,” I said. “Why is that funny?”

“Well, I heard they’re trying to decide what bank to put their money in,” he said, munching on hors d’oeuvres. “It’s just kind of ironic.”

Oh, Christ, I thought. He’s saying the protesters are hypocrites because they’re using banks. I sighed.

“Listen,” I said, “where else are you going to put three hundred thousand dollars? A shopping bag?”

“Well,” he said, “it’s just, they’re protests are all about… You know…”

“Dude,” I said. “These people aren’t protesting money. They’re not protesting banking. They’re protesting corruption on Wall Street.”

“Whatever,” he said, shrugging.

These nutty criticisms of the protests are spreading like cancer. Earlier that same day, I’d taped a TV segment on CNN with Will Cain from the National Review, and we got into an argument on the air. Cain and I agreed about a lot of the problems on Wall Street, but when it came to the protesters, we disagreed on one big thing.

 

 
Cain said he believed that the protesters are driven by envy of the rich.

“I find the one thing [the protesters] have in common revolves around the human emotions of envy and entitlement,” he said. “What you have is more than what I have, and I’m not happy with my situation.”

Cain seems like a nice enough guy, but I nearly blew my stack when I heard this. When you take into consideration all the theft and fraud and market manipulation and other evil shit Wall Street bankers have been guilty of in the last ten-fifteen years, you have to have balls like church bells to trot out a propaganda line that says the protesters are just jealous of their hard-earned money.

Think about it: there have always been rich and poor people in America, so if this is about jealousy, why the protests now? The idea that masses of people suddenly discovered a deep-seated animus/envy toward the rich – after keeping it strategically hidden for decades – is crazy.

Where was all that class hatred in the Reagan years, when openly dumping on the poor became fashionable? Where was it in the last two decades, when unions disappeared and CEO pay relative to median incomes started to triple and quadruple?

The answer is, it was never there. If anything, just the opposite has been true. Americans for the most part love the rich, even the obnoxious rich. And in recent years, the harder things got, the more we’ve obsessed over the wealth dream. As unemployment skyrocketed, people tuned in in droves to gawk at Evrémonde-heiresses like Paris Hilton, or watch bullies like Donald Trump fire people on TV.

Moreover, the worse the economy got, the more being a millionaire or a billionaire somehow became a qualification for high office, as people flocked to voting booths to support politicians with names like Bloomberg and Rockefeller and Corzine, names that to voters symbolized success and expertise at a time when few people seemed to have answers. At last count, there were 245 millionaires in congress, including 66 in the Senate.

And we hate the rich? Come on. Success is the national religion, and almost everyone is a believer. Americans love winners.  But that’s just the problem. These guys on Wall Street are not winning – they’re cheating. And as much as we love the self-made success story, we hate the cheater that much more.

In this country, we cheer for people who hit their own home runs – not shortcut-chasing juicers like Bonds and McGwire, Blankfein and Dimon.

That’s why it’s so obnoxious when people say the protesters are just sore losers who are jealous of these smart guys in suits who beat them at the game of life. This isn’t disappointment at having lost. It’s anger because those other guys didn’t really win. And people now want the score overturned.

All weekend I was thinking about this “jealousy” question, and I just kept coming back to all the different ways the game is rigged. People aren’t jealous and they don’t want privileges. They just want a level playing field, and they want Wall Street to give up its cheat codes, things like:

FREE MONEY. Ordinary people have to borrow their money at market rates. Lloyd Blankfein and Jamie Dimon get billions of dollars for free, from the Federal Reserve. They borrow at zero and lend the same money back to the government at two or three percent, a valuable public service otherwise known as “standing in the middle and taking a gigantic cut when the government decides to lend money to itself.”

Or the banks borrow billions at zero and lend mortgages to us at four percent, or credit cards at twenty or twenty-five percent. This is essentially an official government license to be rich, handed out at the expense of prudent ordinary citizens, who now no longer receive much interest on their CDs or other saved income. It is virtually impossible to not make money in banking when you have unlimited access to free money, especially when the government keeps buying its own cash back from you at market rates.

