FedUpUSA

Archive for January 1st, 2012

A Los Angeles Fire Department firefighter is shown at a fire in West Hollywood, Calif., on Friday Dec.30, 2011. (Mike Meadows/AP Photo)

From the lefty coast….

A rash of arson fires in the dark of night set Los Angeles on edge over New Year’s Eve, and authorities deployed hundreds of extra firefighters, patrol cars, undercover officers and helicopters to stop the attacks.

On Saturday night, firefighters rushed to multiple fires, quickly extinguishing a vehicle fire in a Hollywood carport and responding to another in the massive parking structure at Hollywood Boulevard and Highland Avenue. Those blazes followed at least 38 other suspicious fires between Thursday night and Saturday morning, making it the worst wave of arson since the 1992 riots.

“Whoever is doing this is really messing with people’s lives,” said Los Angeles Fire Capt. Jamie Moore.

This is probably one deranged individual with a penchant for fire.

Probably.

But while you’re sipping your beverage of choice this evening, consider again that while this is probably one deranged individual there are millions of screwed-over individuals that have taken it in the backside from the big banksters who have, incidentally, gone without prosecution.  Indeed, our own President claims that “no laws were broken.”

Oh really?

Hmmm… perjury is a violation of the law.  How many perjured affidavits were filed in foreclosure cases?

Fraud is a violation of the law.  How many investors and others got rooked in various schemes and scams over the last few years?

Money laundering is a violation of the law too.  I seem to remember a “deferred prosecution agreement” instead of handcuffs and prison sentences.

Don’t be fooled by the claim that the injured are all “sophisticated investors” who should know better.  Were all the farmers who got hosed in the MF Global collapse “sophisticated investors” or were they trying to make a living growing corn, wheat or soybeans so you’d have something to eat and were simply trying to lock a decent price for their crop to be delivered in a few months?

Or how about Jefferson County Alabama?  Over 650,000 people got screwed by that fiasco born out of bribery, corruption and graft, and that’s not an allegation — there have been convictions and jail sentences handed out but the screwing remains!

Nobody wants to see anarchy that has a hint of intelligence.  It is a nasty, ugly business and is utterly indefensible.  But this Ticker isn’t about what you want.  It’s about facing the potential of what is, and if it happens, why it happened so you’re prepared to demand political heads roll — before people start taking actions that lead to literal heads on pikes.

I’m concerned.  Everyone has a breaking point.  If just one tenth of one percent of the population of Jefferson County was pissed off enough and got hosed badly enough to rage against the machine by lighting fires, there would be 650 arsonists in that one county alone!

I can’t imagine what Birmingham would look like under such a scenario, yet 1/10th of one percent is a tiny, minuscule percentage.  It’s nothing.

We have history to look to in this nation in that regard; the strikes of 1877 are an interesting case study in that a large number of people basically lost everything, and once they did, they simply “lost it.”

The complete and utter refusal of the state and federal authorities, from the top down, to prosecute bogus deals and frauds that were the hallmark of the second half of the 2000s, letting the statute of limitations run and making speeches claiming that “nobody did anything illegal” is the epitome of stupidity.  Those uttering such nonsense on both sides of the aisle are malignant pustules on the ass of our nation’s government and the risks they are taking when it comes to civil order and our way of life are utterly indefensible.

Perhaps this gamble will “win”, in that there will be no significant number of people who lose everything and are also either mentally unstable or just simply pissed off enough to not care about the consequences (up to and including their own death) that come with going on such a rampage.

But beyond the fact that intentional injustice of the sort we’ve witnessed is never defensible on ethical grounds, don’t you think this is a rather dangerous gamble to be taking with the economic and other tensions in our country today?

