Posted on 15th December 2014 by Administrator in Economy |Politics |Social Issues

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“The real owners are the big wealthy business interests that control things and make all the important decisions. Forget the politicians, they’re an irrelevancy. The politicians are put there to give you the idea that you have freedom of choice. You don’t. You have no choice. You have owners. They own you. They own everything. They own all the important land. They own and control the corporations. They’ve long since bought and paid for the Senate, the Congress, the statehouses, the city halls. They’ve got the judges in their back pockets. And they own all the big media companies, so that they control just about all of the news and information you hear. They’ve got you by the balls. They spend billions of dollars every year lobbying ­ lobbying to get what they want. Well, we know what they want; they want more for themselves and less for everybody else.”  - George Carlin

After the disgusting example of politicians of both spineless parties bowing down before Wall Street, the military industrial complex and corporate interests this weekend with the passage of a bloated pig of a spending bill totaling $1.1 trillion, how can anyone not on the payroll of the vested interests not admit there is only one party – and it serves only the needs of the wealthy business interests. Obama, champion of the common folk, signed this putrid example of political corruption and corporate capture of the American political system. For all the believers who voted for the red team in the November mid-terms, this is what you got – a bipartisanship screwing of the American people.

The entire episode has been nothing but Kabuki Theater. Both parties have proven to be  puppets marching to the tune of Wall Street moneyed interests, while further entrenching the status quo by voting to allow more corporate influence over the election process. Each side of the aisle allowed just enough dissent to make it appear they might not reach an agreement. But at the end of the day Pelosi, Boehner, Reid and McConnell joined hands and gave it to the American public good and hard. And of course we had the candidates for president in 2016 Warren and Cruz playing to their constituents with speeches and maneuvers designed to make them look like fighters for the common man. It was nothing but a show, as they did nothing substantive to stop the bill from passing.

What this entire debacle has proven is that voting doesn’t matter. Your vote is meaningless. Political parties are nothing more than a front for the vested interests. The corrupt politicians are bought and sold by Wall Street and corporate interests. The bills are written by lobbyists for the vested interests. When a spending bill is over 1,700 pages, the purpose is to obscure, hide and insert provisions that will benefit those with money to influence the process at the expense of average Americans. None of the perpetrators in Congress actually read this bill. The public had no say regarding this bill. If this is what bipartisan cooperation looks like, I’ll take gridlock. The system has been so completely captured by those pulling the wires, they no longer even pretend to care what we think. They keep winning and care not about the consequences of their ruthless despicable pillaging.

Politicians decry money in politics when they are paraded onto the mainstream media talk shows. They profess to be men and women of the people, fighting for our rights. So how do they go about getting money out of politics? They dramatically expand the amount of money wealthy political donors can inject into the national parties, drastically undercutting the 2002 landmark McCain-Feingold campaign finance overhaul. A wealthy donor who could only give a maximum of $32,400 this year to the Democratic National Committee or Republican National Committee can now give ten times as much – a total of $324,000. Do you think these wealthy donors might have ten times more influence over government policies, laws, regulations, and tax codes? Do you think these donors are contributing these funds to fight for the rights of average Americans making $50,000 per year? This change just further entrenches the rich vested interests. Your vote just became even more meaningless.

The most outrageous provision in the spending bill is Wall Street putting the American taxpayer on the hook for when their $250 trillion of derivatives of mass destruction blow up the worldwide financial system again. Elizabeth Warren, playing her part in this farce, feigns outrage, knowing it will pass anyway:

“Mr. President, Democrats don’t like Wall Street bailouts. Republicans don’t like Wall Street bailouts. The American people are disgusted by Wall Street bailouts. And yet here we are five years after Dodd-Frank with Congress on the verge of ramming through a provision that would do nothing for the middle class, do nothing for community banks, do nothing but raise the risk that taxpayers will have to bail out the biggest banks once again. You know, there is a lot of talk lately about how Dodd-Frank isn’t perfect. There is a lot of talk coming from CitiGroup about how Dodd-Frank isn’t perfect. So let me say this to anyone listening at Citi —I agree with you. Dodd-Frank isn’t perfect. It should have broken you into pieces. If this Congress is going to open up Dodd-Frank in the months ahead then let’s open it up to get tougher, not to create more bailout opportunities.”

Senator Warren does hit at the heart of the matter. The Too Big To Fail banks should have been made too small to matter after they created the 2008 worldwide financial collapse. Congress should have reinstated Glass Steagall, the insolvent Wall Street banks should have been liquidated or sold off piece by piece, and the American taxpayer shouldn’t have had to pay one dime. Instead, those banks became bigger, more powerful, more arrogant, and more reckless. And now they are writing the laws supposedly regulating them. Regulatory capture at its finest.

Dodd-Frank was already a behemoth mess of a law, written by bank lobbyists, and so complex it was always destined to fail. The law that set up America’s banking system in 1864 ran to 29 pages; the Federal Reserve Act of 1913 went to 32 pages; the Banking Act that transformed American finance after the Wall Street Crash, commonly known as the Glass-Steagall act, spread out to 37 pages. Dodd-Frank was 848 pages long. One of the few beneficial sections of the law was the provision that  required banks to “push out” their derivatives trading into separate entities not backed by the Federal Deposit Insurance Corporation. Essentially, this provision prohibited the Too Big To Trust Wall Street Banks from using the deposits of customers to gamble on derivatives, with no capital behind the gambling. Any Wall Street bank that wanted to trade derivatives had to do it in non-insured subsidiaries, and when these trades blew up in their faces, the banks would be solely on the hook. They prefer the they win you lose method.

This spending bill included language written directly by Citigroup and inserted by the politicians in the back pocket of Jamie Dimon and the rest of the Wall Street cabal. Dimon showed no shame as he personally called lawmakers to insist they pass this bill with the gutting of Dodd Frank. Wall Street bankers can now gamble with the deposits of their clients with impunity generating obscene insider profits, and when they inevitably blow up the financial system again the American taxpayer will be on the hook for the losses. In a shocking development, the members who voted for the spending bill had received vastly more political contributions (bribes) than those who voted no. Simon Johnson, former chief economist of the International Monetary Fund and a professor at the MIT Sloan School of Management, concisely sums up the goal of this provision:

“It is because there is a lot of money at stake. They want to be able to take big risks where they get the upside and the taxpayer gets the potential downside.”

And there will be downside. Like Captain Renault in Casablanca, Jamie Dimon and the rest of the Wall Street CEOs will be shocked to find there has been gambling going on in their upstanding institutions of finance, as they cash their $10 million bonus checks. The markets are already overvalued, built on a foundation of debt, and rigged by the Wall Street scumbags. They make Bernie Madoff look like an upstanding citizen. It seems awfully coincidental this provision was inserted into the 1,700 page bill just as the markets have begun to tremor. Wall Street wouldn’t be preparing for another earthquake, would they? The fact that Obama signed this bill is a reflection of him being a spineless toady figurehead, doing the bidding of the ruling class.