Your average chimpanzee couldn’t fuck up that business plan, which makes it all the more incredible that most of the too-big-to-fail banks are nonetheless still functionally insolvent, and dependent upon bailouts and phony accounting to stay above water. Where do the protesters go to sign up for their interest-free billion-dollar loans?

CREDIT AMNESTY. If you or I miss a $7 payment on a Gap card or, heaven forbid, a mortgage payment, you can forget about the great computer in the sky ever overlooking your mistake. But serial financial fuckups like Citigroup and Bank of America overextended themselves by the hundreds of billions and pumped trillions of dollars of deadly leverage into the system — and got rewarded with things like the Temporary Liquidity Guarantee Program, an FDIC plan that allowed irresponsible banks to borrow against the government’s credit rating.

This is equivalent to a trust fund teenager who trashes six consecutive off-campus apartments and gets rewarded by having Daddy co-sign his next lease. The banks needed programs like TLGP because without them, the market rightly would have started charging more to lend to these idiots. Apparently, though, we can’t trust the free market when it comes to Bank of America, Goldman, Sachs, Citigroup, etc.

In a larger sense, the TBTF banks all have the implicit guarantee of the federal government, so investors know it’s relatively safe to lend to them — which means it’s now cheaper for them to borrow money than it is for, say, a responsible regional bank that didn’t jack its debt-to-equity levels above 35-1 before the crash and didn’t dabble in toxic mortgages. In other words, the TBTF banks got better credit for being less responsible. Click on freecreditscore.com to see if you got the same deal.

STUPIDITY INSURANCE. Defenders of the banks like to talk a lot about how we shouldn’t feel sorry for people who’ve been foreclosed upon, because it’s they’re own fault for borrowing more than they can pay back, buying more house than they can afford, etc. And critics of OWS have assailed protesters for complaining about things like foreclosure by claiming these folks want “something for nothing.”

This is ironic because, as one of the Rolling Stone editors put it last week, “something for nothing is Wall Street’s official policy.” In fact, getting bailed out for bad investment decisions has been de rigeur on Wall Street not just since 2008, but for decades.

Time after time, when big banks screw up and make irresponsible bets that blow up in their faces, they’ve scored bailouts. It doesn’t matter whether it was the Mexican currency bailout of 1994 (when the state bailed out speculators who gambled on the peso) or the IMF/World Bank bailout of Russia in 1998 (a bailout of speculators in the “emerging markets”) or the Long-Term Capital Management Bailout of the same year (in which the rescue of investors in a harebrained hedge-fund trading scheme was deemed a matter of international urgency by the Federal Reserve), Wall Street has long grown accustomed to getting bailed out for its mistakes.

The 2008 crash, of course, birthed a whole generation of new bailout schemes. Banks placed billions in bets with AIG and should have lost their shirts when the firm went under — AIG went under, after all, in large part because of all the huge mortgage bets the banks laid with the firm — but instead got the state to pony up $180 billion or so to rescue the banks from their own bad decisions.

This sort of thing seems to happen every time the banks do something dumb with their money. Just recently, the French and Belgian authorities cooked up a massive bailout of the French bank Dexia, whose biggest trading partners included, surprise, surprise, Goldman, Sachs and Morgan Stanley. Here’s how the New York Times explained the bailout:

To limit damage from Dexia’s collapse, the bailout fashioned by the French and Belgian governments may make these banks and other creditors whole — that is, paid in full for potentially tens of billions of euros they are owed. This would enable Dexia’s creditors and trading partners to avoid losses they might otherwise suffer…

When was the last time the government stepped into help you “avoid losses you might otherwise suffer?” But that’s the reality we live in. When Joe Homeowner bought too much house, essentially betting that home prices would go up, and losing his bet when they dropped, he was an irresponsible putz who shouldn’t whine about being put on the street.

