Archive for the ‘Elite’ Category
A single mysterious computer program that placed orders — and then subsequently canceled them — made up 4 percent of all quote traffic in the U.S. stock market last week, according to the top tracker of high-frequency trading activity. The motive of the algorithm is still unclear.
Oh really? The motive is unclear eh?
No it’s not.
The motive is to try to goad someone else into placing an order against the fake orders that are never intended to execute. This, incidentally, is illegal — the Securities Act makes unlawful any action taken in the market with the intent to distort prices. In other words the placement of any order into the market for any purpose other than to have it executed is against the law.
Translation: The ultimate goal of many of these programs is to gum up the system so it slows down the quote feed to others and allows the computer traders (with their co-located servers at the exchanges) to gain a money-making arbitrage opportunity.
That’s a crime; intentional disruption of the markets is illegal.
“I feel a tax on order-stuffing is what the markets need at this point,” said David Greenberg of Greenberg Capital. “This will cut down on the number of erroneous bids and offers placed into the market at any given time and should help stabilize the trading environment.”
It’s much simpler to fix this, as I’ve noted before.
All orders must be valid until executed or 2 (two) full seconds have elapsed.
That’s it. That’s all you have to do. This change instantly makes this sort of game unprofitable and it ends instantly. It makes all orders comply with the law; any order you place is exposed to execution risk against every other person in the marketplace. That’s what the law says, and a literal one-line change in regulation would put that in place.
Why hasn’t it been done?
Because the markets are not for you, nor are they for honest companies. They have been stolen by the Wall Street bandits and now are used as a tool to screw you and everyone else.
For those waiting for our economic problems to be solved, you can quit holding your breath. There is simply not going to be a solution to our economic problems on the national level. So why is that the case? Well, it is because the economic policies of both major political parties are very, very similar when you take a close look at them. Yes, that statement may sound downright bizarre to many Americans, but it is true. Both major political parties supported the Wall Street bailouts, both of them fully support the job-killing “free trade” globalization agenda, both of them have dramatically increased the national debt when in power, both of them fully support the currency-killing policies of the Federal Reserve, and neither major political party would get rid of the income tax and the IRS. And that is just for starters. Yes, there are some minor differences when it comes to taxing and spending between the two parties, but the truth is that they are a lot more similar on economic issues than they are different. What we desperately need on the national level is a fundamental change in direction when it comes to economic policy, but we simply are not going to get that from either the Democrats or the Republicans. That means that there is no hope that the economic storm that is coming will be averted.
So why are the Democrats and the Republicans so similar on these issues? Well, a big reason is because of who they are trying to please.
The reality of the matter is that most politicians do not really care about what you or I have to say. Instead, what they are really concerned about is getting as much money for their campaigns as possible so that they can keep getting elected.
When you take a close look at the results of federal elections over the past several decades, it quickly becomes apparent that the candidate that raises the most money almost always wins.
So most politicians have learned to please those that fund their campaigns so that the money will keep rolling in.
Yes, there are a few candidates that are willing to rebel against “the system”, but they are few and far between and the major parties tend to marginalize them.
Once again in 2012, political races will overwhelmingly be won by those that raise the most cash. The following is from Politifact….
In congressional races in 2010, the candidate who spent the most won 85 percent of the House races and 83 percent of the Senate races, according to the Center for Responsive Politics. That’s a large percentage, but it’s lower than what the sign indicated.
Indeed, the percentage for 2010 was lower than it had been in recent election cycles. The center found that in 2008, the biggest spenders won 93 percent of House races and 86 percent of Senate races. In 2006, the top spenders won 94 percent of House races and 73 percent of Senate races. And in 2004, 98 percent of House seats went to candidates who spent the most, as did 88 percent of Senate seats.
Once you understand how Washington works, it becomes easier to understand why our politicians do such stupid things.
For example, big corporations tend to donate large amounts of money to political campaigns and they love the “free trade” globalization agenda.
They love to import massive quantities of super cheap foreign goods so that they can undercut the prices of goods made in the United States.
They love to set up manufacturing facilities on the other side of the globe where it is legal to pay slave labor wages to workers.
The “free trade” agenda is great for the largest corporations, but it is horrible for the average American worker.
