FedUpUSA

Archive for December 15th, 2011

Confidence in a systemically corrupt financial system cannot be restored without a complete public exposure of all the lies, fraud, misinformation and complicity.

The truth has a unique sting, and an equally unique ability to heal the destruction wrought by  dishonesty, fraud and lies.The truth hurts, because the daylight of truth demands changes  that the self-serving and those in denial desperately wish to avoid.

But there can be no healing or reconciliation without the truth, baldly stated and  plainly spoken without artifice or spin.

If we can finally be truthful with ourselves as a nation, then we must admit that our financial system is fundamentally based on lies, fraud, embezzlement, misinformation, perverse filters and incentives, shadow systems that mock transparency and regulation, class privilege and the systemic flouting of the rule of law.

This is the truth that hurts because it reveals the financial system as one stupendous exploitative fraud; but it also reveals the complicity and irrelevance of our judicial system and the complete capture of the legislative and Executive processes of governance.

There is a system of government in which rule of law is merely a propaganda screen, where financial and political Elites run the show and escape the consequences of their actions: it’s called tyranny.The truth is that we live in a financial tyranny.

There is no other truthful way to describe the U.S.

If you want evidence, then ask yourself:

How many people have been indicted, convicted and served time for financial crimes during the current era of financial fraud and malfeasance, the most pervasive in U.S. history?

Answer: essentially none; the number is signal noise.

Was the American public lied to about the need and true purpose of TARP and the  other bank bailouts?

Answer: yes.

Did Congress meekly cave into the demands to “save the banks” and swallow whole the most absurd threats, i.e. save our cronies lest anarchy become the order of the day?

Answer: yes.

Did the Federal Reserve backstop the banks to the tune of $7.7 trillion in complete secrecy?

Answer: yes.

Are there  two sets of laws and rules, one for the Financial and Political Elites, who are free from oversight and the rule of law, and another for the rest of us?

Answer: yes. Just look at the massive level of corruption and systemic fraud, and the near-zero number of investigations which result in indictments, convictions and prison time.

Has anything been done to change any of this systemically?

Answer: no. The Kleptocratic Power Elite likes the system as is.

This is the perfection of financial tyranny.

The Status Quo is anxious to “restore confidence” in their corrupt financial tyranny, but without confessing the corruption or naming names.In a system constructed of lies, then sweeping the lies under the carpet and acting like “everything’s fixed now, let’s move on” restores nothing–rather, it proves the system is a sham.

Nothing is fixed until the whole truth and nothing but the truth is revealed for all to see, in broad daylight.This is the origin of the Truth and Reconciliation Commissions that have been established after a brutal tyranny has finally fallen, and the ruined nation seeks to heal itself from the misrule and exploitation of its Elites and from the officially sanctioned coverups of  systemic corruption and predation.

Quite frankly, the American system of justice is too far gone, too corrupted, too worm-eaten, to issue justice at this point.It would be nice if national resources were devoted to rooting out the fraud from 2001 on, but if nothing has been done to date except wrist-slap fines, then we cannot expect a thoroughly compromised and corrupted judiciary to suddenly transform itself into a judiciary worthy of democracy.

But we can demand a Truth Commission, where every one of the millions of people who committed fraud and who lied or mis-stated the truth can come forward and state the truth and name names, under oath.Everyone from the notaries who robo-signed foreclosures and home buyers who mis-stated their income and assets to obtain mortgages to the Wall Street apparatchiks who packaged the mortgages knowing they were fraudulent, the executives who looked the other way, to the politicos who accepted contributions from the engines of financial tyranny– give each and every one the chance to come forward and state the truth of their role in the system of fraud, collusion, avarice, lies and complicity.

Every single employee of Wall Street and the investment/mortgage banks and those Federal and State agencies tasked with their oversight should be called forth and given a chance to free themselves of the guilt of silence and self-serving complicity in a massively,  systemically corrupt system.Those who refuse the opportunity will be duly noted and their names entered in a public register of those who must have known some small sliver of the system but who have refused to tell the truth under oath.

The names of those who worked the machine revealed by their peers will also be publicly listed. If they think it unfair to be identified, then let them come forth and state the truth under oath. If they lie or mis-state the truth once again, then let them go to prison for  perjury.

If 10,000 citizens lie to protect themselves from the truth, then let us empty the prisons of  petty drug users and fill them with white-collar perjurors.

There is no other way to “restore confidence” but to insist that the truth finally matters. This will not be justice, but it will at least release the healing power of truth.