But when banks bet billions on a firm like AIG that was heavily invested in mortgages, they were making the same bet that Joe Homeowner made, leaving themselves hugely exposed to a sudden drop in home prices. But instead of being asked to “suck it in and cope” when that bet failed, the banks instead went straight to Washington for a bailout — and got it.

UNGRADUATED TAXES. I’ve already gone off on this more than once, but it bears repeating. Bankers on Wall Street pay lower tax rates than most car mechanics. When Warren Buffet released his tax information, we learned that with taxable income of $39 million, he paid $6.9 million in taxes last year, a tax rate of about 17.4%.

Most of Buffet’s income, it seems, was taxed as either “carried interest” (i.e. hedge-fund income) or long-term capital gains, both of which carry 15% tax rates, half of what many of the Zucotti park protesters will pay.

As for the banks, as companies, we’ve all heard the stories. Goldman, Sachs in 2008 – this was the same year the bank reported $2.9 billion in profits, and paid out over $10 billion in compensation —  paid just $14 million in taxes, a 1% tax rate.

Bank of America last year paid not a single dollar in taxes — in fact, it received a “tax credit” of $1 billion. There are a slew of troubled companies that will not be paying taxes for years, including Citigroup and CIT.

When GM bought the finance company AmeriCredit, it was able to marry its long-term losses to AmeriCredit’s revenue stream, creating a tax windfall worth as much as $5 billion. So even though AmeriCredit is expected to post earnings of $8-$12 billion in the next decade or so, it likely won’t pay any taxes during that time, because its revenue will be offset by GM’s losses.

Thank God our government decided to pledge $50 billion of your tax dollars to a rescue of General Motors! You just paid for one of the world’s biggest tax breaks.

And last but not least, there is:

GET OUT OF JAIL FREE. One thing we can still be proud of is that America hasn’t yet managed to achieve the highest incarceration rate in history — that honor still goes to the Soviets in the Stalin/Gulag era. But we do still have about 2.3 million people in jail in America.

Virtually all 2.3 million of those prisoners come from “the 99%.” Here is the number of bankers who have gone to jail for crimes related to the financial crisis: 0.

Millions of people have been foreclosed upon in the last three years. In most all of those foreclosures, a regional law enforcement office — typically a sheriff’s office — was awarded fees by the court as part of the foreclosure settlement, settlements which of course were often rubber-stamped by a judge despite mountains of perjurious robosigned evidence.

That means that every single time a bank kicked someone out of his home, a local police department got a cut. Local sheriff’s offices also get cuts of almost all credit card judgments, and other bank settlements. If you’re wondering how it is that so many regional police departments have the money for fancy new vehicles and SWAT teams and other accoutrements, this is one of your answers.

What this amounts to is the banks having, as allies, a massive armed police force who are always on call, ready to help them evict homeowners and safeguard the repossession of property. But just see what happens when you try to call the police to prevent an improper foreclosure. Then, suddenly, the police will not get involved. It will be a “civil matter” and they won’t intervene.

The point being: if you miss a few home payments, you have a very high likelihood of colliding with a police officer in the near future. But if you defraud a pair of European banks out of a billion dollars  — that’s a billion, with a b — you will never be arrested, never see a policeman, never see the inside of a jail cell.

Your settlement will be worked out not with armed police, but with regulators in suits who used to work for your company or one like it. And you’ll have, defending you, a former head of that regulator’s agency. In the end, a fine will be paid to the government, but it won’t come out of your pocket personally; it will be paid by your company’s shareholders. And there will be no admission of criminal wrongdoing.

The Abacus case, in which Goldman helped a hedge fund guy named John Paulson beat a pair of European banks for a billion dollars, tells you everything you need to know about the difference between our two criminal justice systems. The settlement was $550 million — just over half of the damage.