Once upon a time, the United States had the largest and most vibrant middle class that the world has ever seen.  Unfortunately, that is rapidly changing.  The statistics that you are about to read prove beyond a reasonable doubt that the U.S. middle class is dying right in front of our eyes as we enter 2012.  The decline of the middle class is not something that has happened all of a sudden.  Rather, there has been a relentless grinding down of the middle class over the last several decades.  Millions of our jobs have been shipped overseas, the rate of inflation has far outpaced the rate that our wages have grown, and overwhelming debt has choked the financial life out of millions of American families.  Every single day, more Americans fall out of the middle class and into poverty.  In fact, more Americans fell into poverty last year than has ever been recorded before.  The number of middle class jobs and middle class neighborhoods continues to decline at a staggering pace.  As I have written about previously, America as a whole is getting poorer as a nation, and as this happens wealth is becoming increasingly concentrated at the very top of the income scale.  This is not how capitalism is supposed to work, and it is not good for America.

Today I went over to Safeway and I was absolutely appalled at the prices.  I honestly don’t know how most families make it these days.  I ended up paying over 140 dollars for about two-thirds of a cart of food.  That was after I “saved” 67 dollars on sale items.

When the cost of the basic things that we need – housing, food, gas, electricity – go up faster than our incomes do, that means that we are getting poorer.

Sadly, if you look at the long-term numbers, some very clear negative trends emerge….

-The number of good jobs continues to decrease.

-The rate of inflation continues to outpace the rate that our wages are going up.

-American consumers are going into almost unbelievable amounts of debt.

-The number of Americans that are considered to be “poor” continues to grow.

-The number of Americans that are forced to turn to the government for financial assistance continues to go up.

After you read the information below, it should become abundantly clear that the U.S. middle class is in a whole heap of trouble.

The following are 30 statistics that show that the middle class is dying right in front of our eyes as we enter 2012….

#1 Today, only 55.3 percent of all Americans between the ages of 16 and 29 have jobs.

#2 In the United States today, there are 240 million working age people.  Only about 140 million of them are working.

#3 According to CareerBuilder, only 23 percent of American companies plan to hire more employees in 2012.

#4 Since the year 2000, the United States has lost 10% of its middle class jobs.  In the year 2000 there were about 72 million middle class jobs in the United States but today there are only about 65 million middle class jobs.

#5 According to the New York Times, approximately 100 million Americans are either living in poverty or in “the fretful zone just above it”.

#6 According to that same article in the New York Times, 34 percent of all elderly Americans are living in poverty or “near poverty”, and 39 percent of all children in America are living in poverty or “near poverty”.

#7 In 1984, the median net worth of households led by someone 65 or older was 10 times larger than the median net worth of households led by someone 35 or younger.  Today, the median net worth of households led by someone 65 or older is 47 times larger than the median net worth of households led by someone 35 or younger.

#8 Since the year 2000, incomes for U.S. households led by someone between the ages of 25 and 34 have fallen by about 12 percent after you adjust for inflation.

#9 The total value of household real estate in the U.S. has declined from $22.7 trillion in 2006 to $16.2 trillion today.  Most of that wealth has been lost by the middle class.

#10 Many formerly great manufacturing cities are turning into ghost towns.  Since 1950, the population of Pittsburgh, Pennsylvania has declined by more than 50 percent.  In Dayton, Ohio 18.9 percent of all houses now stand empty.

#11 Since 1971, consumer debt in the United States has increased by a whopping 1700%.

#12 The number of pages of federal tax rules and regulations has increased by 18,000% since 1913.  The wealthy know how to avoid taxes, but most of those in the middle class do not.

#13 The number of Americans that fell into poverty (2.6 million) set a new all-time record last year and extreme poverty (6.7%) is at the highest level ever measured in the United States.

#14 According to one study, between 1969 and 2009 the median wages earned by American men between the ages of 30 and 50 dropped by 27 percent after you account for inflation.

#15 According to U.S. Representative Betty Sutton, America has lost an average of 15 manufacturing facilities a day over the last 10 years.  During 2010 it got even worse.  Last year, an average of 23 manufacturing facilities a day shut down in the United States.

