1946 – 1971: THE GOOD OLE DAYS

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Posted on 26th March 2011 by Administrator in Economy |Politics |Social Issues

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The guy who runs the  http://www.mybudget360.com/ website really gets it. When a wealthy ruling elite gain too much control of the wealth and power in the country, the people of the country suffer. The elite use their power to control politicians and accumulate more wealth through changing the tax code and laws. The working middle class is being wiped out, while the Wall Street elite enrich themselves through their puppets at the Federal Reserve. When the economic system was balanced and built on a foundation of creating goods from 1946 through 1971, the wealth distribution in the country was skewed toward the middle class and led to increasing standards of living. The closure of the gold window in 1971 and the unleashing of fiat currency in the hands of politicians has destroyed the country. The ruling elite will not voluntarily relinquish their power and wealth. It will take a systematic economic collapse or a revolution.

The financial scam of the century – In 2010 we added 600,000 millionaires while 5,000,000 people were added to the food stamp program. Wealthy derive profits from stocks while middle class hold most of their net worth in housing.

Part of the discontent roaming across America is that the economic recovery is targeted to a small portion of the population.  This part of the population controls most of the mainstream media channels so the working and middle class are wondering why isn’t the fact that food, college, health care, or many other day to day items with price increases fails to grace the media agenda?  Have you ever heard the words “median household income” or “average income” grace the daily news tube?  The problem of course is that some are doing extremely well in our economy.  In fact the number of millionaires in the United States soared once again last year.  The number of millionaire households jumped to 8.4 million in 2010 increasing by 600,000 last year.  Now to contrast this rise in millionaires in 2010 we added 5,000,000 Americans to the national food stamp program.  The income inequality gap is only getting more pronounced here.  A rising sea is not lifting all ships because many of the reasons for wealth building (i.e., corporations cutting costs to boost profits) directly impacts the working and middle class who own very little in stock.  Yet the stock market going up over 100 percent from the March 2009 lows has helped the top 1 percent that control 42 percent of all financial wealth.

Millionaires grow with stock market

AffluentMarket_E

Source:  Wall Street Journal

This is an interesting chart.  The number of U.S. millionaires is back near its 2007 peak.  At the same time we have an underemployment rate near 20 percent according to Gallup and 45,000,000 Americans on food assistance.  You will also notice that the above chart excludes the primary residence for the household.  Why is that?  Well most middle class Americans derive their household wealth from real estate, and not the stock market.  The real estate market continues to be crushed and prices continue to move lower:

household-real-estate-value

Source:  Federal Reserve

While the primary source of wealth for the top 1 percent is stocks and this sector continues to improve thanks to bailouts and the Federal Reserve pumping easy money into investment banks, millions of other Americans are being kicked out of their homes that are losing value.  Americans have lost $6.3 trillion in household real estate wealth.  If your primary asset for your net worth is collapsing is it any wonder why the majority of the population does not feel this as any sort of economic recovery even though the stock market is now up over 100 percent in a relatively short timeframe?

Growing inequality

income-inequality

Source:  Marginal Revolution

There is nothing wrong with having a system that rewards wealth building.  In fact this is encouraged and should be supported.   Yet the system in place actually encourages short term graft at the expensive of long term growth.  Many investment banks knew and helped create the housing bubble by setting up a system that took a stable investment in homes and turned it into another commodity for global speculation.  Since investment banks knew this would go bust, many lobbied politicians early on for a preparation in bailouts to save them from their massive graft once it imploded.  Many investors including giant investment banks made money on the misery of millions of Americans.  How is this a good system?  In the end the Federal Reserve and U.S. Treasury rolled out trillions of dollars of bailouts to the financial sector.  This is why one tiny part of our economy is booming at the expense of others.

The chart above shows the growing income inequality in the country.  A strong middle class can only thrive when productivity is rewarded and graft is punished.  You cannot have a CEO making 500 times what the average worker makes especially when that CEO was instrumental in the financial products that crushed our nation.  Yet that is the current system we are in.  The media tries to brainwash the public that these captains of industry are somehow doing a good deed for the country.  They are not.  They are selling out the economy via plutocracy and not even capitalism.  If this were truly capitalism most of the investment banks on Wall Street would be gone only to be replaced by other banks that actually take a fiduciary responsibility of their clients.

