Americans Asleep At the Wheel Driving Into Debt Slavery


Americans have an illogical  love affair with their vehicles. There are 209 million licensed drivers in the  U.S. and 260 million vehicles. The U.S. has a higher number of motor vehicles  per capita than every country in the world at 845 per 1,000 people. Germany has  540; Japan has 593; Britain has 525; and China has 37. The population of the  United States has risen from 203 million in 1970 to 311 million today, an  increase of 108 million in 42 years. Over this same time frame, the number of  motor vehicles on our crumbling highways has grown by 150 million. This might  explain why a country that has 4.5% of the world’s population consumes 22% of  the world’s daily oil supply. This might also further explain the Iraq War, the  Afghanistan occupation, the Libyan “intervention”, and the coming war with  Iran.

Graph showing the number of motor vehicles per thousand people for various countries from 1940 to 2008. For more detailed information, see supporting information below.

Automobiles have been a  vital component in the financial Ponzi scheme that has passed for our economic  system over the last thirty years. For most of the past thirty years annual  vehicle sales have ranged between 15 million and 20 million, with only  occasional drops below that level during recessions. They actually surged  during the 2001-2002 recession as Americans dutifully obeyed their moron President  and bought millions of monster SUVs, Hummers, and Silverado pickups with 0%  financing from GM to defeat terrorism. Alan Greenspan provided the fuel, with  ridiculously low interest rates. The Madison Avenue media maggots provided the  transmission fluid by convincing millions of willfully ignorant Americans to  buy or lease vehicles they couldn’t afford. And the financially clueless dupes  pushed the pedal to the metal, until everyone went off the cliff in 2008.

America is proving  itself to be insane as described by Albert Einstein:

“Insanity: doing the same thing over and over again and expecting  different results.”

The 2008 cataclysm was  created by the voracious greed and avarice of Wall Street, sustained by corrupt  politicians in Washington, non-existent regulation by banking regulators,  Federal Reserve easy money policies, unspoken guarantees of Fed bailouts if  Wall Street excess risk taking blew up, and millions of delusional Americans  with an unlimited credit line. Excessive debt created the problem. Adding debt  is the present solution to the problem. And the accumulation of debt will lead  to a tipping point that destroys the U.S. dollar and topples the Great American  Empire.

This spiral of government  sponsored debt financed debacles has shockingly accelerated as we have  supposedly been experiencing an economic recovery for the last two years. The  2008 financial meltdown was the result of too much debt peddled to too many  people who never had the means or intentions to repay the debt. The Wall Street  peddlers of debt didn’t care if it got repaid because they had already packaged  it, bribed Moodys and S&P to rate the toxic garbage as AAA, and sold it to  their “clients”. Then they made derivatives bets that it wouldn’t be repaid and  raked in billions more as their Ponzi scheme unwound. There was just one  problem with their master plan. The Wall Street titans made their derivate  weapons of mass destruction so complicated and confusing that their own evil  organizations of Harvard MBAs didn’t understand them. Enough hubristic CEOs  existed at enough financial firms (AIG, Lehman, Bear Stearns, Citicorp) to  bring the entire system crashing down as the toxic derivatives intertwined  every major institution in the worldwide banking cabal.

What has happened since  those dark days of 2008 is mind blowing in its epic proportions and epic  stupidity. To quote Doug Casey, “Not only haven’t we done the right thing,  we’ve done the exact opposite of the right thing.” It is absurd and ultimately  suicidal to cure a debt disease by administering massive doses of more debt.  But that is exactly what those in power have done. The National Debt has risen  from a $9.7 trillion to $15.6 trillion, a 61% increase in three and a half  years, while our real GDP has grown by $244 billion, a 1.9% increase. Not  exactly a fabulous return on investment. But at least there are 7 million less  people employed today than there were at the peak in 2008. Plus, senior  citizens and middle class savers have seen $450 billion of annual interest income  they were earning in 2008 pilfered from their savings accounts and handed to  the Wall Street banking elite through Ben Bernanke’s ZIRP.

The Federal Reserve has  tripled their balance sheet (actually your liability) from $950 billion to $2.9  trillion. Various other Federal government controlled bureaucracies (Fannie  Mae, Freddie Mac, FHA) have stealthily subsidized hundreds of billions in  losses on behalf of the criminal Wall Street banks. Other Federal government run  agencies (BLS, BEA, CBO) exist solely to massage, manipulate, misuse, and  malign economic data and financial projections in order to muddle, misinform  and mislead the American people about the true nature of our ongoing economic  calamity. Propaganda and obfuscation are the scheme of choice by the powers  that be. They are counting on decades of government run public education to  insure that millions of non-critical thinking dullards will be unqualified or  uninterested in the truth about our grim economic prospects. The oligarchy’s master  plan has centered on houses, automobiles, and the illusion of a jobs recovery.

