FedUpUSA

Archive for November, 2011

The Market is down all six of the last six trading days, the S&P looks to be headed for a bounce today, but is this something to cheer or just an oversold bounce?

The reason for this slaughter-fest?  Continued lies by governments — specifically, those in Europe.

The “big lie” of the season (and year) is the same one we’ve run in the United States for more than 30 years: We can spend more than we take in and it will be ok.

Now to be fair when you get away with lying for 30 years, it’s hard to argue that your strategy is not “successful”, at least in the short term.  Given our propensity to live “in the today” and focus only on the short term, it should not surprise that this type of magical thinking pervades not only the United States but Europe as well.

Even the so-called “Conservatives” who put forward shams such as “Cut, Cap and Balance” don’t really mean it.  One such example is found in one of the appropriations bills in the Senate claimed to have a $1 billion “cut” in spending which Senator Sessions contends is actually a $9.4 billion increase – none of which is “counted” as it’s all in “mandatory” spending (even though such “mandatory” spending still must be, under the Constitution, passed each year!)

Of late our Treasury Bill funding costs have benefited mightily from fear that Europe is about to break apart into feudalism or worse, perhaps spark a war.  After all, Germany’s insistence on being able to “review” or even veto other nation’s budgets is tantamount to a central government — centered in Berlin, of course.  We tried that twice before, I think, in the early and mid 1900s — I wonder if anyone remembers how it turned out?

Why is this strum and furor going on over there?  Simple: Budget deficits are unsustainable over the intermediate and longer term — always.  Eventually investors refuse to continue to fund that which the politicians refuse to pay back and revolt, leaving the nation with only two options: Cut the deficit spending or attempt to force the entire population to fund the previous deficits by depreciating the currency.

Here’s the problem with the second path, which everyone seems to think (other than bond buyers) the US will choose: Bond buyers don’t intentionally lose money either, and this will force yields higher – a lot.  See the 1980s for “how much”, which in turn makes rollover of the existing debt impossible.

If you see the same thing that is happening in Europe in this outcome, you’re right – it is the same outcome and it’s ugly.

Ultimately the risk of rollover moves from weak hands to strong ones, until there are no more strong hands.  Then the facts must be faced.  Japan, which has siphoned off the savings of their people for two decades has now backed themselves into a corner to the point that a mere two percent increase in their interest rates drives their debt service costs above all tax revenue — the point of not just technical bankruptcy but actual bankruptcy as such would force an instantaneous shutdown of all government functions!

Is this some sort of doom-mongering nonsense?  Uh, no.  Remember that Italy has a primary surplus — that is, ex borrowing costs (interest) and deferred expenses (e.g. promises to retirees) they are taking in more in taxes than they are spending.  That doesn’t matter — the market has surmised that these deferred promises and interest expenses are going to go up, not down, and thus the primary surplus is an invalid measurement of fiscal health — they want an actual cash-accounting surplus and since there isn’t one, bond yields are going up — fast.

That in turn forces the actual budget picture the wrong way even in the face of the alleged primary surplus.  There is no escape from such a hole other than to cut spending to the point that you have an actual cash market surplus — then instead of rolling over debt at an unattractive interest rate you pay the maturing bonds and tell the market to go stick it.

That is the only means of dealing with such a situation when all is said and done.  All the strum and furor sounds nice, but it’s not reality.  You can bludgeon and bloviate but in the end analysis if you are selling something in the market it only trades at a price where there is both a willing seller and a willing buyer, and now the buyers are demanding more interest or they’re not going to purchase — period.

This lesson has been completely lost on the United States Congress, which continues to scream like a petulant child that “we’re #1″ and “we’re different!”

No we’re not.  We’re simply last, having the deepest treasury market.  But that depth is not infinite and the shift of risk to us will eventually force the United States into the same box that Europe is in now — stop the deficit spending or else.

The wise policy would be to stop the deficit spending on our own before the market forces the issue.  Contrary to popular belief we can do it, but the requirement to slay sacred cows — especially in the entitlement area — is politically difficult.  Nonetheless a forced slash-and-burn budget fest rather than doing it on our own terms will be far more disruptive and this day, if we do not deal with the problems now, is coming and much sooner than most expect.