Charles Hugh Smith – Of Two Minds

Household income is a taboo topic even though people have a visceral enjoyment of spending their hard earned money.  As we go out and spend during this holiday season many people have absolutely no clue what other family members or neighbors make.  Some would argue that household income is absolutely private and I would agree to a certain point.  The mainstream media is focused on getting people to spend and part with their money.  At this they are highly successful.  Just take a look outside your window and I am certain you will see the artifacts of spending with brand new cars and other shiny lawn toys.  Yet most Americans base the success of others by their purchasing knickknacks and have little clue as to what other households pull in with their income.  This taboo led us into this debt fueled crisis with Americans going into massive debt to keep up with neighbors that never had the income to support their conspicuous consumption.  This article will try to paint a full picture of the income situation across the country.

The distribution of median household income in the US

I’ve noticed a few more mainstream articles discussing life of households making $50,000 a year.  Why is this important?  This threshold is important because this is the median household income in the US:

Source:  Census

This figure has held steady for many years but only until the recent profound recession did people start becoming enlightened to this fact.  I’m sure many Americans have had similar thoughts over the last decade:

“Hey, how is my neighbor able to purchase a BMW when we pull in $50,000 and live in the same type of home?”

“How was my neighbor able to take that luxurious vacation to Hawaii when we work at the same company doing the same job?”

For the most part, a large part of it was financed with debt.  As the reality is setting in we need only look at the above chart for a clearer picture of the economic balance sheet of most households.  Part of the misconception of household income stems from the marketing and ornaments that people carry on the outside.  Since income is a taboo subject most people are left looking at visual cues when in reality many Americans are simply getting by.  This is fact.  One out of three Americans has absolutely no savings account.  How is that for being financially stable?

Let us examine the chart above more closely however:

-To be in the top 25 percent of household income you would need $85,000 or more in income per year

-To make the top 10 percent of household income you would need to make $135,000 a year or more in income

-Approximately 4 percent of households report an income of $200,000 or higher

-Roughly 2 percent of households make more than $250,000 in income per year

The figures are interesting and now with the subject more openly discussed because of the wicked recession, many people are realizing that many are not as wealthy as they once thought and with access to debt being limited, the faux leverage has been yanked out of the system as the graft filled financial system tries to eat up the buffet of taxpayer bailouts.

Breaking down the average income of Americans

The above data examines total household income meaning a likely two or more wage earners per household.  Yet how much does the average American worker make?  That data is also readily available:

Source:  Social Security

People are somewhat shocked that most Americans make $25,000 a year or less.  Your typical American worker is pulling in $25,000 a year which makes sense when the typical household has two workers and the median household income is $50,000.  Of course the figures shift a bit where you might have someone making $35,000 and someone else making $15,000 working a part-time job which is becoming much more common in this country.

Much of the recent job growth has occurred in lower paying occupations:

Source:  NELP

Lower-wage occupations are categorized as those paying less than $10 per hour.  It is an interesting dynamic that is directly impacting the median household income of Americans.  This crisis is spanning multiple generations as many younger workers are coming out with large amounts of debt particularly with student loan debt expecting to earn as much as their parent’s generation.  The facts on the ground show a dramatically different reality.

Read the rest at My Budget 360

Here we go again….

Republican Rep. Paul Ryan plans to unveil a new Medicare proposal Thursday that would give future seniors the choice of purchasing private insurance coverage or staying in the traditional federal plan.

This will do exactly nothing.

Here’s the underlying problem that nobody is offering a legislative agenda to address: Medical spending in the Federal Budget has expanded at a compounded rate of 9% since 1980 and is projected to continue to do so.

The reason for this is that medical care generally in the private economy (e.g. health insurance premiums) is expanding in price at roughly that rate or better for the last 30 years as well, and as such so is the government side of it.

At present the government spends about $800 billion a year (up from ~$53 billion in 1980!) on medical care in all of its programs.  At 9% compounded rates of growth for the 50 year old by the time he reaches 85 (35 years from now) this spending is projected to increase to $16.3 trillion.

That obviously won’t happen — the entire federal budget is currently $3.8 trillion and the entire economy is $15 trillion.  If the economy grows at 3% annually every year for the next 35 years the economy will be $42 trillion in size; with the government being ~20% of the economy ($8.4 trillion) this would still leave medical care totaling twice the entire federal budget.

Again, that obviously won’t happen because you can’t spend more than 100% of something as a subset of that thing.

This has to be stopped — right here and now.

