Comes now this morning into my email notification that The Daily Bell has not only ripped off my commentary and opined upon it (legitimate) they further attributed it to CNBC (not kosher folks.)

But let’s examine their opinion a bit, shall we?

Dominant Social Theme: By expanding the regulatory state, we can make things better.

Free-Market Analysis: One of the main emergent US dominant social themes is that the government and regulators must step in to clean up the market and make it safe for investors. The idea is that the larger modern marketplace is very necessary for the functioning of modern society and that one must “clean up fraud” so that people will “trust” the market again.

This meme is being enunciated aggressively all over the place lately, and we have done our best to point it out. It is based on a misapprehension and is placing good people into rhetorical boxes where they decry modern finance but turn to the US’s penitentiary-industrial complex for solutions. Here’s more from the article excerpted above:

Uh, no.

Expand the regulatory state?  How about we actually enforce the laws that already exist?  And for those that are not laws but written as laws, how about if we either turn them into actual laws (instead of lying about what they are) or repeal them so that nobody thinks they’re a law when they are not?

It is against the law, for example, to swindle people.  It’s a crime.  And as I pointed out here, the Right side of the aisle, including the Tea Party, refuses to address the fact that our nation’s largest financial institutions are serial violators of the law to the point that nearly all would have committed their “third strike” and be disbanded (the equivalent to life imprisonment) by now.

There is no shortage of laws under which to actually prosecute.

The Daily Bell goes on to sling around the common mud of “fiat funny money” and allege that but for The Fed there would be no problem at all.  This, however, is a lie, for two simple reasons:

1. The Fed is already constrained in what it can do — it has a mandate for stable prices (that is, zero inflation) that it has serially and repeatedly violated for its entire 100 year history, even prior to the implementation of the so-called “dual mandate”, and yet there has been no enforcement.  Why not?  There is no punishment called out in that law, just as there is no punishment called out in the former enabling law for the OTS and thus “backdating” deposits by IndyMac bank didn’t lead to a criminal indictment against either IndyMac or the so-called “regulator” who did it.  A “law” or “regulation” without a punishment for violations is no law or regulation at all — it is a mere suggestion.  As such these so-called “laws” are nothing more than sops for the fools at places like The Daily Bell who love to point to all these “laws” and then claim that “more regulation” is futile.  That would be true if those were actual ineffectual laws but due to the lack of a punishment clause they stand as nothing more than blank pieces of paper.
2. The proffered solution, free market currencies, is just another sop to idiocy.  Government will always denominate its current taxes due in something.  Whatever that something is will be the defacto currency of the nation and will be the majority — by far — currency that is used for transactions.  The “why” is simple: Nobody in their right mind wants to wake up some morning and find that their currency du jour has been devalued by some sort of debauchery and their taxes due but not yet paid have suddenly doubled or more, instantly bankrupting them.  The simplest and “zero cost” way to hedge against such an event is to transact in the currency you pay your taxes in.  Sorry folks, but logic resolves this conflict and it doesn’t go where the Paulites would like; you must employ magical thinking to get to their claimed nirvana.

Indeed, the problem with the “free market” currency solution is that if you do not resolve the actual problem — the lack of The Rule of Law (that is, #1) so-called “free market” people will intentionally create the situation in #2 and get away with it!

That, incidentally, is the history of monetary systems going all the way back to the American Revolution and beyond.  Indeed if you look at historical inflation rates prior to The Fed you will find ridiculous changes in the valuation of the currency over very short periods of time.  10, 20, even 30% swings in valuation were common.  If you happen to believe that the fact that over the long haul the “more or less stable value” was preferable to what we have today you’re cherry-picking your timeline — get it wrong by a year or so and you’d either have made a bundle or been bankrupted.

Unfortunately life doesn’t work this way; you fall in love, you get sick, you get well, you find a job, you lose a job, your roof leaks, you get hit by a bus and you die all on a very unpredictable timeline.  But those who pull the strings through government are more than happy to use your series of unfortunate events to screw you blind and steal everything you have — and absent The Rule of Law, they will.

Our latest little corruption was sent to me here, from the Fed weekly balance sheet:

Where did that $45 billion go?  Oh, in the nice catch-all bucket called “Other”, right?  What’s in “Other”?

Let’s see…. the GSEs are in there (Fannie/Freddie), the IMF is in there, the UN is in there, a lot of things are in there.  So which “other” was this and why wasn’t it identified with specificity?  Oh that’s simple: There is no rule of law when it comes to Fed operations as there is no “or else” to be found anywhere in the Federal Reserve Act of 1913, as amended.

Thus The Fed could “decide” that Fannie and Freddie paper was “ok” to buy, even though the black letter of the law says otherwise.  They could point to their own “interpretation” and since there was no “or else”, if they interpreted wrong, even intentionally wrong, there was no cost to them personally that could be imposed.  Ditto for “Maiden Lane” and their other machinations.

In this case it appears they bailed out someone yet didn’t tell us who it was.  Gee, with all the turmoil in the markets you can’t find someone who needed to be bailed out, can you?

Those who argue for “End The Fed” have yet to reconcile the fundamental nature of the problem: It is not The Fed that is the issue, it is the presence of so-called “laws” with no penalty for non-compliance that is where the problem resides.

In point of fact The Fed’s actual mandate for stable prices is exactly correct.  Followed to the letter we have no debasement of the currency over time, no inflation, and you can save a mere 7% of your income — if your Social Security taxes were then to be merely returned to you in retirement along with that 7% you would have an effective 20% saving rate for retirement and would need exactly nothing beyond that for a reasonable retirement lifestyle similar to that of your working years!  If you saved nothing you would still have a 13% saving rate and we would meet the mandate of the “social safety net” allegedly to be provided.

If the “law” had actually been followed there would have been no ramp in credit compared to GDP because it could not have been funded.  There would have been no Internet bubble, no Housing bubble and no crash.  House prices never would have gone materially over 2x incomes and likely would be between 1x and 2x.  Medical and college costs would be what they were then.  Wages would have risen with productivity but not beyond, and you would have kept that standard of living increase instead of having it stolen by the vipers of Wall Street and the Capitol.  Jobs would not have been offshored and there would have been no incentive to hire illegal aliens and displace American workers.

So why didn’t it happen this way?  That’s easy: There is no “or else” in these so-called “laws.”

Ending The Fed will do exactly nothing without fixing this problem.  Competing currencies will do nothing without fixing this problem.  In point of fact essentially every current economic issue we face is found, at some point, in this singular premise.

Those who continue to beat on the “End The Fed”, “Competing Currencies” and other similar-sounding drums are either missing the mark because they fail to analyze the problem or worse, they’re shilling for those who are looking for yet another way to rob you blind when the current scam, which is about to collapse, comes down around their ears.

Don’t fall for it.

Does anyone need any additional evidence that our political system is completely broken?  The bipartisan congressional supercommittee that was given two months to come up with at least $1.2 trillion in deficit cuts over the next decade has failed to reach an agreement.  It is an epic failure and a national embarrassment.  The truth is that they never even came close to an agreement.  In fact, as you will read below, the two sides on the panel have been barely even talking to each other.  In the end, the supercommittee was a super joke.  Meanwhile, the U.S. national debt has passed the 15 trillion dollar mark and we are facing trillion dollar deficits as far as the eye can see.  We are heading directly for a national financial disaster, and our “leaders” seem powerless to do anything about it.