For decades we were warned that when the Baby Boomers started to retire that this country would be facing a retirement crisis of unprecedented magnitude.  Well, that day has arrived ladies and gentlemen.  Back on January 1st, the Baby Boomers began to retire and more than 10,000 of them will be retiring every single day for years to come.  Most of them have not saved up nearly enough money for retirement.  At the same time, private sector pension plans are failing all over the place, hundreds of state and local government pension plans from coast to coast are woefully underfunded, and the Social Security system is on the road to complete and total disaster.  A massive wave of humanity is hitting retirement age at a moment in history when the U.S. economy is coming apart at the seams.  We do not have the resources to keep the promises that we made to the Baby Boomers, and most of them have not made adequate preparations for retirement.  What we have is a gigantic mess on our hands, and millions of Baby Boomers are going to find retirement to be very bitter and very painful.

A lot of younger Americans just assume that Social Security is enough to take care of the needs of elderly Americans.  But that is just not the case.

Have you ever tried to live solely on a Social Security check?

It is not easy.  The truth is that those checks are just not that large.

The following comes directly from the Social Security Administration….

The average monthly Social Security benefit for a retired worker was about $1,177 at the beginning of 2011.

Could you live on less than 300 dollars a week?

And keep in mind that the $1,177 monthly figure is just an average.  Many receive a lot less than that.

In addition, Social Security benefits have been seriously squeezed by inflation in recent years.  The cost of food and other basics has risen briskly and Social Security benefits have not.

Today, many elderly Americans have to make a choice between buying food, heating their homes or buying medicine that they need.  They simply do not have enough money to do all of them.

It would have been nice if all of the Baby Boomers had been busy saving money for retirement all these years, but that just did not happen.  In fact, the Baby Boomers as a group are trillions of dollars short of what they need for retirement.

So why doesn’t the U.S. government step in to help them out?

Well, the reality of the situation is that the U.S. government is flat broke.  The federal government is now over 15 trillion dollars in debt.  During the Obama administration so far, the U.S. government has accumulated more new debt than it did from the time that George Washington took office to the time that Bill Clinton took office.

Lawmakers are already looking at ways to make the Social Security program less costly.  No, the federal government is not going to be riding to the rescue.

In fact, it will be a minor miracle if the Social Security program is able to survive until the end of this decade, and it will be a major miracle if the Social Security program is able to survive until 2030.

As for myself, I do not believe that I will ever see a single penny from Social Security, and many other working age Americans feel the same way.

Retirement is supposed to be a fun time, but sadly most Americans that are approaching retirement age are not going to have any “golden years” to look forward to.

Rather, millions of elderly Americans are going to find the years ahead absolutely agonizing as they struggle just to survive.

The following are 25 bitter and painful facts about the coming Baby Boomer retirement crisis that will blow your mind….

#1 According to the Employee Benefit Research Institute, 46 percent of all American workers have less than $10,000 saved for retirement, and 29 percent of all American workers have less than $1,000 saved for retirement.

#2 According to a recent poll conducted by Americans for Secure Retirement, 88 percent of all Americans are worried about “maintaining a comfortable standard of living in retirement”.  Last year, that figure was at 73 percent.

#3 A study conducted by Boston College’s Center for Retirement Research has found that American workers are $6.6 trillion short of what they need to retire comfortably.

#4 Today, one out of every six elderly Americans lives below the federal poverty line.

#5 On January 1st, 2011 the very first Baby Boomers started to retire.  For almost the next 20 years, more than 10,000 Baby Boomers will be retiring every single day.

#6 At the moment, only about 13 percent of all Americans are 65 years of age or older.  By 2030, that number will soar to 18 percent.

#7 Right now, there are somewhere around 40 million senior citizens.  By 2050 that number is projected to increase to 89 million.

#8 Back in 1991, half of all American workers planned to retire before they reached the age of 65.  Today, that number has declined to 23 percent.

#9 According to one recent survey, 74 percent of American workers expect to continue working once they are “retired”.