Incomes stagnant

average-income-americans

Source:  Social Security

The average working American pulls in $25,000 for the year.  Given the rise of two income households this coincides with Census data that shows the median household income of $50,000.  Yet the cost of many items is eating away at their incomes; food, health care, college costs, and energy keep going up while income remains stagnant or declines.  Public college systems, the typical route toward a middle class lifestyle are becoming more and more expensive as states lose revenues.  The wealthy class in this country does not care since this can create a system where the public is uneducated about their methods of robbing from the productive class.

Does this look like a recovery to you?

food-stamp-participation

More and more Americans keep getting added to the food stamp program.  All the while those in the millionaire ranks continue to grow.  With an abundance of labor, companies can keep wages low or threaten to take companies overseas (which they are doing anyway).  Ironically many of the bailed out investment banks are funneling money to emerging markets because of better gains.  These same investment banks were on bended knee in Congress asking for trillions of dollars for the American people.  That was a lie and a Trojan Horse.  It was the swindle of the century.
The rise of alternative media is merely a reflection of how disconnected our country has become.  People don’t need a doctorate in finance to figure out their incomes are declining and the quality of life for the middle class is shrinking.  All they need to do is look at their bank account.  Much of the last decade of income losses was plastered over with massive debt growth:

HouseholdREMortageQ420101

Source:  Calculated Risk

The only reason many in the middle class felt richer in the last decade is because of the housing bubble.  But that was all a giant lie built by Wall Street investment banks with products like CDOs, CDSs, and the entire mortgage backed securities industry.  When the entire casino went bust, Wall Street received their government welfare handout while the public is now confronted with higher taxes, less public goods, and is now being asked to live with austerity to pay for their graft.  We don’t want to stop that millionaire train while more and more Americans depend on food assistance.  What about the investment banks?  What austerity measures are they taking?  To the contrary their profits are even higher since they have unlimited access to the Federal Reserve at virtually zero percent interest rates.  Expect income disparity to continue since we have a Wall Street run government and much of this will not be broadcast on national television.

Downward Mobility and the White Underclass

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Posted on 19th January 2011 by Reverse Engineer in Economy

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One of the more interesting effects of the progressive downspin has been that it is often true that more recent Asian Immigrants to the country are the harder workers, the ones who Save for retirement, the ones who perhaps save up enough to start their own biznesses etc. Meanwhile, the White children of the prior generation of immigrants don’t seem to care, don’t work as hard. Why is that?

Its differing psychology that does this. The recent immigrant who likely came from a place in far worse condition than here (until recently of course) sees the FSofA as the Land of Opportunity, where anyone who works hard can succeed and own his own bizness and McMansion. A few of them in each generation do in fact succeed in those endeavors. Many more do not however.

For the local White child of a prior generation of immigrants growing up, all he has seen over the past 30 years or so is stagnating wages and ever diminishing possibilities. He has witnessed the effect where the rich get ever richer, while even if well educated he struggles to pay off his college loans. Most of these kids are not well educated though, for most of them their parents were in dead end jobs and themselves bitter about their lives. They are demotivated as a result of this, often long before they ever get into the working world at all. The second or third generation kid whose parents were NOT among the successful ones who emmigrated to this country become what we generally refer to as “White Trash”. We have a subset of that group up here, they are called “Valley Trash”. They have problems with Alcoholism, Domestic Violence, Drug Abuse, all the typical stuff. Since they are from prior generations of European Immigrants, they are mostly White.

Typically if/when this demographic does find a job, its either in the service industry, aka Starbucks Barrista, some type of Goobermint job (Postal worker, DMV Clerk etc) or ever more infrequently these days in some type of construction work or manufacturing. Whichever type of work they drift into, they tend to have problems holding down the job generally because of the habits they picked up in Junior High and High School, namely alcohol and drugs. However, even if they don’t have these problems or keep them at a relatively low level, over time they become bitter about their lives. They have to work overtime or second jobs just to make ends meet. Meanwhile, they are flooded with media advertising the Lifestyles of the Rich and Famous. The financial problems they have hammer down as they move into their 30-something years, a child gets sick and medical bills pile up, arguments with the spouse become more frequent, divorces occur. The rising rate of divorce from the 1970s onward is directly attributable to this phenomenon.

