FedUpUSA

Archive for the ‘political hypocrisy’ Category

The people out there that believe that the U.S. economy is experiencing a permanent recovery and that very bright days are ahead for us should have their heads examined.  Unfortunately, what we are going through right now is simply just a period of “hopetimism” between two financial crashes.  Things may seem relatively stable right now, but it won’t last long.  The truth is that the financial crisis of 2008 was just a warm up act for the economic horror show that is coming.  Nothing really got fixed after the crash of 2008.  We are living in the biggest debt bubble in the history of the world, and it has gotten even bigger since then.  The “too big to fail” banks are larger now than they have ever been.  Americans continue to run up credit card balances like there is no tomorrow.  Tens of thousands of manufacturing facilities and millions of jobs continue to leave the country.  We continue to consume far more than we produce and we continue to become poorer as a nation.  None of the problems that caused the crisis of 2008 have been solved and we are even weaker financially than we were back then.  So why in the world are so many people so optimistic about the economy right now?

Just take a look at the chart posted below.  It shows the growth of total debt in the United States.  During the financial crisis of 2008 there was a little “hiccup”, but the truth is that not much deleveraging really took place at all.  And since the recession “ended”, total credit market debt has gone on to even greater heights….

So what does this mean for the future?

Well, if a small “hiccup” in the debt bubble caused so much chaos back in 2008, what is going to happen when this debt bubble finally bursts?

That is something to think about.

Sadly, most Americans seem oblivious to all of this.

If you go out to malls in the wealthy areas of America today, people are charging up a storm.  In all, Americans charged a whopping 2.5 trillion dollars on their credit cards during 2011.  Way too many people have already forgotten the lessons that we all learned back in 2008.

Of course some Americans pay off their credit cards every month, but way too many Americans are not doing that.  Today, Americans are carrying 793 billion dollars in revolving credit balances.

And student loan debt is an even bigger bubble than credit card debt is.  As I have written about previously, total student loan debt in America is rapidly approaching a trillion dollars.

So it looks like U.S. consumers have not learned to stay away from debt.

That is not good.

Well, what about the banks?

Has the financial system learned any lessons since 2008?

No, not really.

Sadly, the “too big to fail” banks are now even bigger than ever.  The total assets of the six largest U.S. banks increased by 39 percent between September 30, 2006 and September 30, 2011.  If they were to fail today, they would be even more of a threat to our financial system than they were back in 2008.

And our major banks continue to be very highly leveraged.  In fact, major banks all over the world are absolutely swamped with debt.

The following statistics come from Zero Hedge….

The U.S. banking system is leveraged 13 to 1.

The Japanese banking system is leveraged 23 to 1.

The French banking system is leveraged 26 to 1.

The German banking system is leveraged 32 to 1.

These are insane levels of leverage, and they are just inviting another major financial crisis.

Do you all remember Lehman Brothers?  The fact that they were leveraged so highly is what did them in back in 2008.  When the value of their holdings declined by just a little bit they were totally wiped out.

Well, during this next financial crisis large financial institutions are going to be wiped out all over the world.  Major banks all over the globe are going to be crying out for more bailouts when things take a turn against them.

They are making the exact same mistakes that they made before, and they are going to be expecting more government handouts when things go bad.

Will we ever learn?

So obviously the banking system has not learned any lessons.

What about the federal government?

Well, if you follow my blog regularly, you know that I love to write about how horrific U.S. government debt is.

Unfortunately, over the past four years things have gotten so much worse.

Back in 2008, the U.S. national debt crossed the 10 trillion dollar mark.

Just recently, it crossed the 15 trillion dollar mark.

So now we are in a much weaker position financially to respond to another major financial crisis.

Just check out the chart posted below.  This is a recipe for national financial suicide….

During fiscal 2011, the Obama administration stole close to 150 million dollars from our children and our grandchildren every single hour.

At the moment, the legacy of debt that we are passing on to future generations is sitting a grand total of $15,351,406,294,640.49.

But keep in mind that it is going up every single hour.

Meanwhile, our ability to service that debt is declining.  We are rapidly getting poorer as a nation.

During 2011, the amount of money that left the United States exceeded the amount of money that entered the United States by more than a half a trillion dollars.

This gap is called a trade deficit, and it is absolutely ripping our economy to shreds.

For a moment, imagine Uncle Sam standing next to a giant pile of money on a map of the United States.  Then imagine a half a trillion dollars being taken out of that pile every single year.

So why haven’t we totally run out of money yet?

Well, it is because we borrow those dollars back.  In order to maintain our false standard of living, our federal government, our state governments and our local governments have to go out and beg the rest of the world to lend us our dollars back.

Sadly, our government schools have “dumbed-down” the population so much that most of them don’t even know what a “trade deficit” is anymore.

Meanwhile, our economic infrastructure is being gutted like a fish.

Look, I know that I go over this point over and over and over, but it is absolutely imperative that we all understand this.

The half a trillion dollars a year that leaves this country every year could have gone to support businesses and jobs inside the United States.

But instead it is going to support businesses and jobs on the other side of the world.

The consequences of this are absolutely devastating.

According to U.S. Representative Betty Sutton, an average of 23 manufacturing facilities a day closed down in the United States during 2010.  Overall, more than 56,000 manufacturing facilities in the United States have shut down since 2001.

Even many so-called “American companies” have been bought up by the rest of the world.  The following comes from a recent article posted on Economy In Crisis….

RCA is now a French company, Zenith is a Korean company. Frigidaire is a Swedish company. IBM’s Personal Computer Division—with its 500 patents—is now a Chinese company. Westinghouse Nuclear Energy’s major shareholder is Toshiba—a Japanese Company. Lucent Technologies, a former research division of AT&T, along with all the patents acquired from the beginning of the phone system, is now a French company. In 2008, Brazilian-Belgian brewing company InBev purchased the iconic American brewer Anheuser-Busch, makers of Budweiser. With the sale of these manufacturing companies, the future profit and technologies all belong to foreign entities.

We once had the greatest economic machine in the history of the world.

Now it is being dismantled and bought up by foreigners.

When America’s economic infrastructure declines, that means that there are less jobs available for all of us.

As I wrote about the other day, the employment situation in this country is not getting better and we have never even come close to recovering from the recession that started back in 2008.

During 2008 and 2009, the U.S. economy lost millions of jobs.  Since the beginning of 2010, the percentage of the U.S. population that has had a job has remained very stable….

Normally, when a recession ends the percentage of Americans that have a job bounces back pretty dramatically.

So considering the fact that the employment situation has never recovered from the last financial crisis, what is going to happen when the next financial crisis hits?

And most of the jobs that have been “created” during this so-called “recovery” have been low income jobs.  In fact, if you look closely at the employment numbers that were released last Friday, you will find that the vast majority of the “new jobs” were part-time jobs.

But you cannot pay a mortgage and support a family on a part-time job.

Sadly, the truth is that median household income in America has been steadily dropping over the past several years.  Tens of millions of American families are deeply struggling and more Americans than ever are falling into poverty.

Back in the year 2000, about one out of every nine Americans was living in poverty.  Today, about one out of every seven Americans is living in poverty.

All of this is causing a great deal of anxiety in America today.  Large numbers of Americans know that something has fundamentally changed, even if they don’t understand the specifics.  That is one reason why sites such as this one have become so popular.  People want some answers.

And once people get some answers about what is really happening, they tend to want to prepare for the hard times that are coming.

In a few days, a new series on National Geographic entitled “Doomsday Preppers” premieres.  The mainstream media is starting to take notice of the growing “prepper” movement in America today.  It is estimated that there are at least 2 million “preppers” in the United States at this point.  Of course people are “prepping” for a whole host of reasons, but the number one concern among most groups of preppers is the economy.

As the economy crumbles, more Americans than ever have decided that it is not a good thing to be 100% dependent on the system.

Back in 2008 and 2009, millions of Americans suddenly lost their jobs.  Because they did not have any finances stored up, large numbers of them also lost their homes.  Many went from being solidly middle class to being out on the street in a matter of months.

That doesn’t have to happen to you.  Instead of blowing your money on frivolous things, do what you can to set something aside for the difficult times that are on the horizon.