#16 Back in 1980, less than 30% of all jobs in the United States were low income jobs.  Today, more than 40% of all jobs in the United States are low income jobs.

#17 Most Americans are scratching and clawing and doing whatever they can to make a living these days.  Half of all American workers now earn $505 or less per week.

#18 Food prices continue to rise at a very brisk pace.  The price of beef is up 9.8% over the past year, the price of eggs is up 10.2% over the past year and the price of potatoes is up 12% over the past year.

#19 Electricity bills in the United States have risen faster than the overall rate of inflation for five years in a row.

#20 The average American household will have spent a staggering $4,155 on gasoline by the end of 2011.

#21 If inflation was measured the exact same way that it was measured back in 1980, the rate of inflation in the United States would be well over 10 percent.

#22 If the number of Americans considered to be “looking for work” was the same today as it was back in 2007, the “official” unemployment rate put out by the U.S. government would be up to 11 percent.

#23 According to the Student Loan Debt Clock, total student loan debt in the United States will surpass the 1 trillion dollar mark at some point in 2012.  Most of that debt is owed by members of the middle class.

#24 Incredibly, more than one out of every seven Americans is on food stamps and one out of every four American children is on food stamps at this point.

#25 Since Barack Obama took office, the number of Americans on food stamps has increased by 14.3 million.

#26 In 2010, 42 percent of all single mothers in the United States were on food stamps.

#27 In 1970, 65 percent of all Americans lived in “middle class neighborhoods”.  By 2007, only 44 percent of all Americans lived in “middle class neighborhoods”.

#28 According to a recent report produced by Pew Charitable Trusts, approximately one out of every three Americans that grew up in a middle class household has slipped down the income ladder.

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

#30 The poorest 50 percent of all Americans now collectively own just 2.5% of all the wealth in the United States.

Sadly, this article could have been much, much longer.  There are so many other statistics about the middle class that could have been included.

For even more insane economic numbers that show just how dramatically the U.S. economy is declining, just check out this article: “50 Economic Numbers From 2011 That Are Almost Too Crazy To Believe“.

What is even more frightening is that this is about as good as things are going to get.

We have already had “the economic recovery”, such as it was.

Now we are heading for another major financial crisis.  Just like back in 2008, the entire world is going to feel the pain.

But we never recovered from the last financial crisis.  We are like a boxer that is not ready to handle another blow.

And who is going to get hurt the most?  It will be those at the bottom of the food chain of course.  Tens of millions of Americans that are living in poverty will experience a massive amount of pain, and millions more Americans will fall out of the middle class and will join them.

If you have a good job, do your best to hang on to it.  If you don’t have a job, do your best to get one while you still can.  Jobs will become very precious in the years ahead.

But also try to do what you can to become less dependent on the system.  Almost anyone can find ways to make some extra money on the side.  Yes, it will likely cut into your television time.  If someday you were to lose your job you don’t want to be left with zero income.

Right now, the U.S. economy is slowly dying and as time goes by the number of middle class Americans it will be able to support will continue to decrease.

Yes, it is like a perverse game of musical chairs, but this is where we are at.

I encourage all of you to think about how you plan to make it through the collapse that is ahead.

Sticking our heads in the sand and pretending that everything is going to be okay is not going to help anyone.

But if we all start planning for the storm that is ahead, and if we get others around us to wake up as well, that is going to do a great deal of good in the long run.

The Economic Collapse

Faith in the Status Quo is fading fast, spurred on by the long line of critical dominoes toppled by MF Global.

Longtime correspondent Harun I. recently submitted an analysis by Karl DenningerThe Ongoing MF Global DISASTER (Market Ticker) and this commentary:

I have previously written on the seriousness of this subject but there still seems to be no widespread appreciation of its implications.In complex economic systems, futures markets are as important as is a stable and reliable medium of exchange.

A model of normal transactions is:A forward contract is initiated between parties. The parties then proceed to hedge their risk in the futures and commodities markets.

