2012 ELECTION – NEIL HOWE STYLE

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Posted on 1st August 2012 by Administrator in Economy |Politics |Social Issues

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Neil puts the 2012 election into a generational perspective. If you are looking for Neil to pick a winner, read no further. He’s an academic at heart and never tells you what he thinks will happen. But, he supplies plenty of data for you to make up your mind. Based on his breakdown of voters by generation it seems that the Millenials will decide this election. They are still strongly in Obama’s camp, but their enthusiasm for Obama has waned. If they don’t vote in significant numbers or if Romney can split the young white vote, the election would go to Romney. The old farts are strongly in Romney’s corner. GenX is split down the middle. The yuuts will decide this election.

Pundits have long been predicting that the presidential election will be much closer and much meaner in 2012 than it was in 2008.  Closer it now is.  According to the RCP Poll Average, the race is now a virtual tie: Incumbent Obama now leads by a mere 1.8 percent over Romney, whereas challenger Obama led McCain by 7.6 percent exactly four years ago.  It will certainly revolve around a very different array of issues—much less argument about the war on terror and GOP performance, and a lot more about the stagnating economy and Democratic performance.

In one respect, however, the next election will be a replay of the last: There will be a historically large divide in the preferences of younger voters (under 30) versus older voters (65+).  In 2008, this divide (21 percentage points) was wider than in any election since the advent of age-bracketed voting data in the 1960s.  The second-biggest divide (16 percentage points) was back in 1972, when nearly half of all young voters voted for McGovern while older voters went overwhelmingly for Nixon.

 

I’ve been tracking generational leanings in the polls pretty carefully.  The Pew Research Center has issued several reports (most notably, The Generation Gap and the 2012 Election) exploring this divide, and Time followed up with its own cover story (“The New Generation Gap”).  More recently, Mike and Morley, Forbes, The New York Times, and many others have also weighed in.

Bottom line: Every generation is today a bit more favorable toward Obama than they were in 2010 and a good deal less favorable than in 2008.  The partisan gap between the Democrat-leaning young and the Republican-leaning old, however, remains as strong as ever—at around 20 percent.

Back in 2008, the big story was how and why today’s rising Millennial Generation voted by a large and decisive margin for the Democrats.  This fall, the media focus may shift.  The big story could be how and why today’s angry, aging Silent Generation put the Republicans over the top.  The relevant parallel here is 1972, when Nixon was able to split the young Boomer vote with McGovern—and then crush McGovern with all voters over age 30.  (Nixon’s popular margin in 1972, 23.2 percent of the electorate, is the fourth largest in U.S. history.)  Romney, of course, cannot hope for Nixon’s margin.  But the basic logic still stands.  Romney doesn’t have to win the youth vote; he just has to contain youth losses enough so that his huge advantage among older voters puts him ahead.

The 2012 election will hinge on the collective choices of five generations of voters, each with a different collective life story shaped by its own location in history.  Let’s take a look at how each of these stories is likely to determine the outcome.  (Throughout, I will borrow shamelessly from Pew’s wonderful cohort-tracking research and graphics.)

Because this piece turned out to be pretty long, I’m going to break it into two posts.  This post will look at the generations themselves.  The next will look beyond generations to the election outcome.

At the very elder edge of the electorate is the G.I. GENERATION, born between 1901-24. (Sample leaders: John Kennedy, LBJ, Richard Nixon, Jimmy Carter, Ronald Reagan, George Bush, Sr.) With its youngest members now age 87 and older, the G.I.s today comprise just 2 percent of likely voters.  Except during the late 1960s and 1970s, this “greatest generation” has always heavily favored the Democrats, having come of age as huge supporters of the “big government” presidency of FDR.  Indeed, in every election from 1994 to 2004, the peers of Jimmy Stewart were more likely than younger Americans to vote Democratic. [See the “Roosevelt” chart on this page from the Pew study.] Even in 2008, according to Gallup, Obama ran almost even with McCain among these overwhelmingly white 80+ voters—better than he did with any other age bracket over 40. Apparently, generation trumps age when it comes to racial bias. Prediction for G.I.s in 2012: slight edge (3 percent) to the Democrats.

Now let’s turn to the “young old.” Dominating the ranks of retirees is the SILENT GENERATION (born 1925-42, today age 69 to 86), comprising 13 percent of likely voters. (Sample leaders: Robert & Ted Kennedy, Martin Luther King, Jr., Walter Mondale, Michael Dukakis, Gary Hart, John McCain.) Coming of age during the Truman, Eisenhower, and Kennedy presidencies, when Americans generally were voting Republican, the young, conformist Silent leaned more Republican than the rest. While the Silent produced nearly all of the most famous civil-rights leaders and “good government” reformers of the post-war era, they have never favored a strong executive (no Silent has ever been elected President) and have tended to return to their GOP roots as they have grown older.  In seven of the last nine elections, they have voted more heavily than other Americans for Republicans. [See the “Truman” and “Eisenhower” charts on this page.]

Since 2008, the Silent’s pro-GOP tendency has widened considerably, along with their unhappiness with the direction of the country. Polls show the Silent are upset not just because they are “angry” at government (they are twice as likely as Millennials to say this), but also because they are “uncomfortable” with positions they associate with younger Obama Democrats on issues such as immigration, marriage, homosexuality, religion, and the Internet. The Silent are the least-immigrant generation (per capita) in American history, and they grew up at a time when the rules of life were clear and simple. Today they are disoriented by the bewildering diversity of today’s younger generations, and they can’t figure out what the new rules are.

Most Silent recognize that are doing well economically compared to younger Americans. But they worry that America is losing its sense of exceptional “greatness” and gaining an addiction to endless public debt—faults they attribute more to Democrats than to Republicans. Many fear the nation is headed back toward the Hard Times they witnessed in their childhood. According to recent Gallup surveys, the Silent favor Romney by 14 percentage points. Prediction for the Silent in 2012: large margin (15 percent) to the Republicans.

Occupying midlife and already surging past age 65 is the BOOM GENERATION (born 1943-60, today age 51 to 68), today comprising 31 percent of likely voters. (Sample leaders: Bill & Hillary Clinton, George W. Bush, Al Gore, Newt Gingrich, Mitt Romney, Condoleeza Rice.) Boomers came of age during the social and cultural upheavals that rocked America during the late ‘60s and ‘70s—giving them a fixation on vision and values that defines them even to this day as a generation of individualists and culture warriors (left versus right, “blue” versus “red”). As they grow older, Boomers increasingly call themselves “conservative,” but not necessarily Republican.

First-wave Boomers (today in their 60s) have more years of education than younger Boomers, have done better economically, vote more reliably, gravitate to humanist or mainstream churches, and vote more for Democrats. Last-wave Boomers (today in their 50s) experienced a rapid fall in SAT scores and college attendance, lag far behind first-wavers economically, vote less often, veer toward atheism or “born-again” evangelicalism, and vote more for Republicans. In recent elections, first-wave Boomers have tilted to the Democrats; their younger brothers and sisters have favored the GOP. [See the “Kennedy/Johnson,” “Nixon,” and “Ford/Carter” charts on this page.] In recent months, Gallup shows Boomers favoring Romney by about 5 percentage points. Prediction for the Boomers in 2012: medium edge (5 percent) to the Republicans, with red-leaning last-wavers slightly overpowering blue-leaning first-wavers.

Today’s emerging leaders and the parents of most school-age kids belong to GENERATION X (born 1961-81, today age 30 to 50). Gen Xers now comprise 35 percent of likely voters, a slightly larger share than Boomers.  Gen X’s share should be much larger, but their tendency to vote less often than older generations dilutes the impact of their raw numbers. (Sample leaders: Barack Obama, Sarah Palin, Chris Christie, Kirsten Gillibrand, Marco Rubio, Bobby Jindal.) The left-alone children of the Consciousness Revolution who later came of age during an era that stressed free agency, personal ownership, and survivalism, Gen Xers have mixed feelings about the two parties. Xers like the social and cultural liberalism of Democrats (whatever “works for me” is perfect), but they also like the economic conservatism of the GOP (hey, don’t even think about picking my pocket!).

Like Boomers, they show a strong political trend from oldest to youngest, but it’s in the opposite direction.  First-wave Xers, born in the early 1960s, first voted during the early Reagan years and have thereafter leaned heavily to the GOP. (Just over 70 percent of today’s state governors and members of Congress born from 1961 to 1965 are Republican—the biggest partisan tilt of any five-year cohort group.) Late-wave Xers came of age with Clinton and now lean more toward the Democratic Party. [See the “Reagan/Bush” and “Clinton” charts on this page.] According to recent Gallup polls, Generation X favors Obama by 1 percentage point. Prediction for Gen Xers in 2012: dead even, with GOP-leaning first-wavers exactly neutralizing Democratic-leaning last-wavers.