A lot of those “in the know” are quietly making their own preparations.  For example, legendary film director James Cameron (Avatar, Titanic and Terminator) has purchased more than 2600 acres of farmland in New Zealand and he is getting out of the U.S. for good apparently.

Unfortunately, most of us do not have the resources for something like that.  But what most of us can do is we can change our priorities and start focusing on the things that will help us survive the hard times that are coming.

So are you ready?

The Economic Collapse

If most high profile Republican leaders and officials, salaried or not, do not shed their political arrogance and narcissism soon, 2012 November elections may be a repeat of why a high percentage of California Republican middle class voters refused to vote for many Republican candidates last two major election seasons. If any candidate’s only relevance to our lives is their Republican registration – not good enough, not any more.  But the message remains elusive to local, state and national Republican Party officers and leaders suffering a severe handicap of arrogance, narcissism, and many lacking in social and people skills outside of impersonal blogs, websites and podium speeches.  Federal prisons are full of dishonest lawyers and corporate executives which justify us more streetwise middle class voters to remain cynical and distrustful even of our own GOP leaderships.

Every time the majority of elected Republican leaders, local, state or national display condescending attitudes, arrogance, greedy self-serving agendas, and elitist demeanor toward whom they consider economic and intellectually inferior on the basis of modest incomes, they are further alienating an inevitable diversity of voters with potential common shared issues.  Many of us, with the ability and the backbone to confront internal Party deficiencies and push for leadership reforms, are frequent targets of verbal assaults by titular Republicans with delusions of being earthly deity.  God forbid if virtues of speaking truth and accountability are not just confined at Democrats.  It remains the GOP (as in Going Old Party) tradition to discourage us plebiscites from openly (instead of some “quiet room”) exposing ineffective leaders; or to probe into some Republican candidate’s credibility by connecting the dots between current campaign rhetoric to his/her past performance.  Embellishing resumes to expediently fit a believable profile of public leadership has not escaped intelligent voters’ observations. A demon is a demon regardless of partisan labels or religious claims which are no assurance of their personal integrity and humanity.

It takes profound intellect and expansive sociological sophistication, seemingly lacking in sufficient numbers within current traditional Republican ranks, to develop solutions of realistic substance.  The Democratic Party is not alone in being inundated with intellectually hollow whiners.  Attending state GOP conventions are bastions of mind numbing sound bites – stale, archaic, simplistic and lacking in public relations hospitality and other social skills to which the organizers seem totally and repeatedly oblivious, but then consider the sources.

Every political leader should be judged for re-election on the basis of how much legislation and policies have given benefit to the mass numbers of their constituents, not to a small percent of their deep pocket donors.  Not all corporate titans give a damn about helping to preserve and improve the integrity of U.S. patriotism, as most have legally sanctioned privileges to protecting their profits by stashing their monies offshore; low wage overseas job outsourcing; and our U.S. military protecting corporate overseas assets. Legislative offices, supported by middle class taxpayers as well, are visited most frequently by corporate lobbyists, whose fees are a business tax deduction unavailable to us middle class.  In fact, economic treason is a legitimate allegation to launch against many Republican and Democratic congressmen,  U.S. Senators and their corporate donors.  Isolating the ills of this nation just on Democrats alone is wearing thin, given the facts of bi-partisan complicity in playing us middle class voters and taxpayers like human yo-yo’s.

The problem why our GOP presidential candidates are not believable is that Newt Gingrich comes across a capricious and ego driven moral and ethical hypocrite whose criticism against Mitt Romney seems  self-serving.  On the other hand, Mitt Romney believes himself to be an American aristocrat whose rhetoric alone should be sufficient to justify voters’  support.  Romney’s offensive references to “envy” and that tax policy disagreements be confined to “quiet rooms” among other verbal Freudian slips were not just poor choice of words, but reflective of how he defines us not of the elite.  In his mindset, failing to achieve super rich status is the only value which passes his litmus test of intelligence.  Rick Santorum is too culturally and socially unsophisticated to lead a nation where many admitted Christians, including Catholics, prefer government and legislative agendas be confined within secular boundaries. Ron Paul is just a magnet for Libertarian type advocating a anarchy.

News media have no idea the number of scams, deceit, lies and exploitation passing for GOP’s version of gratitude, respect and morale reinforcement to many of us grassroots active uncompensated Republican volunteers in California and beyond.  Our first Bay Area regional Korean American Republican elected as GOP state senate nominee, Doo Sup Park, had to file a police report for a seemingly deliberate act of larceny committed on him last year by Luis Buhler sanctioned by his CAGOP allies, as the case remains ignored by the California Republican Party officers (all white Caucasian and most are social rednecks).  However, such breaches of integrity and respect are prolific, mostly the rule, not the exception. We are no longer electing from high standards of public leadership qualifications, but out of desperation to lure candidates with disposable campaign cash, insatiable egos and under the delusions that simply attacking  Democrats  is synonymous with actual leadership performance.  Unless we grassroots Republicans assert our mandates for higher standards, we will be stuck with the whims of some Tea Party movement; and politically ambitious individuals mistaking narcissism, aloofness and arrogance as social class. Maybe an acting course can help many of them effectively pretend to have charisma. Too many overpriced Republican campaign consultants and spin doctors seem to do a lousy job.

The problem is that many Republican official representatives and leaders, even at county levels, believe their role to just pontificate rules of behavior for others. They believe to be divinely or aristocratically immune from the need to exemplify role model behavior or be held accountable. Talking at us, not with us is a typical Republican tradition which is sowing Republican middle class warfare conflicts.  It is the arrogance of many Republican officials, salaried or not, to presume that blind allegiance to the Republican Party ideals must transfer even to defective Party leaders. We have a moral and ethical right to support the ideological merits of being Republican without being crucified for refusing to pay homage to a growing number of politically ambitious Republicans whose only public leadership qualification lies in their embellished or fictional resumes.

Gail E. Neira
Lifelong conservative Hispanic American active Republican
San Francisco native, past publisher, managing editor, diplomatic embassy aide

Grassroots Republican Pantry

The Pampas of Argentina or the backwaters of Paraguay were the preferred location for those who openly professed their reprehensible loyalty to the Führer principle. However, do not blame all those ex-Nazis for selecting the shores of the Americas for their new domicile, their seeds were planted long ago in the offices of Wall and Broad Streets. Leni Riefenstahl’s Triumph of the Will saga shares more, than what one wants to admit, about the dark side of American History.

From the beginning of the Republic, the Federalists conspired for the illegal passage of their central government constitution in order to form a competing world empire with their British cousins. Their leader was Alexander Hamilton, who championed making individual states subservient to the original crony capitalists. When the Father of our Country, George Washington admonished about the dangers on entangling alliances, the world was warned that the drive towards independent liberty was compromised under this new Federal system.

When Andrew Jackson rallied frontier populism against the establishment elites of his era, you had an opportunity to restore some of the former glory of the Revolution of 1776. The conflict over the abolishment of the National Bank symbolizes the eternal struggle that continues to this very day.

The Manifest Destiny of the U.S.-Mexican War demonstrated just how far the country strayed from the fundamental concept of independence from England. The expansionistic campaign had more in common with the Crown than the Boston Tea Party.

The early 19th century fascists looked to their next defender Abraham Lincoln, the lawyer for the railroad corporatist cabal and the worst of all despotic presidents, to complete the task.

Myth #1: Lincoln invaded the South to free the slaves.

Myth #2: Lincoln’s war “saved the Union.”

Myth #3: Lincoln championed equality and natural rights.

Myth #4: Lincoln was a defender of the Constitution.

Myth #5: Lincoln was a “great humanitarian” who had “malice toward none.”

Myth #6: War was necessary to end slavery.

The significance of the War of Northern Aggression is that the principle of independent sovereign states under the precepts of constitutional law died. With the prevention of secession, the liberty of a voluntary union was betrayed for the rule, under a loyalty oath, to an Amerikan Reich.

The next False Flag excuse was the Spanish-American War and the “Remember the Maine!” slogan that pushed the country into a “Pacific Imperium“. Those NeoCons, like Senator John McCain, who revere Theodore Roosevelt as a model for imperialist jingoism, draw their psychopathic lusts from the same bloodline as Reinhard Heydrich and Heinrich Himmler.