A forward contract is a nonstandard contract between parties. For example, a grainery may agree to deliver a specified amount of grain to a processor at a negotiated price (market today or at delivery, etc). Depending on contract specifics, both parties are now concerned that price may move against them. In the case of market price at delivery, for the selling party, the concern is falling prices. For the buying party, the concern is rising prices.

If price is negotiated at the market upon contract initiation, then for the seller the concern is rising prices and vise versa for the buyer. Why? Because of the present value of money.

The futures contract is a standardized contract that specifies quality, quantity and time. It is marked to market every day. Positions are not held directly between parties but between a party and the Clearinghouse. The Clearinghouse is there to insure performance of the futures contract, meaning, even if a party defaults on physical delivery, the monetary value of the contract will be delivered without fail.

Full Commission Merchants (FCM’s) collect and warehouse client funds and deposit client funds with the Clearinghouse as margin (performance bonds). Client funds are supposed to be sacrosanct. But for some reason it was thought to be a good idea to allow brokerages to use client funds to purchase investment grade instruments on a short term basis. The firms and the clients made money on the earned interest. This has gone on without notice or problem until the recent 100-year flood of MF Global.

The process of hedging allows parties with a legitimate business interest that wish to shed risk transfer it to those willing to take risk in expectation of a return (speculators). In other words, speculators are absorbing price risk and therefore its volatility. Because of the mechanism of the futures markets day-to-day volatility is not put through to the economy on a day-to-day basis. This allows stability of prices which is really stability of the exchange medium.

Take away this mechanism and we have to imagine an economy in which farmers, for example, would not be willing to take the risk of planting enough food to feed the population, or the price for doing so would be very dear as to make it unaffordable to all but the wealthy. Or as news and rumors of unfavorable weather, droughts and crop failures hits the wire, prices fluctuate instantly and wildly at the end user level.

This instability is a positive feedback loop that leads to shortages, hoarding, increased poverty and overall economic and social instabilityas people are thrust into a law of the jungle world where moment-to-moment survival dominates the psyche.

I reiterate, in a complex economy, futures markets are as important as is a reliable medium of exchange. Currently both are at risk of being destroyed.

MF Global punctuates the issues at hand. Opacity, willful deception (fraud), the absence or impotence of the rule of law, which is nothing less than a collapse in government. With that said, opacity and fraud are a human constant. It is the collapse of government that poses the greatest threat.

Thank you, Harun. I see this loss of institutional trust as part of a larger dynamic I term When Belief in the System Fades   (March 12, 2008).

In a way, a belief in the value, transparency, trust and reciprocity of the System is like a religious belief.The converts, the true believers, are the ones who work like crazy for the company, or the Force or the firm. And when the veil of illusion is tugged from their eyes, then the Believer does a reversal, and becomes a devout non-believer in the System. He or she drops out, moves to a lower position, or “retires” to some lower level of employment.When the most dedicated servants of the system awaken to the realization that they are not benefitting from their service as they’d once believed, that their near-religious faith in the System has been bruised by the grim knowledge that the few are benefitting from the lives and sacrifices of the many, then they simply quit, or move down the chain to an undemanding position.

Then you realize you don’t have to work 60 hours a week, or live in a big house.  Let somebody else step up and take all the heat and the guff and the never-catch-up endlessness of the work.

At that point–a point I anticipate will come to pass in the next 5-10 years–then the elites’ machine grinds to a crawl. People don’t have to throw their bodies on the gears of the machine–they just have to stop believing, stop taking that promotion, and stop wanting to trade their entire lives for a thin slice of more more more.

If that day comes, then the social contract will have to be rewritten, or an entirely new set of elites will have to emerge with a new social contract which people are willing to believe and trust.

I hope you each have a safe and enjoyable News Years celebration.

Charles Hugh Smith – Of Two Minds

FedUp co-founder Karl Denninger goes On The Edge with Max Keiser for a look back at 2011 and to discuss what’s ahead in 2012.