You have to remember that in a stratified society, only a very small percentage in any generation actually Succeed in bootstrapping up from poverty. For a while here in the FSofA in the post WWII period the stratification was not that huge, and there was quite a bit of opportunity for many people to succeed, but this has diminished over time. The children of the Baby Boomers have been witnesses to this, and as a group tend to be discouraged and nihilistic as a result. Although in the post-WWII period there was a lot of growth and opportunity for many, not EVERYBODY gets on the Gravy Train in any generation, so you always have this ever growing underclass of disaffected and dysfunctional people and families.

Through the 80s to today, many if not most of the children of the “Middle Class” have become dysfunctional also, because while their parents might have been well educated with “good jobs”, these families also found themselves swimming in an ever larger sea of debt. Even families with quite high 6 figure incomes, by the time they paid the mortgage and the car payments and the jet skis and all the rest of the toys they expected they should be able to afford with a well paid job as an IT Programmer or Ad Executive would build up unsustainable levels of debt, and then get the same type of family problems the underclass has.

You can of course attribute this to their Foolishness, charging up more than they could afford to pay on Credit Cards and buying more McMansion than they could afford, but then they were also sold the idea Real Estate ALWAYS goes UP, and if they just flip their house every few years they could keep Moving On Up, to a DELUXE apartment on 5th Avenue. Cue George Jefferson. I personally never fell for this line, but then I am Insane so I lived well under my means in the cab of a Freightliner while everybody else was flipping McMansions. Turns out being NUTS paid off pretty well here in the end, but that is another story for another post. LOL

As the economic system completely goes off the rails here, just about every young person including the immigrants is in a hopeless situation regardless of how hard they work or how they save their pennies. Even careful savers who worked hard to buy their homes have seen them lose their value and go underwater, and when they lose their jobs also, their discouragement is even more complete. Meanwhile, they observe those at the top end of the Food Chain getting ever larger Bonuses, and all sense that there is some Equity in the system is lost.

Really for most people who have lived in the FSofA for the last 30 years, if you did not get on the Gravy Train and make gobs of Money, even holding down a solid “Middle Class” job was pretty disheartening. TV Glorified the Lifestyles of the Rich and Famous. A $50K/year income didn’t buy you all the toys you were being sold as necessary to enhance your lifestyle. Everybody is sold that in America we can all be Bill Gates, but really most people are always destined to much more average lives at BEST. Unless there is some spiritual component that makes up for the fact they do not have the material wealth, they are very disheartened in their lives. Needless to say, in our culture the spiritual aspect is diminishingly small and has been for quite some time.

People who have been highly successful have a hard time understanding why middle class people don’t save more, why they are so profligate with their meager earnings. This is because they just do not live their lives, they don’t walk a Mile in their Shoes. For one reason or another, most people end up spending their lives in Dead End jobs they end up hating. A few times in their lives they might have had an opportunity for more, but then something went south. They keep operating in Zombie mode and wait for Retirement, but they aren’t happy, and neither are their kids. It all seems Hopeless.

For most people, they will never escape this trap until the system itself collapses. It’s a classic “Rat Race”, with the main driving Cheese being the concept that if you get well educated and work hard you too can become Bill Gates. But of course, this is much like winning the LOTTO, many more people just as smart as the Big Gorilla never got tht successful. In any stratified system, there are only a few who make big bucks with the vast majority making much less. It really becomes a problem when the stratification is such that instead of the top of the pyriamid making say 10x the wage of the average J6P, you get ratios of 100X or more in some cases. What does Lloyd Blankfein take home these days courtesy of your tax money? $600M or so? If the average wage earner takes home $60K, he’s making 10,000X the average wage. This is not a sustainable system.