According to the supercommittee’s rules, any plan would have had to have been submitted to the Congressional Budget Office by Monday in order to give the CBO 48 hours to analyze how much the plan would reduce budget deficits over the coming decade.

When the supercommittee was announced, it made headlines all over the world, but now it is ending with a whimper.

The supercommittee was never a good idea in the first place, but you would have thought that they could have come up with something over the course of two months.

But instead all they are giving us are a whole bunch of excuses and a whole lot of hot air.

What a joke.

Is it really that difficult to come up with $1.2 trillion in cuts over a decade?

It isn’t as if they would even be cutting very deeply.  $1.2 trillion in cuts would not even cut the budget by $150 billion a year.  We would still be talking about trillion dollar deficits way into the future.

But instead of agreeing to some token cuts, they have chosen to do nothing and to blame each other.

So now $1.2 trillion in “automatic budget cuts” will go into effect starting in 2013.  But even that $1.2 trillion figure contains a lot of “fuzzy math”.  For example, it includes $169 billion in “projected savings” from “reduced interest costs” on the national debt.

I would love to see how they came up with that figure.

In any event, the truth is that none of these numbers really matter at all.

Why?

None of the budget cuts go into effect until after the 2012 election.  That means that this Congress can vote to repeal the automatic cuts well before then.

Some in Congress are already pushing for this.  For example, U.S. Senator John McCain said the following recently….

“It’s something we passed. We can reverse it.”

Or, even more likely, once the new president and the new Congress are elected in 2012 they will almost certainly choose to abandon this agreement.

When it comes to politics, the only thing that matters is what happens before the next election.

All of this talk of future cuts is just an illusion.  When the next president and the next Congress come to power, they will want to do their own thing.

So after all of the huffing and puffing over the last couple of years, what has actually been accomplished as far as reducing our horrific budget deficits?

Not much at all.

We racked up a $1.3 trillion budget deficit during the fiscal year that just ended, and this fiscal year we will be somewhere in the same neighborhood.

We have been living in the greatest debt bubble in the history of the world, and at some point all of this is going to end very, very badly.

The total amount of debt in this country (government, business and consumer) has been rising much, much faster than our national income has.  If you don’t believe this, just check out this chart.

In particular, government debt is totally out of control.  When Barack Obama first took office, the national debt was 10.6 trillion dollars.

It is now over 15 trillion dollars.

We are in debt up to our eyeballs and we desperately need our leaders to do something about it.

But according to a recent Politico article, the members of the supercommittee haven’t even been talking to each other….

The supercommittee last met Nov. 1 – three weeks ago! It was a public hearing featuring a history lesson, “Overview of Previous Debt Proposals,” with Alan Simpson, Erskine Bowles, Pete Domenici and Alice Rivlin. The last PRIVATE meeting was Oct. 26. You might as well stop reading right there: The 12 members (6 House, 6 Senate; 6 R, 6 D) were never going to strike a bargain, grand or otherwise, if they weren’t talking to each other. Yes, we get that real deal-making occurs in small groups. But there never WAS a functioning supercommittee: There was Republican posturing and Democratic posturing, with some side conversations across the aisle.

Can you believe that?

Could it really be true that they have not met since November 1st?

Is Congress really that much of a joke?

According to Real Clear Politics, the approval rating for Congress is sitting at about 12 percent right now.

After this, it may get even lower.

Instead of working on a solution to our problems, the members of the supercommittee have been busy going on television and telling us who to blame.

The following is a short exceprt from a recent article in the Washington Post….

Republicans on the supercommittee held a conference call Saturday morning, and aides said members from both parties continued to talk by phone. But neither side was predicting a last-minute breakthrough. Instead, seven panel members booked appearances on the Sunday talk shows, as both sides readied their best arguments for why the other is at fault.

Our politicians are obsessed with finding someone else to blame and with getting ready for the next election.

Meanwhile, the ship is going down and people are starting to panic.

And this is not going to look good to the rest of the world at all.  There is a very real risk that one of the other major credit rating agencies will decide to downgrade U.S. debt.

The second downgrade of debt is often more important than the first.  When the first downgrade happened, U.S. debt still had a AAA rating from the other two major credit rating agencies.

But after another downgrade, the average credit rating of U.S. debt will be less than AAA.  That will mean that U.S. debt will no longer be a cash proxy.  A lot of transactions that take place right now in the financial world would not be able to happen if that takes place.

So what do our leaders need to do?

Well, the truth is that we should recognize that they are in a really, really tough position.  Decades of nightmarish decisions have left us out of good options under our current financial system.

The reality is that members of Congress are damned if they do and they are damned if they don’t.

This is what I mean – if we don’t deal with our national debt now, everyone agrees that a massive day of reckoning is coming down the road.  Greece is an example of what happens when debt catches up with a nation.

However, if we did cut the federal budget very deeply right now, it would almost certainly bring on a huge economic contraction.

Right now, insane federal spending is one of the only things keeping this economy afloat.  If you were to suddenly pull half a trillion dollars (or more) of federal spending out of the economy, it would have a devastating impact.

A lot of people out there correctly argue for a huge reduction in federal spending, but they greatly underestimate the amount of pain that it would cause.

Let there be no doubt, all of this federal debt has enabled us to enjoy a “false prosperity” for several decades, and when we dramatically cut back on spending a lot of that “false prosperity” is going to disappear.

Our “real economy” is rapidly being gutted and America is becoming poorer as a nation every single day.  One way that we have been making up the difference is by going into almost unbelievable amounts of government debt.  When the government debt bubble pops, the pain is going to be enormous.

If you do not believe this right now, you will believe it soon enough.

Not that we should keep going into huge amounts of debt.

Every dollar that we “borrow” is actually being stolen from our children and our grandchildren.

In fact, that is what Thomas Jefferson believed.  According to Jefferson, when the federal government borrows money in one generation which must be paid back by future generations it is equivalent to stealing….

And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.

We have got to stop stealing from future generations.  If they get the chance, they will curse us for what we have done to them.

Anyone out there that supports our current system of running endless budget deficits is supporting a horrific crime against our children and our grandchildren.

But once again, we all need to clearly understand that when the borrowed money stops flowing out of Washington D.C., our economy is going to get much worse.

Are you prepared for the unemployment rate to double?

Are you prepared for foreclosures to soar to unprecedented heights?

Are you prepared for economic pain unlike anything you have ever seen before?

According to the New York Times, there are 100 million Americans that are either living in poverty or that are considered to be among the “near poor” right now.

So how bad will things get if we plunge into a depression?

Anyone that believes that we can drastically cut the federal budget and improve the economy at the same time under our current system is not being rational.

Just look at what is happening to Greece.  They implemented substantial budget cuts (although not nearly big enough to bring them to a balanced budget) and they have plunged into a nightmarish economic depression.

Right now, we are in a position where we are going to experience a horrific amount of pain whatever we do.  If we keep piling up debt at this rate we will experience a nightmare, but if we pop the debt bubble and try to live within our means we will also experience a nightmare.

There is a way out of this, but our politicians are not talking about it.  As I have written about previously, if the federal government abolishes the Federal Reserve and starts issuing debt-free money, we could eliminate our federal budget deficits, cut taxes and improve the economy all at the same time.

But nobody is even talking about debt-free money.

Instead, all of our politicians are talking about “fixing” the current system.