Finally comes the youngest generation of voters, the adult members of the MILLENNIAL GENERATION (born 1982-93, today age 18 to 29), comprising 18 percent of likely voters. (As yet, they have no national political leaders.) Twenty years ago, they were the special and fussed-over “Friends of Barney.” Today, they’re telling older Americans to share their toys and put a smile on their face. For Millennials, the team comes first: They are more likely than older voters to favor strong communities, urge consensus solutions, trust “big government,” and shrug at paranoia over privacy. With their trademark confidence, Millennials embrace many of the social trends (related to race, ethnicity, religion, homosexuality, and the Internet) that older voters find threatening. Millennials are the least likely to believe such trends undermine patriotism or family cohesion. They are the most likely to be optimistic about America’s long-term future.

This outlook puts Millennials decisively in the Democratic camp, with roughly two-thirds of them (66 to 32 percent) voting for Obama over McCain in 2008 and (according to Gallup) a smaller yet still impressive margin of three-fifths of them favoring Obama over Romney today. [See the “Bush/Obama” chart on this page.] The big question is whether the waning enthusiasm Millennials now show in re-electing Obama—combined with the extra fervor Silent and Boomers show in defeating him—will allow the GOP to prevail.  Nonwhite Millennials are as overwhelmingly pro-Obama in 2012 as they were in 2008 (roughly a 60 percentage point margin).  Yet Democrats should worry about the recent Pew finding that, among white Millennials, the 10 percentage point margin for Obama in 2008 has been fading away and nearly disappearing over the past year.  If young whites split anywhere close to 50-50 in 2012 (remember, non-Latino whites still comprise 60 percent of this generation), then it hardly matters what young minorities do: The GOP will possess an almost insuperable advantage. Prediction for Millennials in 2012: very large margin (20 percent) to the Democrats, led by a 4-to-1 advantage among young minorities.

It’s always great to have the young on your side. After all, youth represent the future. In the decades to come, if the Millennials stay their political course, they would confer a huge advantage to the Democratic Party. But in the next election, they are still outnumbered by two larger generations of voters (Gen X and Boom), and they may well be outworked by a more energized generation of seniors (the Silent). The young can sometimes lose elections, and lose them badly. It happened in 1972, when the Boomer youth who voted for McGovern were overwhelmed by all the midlife and senior voters (the G.I. and Lost Generations) who favored Nixon.

Two years later, of course, Nixon resigned. The age gap closed almost entirely by the next election and pretty much stayed closed all the way until 2008. As if to close the circle, many of the Millennials who now favor Obama are children of the same young “peacenik” Democrats who once voted for McGovern. That’s what makes elections so fascinating—their power to surprise and to reveal, both who are today and who we will become tomorrow.

If you do all the arithmetic with the voter shares and margin predictions cited above, you will find that my overall prediction is for a dead-even tie between Obama and Romney.  Meaning: The 2012 winner is going to have to put together a generational scorecard that is, in some combination, better than the figures I have revealed.

How likely is it that Obama or Romney will put together that scorecard?  I look at that in the next post.

PART 2

This happens often.  After I write about generational drivers or changes in the social mood, readers will contact me and ask: OK, so much for the drivers and the theory, Neil—what do you think will actually happen?

So let me try to pre-empt those readers.  In my last post, I talked about how and why different generations lean toward or against the 2012 presidential candidates.  In this post, I’ll talk about the connection between generations and some of the more conventional ways pundits currently handicap the election.  I won’t exactly say who I think will win, but I will discuss some of the indicators I am following closely.

Futures Markets.  Everyone knows that Republicans believe in futures markets (and in weird options and derivatives based thereon, like CDFs) more than anyone else.  So here’s the bad news they have to swallow: Futures markets are now predicting Obama to beat Romney by roughly 16 percentage points.  (This is not the predicted voter margin in the election; it is the probability margin by which of most investors think Obama will sneak by in at least a razor-thin victory.)  That’s 57-40 percent on Intrade or 58-42 on Iowa Futures.  Obama has been leading in these markets since last fall.  Bless those markets.  Because of the “law of one price” (look this one up under “arbitrage”), all of these futures market prices have to match, worldwide.  Even brainy liberals (see Infotopia by Cass Sunstein, ) give very high praise to futures markets.

I agree that futures markets have a great track record and need to be taken seriously.  Why do they lean more pro-Obama than the weekly polls?  Maybe they sense that the sentiment for Romney is merely the way Americans vent their anger (always at the incumbent when talking to pollsters) before settling down and voting for the incumbent after all.  Or maybe they sense that the strong preference of the rising generation for a cool and pragmatic Gen Xer as POTUS really does represent where the nation is heading—and that most voters will wake to that fact come November 6.  Young Pompey once declared (to aging Sulla) that “more people worship the rising than the setting sun.”  Maybe the markets agree.

Then again, markets no less than polls can be greatly mistaken this far away from the election.  At the very least, I think that buying a Romney contract on Intrade at $4.00 and waiting to sell it once it hits $4.50 is an extremely safe trade—since sooner or later Romney is bound to have a surge carrying him at least this far.  Even John McCain in 2008 surged in early September to 0.47 in the futures markets.  It is also possible that the markets could gradually drift to a sizable Romney advantage between now and mid-October, and that after Romney wins everyone will congratulate the markets for being so prescient.

The Economy.  According to the Pew Research Center, Romney leads Obama in his handling of one big issue, the economy, no matter how you phrase the question.  And the economy—for example, the creation of jobs and the revival of wage growth—is now far more important to voters than any other issue (environment, gay marriage, immigration, foreign policy, what have you) by a very large margin.  This is a big advantage for Romney.  The unemployment rate is now 8.2 percent; looking at current indicators, it may not decline at all between now and November.  No President since FDR has won an election with an unemployment rate over 7.2 percent.  (That was the rate in November of 1984, when Reagan won re-election; and unlike Obama, Reagan brought the rate down from the date of his first election.)  See The New York Times’ FiveThirtyEight column for a detailed update on the link between the economy and election outcomes.

The economy is as good an argument for Romney as the futures markets are for Obama.  Still, it has potential weaknesses.  Voters have yet to buy into Romney’s economic program—or even to understand it—in any big way.  Is Romney going to cut deficits faster than Obama?  Who knows?  However he runs deficits, Romney says he wants to do it more through tax cuts than spending increases.  Is John Q. Public OK with this?  Also, keep in mind the “no President since FDR” proviso.  If the public comes to equate George W. Bush with Hoover—and Obama with FDR—well then all bets are off.  FDR won as an incumbent in 1936 with an unemployment rate of 16.9% and in 1940 with a rate of 14.6%.

I agree that if the economy worsens in the next couple of months, or if we simply learn more about how bad the economy now is (at least one eminent forecasting group thinks we’re already in a recession, it just hasn’t been called yet), the news will certainly give a further boost to Romney.  But the link between each generation’s pocketbook and vote is seldom simple or direct.  The Silent Generation has done the best economically in recent years and will never bear much of the burden of large deficits, yet the Silent are the most anti-Obama.  For the Millennials, it’s the other way around.  Liberals often complain that red-zone Americans would switch parties if they only understood their own economic self-interest.  Conservatives say the same today about Americans under age 30.  The problem is, most people don’t respond to piecemeal economic incentives.  They either do, or do not, buy into a whole vision.

Likeability.  How much do you like the candidate?  How much would you like to have a beer with him?  These are the sorts of warm-and-fuzzy questions that many political analysts believe turn the tide in an election.  In most of the critical elections I can remember, GOP candidates have had the likeability advantage: Reagan over Carter; Bush Sr. over Dukakis; Bush Jr. over Kerry.  But this election, it’s tipping the other way: The Democratic candidate in 2012 is currently much more likeable than the GOP candidate.  It hardly matters what you ask—which candidate is more “friendly,” “connecting,” “honest,” “good,” “trying,” or “engaged,”—Obama comes out ahead, typically by double digits.  Likeability could be a huge plus in an era of great anxiety when many voters will want to go with their “gut.  It certainly worked for FDR.

Speaking of whom, there actually was a time when the least likeable candidate was, routinely, the Republican.  And that was the 1930s and 1940s.  Herbert Hoover and Alf Landon were less likable than FDR, and Tom Dewey was less likeable than just about anyone, including FDR and Harry Truman.  So Democrats, yes, can be likeable.  Are we reverting to the last Fourth Turning in party likeability?  Or is there a simpler explanation?  Perhaps Mitt Romney, whom nearly everyone who knows him would call him very “likeable,” has simply not yet had the chance to get his charm on in prime time.  We’ll see.