Can anyone imagine a common thief being caught by police and sentenced to pay back half of what he took? Just one low-ranking individual in that case was charged (case pending), and no individual had to reach into his pocket to help cover the fine. The settlement Goldman paid to to the government was about 1/24th of what Goldman received from the government just in the AIG bailout. And that was the toughest “punishment” the government dished out to a bank in the wake of 2008.

The point being: we have a massive police force in America that outside of lower Manhattan prosecutes crime and imprisons citizens with record-setting, factory-level efficiency, eclipsing the incarceration rates of most of history’s more notorious police states and communist countries.

But the bankers on Wall Street don’t live in that heavily-policed country. There are maybe 1000 SEC agents policing that sector of the economy, plus a handful of FBI agents. There are nearly that many police officers stationed around the polite crowd at Zucotti park.

These inequities are what drive the OWS protests. People don’t want handouts. It’s not a class uprising and they don’t want civil war — they want just the opposite. They want everyone to live in the same country, and live by the same rules. It’s amazing that some people think that that’s asking a lot.

Matt Taibbi – Rolling Stone

Today, there are protests all over America that are targeting “the one percent” and all of the wealth and power that they have accumulated.  Unfortunately, many of the solutions that these protesters are advocating simply will not work and will not lead to less wealth inequality.  To understand this, you have to understand how we got to this point.  Over the past several decades, our federal government has exploded in size and our large corporations have exploded in size.  In fact, we have seen this pattern happen pretty much all over the world.  Governments and corporations all over the globe are getting much bigger.  Whenever you have very, very large concentrations of money and power like that, it is going to lead to massive wealth inequality.  The Occupy Wall Street protesters would like to frame this debate as “socialism vs. capitalism”, but the truth is that wherever you find big government you will almost always find big corporations, and wherever you find big corporations you will almost always find big government.  Sure, they spar once in a while, but the reality is that big government and big corporations work in tandem most of the time.  Sometimes big government has the upper hand and sometimes big corporations have the upper hand, but they are both collectivist institutions.  Wherever you find collectivism in the world, you will find an elite that receives most of the benefits while the rest of the population suffers.  In the United States today, our gigantic government is thriving and our gigantic corporations are thriving and the middle class is rapidly shrinking.  The solution to this is not to replace one form of collectivism with another form of collectivism.  Rather, what we need is to go back to what our founding fathers intended.  They were extremely suspicious of large concentrations of wealth and power, and they intended for us to live in a capitalist system where individuals and small businesses had the freedom to compete and thrive.

Today, Democrats tell us that we need an even bigger government and that we need to redistribute even more wealth to the poor.  But the bigger the government gets, the more poor people we seem to have.  As you will see below, the only people that seem to be thriving from big government are the bureaucrats.

Republicans tell us that we need to make life better for the big corporations.  But the reality is that the bigger our giant corporations get, the faster the middle class shrinks.  The big corporations are shipping millions of our jobs out of the country, and they are magnets for wealth and power.  If you are not aware of how overwhelmingly dominant corporations have become in our society, just read this article.

Democrats should not be defending big government, and Republicans should not be defending the abuses of the big corporations.

Whenever big government and big corporations work together there is going to be massive income inequality, and massive income inequality is not a good thing.

Yes, there are always going to be some people that do much better than others (and there is nothing wrong with that), but we should not have a system which is designed to funnel almost all of the wealth and almost all of the power to a very small minority.

In essence, this article is arguing the following….

Gigantic government = bad.

Gigantic corporations = bad.

This was the view of our founding fathers, and this is what we need to get back to.

Let’s take a look at some of the results of our current system.  Let’s start with income inequality caused by big government.

Today, the Washington D.C. region has the highest median household income in the entire nation.  According to the most recent numbers, median household income in the D.C. area is $84,523.

So what is the cause of this?