Whenever I’m trying to  understand the motivations of the sociopathic Washington politicians, Wall  Street bankers and mega-corporation CEOs, I always come back to the words of master  manipulator Edward Bernays:

“The conscious and intelligent manipulation of the  organized habits and opinions of the masses is an important element in  democratic society. Those who manipulate this unseen mechanism of society  constitute an invisible government which is the true ruling power of our  country. …We are governed, our minds are molded, our tastes formed, our ideas  suggested, largely by men we have never heard of. This is a logical result of  the way in which our democratic society is organized. Vast numbers of human  beings must cooperate in this manner if they are to live together as a smoothly  functioning society. In almost every act of our daily lives, whether in the  sphere of politics or business, in our social conduct or our ethical thinking,  we are dominated by the relatively small number of persons…who understand the  mental processes and social patterns of the masses. It is they who pull the  wires which control the public mind.” Edward  Bernays, Propaganda, 1928

The relatively small number  of wealthy men thinks they are smarter than the masses and can manipulate them  through their control of the government, the financial system and the media.  The players in this game remain the same, but they have switched positions. The  debt accumulation which led to the 2008 collapse was heavily concentrated on  the books of the ruthless Wall Street psychopathic banks and on the backs of a  readily pliable public. Today, the Federal government and the Federal Reserve  have switched positions with their banker puppet masters, essentially shifting  all past and future debt onto the backs of the American middle class. The Federal Reserve Flow of Funds Report, issued two weeks ago, reveals the extent of this  blatant scheme to screw the American people in order to save and further enrich  the Wall Street psychopaths who won’t be satisfied until their looting and  pillaging leads to complete collapse and the world erupting into a world war.  The despicable facts are as follows:

  • Total U.S. credit market debt has RISEN from $50.9 trillion in 2007 to  $54.1 trillion as of 12/31/11, a $3.2 trillion increase.
  • Household debt has declined from $13.8 trillion  in 2007 to $13.2 trillion as of 12/31/11. The mainstream media would point to  this $600 billion decline as proof that Americans have embraced austerity and  have learned their lesson. Of course that would be a lie. The Wall Street banks  have written off $200 billion of credit card debt and the 5 million completed  foreclosures extinguished another $800 billion of mortgage debt. The truth is  that consumers have continued to pile up debt.
  • Much has been made of corporate America being  flush with cash. If they are so flush, why have they added $900 billion of debt  since 2007, an increase of 13% to an all-time high of $7.8 trillion?
  • The revealing data shows up in the financial  company data. These Wall Street national treasures have reduced their debt from  $17.1 trillion in 2008 to $13.6 trillion as of 12/31/11. How were they able to  do this, while writing off $1 trillion of consumer debt?
  • You guessed it. They dumped it on the American  taxpayer. The Federal government increased their debt from $5.1 trillion to  $10.5 trillion. And our old friends called government sponsored enterprises  (Fannie, Freddie, Student loans) increased their debt from $2.9 trillion to $6.2  trillion. Wall Street banks and millions of deadbeats who chose to game the  system and live the good life have effectively foisted their $4.5 trillion of  debt upon the backs of middle class taxpayers who lived within their means.  Another $4.2 trillion has been pissed down the toilet by Obama with his $800  billion Keynesian porkulus program, home buyer tax credits, cash for clunkers,  green energy boondoggles, 47 million people on food stamps success story, 99  weeks of unemployment, doubling of SSDI membership, and his multiple wars of  choice in the Middle East.

The average hard  working, taxpaying American has been enslaved in debt of such proportions that  they will never be able pay it off. Your share of the $15.6 trillion National  Debt is now $50,000, and growing by $4,500 per year. Your share of the future  unfunded liabilities, created by the people you elected, is approximately  $350,000. This crushing burden is in addition to the $13.8 trillion of  mortgage, credit card, student loan, and auto loan debt Americans have  accumulated in the last three decades of delusion. Forty percent of all credit  card users do not pay-off their credit card every month and carry an average  balance of $16,000 at an average interest rate of 15%. Good to see the Wall  Street banks passing along some of their 0% borrowing windfall to their  “customers”.