#10 According to a recent AARP survey of Baby Boomers, 40 percent of them plan to work “until they drop”.

#11 A poll conducted by CESI Debt Solutions found that 56 percent of American retirees still had outstanding debts when they retired.

#12 A study by a law professor at the University of Michigan found that Americans that are 55 years of age or older now account for 20 percent of all bankruptcies in the United States.  Back in 2001, they only accounted for 12 percent of all bankruptcies.

#13 Between 1991 and 2007 the number of Americans between the ages of 65 and 74 that filed for bankruptcy rose by a staggering 178 percent.

#14 What is causing most of these bankruptcies among the elderly?  The number one cause is medical bills.  According to a report published in The American Journal of Medicine, medical bills are a major factor in more than 60 percent of the personal bankruptcies in the United States.  Of those bankruptcies that were caused by medical bills, approximately 75 percent of them involved individuals that actually did have health insurance.

#15 Public retirement funds all over the United States are woefully underfunded.  For example, it has been reported that the $33.7 billion Illinois Teachers Retirement System is 61% underfunded and is on the verge of complete collapse.

#16 Most U.S. states have huge pension obligations which threaten to bankrupt them.  For example, pension consultant Girard Miller told California’s Little Hoover Commission that state and local government bodies in the state of California have $325 billion in combined unfunded pension liabilities.  When you break that down, it comes to $22,000 for every single working adult in the state of California.

#17 Robert Novy-Marx of the University of Chicago and Joshua D. Rauh of Northwestern’s Kellogg School of Management have calculated the combined pension liability for all 50 U.S. states.  What they found was that the 50 states are collectively facing $5.17 trillion in pension obligations, but they only have $1.94 trillion set aside in state pension funds.  That is a difference of 3.2 trillion dollars.  So where in the world is all of that extra money going to come from?

#18 According to the Congressional Budget Office, the Social Security system paid out more in benefits than it received in payroll taxes in 2010.  That was not supposed to happen until at least 2016.  Sadly, in the years ahead these “Social Security deficits” are scheduled to become absolutely nightmarish as hordes of Baby Boomers retire.

#19 In 1950, each retiree’s Social Security benefit was paid for by 16 U.S. workers.  According to new data from the U.S. Bureau of Labor Statistics, there are now only 1.75 full-time private sector workers for each person that is receiving Social Security benefits in the United States.

#20 The U.S. government now says that the Medicare trust fund will run out five years faster than they were projecting just last year.

#21 The total cost of just three federal government programs – the Department of Defense, Social Security and Medicare – exceeded the total amount of taxes brought in during fiscal 2010 by 10 billion dollars.  In the years ahead expenses related to Social Security and Medicare are projected to skyrocket dramatically.

#22 The Pension Benefit Guaranty Corporation is the agency of the federal government that pays monthly retirement benefits to hundreds of thousands of retirees that were covered under defined benefit pension plans that failed.  The retirement crisis has barely even begun and the PBGC is already dead broke.  The PBGC says that it ran a deficit of $26 billion during the fiscal year that just ended and that it will probably need a huge bailout from the federal government.

#23 According to a survey by careerbuilder.com, 36 percent of all Americans say that they don’t contribute anything at all to retirement savings.

#24 More than 30 percent of all investors in the United States that are currently in their sixties have more than 80 percent of their 401k plans invested in equities.  So what is going to happen to them if the stock market crashes?

#25 A survey taken earlier this year found that 20 percent of all U.S. workers admitted that they had postponed their planned retirement age at least once during the last 12 months.  Back in 2008, that number was only at 14 percent.

Our politicians should have addressed the retirement crisis decades ago before we got to the point of being in debt up to our eyeballs.

It is being projected that the U.S. national debt will hit 344% of GDP by the year 2050, and the Congressional Budget Office says that U.S. government debt held by the public will reach a staggering 716% of GDP by the year 2080.

Obviously those figures will never be reached because our financial system would totally collapse long before then.

So what do we do?

We have tens of millions of elderly Americans that are completely and totally dependent on Social Security and Medicare, but those programs also threaten to bankrupt us as a nation.