According to the Economic Policy Institute, the U.S. economy loses approximately 9,000 jobs for every $1 billion of goods that are imported from overseas.
Trade with other countries can be good as long as it is balanced. Unfortunately, the U.S. trading relationship with the rest of the world is tremendously imbalanced.
In 2011, the United States bought more than 550 billion dollars more stuff from the rest of the world than they bought from us.
This trade deficit has enormous consequences that most Americans simply do not understand.
Over the past decade, tens of thousands of businesses, millions of jobs and trillions of dollars have left our country.
Our industrial base is being dismantled and we are rapidly becoming poorer as a nation.
According to U.S. Representative Betty Sutton, an average of 23 manufacturing facilities a day closed down in the United States during 2010.
Just think about that.
Every single day we lost 23 more.
Overall, America has lost a total of more than 56,000 manufacturing facilities since 2001.
Why do you think cities like Detroit are dying?
The truth is that we killed them with our idiotic policies.
America has a trade imbalance that is more than 5 times larger than any other nation on earth has. We are losing wealth, jobs and businesses at a pace that is absolutely astounding.
It is neither “conservative” nor “liberal” to commit national economic suicide.
Our trade imbalance with China is particularly bad. The U.S. spends about 4 dollars on goods and services from China for every one dollar that China spends on goods and services from the United States.
Does that sound fair to you?
China slaps huge tariffs on many of our products, they deeply subsidize their own national industries, the brazenly steal technology from us, and they manipulate currency rates so that their products end up being significantly cheaper than ours.
Our trade deficit with China in 2011 was nearly 300 billion dollars. That was the largest trade deficit that one country has had with another country in the history of the world.
Yet both major political parties refuse to do anything about it.
Back in 1985, the U.S. trade deficit with China was only 6 million dollars for the entire year.
In 2011, our trade deficit with China was more than 49,000 times larger.
The consequences of this trade deficit with China are being felt all over the United States every single day.
For example, the United States has lost an average of 50,000 manufacturing jobs per month since China joined the World Trade Organization in 2001.
Do you support losing more than half a million manufacturing jobs a year?
If not, then you should be for “fair trade” instead of “free trade” where other nations can cheat us blind as often as they want.
The Economic Policy Institute says that since 2001 America has lost approximately 2.8 million jobs due to our trade deficit with China alone.
Do you think that the U.S. economy could use an extra 2.8 million jobs right now?
Sadly, if current trends continue things are going to get a lot worse.
According to Professor Alan Blinder of Princeton University, 40 million more U.S. jobs could be sent offshore over the next two decades.
So why won’t our politicians do something?
The United States has run a trade deficit every single year since 1976.
During that time, America has had a total trade imbalance of more than 7.5 trillion dollars with the rest of the world.
That 7.5 trillion dollars could have gone to support U.S. jobs and U.S. businesses.
Taxes could have been paid on that 7.5 trillion dollars.
Instead, it went out of the country and made foreigners wealthier.
So what is Barack Obama doing about all of this?
Well, Obama has been aggressively pushing for even more “free trade” agreements. The Obama administration has inked deals with Panama, South Korea and Colombia and the Obama administration is making the Trans-Pacific Partnership (“the NAFTA of the Pacific“) a very high priority.
Well, Mitt Romney must be criticizing these moves, right?
No, Romney has actually criticized Obama for not pushing for more “free trade” fast enough.
Mitt Romney wants to make it even easier for jobs to go out of the country and for other countries to drain our wealth. The following quote comes directly from the Romney campaign website….
Access to foreign markets is crucial to growing our economy. We must reassert American leadership in international negotiations, follow through on commitments we have already made, and push aggressively for advantageous new agreements.
So we are not going to see a change in direction in trade policy no matter who wins the next election.
Well, what about the national debt?
Are there differences between the two parties on this issue?
Sadly, there are only minor differences.
Both major political parties are packed with big spenders that have been spending us into oblivion.
Since Barack Obama entered the White House, the U.S. national debt has increased by $5,027,761,476,484.56.
That comes to $16,043.39 for every man, woman and child living in the United States.
What the Obama administration and the Democrats are doing to future generations is absolutely criminal.