Now, in a prior thread, Stucky said (paraphrasing) “In RE’s system NOBODY can be RICH!”. This is as usual a false statement. I am not in favor of monetary systems of any type in general, but we are not going to achieve a Potlatch Gift Economy overnight starting from where we are now. So some intermediary form needs to be found to engineer a gradual transition to this, if we are to avoid either Mad Max or a simalcrum of Robespierre and the French Revolution, which is the road we are taking right now. So in an intermediary form, I would support a system where your Top Earners in the society (the “rich”) could earn up to 5X the amount of the Average Wage earner, and 10X the amount of the Minimum Wage earner in the society. So, if your average earning is say $50K and the minimum is $25K, then the Rich in this society would be making $250K. At typical prices prior to the collapse, I think your average wage earners could do OK, and the rich would live pretty well. As long as the housing market was run reasonably, the prices of the housing would reflect what people were actually earning, and your Rich folks could have homes 5X as big as your average folks. Isn’t that enough? You need more stratification than that to have incentive in the society to work hard and get well educated?

Such a monetary system could easily be constructed out of the system we have now by placing limits on individual ownership of the means of production, which basically means keeping all Bizness beneath a threshold level. Lots of Small Biznesses, no Big Biznesses allowed. Add a few moderate taxation tweaks at the production and consumption levels, and you could engineer exactly how much any Small Biz would pay out to its employees, and then the stratification inside an individual Small Biz would pretty much be up to the Market to figure out.

Will such a system prevent people and families from gradually sliding into dysfunctionality? Not entirely, beause there will always be some at the very bottom, but the skew in the system would not be so great as to make them lose all hope. There would be less tendency toward Downward Mobility and more Incentive for Upward Mobility. Rather than a very few Large Corporations and Banks, there would be many more Small Biznesses and Small Banks. There would still be relatively “Rich” people and relatively “Poor” ones, but not such outrageous and socially destabilizing discrepancies as we have now.

When and if that happens, there will be rebirth, but as it is structured right now, for the vast majority of people the system they are living under is a hopeless waste of their lives. Its been that way for the last 30 years at least. I do NOT seek to destroy as LLPOH maintains, I simply am looking for a means to an equitable society, which has not been achieved in Capitalism, Corporatism or whatever it is you would like to label what we have been working with for these 3 centuries. We need to move toward a world where real WORK is honored and not the control of Capital and the means of production. If we do not do this, we are destined for Mad Max, Robespierre or Both.

RE

THE BENNIE WHO STOLE CHRISTMAS (Featured Article)

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Posted on 20th December 2010 by Administrator in Economy |Politics |Social Issues

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Ben Bernanke is a highly educated PhD from Princeton who has never worked a day in the real world since he graduated from college in 1975. His entire life has been spent in the ivory tower of academia surrounded by models and theories that work perfectly in the comfort of his office. After building his reputation as an “expert” on the Great Depression by studying it and reaching the wrong conclusions, he came down from his ivory tower in 2002 to join an organization that has systematically destroyed the value of the US currency, thereby undermining the well being of the once vibrant middle class.

He became a member of the Federal Reserve and has served his masters (Wall Street Banks, Mega-corporations, Washington politicians) unswervingly since. When he makes his now regular appearances on 60 Minutes, he tries to give the appearance of being someone concerned about the average American. The facts in the real world completely obliterate the lies he nervously mouths while answering softball questions underhanded to him by corporate media mouthpieces. His quivering lip and nervous ticks reveal his true nature. How could Bernanke blatantly take measures that destroy the lives of millions of Americans?  Maybe Dr. Seuss had the answer: 

 

It could be his head wasn’t screwed on just right.
It could be, perhaps, that his shoes were too tight.
But I think that the most likely reason of all,
May have been that his heart was two sizes too small.
Whatever the reason, His heart or his shoes,
He stood there on Christmas Eve, hating the Whos,
Staring down from his cave with a sour, Grinchy frown - Dr Seuss

If the Grinch had been pimping for a small pack of Grinchsters who impoverished the honest people of Whoville, then the Dr. Seuss poem would have perfectly described Ben Bernanke, the Federal Reserve and the banksters that run the show here in the USA. The actions taken by Ben Bernanke, Alan Greenspan and their brethren on the Federal Reserve over the last quarter century have destroyed the middle class and left senior citizens impoverished, while enriching its Wall Street masters. Now he is stealing Christmas from the hard working middle class of this country.