Anyone that believes that there is a “quick fix” to these issues is being naive.

The “supercommittee” was supposed to address this problem, but they failed so spectacularly that they have become a national joke.

Sadly, most of our politicians just keep kicking the can down the road.  They hope that somehow things will just magically “work out”.

Well, the truth is that things are not going to “work out”.  The poverty level among the elderly is going to continue to increase.  Pension plans all over this nation are going to continue to fail in staggering numbers.  Social Security and Medicare are going to bleed more red ink with each passing year.

Something should have been done about this problem a long, long time ago.

But it wasn’t.

This crisis was ignored, dealing with it was put off time after time and all the doomsayers were laughed at.

Now the crisis is here, and we are all going to pay the price.

The Economic Collapse

Let’s reflect between bouts of Turkey and Pumpkin Pie, shall we?

Should you be thankful that you live in a nation that is governed as a strong Constitutional Republic?  Well, you’d have trouble doing so, considering the bailouts, swindles and frauds — not to mention the blatantly unconstitutional behavior of our governments at all levels.  From Medicare to HUD to the Education Department to Solyndra and gun running by our own government there’s little left of the Constitution and what does exist is being used as toilet paper on a literal daily basis.

Should you be thankful that you have equality of opportunity?  Well, I suppose if you’re one of the banksters that has equal opportunity to steal anything not nailed down, sure.  But if you’re one of the people victimized, as thousands of MF Global customers have been recently?  Maybe not so much eh?

Should you be thankful that you have the right of free speech and expression?  Well, certainly if you’re Newt Gingrich.  But if you’re the line of peacefully-protesting kids who were expressing themselves in California when they were bear sprayed, not so much.

The Rule of Law and Fundamental Rights are a funny thing: They’re binary.  They either exist or they do not; both are far closer to a toggle than a continuum.  In a nation where The Rule of Law meant something there would not be banksters stealing houses, there would not be other banksters with “missing” customer money, we would not have politicians standing up and telling everyone over the age of 50 they were going to get “their medicare” for the rest of their lives when factually this means that a $9,000 annual health insurance bill will go to nearly a quarter of a million dollars thirty-five years hence and we would not have politicians claiming they need to “stimulate the economy now and cut government spending tomorrow” when they know for a fact that tomorrow will never come, just as it never has before.

I would love to be thankful that there’s “no inflation” in food of materiality but when the Farm Bureau shows a double-digit increase in the cost of that Thanksgiving dinner, and even this is grossly understated, that would be giving thanks for a lie. Many years ago soft drinks were made with cane sugar.  Today they’re not, and the decreased cost is not counted as “inflation” when the price does not change.  The same “ingredient push” has occurred in virtually everything we eat — artificial colors and flavors, “texturing” ingredients that are used because they’re cheaper than the “real deal” and other adulterants — all “generally recognized as safe”, of course.  Many people have documented the “incredible shrinking container” — just try to find a half-gallon of ice cream, for example.  At the same time we’re told that we should eat from a “food pyramid” that is constructed more from the desires of agribusiness and, of course, frankenfood qualifies — even though much of it is entirely-manufactured.  Food “manufacturers” put various “stabilizing” chemicals into their products so they don’t spoil but the entire process of digestion is, if you think about it, “spoilage” — it just happens in the body.  Never mind the imagery and sales tactics – “the sales ploy of more” is of course part of what marketing is, but in fact if you stuff your pie hole and sit on your tush you’re going to get both fat and (eventually) ill.  Shouldn’t “truth in advertising” feature “People of WalMart” on the cartons of the various Frankenstein creations in the grocery aisles, given what most of that “food” will promote?