So what about the Republicans?
Well, when the Republicans have had control of the White House they have run up debt “like a drunken sailor” as well.
If the Republican Party wants to have any credibility when it comes to fiscal issues, it needs to publicly admit that George W. Bush was a horrible failure when it came to the federal budget.
George W. Bush was a “big government” politician that dramatically increased the size of the federal government and spent money like it was going out of style.
He was not a conservative when it came to fiscal issues, and that is the truth.
Sadly, neither political party is proposing to balance the federal budget any time soon. There are a few politicians that have suggested doing this, but they have been marginalized.
So why don’t our politicians support living within our means?
Well, the truth is that if the federal government balanced the budget today, it would result in a catastrophic drop in living standards inside the United States. We are currently living in an era of debt-fueled “false prosperity”, and if that false prosperity were to disappear there would be riots in the streets of our major cities within months.
It is much easier for our politicians to continue to pile up more debt and to continue to kick the can down the road.
But this party cannot go on too much longer. Already, the United States has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain.
As you can see from the chart below, we are in a whole lot of trouble….
Our foolishness will catch up to us in a big way eventually.
Another area where the two major political parties agree is that they both fully support the Federal Reserve.
The Federal Reserve is supposed to keep inflation low, but the truth is that the Fed has absolutely killed the value of the U.S. dollar. Just check out the chart below which was produced by the Fed itself. It shows how dramatically the purchasing power of the U.S. dollar has declined over the years….
Keep in mind that the chart above is using official government numbers which actually downplay how much the U.S. dollar has been debased.
If inflation was measured the exact same way that it was back in 1980, the annual rate of inflation would be more than 10 percent right now.
By any measure, the Federal Reserve has been a colossal failure for the American people. Since the Fed was created, our currency has lost more than 95 percent of its value and our national debt has gotten more than 5000 times larger.
But Barack Obama just loves Bernanke. He nominated him for another term as Fed Chairman and he never criticizes anything that he does.
So will things be any different under Mitt Romney?
Of course not.
During one Republican debate, Mitt Romney actually had the gall to try to explain to all of us why “we need to have a Fed“.
Mitt Romney says that he is “not going to take my effort and focus on the Federal Reserve“.
But the Federal Reserve is at the very heart of our economic problems.
Doesn’t Mitt Romney understand that?
The mainstream media is already telling us not to expect any significant changes at the Fed if Romney wins. A recent Reuters article had the following headline….
Are you starting to understand why I am saying that there is not going to be a solution to our economic problems at the national level?
A great economic cataclysm is coming, and there is very little hope that it can be averted.
So what does that mean?
It means that we all need to start preparing to weather the coming storm on an individual level.
The nation as a whole may not change course, but as individuals and as families we can change course.
All of us can work to reduce our expenses, get out of debt, build up a six month financial cushion, learn to grow a garden and slowly become more independent of the system.
Both political parties are leading us down a road that will only end in economic disaster.
Instead of waiting for a “national solution” that is never going to come, you need to focus on being your own solution.
Time is short, so you better get ready.
The brittle financial American middle class – 50 percent of Americans would be in financial trouble if $2,000 of expenses came up in 30 days. By 2020 the world’s richest households will control $202 trillion in wealth, 4 times current global GDP.
This economic recovery has excluded working and middle class Americans which begs the question, what really defines a financial recovery? In past and distant recoveries the economic gains were widely distributed amongst all Americans. Most realize that income gains will never be equal simply because in a market based economy those with certain desirable skills will be rewarded more than others. Yet in the last decade the banking sector has co-opted the government to turn it into a welfare state for the large banks. Desirable qualities are now replaced by predator diseased qualities of ripping off the taxpayer for bad market based bets. That is why recent data showing that nearly 50 percent of Americans are unable to come up with $2,000 in 30 days if an emergency came up is startling. $2,000 for most is the basic monthly expenses on food, home, and other little items. So half our country is living one paycheck away from financial collapse. 44,000,000 Americans are living with food assistance from the government already. Keep in mind the recovery has been going on now for close to two full years. According to the NBER the recession was over in June of 2009. The fact that $2,000 is enough to bankrupt half of American households tells you about the new state of our economic recovery.