Well, let me tell you, it is impossible to solve our problems under the current system.  If we insist on maintaining our current debt-based financial system, it will only end in a massive amount of pain.

The American people need to get educated about our financial system.  They need to learn that the Federal Reserve and the debt-based currency that they issue are at the very heart of our economic problems.

Back in 1913, prior to the passage of the Federal Reserve Act, the national debt was only about $2.9 billion.

Today, our national debt is over 5000 times larger.

Debt-based central banking is a perpetual debt machine.  It is at the heart of our financial problems and it is also at the heart of the financial problems that Europe is experiencing.

Unfortunately, the American people don’t understand this, and there are virtually no politicians out there that are even talking about this.

Very dark days are ahead for America.

You had better get prepared.

The Economic Collapse

This is the Ticker I’ve been holding for roughly the last week, editing it as the days go by.

Please go pull an espresso, grab a beer, or (if you’re easily disturbed) a shot of whiskey might be appropriate.

I’ve taken a boatload of heat for my alleged “support” of the “Occupy Everything” meme that is taking off across the country.  There are a lot of people commenting on my positions that have displayed everything that is wrong with our education system, chief among them being its utter lack of teaching people to read for content rather than generating spittle-laced knee-jerk invective.

No matter.  Since 2007 I have written what I believe on The Market Ticker and if you read Musings going back to 2004 you can see my commentary there too.  A very few remember the rather-acerbic interviews and debates that I had with the ACLU and other organizations during the 1990s, including some tame appearances on Chicago Tonight and some much-more-lively ones on Usenet.  If you think I can’t take the heat that gets dished out you are rather naive; I believe there were entirely-new curses named for me back in the 1990s.  In comparison the screeching of people on other blogs and media outlets today is the sort of thing that annoys with the intensity of a dog that occasionally barks next door.

OWS, whether you like it or not or whether you accept it or not, is displaying all of the hallmarks of a nascent political apparatus.  In this nation we’re free to organize with others, irrespective of our beliefs, into political parties.  We usually remember only Democrats or Republicans, but in fact there are a whole bunch of actual parties; the Libertarians are one such example of a third party that has some prominence.  The modern Democrat and Republican parties date to the 1800s; prior to them we had The Federalists, the Anti-Federalists, the Democratic-Republicans, the Toleration Party, The Anti-Masonic (really!) party, and of course the Whigs, among others.

Through our nation’s history, however, we have more-or-less always had a two-party system.  Sure, there have been times (like when Ross Perot ran for President) that this has been threatened, but it has never been a stable situation unlike many other nations that have several political parties active at any given time and revolve around coalitions between them to build consensus in their legislatures.

Whether this is good or bad from your point of view doesn’t matter; it simply is.

Now add to your perception of OWS the following: They have and are explicitly disavowing any sort of “spokesperson” support from MoveOn, as just one example.  In short they’re refusing to “ally” with others – they see themselves as an independent group and are acting like it.  That doesn’t stop other organizations to claiming that they “stand with” or “in solidarity with” the protests, but that’s no more valid of OWS’ interest in the claiming organization than if I were to say I stand “in solidarity” with Harry Reid (trust me, I’m quite sure he wouldn’t stand “in solidarity” with me!)

As I see it “OWS” (in all of its branches across the country) will go one of two routes:

1. Someone will do something stupid.  Specifically, the “movement” will turn toward violence.  Public opinion will instantly shift against them and that will be the end of it.  The people generally support the First Amendment but they will not stand for looting and burning cars, nor should they.  I will leave the position I will immediately adopt if that happens “in my pocket” for the present time as I don’t expect to have to show that set of cards, but trust me on this: I have pocket rockets and my position is founded in the Constitution as currently written.
2. The group will maintain a peaceful organization, even if “in your face”, long enough to actually coalesce around a core set of ideas.  If that happens a formal political apparatus will almost-certainly arise.

Now you can dislike this but there is no legal means available to you to prevent it from happening nor should there be.  Political activism is what we all be both supporting and engaging in ourselves.  After all, if you’re not politically active you have little room to bitch if you don’t like the political outcome.

I believe the second is their goal; the people I’ve talked with, the videos I’ve seen, the emails that I’ve read on the various mailing lists lead me to believe that while there are some “bomb throwers” in the group there are in all groups and that the vast majority of those involved in OWS recognize that #2 is imperative if anything is to be accomplished (other than getting their head cracked, that is.)  Indeed, if you watched any of the livestream coming from Times Square last weekend you saw this in action – the camerapeople were warning the protesters that the police were showing up with lots of plastic handcuffs intending to bust heads and that they had to keep their cool.  They did.

This doesn’t mean that the bomb-throwing nuts are all done and won’t take their best shot.  They might.  I don’t know what sort of goal doing that has in any kind of cogent movement, because there’s only way that ever can “win”: You have to incite a revolution and doing so requires at least high-single-digit percentages of the general population willing to die for what you believe in.  If not you’re simply going to go to prison – and in my view you should as you’re a rioter, not a “freedom fighter.”

Now add another nasty historical fact to the mix: Revolutions are odds-on things to produce dictatorships, not freedom.  For every 1 George Washington you get 10 Hitlers.  Oh, and by the way, if you think you’ll be the dictator’s new best friend if you “help” incite such a thing?  You’re wrong – you’ll be one of the first shot since you could do it again and overthrow him!  Don’t be stupid: The first act of a dictator is to cement his power and he does that by killing anyone that could threaten him.  Duh.

So let’s not play the romantic eh?  It doesn’t work like that and anyone who has bothered to pass history class in High School (say much less do any independent reading) knows it.  I’m going to assume anyone reading this blog is well-aware of these facts and is too intelligent to fall for the sort of tripe that the agitators might run.

Back to the practical: If a new political party comes from this one of the existing ones will almost-certainly splinter and die.

The salient question: Which one will it be?

Did that deep chill go down your spine?

If not, you’re not paying attention.  And don’t be smug either — let’s remember the facts, shall we?  There are a lot of people who got screwed.  The OWS folks have the “who did it” right.  The Republicans and Democrats have both rewarded (and participated in!) the scammers games, but who takes the hit?

I honestly don’t know, but my handicapping says that if you think the Republicans are “safe” on this you’re playing with fire.

IF the Republican Party goes down then you have the Democrats and….. what, exactly?

I don’t know, but I’m not at all sure I like it!

Do I like it if the Democrats go down?  Not necessarily much better if the more-radical and mathematically stupid views prevail.

They don’t have to.  If you’ve been reading this blog for a good long while and listening to Blogtalk you know my position on this going back to before Obama’s election, when people were calling him the “Marixist in Chief” and suggesting that he would never leave office (just as they did with Bush, incidentally): I have no fear of Obama.  The guy who follows him, or worse, someone down the road later on in the throes of a real economic shitstorm is an entirely different matter.

History, if you recall, is replete with these examples: An economy goes “overcenter” due to exponential games that cannot be maintained.  Rather than address it and get in front of it, accepting that which has to happen partisanship increases and the people become more and more restive.  They recognize that the politicians and those in “private business” have conspired together to rip them off but they have no effective voice.  Economic deterioration continues right up until someone stands and says “I can fix all this….. but there will be a few compromises.”

He wins in a landslide.