Source: TF Metals Report    

Pedal to the Metal

You may have noticed the  corporate mainstream media, crooked politicians and lying Wall Street shills  attempting to pound the economic recovery storyline into the consciousness of a  terminally distracted populace. This is part of the Bernays inspired master  plan of a small cabal of powerful men to control the public mind and keep our  mass consumer society functioning smoothly so these corporate fascists can  continue to gorge upon the carcass of a once vital republic. Decades of mass  media consumer indoctrination, dumbing down of children through public school  education and the conscious manipulation of attitudes and opinions of the  malleable masses has succeeded. The invisible government of the rich and  powerful has effectively converted responsible citizens into mindless consumers  of products, bought with debt, peddled by associates of the invisible  government. The crowded shopping malls, automobile showrooms, and restaurants  are a testament to the power of propaganda and the intellectual bankruptcy of a  vast swath of the American population.

Only psychopaths would  encourage and condone behavior that would financially enrich themselves while  destroying the lives and personal wealth of millions. The invisible government  (Wall Street bankers, D.C. political hacks, mega-corporate executives, mass  media titans) exhibits all the traits of a psychopath as described in a recent  Harvard Business Review article:

  • Glibness and superficial charm
  • Lack of empathy
  • Consistent decisions in their  self-interest, even where it is ethically questionable
  • Chronic, sometimes transparent  lies, even with regard to minor things
  • Lack of remorse
  • Failure to take responsibility  for their actions, and instead blaming others
  • Shallow emotions
  • Ignoring responsibilities
  • Persistent focus on gratifying  their own needs at the expense of others
  • Conning and manipulative behavior

Do you recognize any of  these traits in our president (Obama), congressmen (Weiner, McCain) Wall Street  bankers (Dimon, Blankfein), corporate CEOs (Immelt), and mass media titans  (Murdoch)? These people and many more like them will stop at nothing to further  their self-serving agenda. They are intelligent and highly skilled at lying and  manipulation. They lack empathy and don’t care what others think as they  relentlessly pursue riches and power no matter the damage they inflict upon the  people they so casually abuse, scorn and look down on. These are the people  attempting to convince you that the path to economic recovery is through  increased spending by consumers, utilizing debt supplied by them.

The entire recovery  theme is a sham, financed by the Federal government with your tax dollars and  the tax dollars of future unborn generations. I’ve arrived at this conclusion  after pondering what I’ve been seeing with my own two eyes and through the  insightful analysis found in the non-mainstream media (Zero Hedge, Jesse, Mish and many others). The mantra being pounded  relentlessly by the mainstream media is that retail sales are booming and the  unemployment rate has declined significantly, therefore an economic recovery is  at hand. The chart below reveals the dramatic surge in vehicle “sales”. The  annual pace is all the way back to 15 million, from the low below 10 million in  2009. The brief surge in mid-2009 was due to Obama’s highly successful Cash for  Clunkers program that cost taxpayers $2.8 billion or $24,000 per car sold. It  was highly successful for Government Motors (GM) and their union workers (Obama  voters).

This rapid surge in auto  sales has also resulted in a boost to overall retail sales, which have reached  an all-time high. Automobile “sales” make up 18% of the retail sales number, by  far the largest segment. The “record” retail sales are the result of surging  gasoline sales, swelling food inflation, and a somewhat confusing cascade of  car sales. It’s somewhat confusing until you realize how and why the 50% rise  in vehicle sales has been accomplished by our Bernaysian masters. Retail sales  in the first two months of 2012 are up 8.2%, led by a 9.2% wave of motor  vehicle sales. Auto sales are at levels last seen in early 2008. This seems  peculiar, since there are still 7 million less employed people in the country  than in early 2008 and the real median household income is 9% lower than it was  in early 2008. Real average hourly earnings have fallen for the last three  months and are 1.2% lower than they were in October, 2010. A critical thinking  person might ask himself, how could American households with less jobs and lower  wages increase their purchases of automobiles by 50% in the last two years?

The answer is just what  you expected. A phenomenal amount of debt peddled to people without the means  or intent to ever repay the debt by the usual suspects: Ally Financial, Capital  One, Wells Fargo, JP Morgan and Bank of America. These fine upstanding  institutions control 25% of the auto loan market. They doled out $24 billion of  new car loans in the 4th quarter of 2011, with an outpouring of  loans to those downtrodden subprime borrowers and an extension in the average  loan length beyond 6 years. Subprime borrowers now account for 45% of all auto  loans. As a refresher, subprime borrowers generally have little or no assets,  have a history of late payments or defaulting on obligations, and have low  incomes. No worries there. When has making hundreds of billions in subprime  loans ever caused a problem before. Ally Financial CEO Michael Carpenter had  this to say about the market:

“We have seen crazy, irrational competition in the subprime  end of the marketplace, which is one reason why more banks are targeting the  lower end of the market.”