This is a recent survey and the implications are troubling:
“(WSJ) The survey asked a simple question, “If you were to face a $2,000 unexpected expense in the next month, how would you get the funds you need?” In the U.S., 24.9% of respondents reported being certainly able, 25.1% probably able, 22.2% probably unable and 27.9% certainly unable. The $2,000 figure “reflects the order of magnitude of the cost of an unanticipated major car repair, a large copayment on a medical expense, legal expenses, or a home repair,” the authors write. On a more concrete basis, the authors cite $2,000 as the cost of an auto transmission replacement and research that reported low-income families claim to need about $1500 in savings for emergencies.”
The above data fits into the mold that average Americans are simply falling behind the elusive curve. The average per capita income for the United States is $25,000. People get somewhat surprised when they hear this figure because it seems low for the most wealthy nation in the world. We invented Cribs and Lifestyles of the Rich and Famous for crying out loud. Yet most that are surprised do not live in the bottom half and keep in mind many of these families are in the two income trap. Meaning both spouses have to work in order to keep things moving financially:
Source: Social Security
This brings up the question of recovery once again. If half of Americans are teetering on financial disasters and all it would take is $2,000 in unexpected expenses, what do we really mean by a middle class lifestyle? The last two years have not been supportive to the working people of America. The large gains have gone directly to the top 1 percent:
Even with these kinds of gains the income is going to the wealthiest in our country because the current bailouts have rewarded those with large financial positions in stocks:
Now part of this inequality is merely the widespread pillaging of Wall Street on the American public. The banking bailouts that occurred to an industry that turned housing, the largest net worth item for average Americans, into a commodity to be traded and exploited. Most Americans derive their net worth from home values, not stock market gains. So the 100 percent run-up of the stock market has done very little for the majority in the country (this can be seen by the Gallup 19 percent underemployment figure). Do we think that those that are $2,000 away from financial ruin are loading up on stocks in their retirement accounts? They are simply getting by. This is why wealth inequality is now at levels last seen since the Great Depression:
The rich will get richer
An interesting report from Deloitte came out showing that over the next decade the rich in the world will simply get richer by using the current system that pillages the working classes around the globe:
Source: Zero Hedge
“(Zero Hedge) A new study by Deloitte confirms everyone’s worst fear (and every millionaire’s wettest dream): the wealth amassed by millionaire households is set to increase by more than 100% over the next 9 years. From a total of $92 trillion held by the world’s richest in 2011, by 2020 the world’s millionaire households will possess $202 trillion, or roughly 4 times current global GDP. Even though much of move up is attributed to the wealth surge in the developing world, the biggest beneficiary is, you guessed it, the United States where the millionaires (those with net wealth of at least $1 million), who currently account for $38.6 trillion of total wealth, will see their assets increased by 225% to $87.1 trillion! And while a comparable study of how much wealth the lower and middle classes are set to lose over the next decade, we are confident that it will be roughly comparable…inversely. So if anyone harbored any illusions that the current status quo was about anything but the rich getting richer, all those can be promptly swiped aside.”
The model of exploiting bubbles and financially ruining working and middle class families has worked so well that it is being applied globally by the wealthy and financially connected class. Again the question becomes what do we mean by recovery? Is it a recovery if the majority of American families are left in a financially destitute situation just to bailout too big to fail financial institutions to protect the wealth of the top one percent? Keep in mind these are the individuals that have set fire to the economy and have put a match to the home equity of most Americans. This is the system that is being protected but not for the majority.
Job growth in low paying fields
We would expect that a recovery would occur with good paying jobs dominating the new workforce. That is not the case:
As you can see from the chart above most of the jobs being added in the recovery are from lower paying job sectors. The middle class is seeing more and more strains being placed on their monthly budgets. Trading good blue collar jobs in say building cars into burger flipping McDonald’s jobs. Anyone that has followed the trends closely realizes that seeing 50 percent of Americans only $2,000 away from major financial issues is no surprise. In fact 1 out of 3 Americans doesn’t even have a penny to their name! This is the issue at hand and while too big to fail banks leverage the Federal Reserve for zero percent loans and a place to trash toxic waste loans, many Americans do not even share in their rising productivity:
No wonder why profits are up and wages are down. Less is being given to those creating the new gains under the guise that things are financially tight. Tight for who? The CEO of JP Morgan that makes 800+ times the median household income of Americans for foreclosing on millions and gambling in speculative investments that hurt the real economy? If you wonder why nothing is done in Washington D.C. the vast majority of representatives support the elite class because they are part of it:
Until people start making these wider connections we will keep rearranging the deck chairs on the Titanic and by 2020 the wealthy will be even wealthier and the middle class will be a shell of what it once was in the United States. This is the new recovery according to the large financial interest that controls our government.