World War I produced the infamous Woodrow Wilson internationalist treason. No longer will America be a society governed by elected representatives. The only coup to come out of his administration was won by the banksters. The fate of a proud people, sealed with the creation of the Federal Reserve, the establishment of the income tax and the permanent foreign military intervention abroad is the basis for the final destruction of the country and the horrors that befell our nation in the last century.

World War II inflicted the Franklin D. Roosevelt curse that guaranteed the imposition of socialism on the American people. How ironic that the Hitler bogyman’s regime, the scourge of Western Civilization and the reason for defending democracy, ultimately lead to similar collectivist policies, now adopted in the United States.

Just look to the ignominious involvement of Prescott Bush’s involvement with the funding of Adolph Hitler. Even FAUX news cannot hide the relationship in Bush’s Grandfather Directed Bank Tied to Man Who Funded Hitler.

“Prescott Bush was one of seven directors of Union Banking Corp., a New York investment bank owned by a bank controlled by the Thyssen family, according to recently declassified National Archives documents reviewed by The Associated Press.”

So what can and should a “reasonable man” conclude from these examples from history? The essential lesson is that the pristine fairy tale of the federal government’s noble role as defender of righteousness, that politicians want to accept and often die for, is a fictional myth.

Power politics always serves the interests of the banking elites, who control the political process, own the financial capital and manipulate the media viewpoint of events. This reality is pure fascism. You live under this system, so grow up, and admit it . . . it is the lamentable truth.

The Fourth Reich did not originate with Operation Overcast, the initiate name for Operation Paperclip. The classic book Fourth Reich of the Rich, by Des Griffin deserves another read.

“Some 150 years ago, in a speech at Springfield, Illinois, Abraham Lincoln acknowledged the fact that “no foreign power or combination of foreign powers could by force take a drink from the Ohio or make a track on the Blue Ridge in a trial of a thousand years.”At what point then is the approach of danger to be expected? I answer, if it ever reach us it must spring up from among us, it cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen we must live through all time or die of suicide.”

Are we committing national suicide? Webster’s Dictionary (1828) defines suicide as: “Self murder; the act of designedly destroying one’s own life.” For that to be true on a national scale, the decisions leading up to our national self-destruction would, of necessity, have to be made by those who govern the country Congress, or “the government.”

Much of the German population was captivated by Hitler. The “presstitute” Goebbels’ media holds out Obama as a shining example. His manners are a composition of every tyranny to grace the scorched earth of despotic government. Will the America public come to their senses and make war against this Amerikana version of the Fourth Reich? You need not look for the Boys from Brazil to find today’s Nazi’s. They do their business in New York City, run their international institutes from London and order their bombing from Washington, DC.

Sieg heil! to the New World Order is the modern definition of national suicide.

SARTRE

Chief executive officers from eight of the largest US banks receiving government aid testify at a House Financial Services Committee hearing in Washington, DC, 02/11/09 (photo: Brendan Smialowski/Bloomberg)

I’ll be damned.

As 2011 slithers to its end, none of the major problems that led to the crisis point three years ago have really been solved. Bank balance sheets still reek. Europe day by day becomes a financial black hole, with matter from the periphery being sucked toward the center until the vortex itself collapses. The Street and its ministries of propaganda have fallen back on a Big Lie as old as capitalism itself: that all that has gone wrong has been government’s fault. This time, however, I don’t think the argument that “Washington ate my homework” is going to work. This time, a firestorm is going to explode about the Street’s head – and about time, too.

….

Over the next year, I expect the “what” will give way to the “how” in the broad electorate’s comprehension of the financial situation. The 99 percent must learn to differentiate the bloodsuckers and rent-extractors from those in the 1 percent who make the world a better, more just place to live. Once people realize how Wall Street made its pile, understand how financiers get rich, what it is that they actually do, the time will become ripe for someone to gather the spreading ripples of anger and perplexity into a focused tsunami of retribution. To make the bastards pay, properly, for the grief and woe they have caused. Perhaps not to the extent proposed by H. L. Mencken, who wrote that when a bank fails, the first order of business should be to hang its board of directors, but in a manner in which the pain is proportionate to the collateral damage. Possibly an excess-profits tax retroactive to 2007, or some form of “Tobin tax” on transactions, or a wealth tax. The era of money for nothing will be over.

But it won’t just end with taxes. When the great day comes, Wall Street will pray for another Pecora, because compared with the rough beast now beginning to strain at the leash, Pecora will look like Phil Gramm. Humiliation and ridicule, even financial penalties, will be the least of the Street’s tribulations. There will be prosecutions and show trials. There will be violence, mark my words. Houses burnt, property defaced. I just hope that this time the mob targets the right people in Wall Street and in Washington. (How does a right-thinking Christian go about asking Santa for Mitch McConnell’s head under the Christmas tree?) There will be kleptocrats who threaten to take themselves elsewhere if their demands on jurisdictions and tax breaks aren’t met, and I say let ‘em go!

Hoh hoh hoh.

Michael Thomas is right, you know.  I’ve been trying to get purchase for draining the swamp and punishing the wrongdoers among the various political classes in DC and elsewhere for a long time, in some cases dating back to the 1990s.  My stock in trade is mathematics — that irrespective of the money flowing into the coffers of campaigns and lobbying offices what’s being attempted cannot work and as a consequence we are choosing between doing the right thing now and having it suck and doing it later by force and having it suck more.

Why appeal to people in this way?  Well, what else do you have when the base case — that you should do the right thing because it’s right — no longer has any currency?  In a city (DC) and nation (America) where bribery and corruption have become a way of life, where lies told to the electorate as a means of buying votes has become the degenerate set that’s left of what used to pass for law and order, you can no longer appeal to people’s “better virtues.”

All that’s left is trying to appeal to their desire to survive what’s coming, whether that survival is political or at rather-more-fundamental level.

This isn’t the sort of thing that anyone wants to talk of openly, of course, but we must, because just like mathematics it is inevitable on the path we are on.  The idea that one can “throw money from helicopters” as Bernanke has put forward is an intentional fraud.  Diluting the currency base of course simply makes everything more expensive you need while attempting to bail out those in debt at the same time.  For the common man in debt nothing happens.  For the poor who never had access to credit at a material level they literally starve and thus civil and political order is threatened.  The wealthy, for their part, simply skim off more and more to “protect” their capital.   That a man who runs this sort of crap manages to get reconfirmed after intentionally averting his eyes to the bubble being blown as a consequence of his policies is an outrage.  It speaks to the high corruption of public process and public life, but it is not an isolated incident or uncommon in the world of today.

The IMF’s Lagarde talks of Europe being “everyone’s problem”, as if Germany and France decided to con the world with hinky Greek derivative deals.  Perhaps some French or German banks did so (along with American ones), but France and Germany themselves?  No.  But now, having happened, it suddenly is someone else’s problem to bail out, and oh by the way, it’s not just Greece.

At its core the problem is both simpler and more complex than it first appears.  The complexity is intentionally used as a foil by various pundits and others who argue that we must support the “financial innovators” lest it all go somewhere else.  But Paul Volcker, hardly a dummy, has said in public that the only real “innovation” in the financial industry in the last 30 years was the ATM!

He’s right, you know.  Ginning up some debt deal and selling it to rubes, knowing full well that it was crap and destined to eventually blow up, is nothing new at all.  A column over at Interfluidity argues that the bankster model is not only old hat but has driven much of innovation through the ages.  To that argument I call bull.

Simply put the question being put forward in the latter article proceeds from a false premise.  The idea that we gain some sort of “societal benefit” from these misallocations of capital is trivially proved to be false using nothing more than basic analysis and mathematics.  All you have to do is look here:

Notice how the outstanding debt increase, quarter by quarter, exceeds that of output.  The premise run by Interfluidity is that the societal good in terms of Nash Equilibria is therefore false, as it is not adjusted for the claims made against the future.  This of course is exactly the sort of lie the banksters and politicians have run as their stock in trade for 30 years, and it is not surprising at all that Steve would fall into the trap.  After all most of us alive have spent the majority of our lives in this lie.