Well, it is not because Washington D.C. is a great center of industry or finance.  Rather, it is because the federal government is spending over 3 trillion dollars a year and is showering huge piles of cash on hordes of bureaucrats.

In a recent article, I noted some of the mind blowing statistics that show how bureaucrats in Washington D.C. are living the high life at our expense….

*When you total up all compensation (including health care and benefits), the average income for a federal worker in the Washington D.C. area last year was $126,369.

*In 2005, 7420 federal workers were making $150,000 or more per year.  In 2010, a whopping 82,034 federal workers were making $150,000 or more per year.  That is more than a tenfold increase in just five years.

*In 2005, the U.S. Department of Defense had just nine civilians earning $170,000 or more.  When Barack Obama took office, the U.S. Department of Defense had 214 civilians earning $170,000 or more.  In June 2010, the U.S. Department of Defense had 994 civilians earning $170,000 or more.

*Last year, federal employees “earned” approximately 447 billion dollars in total compensation.

As I have written about previously, our gigantic federal government also empowers the big corporations to continue to accumulate staggering amounts of wealth and power.  This is one reason why the big corporations contribute so much money to political campaigns.  The big corporations (and the elite that own and run them) have much more influence over the political process than we do.  They have spent decades buying politicians and getting laws passed that tilt the rules of the game radically in their favor.

This is something that our founding fathers did not want to happen.  In a 2010 article, Rick Ungar noted that there were very significant restrictions on corporations in the early days of America….

After the nation’s founding, corporations were, as they are today, the result of charters granted by the state. However, unlike today, they were limited in how long they were permitted to exist (typically 20 or 30 years), only permitted to deal in one commodity, they could not own shares in other corporations, and their property holdings were expressly limited to what they needed to accomplish their corporate business goals.

There was a lot of wisdom to that approach.  Our founding fathers knew that corporations would become giant magnets for wealth and power if they were allowed to grow unchecked.

Today, multinational corporations completely and totally dominate the global economy.  The following comes from a recent article I posted on The American Dream….

Corporations not only completely dominate the U.S. economy, they also completely dominate the global economy as well.  A newly released University of Zurich study examined more than 43,000 major multinational corporations.  The study discovered a vast web of interlocking ownerships that is controlled by a “core” of 1,318 giant corporations. But that “core” itself is controlled by a “super-entity” of 147 monolithic corporations that are very, very tightly knit.  As a recent article in NewScientist noted, these 147 corporations control approximately 40 percent of all the wealth in the entire network

These giant corporations are so dominant that it is nearly impossible to compete with them.  The number of small businesses in America is shrinking fast.

According to the Bureau of Labor Statistics, 16.6 million Americans were self-employed back in December 2006.  Today, that number has shrunk to 14.5 million.

This is exactly what we would expect to see under “corporatism“, but under true capitalism we would expect to see the exact opposite.

As the federal government and the big corporations continue to grow, the middle class is being wiped out.  If you doubt that the middle class is shrinking, just read this article.

Yes, there is a limited role for the federal government to play and there is a limited role for corporations to play.  But right now things are radically, radically out of balance.

This is creating a tremendous amount of income inequality in the United States.  The middle class is being systematically destroyed, and the growth of the gap between the one percent and the rest of us just continues to accelerate.

This was certainly illustrated by numbers that were recently released by the Congressional Budget Office.  The very wealthy have done extremely well over the last 30 years.  For the rest of us, things have not been so great.  The following figures come from a recent blog post by the director of the Congressional Budget Office….

CBO finds that between 1979 and 2007:

• For the 1 percent of the population with the highest income, average real after-tax household income grew by 275 percent (see figure below).
• For others in the 20 percent of the population with the highest income, average real after-tax household income grew by 65 percent.
• For the 60 percent of the population in the middle of the income scale, the growth in average real after-tax household income was just under 40 percent.
• For the 20 percent of the population with the lowest income, the growth in average real after-tax household income was about 18 percent.