The Republicans have run against Obamacare since the day it was passed in 2009. They have threatened to overturn it, de-fund it, and scale it back. This spending bill fully funds Obamacare just as it was passed. Dozens of Republicans voted for a spending bill that fully funds the program they despise. Obama recently subverted the U.S. Constitution once again with his latest executive order allowing illegal immigrants to stay in the U.S. and enjoy our wonderful welfare system. The Republicans were morally outraged and their response was to fund Obama’s executive order to the tune of $2.5 billion. There’s $948 million for the Department of Health and Human Service’s unaccompanied children program — an $80 million increase. The department also gets $14 million to help school districts absorbing new immigrant students. And the State Department gets $260 million to assist Central American countries from where of the immigrant children are coming.

So much for principles, ethics, and courage. You see bipartisanship in Congress means that one side will agree to fully fund the welfare state as long as the other side will fully fund the warfare state, while both sides do whatever Wall Street instructs them to do. Neither side cares that the National Debt increases by $2.5 billion per day. That’s what the Fed is for. The neo-cons in the Republican party were happy, as their dreams of World War III come closer to fruition. There’s $1.3 billion for a new Counterterrorism Partnership Fund; $5 billion for military operations to combat the Islamic State, including $1.6 billion to train Iraqi and Kurdish forces (I thought we already trained them once before); $500 million for a Pentagon-led program to train and equip vetted Syrian opposition fighters; $810 million for ongoing military operations in Europe, including requirements that at least $175 million is spent in support of Ukraine and Baltic nations. And you were worried about Defense cuts. The military industrial complex will never allow their profits to decline. If we run out of real enemies, we just make them up out of thin air – ISIS, or go back to the Cold War playbook and declare Russia to be an imminent threat to our safety and security.

Despite running $800 billion actual (not the BS reported deficits) annual deficits, the political hacks of the ruling party still funnel $3.1 billion per year to Israel, $1.3 billion to the dictator in Egypt, and $1 billion to our puppets in Jordan. This hyper-interventionism in the affairs of countries around the globe, either through military intervention, supplying arms, overthrowing elected leaders, or funding dictators has destabilized the entire world. Russia is not the aggressor on the world stage, as portrayed by the mouthpieces for the state in the mainstream corporate media. The American empire has created the conditions for havoc, disarray and war to flourish. Someone will ultimately do something stupid and the fury of hell will be unleashed across the globe. And it is our fault.

You’ll be happy to know the trucking industry still has some pull in Congress. Their drivers will be allowed to work 82 hours per week, versus the far too restrictive 70 hours per week. When you are driving your economy car on the interstate and that 18 wheeler is barreling down on you from behind, thank Congress when the drowsy dude behind the wheel is working his 81st hour of the week. And if you were a hard working middle income blue collar worker in businesses such as trucking, construction and supermarkets and were promised a pension, tough luck. Hidden inside the bill was a haircut for pensions. This provision allows the promised pension benefits of up to 1.5 million workers and retirees to be cut. It affects the pooled pension plans — called multi-employer plans — of mostly union workers across a bunch of companies, where it looks like the plans won’t be able to cover full benefits in coming decades.

Could it be any clearer that we are nothing but lowly peasants and the aristocracy inhabiting the protected luxury skyscrapers suites in New York City and the government buildings in Washington D.C. have nothing but contempt and scorn for our plight, as they gorge themselves like pigs at the trough of working people’s wealth? They use taxes and inflation to siphon your savings and earnings, rig the markets so they always win, write the laws to favor themselves, and use the mass media and the police surveillance state to crush dissent, control the message and intimidate the masses. The ruling class fears the masses and continues to prepare for a coming conflict. Within the Intelligence Authorization Act for FY 2015, passed this week, was written a new section that grants the executive branch virtually unlimited access to the communications of every American.

Sec. 309 authorizes “the acquisition, retention, and dissemination” of nonpublic communications, including those to and from U.S. persons. The section contemplates that those private communications of Americans, obtained without a court order, may be transferred to domestic law enforcement for criminal investigations.   Sec. 309 provides the first statutory authority for the acquisition, retention, and dissemination of U.S. persons’ private communications obtained without legal process such as a court order or a subpoena. The administration currently may conduct such surveillance under a claim of executive authority, such as E.O. 12333. However, Congress never has approved of using executive authority in that way to capture and use Americans’ private telephone records, electronic communications, or cloud data.

The majority of American people still believe they live in a democracy where their vote matters. Sadly, they are living in a delusional fantasy world, as they actually live in a corporate fascist welfare/warfare surveillance state run by one party of vested corporate interests. Until consent is withdrawn and the pigmen are violently confronted, nothing will change. The existing social order will be swept away within the next fifteen years as this Fourth Turning reaches its bloody conclusion. You may think we are all equal under the law, but Orwell knew that some are more equal than others. Can you distinguish the pigs from the men?

“The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.”  ― George Orwell, Animal Farm

“Democracy is the theory that the common people know what they want and deserve to get it good and hard.”H.L. Mencken 

Mucks’ Minute (or maybe two)

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Posted on 17th December 2014 by MuckAbout in Economy |Politics |Social Issues |Technology

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The Argument for Fiat Money


Now that title got your attention, didn’t it?

Here in the middle of governmental chaos and confusion, political bickering and turmoil, moral decay and dishonesty, debt through the roof with mathematical proof that there is no way to pay it back and that will, at any rate, result in a Depression worse than the last “Great One” and before we’re through, if history is a guide, it will likely be a world wide Depression of a size never before seen or experienced.  The killer drop in oil prices is simply the next bubble in line to pop!  And there are dozens more right there in line to follow.

So,  I am making a case for fiat money…

No, I’m not nuts, just trying making a point.

First, as we all know, all debt must be paid – all over the world.  The debt may be repaid in real goods (gold, silver, productive output, etc)  Most countries of lesser stature – but the group is growing by leaps and bounds-  merely thumb their noses at creditors and default.  Ireland just did that by offering (and getting ) payment of $0.10 on the dollar for the Bank of Irelands debt to the Euro-banks (which never made the Main Street Media in any form or fashion and only Reuters carried the story – to this day!).

Iceland, on the other hand, just told their European creditors to bugger off and defaulted on the whole debt.  After suitable screams and wails from the EU Banks, Iceland is now on the healthy road to recovery, albeit with a greatly reduced (and temporary) access to debt markets.  But they are growing again from a lower base which is better than sinking to a lower base yet through “austerity” and going deeper in debt and juggling fiat money loans while building an even more fragile pile which WILL FALL DOWN in the future.

That’s the honest way out of debt.  Default, bankruptcy, a few mea culpa’s, a few years of suffering from depreciated currency and, followed by the start of honest growth (if that is at all possible in a world of depleting resources), all is well and things get better.  Falling availability of resources is a whole ‘nuther story..