If I can falsify the premise from which you proceed then the remainder of your argument goes in the ashcan.  Sorry Steve.

The smartest guys in the room (that would be the banksters) always believe they can get away with it, of course.  Some of them are delusional, many for the same reasons.  A number of those who are considered “respectable” even subscribe to idiocies like “MMT”, believing that somehow the government causes economic growth through deficit spending.

But the graph above does not lie.  As I have repeatedly commented these beliefs are much like perpetual motion in its various forms; there is always someone who claims to have figured it out.  But the laws of thermodynamics say perpetual motion is impossible, and ultimately once again the person running the scheme is proved to be wrong — usually intentionally so when their hidden energy source is discovered.

The choice is not between a modern economic system that favors growth and living in caves.  It is between economic progress that is sustainable and funded from economic surplus and one that is built on debt bubbles, lies, and ultimately must and does collapse.

The former is an economy that grows through actual innovation and improvement in productivity, where debt is a tool to liquify transaction flow rather than pyramid upon the shoulders of the people.  The latter is the lie we’ve lived for 30 years, and which is now reaching its mathematical conclusion.

We face a time when in the present we have a choice of becoming adults and accepting what we’ve done, along with what we must do, or continuing to pound on the table like a petulant child demanding another bar of chocolate.  The latter path has been the road of the last 30 years, but now the supply of chocolate is exhausted.  There is food to be had outside in the form of strawberries, ears of corn and even a rabbit or three, but to obtain the latter we must get off our collective asses and pick the strawberries, cultivate the corn or shoot, skin and cook the rabbit.  We are choosing now between recognition and personal effort, along with acceptance of the harm we’ve done by eating all that chocolate (we’re all 100lbs overweight!) or literal starvation through laziness.

The old political and bankster ways are out of gas folks.  There is no path forward on the road we’ve been traveling — the bridge is out and our choice is to either stop before we reach the edge or take the plunge onto the rocky cliffs below.

Choose wisely.

If you spend much time watching the mainstream news, then you know how incredibly vapid it can be.  It is amazing how they can spend so much time saying next to nothing.  There seems to be a huge reluctance to tackle the tough issues and the hard questions.  Perhaps I should be thankful for this, because if the mainstream media was doing their job properly, there would not be a need for the alternative media.  Once upon a time, the mainstream media had a virtual monopoly on the dissemination of news in the United States, but that has changed.  Thankfully, the Internet in the United States is free and open (at least for now) and people that are hungry for the truth can go searching for it.  Today, an increasing number of Americans want to understand why our economy is dying and why our national debt is skyrocketing.  An increasing number of Americans are deeply frustrated with what is going on in Washington D.C. and they are alarmed that we seem to get closer to becoming a totalitarian police state with each passing year.  People want real answers about our foreign policy, about our corrupt politicians, about our corrupt financial system, about our shocking moral decline and about the increasing instability that we are seeing all over the world, and they are not getting those answers from the mainstream media.

If the mainstream media will not do it, then those of us in the alternative media will be glad to tackle the tough issues.  The following are 40 hard questions that the American people should be asking right now….

#1 If Iran tries to shut down the Strait of Hormuz, what will that do to the price of oil and what will that do to the global economy?

#2 If Iran tries to shut down the Strait of Hormuz, will the United States respond by launching a military strike on Iran?

#3 Why is the Federal Reserve bailing out Europe?  And why are so few members of Congress objecting to this?

#4 The U.S. dollar has lost well over 95 percent of its value since the Federal Reserve was created,  the U.S. national debt is more than 5000 times larger than it was when the Federal Reserve was created and Federal Reserve Chairman Ben Bernanke has a track record of incompetence that is absolutely mind blowing.  So what possible justification is there for allowing the Federal Reserve to continue to issue our currency and run our economy?

#5 Why does the euro keep dropping like a rock?  Is this a sign that Europe is heading for a major recession?

#6 Why are European banks parking record-setting amounts of cash at the European Central Bank?  Is this evidence that banks don’t want to lend to one another and that we are on the verge of a massive credit crunch?

#7 If the European financial system is going to be just fine, then why is the UK government preparing feverishly for the collapse of the euro?

#8 What did the head of the IMF mean when she recently said that we could soon see conditions “reminiscent of the 1930s depression“?

#9 How in the world can Mitt Romney say with a straight face that the individual health insurance mandate that he signed into law as governor of Massachusetts was based on “conservative principles”?  Wouldn’t that make the individual mandate in Obamacare “conservative” as well?

#10 If the one thing that almost everyone in the Republican Party seems to agree on is that Obamacare is bad, then why is the candidate that created the plan that much of Obamacare was based upon leading in so many of the polls?

#11 What did Mitt Romney mean when he stated that he wants “to eliminate some of the differences, repeal the bad, and keep the good” in Obamacare?

#12 If no Republican candidate is able to accumulate at least 50 percent of the delegates by the time the Republican convention rolls around, will that mean that the Republicans will have a brokered convention that will enable the Republican establishment to pick whoever they want as the nominee?

#13 Why are middle class families being taxed into oblivion while the big oil companies receive about $4.4 billion in specialized tax breaks a year from the federal government?

#14 Why have we allowed the “too big to fail” banks to become even larger?

#15 Why has the United States had a negative trade balance every single year since 1976?

#16 Back in 1970, 25 percent of all jobs in the United States were manufacturing jobs. Today, only 9 percent of all jobs in the United States are manufacturing jobs.  How in the world could we allow that to happen?

#17 If the United States has lost an average of 50,000 manufacturing jobs a month since China joined the World Trade Organization in 2001, then why don’t our politicians do something about it?

#18 If you can believe it, more than 56,000 manufacturing facilities in the United States have permanently closed down since 2001.  So exactly what does that say about our economy?

#19 Why was the new Martin Luther King, Jr. Memorial on the National Mall made in China?  Wasn’t there anyone in America that could make it?

#20 If low income jobs now account for 41 percent of all jobs in the United States, then how are we going to continue to have a vibrant middle class?

#21 Why do the poor just keep getting poorer in the United States today?

#22 How can the Obama administration be talking about an “economic recovery” when 48 percent of all Americans are either considered to be “low income” or are living in poverty?

#23 Why has the number of new cars sold in the U.S. declined by about 50 percent since 1985?

#24 How can we say that we have a successful national energy policy when the average American household will spend a whopping $4,155 on gasoline by the end of this year?

#25 Why does it take gigantic mountains of money to get a college education in America today?  According to the Student Loan Debt Clock, total student loan debt in the United States will surpass the 1 trillion dollar mark in early 2012.  Isn’t there something very wrong about that?

#26 Why do about a third of all U.S. states allow borrowers who don’t pay their bills to be put in jail?

#27 If it costs tens of billions of dollars to take care of all of the illegal immigrants that are already in this country, why did the Obama administration go around Congress and grant “backdoor amnesty” to the vast majority of them?  Won’t that just encourage millions more to come in illegally?

#28 Why are gun sales setting new all-time records in America right now?

#29 Why are very elderly women being strip-searched by TSA agents at U.S. airports?  Does that really keep us any safer?

#30 The last words of Steve Jobs were “Oh wow. Oh wow. Oh wow.“  What did he mean by that?

#31 How in the world did scientists in Europe decide that it was a good idea for them to create a new “killer bird flu” that is very easy to pass from human to human?

#32 If our founding fathers intended to set up a limited central government, then why does the federal government just continue to get bigger and bigger?

#33 Are we on the verge of an absolutely devastating retirement crisis?  On January 1st, 2011 the very first of the Baby Boomers started to reach the age of 65.  Now more than 10,000 Baby Boomers will be turning 65 every single day for the next two decades.  So where in the world are we going to get all the money we need to pay them the retirement benefits that we have promised them?

#34 If the federal government stopped all borrowing today and began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the U.S. national debt.  So does anyone out there actually still believe that the U.S. national debt will be paid off someday?

#35 If the U.S. economy is getting better, then why are an all-time record 46 million Americans now on food stamps?

#36 How can we say that we have the greatest economy on earth when we have a child poverty rate that is more than twice as high as France and one out of every four American children is on food stamps?