Intangibles & Wildcards.  I give most of the intangibles at this point to Romney.  He is the challenger, and it is an old maxim (though some disagree) that challengers do better late in the campaign.  A much larger share of his supporters say they are “enthusiastic” about this election—no doubt reflecting the higher relative energy of older voters this time around.  He also remains relatively unknown, which means that millions of Americans will be taking a close look at him for the first time in the ten weeks between the GOP convention and the election.  Since much of what is known about Romney thus far is negative (thanks to the attacks from his primary opponents and to the Obama campaign’s efforts to “predefine” him), it is likely that his strengths—for example, his intelligence, wit, and dedication to his family and the community—will get plenty of play.  Romney may surprise voters during the debates by coming across smarter and warmer than most voters are expecting.

Another possible plus for Romney is the “reverse coattails effect.”  Since the GOP are odds-on favorites to retain a majority in the House and gain a majority in the Senate, Romney could be pulled along by state and local candidates.  That assumes of course that most voters prefer to vote a straight ticket and have a single-party government.  It’s often said that Americans are happy with divided government, but according to one recent study a large (and possibly rising) majority say no, they really do want one party in charge.

Any intangibles for Obama?  Confidence, maybe.  Though Obama supporters are less enthusiastic, they are more likely to say they want to cast a positive vote for their candidate (as opposed to voting against the other guy) and are a lot more confident than Romney supporters that their candidate will win.  Obama must hope that confidence doesn’t morph into complacency and that his supporters are still ready to sprint.  Many pundits also say that Obama has an advantage in the electoral college by leading in the bigger states.  That could make a difference, but only if the popular vote is extremely close.

As for wildcards—meaning sudden big surprises—these usually break for the incumbent Commander in Chief, unless voters associate them with mistakes made by the incumbent.  An attack on Iran (by Israel and/or the United States, though the most likely date now mentioned in the media is October, after the election), would likely break favorably for Obama.  Seismic financial news (like a crash triggered by an impending breakup of the Euro) may not break as well, since it may persuade many voters that the world needs better global economic leadership.

Obama and Romney.  Let me conclude with a few thoughts on the two candidates themselves—and how they are, or are not, representative of their generation.

As readers of our books and this blog know, I consider Obama (born, 1961) to be a first-cohort member of Generation X (born 1961-81).  The Gen-X dates we’ve explained and defended at length elsewhere (too many books to hyperlink!).  But what about Obama?  Does he fit the basic Xer picture?  I’ve always thought so: Son of a new-age mom; child of a broken family; growing up disoriented amid incessant travel, change, and social experimentation; coming of age agoraphobic, feeling (as he puts it) “like an outsider”; and ultimately constructing his own persona (like Gatsby), a quality I see in many successful Xers.  What’s more, Obama knows he’s not a Boomer: In his books (Dreams from My Father, The Audacity of Hope), he repeatedly mentions how he feels he came along “after” the Boomers and wants to put an end to much that Boomers have done wrong (culture wars, ideological polarization, and so on).  Back in 2008, Obama often referred to this as a contrast between an earlier “Moses” generation and his own “Joshua” generation.

Obviously, opinions differ about who Obama “really” is.  I think he is at heart a canny survivor, a masterful tactician, a pragmatist who doesn’t let emotions cloud his judgment.  He knows when to play rope-a-dope (always let the GOP make the first budget move, then counter), or when to rouse his base by inveighing against Wall Street tycoons (even while hiring them to staff his Treasury), or when to ignore his own base and make a shrewd cost-benefit call (War on Terror by Predators, anyone?).  On the Boomer cusp, Obama is certainly capable of crusading oratory—which adds to his versatility.  Many of the most memorable crisis-era leaders in American history have been, like Obama, Nomad-Prophet hybrids: FDR, Abraham Lincoln, Sam Adams.  Yet clearly Obama would need a very different and far more effective second term—and another opportunity handed to him by history—to enter these ranks.

As for Mitt Romney (born 1947), no one doubts he is a Boomer.  He’s led a committed religious life; he’s always won accolades as a driven achiever; he’s made tons of money as a blue-chip yuppie; he believes in Values and Culture and Principles; and he tends to see America’s future in heavily moralistic terms (for example, in his recent book, No Apology: Believe in America, he juxtaposes his father’s “Greatest Generation” against his own “Worst Generation”—a dark figure of speech that Obama would never use).  Will his religion be a problem?  There is lots more talk about Mormonism as a Christian heresy among older than among younger Americans, that’s for certain.  Many Millennials are impressed by the strong community ethic of Romney’s LDS Church.

One mystery about Romney, though, is the impression he gives to many of his fellow Boomers that he never shared their passionate coming-of-age experience, never broke from Mom and Dad, and never drank from the same deep well of authenticity and inner fire.  We used to call this the “Dan Quayle problem.”  Boomers have never been drawn to someone who seems to paint by the numbers.  In the GOP primaries, when running against Gingrich and Santorum, Romney consistently did worse among Boomers than among other generations.

Yet in the general election, this weakness may rebound to his advantage.  In the GOP primary, Mitt Romney consistently did better with young voters than any of the other candidates (with the occasional exception of Ron Paul).  Millennials may actually like Romney’s cool and precise 7-point memo responses.  (Romney, far more than McCain, will be able to debate Obama this fall on his own Ivy-League level.)  Silent voters, similarly, may also prefer the buttoned-down Romney over the totally unplugged Boomer radical.

Yet at some point, for all of his advantages on paper, Romney will have to show some flame, some focus, and some real killer instinct.  He will have to get ahead, stay ahead, and systematically thwart his opponent’s comebacks.  In a national election, Romney has not yet demonstrated he has that endurance and resolve.  Obama has.

2012 ELECTION

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Posted on 27th July 2012 by Administrator in Economy |Politics |Social Issues

Report: 2012 Election Likely To Be Decided By 4 Or 5 Key Swing Corporations

July 25, 2012 | ISSUE 48•30

WASHINGTON—With polls this week showing the race between Barack Obama and Mitt Romney tightening even further, a growing number of political experts have declared this year’s election will almost certainly be decided by a small handful of swing corporations.

“While most publicly traded companies are solidly red or blue, there are four or five major corporations that are complete tossups right now, and any one of them could prove decisive come November,” said Nate Silver of The New York Times, noting in particular that Procter & Gamble, a traditional bellwether for the country as a whole, remained a “total wildcard.” “Both candidates will have to focus almost exclusively on these swing businesses in order to gain the upper hand.”

“And given how close this race is, I wouldn’t be surprised if the whole thing comes down to undecided executives at Dow Chemical or Disney,” Silver continued. “Let’s not forget 2000, when Philip Morris International single-handedly put George W. Bush into office.”

According to polling data, the president’s favorability has fallen steadily among independent-leaning multinationals, a demographic that effectively carried him to victory in 2008. Additionally, the latest figures suggest that even some reliably Democratic strongholds, such as Google, may now be in play, buoying hopes within the Romney camp that the GOP challenger could take the White House with an unexpected victory in a key tech boardroom.

Recognizing the importance of these closely contested conglomerates, both Obama and Romney have made frequent campaign stops at swing corporations in recent weeks and delivered speeches aimed squarely at these pivotal companies’ interests, with both candidates blasting each other as out of touch with the issues that truly matter to real American CEOs.

“As president, I promise to stand up for you in Washington and always put you first,” Romney said earlier this week, addressing an audience in the battleground boardroom of Time Warner during a barnstorming tour through the communications sector. “All of you good, hardworking people gathered here represent the best of America, and mark my words, I will do everything in my power to fight for your freedoms and prosperity.”

Political observers have noted the stakes of this year’s election are unusually high, with many experts claiming the Affordable Care Act’s fate, the tax burden on American families, and a possible U.S. invasion of Iran are questions that now reside entirely in the hands of those few Fortune 500 corporations that remain up for grabs.

“I went with Obama in 2008, but now I’m having my doubts,” said Kenneth Frazier, an undecided CEO at the Merck corporation. “Frankly, I’ve been disappointed with his failure to follow through on the promises he made to us four years ago. This time around, I want to make sure I’m voting for someone who truly has the best interests of me and my company at heart.”

“It’s kind of exciting, though,” Frazier added. “Who knows? Maybe in November it will be our $15 million backing funneled anonymously into a political action committee that decides this whole thing.”

EPIC FAIL – PART ONE

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Posted on 23rd April 2012 by Administrator in Economy |Politics |Social Issues

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 “Facts are to the mind what food is to the body.” – Edmund Burke

No wonder one third of Americans are obese. The crap we are shoveling into our bodies is on par with the misinformation, propaganda and lies that are being programmed into our minds by government bureaucrats, corrupt politicians, corporate media gurus, and central banker puppets. Chief Clinton propaganda mouthpiece, James Carville, famously remarked during the 1992 presidential campaign that, “It’s the economy, stupid”. Clinton was able to successfully convince the American voters that George Bush’s handling of the economy caused the 1991 recession. In retrospect, it was revealed the economy had been recovering for months prior to the election. No one could ever accuse the American people of being perceptive, realistic or critical thinking when it comes to economics, math, history or distinguishing between truth or lies. Our government controlled public school system has successfully dumbed down the populace to a level where they enjoy their slavery and prefer conscious ignorance to critical thought.