I think you know what comes next – the last time six million gassed people came next, along with a global conflict that killed millions more.  Today such conflicts come with body counts that can be in the tens of thousands or more per weapon used, which makes avoidance of such an outcome much more important than it was before (not that ignoring the risk then was very smart!)

So yeah, folks, I think you should all engage these people.  Logic wins, if you can manage to get people to think.  The anger on the street is properly placed in terms of who did it, by and large, although they’re not (yet) directing the proper proportion of it toward the elected and appointed officials that glad-handled the situation and “backstopped” their stupidity (and worse) by ripping you off.

The fact of the matter is that these problems are not new and cannot be solved without serious efforts by everyone  involved, along with a lot of pain.  But there are two principles we must adhere to if we’re going to actually fix things:

1. Those who took on or have leverage on at present cannot be protected from what happens to them when the supports are removed – and they must be removed.  That is, the entire problem, boiled down, is the amount of debt in the system.  You can’t reduce it without the people on both sides (who borrowed and who lent) foolishly taking the hit.  If you shift it from one person to another to provide “relief” you have not reduced the amount outstanding, and what you’re doing won’t work.  It’s called a balance sheet for a reason – it balances.
2. The enabling policies in trade, taxation, immigration and on the monetary side must be fixed and then safety-wired closed so they can’t be abused again.  One of the big problems is that there are many regulations that prevent the sort of abuses we’ve seen (and we continue to see) in the laws governing acts by various government and quasi-government actors but there is no “or else” in those laws of materiality.  That has to change.

These are the two keys folks.  Everything else is open to debate – the exact how, the what and similar, but we cannot avoid these two realities if we intend to actually fix things.

Economic adjustment cannot be avoided.  But we can stop propping up those who did evil, even illegal things.  We can allow the market to work.  We cannot avoid the pain but we can mitigate it, and we must.

As just one example we can restore the right of bankruptcy to all citizens irrespective of how their debt was acquired.  This immediately collapses the college debt and college cost bubbles and neither gives students who did foolish things a free ride nor their lenders.  A one-sentence law reversing decades of intentional gate-barring that our government has engaged in for the purpose of enslaving our youth.  We can demand this today, and we should both demand it and enforce that demand.  This is a demand that I suspect virtually everyone involved in OWS would support.

There is much more and I’m sure that readers have their own ideas.  The key point is this: You can either engage or go hide in a cave – but you can’t, through lawful means, stop what is going on.  If we refuse collectively to engage then we own whatever comes out of this, and we owe it to ourselves and our children to each attempt to make this a constructive process before believing what someone else tells you – including me.

The “professional right” has gone into a tizzy over this movement, just as the left did with the Tea Party (remember calling the Tea Party “teabaggers”, referencing an obscene act performed with a man’s testicles?)  The “Tea Party” in the professional sense was effectively marginalized (anyone who doubts this simply needs to look at how Bachmann is polling as the Tea Party “standard bearer” in the Presidential race; she’s running at roughly “dog catcher” in terms of popularity) but don’t be so sure that this will work with OWS.  Remember that as of right now all you have from them for a platform is discussion points, which means they’re deliberating – you’re not being asked to support or not as written, you’re being asked for input!

So give them input, and educate people – or, if you refuse, I hope you intend to shut up if what comes of this doesn’t meet with your approval.

Libertarians Support Wall Street Protest to End the Fed

Ron Paul says that the Wall Street protests are legitimate, and that they are really protesting against the Federal Reserve.

One of the protest organizers tells me that a large proportion of the protesters are Ron Paul supporters. Most of them believe that ending the Federal Reserve is the most important step to restore our country’s prosperity. See this and this.

Remember, even the Wall Street Journal has called for the Fed to be broken up.

As I have extensively documented, the Fed is largely responsible for the economic crisis, and has failed to meet a single one of its stated mandates (let alone its implied ones).

The Fed has been enabler-in-chief for the corruption rampant on Wall Street.

And as I noted Tuesday:

Some very well-known economists also support ending the Fed.

For example, Milton Friedman said:

This evidence persuades me that at least a third of the price rise during and just after World War I is attributable to the establishment of the Federal Reserve System… and that the severity of each of the major contractions —
1920-1, 1929-33 and 1937-8 is directly attributable to acts of commission and omission by the Reserve authorities…

 

Any system which gives so much power and so much discretion to a few men, [so] that mistakes — excusable or not — can have such far reaching effects, is a bad system. It is a bad system to believers in freedom just because it gives a few men such power without any effective check by the body politic — this is the key political argument against an independent central bank…

To paraphrase Clemenceau, money is much too serious a matter to be left to
the central bankers.

Austrian economists such as Murray Rothbard also would like to end the Fed:

Given this dismal monetary and banking situation, given a 39:1 pyramiding of checkable deposits and currency on top of gold, given a Fed unchecked and out of control, given a world of fiat moneys, how can we possibly return to a sound noninflationary market money? The objectives, after the discussion in this work, should be clear: (a) to return to a gold standard, a commodity standard unhampered by government intervention; (b) to abolish the Federal Reserve System and return to a system of free and competitive banking; (c) to separate the government from money; and (d) either to enforce 100 percent reserve banking on the commercial banks, or at least to arrive at a system where any bank, at the slightest hint of nonpayment of its demand liabilities, is forced quickly into bankruptcy and liquidation. While the outlawing of fractional reserve as fraud would be preferable if it could be enforced, the problems of enforcement, especially where banks can continually innovate in forms of credit, make free banking an attractive alternative.

Congressmen Ron Paul and Dennis Kucinich have introduced bills to abolish the Fed.

And as I noted last week, most Americans want the Fed ended or at least reined in:

At least 75% of the American people want a full audit of the Fed, and most
were against reconfirming Bernanke.

Indeed, as Bloomberg noted last December:

A majority of Americans are dissatisfied with the nation’s independent central bank, saying the U.S. Federal Reserve should either be brought under tighter political control or abolished outright, a poll shows.

***

Americans across the political spectrum say the Fed shouldn’t retain its current structure of independence. Asked if the central bank should be more accountable to Congress, left independent or abolished entirely, 39 percent said it should be held more accountable and 16 percent that it should be abolished. Only 37 percent favor the status quo.

As I have extensively documented, the Fed is largely responsible for the economic crisis, and has failed to meet a single one of its stated mandates (let alone its implied ones).

Indeed, the Founding Fathers despised the British central bank, and said that the right to create their own credit and currency was one of the core battles in the Revolutionary
War.

Obama Is Not the Answer

Libertarians also point out that – while the Obama campaign and Democratic National Committee are trying to hijack the Wall Street protests – they have been part of the problem, not part of the solution.

They point out that Obama has appointed Wall Street insiders to all of his key economic posts, and accepted more money from Goldman Sachs and the other big Wall Street banks than anyone
else (and is still raking it in). As such, despite his populist rhetoric, he’s with Wall Street, not the protesters. Indeed, he is Wall Street.

They point out that Obama has continued the process of turning the U.S. into a banana republic, and whether you call it communism, fascism or crony capitalism, Obama has been at least as bad as Bush.

They point out that Obama has been a wolf in sheep’s clothing, someone who thinks high levels of unemployment are good.

They point out that Obama has been more brutal than Bush and has destroyed our liberties
even faster than Bush.

For these reasons, libertarians correctly state that re-electing Obama is not the answer. And they note that Ron Paul’s consistent, decades-long positions are much closer to the American peoples’ demands than Obama’s.