#37 Since 1964, the reelection rate for members of the U.S. House of Representatives has never fallen below 85 percent.  So are the American people really that stupid that they would keep sending the exact same Congress critters back to Washington D.C. over and over and over?

#38 What does it say about our society that nearly one-third of all Americans are arrested by the time they reach the age of 23?

#39 Why do so many of our politicians think that it is a good idea to allow the U.S. military to arrest American citizens on American soil and indefinitely detain them without a trial?

#40 A new bill being considered by the U.S. House of Representatives would give the U.S. government power to shut down any website that is determined to “engage in, enable or facilitate” copyright infringement.  Many believe that the language of the new law is so vague that it would allow the government to permanently shut down any website that even links very briefly to “infringing material”.  Prominent websites such as Facebook, Twitter and YouTube would be constantly in danger of being given a “death penalty”.  The American people need to ask their members of Congress this question: Do you plan to vote for SOPA (The Stop Online Piracy Act)?  If the answer is yes, that is a clear indication that you should never cast a single vote for that member of Congress ever again.

So do you have answers to some of the questions posted above?

The Economic Collapse

The Corruption of America

The numbers tell us America is in decline… if not  outright collapse.

I say “the  numbers tell us” because I’ve become very sensitive to the impact this  kind of statement has on people. When I warned about the impending bankruptcy  of General Motors in 2006 and 2007, readers actually blamed me for the  company’s problems – as if my warnings to the public were the real problem,  rather than GM’s $400 billion in debt.

The claim was absurd. But the resentment my work  engendered was real.

So please… before you read this issue, which makes  several arresting claims about the future of our country… understand I am  only writing about the facts as I find them today. I am only drawing  conclusions based on the situation as it stands. I am not saying that these  conditions can’t improve. Or that they won’t improve.

The truth is, I am optimistic. I believe our country is  heading into a crisis. But I also believe that… sooner or later… Americans  will make the right choices and put our country  back on sound footing.

Please pay careful attention to the data I cite. And  please send me corrections to the facts. I will happily publish any correction  that can be substantiated. But please don’t send me threats, accusations  against my character, or baseless claims about my lack of patriotism. If I  didn’t love our country, none of these facts would bother me. I wouldn’t have  bothered writing this letter.

I know this is a politically charged and emotional  issue. My conclusions will not be easy for most readers to accept. Likewise,  many of the things I am writing about this month will challenge my subscribers  to re-examine what they believe about their country. The facts about America today tell a painful story about a country in a  steep decline, beset by problems of its own making.

One last point, before we begin… I realize that this  kind of macro-economic/political analysis is not, primarily, what you pay me  for. You rightly expect me to provide you with investment opportunities –  whether bull market, bear market, or total societal collapse. And that’s what  I’ve done every month for more than 15 years.

But that’s not what I’ve done this month. You won’t  find any investment ideas at all in these pages. This issue is unlike any other  I have ever written.

I’m sure it will spark a wave of cancellations –  costing me hundreds of thousands of dollars. I fear it will spark a tremendous  amount of controversy. Many people will surely accuse me of deliberately  writing inflammatory things in order to stir the pot and gain attention. That’s  not my intention. The truth is, I’ve gone to great lengths throughout my career  to protect my privacy.

I am speaking out now because I believe someone must.  And I have the resources to do it. I am  sharing these ideas with my subscribers because I know we have arrived at the  moment of a long-brewing crisis.

Our political leaders, our business leaders, and our  cultural leaders have made a series of catastrophic choices. The result has  been a long decline in America’s standard of living.

For decades, we have papered over these problems with  massive amounts of borrowing. But now, our debts total close to 400% of GDP,  and America is the world’s largest borrower (after being the world’s largest  creditor only 40 years ago)… And the holes in our society can no longer be  hidden…

We’ve reached the point where we will have to fix what  lies at the heart of America’s decline… or be satisfied with a vastly lower  standard of living in the future.

How do I know? How do I statistically define the  decline of America?

The broadest measure of national wealth is per-capita  gross domestic product (GDP). Economists use this figure to judge standards of  living around the world. It shows the value of the country’s annual production  divided by the number of its citizens. No, the production isn’t actually  divided among all  the citizens, but this measure provides us with a fair  benchmark to compare different economies around the world. Likewise, this  measure shows the growth (or the decline) in wealth in societies across time.

So… is America growing richer or poorer based on  per-capita GDP? Seems like a simple enough question, doesn’t it? Is our economy  growing faster than our population? Are we, as individuals, becoming more affluent?  Or is the pie, measured on a per-person basis, growing smaller?

This is the most fundamental measure of the success or  the failure of any political system or culture. Are the legal and social rules  we live under aiding our economic development or holding us back? What do the  numbers say?

Unfortunately, it’s a harder question to answer than it  should be. The problem is, we don’t have a sound currency with which to measure  GDP through time. Until 1971, the U.S. dollar was defined as a certain amount  of gold. And the price of gold was fixed by international agreement. It didn’t  actually begin to trade freely until 1975. Therefore, the value of the U.S. dollar  (and thus the value of U.S. production, which is measured in dollars) was  manipulated higher for many years.

Even today, our government’s nominal GDP figures are  greatly influenced by inflation. The influence of inflation is particularly  pernicious in GDP studies. You see, inflation, which actually reduces our  standard of living, drives up the amount of nominal GDP. So it creates the  appearance of a wealthier country… while the nation is actually getting  poorer.

The only real way to accurately measure per-capita GDP is  to build our own model. The need to build our own tools tells you something important  – the government doesn’t want anyone to know the answer to this question. It  could easily publish data far more accurate than the indexes it puts out. But  government doesn’t want anyone to know. And it wants to be able to say  “those aren’t the real data” when studies like ours produce bad news.

So pay attention to how we built our charts. You can  see for yourself that our data are far more accurate than the government’s  figures. Our data are based on the real purchasing power of the currency, not  the nominal numbers, which are completely meaningless in the real world.

The question we are trying to answer is: What would  per-capita GDP numbers look like, if we used a real-world currency, like gold,  or a basket of commodity prices, instead of the paper-based U.S. dollar? What  would the figures be if we measured GDP in sound money instead of the  government’s funny money?

Here’s how we figured it out. We took the government  numbers for nominal GDP and measured them first against commodity prices, and  later (after it began to trade freely) gold. We used a standard commodity index  (the CRB) up to 1975 and gold post-1975. The result of this analysis shows you  the real trend in U.S. per-capita  GDP, as measured on a real-world purchasing power basis.

Our analysis shows you what’s actually happened to our  real standard of living. The results, we suspect, will surprise even the most  bearish among you.

America is in a steep decline.

Americans Are  Getting Poorer – Fast

Let me anticipate the “official” criticism of  our study. Many people will claim that our numbers aren’t “real.”  They will say that we “mined” the data to produce a chart that showed  a steep decline.

That’s simply not so. All we’ve done is convert the  government’s nominal GDP stats into a fixed currency value that’s based on  real-world purchasing power. The fact is, our data are far more accurate than  the government’s because they represent the real-world experience. That’s why our data are far more closely  correlated to other real-world studies of wealth in America.

Consider, for example, annual sales of automobiles.  Auto sales peaked in 1985 (11 million) and have been declining at a fairly  steady rate since 1999. In 2009, Americans bought just 5.4 million passenger  cars. As a result, the median age of a registered vehicle in the U.S. is almost  10 years.

Our data shows that real per-capita wealth peaked in  the late 1960s. Guess when we find the absolutely lowest median age of the U.S.  fleet? In 1969. At the end of the 1960s, the median age of all the cars on the  road in the U.S. was only 5.1 years. Even as recently as 1990, the median age  was only 6.5 years.

Rich people buy new cars. Poor people do not.

Most important, our data “proves” something I  know many of you have felt or perceived for many years. You’ve seen the decline  of your neighborhoods. You’ve gone years without being able to earn more money  in your job. Or you’ve seen your purchasing power decrease to the point where  you’re now substituting lower-quality products on your grocery list for the  brand-name products you used to buy.

You can see how much harder it is on your children to  find good jobs, to buy good housing or a new car. As a result, few people under  the age of 40 have the same kind of “life story” as their parents.