Meanwhile, as a recent USA Today article noted, the middle class continues to falter in the majority of the communities around the United States….

A USA TODAY analysis of Census data found the Reno area was among 150 nationwide where the share of income going to the middle class — generally made up of households that make $20,700 to $99,900 a year — shrank from 2006 to 2010. Metro areas where the middle class’ share of income dropped outnumbered those where it grew by more than 2-to-1.

So just how well is the top one percent doing compared to the rest of us?

The following statistics should be a wake up call for all of us….

*According to the Congressional Budget Office, the top one percent is the only group that saw its share of our national income increase between 1979 and 2007.

*According to a joint House and Senate report entitled “Income Inequality and the Great Recession“, the top one percent of all income earners in the United States brought in a total of 10.0 percent of all income income in 1980, but by the time 2008 had rolled around that figure had skyrocketed to 21.0 percent.

*Between 1979 and and 2007, the average household income of the top one percent of all Americans soared from $346,600 to $1.3 million.

*In the United States today, the wealthiest one percent of all Americans have a greater net worth than the bottom 90 percent combined.

*As the “one percent” thrives, the share of the pie being enjoyed by the middle class is shrinking.  According to Heidi Shierholz, an economist with the Economic Policy Institute, about 53 percent of all income went to the middle class back in the 1970s, but today only about 46 percent of all income does.

*According to Harvard Magazine, 66% of the income growth between 2001 and 2007 went to the top one percent of all Americans.

*The wealthiest one percent of all Americans now own more than a third of all the wealth in the United States while the poorest 50 percent of all Americans collectively own just 2.5% of all the wealth in the United States.

*The wealthiest one percent of all Americans own over 50% of all the stocks and bonds.

*The top 0.01% of Americans make an average of $27,342,212.  The bottom 90% make an average of $31,244.

*This is all happening at a time when the United States as a whole is slipping.  Ten years ago, the United States was ranked number one in average wealth per adult.  In 2010, the United States fell to seventh.

*Income inequality is not just growing in the United States.  Today, the wealthiest one percent of the earth’s population controls 39% of the wealth.

There is certainly nothing wrong with being wealthy.  If you and your family work really hard and provide great value to the community around you then you should greatly benefit.

But a system that is designed to systematically drain wealth from the general population and transfer it into the hands of an ultra-wealthy elite is not what our founding fathers ever hand in mind.  At the time of our founding, England was dominated by big government (the monarchy) and by big business (the East India Company, for example).  Our founders warned us over and over about the potential abuses that can happen when very large concentrations of wealth and power are allowed to dominate a society.

Unfortunately, the Occupy Wall Street movement has it all wrong.  They recognize the overwhelming wealth and power accumulated by the one percent, but most of them are advocating even more collectivism as the answer.

Some of them even say that they want to “end capitalism” altogether.  Michael Moore says that he is not part of the one percent and that he wants to “end capitalism”, even though he has made millions upon millions of dollars from his various projects.

But socialism and communism never bring equality.  Like other forms of collectivism, socialism and communism almost always bring more tyranny and they almost always funnel most of the financial rewards to a very small elite.

Others simply wish to see the U.S. government transfer more wealth from the hands of the rich to the hands of the poor.

Helping the poor is certainly a noble goal, and handouts can certainly ease suffering at least temporarily.  But handouts are never a permanent solution and they can cause large numbers of people to end up becoming completely and totally dependent on the government.

Back in 1980, government transfer payments accounted for just 11.7% of all income.  Today, government transfer payments account for 18.4% of all income.

So has the plight of the poor gotten better?

No, we now have more than 45 million Americans on food stamps, last year we had the largest increase in the number of Americans living in poverty in U.S. history and the middle class continues to shrink rapidly.

The truth is that what poor and middle class Americans really need are opportunities.  Handouts will keep people alive, but they will not give people hope and a future.