Down Central America and South of the equator they have this default business down pat.  North of the Equator not so much.  Oh sure, Russia did it – but they had so many natural resources nobody noticed much except the banks that got bailed out.  Further more the crash (and that is what it is) of oil prices will shortly see Russia and their captive cronies default again to much greater and world wide devastation  than, say Zimbabwe or Greece (Greece is in a state of continuously defaulting under a “tent” of obfuscation)  who tried a simple default but thanks to the EU who will nail their feet to the floor and torture them for years to come (unless they pull a typical Grecian reaction and burn the place down to stop it).  For some reason they can’t bring themselves to give up the dole and work for a living.

Russia is a different bag.  When they default this time, (after a likely crack-up first), all their dependent annexed countries will find the subsidies gone.  Cuba will go very hungry as they now subsist on Russian handouts. Venezuela, a doomed country with nothing but oil between it and universal poverty will, shortly, go up in a poof of smoke and disintegrating civility and drop into a medieval existence of subsistence farming , small feudal villages and a 500% increase in the numbers of street vendors.

The current not so comedic problems with debt and budget in our own battered, dinged and buried beyond the neck (we’re barely breathing now!) in debt U.S.A. will continue into  yet another “kick the can” attempt which will eventually (if not now) fail.  I’d like for it to fail now and get it over with that’s a personal wish.

That doesn’t address the title of this article, does it?  The Austrians want to return to the gold standard.  The Republicans want to stop (all of a sudden, I might add) excessive Government spending, the Democrats desperately want to “kick that can” (at least past the 2016 Presidential farce) so that things can continue as they were/are – which isn’t going to happen.

Well, what the Republicans and Democrats want to happen will probably both happen – one after the other – and then game over.  Or maybe sooner.  The world will not allow the Democratic no-plan and the American people will throw out of office every Republican in Washington if the Republican’s really cut back spending to where it matters! Neither political party has the guts or statesmanship or leadership to do what’s necessary, so we will, very likely, follow Russia (at a slower and more painful rate) into and maybe under the pit of at least partial hyper-inflation  before the deflationary bullet is not bitten but fired!  Either way, we are well and truly doomed to a Depression of much greater extent than that of the 1930’s and world-wide at that – but no one wants to admit it.

BUT – big but..  what happens then?  Most likely, the pendulum will swing and inflation will (properly) get blamed for all our problems and we’ll reset the economy by going to some sort of commodity money – based on gold and silver most likely, but it could be carrots, or wheat or something else our “new” Government figures they can control.  (We will never, sadly, punish the real villains, ourselves, for allowing it to happen for the umpteenth time).  Let’s assume it to be old style bi-metalism and an attempt to  restate our medium of exchange (the dollar) to whatever the current world price of gold happens to be with silver priced at some fraction to that of gold.

Ah – says a large part of the audience, heaven is upon us and all will be well.

Which probably will not be a truism for the first few years to a decade or two.

But then we struggle up from our debtor/defaulter dungeon, climb back over the edge  of the pit and wonder of wonders – start to grow economically speaking!  After all, after an inflationary crash and depression, there are a lot of poor people, sadly in this case, probably fewer people as well, and a little bit of growth goes a long way in that situation.  With or without resources.

One problem.  Where does the “real” money come from to allow the growth that is so badly needed?  I know the commodity money fans will say that we don’t need more money – prices will naturally fall as production slowly rises all with the same amount of money (thanks to better technology and higher productivity) – and that is true in the small limited sense.  A fixed money supply does not, however encourage anything. This situation of “encouraging” things is handled by those who run the government at the behest of monied, influential PTB to their own benefit with no thought to the general public or economy at large.

Entrepreneurship is sometimes muzzled for lack of credit (after all, credit is just money that’s advanced on the premise that interest will be paid on it and it will be paid back in a set period of time, right?).  Credit keeps you from spending years and years saving up a stake for a new business you just “know” will (maybe) be successful so monetary growth in a fixed money supply economy is limited to the growth of the commodity that the money is “fixed to”.

Now, from the human view, this is unacceptable because it just to damn slooooooow.   We humans are “speed balls” when it comes to inventiveness and entrepreneurial ability provided we stop paying people not to work and knock off paying welfare moms (and their sperm suppliers)  money for children produced.   I doubt government will exist by then in any significant size other than local, perhaps state and bare bones federal so we may be able to get on with it anyway.

But we’re not talking small stuff here, either.  We’re talking about dragging 150- 200 million people – and much more if you consider the world at large – out of a much poorer place back up the human conditional ladder into some kind of higher location. (Please note the smaller population quoted for the US..  Scary? Bet your bippy it is)

Voila! We need more money!  Fractional banking and more money/credit will do it as it will encourage borrowing for those with good ideas and allow people to buy more things and spend and increase demand for all sorts of good stuff like sofas and cars and houses and flat screens and transport and a replacement for that tent we’ve been living it and perhaps a diet that would include more than potatoes and dandelion greens and new shoes for the kids and – and – maybe with the new money we can restart the school down the road in the next town so we can stop home schooling the brats!  In addition, with just a little more money to go around, Johnny Smith can borrow a little of it and start that wood cutting business he’s been wanting to do out on his property!   What a wonderful idea and all it needs is more money than is allowed by locking in the supply of it to the “Cross of Gold” (and where have I heard that before?).  Let’s print some!

Now we come to the crux of the problem.  Commodity money doesn’t work fast enough because it limits the ability of the economy to grow by other means than technology and productivity improvements reducing the prices of goods and services.  Commodity money is rigid.  It doesn’t encourage anything, good or bad.

Please read that paragraph again.

Fiat money, which one gets when not using a commodity based money works fine for a little while.  A little while.  From the get-go the citizens get screwed because he who pockets and spends fiat currency first (i.e. governmental entities and banks) gets the most use out of it —– unless the issuance of said fiat currency is limited to no more than the HONEST value of the gross production of goods and services of the Country (or the State, or the local community) minus the outstanding debt that needs to be paid off sometime real soon now.

I’ll spell it out,  P-R-O-D-U-C-T-I-O-N.

Not government spending (National, State or local), not welfare, not social programs of any kind, not education, not health and welfare – NOTHING but productive earnings of a country (and I include all three of the above whenever I say “country”).  If the country actually earns more than it consumes, then it is able to tax itself a bit to handle things like national defense, interstate and international commerce negotiations, even local police if you’ve got some problem drunks.  No fair counting anything other than production of goods and services required for those things that are in demand for both domestic and international use.

Also (and this will bring some boo-blahs), so called free trade where intelligence is hauled overseas and mixed with fiat money to put people to work at 1/20th the cost of domestic labor sucks and I am no fan of this destructive commercial behavior. Tariff the  products when they return to our shores or what you end up with eventually is what we have today:  We produce next to nothing, most all important production has moved off shore and all we have is the mathematically unworkable system of buying products produced in foreign countries by selling them debt that will never be paid back to get money to buy their products –  a Ponzi scheme larger, by far, and enormous proportions never seen before that is now coming home to roost with our unstoppable unemployment, , ever lowering wages (compared to ever rising prices), skill loss, our manufacturing capability mostly dead, a consumer driven society dying from debt that can’t be paid and a future that will be a depression of far Greater Proportion than the last one.