And because they can’t “make it,” many have decided to “fake it.” The average college  student now graduates with $24,000 in debt… and by his late 20s has racked up  more than $6,000 in credit card debt. Meanwhile, median earnings for Americans  aged 25-34 equals $34,000-$38,000. (Source: Demos.org, “The Economic State  of Young America,” November 2011.)

Can you imagine starting your life out as an adult with  a personal debt-to-income level at close to 100%?  What does this say about the state of our economy? What does this say about the  state of our culture?

Who Suffers Most

It’s not only the young that are having trouble in  America. It is also the old.

Debt levels among households headed by people older  than 62 have been rising for two decades. The average mortgage size for this population is now $71,000 – five times  larger than it was in 1987 (adjusted for inflation), according to William Apgar  of Harvard’s Joint Center for Housing Studies.

Older Americans are also more reliant on credit card  debt than ever before… credit card debt.  From 1992 through 2007 (which is the latest data available) older Americans took on  credit card debt at a faster pace than the population as a whole. According to USA Today, lower- and middle-income  Americans aged 65 and older now carry an average of more than $10,000 in credit  card debt, up 26% since only 2005.

Given average interest rates of 20% for these debts,  it’s a fair bet that these obligations will never be repaid. But they will have  a terrible impact on the standard of living of these older Americans.

What in the heck is going on? Don’t Americans pay off  their mortgages before they retire? Don’t they work hard during their careers,  save, and invest, so they can move to Florida and spend their retirement in  comfort?

Older Americans living with credit card debt! This  doesn’t sound like America, does it? Or maybe it does.

My bet is that most of my subscribers know that  something has gone terribly wrong with America. It’s not easy to figure out how  all of this happened… but you know from your own experiences that these  numbers aren’t wrong. It might not be pleasant to think about… but these  figures paint a sad but accurate picture: America  is not the country it was 40 years ago. These changes are warping our economy,  politics, and culture.

In this month’s issue, I’d like to try to define a few  of the core reasons we’re in this situation. I can’t possibly analyze all the  factors that have led to this decline. But I want to document the growth of  graft in politics. I want to demonstrate – with real facts and examples – how  public company leadership has deteriorated. And I want to document some of the  things that are occurring in the broader society, all of which I believe are  linked to this fundamental decline in our standard of living.

You see, I believe the decline of our country is  primarily a decline of our culture.

We have lost our sense of honor, humility, and the  dedication to personal responsibility that, for more than 200 years, made our  country the greatest hope for mankind. I want to detail some of the factors  that gave rise to the current entitlement society. We have become a country of  people who believe their well-being is someone else’s responsibility.

I’ve labeled these problems: The Corruption of America.

These problems manifest themselves in different ways  across institutions in all parts of our society. But at their root, they are  simply facets of the same stone. They are all part of the same essential  problem.

The corruption of America isn’t happening in one part  of our country… or in one type of institution. It is happening across the  landscape of our society, in almost every institution. It’s a kind of moral  decay… a kind of greed… a kind of desperate grasp for power… And it’s  destroying our nation.

Henry Paulson and Jon Corzine - formerly of Goldman Sachs

The Ethos of  ‘Getting Yours’

Americans know, in their bones, that something terrible  is happening. Maybe you can’t articulate it. Maybe you don’t have the  statistics to understand exactly what’s going on. But my bet is, you think  about it a lot.

For me, a poignant moment of recognition came this  month.

Bloomberg news published an article based on  confidential sources about how Henry Paulson, the former CEO of Goldman Sachs  and the Republican U.S. Treasury secretary during the financial crisis, held  a secret meeting with the top 20 hedge-fund managers in New York City in late  July 2008. This was about two weeks after he testified to Congress that Fannie  Mae and Freddie Mac were “well-capitalized.”

I knew for a fact that what Paulson told Congress  wasn’t true. I wrote my entire June 2008 newsletter detailing exactly why  Fannie and Freddie certainly had billions in losses that they had not yet  revealed to investors – $500 billion in losses, at least. There was no question  in my mind, both companies were insolvent – “zeros,” as I explained.

And yet, in front of Congress, the U.S. Treasury  secretary was saying exactly the opposite. Either I was a liar… or he was.

Then… only a few days later… what did Paulson tell  those hedge-fund managers?

He told them the same thing I had written in my  newsletter. He told them the opposite of what he’d said publicly to Congress. He told these billionaire investors  that Fannie and Freddie were a disaster… They would require an enormous,  multibillion-dollar bailout… The U.S. government would have to take them  over… And their shareholders would be completely wiped out.

Here you had a high-government official, explicitly  lying to Congress (and by extension, the general public), while giving the real  facts to a group of people who represented the financial interests of the  world’s wealthiest folks. The story didn’t come to the public’s attention for two years.

This was the most outrageous example of graft and  corruption I have ever seen. Certainly it involves more billions of dollars in  misappropriated value than any other similar story I can recall. These managers  had the risk-free ability to make tens of billions of dollars, if not hundreds  of billions, by using derivatives to capitalize on what they knew was the  imminent collapse of the world’s largest mortgage bank. Who picked up the tab?  You know perfectly well. It was you and me, the taxpayers.

(One of the investment managers present at this meeting  was Steve Rattner, who by that point was already deeply involved in another bit  of graft, his efforts to bribe New York state pension-fund managers for large  investments into his hedge fund, from which he earned perhaps as much as $100  million. He later settled the charges for a mere $10 million shortly after  Andrew Cuomo was elected governor of New York.)

The Bloomberg story… about a crooked Treasury  secretary handing a room full of crooked billionaires inside information worth  billions of dollars… hardly caused a ripple. As far as I know, no actions are  being planned against Henry Paulson or any of the hedge-fund managers involved.  No other major media outlet picked up the story. I saw nothing about it from  the Department of Justice or the Securities and Exchange Commission.

What does that say about our country when even the most  egregious kind of corruption – involving hundreds of billions of dollars – is  simply ignored?

It seems like everyone in our country has lost his moral  bearing, from the highest government officials and senior corporate leaders all  the way down to schoolteachers and local community leaders. The ethos of my  fellow Americans seems to have changed from one of personal integrity and  responsibility to “getting yours” – the all-out attempt, by any means  possible, to get the most amount of benefits with the least amount of work.

You can see this in everything from the lowering of  school standards (revising the SAT) to the widespread use of  performance-enhancing drugs in professional, college, and high school sports.  Cheating has become a way of life in America.

I have an idea about how this happened… about the  root cause of this kind of corruption and why it was inevitable, given some of  the basic facts regarding how we’ve organized our government and our  corporations.

Let me show you the numbers – the hard facts – behind  what’s happened to our country…

The Corruption of  Politics

I’ll start with one of the biggest factors in the  decline of our civilization – the link between welfare, education, crime, and  politics.

It is routinely alleged in national political debates  that something is fundamentally unfair and un-American about the huge  “wealth gap” between the poorest Americans and the wealthiest. Some  politicians like to argue that the poor never have a real shot at the American  dream, and as a nation, we owe them more and more of our resources to correct  this injustice. Most important, it is alleged that only the government has the  resources to correct this inequality.

This is a dangerous notion…

First, it promotes the idea of entitlement. Entitlement  is a fairly new idea in the American political lexicon – perhaps because most  of our nation’s wealth is still fairly new. The American idea of entitlement  argues that because you were born into a rich society, other people owe you  something. The idea has become pervasive in our culture. It underlies the basic  assumptions behind the idea of a “wealth gap.” Implicit is the  assumption that successful Americans haven’t rightfully earned their wealth…  that in one way or another, they’ve taken advantage of the society and have an  obligation to give back most of what they’ve “taken.”

As you’ll see, I believe the idea of entitlement lies  at the root of many of our most serious cultural problems.

The more obvious problem is the idea that the  government is responsible for fixing the “wealth gap.” But the  government has proved wholly ineffective at dealing with poverty in America.  The data is nearly conclusive that government efforts are far more likely to be  the cause of the wealth gap than the solution.

The simple fact is, the government has to take  resources from someone before it can dole them out to others. And this act of  taking turns out to be economically destructive. It reduces the market’s  incentives for entrepreneurs. The more you take from the productive members of  society, the less productive they become. That’s the primary lesson of the  history of socialism. Yet… many of our political leaders seem oblivious to  this iron law of human nature.