What Americans really need is an environment where they can find jobs or start small businesses.  Unfortunately, the environment for small businesses in this country is incredibly toxic and millions of our good jobs have been shipped overseas.  The big corporations have discovered that they can make even bigger profits by sending jobs to countries where it is legal to pay slave labor wages.  To say that we need big corporations because they are the ones that “create jobs” is simply not true anymore.

So now we have tens of millions of Americans that we have to take care of every single month.  There is nothing wrong with helping them survive, but giving them even more handouts is not going to permanently solve anything.

We need to have a population that is empowered to work hard, produce wealth and create a bright future for their families.

Instead, what we have is a system that greatly rewards the top one percent and that is pushing all of the rest of us toward poverty.

Gigantic government plus gigantic corporations is always going to equal massive wealth inequality.

The bigger we allow government to grow and the bigger we allow corporations to grow, the worse it is going to get.

So is any of this going to change any time soon?

Well, considering the fact that the vast majority of our politicians are in the pockets of the big corporations, I would not be getting your hopes up.

The Economic Collapse

Americans may be fleeing from stocks in droves, but they sure aren’t shy about rotating the resulting meager liquidation proceeds into weaponry. According to Gallup, “Forty-seven percent of American adults currently report that they have a gun in their home or elsewhere on their property. This is up from 41% a year ago and is the highest Gallup has recorded since 1993, albeit marginally above the 44% and 45% highs seen during that period.” Considering the social situation “out there”, and the fact that the world is one badly phrased or translated headline away from a complete HFT-facilitated market collapse, this is hardly all that suprising.

More:

The new result comes from Gallup’s Oct. 6-9 Crime poll, which also finds public support for personal gun rights at a high-water mark. Given this, the latest increase in self-reported gun ownership could reflect a change in Americans’ comfort with publicly stating that they have a gun as much as it reflects a real uptick in gun ownership.

Not surprisingly, republicans pack more heat than democrats. Perhaps it is best not to piss too many off…

Republicans (including independents who lean Republican) are more likely than Democrats (including Democratic leaners) to say they have a gun in their household: 55% to 40%. While sizable, this partisan gap is narrower than that seen in recent years, as Democrats’ self-reported gun ownership spiked to 40% this year.

Women are more armed than ever. Perhaps it is best not to piss too many off…

The percentage of women who report household gun ownership is also at a new high, now registering 43%

Southerners, yes shocking, are the best armed of all. Perhaps it is best not to piss too many off…

Gun ownership is more common in the South (54%) and Midwest (51%) than in the East (36%) or West (43%) — a finding typical of Gallup’s trends in gun ownership by region.

Gallup’s conclusion: “A clear societal change took place regarding gun ownership in the early 1990s, when the percentage of Americans saying there was a gun in their home or on their property dropped from the low to mid-50s into the low to mid-40s and remained at that level for the next 15 years. Whether this reflected a true decline in gun ownership or a cultural shift in Americans’ willingness to say they had guns is unclear. However, the new data suggest that attitudes may again be changing. At 47%, reported gun ownership is the highest it has been in nearly two decades — a finding that may be related to Americans’ dampened support for gun-control laws. However, to ensure that this year’s increase reflects a meaningful rebound in reported gun ownership, it will be important to see whether the uptick continues in future polling.”

Our conclusion: Buy gold. Buy guns. Buy ammo. Be prepared. It’s coming.

h/t John Lohman

ZeroHedge

How better to corral restive underwater debt-serfs than to herd them into accepting a new, “better” set of lifelong servitude shackles?

President Obama is taking credit for a new government plan to “save homeowners.” That is of course pure propaganda to mask the plan’s true goal: the perfection of debt-serfdom.  The basic thrust of the plan is straightforward: encourage “underwater” homeowners whose mortgages exceed the value of their homes to re-finance at lower rates.

The stated incentive (i.e. the PR pitch) is to lower homeowners’ monthly payments via lower interest rates.