Bernanke’s latest theoretical venture into manipulating the puppet strings of the economy began with his speech at Jackson Hole in August and concluded with his Op-Ed on November 4. His master plan to buy an additional $600 billion of Long-term Treasuries is being implemented on a daily basis. This QE2 follows his previous QE1, which consisted of buying $1.4 trillion of toxic mortgage securities from his masters, the insolvent Wall Street banks. What follows are Ben Bernanke’s own words:   

“I believe that additional purchases of longer-term securities, should the FOMC choose to undertake them, would be effective in further easing financial conditions.” – Ben Bernanke – August 27, 2010 -  Jackson Hole

“Given the Committee’s objectives, there would appear–all else being equal–to be a case for further action. For example, a means of providing additional monetary stimulus, if warranted, would be to expand the Federal Reserve’s holdings of longer-term securities. Empirical evidence suggests that our previous program of securities purchases was successful in bringing down longer-term interest rates and thereby supporting the economic recovery.” – Ben Bernake – October 15, 2010 – Boston Speech

“To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month.” – Ben Bernanke Fed Announcement – November 3, 2010

“This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.” – Ben Bernanke – November 4, 2010 – Washington Post Op-Ed

Ben and his friends on the Federal Reserve have a PR machine to help sell their lies. Let’s assess whether Ben and his Federal Reserve have helped or hurt the average American.

Throwing Senior Citizens Under the Bus

Then he slunk to the ice box. He took the Whos’ feast, he took the who pudding, he took the roast beast. He cleaned out that ice box as quick as a flash. Why, the Grinch even took their last can of Who hash. - Dr Seuss

 

There are approximately 40 million senior citizens living in 25 million households in the US. According to the Census Bureau, more than 12 million of these households survive on less than $30,000 of income per year. The median household income in the US is $49,777. A full 70% of all over 65 households make less than the median income.  A recent study found that 58% of those between 60 and 84 will at some point fail to have enough liquid assets to allow them to get through unanticipated expenses or declining income.

The vast majority of their income is from Social Security payments. Most senior citizens are rightly risk adverse and dependent upon income from certificates of deposit. During the 1990′s and as recently as 2007, a senior citizen could get a 5% return on a CD. Many of these people depended on this interest income to pay their everyday expenses. Below is a chart that plots the average interest rate for 6 month CDs since 1964. Today the average rate on a 6 month CD is .30%.

Ben Bernanke is to thank for this poverty enhancing rate. He reduced the discount rate to 0% while paying interest on deposits at the Fed. The affect of this policy has been to transfer hundreds of billions to the Wall Street criminal banks from the pockets of senior citizens and other Americans dependent upon interest income to sustain their meager lives. A brainless CNBC anchor can look at this chart and realize that the Federal Reserve caused the housing crisis by driving down rates from 2002 through 2005. Ben Bernanke, who never saw the housing collapse coming and personally had an exploding adjustable rate mortgage, has learned nothing from the prior disaster. He has driven rates down to 0% in order to force people into speculative investments. The Federal Reserve is a perennial bubble blower. This will likely be the final bubble of Bennie’s career.

 Graph: 6-Month Certificate of Deposit: Secondary Market Rate

These recent actions by the Federal Reserve are just the tip of the iceberg. Alan Greenspan, the Federal Reserve and the US Government have systematically screwed senior citizens for decades by purposely understating CPI. The result has been that the cost of living adjustments to Social Security has seriously lagged real inflation. For the 2nd consecutive year senior citizens will get no cost of living increase on their Social Security. The average monthly Social Security payment is $1,074. While seniors struggle to make ends meet, Wall Street banks are handed billions in free money by Ben Bernanke. The chart below details the COLA increases since 1975. Alan Greenspan and his commission began manipulating the CPI in the early 1980s. 