Postscript: Anyone who still thinks Obama will save us is high.

On the other hand, libertarians have been out of power for a long time. Neoliberals and Neoconservatives – two masks on a single face of corruption – have been in the driver’s seat for
decades. Libertarians should welcome the protests as a chance to challenge the status quo, to promote liberty and to end the Fed – the chief enabler of corruption in our country today.

Folks dismissing the Occupy protests as being Obama propaganda or left-wing haven’t yet learned the facts, are blaming the fact that the mainstream Democratic party is trying to infiltrate the movement on the protesters, or are letting Fox, Drudge or other mainstream news sources blow a sub-set of the overall protests out of proportion. See this, this and this.   Indeed, as the Associated Press notes, the protesters are fed up with BOTH mainstream parties.

ZeroHedge

Considering that the Republicans are now attempting to implement a ”Super Congress,” essentially creating a new UNCONSTITUTIONAL legislative body, it appears they’ve already ignored this warning.

http://www.youtube.com/watch?v=HImMGWiRV-Y

Make no mistake, whether Republicans cave and raise the debt ceiling, choosing instead to hide behind the lie of ‘default’ or whether they decide to create their Stasi-Style “Super Congress” -  they will have simultaneously chosen to destroy themselves.

Here’s a hint if you can’t stomach doing what must be done, DO NOTHING!

But here’s the rub.  If the debt ceiling is not raised, and I sure hope it’s not, the balanced budget amendment is no longer theoretical.  It’s very real, and it’s happening right NOW.

All agree that for the month of August, there is approximately $200 billion of revenue coming into the Treasury.

It’s been widely discussed that the Treasury and the President can decide which bills to pay first.  Assuming the debt is paid off, so no default (not even Greek style); there still is sufficient money for Social Security, Medicare, Medicaid, and military salaries.

So, what’ll it be Republicans?  Do you feel lucky?

I know this is getting repetitive, but I’m going to keep pounding the table on this until it sinks in to the American public and they rise and demand that we cut the crap with the deficit spending.

Bloomberg is once again stoking the “tanks in the streets” fear game, with this crap:

“The markets will be under very real pressure at the open because the assumption will be there is really no resolution to this,” Cooper said. “The breakdown in negotiations has crossed the line from the political posturing of the last few weeks to potentially a very real crisis.

“The Tea Party is effectively playing Russian roulette with the bond market and they will, with certainty, lose,” Cooper said. Jefferies is one of 20 primary dealers that trade with the U.S. Federal Reserve.

Utter and complete crap.

Look folks, there is absolutely zero risk of default based upon payment flows without a deal.  None.  Nada.  Zip.

I want you to look at the following – this is from Treasury itself.  It’s the monthly treasury statement, otherwise known as “MTS”:

Click for a larger copy that’s easier to read.

There’s no magic here.  The “heavy” revenue months are January (Corporate 1120 filing deadline), April (tax day, of course), June (estimated taxes), September (estimated taxes) and December (estimated taxes and end-of-calendar year deposits.)  The other months, of which July and August are two, tend to be significantly lower revenue months.

But when I say “significantly lower”, I am still referring to somewhere around $150-170 billion in tax revenues.

Bloomberg has nice enough to categorize expected outlays for August.  Here we go, assuming we have $150 billion (I’m a pessimist) in revenue to spend.

First, there’s what we must pay.  That’s $29 billion in interest.  We have $121 billion left.  Everything else is, legally, a choice.

Social Security ($49.2 billion, Medicare (28.6 billion) and Medicaid (21.4) billion are up next.  They’re big.  If we pay them all without exception we now have $21.8 billion left.

We can pay military active duty pay and IRS tax refunds (you’re going to have trouble getting people to send in taxes in the future if you simply steal them) which total $2.9 billion and $3.9 billion, respectively.  We can also pay Veterans benefits ($2.9 billion.)  We now have $12.1 billion.

We now have a choice.  We can pay a third of the defense vendor payments, or nearly all of unemployment benefits, most of which are not insurance – they’re extended benefits.  Those are $31.7 billion and $12.8 billion respectively.  We cannot, however, pay both, and whichever we choose we just ran out of money.

That means we can’t pay TANF ($7.1 billion), federal salaries (awwwwww, that’s $14.2 billion) or the Department of Wasted Minds (otherwise called “education”) at $20.2 billion.  HUD gets stiffed ($6.7 billion), energy, highway admin and justice.  I suggest, incidentally, that for the Department of Justice we let Mexico have Eric Holder and his pals at BATFE – they’ll take care of that for us.

There’s much more of course, but this outlines the problem.

It also outlines the solution.

We will not default in August, unless Treasury intentionally spends the money that they are legally required to pay in interest on the equivalent of “hookers and blow” instead.

However, a refusal to pass the debt increase will force an immediate balanced budget.

If you think we can’t find 50% savings in Medicare and Medicaid, I assure you that we can.  We have to fix the entire medical system, starting with refusing to give away billions to illegal aliens in “free” medical care along with permitting medical drug and device vendors to price-fix in this country while selling for far less everywhere else in the world – for openers.  We also have to deal with the fact that not everyone can be given a triple-bypass and two new hips when they’re 70.  Sorry, the money doesn’t exist.

Unemployment insurance?  It’s supposed to be 26 weeks; that’s actually insurance since premiums are paid for it.  Cut off the extended programs. Poof – there goes a lot of spending.

Federal salaries and benefits?  Cut ‘em in half.  Anyone who doesn’t like the deal can quit.  With as many unemployed as we have, there will be plenty of people willing to work for the offered wage.

Education Department?  Gingrich told us in his “Contract for America” it was going to go away.  There’s no time like the present.  Poof.

HUD?  Poof.

Justice?  Legalize pot tomorrow.  There’s more than enough tax revenue from that to cover the expense, not to mention the decrease in the cost of jails with all the people we’ll release the next morning.  Resolved.

Health and Human Services grants?  Poof.

“Other spending”?  If you can’t itemize it then it must not be important.

Defense?  Now that’s a tough one, but I got an answer.  President Obama told us he was going to leave Afghanistan and Iraq when he campaigned in 2008.  Well, let’s do it.  Like now.  As for those who want paid for past performance they’ll have to wait.  We’ll pay ‘em, but not today, and we won’t need so many tanks, body armor sets and bullets going forward since we’re brining the boys home immediately.

Yeah, this will be a rough ride.

Have you ever lost your job?  I have.

What happened?  You went through the family budget and figured out what you couldn’t kill off.  Cable TV?  Gone.  Second phone line?  Gone.  Expensive cell plan?  Gone.  Internet?  Gone or seriously cut back.  Air conditioning?  Hahaha – turn it off.  (For those who think it’s impossible, my girlfriend, who lives in Florida, proves otherwise.  Yes, you can have a $30 electric bill in this state.  Shut the damn thing off!)  Eating out?  Nope.  Chicken thighs are inexpensive and nutritious.  So are a few apples, bananas and broccoli crowns and a dozen eggs and a hunk of cheese for your breakfast.  Starbucks?  Nope.  Lunches out?  Nope.  Movie night?  Redbox – $1 – instead of $50 at the theater.  Netflix? Gone.

You get the idea.

We can do this.  We must do this.  But the reason the political parties don’t want to do it is right here:

Our GDP is being overstated by more than 10%, and has been for the last three years running.  If we balance the budget we’ll be forced to recognize what condition our economy is truthfully in and has been since 2008 – a Depression.