The next six months leading up to the November elections will surely provide a shining example of the degraded society we’ve become. Both parties and their propaganda machines, SuperPacs, and corporate media sponsors will treat the igadget distracted masses to hundreds of hours of lies, spin, and vitriol, designed to divert the public from the fact that both parties act on behalf of the same masters and have no intention of changing course of the U.S. Titanic to avert the iceberg dead ahead. We will be treated to storylines about race, gun control, the war on women, energy independence, global warming, the war on terror, the imminent threat of Iran and North Korea, Obamacare, Romneycare, and of course the economy, stupid.

There are 240 million voting age Americans. About 130 million will likely vote in the 2012 election based upon recent voter participation results. This means that 110 million Americans don’t give a crap about who runs this country or they’ve come to their senses and realize our votes don’t matter. Between 1840 and 1900 voter participation ranged between 70% and 82% as Americans took their civic duty seriously and believed their vote counted. Since 1913, when the politicians relinquished control of our currency to a private bank controlled by a small group of powerful men, voter participation for President has ranged between 49% and 62%. It hasn’t surpassed 57% since 1968. Now that corporations are people and our candidates are selected by a few rich men, the transformation from a republic to a corporate fascist state is almost complete. During the coming interminable political campaign you will hear about jobs until your ears bleed. I can guarantee that 98% of the rhetoric will be false. Neither party wants the American people to understand the truth about what happened to our economy and jobs over the last 100 years. It has been a bipartisan screw job and ignoring the facts doesn’t change them.

The first fact that can’t be ignored is how many Americans are actually unemployed today. Here is some truth you won’t get from a politician or media talking head:

  • There are 243 million working age Americans.
  • There are 142 million employed Americans.
  • Only 101 million of the employed Americans are working more than 35 hours per week. This means that only 41.6% of all working age Americans have a full-time job.
  • According to the government drones at the BLS, 88 million Americans have “chosen” to not be in the labor force – the highest level in U.S. history.
  • The percentage of Americans in the workforce at 63.8% is the lowest since 1980 and down from a peak of 67.1% in 2000. The difference between these two percentages is 8 million Americans.
  • The BLS reports there are only 12.7 million unemployed Americans in the country, down from 15.3 million in 2009.
  • The BLS reports the unemployment rate has dropped from 10% in late 2009 to 8.3% today. Over this time frame the working age population grew by 5.7 million, while the number of employed Americans grew by 3.6 million. Only a government drone could interpret this data and report a dramatic decline in the unemployment rate.

 

Any critical thinking human being would examine the data being reported as fact by our government and regurgitated without question by the corporate mainstream media and conclude it is false, misleading and manipulated. The economy was booming in 2000 and 67.1% of the working age population were in the labor force. Today the economy is in much worse shape. More people NEED to work in order to just make ends meet, but according to the government, 8 million Americans have chosen to not work. Only an Ivy League economist or CNBC bimbo pundit would believe such a blatant distortion of reality. A comparison to prior decades provides all the evidence you need:

  • In 1980 the working age population was 168 million and the labor force totaled 107 million.
  • By 1990 the working age population grew by 21 million and the labor force grew by 19 million.
  • By 2000 the working age population grew by another 23 million and the labor force advanced by 17 million.
  • Since 2000 the working age population has grown by 30 million, but shockingly the labor force has supposedly grown by only 12 million.

 

This data is so twisted that there is absolutely no doubt the Federal Government is purposely manipulating the numbers to make the economic situation appear better than the reality. During the Great Depression propaganda and spin had not been perfected. There weren’t multiple definitions of unemployment designed to confuse and mislead the public. The peak level of unemployment in the 1930s was 25%. The current reported level is 8.3%. On a comparable basis to the 1930s, including short-term discouraged workers, those forced to work part-time, and the long-term discouraged workers which were defined out of existence in 1994 by the BLS, the real unemployment rate is 22% today. It feels like a depression for millions of Americans because it is a depression.

 

The rhetoric from the Obama administration about a jobs recovery is laughable. Full time employment peaked in July 2007 at 122.4 million. Today there are 113.9 million people classified as full-time, with only 101.3 million working more than 35 hours. There are 8.5 million fewer people with full time jobs today than there were in 2007. That fact is even more disheartening considering the working age population has grown by 10.5 million over the same time span. Taking an even longer term view provides the perspective needed to assess our true economic state.  Total nonfarm employment hasn’t grown in twelve years, while the working age population has grown by 30 million people.

 

Obama will tout the fact that we’ve added 3.6 million jobs since the bottom of this recession. What he won’t tout is that hiring of temporary workers surged by 37% and accounted for 25% of all the jobs added since 2009. I’m sure these temporary workers, with no health or retirement benefits, are confident about their future.  The facts about jobs and employment are consistent with the 47 million Americans on food stamps (up from 35 million when the recession supposedly ended). It’s a sure sign of recovery when spending on food stamps doubles in the last two years. No depression here, just move along.  

 

Record numbers of Americans being added to the SSDI rolls for depression and other illusory disabilities is surely a positive development pointing to a strong economic recovery. In just the first four months of this year, 539,000 joined the disability rolls and more than 725,000 put in applications. “We see a lot of people applying for disability once their unemployment insurance expires,” said Matthew Rutledge, a research economist at Boston College’s Center for Retirement Research. The number of applications last year was up 24% compared with 2008, Social Security Administration data show. Why participate in the labor market when you can collect a government check for life because you are obese or depressed. These are the people no longer in the labor force. Once they go on SSDI, they rarely go back to work again.   

 

The government reported figure of 12.7 million unemployed Americans is an utter falsehood. There are in excess of 30 million Americans that are either unemployed or working part-time that want full-time jobs. Government propaganda doesn’t change the facts.

 “Facts don’t cease to exist because they are ignored.” – Aldous Huxley

Would You Like a Side Order of Facts with That Propaganda?

When you watch the Wall Street scam artists paraded on CNBC declaring the number of people not in the labor force is going up due to Baby Boomers retiring, you should understand they are propagating a falsehood. They are either intellectually dishonest or too lazy to do the most basic of research. They are paid millions to impart false storylines to anyone dumb enough to watch CNBC expecting facts or a smattering of truth. If you want some truth, turn to John Mauldin and John Hussman. CNBC doesn’t invite these outstanding honest analysts on their station when they can roll out a shill like Abbey Joseph Cohen or James Paulson. They wouldn’t want some factual analysis when they can have Becky Quick do one of her frequent handjob interviews with that doddering old status quo fool Warren Buffet.

A critical thinker might wonder how could real disposable income be dropping over the last three months and only have risen by 0.3% in the last year if we’ve had the strong job growth touted by Obama. Could it be the jobs being created are extraordinarily low-paying? There are signs of desperation everywhere you look. The two charts below, from one of John Mauldin’s recent articles, reveal the truth about the Baby Boomers retiring storyline. The first chart shows the employment level for those over the age of 55 since 2007. There were 25.3 million people over the age of 55 working in 2007 and there are 30.1 million working today. People over 55 have seen their total employment level rise by 4.8 million jobs since the beginning of the recession, and over 3 million jobs since the 3rd quarter of 2009. Total employment is down by 4 million since 2007, while employment among those over 55 is up 19%. John Hussman described the reality about employment in his recent weekly article:

“If you dig into the payroll data, the picture that emerges is breathtaking. Since the recession “ended” in June 2009, total non-farm payrolls in the U.S. have grown by 2.32 million jobs. However, if we look at workers 55 years of age and over, we find that employment in that group has increased by 3.04 million jobs. In contrast, employment among workers under age 55 has actually contracted by nearly one million jobs, regardless of which survey you use. Even over the past year, the vast majority of job creation has been in the 55-and-over group, while employment has been sluggish for all other workers, and has already turned down.”

I wonder how Larry Kudlow will spin this.

 

Now for the really eye opening facts. While the labor participation rate has been plunging, the Boomer participation rate has been skyrocketing. The participation rate for the over 65 age group is now at an all-time high. Do you think this has anything to do with home values dropping 36% since 2005, gasoline prices doubling since early 2009, food prices surging by 25%, the 1.4% annual return of stocks since 1999, or the .15% senior citizens can earn on their money today versus the 5% they could earn in 2007?