We are and have been exporting our fiat financing to the rest of the world.  So far they take it.  Later, they won’t.

Now to get back on subject, a purely commodity form of money will not work efficiently for an advanced (if smaller) technological society.  It hasn’t worked in the past and it won’t work in the future.  Commodity money will arrest inflationary problems overnight once the general public see and understand that it will arrest inflation of the money supply.  True. Overnight.  The human race has been there and done that a number of times.

Fiat money, unanchored to anything, on the other hand, always destroys a civilization in which it is used as over time, venial rulers, kings, despots, tribal chiefs, emperors, presidents and congressmen find that it’s so much easier to print more fiat money (in the form of cash or credit – which is the same thing in two different siren suits) than it is to explain to the citizens why they should give up their hard earned “productive” money to the government to do things they don’t care about or want.  This way, the government (of any sort or variety) can spend more than the country can produce and tax away to the government in the form of scalping excess production.  These “upper caste rulers” can then buy votes (in a democracy) and fund huge police forces.  Remember the TSA ordering a billion rounds of ammo?  Has your local police force got a tank yet?  My town does and I live in a little calm community on a lake in Central Florida.  And, of course,  in not so democratic countries, it’s easy.  These politicians (and anonymous corporations and contributors who fund them) can stuff the pockets of favored people including those “governing” the country and their cronies and do all manner of mischief with money they have no business having.  Especially now that there is virtually no limit to anonymous fiat cash that can be funneled to political parties with the newly passed “bribery special” funding bill that cleared both houses of Congress last weekend.  Now we look forward to who can purchase the most crooked Congressional, Executive and Judicial people. As if we needed more of that crap anyway.  Turns out that who spends the most wins the elections, determines the judicial appointments and who gets screwed and who doesn’t.

The result of this is slow (don’t be too speedy, now!) depreciation of the fiat money doesn’t kill the golden goose very quickly as an excess of money encourages growth that is not necessarily productive, not necessarily safe (hence a percentage of the growth is false!) i.e serial bubbles; so standards of living usually climb for a while – sometimes a long while – thanks to technological progress and productivity gains that technology brings.  This can go on for a long time – think five generations for the United States – not too shabby an effort even if it has now run off the tracks.

But sooner or later, the ruling scions, bankers, scam artists, politicians, stock sellers and check loan artists get greedy.  Why?  Because every time you add to the debt of the country, you cut down on the productivity of the country.  The more debt you have to roll over and suffer paying the interest for it, the less money is available for productive (REAL production) purposes.  So the gross production (and true products) of the country starts to fall. ROI falls. Savings crunch. The middle class is decimated by such bizarre policies as ZIRP (another name for paying for things by the government and keeping banks from folding up without really having to pay for it (which is a proven failed method that goes back to the Roman Empire with coin shaving et al)

THIS IS A POINT THAT WE HAVE ALREADY PASSED.. Mark that on your calendar.

Things tend to go to pot pretty fast after that happens because every fiat dollar of debt incurred beyond that point actually reduces production capability that much more and it is not linear.  Mathematically,  it turns out to be exponential so the curves of doom rise ever faster until they are unsustainable as they are now.  So crash already and get it over with..

Now what do we do on the other side? What kind of money are we going to use when all the dung has been flung, the depressing future is in the past and we see the light of day and start thinking of eating more than one meal a day?  (I apologize for the doomer slant – but I am not optimistic about the comfort of the coming period of time.)

First, our problem is not with start up money as we can cobble together a commodity based money to dig our way up the side of the pit.  It may very well be that commodity money will be the only way we can do so.  Time will tell.

Sooner or later, we will, once again, need more money than commodity money allows us to have because of the ever limited supply of the base commodity and that is the question.  What can we use?  History is not kind here.  And further (as in Germany today) the memory still lives of worthless “money” (i.e. fiat), hardships unbelievable and a tough row to hoe to get themselves back into a decent level of prosperity (only 75 years of hard work and a large saving rate)..

Our problem is not money, you see, it is human nature.  Human nature is what drives fiat money based systems into disaster, not what is used for the “money” or medium of exchange.   Yes, I know the “real” requirements of money – intrinsic value, small, divisible, retains value over time, readily acceptable in trade, blah, blah, blah.….  Fiat money fills all those requirements if we would just stop printing so damn much of it in paper currency and issue of credit (be it loans or bonds or derivatives or whatever) all based on a nebulous “fractional” banking and credit system.  I have ten bucks so I can loan out $100 because no one will ever want all their money back at one time ; a fairy tale that has sunk many a nation and oh so many individuals.

So, fellow voyagers,  after exploring a good part of the in and outs of fiat money and credit I have come to the conclusion there is no valid reason to create a medium of exchange (paper and credit) that is not rigidly capped by the amount of gold, silver, increasing productivity and technological enhancements of the country involved.

Which kind of blows away the title of this Mucks’ Five Minutes piece (but that was to suck you into reading it in the first place!).  There is truly no case for fiat money at all.  Period.

One exception.  In the event of true National Emergency (invasion or an asteroid) or someone nukes us that requires the Last World War to commence.  Then, sadly, all bets are then off and we are in the soup again.  That has happened time after time after time in history and history will always repeat – usually with different timing, flavors and smells and even outcomes, but repeat it will.

As for today’s debt problems?  Forgetaboutit. The end game is baked in the cake.  We are all going to get poorer by and by and as to investments, he who looses least wins!

But we still need to think about and discuss the other side of it all.  Just in case there is another side.




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Posted on 17th December 2014 by T4C in Economy

I don’t know if reading the following before reading the article will change one’s opinion of  JC Collins….and I’m specifically addressing those that think he’s full of shit….but out of fairness to him, and of course because I find his explanations of what is historically occurring regarding the global economy and global monetary policy changes to be one of the most rational and emotionally centered available….here it is:

The other day I noticed that ZH ran an article by him via Alt-Market.com.  I’m thinking “Awesome!” as it’s the first time as far as I know that JC’s been featured on ZH. Unfortunately, in addition to tagging the essay “Economics” on his blog, it was also tagged “Cultural”. I say unfortunate because when he goes in to ‘Cultural/Esoteric’ mode he either loses a portion of his audience, or becomes a target for arrows of derision. IMHO that is due to not understanding his point, which of course on one hand is his bad for not making himself clear, but on the other hand is simply not understood by some because well….they just don’t think that way, i.e. too left-brained not enough right-brain. The reception to his article was tepid at best, but I was entertained by a commenter that is a loyal fan of JC’s who got into a petite tête-à-tête with williambanzai7.

His blog will be 1 year old this New Year’s Eve and its popularity and influence in this first year would make any new blogger wish-upon-a-star to have the same reception. Here’s a stellar example:

I’ve seen Bruno de Landevoisin’s stealthinflation.com articles posted often on ZH among other places of import. In the past 1 – 2 months Bruno has fallen in love with JC’s mind. He has posted comments on JC’s site, and a few weeks back listed JC’s site under “OUR BROTHERS IN ARMS” which is the list of blog sites Bruno pays attention to. It’s a strong list and even includes some website known for terrorist postings by it’s Administrator and his monkeys called The Burning Platform.