Social Security Cost-Of-Living Adjustments
Year COLA
1975 8.0
1976 6.4
1977 5.9
1978 6.5
1979 9.9
1980 14.3
1981 11.2
1982 7.4
1983 3.5
1984 3.5
1985 3.1
1986 1.3
1987 4.2
1988 4.0
1989 4.7
Year COLA
1990 5.4
1991 3.7
1992 3.0
1993 2.6
1994 2.8
1995 2.6
1996 2.9
1997 2.1
1998 1.3
1999 2.5
2000 3.5
2001 2.6
2002 1.4
2003 2.1
2004 2.7
Year COLA
2005 4.1
2006 3.3
2007 2.3
2008 5.8
2009 0.0
2010 0.0
a The COLA for December 1999 was originally determined as 2.4 percent based on CPIs published by the Bureau of Labor Statistics. Pursuant to Public Law 106-554, however, this COLA is effectively now 2.5 percent.

 

Since 2000, seniors have seen their monthly payment increase by 27%, or less than 2.5% per year. I challenge anyone to convince me that inflation has been 0% for the last two years. I have calculated my real inflation and it is four times the government reported figure. I suppose government bureaucrats and Federal Reserve Chairmen don’t fill up their gas tanks or go food shopping. John Williams at www.Shadowstats.com calculates the CPI as it was calculated prior to the Greenspan fraud. Based on this true assessment of inflation, prices have increased by 100% since 2000, or 8% per year.

Only an Ivy League academic could examine the following yearly price data and conclude, as Bernanke has, that inflation is well contained:

  • Unleaded gas up 24%
  • Heating Oil up 28%
  • Corn up 50%
  • Wheat up 48%
  • Coffee up 56%
  • Sugar up 27%
  • Soybeans up 30%
  • Beef up 26%
  • Pork up 22%
  • Cotton up 101%
  • Copper up 33%
  • Silver up 72%

I wonder what a can of Who Hash will cost in 2011?

The truth is that senior citizens spend a much higher percentage of their limited income on the basics of housing, transportation, food, and insurance. So, these increases have a much greater impact on seniors than rich bankers and Princeton scholars. The figures for key items over the last decade prove the point that seniors have fallen further due to the inflationary policies of the Federal Reserve.

Category Expense Cost in 2000 Cost in 2010 % Increase, 2000 – 2010
Housing Homeowner’s insurance (annual) $508.00 $1,059.00 108%
  Real estate tax (annual) $690.00 $1,223.88 77%
  Heating oil (gallon) $1.15 $2.88 150%
  Natural gas (per thousand cubic foot) $6.37 $10.39 63%
  Electricity (per kw hr) $0.08 $0.12 50%
Transportation Regular gas (gallon) $1.26 $2.75 118%
Medical Medicare Part B premiums (monthly) $45.50 $110.50 143%
Food 10 lbs. potatoes $2.98 $4.98 67%
  Eggs (dozen) $0.93 $1.79 93%
  Ground chuck (lb.) $1.90 $2.83 49%
  Bread, white loaf $0.91 $1.36 50%

 

Helping Housing?

And the one speck of food That he left in the house,
Was a crumb that was even too small for a mouse.
Then He did the same thing To the other Whos’ houses
Leaving crumbs Much too small For the other Whos’ mouses! - Dr. Seuss

Not only was Ben Bernanke complicit in aiding Greenspan in creating the housing bubble by keeping interest rates too low for too long, completely missing a two standard deviation (PhDs love this stuff) price bubble right in front of his eyes, telling Americans that we had a strong housing market, telling Americans that housing price declines would not affect the economy, not regulating or policing the rampant mortgage fraud that was happening under his nose, and aiding and abetting the very criminal banks that created the bubble, but now he has blatantly lied by saying his QE2 $600 billion monetization of our debt is to support the housing market. If you believe this, I have some prime real estate with great views in the mountains of Afghanistan to sell you. 

In his October 15 speech, Bernanke assured the world that QE2 would reduce long term interest rates. On November 4, he stated:

“Lower mortgage rates will make housing more affordable and allow more homeowners to refinance.” 

On October 7, one week before Bernanke gave the green light to QE2, the 10 Year US Treasury rate was 2.38%. Today it stands at 3.3%, almost 100 basis points higher. I’m guessing this guy isn’t very good picking his weekly football pool. Interest rates have done the exact opposite of what he proclaimed they would do. These rates have surged in the face of an already weakening economy, as unemployment continues to rise and home prices continue to fall. A 100 basis point rise in Treasury bonds piles approximately $120 billion more interest expense per year onto the backs of future generations.