Then when we do get sick that’s “managed.”  Let’s just take one example: What’s an actual normal blood sugar level?  Will they simply “watchfully monitor” you if you’re not technically at a diabetic level on a glucose tolerance test?  Yes, the doc sure will, but guess what — if you’re overweight, and most of the people in this situation that are middle-aged and above adults are — there is only one realistic way to stop the otherwise inevitable progression: Cease stuffing the pie hole with frankenfood, lose the weight and move your butt more often.  That advice is easy to ignore when you can get “society” to pay the $500+ a month for medication and “supplies” though, isn’t it?  If the stark truth was that your options were to cut that out, spend your own cash or die would it change your decision process?  It wouldn’t for everyone but I bet it would for many, and this underlies much of what we shouldn’t be thankful for — the incessant and creeping destruction of personal responsibility and cost-shifting of all sorts, including only indirectly economic costs.

It’s not limited to food and medicine either.  Occupy Wall Street has it right in that the crooks and thieves on Wall Street have largely created this mess but they didn’t do it alone.  We have removed both choice and consequence from the people of the nation and this is the rot at the core of our nation’s problems.  You can have a student loan you can’t pay back, and it’s someone else’s fault. When the bankster is threatened with the loss of his money because he made bad student loans, it’s someone else’s fault there too and thus we must change the bankruptcy laws by removing the ability of the student to march into court and discharge the bad debt!  It’s the dumb starry-eyed consumer who bought a bubble house but when the bankster managed to give the money to the consumer through fraudulent securitization that never really happened and thus they can’t document a proper chain of ownership it’s someone else’s fault and the banksters robosign 100,000 affidavits because they can’t prove ownership of the debt due to actions and inactions of their own hand.  The majority of those who fall seriously ill are chronically so due to lifestyle decisions they made or just simple bad luck but it’s someone else’s fault and as a consequence they have to be bailed out as well.  It was someone else’s fault that the airlines didn’t armor cockpit doors prior to 9/11 so we must be sexually assaulted to fly and the airlines must be given blanket immunity from terrorist acts — even if their negligence contributes to the success of the act.

I could go on for hours — literally — on this topic.  Even the little things in life we do every day are impacted.  You can no longer play dodgeball in gym class because “someone might get hit with a ball” (never mind that’s the point of the game) and it’s “aggressive” (ditto.)  You can’t choose whether to buy a car without the 500lbs of “mandatory safety equipment” in it never mind that it’s you who gets hurt if it’s not there and you wreck — you’re forced not only to spend the thousands of dollars now but also forced to spend thousands more moving that additional mass everywhere you go in said vehicle.  I can’t choose to buy less-process or unprocessed foodstuffs (such as milk) even with full disclosure and acceptance of the risks and potential benefits — the government happily shoves a gun in the farmer’s face and threatens him with arrest if he entertains my offer to purchase.  In Texas they attempted to force all teenage girls to take a vaccine for a sexually-transmitted disease, never mind that (1) only consensual or felonious personal conduct can pass HPV from one person to another and (2) such conduct is absolutely prohibited while on school property.  We don’t even have to reach the point of safety and effectiveness of the vaccine itself in this case, even though both are open to significant doubt.

I guess I can in fact be thankful that we live in a time of relative peace, at least here in the United States.  This is not, of course, true in all parts of the world.  And I can be thankful that myself and my immediate family are healthy and enjoying a beautiful day in Florida while the turkey cooks and the pumpkin pie cools.

But that will have to do on a day that is no longer lived in the land of the free and the home of the brave, having been turned by the lack of the rule of law and shifting of responsibility and cost, along with a poisonous political process that renders us more akin to the land of the screed and the home of the slave.

It’s a day for the turkey all right.

“The worst crime against working people,” so said Samuel  Gompers, “is a company which fails to operate at a profit.”

Gompers, of course, is known by the history books as the father of  the labor  union movement in America. He was founder of the American  Federation of Labor. It may seem incongruous for such an important labor figure to say such a  thing about profit, but Gompers appreciated  something back then that perhaps a  few of today’s labor leaders don’t.  An economy without profit is an economy in  deep, deep depression.

Profit and the self-interest motive behind it were under relentless  attack  not so long ago. The radicalism of the 1960s was dead set  against them, laying  most of society’s ills at the feet of greedy,  profit-hungry and selfish  capitalists. Anti-profit sentiment was even  more popular in Europe and Africa,  where it helped boost the socialist  agenda and a wave of  nationalizations.