Well Bruno the other day told JC he was including him on the stealthflation team of esteemed writers; the likes of which include Stockman, PC Roberts, Alasdair Macloed, Tyler Durden, Orlov, R.I. Meijer, and some Google-hating-Government-bashing-rapscallion named Quinn. Jim I believe is his first name.

So now that I’ve gotten that out of the way; here’s the fresh-out-of-the-oven post by JC today.



DECEMBER 17, 2014

By JC Collins


Global markets are showing increasing signs of instability and there are serious concerns about risks to international liquidity building across the spectrum. Exchange rate volatility is deepening with the Russian ruble leading the way and the systemic contagion is spreading around the world, from European and Western banks to stock market crashes in the Middle East.

Oil continues its descent into the $30 to $40 dollar range with a strategically timed announcement by OPEC today, at the peak of the turmoil, stating it will not meet again until June, 2015, ensuring continued instability and lack of confidence in the energy markets.

Trading between the ruble and USD has been halted almost at the same time as Russia’s alternative to the SWIFT system came on line.

Since the beginning of the year we have rehearsed these moments in our minds, not sure if they would happen as we had been discussing, and hoping that they wouldn’t, but knowing full well that the amount of preparation and strategy which has gone into the transition of the international monetary system, from a unipolar structure to a multilateral structure, would eventually materialize in the real world as the Hegelian Dialectic machinations which we are witnessing now.

A look through the headlines on such sites as Zero Hedge will quickly give the reader a birds eye view of the destruction that is now taking place in the international financial system. Much of it is exactly what we have been expecting as a part of the problem, reaction, solution dynamic which will engineer and implement the multilateral financial system.

It was always expected that the transition would require some level of crash or instability. Like massive deflationary periods before, wealth is being transferred to the top as if it was being sucked through a straw. The script which states the USD system is too blame for the instability has been widely distributed beforehand along with the inability of the central banks to increase liquidity in the event of another financial crisis.

Whether any analysts or colorful commenters disagree, the system is shifting towards the multilateral framework that has been developed over the last 5 years, and the implementation is now unfolding as expected. The USD framework is being abandoned as the necessary component of the “reaction stage”, in order for the “solution stage” to manifest as the logical evolution of the financial framework.

The BRICS economies, being Brazil, Russia, India, China, and South Africa, have expanded the structure of the international financial system by implementing the New Development Bank and Contingency Reserve Arrangement. Most analysts and commenters promote the story that the BRICS countries are going to overthrow the Western banks and implement their own gold backed system.

This simply is not true or factual as the BRICS countries themselves are demanding reform to the International Monetary Fund, as agreed in 2010 by all 188 members, including the American administration. And China has been quickly internationalizing the RMB for inclusion into the SDR basket composition by next July, a date which quickly follows the next OPEC meeting in June, 2015.

The blueprint and engineering surrounding the SDR based multilateral financial system can be found in a document titled Enhancing International Monetary Stability, published by the IMF in January, 2011. Interested readers should be highly encouraged and motivated to read and fully understand the document.

In short, the USD system is creating systemic instability and a new multilateral reserve asset is required to balance the international system of finance and create stable liquidity. Some of the methods and components of this transition and new system can be found in the idea of substitution accounts.

The purpose of the substitution accounts is mainly for the exchange of IMF members foreign reserve assets, such as USD, for SDR denominated claims and assets. SDR assets will, at least for a few years, enhance global liquidity and facilitate hedging.

One of the expected risks associated with using SDR denominated assets is the exchange rate disparity, and who will carry this risk. This can be countered by using the SDR as the unit of account within a fixed exchange rate system.

Other methods of reducing the risks associated with SDR denominated liquidity can be found in reporting international transaction data in SDR, and presumably denominating all foreign trade in SDR, which would publish balance of payment statistics in SDR as well.

In line with transitioning away from the USD based system, SDR pegging would encourage a true multilateral global monetary policy and framework which would stand in contrast to the imbalances found in the current system, which is based on the policies of a single country, or economy, being the USD.

In the document titled Enhancing International Monetary Stability, in regards to implementing an SDR based system, the following Costs and Mitigating Costs are quoted:

Costs: SDR-denominated assets would operate in a shallow market at first and therefore would likely carry a liquidity premium. This is estimated initially at around 80–100 basis points, which could render it too costly for any individual country or IFI to take the first step and provide the impetus for an SDR-bond market, particularly in a context of fiscal consolidation pressures.

Mitigating Costs: To enhance initial market liquidity and reduce the premium faced by first movers, it may be useful to have a ‘group’ issuance where a number of countries issue jointly, thus expanding the volume issued, reducing fixed cost to individual issuers and the liquidity premium. Coordination should be aimed at establishing relatively quickly liquid benchmark instruments throughout the maturity spectrum.
These statements are clear indicators of the move away from the USD based system, as the countries that leave the dollar system would need to coordinate and create joint issuance of SDR bonds and liquidity. The BRICS group of countries provide this coordination and the New Development Bank and Contingency Reserve Arrangement provide the means to jointly issue SDR liquidity as a coordinated transition away from the USD system.

The theory that the BRICS economies are moving away from the USD is factual, but only towards the multilateral framework of the SDR, as developed by the central banks themselves and the global institutions. Though countries such as Russia and China may use gold to support their currencies in the interim, it is more likely that gold will become part of the SDR basket composition next July, along with the Chinese renminbi, and possibly the Canadian and Australian dollars.

It is heartrending that so many are losing and will continue to lose as the transition continues. Everything from pension funds, real estate, and possibly even continued devaluations in gold and silver, at least in the short terms, will be bombarded by the liquidity squeeze taking place.

Only last month I was talking with a real estate agent here in Canada and told him that home values are going to come down by approx 20% to 30% because of the deflationary period we have been entering and a decrease in global liquidity, with a bigger drop in oil. The agent almost laughed and stated that BMO and other Canadian banks have been publishing material that stated prices will continue to increase.

Since that weekend oil has decreased another $25 and the Bank of Canada stated last weekend that homes prices in Canada are over valued by 10% to 30%. Considering the turmoil that is taking place around the world, I wonder what that agent is thinking now, especially since the Alberta oil market is taking a big hit and companies are cutting their CapEx budgets for 2015, as well as putting in place hiring freezes, with potential lay offs coming in the New Year.

We are only at the beginning of this transition and expect to see even deeper instability wash upon North American shores in the coming days and weeks. The obvious “event” will be China stepping away from the USD. But how that will coordinate with the substitution accounts and issuance of SDR bonds through the BRICS group is not discernible at this time. It can be expected that SDR bonds will not be issued until the basket composition is changed and the 2010 IMF Reforms, being Plan B, are fully implemented. Plan A, which would have lead to a more constructive transition required the US Congress to pass legislation supporting the 2010 Reforms, which it hasn’t. Let’s hope that the Plan B process doesn’t take until next July. Perhaps an emergency session is in order for the New Year. – JC

New Poll Finds 59% Of Americans Support Post-9/11 Torture – Propaganda, Cultural Sickness, Or Both?