 

Intellectually dishonest ultra-liberal Ivy League defender of the Federal Reserve – Paul Krugman had this to say about Ben Bernanke’s zero interest rate policy on senior citizens:

“Finally, how is expansionary monetary policy supposed to hurt the 99 percent? Think of all the people living on fixed incomes, we’re told. But who are these people? I know the picture: retirees living on the interest on their bank account and their fixed pension check — and there are no doubt some people fitting that description. But there aren’t many of them.”

It must be comforting living in an ivory tower or penthouse suite and looking down upon the ignorant masses while caressing your Nobel Prize. The millions of senior citizens with $100,000 of savings could earn $5,000 of interest income in 2007 to supplement their $18,000 of Social Security income. Today, they can earn $150 while the Wall Street banks receive the benefits of ZIRP by borrowing for free from the Federal Reserve and earning billions risk free. Paulie doesn’t think the $4,850 reduction in income and the 15% increase in inflation since 2007 had a negative impact on senior citizens. They must be pouring into the work force because they are just bored, after working for the last 45 years. John Hussman has a slightly different viewpoint, based upon facts rather than a false disproven ideology:    

“Beginning first with Alan Greenspan, and then with Ben Bernanke, the Fed has increasingly pursued policies of suppressing interest rates, even driving real interest rates to negative levels after inflation. Combine this with the bursting of two Fed-enabled (if not Fed-induced) bubbles – one in stocks and one in housing, and the over-55 cohort has suffered an assault on its financial security: a difficult trifecta that includes the loss of interest income, the loss of portfolio value, and the loss of home equity. All of these have combined to provoke a delay in retirement plans and a need for these individuals to re-enter the labor force.

In short, what we’ve observed in the employment figures is not recovery, but desperation. Having starved savers of interest income, and having repeatedly subjected investors to Fed-induced financial bubbles that create volatility without durable returns, the Fed has successfully provoked job growth of the obligatory, low-wage variety. Over the past year, the majority of this growth has been in the 55-and-over cohort, while growth has turned down among other workers. Meanwhile, broad labor force participation continues to fall as discouraged workers leave the labor force entirely, which is the primary reason the unemployment rate has declined. All of this reflects not health, but despair, and helps to explain why real disposable income has grown by only 0.3% over the past year.”

Do you believe Krugman or Hussman? The key takeaway from the data is the desperation exhibited by average Americans, while the political governing elite and Wall Street pigs continue to gorge themselves at the trough of free money provided by the Federal Reserve, while paying themselves obscene bonuses for a job well done buying the corrupt Washington politicians.

 

Over the next six months we will hear unceasing rhetoric from Obama and Romney about how they are going to create jobs. Neither of these government apparatchiks have a clue about jobs or desire to change the course that was set one hundred years ago with the creation of the Federal Reserve. Obama never worked at a real job in his entire life, while Romney has spent his life firing people and spinning off heavily indebted companies to unsuspecting investors. The current deteriorating jobs picture has been decades in the making and a truly bipartisan effort. The rhetoric about America being an engine of growth and the world leader in innovation and entrepreneurship is laughable when examined with a critical eye. We are an aging empire living in the past as the facts portray an entirely different reality. Our fastest growing industries include:

  • Solar panel manufacturing (subsidized by your tax dollars)
  • For-profit universities (diploma mills subsidized by your tax dollars)
  • Pilates and yoga studios
  • Self-tanning product manufacturing
  • Social network game development
  • Hot sauce production

The “surge” in jobs in the last three months is being driven by these industries:

  • Food services and drinking places
  • Administrative and support services
  • Ambulatory health care services
  • Credit intermediation
  • Hospitals

Is this the picture of a world leading jobs machine or a delusional, paper pushing, self-involved, obese, sickly, overly indebted crumbling empire? The job openings in industries that actually produce something are barely identifiable on the chart below. Maybe the University of Phoenix can successfully retrain construction and manufacturing workers to be waiters, waitresses, and Wal-Mart greeters if the Federal government can funnel more of our tax dollars into student loans.    

 

If you thought low wage work was only for Chinese, Indians, and Vietnamese, you haven’t been paying attention. The United States is a world leader. We are by far the world leader among developed countries in percentage of low wage workers at 24.8%. I find it hysterical that the dysfunctional insolvent countries of Greece, Spain, Portugal, and Italy have a much smaller percentage of low wage workers than the great American empire. We have 142 million employed Americans and 35 million are slaving away in low paying thankless jobs. This explains why the half the workers in the country make less than $25,000 per year.  

 

The top three employment occupations in the country are:

  • Office and administrative support work
  • Sales & Related
  • Food preparation and serving related

 

There are high paying good jobs in America, but there aren’t many and on-line college graduates from the University of Phoenix aren’t going to get them. The highest paying jobs today require a high level of specialization and education, especially in the healthcare and technology industries. This disqualifies the vast majority of government run public school graduates. High paying manufacturing jobs which were the backbone of the country during the 1950s and 1960s are gone forever. The reasons for this transformation are multifaceted and will be addressed in Part Two of this article. It didn’t happen by accident and there are culprits to blame. The conversion of our country from making high quality things other countries needed to a debt driven service economy of paper pushers, hash slingers, and retail “specialists” has slowly but surely destroyed the middle class. The masses are distracted by the latest technological marvel that allows them to waste another two hours per day posting how they feel about the latest episode of America’s Got Something or America’s Top Whatever. We have become a country that glories in our materialism and shallow culture while acting like a thug around the world with our unparalleled military machine.  

This result is not an accident. It was set in motion by the actions of a handful of rapacious, wealthy powerful men that have been calling the shots in this country for the last hundred years. It wasn’t a planned conspiracy but the logical result of man-made inflation, a fiat currency not backed by gold, the craving of rich men to become richer, a willfully ignorant populace, and a slow devolution of our society into a corporate fascist state. We praise and honor psychopathic criminals while scorning and ridiculing the middle class workers that built this country. The American dream has become a nightmare for the millions of unemployed and underemployed. The acceleration of debt accumulation and money printing guarantees this rotting carcass of a country will go belly up in the foreseeable future.     

“Thus did a handful of rapacious citizens come to control all that was worth controlling in America. Thus was the savage and stupid and entirely inappropriate and unnecessary and humorless American class system created. Honest, industrious, peaceful citizens were classed as bloodsuckers, if they asked to be paid a living wage. And they saw that praise was reserved henceforth for those who devised means of getting paid enormously for committing crimes against which no laws had been passed. Thus the American dream turned belly up, turned green, bobbed to the scummy surface of cupidity unlimited, filled with gas, went bang in the noonday sun.” - Kurt Vonnegut

In Part Two of this article I will examine how we got to this point and what is likely to happen next.



 

YOU AIN’T SEEN NOTHING YET – PART THREE

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Posted on 5th April 2012 by Administrator in Economy |Politics |Social Issues

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 This is Part Three of a three part series trying to make sense of the Crisis period we entered in 2008. Click here to read: PART ONE or PART TWO

Seeking Regeneracy

“Soon after the catalyst, a national election will produce a sweeping political realignment, as one faction or coalition capitalizes on a new public demand for decisive action. Republicans, Democrats, or perhaps a new party will decisively win the long partisan tug of war. This new regime will enthrone itself for the duration of the Crisis. Regardless of its ideology, that new leadership will assert public authority and demand private sacrifice. Regardless of its ideology, that new leadership will assert public authority and demand private sacrifice. Where leaders had once been inclined to alleviate societal pressures, they will now aggravate them to command the nation’s attention. The regeneracy will be solidly under way.” – Strauss & Howe – The Fourth Turning

   

  

 

  

 The 2008 election happened in the midst of the catalyst events. A sweeping political realignment did not occur. In fact, the 2010 mid-term elections produced a result which has essentially gridlocked the political process in Washington D.C. The reunification and reenergizing of society has yet to occur. Neil Howe in his recent article pondered the question of regeneracy:

“We may like to imagine that there is a definable day and hour when America, faced by growing danger and adversity, explicitly decides to patch over its differences, band together, and build something new. But maybe what really happens is that everyone feels so numb that they let somebody in charge just go ahead and do whatever he’s got to do. I’m thinking of how America felt during the bleak years of FDR’s first term, or during Lincoln’s assumption of vast war powers after his repeated initial defeats on the battlefield.