The expansion is being caused by the massive cost-shifts through all areas of the medical system.  As I detail in Leverage these cost-shifts are pervasive and outrageous — we effectively in America pay for the development of every advanced technology and treatment and subsidize government-run health care worldwide!  This is a very profitable model for pharmaceutical and device makers, not to mention all the other providers who look at the provision of these products as “cost plus” — the higher the price, the greater in dollars the “plus” percentage is.

There are too many points of debate to cover in one ticker on this; you can go back through my various points in this regard using the Archive function if you wish, or buy a copy of Leverage and read it for a more-succinct yet reasonably-complete treatment of the problem.

What we cannot do is continue to sit back and watch partisans like Ryan continue to lie through his teeth, along with the others in Congress on both the Left and Right.  If we do not get our arms around this portion of the Federal Budget in the immediate future it will lead to the destruction of the US Government and our way of life.

Some stock investors  never seem to learn.

They hope and pray for a  new government rescue from Washington or Brussels.

They wait with bated  breath for each official sign of money printing, interest-rate cuts, or  financial bailouts.

Then, as soon as  something is finally announced, they breathe a sigh of relief, applaud with  enthusiasm, even buy a stock or two.

But it’s a fool’s game.  Because within a few months — or even just a few days — the government rescue crumbles,  investors run for cover, and, ironically, they begin a whole new cycle of hoping  and praying for the NEXT big rescue.

Just this year alone,  European authorities have held 19 high-level emergency meetings … proposed  dozens of rescue packages … and delivered an endless stream of promises.

Since the crisis began, we’ve  seen four PIIGS bailouts (Greece twice, Ireland and Portugal) … the creation  of two European bailout funds (ESFS and ESM) … plus countless central bank interventions  to buy sinking PIIGS bonds.

What have they gained  from all this? Nothing! In fact …

The Danger  of Systemic Collapse Is
Far Greater Today Than at Almost Any
Time Since the Debt Crisis Began

The European Union is the biggest economy  in the world — close to $15 trillion in GDP. When it sinks, so does the U.S.  and much of the world.

European banks are roughly THREE times  larger than U.S. banks. When they’re forced to cut their lending drastically,  global capital shortages hit hard.

Most frightening of all, the U.S. has  committed most of the same mistakes as Europe — the same kind of massive debts,  deficits, and failed bailouts.

And now the European  Union is crumbling, threatening a systemic collapse far larger than the near  meltdown witnessed in the wake of the Lehman Brothers collapse in 2008.

My Debt  Danger Index

How do I know a  dangerous new meltdown is so likely?

Because that’s what the  objective data proves. In fact, to measure and track this danger as accurately  as possible, I’ve created a new barometer — my Debt Danger Index for Europe.

This index is based on  the total cost of insuring against sovereign debt defaults in each of five key  countries — Belgium, France, Germany, Italy, and Spain.

So it directly reflects  the danger of European debt disasters, regardless of the sentiment in the stock  market.

Reason: Unlike stock  market investors, sellers of these specialized insurance contracts see through  the hype and hoopla of government bailouts and rescues.

If the danger of debt  default is rising, they charge a higher premium for the insurance and my index goes up.  If the danger of default is subsiding, they charge a lower premium and the index goes down.

Now, just look at how my  Debt Danger Index has surged:

Four years ago, before  the U.S. housing bust and the Greek debt crisis, the sovereign debts of large  European countries were considered beyond reproach.

Default was unthinkable.

And any talk of  wholesale collapse was considered science fiction.

So the cost of insuring against  default was a pittance:

To insure  a $50-million portfolio — allocated equally among sovereign bonds of Belgium,  France, Germany, Italy, and Spain — the total cost was a meager $28,649 per  year.

Care to venture a guess as  to how much it costs now?

The cost  of insuring the same $50-million portfolio today is a whopping $2,258,200 per year, or 78.8 times  more!

In other words, based on  the market for these insurance contracts, the danger of a wholesale European  debt disaster — with the potential to melt down the global banking system — is  now nearly 79 times greater today than it was four years ago.

Massive  Policy Failure

What about all the  trillions of dollars and euros committed to money printing, bailouts, and  guarantees?

What did they do to stem  the crisis?

Nothing, absolutely  nothing!

Quite the contrary, even  the most massive and dramatic government interventions only made the crisis  worse.

What proof?