Posted on 17th December 2014 by Administrator in Economy |Politics |Social Issues

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Submitted by Mike Krieger via Liberty Blitzkrieg blog,

Ever since the torture report was released last week, U.S. television outlets have endlessly featured American torturers and torture proponents. But there was one group that was almost never heard from: the victims of their torture, not even the ones recognized by the U.S. Government itself as innocent, not even the family members of the ones they tortured to death. Whether by design (most likely) or effect, this inexcusable omission radically distorts coverage.


Whenever America is forced to confront its heinous acts, the central strategy is to disappear the victims, render them invisible. That’s what robs them of their humanity: it’s the process of dehumanization. That, in turns, is what enables American elites first to support atrocities, and then, when forced to reckon with them, tell themselves that – despite some isolated and well-intentioned bad acts – they are still really good, elevated, noble, admirable people. It’s hardly surprising, then, that a Washington Post/ABC News poll released this morning found that a large majority of Americans believe torture is justified even when you call it “torture.” Not having to think about actual human victims makes it easy to justify any sort of crime.


– From Glenn Greenwald’s latest piece: U.S. TV Provides Ample Platform for American Torturers, but None to Their Victims

After reading about a new poll that shows 59% of Americans support post 9/11 torture, I’ve spent the entire morning thinking about what it means. Does this confirm the total degeneration of American culture into a collective of chicken-hawk, unthinking, statist war-mongering automatons? Alternatively, does it merely reflect the effectiveness of corporate-government propaganda? Is it a combination of both? How does the poll spilt by age group?

These are all important questions to which I do not have definitive answers, but I have some thoughts I’d like to share. First, here are some of the observations from the Washington Post:

A majority of Americans believe that the harsh interrogation techniques used on terrorism suspects after the Sept. 11, 2001, attacks were justified, even as about half the public says the treatment amounted to torture, according to a new Washington Post-ABC News poll.


By an almost 2-1 margin, or 59-to-31 percent, those interviewed support the CIA’s brutal methods, with the vast majority of supporters saying they produced valuable intelligence.


In general, 58 percent say the torture of suspected terrorists can be justified “often” or “sometimes.”


The new poll comes on the heels of a scathing Senate Intelligence Committee investigation into the CIA’s detention and interrogation program, which President Obama ended in 2009. The report concluded that controversial interrogation techniques — including waterboarding detainees, placing them in stress positions and keeping them inside confinement boxes — were not an effective means of acquiring intelligence.

This is important, because despite the Senate Report showing torture was not effective in acquiring intelligence (see: Revelations from the Torture Report – CIA Lies, Nazi Methods and the $81 Million No-Bid Torture Contract), the American public thinks it was. This is the power of mainstream media spin and propaganda.

Fifty-three percent of Americans say the CIA’s harsh interrogation of suspected terrorists produced important information that could not have been obtained any other way, while 31 percent say it did not.


In a CBS poll released Monday, nearly seven in 10 considered waterboarding torture, but about half said the technique and others are, at times, justified. Fifty-seven percent said harsh interrogation techniques can provide information that can prevent terrorist attacks.

While the above is disturbing, if I felt that the culture is lost beyond hope and that my fellow American is akin to a zombified sociopath with no hope of awakening, I wouldn’t be writing on this website. I would have renounced my citizenship long ago and moved somewhere else. In contrast, I think there’s a lot to fight for in these United States and I think the war for freedom, civil rights and the rule of law can and will prevail. After all, I was admittedly more or less a zombie during the years immediately following 9/11 and for most of my time on Wall Street. If I was able to make such a profound transition (and countless of my friends have as well ), then there is always hope.

I continue to think that the vast majority of human beings are not particularly ethical or unethical. They are basically somewhere in the middle and thus very easily molded by propaganda. History pretty much proves this to be the case. My sentiments on the subject can be best summarized by something I wrote back in 2012 in the post: Humanity is Rising.

I have always felt that human disposition lies on a bell curve.  So let’s say for the sake of argument that 1% is just extraordinarily wicked, selfish, mentally deranged so along the lines of a Stalin like character.  Then let’s say the 1% on the other side is gentle, enlightened, and moral almost to a fault so a Gandhi like character.  Then the masses in the middle are not of any extreme disposition in either way, but are easily malleable and generally just “go along to get along.”  Well as far as recorded human history is concerned, the 1% of nasty, immoral parasites have dominated humanity through the various playbooks strategies that I and many others have outlined.  The 1% on the other side have generally been silenced or ostracized systematically by the control freak “leaders” and if that fails to work, they are simply murdered.  I mean even up until the 20th Century think about the kinds of guys that have been murdered.  Gandhi.  Martin Luther King Jr.  John Lennon.  Oh and if we want to go back a couple thousand years there was Jesus.  The list is endless.  Guys that talk about a higher level of consciousness and love and actually make inroads in society are murdered.  Yet no one ever seems to take a shot at the genocidal, sociopaths that run our lives through politics and banking (nor would I ever want that as I do not condone violence as a solution to a violent system).  Interesting isn’t it?  I think it is pretty obvious why this is the case.  The 1% on the decent side of the bell curve aren’t murderers.  The guys on the other side of it are.  

While certainly not giving the middle of the bell curve a pass for its unquestioned apathy and ignorance, I am convinced that the key variable here is information, which is why it is so imperative to conduct alternative narratives, and is why I spend most of my time working on this site. Glenn Greenwald’s recent piece in the Intercept helped to reinforce the impact of media propaganda in shaping public perceptions. Here are some excerpts:

Ever since the torture report was released last week, U.S. television outlets have endlessly featured American torturers and torture proponents. But there was one group that was almost never heard from: the victims of their torture, not even the ones recognized by the U.S. Government itself as innocent, not even the family members of the ones they tortured to death. Whether by design (most likely) or effect, this inexcusable omission radically distorts coverage.


Whenever America is forced to confront its heinous acts, the central strategy is to disappear the victims, render them invisible. That’s what robs them of their humanity: it’s the process of dehumanization. That, in turns, is what enables American elites first to support atrocities, and then, when forced to reckon with them, tell themselves that – despite some isolated and well-intentioned bad acts – they are still really good, elevated, noble, admirable people. It’s hardly surprising, then, that a Washington Post/ABC News poll released this morning found that a large majority of Americans believe torture is justified even when you call it “torture.” Not having to think about actual human victims makes it easy to justify any sort of crime.


This self-glorifying ritual can be sustained only by completely suppressing America’s victims. If you don’t hear from the human beings who are tortured, it’s easy to pretend nothing truly terrible happened. That’s how the War on Terror generally has been “reported” for 13 years and counting: by completely silencing those whose lives are destroyed or ended by U.S. crimes. That’s how the illusion gets sustained.