We can’t keep doing this, and the time to stop lying was three years ago, as I have repeatedly pointed out.  But since we didn’t, and we can’t turn the clock back, the best time to “eat our peas” is right now.

The time for lies has passed ladies and gentlemen.

It is now time for truth, because the mathematics have caught up with the forked-tongue brigade in Washington DC on both the left and right.

Arianna, this one’s for you – incoming…..

As we get ready for John Boehner to take the gavel from Nancy Pelosi on Wednesday, I find myself thinking back to the last time a Republican speaker took control of the House from a Democrat — and reflecting on how far down the wrong road we have traveled since then.

You’re right about us going down the wrong road.  This, unfortunately, was the last thing in your article you were right about.

“The balanced budget is the right thing to do,” he said. “But it does not in my mind have the moral urgency of coming to grips with what is happening to the poorest Americans.”

For the incoming Republican speaker, reducing poverty and lifting the poor into the middle class was a moral imperative beyond the left vs. right battlefield — not just the purview of lefties, socialists, and community organizers.

Oh really?  So let’s see – we have tried it that way for what….. 15 years?  What did we get?

• An internet bubble, which exploded.  Predicated on fraud, it cost US Citizens (and others) a few trillion dollars in saved funds, put into companies that were worth zero.  You can count the prosecutions of said people responsible on the fingers of one hand.  Most-notably, you can’t find any of the bank executives that were involved in bringing these firms public and earning their fees from same among the indicted, say much less charged or convicted.

• A housing bubble, which exploded.  Also predicated on fraud, this one cost virtually all US Citizens.  Millions of foreclosures, goading people to spend beyond their means, and now, once again, no indictments of the big bank executives.

We also “charged it” on the credit card.  In point of fact, President Clinton was the last one to have any smattering of discipline when it came to spending, and virtually all of that was imposed by those same Republicans you hate so much.

So now, with poverty higher than it was 16 years ago, with greater income inequality, and with the middle class struggling to hold on, what will Speaker Boehner make his number one priority? According to the Washington Post, it’s “cutting spending,” followed by repealing the healthcare law, and “helping get our economy moving” (no specifics on how he plans to do that).

Yet we saw on 60 Minutes that he’s very aware of how fragile the American Dream has become, telling Lesley Stahl, “I can’t go to a school anymore. I used to go to a lot of schools. And you see all these little kids running around. Can’t talk about it.” And he choked up when he did try to talk about “making sure these kids have a shot at the American Dream, like I did. It’s important.”

And why can’t you go to school any more?  If we’re talking about college, it is precisely because the government started handing out “Free Cheese” – and allowed the banksters to treat student debt as a loan that would be shackled around your neck for life.  This in turn caused the schools to turn a college into a luxury playground, complete with gilded dorms, er, “housing units” and $200+ textbooks.  Even in subjects such as a mathematics, which, last time I checked, hadn’t changed with regards to things like Calculus in far longer than I’ve been drawing breath.  Yet every year there’s a “new edition”, edited for the purpose of forcing kids to blow yet another $200 – per class – or more.  Ordinary people simply can’t afford that.

But the trajectory of our political discourse over the last decade and a half has meant that taking on poverty has gone from a moral imperative and shared national objective to an afterthought — or no thought at all.

And exactly how do you take on poverty Arianna?  Do you teach people that sitting at home sucking on the government teat is the way to prosperity?  Do you protect those who sell debt to students that they cannot possibly pay by passing laws that make that debt non-dischargeable?  Do you promote a housing bubble that drives house prices beyond those of modest means, goad those people into taking on debts they cannot pay, and then evict them when they lose the house that was priced at 3x what it should be?  Do we refuse to recognize wage and environmental arbitrage that leaves us with only jobs that ask “would you like fries with that?” instead of engineering, hard science, and blue-collar production – all so we can have $200 TVs instead of $400 ones and you can run your yap on an iPhone application that runs on hardware built by virtual Chinese slaves and peddled to US consumers as yet another debt ponzi (who think that phone costs $100 – yet another “pulled forward demand” game)?

All of this is part and parcel of the Liberal Left, along with the Radical Right.  Neither side will tell the banksters to go stick it up their tush and die in a fire.  Neither one will get rid of the illegal immigrants that depress wages in the United States, nor deal with the wage and environmental arbitrage that dumps raw chemicals into rivers and lakes – in China – all so we can have our “cheap consumer goods” while the workers there live in conditions that our former African Slaves would consider beneath them!

None of this is on YOUR radar Arianna.  No, instead you want to “soak the rich and give to the poor”, but in point of fact we’ve been doing that now for the last three years.  $1.7 trillion in budget deficits is proof.  How much more do you think we can put on the credit card Arianna?  Are you one of those who thinks there’s no limit?

Robert Reich does:

Republicans are telling Americans a big lie, and Obama and the Democrats are letting them. The Big Lie is that our economic problems are due to a government that’s too large, and therefore the solution is to shrink it.

Oh really?  I suppose you would like to deny this?

This isn’t evidence that the government is too large?

The short-term solution is for government to counteract this shortfall by spending more, not less. The long-term solution is to spread the benefits of economic growth more widely (for example, through a more progressive income tax, a larger EITC, an exemption on the first $20K of income from payroll taxes and application of payroll taxes to incomes over $250K, stronger unions, and more and better investments in education and infrastructure.)

Sorry, the short-term solution is to force the bad debt into the open and by doing so force recognition of its true value.  The long-term solution is as I’ve noted above – remove the special exemptions for debt on education, forcing the colleges to either go broke or reduce costs dramatically so you can earn your way through working part time flipping burgers, along with putting a stop to wage and environmental arbitrage with wage and environmental-parity tariffs.  Flush all the bad debts and make those “rich bastards” on Wall Street eat their own cooking.  They’ll choke on it and go broke.  Good.  Now you get your “vengeance” and, more-importantly, there will be new banks that are set up by ordinary people and entrepreneurship along with capital formation will once again return.

You know, the process by which we create jobs?  Yeah.

Exponential equations are mathematical facts.  The curve they produce is a fact.  That periodic recessions and bankruptcies are necessary in any system where capital can be lent is also a fact, and that fact extends to the “fat cats” who are doing the loan-making!  Every act that protects the foolish from the consequence of their folly is one that attempts to violate the laws of mathematics.  Such attempts, which are often mis-named “regulatory capture”, are how you get depressions instead of recessions, as you try to prevent those who do imprudent things (both in business and as individual acts) from having to face the music for their foolishness.

The big lie is, in fact, stating that such exponential functions and “protection” for any group – whether it be “the less fortunate” or “the fatcat banker” can proceed apace for any sort of “indefinite future” without periodic purges that restore these functions to the baseline.

The longer this lie goes on, and both The Left and Right are equally-complicit in spewing it, the worse the outcome for our nation.  And make no mistake – since I presume that both Arianna and Robert are intelligent, I therefore am forced to conclude that these lies are not told out of ignorance but rather with an intent to deceive – and destroy.

The primary problem with partisan politics is that the true “Big Lie” is the willful refusal to deal with the reality of exponential functions.  These functions are not suggestions – they’re mathematical laws.