It’s the corporations and the very wealthiest against all the rest of us. We’re losing.
In 1962 the wealthiest 1 percent of American households had 125 times the wealth of the median household. Now it’s 190 times as much. Is that a case of a rising tide lifting all boats, just a few of them a little bit higher? No.
From 1950 to 1965, median family income rose from $24,000 a year to $38,000 a year. That’s close to 4 percent a year, close to 60 percent over 15 years. That’s a rising tide.
In 1964 there was a big tax cut. That’s when things started to slow down for average people. By the mid-’70s the rise of the middle class stalled. From 1975 to 2010 median family income rose $42,936 to $49,777. That’s not quite 16 percent over 25 years, less than six-tenths of 1 percent per year.
Briefly, when taxes went up under Clinton, median income rose, peaked at $52,587 in 1999, and then, after Bush cut taxes, declined. Keep in mind that this is median family income. In the ’50s and ’60s, family income was usually earned by a single person. Today, family income normally comes from at least two people.
At the same time, income for the richest soared. In 1979 the richest 1 percent of Americans earned 9 percent of all U.S. income. Now they earn 24 percent of all U.S. income. One percent of Americans earn nearly one-fourth of all the income in the country.
Then came the crashes of 2001 and 2008 and the recessions that followed.
The crash hasn’t changed anything. Things have become worse.
From 1990 to 2005, adjusted for inflation — the minimum wage is down 9 percent, production workers’ pay is up only over 15 years 4.3 percent.
At the same time, the rich get richer:
Corporate profits are up 106.7 percent. The S&P 500 is still up 141.4 percent since 1990. CEO compensation is up 282 percent. Call it transfer of wealth. Or call it class warfare.
What’s wrong with the rich getting richer?
Slate’s Timothy Noah, in “The United States of Inequality,” wrote, “Income distribution in the United States [has become] more unequal than in Guyana, Nicaragua, and Venezuela, and roughly on par with Uruguay, Argentina, and Ecuador.”
Take a look at that list.
Countries with wide income inequality don’t lead the world in research, technology, industry, and innovation. They’re unstable. They have large underclasses. They have high rates of crime. They have little opportunity.
In such countries the rich have disproportionate power. They take control of all aspects of society, especially government, the police, and the judiciary. They become self perpetuating.
If current trends continue, “The United States by 2043 will have the same income inequality as Mexico.” (Tula Connell, Mar 12, 2010, AFL-CIO Now.)
Countries with high levels of income inequality are third-world countries.
Here’s how regular people can deal with cultures of high inequality. The primary, and best, weapon is a progressive tax structure. As people move up the income ladder they pay a higher rate at each rung. Unearned income –from dividends and capital gains – is taxed at least as high as earned income (money that people actually work for.) Tax cuts for the wealthy mark, with great precision, the decline in fortunes of ordinary Americans. Tax cuts for the wealthy mark, with equal precision, the increase in inequality. We had a chance to slow the process by letting the last round, the Bush tax cuts, expire. We’ve lost that round.
People can become educated and move on up.
Back in the ’60s, when I was growing up, New York City had free universities. The burgeoning SUNY system charged $400 tuition a semester. The minimum Regents scholarship was $400 a semester. If a student didn’t get one, he or she could easily earn enough to pay tuition with a summer job. The same held true for most state university systems across the country.
You might need an air-sick bag to read this one. Here are some highlights:
The U.S.-based CEO of one of the world’s largest hedge funds told me that his firm’s investment committee often discusses the question of who wins and who loses in today’s economy. In a recent internal debate, he said, one of his senior colleagues had argued that the hollowing-out of the American middle class didn’t really matter. “His point was that if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile means one American drops out of the middle class, that’s not such a bad trade,” the CEO recalled.