The regeneracy cannot always be identified with a single news event. But it does have to mark the beginning of a growth in centralized authority and decisive leadership at a time of great peril and urgency. Typically, the catalyst itself doesn’t lead directly to a regeneracy. There has to be a second or third blow, something that seems a lot more perilous than just the election of third-party candidate (Civil War catalyst) or a very bad month in the stock market (Great Power catalyst). We are still due for such a moment. We have not yet reached our regeneracy. When it happens, I strongly suspect it will be in response to an adverse financial event. It may also happen in response to a geopolitical event. It may well happen over the next year or two.” – Neil Howe – Dating the Fourth Turning

Regeneracy occurred within five years of the outset of the three previous Crisis periods in U.S. history. The historic year of 1776 saw the colonies come together and declare independence from Great Britain. Group solidarity and willingness to die for their cause launched an eight year war and ultimately the formation of a new republic. The Civil War regeneracy occurred after the Union debacle at Bull Run in 1861. The Washington aristocrats had treated the battle like a show, where they could bring a picnic lunch and be entertained by an entertaining skirmish between two armies. After the resounding bloody defeat Abraham Lincoln assumed dictatorial like powers over the North and ordered the immediate enlistment of a half a million soldiers. He assumed unprecedented powers of taxation, forced conscription, suspension of due process and showed a willingness to administer maximum destruction to his foes. This would be no picnic in the park, as 700,000 men died in the next three years. The regeneracy during the Great Depression/WWII Crisis occurred in 1933 with the election of Franklin Roosevelt. He immediately declared a bank holiday and confiscated all the gold in the country. In a flurry of executive orders and bills sent to Congress he rammed through his New Deal, assuming new and broader powers for the Federal government and Executive branch.

Based on these examples in American history it is clear we have not entered the regeneracy stage of this Crisis. Also based on history, it is likely to occur by the end of 2013. A second blow to our nation and our psyches is the only thing that could possibly bring together a deeply divided nation. The country was struck by a category 3 hurricane in 2008. We have been in the eye of the hurricane for the last two years and have grown complacent. The eye will pass over us in the next year and we will again be buffeted by hurricane force winds – except the hurricane has strengthened to a category 5 as the “solutions” to the storm will make part two far worse.  Those with a libertarian mindset are not likely to be happy with the Federal government and President taking on even greater powers in the coming years. The usurpation of more control over the citizens of this country in the last decade has been one of the major reasons for the ratcheting down of trust in our leaders. The upcoming presidential election will likely create the dynamic that propels the country into its regeneracy. If the next downward blow can be averted before the election, the country will end up with four more years of Obama. If the Crisis suddenly worsens before November, Romney assumes the mantle of Prophet Leader in January 2013.   

I agree with Neil Howe that the country’s reaction to an adverse financial event will be the likely regeneracy moment. The explosive mixture of the five D’s will provide the spark for the next phase: Debt; Derivatives; Default; Devaluation; and ultimately Depression. There is no way to deny the $15.6 trillion of debt this country has accumulated, with $10 trillion of it added since 2000. The debt ceiling of $16.4 trillion will be breached in October 2012 at the current rate of extreme spending. This should set up an interesting dynamic just prior to the November elections. A replay of the August 2011 showdown could be disastrous for Obama if the stock market were to crater again.

      

 

We are accumulating debt at a rate of $3.7 billion per day, or $154 million per hour. No politician of either party, other than Ron Paul, has any plan to even moderate the spending, let alone make actual cuts. The CBO projections rolled out by these congressional weasels aren’t worth the paper they are printed on. The National Debt is on track to surpass $20 trillion in 2015 and $25 trillion by 2018. And this is before the Medicare and Social Security costs blast into orbit in 2020. Kicking the can down the road works until math catches up with you. It is insane to believe we can dig ourselves out of this debt induced mess with more debt, but empires tend to act insanely in their death throes.

“In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule.” – Friedrich Nietzsche

Strauss & Howe made preparation recommendations back in 1997 that would have lessened the impact of this Crisis, but they fell on deaf ears. Their common sense suggestions included:

  •  Work to elevate moral and cultural standards. Toddlers with Tiaras and The Kardashians were not an elevation.
  • Shed and simplify the federal government by cutting back sharply on its size and scope.
  • All levels of government should prune legal, regulatory and professional thickets.
  • Politicians should define our challenges bluntly and stress duties over rights.
  • Require community teamwork to solve local problems without federal government intervention.
  • Treat children as the nation’s highest priority.
  • Tell future elders they will need to be more self-sufficient, save more, and expect fewer entitlements.
  • Shift government pension plans from defined benefit plans to defined contribution plans.
  • Begin to trim Medicare, Medicaid and Social Security benefits.
  • Raise the national savings rate, reduce consumption and work towards federal budget surpluses.
  • Expect the worst, conserve our forces, and be prepared for an epic struggle down the road.

I would reckon we went 0 for 11 on the preparation front. We took the exact opposite course in most cases. Each generation has their own crosses to bear. No one will escape the bitter gale force winds of this Crisis. Strauss and Howe must have had a crystal ball looking fifteen years into the future when they made this supposition:    

 “The Boomers’ old age will loom, exposing the thinness in private savings and the unsustainability of public promises. The 13ers will reach their make or break peak earning years, realizing at last that they can’t all be lucky exceptions to their stagnating average income. Millenials will come of age facing debts, tax burdens, and two tier wage structures that older generations will now declare intolerable.”

Thus far the older generations have refused to yield. They demand promises made be promises kept. The Boomers did not save enough to sustain themselves during their retirement. Many are entirely reliant upon Social Security and Medicare as their only savings and health insurance. Generation X is caught between aging parents and indebted jobless children. The Millenials are saddled with $1 trillion of student loan debt and few decent job opportunities. In prior Fourth Turnings the Prophet generation led and the Hero generation followed, doing the heavy lifting. This dynamic is yet to be realized during this Crisis. Maybe the regeneracy event will create this dynamic.

That event will likely be triggered by another debt crisis. Rogoff and Reinhart studied 44 countries over 200 years and concluded that once government debt exceeded 90% of GDP economic growth slowed and the likelihood of disaster rose dramatically.   

“Those who remain unconvinced that rising debt levels pose a risk to growth should ask themselves why, historically, levels of debt of more than 90% of GDP are relatively rare and those exceeding 120% are extremely rare. Is it because generations of politicians failed to realize that they could have kept spending without risk? Or, more likely, is it because at some point, even advanced economies hit a ceiling where the pressure of rising borrowing costs forces policy makers to increase tax rates and cut government spending, sometimes precipitously, and sometimes in conjunction with inflation and financial repression (which is also a tax)? Historical experience and early examination of new data suggest the need to be cautious about surrendering to “this-time-is-different” syndrome and decreeing that surging government debt isn’t as significant a problem in the present as it was in the past.”

 

On this date the U.S. debt to GDP ratio is 102%. Our debt accumulation is on automatic pilot and the national GDP is incapable of growing above 3%. Anyone with the most basic math skills (this excludes Wall Street economists, CNBC bimbo anchors, and Bernanke) can determine the ratio will pass 120% in 2015. This doesn’t even include the Fannie, Freddie, and Student Loan debt that are guaranteed by the Federal government, along with trillions of unfunded social program liabilities and state and local debts. In reality the true debt obligations of this country exceed 500% of GDP, as no politician plans to willingly renege on Medicare and Social Security promises made to voters who would boot them if they voted to cut these entitlements.

The linear thinking deniers of reality (Krugman) will use Japan as their example of a country whose debt ratio is above 200%, without disastrous consequences. I guess a 22 year recession is not considered disastrous. Japan has been able to fund themselves internally because their citizens had a 15% savings rate in and they have run gigantic trade surpluses for decades. That game is over and they will hit the wall in the near future. The savings rate in the U.S. is 3.7% and we run $550 billion trade deficits, or 3.7% of GDP. The United States has no advantages other than the U.S. dollar currently being regarded as the worldwide reserve currency. We are hanging our hat on being the best looking horse in the glue factory.

 trade deficit as gdp

The cracks in the façade are already painfully visible. The U.S. ran a $1.4 trillion deficit in 2009; $1.3 trillion in 2010; and $1.3 trillion in 2011. In the chart below you can see foreigners’ appetite for U.S. debt since 2007 has plunged. Maybe it has something to do with getting a negative real return by investing in U.S. Treasuries paying 2%. Maybe it has something to do with Ben Bernanke attempting to inflate away our debt burden. Maybe it has something to do with Congress and the President accelerating spending and creating massive deficits for as far as the eye can see. Maybe they are losing trust and confidence in the American Empire.   