And whether we like it or not the longer we allow this lie to be told, and the longer we continue to play the game of allowing people like Arianna and Robert to spew these lies, along with Boehner, the more pain we will inflict on the nation and its population as a whole.

FiredogLake is reporting this morning that six Senators have demanded criminal and regulatory action by the FHFA regarding the blatant fraud in the mortgage industry. 

The six Democrats – Sherrod Brown, Barbara Boxer, Sheldon Whitehouse, Debbie Stabenow, Tom Harkin and Mark Begich – pushed back on the idea that these are merely technical errors, as the FHFA letter intimates, rather than systematic violations of the law:

There have been attempts to dismiss the reported violations as minor technical paperwork errors, and to employ the defense that these were harmless errors because the homeowners were in foreclosure and would have lost their houses anyway. These are not technicalities, they are not isolated cases – it is likely that over 200,000 foreclosures have now been suspended – and these improprieties cast doubt on the foreclosures in question.

Rather than a few rogue employees disregarding company policy, the policies themselves were flawed, indicating that there is a systemic problem with the manner in which loss mitigation and foreclosure operations are being conducted by most, if not all, mortgage servicers. This pattern of behavior has undermined the integrity of the housing market, creating uncertainty for home sales and the availability of title insurance.

We shouldn’t be reassuring the banks and their servicers that they’ll make it through this all right, we should be filling out criminal charges. The banks basically never changed their policies from the questionable lending practices of the subprime mortgage scandal – they couldn’t be trifled with basic legal procedures, and they hired a bunch of incompetents to push the paperwork. When the defaults rose, the same gang of idiots failed to provide any relief for homeowners through mortgage modification. And now they’re breaking the laws surrounding foreclosure, to cover up for their other fraudulent activities with proper mortgage assignment.

While this has started to become an election issue, with familiar battle lines, it should be noted that only Barbara Boxer among these six is up for re-election. I do think this issue resonates and is pretty clear:

To Cuban-born Jose Martinez, 65, a lifelong Republican from the Miami area who works in liquor manufacturing and export, “It seems like a joke that we are a country with laws and the banks keep stealing.”

As for remedies, the Senators suggest forcing the servicers to work with homeowners to modify loans, to impose “tailored moratoriums” for certain lenders as per their authority as regulators of banks and non-bank institutions that are the parent companies of the servicers, and to “review and reform” the financial incentives that make it beneficial for the servicers to foreclose. They are looking at the issue in a comprehensive way and beyond the “technical errors” argument which is clearly false.

 As has been tediously and thoroughly documented on this website now for more than 2 years, there is no ‘procedural error’ – this was blatant, intential and orchestrated fraud from the very top down to the bottom of the mortgage industry.  While it is easy to just ‘blame homeowners’ , the fact is, homeowners were not the predators. 

This is WRONG HEADED thinking!  It is NOT illegal to default on a debt, but it IS a CRIME to commit fraud – and the latter is what the banks have done, the former is what the homeowners have done.   While there is no denying that there were some homeowners that lied on their mortgage applications, that number pales in comparison to the number of lenders, brokers and banks that lied to prospective buyers in order to put them into homes they knew darn well they couldn’t afford.  The more mortgages they could write, the more money they made.  Prospective buyers were no longer people they were helping to purchase a home in a price range that was sustainable, they were a profit stream.  Often times it wasn’t the buyer who lied on the application at all, it was the lender who altered documents before submitting the loan for underwriting without the knowledge of the buyer!

The other problem with the idea of blaming the homeowner is that the homeowners were NOT the experts.  The lenders were – and when they told people ‘this is how you do it’ and ‘yes you can afford this’ and ‘this is a fantastic deal’ – how were laypeople supposed to know better?   Being naive and uneducated about the home-buying process is not a criminal act.  All these creative toxic loans were crammed down the public’s throats which caused home prices to skyrocket far out of the reach of average wages. While inflation in food, energy, clothing and everything else also increased at a historic rate at the same time, wages were FALLING.  Often times, people had NO CHOICE but to take on more credit than they were comfortable with because the government policies were not only creating rampant inflation, but they were mandating that banks lend to people who they deemed ‘underserved’  – minorities, poor people, the unemployed - basically the government forced banks to lend to those who could not afford to pay.  For reference, at the peak, home prices had inflated to more than 7 times wages.  This is historically and definitively unsustainable….yet banks were processing loans with 60% DTIs and this was advertised to the public as acceptable! 

Nowhere was this more evident than in the State of Ohio.  The State itself attempted to kick subprime lenders out of Ohio because it had become exceedingly clear that the predatory lending practices were entrapping people by putting them into loans they could not pay for and ultimately ending up with entire neighborhoods where the vast majority of houses were in some stage of foreclosure.  Unfortunately, the Federal Government told the State of Ohio, that they could not stop these lenders from operating in the State because that would be ‘discrimination.’  So, basically the federal government gave these lenders a license to commit fraud and forced the State of Ohio to accept it. 

As for the lenders, at first they weren’t so sure that lending to those that couldn’t pay would be such a great idea.  So, to offset this risk in lending to people they KNEW couldn’t pay, they came up with mortgage backed securities and other ‘creative investment vehicles’ that they could buy and sell like stocks.  As fast as they could bundle and pool these things together, they would sell them to individual investors, pension funds and anyone who was looking for big returns….because after all, home prices only go up, right?  Thing is, long after people got weary of taking on more debt, the demand for mortgages became driven ENTIRELY by the banks THEMSELVES because the toxic instruments they created were a cash cow….as long as home prices were going up – they kept inflating the values of the securities so they could continue to profit from them. 

It was when ALL private sector demand stopped because no one could take on any  more debt, that the wheels started to come off back in late 2007.  Then the banks and Wall Street were bailed out with taxpayer money and we’ve now seen them again inflate the prices of fuel and commodities with their taxpayer money that they gamble with – but because the hole is so large, the over $1 Trillion in taxpayer money is not enough to prevent the over $14 Trillion in leveraged security instruments from imploding.

THAT is the summary of the true depths of the fraud we are dealing with.  Long after real demand for home mortages stopped, the banks continued to leverage these instruments, fraudulently inflate their values and sell them to investors.  Because profits depended upon doing this in bulk, the rule of law was abandoned in transferrence of title.  MERS (Mortgage Electronic Registration Systems) was invented by the banks themselves in order for them to more rapidly offload these ‘investments’ without the pesky business of continuity of the chain of title of the collateral (that would be your home).  Now, quite frankly, no one with any sort of mortgage transaction since 2002 can be sure of whether or not their title is clear, nor can they be sure they are actually paying the entity to which they truly owe money! 

Meanwhile, the banks and lenders are foreclosing as quickly as they can, often times facilitating this process with ‘recreated’ (forged) documents, robo-signers and false affidavits as has been documented extensively here on FedUpUSA.  Multiple courts across the country have discovered much of this fraud, and some banks have now claimed to be temporarily halting foreclosures to ‘sort out this procedural error’, but even that is a lie.  Foreclosures especially continue unabated and at an accelerated pace in non-judicial states where the lenders can be sure they never have to prove their standing or right to foreclose.  Essentially, what the banks are doing amounts to asset stripping the public.  They deceived the public with the loans themselves, the loans began to default, so they got Congress to give them more than $700 Billion in bailout money and now that the fraud is beginning to be exposed, they are taking possession of the collateral as quickly as possible, even if they have no legal rights to do so.  Asset stripping at every possible level.  This will continue until or unless we stop it.