I heard a similar sentiment from the Taiwanese-born, 30-something CFO of a U.S. Internet company. A gentle, unpretentious man who went from public school to Harvard, he’s nonetheless not terribly sympathetic to the complaints of the American middle class. “We demand a higher paycheck than the rest of the world,” he told me. “So if you’re going to demand 10 times the paycheck, you need to deliver 10 times the value. It sounds harsh, but maybe people in the middle class need to decide to take a pay cut.”
Wilson’s distinction helps explain why many of America’s other business elites appear so removed from the continuing travails of the U.S. workforce and economy: the global “nation” in which they increasingly live and work is doing fine—indeed, it’s thriving. As a consequence of this disconnect, when business titans talk about the economy and their role in it, the notes they strike are often discordant: for example, Goldman Sachs CEO Lloyd Blankfein waving away public outrage in 2009 by saying he was “doing God’s work”; or the insistence by several top bankers after the immediate threat of the financial crisis receded that their institutions could have survived without TARP funding and that they had accepted it only because they had been strong-armed by Treasury Secretary Henry Paulson. Nor does this aloof disposition end at the water’s edge: think of BP CEO Tony Hayward, who complained of wanting to get his life back after the Gulf oil spill and then proceeded to do so by watching his yacht compete in a race off the Isle of Wight.
It is perhaps telling that Blankfein is the son of a Brooklyn postal worker and that Hayward—despite his U.S. caricature as an upper-class English twit—got his start at BP as a rig geologist in the North Sea. They are both, in other words, working-class boys made good. And while you might imagine that such backgrounds would make plutocrats especially sympathetic to those who are struggling, the opposite is often true. For the super-elite, a sense of meritocratic achievement can inspire high self-regard, and that self-regard—especially when compounded by their isolation among like-minded peers—can lead to obliviousness and indifference to the suffering of others.
Unsurprisingly, Russian oligarchs have been among the most fearless in expressing this attitude. A little more than a decade ago, for instance, I spoke to Mikhail Khodorkovsky, at that moment the richest man in Russia. “If a man is not an oligarch, something is not right with him,” Khodorkovsky told me. “Everyone had the same starting conditions, everyone could have done it.” (Khodorkovsky’s subsequent political travails—his oil company was appropriated by the state in 2004 and he is currently in prison—have tempered this Darwinian outlook: in a jail-cell correspondence last year, he admitted that he had “treated business exclusively as a game” and “did not care much about social responsibility.”)
Though typically more guarded in their choice of words, many American plutocrats suggest, as Khodorkovsky did, that the trials faced by the working and middle classes are generally their own fault. When I asked one of Wall Street’s most successful investment-bank CEOs if he felt guilty for his firm’s role in creating the financial crisis, he told me with evident sincerity that he did not. The real culprit, he explained, was his feckless cousin, who owned three cars and a home he could not afford. One of America’s top hedge-fund managers made a near-identical case to me—though this time the offenders were his in-laws and their subprime mortgage. And a private-equity baron who divides his time between New York and Palm Beach pinned blame for the collapse on a favorite golf caddy in Arizona, who had bought three condos as investment properties at the height of the bubble.
It is this not-our-fault mentality that accounts for the plutocrats’ profound sense of victimization in the Obama era. You might expect that American elites—and particularly those in the financial sector—would be feeling pretty good, and more than a little grateful, right now. Thanks to a $700 billion TARP bailout and hundreds of billions of dollars lent nearly free of charge by the Federal Reserve (a policy Soros himself told me was a “hidden gift” to the banks), Wall Street has surged back to pre-crisis levels of compensation even as Main Street continues to struggle. Yet many of America’s financial giants consider themselves under siege from the Obama administration—in some cases almost literally. Last summer, for example, Blackstone’s Schwarzman caused an uproar when he said an Obama proposal to raise taxes on private-equity-firm compensation—by treating “carried interest” as ordinary income—was “like when Hitler invaded Poland in 1939.”
If you can stand to read more: The Atlantic