This is the Federal Reserve’s entire game plan in a nutshell:don’t write off any debt, as that would reveal the banking sector’s insolvency, but play extend-and-pretend with crushing debtloads by lowering the cost of servicing the debt.

The key purpose of this “plan” is to leave the principle owed to banks on their books at full value while ensnaring the hapless debt-serf (the “homeowner”) into permanent servitude to the banks.

If the net worth of your home is a negative number, then what exactly do you own? You have the right to occupy the shelter, and you own the debt. So how is this any different from a lease? There is no equity, and no equity being built: there is a monthly payment in return for the right to occupy the dwelling.

The difference is the leaseholder can move at the end of the lease with no debt obligations.The underwater “homeowner” debt-serf is trapped by his/her mortgage into what amounts to lifetime servitude to the holders of the mortgage.

All the plan does is perfect this debt-serfdom.In a truly capitalist, transparent, free-market economy in which assets were always marked to market, then mortgages that are grossly misaligned with the market value of the house would be written down and the mortgage holders forced to book the loss.

Over-leveraged lenders, i.e. the “too big to fail” banks which dominate the U.S. mortgage market, would see their capital reduced to zero by the writedowns. They would be declared insolvent and liquidated. Their shareholders and bondholders would book losses.

But these losses are unacceptable in our crony-capitalist/cartel-capitalist Status Quo,so the “solution” to systemic insolvency is to manipulate the debt-serfs to keep paying, and thus keep the unicorn-and-pixies valuations of  real estate on the banks’ books at full value.

This is the same game that Japan’s lenders and Central State have played for two decades,and it remains the heart of their failed policies and decaying economy.  In Japan, lenders papered over their bad debts with all sorts of back-door machinations: they extended new loans to debtors so the debtors could continue to make interest payments, they created zombie accounts  filled with delinquent loans that were still kept on the books at full value, they wrote new loans at near-zero rates so interest payments were lowered, and so on–the same ploys and games being played by the Federal Reserve, the Federal government’s housing lenders (Fannie and Freddie) and the banks.

The propaganda machine is running at full throttle, of course, with the usual parade of toadies and lackeys trotted out to say what a great and wonderful thing this plan is for poor homeowners.  But industry analyst Ken Rosen inadvertently revealed the real motivation for the plan: to keep underwater homeowners from “walking away” in so-called “strategic defaults.”underwater homeowners thrown lifeline by Obama(Mercury News).

Why is strategic default anathema to the Status Quo? Because the abandoned house will eventually have to be sold on the market, and at that point its true value revealed. The mortgage holder will then be forced to book a stupendous loss, and the inflated-paper “asset” on the books vanishes.

The Big Lie here is implicit: “your house will someday come back in value, so hang in there, debt-serf.” No, it won’t.  The bubble has popped, and the mania has left town. Housing will retrace to pre-bubble valuations circa 1996-98.

As usual, the Plan is all about managing perceptions and political theater:we’re here to help the little guy, the struggling homeowner; we are in charge, we have a plan, we’re competent, this will fix the housing market.

Too bad they’re all lies.Perception management is not the same as actually solving the underlying problem, yet perception management is the Status Quo’s response to every problem.

The perfection of debt-serfdom is now complete. First, make student loans “necessary” for the “good life” and then make that debt permanent and unbreakable. In other words, institutionalize debt-serfdom and lifelong servitude to the financial sector.

The re-fi “plan” herds potentially rebellious mortgage debt-serfs into new corrals, with the incentive of slightly lower interest rates. The lifetime of servitude to financial Overlords remains firmly in place. That’s the “plan.”

The Plan has other flaws as well:

Got A Hundred Bucks? Buy A Home (Or Virtually Anything Else) Using 2,000x Non Recourse Leverage(Zero Hedge)

On the Administration’s Latest Potemkin Help Struggling Homeowners Plan (Naked Capitalism)

Charles Hugh Smith – Of Two Minds