Clearly the enormous economic crisis we face today was largely created by the banks/lenders and Wall Street and the stupid policies of our government.  Homeowners were the victims here.   At the very least they deserve: 

#1.  Their day in court to discover exactly WHO owns their mortgage; they have a right to know to whom they are actually indebted (and it is not the servicers).  This is a legal right of every debtor under the FDCPA – The Fair Debt Collection Practices Act

#2.  The opportunity to negotiate with the actual party to whom they are indebted  (in most cases, the servicer was ALREADY PAID when the note was sold and has absolutely no motivation or consideration for negotiating a fair market price – this is why HAMP was such a failure!)

#3.  The opportunity to have clear title to the asset that they purchased – and if that title is not clear, they are entitled to restitution under USC 15 § 1641 , which allows for the sanction of expunging  interest on the debt which encumbers that property wherein a title has been fraudulently transferred.  In addition, wherein the chain of title has been broken, there should be a release of that collateral, making the mortgage loan an unsecured debt (like a credit card), which also makes the debt dischargeable under Chapter 7 Bankruptcy.

As for the political angle of all this - it sure seems to me that the Republicans are vastly missing here.  Is it that they truly want to snatch defeat from the jaws of victory this November?  The surest way to lose much of the momentum they have been building this election cycle is to be completely silent on the issue of fraud, or worse, seen as defending fraud!  I make no secret of the fact that I am and always have been a staunch conservative and I believe that part of that ideology includes a moral and ethical obligation.  Hasn’t the Tea Party been demanding a return to principles over politics and party?  This election hinges upon which party gets their constituents to the polls and up until this point all the enthusiasm has come from the re-engergized Tea Party groups.  I am now seeing some of the liberal base become re-engergized in response to the issue of the massive fraud that has been perpetrated upon America by the banking sector and Wall Street.  Certainly, the fact is not lost on me that much of the blame for enabling this to happen resides with Congress and much of the way was paved by liberals with their mandates to loan to those that could not afford it.  It also is not lost on me that Wall Street and the banks gave more to Democrats in the past 4 years than any time in history.  Coincidence?  I think not.  But in a strange twist of irony, we now have Democrats leading the way in pursuit of the prosecution of fraud in this industry. 

So, why are Republicans missing?  This could be an issue that they slam-dunk Democrats with – but we have only deafening silence.  Could it be that Wall Street and the big banks are now giving all that money to the GOP?  Will Tea Party voters allow Republicans to be bought, in direct conflict with the values that they have been espousing?  Can the Republicans afford to risk losing voter support to gain all that Wall Street money they’ve long been missing?

Somebody better wake up – we have only 3 weeks to go.  Either all this effort by the Tea Parties to clean up our government and demand morals and ethics will be wasted as we end up with more of the same crap we have had just under a different label or the Tea Partiers really DO stand for something.  Either the Republicans are worth surviving as a party with principles or they are not.

When You’re A Kleptomaniac, Stealing Looks Normal

Posted by Karl Denninger

The WSJ has an interesting article that deserves some exposition:

As debate started in the Senate Thursday on the broad overhaul, some administration officials and lawmakers said they worried the amendments could backfire, steering lending and trading in complex financial instruments to hedge funds and other finance companies that are less regulated than banks. There are also fears that tight limits on U.S. banks could put them at a competitive disadvantage, because similar restraints don’t exist for their overseas rivals.

Notice the weasel in here.  One part (trading complex financial instruments) should be diverted to hedge funds and other unregulated – and free-to-fail, no-backstopped firms.

The other part (lending) will always be done by banks – you have one on the corner, or a credit union, that will write you a loan, yes? 

Sens. Ted Kaufman (D., Del.) and Sherrod Brown (D., Ohio) plan an amendment that would prohibit any bank from ever holding more than 10% of the country’s deposits and put strict caps on the debt banks issue.

This is the amendment that I highlighted with two Tickers, one text and one, for the “visually inclined”, in video.  This amendment deserves to be law right now – one way or another.

Sens. Maria Cantwell (D., Wash.) and John McCain (R., Ariz.) have worked on an amendment that would force commercial banks to separate from investment banks—revisiting the Glass-Steagall Act of the 1930s.

That plus the above would effectively BE Glass-Steagall. 

I like that a lot.

Obama administration officials have declined to weigh in on any specific amendments, with one exception: a move by Sen. Bernie Sanders (I., Vt.) to give the government more power to audit certain operations at the Federal Reserve. Fed and administration officials have signaled they would fight to stop it at all costs. Mr. Sanders has more than a dozen co-sponsors.

Why should the administration fight such a thing?  What possible purpose – that doesn’t involve scams and fraud – is served by The Fed being able to operate in secrecy?

“Hopefully, common sense and maturity will take control, and the hyperbole and populism, while good for the TV cameras, will be put aside,” said Mr. Gregg said.

Mr. Gregg (and the rest of you) ought to read this (warning – not mine, and full of colorful language.  Not suitable for children and all that:)

“I’m sure you have the answer, you and Ron Paul and all the other pot-smoking libertarian do-gooders have it all figured out. But what I’m saying is, no confidence means end of the confidence game. That’s what Lehman showed. Every single player in finance suddenly had to face the fundamental problem—this whole fu!@ing economy is built on fraud and lies and garbage. So when Lehman collapsed, every single player panicked, going, ‘If Lehman was nothing but a Ponzi scheme—and I know what I’m running is a Ponzi scheme—holy shit, that means everyone else is running a Ponzi scheme too! Run for the exits!’ No one trusted anyone else, everyone pulled out, and the entire global economy collapsed just like that. And that meant your parents, my parents, every teacher, every fireman, every person in the country going into retirement, every price on every asset—wiped out.

Oh.  You mean that “if we scam and screw people enough, then you must let us keep doing that, lest we have riots or even civil war”?

That seems to be the argument that Judd Gregg and others – including Geithner and Obama – are putting forward.

Here’s the problem with the argument: It doesn’t work in the long haul.

It got a lot more vicious and personal than this, but when our verbal slap-fight ended—and he paid the bill—I thought about what he said, and it made a lot more sense. Fraud has become so endemic in this country that it’s woven its way into America’s DNA, forming a symbiotic relationship that can’t be undone without killing off the host. If they push it just a little too hard, the entire American economy could crash, asset values could tank, and that means tens of millions of extremely pissed off retirees and Baby Boomers. As the Wall Streeter put it: “Whoever is responsible for bursting this latest bubble by exposing all the fraud—and tanking all the markets—will not only be out of power for at least a generation, but they’ll all have to get radical reconstructive surgery on their faces and seek political asylum somewhere remote. No one wants to be that guy, and that’s why it’s not going to happen.”

That may be true, but all bubbles to eventually burst, all Ponzi schemes do collapse. The only question is when. For those of us not on the verge of retiring, the sooner we have this day of reckoning and get it over with, the better.

What the author forgets is that for those who are on the verge of retiring, you’d be better off getting it over with now and choosing not to retire, than having it happen once you do and being completely and irredeemably hosed.

In case you’ve forgotten, this isn’t uniquely (or even largely) the fault of one political party or the other.  It’s both.

But here’s the key: The party that does not put a stop to this and gets tagged with obstructing locking all these ignoble, felonious bastards up will be the one that – at best – never darkens the halls of Congress or The White House again.