Thus, we sometimes hear about drones (usually to celebrate the Great Kills) but almost never hear from their victims: the surviving family members of innocents whom the U.S. kills or those forced to live under the traumatizing regime of permanently circling death robots. We periodically hear about the vile regimes the U.S. props up for decades, but almost never from the dissidents and activists imprisoned, tortured and killed by those allied tyrants. Most Americans have heard the words “rendition” and “Guantanamo” but could not name a single person victimized by them, let alone recount what happened to them, because they almost never appear on American television.


It would be incredibly easy, and incredibly effective, for U.S. television outlets to interview America’s torture victims. There is certainly no shortage of them. Groups such as the ACLUCenter for Constitutional RightsReprieve, and CAGE UK represent many of them. Many are incredibly smart and eloquent, and have spent years contemplating what happened to them and navigating the aftermath on their lives.


I’ve written previously about the transformative experience of meeting and hearing directly from the victims of the abuses by your own government. That human interaction converts an injustice from an abstraction into a deeply felt rage and disgust. That’s precisely why the U.S. media doesn’t air those stories directly from the victims themselves: because it would make it impossible to maintain the pleasing fairy tales about “who we really are.”


When I was in Canada in October, I met Maher Arar (pictured above) for the second time, went to his home, had breakfast with his wife (also pictured above) and two children. In 2002, Maher, a Canadian citizen of Syrian descent who worked as an engineer, was traveling back home to Ottawa when he was abducted by the U.S. Government at JFK Airport, heldincommunicado and interrogated for weeks, then “rendered” to Syria where the U.S. arranged to have him brutally tortured by Assad’s regime. He was kept in a coffin-like cell for 10 months and savagely tortured until even his Syrian captors were convinced that he was completely innocent. He was then uncermoniously released back to his life in Canada as though nothing had happened.


When he sued the U.S. government, subservient U.S. courts refused even to hear his case, accepting the Obama DOJ’s claim that it was too secret to safely adjudicate.


There are hundreds if not thousands of Maher Arars the U.S. media could easily and powerfully interview. McClatchy this week detailed the story of Khalid al Masri, a German citizen whom the U.S. Government abducted in Macedonia, tortured, and then dumped on a road when they decided he wasn’t guilty of anything (US courts also refused to hear his case on secrecy grounds). The detainees held without charges, tortured, and then unceremoniously released from Guantanamo and Bagram are rarely if ever heard from on U.S. television, even when the U.S. Government is forced to admit that they were guilty of nothing.


This is not to say that merely putting these victims on television would fundamentally change how these issues are perceived. Many Americans would look at the largely non-white and foreign faces recounting their abuses, or take note of their demonized religion and ethnicity, and react for that reason with indifference or even support for what was done to them.

I’m not so sure this is the case, and in any event, we can’t know unless we try.

Keeping those victims silenced and invisible is the biggest favor the U.S. television media could do for the government over which they claim to act as watchdogs. So that’s what they do: dutifully, eagerly and with very rare exception.

Watching television is easy and addicting, particularly if you came of age before the internet. Television news is simply horrifying. On those rare instances when I catch a glimpse of it at the gym, I feel as if I have entered a bizarro world of idiocy and shamelessness.

Nevertheless, it remains true that a lot of the pre-internet generation still receives intellectual marching orders from the idiot-box. This is why I’m so curious to see how the Washington Post poll splits by age bracket. Either way, hope is never lost and the torch of liberty must remain lit and carried forward by those who care. That’s precisely what I try to do here at Liberty Blitzkrieg, and I ask you to do the same in whatever capacity you can.

Want to Know Who Really Runs the United States?

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Posted on 17th December 2014 by Administrator in Economy |Politics |Social Issues

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A Visit to Zombie Town

Dow down 99 points on Monday. Gold fell $28 an ounce – its fourth straight day of losses. Stock markets have been slipping all over the world, especially in Europe. But outside of Russia, and maybe Greece, so far there is no sign of real panic. That will come later.

We’re spending this week in Washington, zombie watching. Yesterday, we spent the evening in the lobby of The Willard hotel. A choir sang carols.


“Hark the herald angels sing,

“Glory to the newborn King!”


In one corner a group of cronies sat negotiating a deal; whose ox they were goring we don’t know. Pairs of women sipped their champagne and nibbled their cookies. A few tourists gawked at the splendor of it: a Christmas tree worthy of Yosemite… ceilings rivaling those of the Louvre.


dre-blog2 Photo credit: Andrew Bossi


Your editor – his laptop in one hand and a glass of Cabernet in the other – sat in another corner, enjoying the singing and inconspicuously recording events.


As Timeless as Prostitution

Politics is the leading industry in this town. When JPMorgan Chase CEO Jamie Dimon was on line on Thursday, the other end of the line was here. Dimon was adding his backing to the so-called “cromnibus” bill – which, among other things, again allows Wall Street banks to take risky derivative bets with consumer deposits.

Here’s one of our dear readers with the story:


“The US House passed a bill repealing the Dodd-Frank requirement that risky derivatives be pushed into big-bank subsidiaries, leaving our deposits and pensions exposed to massive derivatives losses. The bill was vigorously challenged by Senator Elizabeth Warren; but the tide turned when Jamie Dimon, CEO of JPMorgan Chase, stepped into the ring.

Perhaps what prompted his intervention was the unanticipated $40 drop in the price of oil. As financial blogger Michael Snyder points out, that drop could trigger a derivatives payout that could bankrupt the biggest banks.”


Compared to New York, D.C. is remarkably quiet. Not too much traffic yesterday. Few people on the streets in the downtown area. It was quiet, calm, peaceful – like the beginning of a horror movie.

Our hotel has a completely different clientele and atmosphere than the boutique New York hotel we stayed in last week. In Lower Manhattan we saw “hipsters” and artists… publishers and filmmakers. Everyone seemed young and fashionable. The shops were busy. The old buildings – with their industrial windows and loading docks – recalled yesterday’s.

Washington, on the other hand, is as timeless as prostitution. Here, men still wear business suits and ties. Women are not quite as chic as New Yorkers. All look as though they take themselves too seriously… as though the future of the planet depends on what they did today. They must be trying to compensate for the fact that their work – and their lives – are parasitic and pointless.

They come and go in the hotel lobby. One is off to try to pull a little pork out of a Nebraska senator. Another is looking for help with a Pentagon contract. They are all zombies, we reckon, all getting without giving anything of any real value.


Zombie InvasionDon’t believe that Washington is zombie infested? Think again.

Photo via gothic.net


Jamie Dimon – Hero

Dimon must be a hero to this crowd…

He is not in politics … and not even a full-fledged master of zombie arts. After all, he must spend some of his time at JPMorgan Chase offering real services – or at least the appearance of them – to get clients to part with their money.

On Thursday, he did the rest of the nation a grave disservice. But in helping to push Republicans and Democrats to the scammy bipartisan “cromnibus” bill, he helped keep the lights on in Washington.

