THOSE WHO DON’T BUILD MUST BURN

Originally posted in September 2010 – RIP Ray Bradbury

“Out of the nursery into the college and back to the nursery; there’s your intellectual pattern for the past five centuries of more. School is shortened, discipline relaxed, philosophies, histories, languages dropped, English and spelling gradually neglected, finally almost completely ignored. Life is immediate, the job counts, pleasure lies about after work. Why learn anything save pressing buttons, pulling switches, fitting nuts and bolts?” – Captain Beatty in Fahrenheit 451

Ray Bradbury wrote his dystopian novel Fahrenheit 451 in 1950. Most kids were required to read this book when they were seventeen years old. Having just re-read the novel at the age of forty-seven makes you realize how little you knew at seventeen. It is 165 pages of keen insights into today’s American society. Bradbury’s hedonistic dark future has come to pass. His worst fears have been realized. The American public has willingly chosen to be distracted and entertained by electronic gadgets 24 hours per day. Today, reading books is for old fogies. Most people think Bradbury’s novel was a warning about censorship. It was not. It was a warning about TV and radio turning the minds of Americans to mush.

It is now sixty years later and his warning went unheeded. A self imposed ignorance by a vast swath of Americans is reflected in these statistics:

33% of high school graduates never read another book for the rest of their lives.
42% of college graduates never read another book after college.
80% of U.S. families did not buy or read a book last year.
70% of U.S. adults have not been in a bookstore in the last five years.
57% of new books are not read to completion.
There are over 17,000 radio stations and over 2,000 TV stations in America today.
Each day in the U.S., people spend on average 4.7 hours watching TV, 3 hours listening to the radio and 14 minutes reading magazines.
The projected average number of hours an individual (12 and older) will spend watching television this year is 1,750.
In a 65-year life, the average person will have spent 9 years glued to the tube.
Number of 30-second TV commercials seen in a year by an average child – 20,000
Number of videos rented daily in the U.S. – 6 million
Number of public library items checked out daily – 3 million
Percentage of Americans who can name The Three Stooges – 59%
Percentage who can name at least three justices of the U.S. Supreme Court – 17%

When Ray Bradbury wrote his novel in the basement of the UCLA library on a pay per hour typewriter, television was in its infancy. In 1945 there were only 10,000 television sets in all of America. By 1950, there were 6 million sets. The US population was 150 million living in 43 million households. Only 9% of these households had a TV. There was one TV for every 25 people. Americans read books and newspapers to be aware of their world. Today, there are 335 million television sets in the country. The US population is 310 million living in 115 million households. There is a TV in 99% of these households, with an average of 3 TVs per household. Your reality is whatever the corporate media decides is your reality.

Bradbury envisioned gigantic flat screen wall TVs that interacted with the audience and people wearing seashell earbuds so they could listen to the radio. Anything to keep from reading, thinking, questioning or wondering. Today, anesthetized kids and non-thinking adults sit in front of the boob tube with their Playstation controllers in hand and a microphone attached to their ear, killing zombies while talking to their fellow warriors, sitting in their own living rooms somewhere in the world. Apple has sold 260 million iPods since 2001 that allow people to zone out and live in their own private music world, never needing to interact or associate with their fellow humans. Millions of Blackberry addicts roam the streets of our cities like androids, forcing alert pedestrians to bob and weave to avoid head-on collisions with these connected egomaniacs. They are overwhelmed with their self importance.

For those who have not read the book since high school, or have never read the novel, here is a quick summary of Fahrenheit 451:

Guy Montag is a fireman who burns books in a futuristic American city. In this dystopian world, firemen start fires rather than putting them out. The people in this society do not read books, enjoy nature, spend time by themselves, think independently, or have meaningful conversations. Instead, they drive at extreme speeds, watch excessive amounts of television on wall-size sets, and listen to the radio on “Seashell Radio” sets attached to their ears. Guy meets a girl that makes him rethink his priorities. He starts to question book burning and why people fear books. After not showing up for work, his boss Beatty comes to his house and explains why books are now banned. According to Beatty, special-interest groups and other “minorities” objected to books that offended them. Soon, books all began to look the same, as writers tried to avoid offending anybody. This was not enough, however, and society as a whole decided to simply burn books rather than permit conflicting opinions.

Montag connects with a retired English professor named Faber. He tells him that the value of books lies in the detailed awareness of life that they contain. Faber says that Montag needs not only books but also the leisure to read them and the freedom to act upon their ideas. After Montag’s wife turns him in and he is forced to burn his own house to the ground, he turns his flamethrower on Beatty. He is hunted by a mechanical hound and the chase is broadcast on national TV. He escapes to the forest where he finds a group of renegade intellectuals (“the Book People”), led by a man named Granger, who welcome him. They are a part of a nationwide network of book lovers who have memorized many great works of literature and philosophy. They hope that they may be of some help to mankind in the aftermath of the war that has just been declared. Montag’s role is to memorize the Book of Ecclesiastes. Enemy jets appear in the sky and completely obliterate the city with atomic bombs. Montag and his new friends move on to search for survivors and rebuild civilization.