Consider a simple analysis that compares the  unemployment rate with the size of the federal government’s spending, as  measured against GDP. (We created this chart after reading a similar analysis   at  Mark Perry’s excellent financial blog, Carpe Diem.)

As you can see in this chart, the larger the government grows as a  percentage of our economy, the higher unemployment rises. The more government, the less opportunity. These figures are  similar when studied comparatively across many different countries.

We also know from decades of experience that little of  the government’s funding for the poor will ever reach those who are actually in  need. Instead, these kinds of socialist policies end up sending billions of dollars into  the hands of unions, “community organizers,” and other sponsors of  the Democratic Party. This tightens their political control of America’s inner  cities, which have become the source of our country’s most intractable social  problems.

Believe me, I have reams of data and decades of case  studies for these conclusions. But before we get to my  proof, I want you to simply assume that what I’m saying is 100% correct. Assume  most of the government’s social spending ends up corrupting the politics of the  inner city. Assume these efforts actually make the “wealth gap”  larger. Assume these policies and the politicians who sponsor them are actually  creating a society of complete dependence, where the spread of ignorance has  created entire generations of people who aren’t educated enough to know they’ve  been enslaved by their own leaders.

If these things  are true, if my conclusions are exactly right, what would America’s poorest  communities look like today?

It has now been almost 50 years since the start of the  War on Poverty, President Lyndon Johnson’s program to radically increase  domestic welfare spending. These programs and their various spinoffs have been  at the center of Democratic politics ever since. In fact, if you compare  speeches about these programs from the mid-1960s until today, you will find the  verbiage never changes. Obama is merely echoing the same calls for “social  justice” that Robert Kennedy used in his ill-fated 1968 campaign for  president.

But besides the soaring rhetoric, besides the promise  of a “chicken in every pot,” what have these programs actually  achieved? The wholesale destruction of urban communities across America,  communities that are overwhelmingly African American. If the intention of these  programs had been to destroy black communities, you could have hardly done more  damage than the last 50 years of Democratic policy.

I don’t think most Americans realize how dangerous  these communities have become or the toll they take on our country as a whole.  That’s primarily because talking about this problem is seen as racist. That’s  complete nonsense. The victims of these policies are primarily black people.  Trying to help them restore dignity and independence to their communities isn’t  a racist goal. It’s humanitarian.

And let me offer a prediction… Sooner or later, the  people in these communities are going to finally point their finger at the  politicians who’ve lied and pandered to them for decades, all while stealing  from them at every turn. When that moment comes, having a track record of  correctly speaking out about the real nature of these problems will be a  valuable political asset.

No, I’m not running for office… I’m just trying to  buck-up the politicians who I know read this letter. They need to get out in  front of this issue.

Let me give you some of the numbers that define the  enormous scope of these problems.

According to the NAACP, Texas taxpayers spent $175  million in 2009 to imprison residents from a small part of Houston – only 10  zip codes out of 75. Thus, people from neighborhoods that are home to only  about 10% of the city’s population account for more than 33% of the state’s  entire $500 million annual prison spending. These neighborhoods are  overwhelmingly poor and African American.

In Pennsylvania, taxpayers will spend $290 million in  2009 to imprison residents from just 11 of Philadelphia’s neighborhoods,  representing about 25% of the city population. On this relatively small urban  area, the state will spend roughly half its $500 million prison budget. These neighborhoods are overwhelmingly poor and  African American.

In New York, taxpayers will spend $539 million to  imprison residents from only 24 of New York City’s 200 different neighborhoods.  Only 16% of the city’s population lives in these areas, but they will account  for nearly half of the  state’s  $1.1 billion prison budget. These  neighborhoods are overwhelmingly poor and African American.

America has many problems… but these neighborhoods  represent more than a society in decline. Life  in these places reflects a complete collapse of Western civilization. What’s happening in these communities? A breakdown of the family and the  resulting collapse of the school system. What you have left is crime – violent  and political.

In Detroit, only 27% of the black male students in the  school system graduate from high school. This  is not a racial problem: Only 19% of the white male students graduate from  those same schools. What’s causing this problem? A complete breakdown of  society. When communities can no longer teach their children the most basic  academic skills, such as reading, math, history, literature, and economics…  what future can we expect? And what kind of society do you expect after several  generations of total ignorance?

These problems are still found primarily in urban  areas, but they are spreading across the country. In Pinellas County, Florida,  only 21% of black male students graduate from high school. In Palm Beach  County, Florida, you find a similar number. Likewise Duval County, Florida…  and Jefferson Parish, Louisiana… and Charleston County, South Carolina. In  Nebraska, only 40% of black male students graduate from high school. In Nevada,  only 45%. In New York state, only 25%.

What opportunities are available in America to people  without even a basic education? The New York Times reports almost 70% of  black males without a high school diploma are unemployed in the United States.

In many predominantly black, urban communities, the  actual unemployment rate is close to 100% for young dropouts. Given these  figures, it isn’t surprising that many of these people end up in jail.

According to various studies, black males who dropped  out of school by age 16 are four times more likely to end up in jail than those  who remained in school. Crime is literally all they know. Likewise, a black  youth whose mother was a high school dropout is 88% more likely to end up in  jail. These are the two primary reasons nearly one in 11 adult black men are  either in jail or on parole.

How did this all happen? How did we end up with expensive schools that can’t  teach? How did we end up with young mothers who aren’t married? How did we end  up with entire generations of people who won’t – and probably can’t – work in  the labor force? How did we end up with a skyrocketing prison population? The  prison population in America has soared from less than half a million people in  1980 to more than 2.5 million people today. More than 7 million adults are in  prison or on parole in the United States. We  have an incarceration rate that’s seven times higher than any other industrialized  nation.

The land of the free?

Let’s ask the most basic question: What has the  gigantic increase in welfare spending and education spending done for the  underclass of America? It seems apparent that growth in federal spending has  caused far more harm than good. When you study these neighborhoods, what you  find is a horrifying story that’s been repeated, generation after generation  since the early 1960s. It’s a story of families who have been destroyed by  their dependency on the state.

The truly extraordinary part is that all  these  things happened after these  neighborhoods began voting and electing their own (typically black and  Democratic) leadership. The socialism they voted for themselves led most  directly to the destruction of their communities. It was their own mayors, ward  leaders, and congressmen who chose this path for these communities.

Let me show you one case study – Detroit.

How Socialism Came  to America… and Destroyed  Detroit

In 1961, the last Republican mayor of Detroit, Louis C.  Miriani, lost his re-election bid. He probably would have lost to anyone who  ran against him because he was known to be a crook. He later served 10 years in  prison for tax evasion.

The man who defeated him, Jerome Cavanagh, was a  Democrat. He ushered in a new kind of politics in Detroit. Cavanagh, who was  white, got elected by promising to give Detroit’s African American population  the civil rights they deserved. But he didn’t stop there. Seeing the political  advantage to serving this community’s interests, he did all he could to bring  government benefits and government spending to Detroit’s black community.

Cavanagh brought socialism to Detroit.

Mayor Cavanagh was the only elected official to serve  on President Johnson’s Model Cities task force. The program was modeled after  Soviet efforts to rebuild whole urban areas in Eastern Europe. At the time,  this centralized approach to urban development was proclaimed as an advantage  to the Soviet system, something that could give them an edge in the Cold War.

Detroit received widespread acclaim for its leadership  in the program, which attempted to turn a nine-square-mile section of the city  (with 134,000 inhabitants) into a “Model City.” To help finance the  effort, Cavanagh pushed a new income tax through the state legislature and a  “commuter tax” on city workers. He promised the mostly poor and black  residents of the Model City area that the rich would pay for all of these  benefits. He bought their votes with taxes they didn’t have to pay.

It was classic American socialism.

More than $400 million was spent on the program – and  that was back when quarters still had actual silver in them. The feds and  Democratic city mayors were soon telling people where to live, what to build,  and what businesses to open or close. In return, the people received cash,  training, education, and health care.

But they didn’t like being told what to do… or how to  live. Not surprisingly, the Model Cities program was a disaster for Detroit.  Within five years, it had helped trigger a complete breakdown of civil order  and the city’s population began to rapidly decline.