In more recent years, however, a better understanding of profit has  taken  hold in surprising places. Communist China started implementing  it in the late  1970s as an incentive for moribund state industries and  previously prohibited  private enterprise. And in my files is an English translation of an article that  appeared in a most unlikely place.  Here’s a key excerpt:

“The economic situation of enterprises will have to depend directly  on  profit, and profit cannot fulfill its function until prices are  liberated from  subsidies. Over the centuries, humankind has found no  more effective measure of  work than profit. Only profit can measure the quantity and quality of economic  activity and permit us to relate  production costs to results effectively and  unambiguously . . . .  Our  suspicious attitude toward profit is a historical misunderstanding, the result  of the economic illiteracy of people . . .”

Those words were written by economist Nikolaay Shmelyov in the June  1987  issue of Novy Mir, the leading political and literary journal of  the then-Soviet  Union, no less. The Soviets, after years of anti-profit propaganda and policies  that produced a world-class basketcase  economy, were showing signs of shedding  some of that economic  illiteracy. There’s truth in one of the jokes that was  making the  rounds in Moscow just before the collapse of the Soviet system in  1991, namely, that to find a genuine believer in Marxism these days, one has  to  visit universities in the United States.

Thanksgiving Day is a particularly appropriate time to reflect on the meaning  and value of profit. The settlers at Plymouth colony who  started the holiday  tradition nearly wiped themselves out early on when they set up a communal,  socialistic economy. Each person was producing for everybody else and received  an equal share of the total  production. In the absence of a strong profit  motive, the settlers  starved until Gov. Bradford altered the arrangement.  Thereafter, men  and women produced for profit and the result was bountiful  harvests  with full Thanksgiving tables.

The people who don’t like profit prefer to extol the virtue of  selflessness,  the charitable motive. Don’t get me wrong here, I’m not  opposed to charity. A  loving, caring concern for others is a beautiful  thing, and Americans have  always been the most charitable, giving  people on the planet. But the fact  remains that profit is responsible  for more good things—by a long shot—than all  the charity in the world.

Consider this as you feast at the table today. The people who raised  the  turkey didn’t do so because they wanted to help you out. The others who grew the  cranberries and the yams didn’t go to the trouble and  expense out of some  altruistic, charitable impulse. If you think those  folks and the others who made  almost everything else you own performed  their tasks as sacrificial rituals,  then you probably believe McDonalds when they say, “We do it all for  you.”

In Marxist North Korea, they have a regime that works night and day  to see  that nobody makes a profit or owns a private business. There  won’t be anything  like Thanksgiving dinner in North Korea today, and  that’s no  coincidence.

As for me, you can count on me saying a prayerful thanks for more  than just  good food today. I’m going to say thanks for the profit  motive which made it all  possible. When God instilled a measure of  productive self-interest into the  human mind, he knew what he was  doing.

Lawrence W. Reed is president of the Foundation for Economic Education — www.fee.org — and president emeritus of the Mackinac Center for Public Policy.

Michigan Capitol Confidential

It’s pretty-much over at this point….

This morning Germany had a failed Bund auction.  That’s not particularly noteworthy; it happens from time to time.

But what’s noteworthy is what happened to bond yields everywhere through Europe in response: They blew out.

The Greek and Italian “problem” is no longer about Greece and Italy.  It has been creeping into Spain and more-recently France, but this morning jumped into Germany and everywhere else “all at once.”

Capital has said “no more” to the lies in Europe.  While this does not mean an instant implosion it does mean one important thing: The willingness of capital holders to continue to permit deficit spending is coming to an end, and with it the false “GDP” that this lie has “supported” will also come to an end.

Our lawmakers, for their part, continue to sing a happy song about how we’ll get it done — but not today, since the supercommittee was an abject failure.  Covering up the failure was the fact that there were departments that had 10, 20 even 30% increases in the funding found in the appropriateions bills that were passed in the House even while the “committee” was trying to find a way to “cut” spending.

Folks, this political game of lie, lie and lie some more cannot go on forever.  Eventually the waiter appears with the check and you either pay it, wash dishes, or get arrested for theft.  In the political world that “arrest” comes in the form of capital holders saying that they no longer believe you will ever pay and borrowing costs go up — way up.