 

In the last three years we have run $4 trillion in deficits and foreigners have only funded $1.4 trillion of that debt. That means someone else had to buy $2.6 trillion of our long term Treasuries. Some of it was funded by little old ladies and pension funds that are setting themselves up for enormous losses. The vast swath was purchased by Ben Bernanke with his QE for eternity programs. As foreigners rationally reduce their Treasury holdings and we continue to run $1.3 trillion deficits, Bernanke must keep buying the debt. This cycle will continue until we reach our Minsky Moment, then Strauss & Howe’s forecast will be realized:

“This might result in a Great Devaluation, a severe drop in the market price of most financial and real assets. This devaluation could be a short but horrific panic, a free-falling price in a market with no buyers. Or it could be a series of downward ratchets linked to political events that sequentially knock the supports out from under the residual popular trust in the system. As assets devalue, trust will further disintegrate, which will cause assets to devalue further, and so on.” - Strauss & Howe – The Fourth Turning

Who will buy our debt in the coming months and years? Europe is saturated with debt and doesn’t have the means to purchase our debt. Japan is a train wreck waiting to happen. China’s customers aren’t buying their crap, so their economic miracle is about to go in reverse. The Federal Reserve cannot buy $1 trillion of Treasury bonds per year forever without creating more speculative bubbles and raging inflation in the things people need to live. The Minsky Moment will be the point when the U.S. Treasury begins having funding problems due to the spiraling debt incurred in financing perpetual government deficits. At this point no buyer will be found to bid at 2% to 3% yields for U.S. Treasuries; consequently, a major sell-off will ensue leading to a sudden and precipitous collapse in market clearing asset prices and a sharp drop in market liquidity. In layman terms that means – the shit will hit the fan. The Federal Reserve and Treasury will be caught in their own web of lies. The only way to attract buyers will be to dramatically increase interest rates. Doing this in a country up to its eyeballs in debt will be suicide. We will abruptly know how it feels to be Greek.

Linear thinkers like Krugman and most of the mainstream media opinion leaders can’t fathom the possibility of a complete collapse of our economic system. Most of their little models and economic data points don’t even go back to the last Fourth Turning period. They make projections about a housing recovery based on historical data that starts in 1962. Housing sales linger at historical lows with mortgage rates at 4%. The entire housing market would cave in if mortgage rates reached 6%, where they were in 2008. The forty year average mortgage rate has been 9%. Everything about our economic system is abnormal. Even reversion to the mean would be disastrous. The Minsky Moment headed our way will not be a single uncorrelated event. The entire financial world is hopelessly entangled by the $700 trillion of derivatives that ensure mass destruction if one of the dominoes falls. This is the reason an otherwise inconsequential country like Greece had to be “saved”.

Everyone knows Greece, Portugal, Spain and Italy are broke. One or more will eventually default on their debt. It is highly likely that a butterfly will flap its wings in Europe and cause a hurricane in the U.S. The default will spark a worldwide contagion as trust in a system of false promises disintegrates. China’s already crumbling real estate market will implode. As interest rates soar and stock markets plunge, global tensions will intensify. Continued oil supply constraints will be the cherry on top. Based on historical precedent, this is likely to strike before 2014 arrives. The wealth destruction and pain will be so intense a regeneracy will be at hand. Our very survival will feel at stake.   

“Eventually, all of America’s lesser problems will combine into one giant problem. The very survival of the society will feel at stake, as leaders lead and people follow. The emergent society may be something better, a nation that sustains its Framers’ visions with a robust new pride. Or it may be something unspeakably worse. The Fourth Turning will be a time of glory or ruin.” - Strauss & Howe – The Fourth Turning

And here is the rub for those who argue for less government intervention in our lives. Which leaders will lead and who will follow? The actual events do not matter as much as how the people react to the events. Fourth Turnings are always chaotic and tumultuous. In the frenzied period during the next leg down, people will demand order. They will call for the government to do something. Obama or Romney will use the fear and uncertainty to assume more power over our lives. Executive orders, new legislation, and another stripping of our liberties will be attempted. How the generational cohorts react to these deeds will determine what happens next. There are 97 million Millenials, 83 million Generation X and 73 million Boomers. The Boomers hold most of the positions of power, but their credibility as leaders has been damaged by their actions over the last two decades.

How the Millenials react to Boomer commands will determine the course of this Fourth Turning. The great devaluation will provide our leaders the opportunity to address the structural imbalances that haunt our nation. They could force Wall Street bankers, shareholders and bondholders assume their losses. They could rewrite the social contract with all generations, balancing the needs of elders with the futures of our youth. They could dramatically scale back the military industrial complex. They could completely scrap the ridiculous tax code and shift from taxing income to taxing consumption. They could revamp our political system and remove money from the political process. They could choose to balance budgets and reduce the size of government. They could ask for proportional sacrifice from everyone in order to keep this ship from sinking. If you believe this will happen, I have nice home near an Iranian nuclear power plant I’d like to sell you.

The regeneracy does not mean the actions taken by our leaders will be wise, well thought out, rational or beneficial to all people. Many believe the actions taken by Abraham Lincoln and Franklin Roosevelt during the previous Fourth Turning Crisis periods were detrimental, foolish, and enhanced the power of the state at the expense of liberty for the people. The leader when the regeneracy events strike is more likely to respond with more government control as the solution. He will invoke executive orders giving government control over important industries and crucial institutions. The government politician leaders will pick the winners and losers, with their cronies and contributors winning again. Dissent will not be acceptable. The NDAA will be invoked to imprison those who disagree with the mandates handed down by those in power. Congress would pass SOPA and lock down the internet and shutdown any websites they consider dangerous to their central authority. Lastly, with the biggest and baddest military machine on earth, the leader will attempt to rally the masses and distract them from our dire economic situation by seeking an external threat to confront. It just so happens that China is also in the midst of their own Fourth Turning. History has shown that armed confrontation is likely around the climax of the Crisis:    

“History offers even more sobering warnings: Armed confrontation usually occurs around the climax of Crisis. If there is confrontation, it is likely to lead to war. This could be any kind of war – class war, sectional war, war against global anarchists or terrorists, or superpower war. If there is war, it is likely to culminate in total war, fought until the losing side has been rendered nil – its will broken, territory taken, and leaders captured.” - Strauss & Howe – The Fourth Turning

No one knows the exact events that will mark this Crisis period in our history. But there is no turning back. We’ve entered the Winter season and the beautiful calm days of autumn are long past. Nothing but turmoil, bitterness and sacrifice lie ahead. We entered this Winter of our discontent unprepared like the grasshopper in the fable. This has insured this Crisis will be far worse than it needed to be. The grasshoppers want solutions and easy answers to problems created over decades of ignorance, sloth, greed and stupidity. It’s too late. There are no easy answers and the solutions are all painful and bitter. This is not some theoretical exercise. This is the reality of our situation. I have three teenage sons and their futures depend on the outcome of this Crisis. I will do whatever it takes to support them. I will not allow them to be cannon fodder in some war for oil in the Middle East. If their future requires me to oppose a tyrannical government, so be it. If their future requires me to give up my Social Security and Medicare security blanket, so be it. If I have to die so they may live, so be it. There are no guarantees in this life. We get about 80 years on this planet to make a difference. The choices we make in the next few years will matter. Are you ready? I am.

   

“The seasons of time offer no guarantees. For modern societies, no less than for all forms of life, transformative change is discontinuous. For what seems an eternity, history goes nowhere – and then it suddenly flings us forward across some vast chaos that defies any mortal effort to plan our way there. The Fourth Turning will try our souls – and the saecular rhythm tells us much will depend on how we face up to that trial. The saeculum does not reveal whether the story will have a happy ending, but it does tell us how and when our choices will make a difference.” - Strauss & Howe – The Fourth Turning

Click here to read: PART ONE or PART TWO

 


 

YOU AIN’T SEEN NOTHING YET – PART TWO

54 comments

Posted on 4th April 2012 by Administrator in Economy |Politics |Social Issues

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This is Part Two of a three part series trying to make sense of the Crisis period we entered in 2008. Click here to read: PART ONE

Catalyst of Change

“As late as December 1773, November 1859, and October 1929, the American people had no idea how close it was. Then sudden sparks (the Boston Tea Party, John Brown’s raid and execution, Black Tuesday) transformed the public mood, swiftly and permanently. Over the next two decades or so, society convulsed. Emergencies required massive sacrifices from a citizenry that responded by putting community ahead of self. Leaders led, and people trusted them. As a new social contract was created, people overcame challenges once thought to be insurmountable – and used the Crisis to elevate themselves and their nation to higher plane of civilization.” – Strauss & Howe - The Fourth Turning

 

 

 

Anyone who hasn’t sensed a mood change in this country since the 2008 financial meltdown is either ignorant or in denial. Millions of Americans fall into one of these categories, but many people realize something has changed – and not for the better. The sense of pure financial panic that existed during September and October of 2008 had not been seen since the dark days of 1929. Our leaders used the initial terror and fear to ram through TARP and stimulus packages that rewarded the perpetrators of the financial collapse rather than helping the middle class who lost 8 million jobs, destroyed by Wall Street criminality. The stock market plunged by 57% from its 2007 high by March 2009. What has happened since September 2008 has set the stage for the next downward leg in this Crisis. The rich and powerful have pulled out all the stops and saved themselves at the expense of the many. Despite overwhelming proof of unabashed mortgage fraud, rating agency bribery, document forgery on a grand scale and insider trading based on non-public information, the brazen audacity of Wall Street oligarchs is reminiscent of the late stages of the Roman Empire.    