On July 23, 1967, police attempted to break up a  notorious “blind pig” in the heart of the new Model City. Blind pigs  were after-hours clubs that featured gambling and prostitution. They were part  of the black culture of Detroit, with many having been in operation since the  Prohibition period. The community tolerated these establishments – but the  political leadership didn’t want any blind pigs in the new Model City area.

On this particular night, at this particular club, the  community was celebrating the return of two Vietnam War veterans. More than 80  people had packed into the club. The police decided to arrest everyone present,  including the two war vets. This outraged the entire neighborhood, which began  to riot. The scene turned into the worst race riot of the 1960s.

As my friend Doug Casey likes to say about the War on  Poverty, “The poor lost.”  The violence killed more than 40 people and left more than 5,000 people  homeless. One of the first stores to be looted was a black-owned pharmacy.  The largest black-owned clothing store in the city was also burned to the  ground. Cavanagh did nothing to stop the riots. (He claimed a large police  presence would make matters worse.) Five days later, President Johnson sent in  two divisions of paratroopers to put down the insurrection.

The situation destabilized the entire city. Most of the  people who could afford to leave did. Over the next 18 months, 140,000 upper-  and middle-class residents – almost all of them white – left the city.

And so, you might ask… after five years of  centralized planning, higher taxes, and a fleeing population, what did the  government decide to do with its grand experiment? You’ll never guess…

Seeing it had accomplished nothing but failure… The  government expanded the Model City program with 1974′s Community Development  Block Grant Program. Here again, politicians would decide which groups (and  even individuals) would receive state funds for various “renewal”  schemes. Later, big business was brought into the fold. In exchange for various  concessions, the Big Three automakers “gave” $488 million to the city  for use in still more redevelopment schemes in the mid-1990s.

What happened? Even with all of their power and all of  the money, centralized planners couldn’t succeed with any of their plans.  Nearly all of the upper- and middle-class citizens left Detroit. The poor fled,  too. The Model City area lost 63% of its population and 45% of its housing  units from the inception of the program through 1990.

Even today, the crisis continues. At a recent auction  of nearly 9,000 seized homes and lots, less than one-fifth of the available  properties sold, even with bidding starting at $500. You literally can’t give  away most of the property in Model City areas today. The properties put up for  sale represented an area the size of New York’s Central Park. Total vacant land  in Detroit now occupies an area the size of Boston. Detroit properties in  foreclosure have more than tripled since 2007.

None of this is surprising. It’s exactly what you’d  expect to see given the implementation of a socialist scheme like a Model  Cities’ program. Quite simply, coercion doesn’t work for economic development.  You cannot tax yourself into prosperity.

It might buy votes… but sooner or later the voters  will realize all that’s been promised was a lie. Won’t they?… Maybe not.

You see, the failure of the Model Cities program and of  the War on Poverty wasn’t surprising. What is surprising is that every  single mayor of Detroit since 1961 has been a Democrat. And extremely  liberal, black politicians have filled almost every major political office in  the city since the mid-1960s.

For example, John Conyers, Jr. has represented most of  Detroit’s worst neighborhoods since 1965. Today, Conyers is the  second-longest serving congressman in the House. And his election track record  could be described as “Putin-esque.” Conyers doesn’t merely win all of his election campaigns… He wins by  margins that aren’t explainable in a normal, two-party system.

He defeated Republican Robert Blackwell in 1964,  getting 84% of the vote. He was re-elected 13 times in a row from that  district, all with a greater margin of  victory than 85%. Ironically, the district was so ill-served by his  socialistic policies that about half of the people moved away. The population  losses led to redistricting. From then on, his margin of victory has fallen…  to “only” around 80%.

These election results don’t seem reasonable, do they?  They aren’t. By controlling the state legislature in Michigan, the Democrats  are able to draw the congressional districts in a way that guarantees them  almost permanent control. It’s no different than what despots do all over the  world. They hold an “election.” But it’s only for show.

And what do the Democrats do with this power? They push  a form of American socialism. This political system features transfer payments,  government jobs, and lucrative government contracts to voters in exchange for  political support – and in many cases, outright bribes. They do all of these  things under the cover of “progressive” politics and “social  justice.”

But if you brush away the veneer, what you find is a  history of abuse of power, corruption, and outright bribery. Conyers himself  was found guilty of several minor ethical violations in 2006 – mainly of using  his staff as personal servants, forcing them to babysit and chauffer his  children. In 1992, he was one of the most egregious abusers of the House  Banking scandal. He wrote 273 bad checks and left his account overdrawn for  nine months. But that’s all small-time graft compared to how things really work  in his office and in his district.

How do I know? Well… just ask yourself where Conyers’  wife sleeps today.

Monica Conyers, the wife of the second-longest tenured  congressman in the United States, sleeps in a federal prison in West Virginia.  She pled guilty to bribery in June 2009. She is serving a 37-month sentence  for accepting $60,000 in bribes as the president pro tempore of the Detroit  City Council. And yet… and yet… Conyers won re-election handily in  2010.

How is that possible?

These kinds of people and their political philosophy  have destroyed what was once America’s fourth-largest city. There is almost  nothing left of what was the capital of America’s industrial heartland. It’s  not hard to understand what has happened. When you start taxing people at  extremely progressive rates to pay for socialist “benefits”… when  you start telling them which schools their children must attend… when you  start giving jobs away to people based on political patronage, race, or  anything other than ability… you quash human freedom, you create dependency.  And you deter capital and investment… which bogs down productivity and economic  growth. If continued for long enough, it leads to social collapse.

And Conyers is hardly an anomaly. Just look at those  same blighted districts in Houston and Philadelphia…

In Houston, most of the city’s worst neighborhoods in  terms of high-school graduation rates and crime are found in Texas  Congressional District 18, where Democrats have won every election since the  district was created through re-zoning in 1972. In 1994, Sheila Jackson Lee won  the seat by promising to deliver more federal benefits to her constituents…

To appreciate the sterling representation the Honorable  Ms. Jackson Lee provides, consider this… In 2010 in bizarre remarks before  Congress, she demanded the government recognize victory in Vietnam. You can try  to figure out what she’s talking about here.  She also alleged racism on the part of her fellow  members of Congress who were voting against raising the debt ceiling. Don’t  believe it? View for yourself.

In Philadelphia, Chaka Fattah represents the worst parts  of the city, Pennsylvania’s 2nd Congressional District. The 2nd District is the  fifth-most Democratic Congressional District out of the 435 in Congress (and  the most Democratic outside of New York) based on the consistency and margin of  Democratic victories. A black Democrat has held the seat since 1963.

Among Chaka Fattah’s political highlights is his  economically illiterate plan to implement a 1% surcharge on all financial  transactions and transfers in lieu of all other forms of tax. This ill-fated  plan, which hasn’t gotten a single co-sponsor, ignores everything we know about  actual human behavior. (If you implemented such a cost to financial  transactions, the viability of those transactions would be destroyed and they  wouldn’t occur.)

Fattah’s other notable political position is his  support for convicted cop killer Mumia Abu-Jamal. Mumia’s case has been a cause  célèbre for years. The details of his endless appeals are tedious… just  know the evidence presented against him is overwhelming. And the Fraternal  Order of Police has consistently campaigned against Fattah’s re-election over  his support of Mumia.

The larger point is… These districts are among the  most blighted in our nation. Society has broken down there to a horrible  degree. Opportunity has vanished… Crime is rampant… Dependency on the state  is the norm. The leadership in these communities should be the most  scrutinized, their elected positions among the most contested. And yet, they  are the safest seats in Congress. The  officials dominance goes  unchallenged.

Why haven’t these policies and these leaders been  dropped – even after they’ve pled guilty to outright bribery? You would think  having experienced enough failure, having lived through horrible riots,  terrible crime, total economic collapse, brazen corruption… that sooner or  later, the voters in Detroit (and many other cities in America) would come to  their senses. But that’s not what happened. Instead, these systems have  continued to fail up to the point of total collapse. It is as if one part of  our society decided to run off the cliff… and then continued to do so for decades.

Why? Why did this happen? Why does it continue to  happen?

Read the rest at Stansberry Research