Bank of America and  Capital One increased their market shares of the auto loan market by 40% in the  4th quarter as they attempt to keep up with Ally Financial in  reckless lending to deadbeats. If you aren’t familiar with Ally Financial, then  you should be. You own 74% of this POS. Here is a brief summary:

  • GMAC, after  contributing mightily to the financial crash of 2008 through their reckless subprime  mortgage (Ditech) and auto lending and requiring a $16 billion bailout from  American taxpayers, changed its name to Ally Financial in 2009. It’s sort of  like John Dillinger using acid to try and change his fingerprints.
  • Ally  Financial provides financing for all GM and Chrysler customers and dealers and  is the market share leader in auto lending.
  • Ally  Financial still owes the American taxpayers $12 billion.
  • Ally  Financial is a ward of the Federal government and will do anything it is told  to do by Obama. The recent foreclosure fraud settlement required Ally to pay  $250 million to the customers it defrauded. They will only pay $110 million  based on their inability to pay $250 million. Sounds like a company that should  be increasing their subprime loan portfolio. Obama and his minions instead  received a commitment from a lender they own and control to cut principal for  delinquent borrowers and refinance underwater borrowers. And Obama didn’t even  offer us a cigarette afterwards.
  • Ally  Financial, along with Capital One, failed the Federal Reserve stress test last  week. Ally, Capital One, Bank of America, and Citicorp are dead banks walking.  Brilliant bank analyst Chris Whelan succinctly sums up their fate after analyzing  the Federal Reserve stress test results:

“When  you get to junior liens and HELOCs you will understand why I have been saying  that Ally Financial and BAC need to be restructured. With a plus 20% loss rate  on second liens, Ally has substantial capital issues to put it mildly. But look  at C right behind them with a loss rate in the mid-teens followed by BAC.  Yikes. This type of loss rate is typical for credit cards and both of these  second lien portfolios are > $100 billion.

And  the real lesson, dead friends, is that the good old USA is a subprime nation, a  society of individuals whose aggregate probability of default is probably  around a “B” to “CCC.” Convert the loss rates in the stress  tests to bond ratings using the break points from Moody’s or S&P and tell  me what you see.

Last  point on Ally Financial: Yikes. Probably the weakest results of the whole  group. Memo to POTUS: File Ch. 11, sell auto biz and bank to GM in 365 sale.  Liquidate ResCap. Declare success. But do not be surprised if BAC follows if  Ally goes into bankruptcy. The one thing that the Fed almost completely ignores  is the vast financial risk facing BAC and Ally, and to a lesser degree, WFC,  JPM and C.”

When you understand this  background, anecdotal evidence that seems absurd starts to make sense. I spend  two hours per day on the road and have plenty of time to observe my  surroundings. I drive through the Mantua section of West Philadelphia every  day. The average household income in this neighborhood is $16,000. The average  home value is $25,000. The true unemployment rate exceeds 40%. At least 20% of  the properties are vacant and the neighborhood resembles Baghdad. Last week, I  counted six brand new vehicles with registration tags in their back windows in  a one block radius of this neighborhood. Every block has newer model Ford  Expeditions, GMC Sierras, BMWs, Acuras, Cadillacs, and Mercedes sprinkled among  the squalor. Someone is loaning these people the money to buy these $40,000  vehicles or approving them for leases. This neighborhood puts the SUB in  subprime. No financial firm worth spit would make a six year $35,000 auto loan  to someone in this neighborhood unless they were instructed to do so by the  Federal government or were guaranteed that the future loss would be borne by  someone else – YOU.

The GM, Chevy and Chrysler  car dealer ads in my local paper actually have the following headline in bold:

Have  credit problems? NO PROBLEM

Most of the ads don’t even  list the prices of the vehicles. They either tout the 72 month 0% financing or  they list the monthly lease cost. It seems that virtually any vehicle can be  leased for $300 per month or less these days. This might explain why 25% of all  vehicles are leased today. In reality, 25% of the cars being “sold” today are  really just being rented for three years. Both the lessors and lessees are  basing these transactions upon delusions and assumptions which will likely blow  up in their faces and again cost – YOU.