“Crime, once exposed, has no refuge but in audacity.”
― Tacitus, Annals

The actions of the governing elite have provoked the darkening mood creeping across the land. The rise of the Tea Party in 2009 was fueled by anger over the bank bailouts, out of control federal spending and ever increasing taxes. The anger spilled over into town hall meetings, as Congressmen felt the wrath of public dissatisfaction. The fury propelled Tea Party Republicans to being elected in large numbers in 2010. But the movement was hijacked by the Republican establishment and defanged. As 2011 progressed, with Wall Street continuing to pillage the American middle class, the Occupy Movement spread to cities across America and around the world. The movement, led by Millenials, claims that mega-corporations and Wall Street manipulate the world in an unbalanced way that disproportionately benefits a super wealthy minority and is undermining democracy. They have shone a light upon the fact the 1% has used their wealth and power to plunder the national treasury, while impoverishing the 99%. The audacity of the 1% was on display for all to see when former Goldman Sachs CEO and former U.S. Senator Jon Corzine absconded with $1.2 billion of his customers’ money and continues to hide it in the vaults of his fellow robber baron Jamie Dimon at J.P. Morgan. To this day, no one has been jailed for this heist or any of the thousands of other crimes committed by the Wall Street titans. These psychopaths will not be satisfied until nothing remains of our country but a barren desert.

“They have plundered the world, stripping naked the land in their hunger… they are driven by greed, if their enemy be rich; by ambition, if poor… They ravage, they slaughter, they seize by false pretenses, and all of this they hail as the construction of empire. And when in their wake nothing remains but a desert, they call that peace.” – Tacitus, The Agricola and the Germania

A few weeks ago I watched The Grapes of Wrath movie for the first time in many years. The novel was written by John Steinbeck during the last Fourth Turning. It is as powerful today as it was in the 1941. It perfectly captures the mood of the country during the Great Depression. The message of the working class being exploited and manipulated by wealthy landowners resounds today. The Joads only sought an opportunity for a job, their own land, simple human dignity, and the chance for a better future. Wall Street has replaced the wealthy landowners as the exploiters of the working class. Steinbeck saw the Federal Government as a solution during the 1930s, but they are a major part of the problem today, as politicians have been captured by corporate and special interests. Their solutions do not benefit the average middle class American.

 

The feelings about our government and political system is reflected in Suzanne Collins’ Hunger Games novel, which captures the vein of government brutality, oppression of the working class, excessive wealth inequality, and the vapid shallowness of our American Idol culture. The Hunger Games was written in 2008 and the movie version has become a worldwide sensation. The immense divide between the wealthy ruling class, living an obscenely decadent lifestyle, and the exploited working class on the verge of starvation, is portrayed in a cruelly sadistic manner. The fact that it is appealing to Millenials and all generations says much about the changing of attitudes in the last four years. Hunger Games will be viewed as the modern day Grapes of Wrath by future generations.         

There is no denying the darkening disposition of the country, except by those whose job it is to deny the reality of our deteriorating situation. Those whose power and wealth are dependent upon a citizenry being kept in the dark and convinced the way out of this mess is to resume spending borrowed money, have pulled out all the stops since the initial catalyst for this Fourth Turning struck with its full fury in 2008. The frantic efforts by those in power to prop up the status quo were predictable. If our leaders had dealt with the initial crisis in a realistic manner, many wealthy powerful men would have gone broke. They have been able to temporarily fend off a full-fledged catastrophe as predicted by Strauss & Howe:

“At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where, during the Unraveling, America will have neglected, denied, or delayed needed action. Anger at “mistakes we made” will translate into calls for action, regardless of the heightened public risk. It is unlikely that the catalyst will worsen into a full-fledged catastrophe, since the nation will probably find a way to avert the initial danger and stabilize the situation for a while. Yet even if dire consequences are temporarily averted, America will have entered the Fourth Turning.”

But they have solved nothing. In fact, they have exacerbated the problem areas of debt, civic decay and global disorder with their “solutions”. Our leaders have added $5.6 trillion to the National Debt; the Federal Reserve tripled their balance sheet by taking on $2 trillion of Wall Street toxic debt; the Federal Government assumed trillions in new debt by taking over Fannie Mae, Freddie Mac and Sallie Mae; and real GDP went up by a mere $103 billion (.8%) between the 4th quarter of 2007 and the 4th quarter of 2011. Rescuing the 99% was never the focus of their solutions. It was to save the bankers and wealthy investors (1%) who took the world destroying risks and should have borne the losses of their risk taking. The oligarchs have been wildly successful in this effort. The stock market has doubled from its lows. Borrowing at 0% from the Federal Reserve has done wonders for banker bonuses.   Global disorder increases by the day, as politicians and bankers force austerity on their citizens, while continuing to harvest billions in profits and bonuses still waging wars of choice, further enriching the peddlers of debt and the peddlers of death (military industrial complex).

  

The Great Depression lasted from 1929 until 1940. The GDP of the country actually grew by 80% between 1933 and 1940. The stock market soared by 100% from the 1932 low to its 1933 high. It then soared another 100% from 1934 through 1937. Despite these fabulous economic statistics and investment riches scooped up by the 2.5% of the population that owned stocks, they still call this time period the Great Depression. With unemployment ranging from 15% to 25% during this entire time frame, the common man suffered greatly. There was no recovery for the 99%.

The net worth of the 99% is highly dependent on the value of their homes and their ability to increase their annual wages. Home prices have fallen 34% from their peak and continue to fall, recently reaching 2002 levels. Real median weekly earnings are lower than they were in 2003 and have fallen 3% since the economy supposedly entered its recovery in December 2009. Gas prices have doubled since early 2009. The 1% rejoices as they treat oil as an investment in their diversified portfolio. The 99% suffer as the average household is spending $2,500 per year more to fill up their vehicles. Food prices are up 15% to 25% in the last three years, even using the manifestly manipulated BLS figures.

It is essential for those in power to utilize their mainstream media propaganda machines, massaging of economic information and Ben Bernanke’s printing press to give the appearance of recovery to the masses. In the last three months the hyperbole and extreme spin from the corporate mainstream media has become exceedingly robust. It smells of desperation. Even as the media touts a recovery and Obama peddles drivel about millions of new jobs, Bernanke keeps the throttle of quantitative easing and zero interest rates wide open. Their actions are not consistent with their rhetoric. People who had jobs as accountants making $55,000 per year in 2007 are now stocking fertilizer in the garden center at Lowes making $20,000, with no benefits. This is the face of the jobs recovery. Only a corporate media doing the bidding of their masters could possibly rejoice at the February data showing consumers spending at a rate 450% higher than their income gains as a sign of recovery. There is a concerted effort to revive the auto market by the Federal Government (Ally Financial) and the Wall Street banks by employing exceptionally loose credit standards for auto loans and leases that are reminiscent of the subprime mortgage debacle. I’m sure it will turn out better this time. The downward spiral of trust is accelerating as predicted by Strauss & Howe:

“As the Crisis catalyzes, these fears will rush to the surface, jagged and exposed. Distrustful of some things, individuals will feel that their survival requires them to distrust more things. This behavior could cascade into a sudden downward spiral, an implosion of societal trust.”

The downward spiral of societal trust is well founded. The monied interests have captured the political process. The regulated have captured the regulators. Wall Street has always controlled the Federal Reserve. Corporations and the wealthiest among us select the politicians that will best serve their interests. The governing elite of psychopathic bankers, corrupt politicians, and powerful mega-corporations create crises, then save us from the crises they created, while accumulating more control, wealth and power. This perpetual swindle has been going on for decades and has reached its zenith as it did during the last Fourth Turning. Income inequality has reached the extreme levels last seen in the 1930s. The capitalism storyline has grown old and tired. Complete systematic capture is the reason for those at the top reaping all the benefits of our dysfunctional economic system.

The rampant mortgage fraud, the robo-signing crimes, trillions of shadowy derivatives, unfunded government pensions, unfunded Medicare and Social Security promises, and the bald-faced looting of customer accounts at MF Global have brought about a realization among those capable of critical thought that this Crisis is growing worse by the day. Strauss & Howe clearly understood the factors that would lead to this deficit of trust:

“But as the Crisis mood congeals, people will come to the jarring realization that they have grown helplessly dependent on a teetering edifice of anonymous transactions and paper guarantees. Many Americans won’t know where their savings are, who their employer is, what their pension is, or how their government works. The era will have left the financial world arbitraged and tentacled: Debtors won’t know who holds their notes, homeowners who owns their mortgages, and shareholders who runs their equities – and vice versa.”

Here we stand, three and a half years since the catalyst of this Crisis. What event or events will produce the regeneracy stage of this Fourth Turning and when can we expect its arrival? I’ll try to make some educated guesses in Part Three of this series.

Click here to read: PART ONE

 



 

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