The federal government was getting ready to shut down. Then Dimon got on the phone. It was probably a tit-for-tat payback. The feds helped keep his lights on in 2008. Now, he has repaid the favor.

Colleague Dan Denning, newly returned from 10 years in Australia, is appalled. He was a congressional page 25 years ago. All of the twisted roots he saw sink into the D.C. earth in the 1980s have now grown into full-sized trash trees. They now cast their long shadows over Washington… and the nation.

It was in the beginning of the 1980s that President Reagan’s budget director David Stockman lost his famous battle for the soul of the Republican Party.

Stockman believed the GOP should remain true to its best traditions and should demand balanced federal budgets. But the progressive wing of the party was more interested in winning elections and distributing pork than in fiscal rectitude.

The Reagan administration went on to run some of the biggest deficits in history. And that was just the beginning. Among the bits of grease in the $1.1 trillion spending bill passed Saturday night was a provision allowing Dimon’s Wall Street cronies to “donate” up to $230,000 each to the Republicans and Democrats. This will help cement their control of the political process.

It was a win-win deal: Dimon got something. And the feds got something. That must be why the Wall Street Journal labeled it a “rare bipartisan success.” We understand the bipartisan success part: Both Washington and Wall Street benefited.

It’s the “rare” part we don’t understand.


dimonbillfoldBehold this here billfold, which shall henceforth be wide open to zombies on both sides of the aisle, so that they may continue to preserve our hard-won privileges in bi-partisan unity, amen.

Photo credit: AFP


The above article is taken from the Diary of a Rogue Economist originally written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.


1 comment

Posted on 17th December 2014 by Administrator in Economy |Politics |Social Issues


“Citigroup is a very large bank that has amassed a huge amount of political power. Its current and former executives consistently push laws and regulations in the direction of allowing Citi and other megabanks to take on more risk, particularly in the form of complex highly leveraged bets. Taking these risks allows the executives and traders to get a lot of upside compensation in the form of bonuses when things go well – while the downside losses, when they materialize, become the taxpayer’s problem.

Citigroup is also, collectively, stupid on a grand scale. The supposedly smart people at the helm of Citi in the mid-2000s ran them hard around – and to the edge of bankruptcy. A series of unprecedented massive government bailouts was required in 2000-09 – and still the collateral damage to the economy has proved enormous. Give enough clever people the wrong incentives and they will destroy anything.

Now the supposedly brilliant people who run Citigroup have, in the space of a single working week, made a series of serious political blunders with long-lasting implications.

Their greed has manifestly proved Elizabeth Warren exactly right about the excessive clout of Wall Street, their arrogance has greatly strengthened a growing left-center-right coalition concerned about the power of the megabanks, and their public exercise of raw power has helped this coalition understand what it needs focus on doing – break up Citigroup.”

Simon Johnson: Here

Via William Banzai



Posted on 17th December 2014 by Administrator in Economy |Politics |Social Issues


Connecting the Dots: Dumb & Dumber: Relax Mortgage Rules, Financial Crisis 2.0


Posted on 17th December 2014 by Administrator in Economy |Politics |Social Issues

Connecting the Dots: Dumb & Dumber: Relax Mortgage Rules, Financial Crisis 2.0

By Tony Sagami


Mortgage credit is too tight. They should have changed that a long time ago. —Jamie Dimon, CEO JPMorgan

Today’s rule is an important step forward in creating an environment where good lenders and good borrowers can work together without reservation. —Julian Castro, HUD Secretary

Geez, I can’t decide who is dumber when it comes to repeating the same mistakes: the profits-at-any-cost crowd on Wall Street or the do-anything-for-votes politicians in Washington, DC.

I can’t decide; they’re both dumber than dirt and often in bed when it comes to lining each other’s pockets.

What I’m talking about today is the new regulations for mortgage qualification a.k.a. “qualified residential mortgage” (QRM) rules.

Some background first.

After the 2008 financial crisis and subprime mortgage implosion, governmental agencies led by the Federal Housing Finance Agency enacted a series of tougher rules to clean up the overly easy mortgage qualification process.

Of course, tighter lending standards and higher down payments squeezed a lot of marginal buyers out of the real estate market, and that meant fewer dollars for big banks that package the loans and members of the National Association of Realtors that sell the homes.

The drop in income bothered them so much that they formed a big organization called the Coalition for Sensible Housing Policy to push the noble goal of helping first-time homebuyers with a return to the good old days of easy credit.

Big surprise. The lobbying efforts (and no doubt large political contributions) paid off. The 20% down payment requirement has disappeared and Fannie Mae and Freddie Mac will now guarantee some loans with down payments of as little as 3%.

Bye-bye credit standards.

These new QRM rules make it possible for mortgage applicants to do away with pesky things like good credit and a down payment.

“The QRM rule is a win-win for consumers, Realtors and the housing finance industry,” said Steve Brown, the president of the National Association of Realtors.

I don’t know about the consumers, but  Brown is absolutely right about the new QRM rules being a win for Realtors and mortgage lenders. But heck, two out of three ain’t bad… right?

By the way, the three politicians most responsible for the new QRM rules are Senators Johnny Isakson (R-GA), Kay Hagan (D-NC), and Mary Landrieu (D-LA).

Senator Isakson of Georgia, by the way, was president of Northside Realty for 22 years before going into politics. Yup, enough to make you puke, but that’s standard operating procedure for Washington, DC.

Will these relaxed lending rules light a fire underneath the real estate market? So far… no!

The last new MBA mortgage application survey for the week ending November 28 showed the New Application Index stuck at 168, roughly the same level as shown in the mid-1990s.

Of course, mortgage rates are a lot lower today than they were in the 1990s.

What’s the problem then?

Not only are wages stagnant in nominal terms, wages are actually lower—a lot lower—in real, purchasing-power terms.

Just in October, the median household income in the US dropped by -0.6%, or $318.

And Americans seem to be less inclined to abuse credit as they have in the past. The total amount of revolving credit (credit cards) has plunged.

You see, people make borrowing decisions based on their confidence in future earnings and perceived strength of the economy, and Americans are clearly not confident about their economic future.

The new QRM rules aren’t going to give the big banks and Realtors the jump in income they’re hoping for.

So what does this mean for investors? The real estate food chain is so deep that there’s no shortage of potential trouble spots, but I’d be particularly leery of the giant bond guarantors, like MBIA and Assured Guaranty, as well as big mortgage lenders.

Who are the biggest mortgage lenders? Wells Fargo, US Bancorp, JPMorgan, Bank of America, and Quicken.

If you’re more of an ETF investor and want to play the “short” side, take a look at ProShares Short Real Estate (REK), an ETF that is designed to profit from falling stock prices of publicly traded companies involved in the real estate industry.

30-year market expert Tony Sagami leads the Yield Shark and Rational Bear advisories at Mauldin Economics. To learn more about Yield Shark and how it helps you maximize dividend income, click here. To learn more about Rational Bear and how you can use it to benefit from falling stocks and sectors, click here.



Posted on 17th December 2014 by Administrator in Economy |Politics |Social Issues

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