 Chart forCBOE Interest Rate 10-Year T-No (^TNX)

The rate on 30 year fixed mortgages has surged to 5.07% from 4.4% in mid-October. That should do wonders for refinancing and home purchases. Bernanke’s actions have priced millions of people out of the market. He has inflicted more damage on an already teetering housing market and has insured that home prices will plunge by another 20% in the next year.

Mortgage rates for Dec. 15, 2010

Despite the trillions of dollars thrown at the housing market by Bernanke and Obama through home buyer tax credits, mortgage modification programs, purchasing toxic mortgages from the criminal banks at 100 cents on the dollar, artificially reducing mortgage rates, and forcing those government run disasters Fannie Mae, Freddie Mac and the FHA to backstop more bad loans, home prices are resuming their downward trajectory to fair value. That value is at least 20% lower. With 22.5% of all properties (10.8 million properties) with a mortgage having negative equity, the housing market was already in dire straits. With the surge in mortgage rates caused by Ben Bernanke’s actions, a rapid plunge in prices can be expected in 2011, resulting in more foreclosures and negative equity swamping millions.  

The truth is that Ben Bernanke could care less about the average American homeowner making $48,000 per year. The real purpose of QE2 was to further enrich his masters on Wall Street and the ruling elite who control the wealth in this country.

Wall Street Wealth Bailout

 

 

“When the Fed uses QEII to subsidize the largest players on Wall Street, it is disadvantaging the smaller, better run banks, and it is also playing with politics. Priyank Gandhi and Hanno Lustig, in a National Bureau of Economic Research working paper issued in November (No. 16553), suggest that the implicit collective guarantee extended to large U.S. financial institutions reflects an annual subsidy to the largest commercial banks of $4.71 billion per bank, measured in 2005 dollars. But, even more important, the paper notes that subsidies for the “too big to fail” banks shows the Fed’s willingness to support the equity markets, an extraordinary and ultimately political act that requires further hearings by the Congress.” – Chris Whalen

Chris Whalen and a few other brilliant analysts realize the true purpose of Ben Bernanke’s actions. Bernanke even revealed his true intentions in his November 4 Op-Ed:

“Higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending.”

On August 26, the day before Bernanke’s Jackson Hole speech, the S&P 500 was at 1,047. Today, it stands at 1,247, a 19% increase in the face of  weakening economic conditions for the middle class worker. The more speculative NASDAQ stood at 2,119 on August 26, and today sits at 2,649, a phenomenal 25% increase as more middle class Americans have lost their jobs. Over this same time frame, according to the BLS, there are 500,000 less Americans employed.

The truth is that Ben Bernanke’s sole reason for implementing QE2 is to enrich the few at the expense of the many. The chart below paints the picture clearer than the lies and misinformation you will get from CNBC and Fox. The top 1% wealthiest Americans own 60.6% of all the stocks in America, with the next 9% wealthiest owning 37.9% of the stocks in America. That leaves a full 1.5% of stocks in the hands of the remaining 90% of Americans. Who is benefitting from QE2?

Part 2 of the table clarifies who Bennie is working for. The 90% of Americans have 42.3% of the liquid deposits, 61.5% of residential investment and 73.4% of the debt in the country. Ben Bernanke’s actions have resulted in liquid deposits paying 0% interest (19 largest banks out of 7,700 banks control 50% of all deposits), residential real estate prices declining, and the cost of carrying debt to rise. Meanwhile, the top 1% convinced the public they needed a tax cut so they could continue to buy  gifts like Clive Christian’s $247,000 Imperial Majesty perfume, packaged in a diamond-encrusted Baccarat crystal bottle.