Then take a look at my  timeline in the chart below. It’s the same Debt Danger Index I showed you in the previous chart, but this time zeroing in on just the last two years:

Here’s a timeline of the  four most important government actions:

  April 2010 — the first  Greek bailout. What did it do? Nothing! My Debt Danger Index was rising at a  steady pace before the bailout announcement  … and it continued to do so after the announcement.

  May 2010 — the $1 trillion European bailout fund (EFSF). Now, THIS was supposed  to be the be-all, end-all Mother of All Bailouts. Instead, it was the cue for a  whole new wave of the crisis … and my Debt Danger Index promptly resumed its  steep rise.

  July 2011 — the second Greek bailout. Finally a solution? Of  course not! Instead of reducing the Debt Danger Index, it merely helped drive  it sharply higher.

  This past Friday, December 9, 2011 — Europe’s “new fiscal pact.” The grand bargain that  markets were praying for? Far from it!

The European Central Bank will NOT provide  the money printing that investors were hoping for.

England will NOT sign on to the deal.

And even most of the countries that DO  join the pact — including big movers and shakers like France and Germany — are  merely making the same old promises that they’ve already broken repeatedly in  the past.

Bottom  line: The European  sovereign debt crisis is barely beginning. It will strike our shores directly  and massively in 2012. And you must do everything possible to prepare.

Good luck and God bless!

Martin Weiss Ph.D. – Money & Markets

Dr. Weiss founded Weiss Research in 1971 and has dedicated the past 40  years to helping millions of average investors find truly safe havens and  investments. He is president of Weiss Ratings, the nation’s leading independent  rating agency accepting no fees from rated companies. And he is the chairman of  the Sound Dollar Committee, originally founded by his father in 1959 to help President  Dwight D. Eisenhower balance the federal budget. His last three books have all  been New York Times Bestsellers and his most recent title is The Ultimate Money Guide for  Bubbles, Busts, Recesssion and Depression.

We of course hear all the time that the government has to “help” the economy, or “prime the pump.”

The problem is that it’s a lie — not due to intentions, but due to what has to happen for it to work as claimed and intended.

Let’s first define “Stimulus” and “Work”:

“Stimulus”: A deficit spending bill or bills by government — intentionally borrowing money to spend it in excess of tax revenues for the purpose of attempting to foster economic growth.

“Work”: A Stimulus program can be said to have “worked” if it produces more than it costs in tax revenue.  That is, it “works” if it produces economic change sufficient to fund itself over a reasonable amount of time.  If it does not then the program must be deemed a failure, since it is impossible to sustain it permanently and yet the desired goal will not come to pass; at best a temporary substitution — not stimulus — can be obtained.

Let’s look at history in terms of percentage of GDP:

Pay careful attention to this chart.  Note that government tax revenues are about $2 trillion, more or less.  We’ll be kind and call it $2.5 trillion (the last couple of years it has fallen short.)  This means that the government taxes about 17% of GDP.

Therefore, the reciprocal of that percentage of GDP that shows up as tax revenues must be the multiplier of economic activity of the “Stimulus” in order for it to be revenue neutral!

That is, each dollar of deficit spending must produce about six dollars of new economic activity in order for the amount of tax revenue generated from that stimulus to offset the spending that took place.

This has never happened.  Ever.  Even the most-generous of economic estimates on stimulative spending have left the multiplier below 2.0.  Yet a 2.0 multiplier would require that government tax half of GDP for it to be neutral!

This is the fundamental reason that all of the “stimulus” program attempts to lift the economy out of recession over the last 30 years instead fueled the debt bubble.  The only “pump” they primed was the one marked “Leverage“!

The Keynesian view of “pump priming” isn’t wrong because it is too small or misdirected, it is wrong because there is no reasonable program that the government can put into place that will have an economic multiplier of 6 in the real economy. 

As such these programs “worked” in the 08-11 timeframe through substitution only and have never been self-sustaining — even in the 1980s and 1990s.

This is the fundamental flaw in attempting “stimulus” measures; the only exception would be were you to first run a surplus and bank it — you could then spend that without debt consequence.  Unfortunately that course of action — to run and bank surpluses in anticipation of future need — has never been taken by our government.

As debt saturation is reached it becomes even worse.  Now there is no ability to drive consumer and business behavior to take on more debt — that is, instead of producing more pyramiding of debt in the private economy all the “stimulus” does is directly go to GDP, meaning that 2/3rds to 5/6ths of the “stimulus” literally winds up as new and unfunded debt on the federal balance sheet! 

The harder and faster you dig the deeper the hole gets!

Sorry Krugman, Obama, Reid and others: The math always wins.