An auto lease payment is  based upon interest rates, the cost of the car, subsidies from the auto makers,  and the expected residual value of the vehicle at the end of the three year  lease. When have financial companies ever miscalculated any of these  assumptions? How about 2001-2002 and 2008-2009? The reason auto leases are  ridiculously low is because Ben Bernanke’s zero interest rate policy is  providing free money to Ally Financial and the rest of the Wall Street zombie  banks and creating huge mal-investment – Again. The auto makers see no risks,  as the used car market has been extremely strong for the last year and they  anticipate continued strong demand for cars as they come off their three year  leases. Therefore, they have estimated the residual values three years out at a  very high level. The strong used car market may have been slightly impacted by  the destruction of 700,000 vehicles under Obama’s Cash for Clunkers debacle. The  combination of excessively low interest rates and excessively high residual  value estimates leads to ridiculously low lease rates. The sales statistics for  the first two months of 2012 reveal why this will blow up in the faces of  lessors and the predictably incompetent financial drug dealers.

It seems the delusional  American public and their love affair with big SUVs, pickups, and their 8  cylinder luxury wheels will continue until they are hit over the head with the  baseball bat of $5 a gallon gas. The Madison Avenue Bernays disciples have  molded the minds and formed the opinions of millions of easily influenced,  financially ignorant superficial Americans into believing the vehicle they  drive is a true measurement of success. These people choose being up to their  eyeballs in auto debt or perennial renters of luxury vehicles to appear  prosperous to their neighbors and coworkers rather than actually achieving real  success through the time honored tradition of earning more than you spend and  saving the difference. The fact is that 80% of all the vehicles being sold in  the U.S. are SUVs, pickups, crossovers, minivans, and larger cars that get 25  mpg or less.

As gas prices continue to  rise towards $5 per gallon, a war with Iran looming in the near future,  interest rates beginning to rise, and the country headed back into recession (MSM  is wrong about the recovery), the car makers are poised to again experience  enormous losses. Auto makers will have a sense of déjà vu as  they have committed an epic blunder by overestimating the future value of the gas  guzzlers they have been leasing. As a result, when the leases expire and auto  makers take back the SUVs and pickups that get 15 mpg and attempt to resell  them, the losses will run into the billions of dollars. There will be no one  buying used gas guzzlers, with gas costing $5 per gallon. As the millions of  subprime borrowers realize they can’t afford car payments, paying 40% more for  gas, and trying to put food on the table, auto loan delinquencies will soar.  This is as predictable as the housing market collapse in 2005. None of this  matters to the psychotic governing elite who only care about the illusion of  recovery today. These vampire squids will not be satisfied until every drop of  blood is sucked out of the national carcass.

Ally Financial is part of  the Federal Government and is being used to promote the agenda of the governing  elite. They join Fannie Mae, Freddie Mac, and the Federal student loan peddlers  as the primary tools of the corporate fascist powers that control this country.  The nominal private ownership of these companies is a sham, as the state  dictates how they will be run and who they will benefit. This corporate fascist  empire is built upon an unholy alliance between big banks, big business, big  media and big government, with each protecting and enriching each other. The  psychopaths who are drawn to these organizations want to control people. They  desire power, wealth, and the ability to manipulate public opinion. Their  tactics include spreading fear and an atmosphere of paranoia in order to  convince the populace that more government action will improve their lives. We  are headed towards economic and financial collapse as these psychopaths will  never willingly reverse course and the majority of our population has become so  degraded (have you been to a Wal-Mart lately) that they are incapable or  unwilling to confront the psychopaths.

Doug Casey in the latest Casey Report explains how evil and  stupidity are a deadly combination:

“I  would like to suggest that what really distinguishes political elites from  normal people is not just a predilection for stupidity but a real capacity for  evil. Evil might best be defined as the intentional and usually gratuitous  commission of acts that are cruel or unjust. A person who commits many evil  acts is a sociopath. The sociopaths who are naturally drawn to government  eventually come to dominate it. They’re very dangerous people. They reset the  social mores of the country they control. After a certain point, a critical  mass is reached, and it’s GAME OVER. I suspect we’re approaching that point.”

The next time you  hear a government drone, Wall Street shyster, or corporate mainstream media  whore declare we are experiencing an economic recovery try not to laugh out  loud. Their agenda doesn’t include making your life better. Prepare  accordingly. 

James Quinn for The Market Oracle