Table 2: Wealth distribution by type of asset, 2007
  Investment Assets
Top 1 percent Next 9 percent Bottom 90 percent
Business equity 62.4% 30.9% 6.7%
Financial securities 60.6% 37.9% 1.5%
Trusts 38.9% 40.5% 20.6%
Stocks and mutual funds 38.3% 42.9% 18.8%
Non-home real estate 28.3% 48.6% 23.1%
TOTAL investment assets 49.7% 38.1% 12.2%
 
  Housing, Liquid Assets, Pension Assets, and Debt
Top 1 percent Next 9 percent Bottom 90 percent
Deposits 20.2% 37.5% 42.3%
Pension accounts 14.4% 44.8% 40.8%
Life insurance 22.0% 32.9% 45.1%
Principal residence 9.4% 29.2% 61.5%
TOTAL other assets 12.0% 33.8% 54.2%
Debt 5.4% 21.3% 73.4%
 
From Wolff (2010).

 

 Of course, we all know the rich create all the jobs. Too bad they were created in India and China. No more conclusive evidence of the Federal Reserve destroying the American middle class can be found on the US Census Bureau site. The median household income in the US reached its all-time peak in 1999 at $52,388, in today’s dollars (key data point). Ten years later the median household income is $49,777. The standard of living for the median household in the US has fallen by 5% in the last decade, even using the government manipulated CPI.

The mainstream media will not report this fact. They will report the non-inflation adjusted figures that show a 22% increase in the median household income. They do this because they know that the average American has no clue what the term “inflation adjusted” means. Ben Bernanke, the Federal Reserve, and the ruling oligarchy can only retain their power through the use of inflation, while slowly destroying the currency, impoverishing the masses and enriching them. The website www.mybudget360.com has suggested the proper mission statement for Bennie and the Feds should be:

“To aggregate as much wealth into the banking system while eliminating the American middle class by a slow systematic dilution of their currency and financial well being and standard of living.”

   
Table H-6.  Regions–All Races by Median and Mean Income: 1999 to 2009
(Households as of March of the following year.  Income in current and 2009 CPI-U-RS adjusted dollars (28))
Region and year Number (thousands) Median income Mean income
Current dollars 2009 dollars Current dollars 2009 dollars
 
2009 117,538 49,777 49,777 67,976 67,976
2008 117,181 50,303 50,112 68,424 68,164
2007 116,783 50,233 51,965 67,609 69,940
2006 116,011 48,201 51,278 66,570 70,819
2005 114,384 46,326 50,899 63,344 69,597
2004 113,343 44,334 50,343 60,466 68,662
2003 112,000 43,318 50,519 59,067 68,886
2002 111,278 42,409 50,563 57,852 68,976
2001 109,297 42,228 51,161 58,208 70,521
2000 108,209 41,990 52,301 57,135 71,165
1999 106,434 40,696 52,388 54,737 70,462

 

While real average weekly earnings for the average American are lower today than they were in the early 1970s, you will be happy to know that Wall Street bonuses have recovered nicely from the dip in 2008.  Compensation at Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America, and Citicorp increased by 31% in 2009. Average compensation rose by 27% to more than $340,000. Bonuses jumped above the $20 billion mark in 2009, but sadly trail the record of $35.5 billion in 2006 just before Wall Street destroyed the financial system of the entire world. According to the NYT, 2010 will be a banner year:

“Wall Street’s five biggest firms have put aside nearly $90 billion for bonuses. Whether it’s for jewelry, high-end clothing or apartments, bonus spending has long fed a post-holiday boom in January and February, especially in Manhattan and expensive suburbs like Greenwich.”

I’m sure this information warms the cockles of your heart.

At the end of Dr. Seuss’ poem, the Grinch repents and brings a happy ending to Whoville:

That the Grinch’s small heart Grew three sizes that day!
And the minute his heart didn’t feel quite so tight,
He whizzed with his load through the bright morning light,
And he brought back the toys! And the food for the feast!
And he, HE HIMSELF! The Grinch carved the roast beast! - Dr. Seuss

Even if Ben Bernanke’s heart was to grow three sizes, he would be discarded by the other Grinchsters (banksters) like piece of Whoville tinsel. The truth of our current situation is better captured by Mick Jagger in his song Sympathy for the Devil:

I’m a man of wealth and taste
I’ve been around for a long, long year
Stole many a man’s soul and faith

But what’s confusing you
Is just the nature of my game

The people running the show in this country will not be bringing joy to Whoville. You need to understand the nature of their game.