The Fed cannot “print” out of this and neither can the ECB.  If either try that they will engender an all-on revolt, never mind that as purchasing power falls the fixed costs of staying alive go up relative to incomes and the war is lost anyway.

Reality must eventually be faced.  That day is here for Europe and it will soon be here in the US.  We have permitted the lies and stealing — both indirectly and now, as we’ve seen, it appears directly through MF Global — to go on for too long.

To those Seniors (and soon-to-be-Seniors) and others who say “but we were promised!” and “I vote damnit – you better give me what you said I’d get” respond: The till is empty and your check is going to bounce.

Occupy Wall Street?  Well sure, but while you’re at it, why aren’t the Seniors encircling the Capitol and refusing to leave?  Why isn’t the underlying truth being discussed and why aren’t the jackals that led to this happening being forced from office and run out of town on a rail?

I’ll tell you why: Because everyone thinks that they can manage to somehow “get theirs” while “someone else” will take the hit.

I’m sorry to tell ou that it isn’t going to work out like that.

There’s no point in continuing to play this game.  MF Global showed us — you’re right, you hedge or you place your bet, you still lose your money!  How many farmers, airlines, industrial producers and other legitimate entities using the market for risk management got screwed by that little game and why is it that Corzine is not in handcuffs?  FINRA?  What’s that — it appears Corzine didn’t have a valid (and required) securities license.  Self-regulation not only failed so has any resemblance of actual law enforcement.

The same game was run over in Europe with sovereign CDS.  You hedge, you bet right, the ISDA declares that you were “voluntarily” exchanging your bonds and the hedges you bought were worthless.  Your “exchange” was as voluntary as is handing over your wallet when there’s a gun up your nose, but that doesn’t matter — the word “is” can be redefined any time the people in charge want, and they want.

Your money, that is.

It will not be long ladies and gentlemen, when the bulk of the folks running the algorithms deduce that they’re exposed to the same risks – they have to post margin too, you know, and if it can be stolen then their capital isn’t safe either.  These deposits aren’t supposed to be “at risk” when there’s no position actively open — that’s a performance bond against possible failure to pay, but is supposed to be exactly as safe as a bank deposit in a checking account under FDIC limits.

Well, it wasn’t.  The CDS you bought on Greece wasn’t.  And it will only take another event like this or two before people conclude that everything is unsound as the jackals running the game will redefine the meaning of words to suit themselves and, failing that will simply steal the money.

30+ years of lawless behavior has now devolved down to blatant, in-your-face theft.  They don’t even bother trying to hide it any more, and Eric “Place” Holder is too busy supervising the running of guns into Mexico so the drug cartels can shoot both Mexican and American citizens.

What am I, or anyone else, supposed to do in this sort of “market” environment?  Invest in…. what?  Land titles are worthless as they’ve been corrupted by robosigning, margin deposits have been stolen, Madoff’s clients had confirmations of trades that never happend and proved to worthless pieces of paper instead of valuable securities and while Madoff went to prison nobody else has and the money is still gone!

Without enforcement of the law — swift and certain — there is no deterrent against this behavior.

There has been no enforcement and there is no indication that this will change.

It will take just one — or maybe two — more events like MF Global and Greek CDS “determinations” before the entire market — all of it — goes “no bid” as participants simply stuff their hands in their pockets and say “screw this.”

It’s coming folks, and I guarantee you this: Whatever your “nightmare” scenario is for such an event, it’s not bearish enough.

Hilarity ensues.  (Click for larger image.)

A protester handed President Barack Obama a note while shaking hands along a rope line in New Hampshire today.  AP photographer Charlie Dharapak smartly zoomed in so you can read the note for yourself.

For those of you who like to know (myself included) the technical information on how Charlie shot the pictures, here it is. Both frames were made with a Canon 1D Mark IV with a 70-200mm zoom lens. The exposure was 1/250 @ f2.8 rated at 1600iso. The first image was shot at 70mm and the close up was shot at 160mm.

Source: Paid to See