Knowledge versus Willful Ignorance

“Give the people contests they win by remembering the words to more popular songs or the names of state capitals or how much corn Iowa grew last year. Cram them full of non-combustible data, chock them so damned full of ‘facts’ they feel stuffed, but absolutely ‘brilliant’ with information. Then they’ll feel they’re thinking, they’ll get a sense of motion without moving. And they’ll be happy, because facts of that sort don’t change. Don’t give them any slippery stuff like philosophy or sociology to tie things up with. That way lies melancholy.” – Captain Beatty in Fahrenheit 451

In Bradbury’s novel the fireman’s duty is to destroy knowledge and promote ignorance, in order to equalize the population and promote sameness. Any impartial analysis of the current state of affairs must conclude that he was absolutely right. In an interview with the LA Weekly in 2007, Bradbury clarified his views:

“Television gives you the dates of Napoleon, but not who he was,” Bradbury says, summarizing TV’s content with a single word that he spits out as an epithet: “factoids.” His fear in 1953 that television would kill books has, he says, been partially confirmed by television’s effect on substance in the news. “Useless,” Bradbury says. “They stuff you with so much useless information, you feel full.”

Bradbury wrote his novel shortly after WWII, at the outset of the Korean War, during the early stages of the Cold War and in the midst of McCarthyism. The novel reflects these influences. Orwell’s 1984 used television screens to indoctrinate citizens. Bradbury envisioned television as an opiate, keeping the public sedated. The wall televisions in Fahrenheit 451 allow characters to interact with those watching. Bradbury captured the future of reality TV. Entertainment today is dominated by reality TV. We are blasted by the likes of Jersey Shore, Jerseylicious, American Idol, America’s Got Talent, Survivor, Big Brother, Project Runway, Dancing With the Stars, Amazing Race, Housewives of OC, NJ, NY, DC, and Atlanta, I Didn’t Know I Was Pregnant and fifty other mind numbing reality shows. Morons with names like Snookie and The Situation are better known by teenagers than George Washington and Thomas Jefferson. In Bradbury’s world, television was used to broadcast meaningless drivel to divert attention, and thought, away from an impending war. Today, television is used to broadcast meaningless drivel to divert attention, and thought, away from ongoing wars, government corruption, impending financial collapse, and truth.

Bradbury still lives in Los Angeles and observes the alienation aspects of his novel playing out exactly as he envisioned:

“In writing the short novel Fahrenheit 451 I thought I was describing a world that might evolve in four or five decades. But only a few weeks ago, in Beverly Hills one night, a husband and wife passed me, walking their dog. I stood staring after them, absolutely stunned. The woman held in one hand a small cigarette-package-sized radio, its antenna quivering. From this sprang tiny copper wires which ended in a dainty cone plugged into her right ear. There she was, oblivious to man and dog, listening to far winds and whispers and soap-opera cries, sleep-walking, helped up and down curbs by a husband who might just as well not have been there. This was not fiction.”

Bradbury directly foretells this incident early in his novel:

“And in her ears the little Seashells, the thimble radios tamped tight, and an electronic ocean of sound, of music and talk and music and talking coming in.” – Fahrenheit 451

Montag spends the entire novel seeking truth. Professor Faber becomes his mentor, leading him toward the truth. It is not a coincidence that Bradbury named the Montag character after a paper company and the Faber character after a pencil company. Faber was the instrument through which Montag was taught. Montag was clearly fighting an uphill battle. The majority had stopped thinking and seeking truth decades ago. The majority always wants things to remain the same.

“But remember that the Captain belongs to the most dangerous enemy of truth and freedom, the solid unmoving cattle of the majority. Oh, God, the terrible tyranny of the majority.” – Professor Faber

Government did not need to ban books. As technology advanced and filled the days with 24 hours of entertainment, infomercials, propaganda, and trivia, the population willfully stopped reading books. Why think, ponder, or question when you can be entertained and directed to believe in whatever the state thinks is best? When entertainment wasn’t enough, the population would drive their cars at speeds exceeding 100 mph with a goal of running animals and people over. Today, the mainstream media is controlled by a few mega-corporations that do the bidding of the state. They are responsible for keeping the population sedated, entertained, confused, and misinformed. The public willfully accepts the reality presented by those in power, rather than thinking, questioning or seeking the truth.

“Remember the firemen are rarely necessary. The public stopped reading of its own accord. You firemen provide a circus now and then at which buildings are set off and crowds gather for the pretty blaze, but its a small sideshow indeed, and hardly necessary to keep things in line. So few want to be rebels anymore.” – Professor Faber

In America’s pleasure society we drive as fast as we want, heedless of danger. We care only for our own gratification, not for the welfare of others. For enjoyment, we memorize lyrics to Eminem rap songs. Thinking is not pleasurable so we envelop ourselves with flat screen HDTVs that provide nonstop distraction. Reading books is no longer necessary in our world. This is reflected in the fact that 40% of all adults in America can be classified as functionally illiterate. The U.S. public school system has been so dumbed down, with equality of all as the mantra that one wonders whether the state purposefully wants to process non-thinking, non-questioning autobots into society. A thinking, questioning public is dangerous to the state.

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“We must all be alike. Not everyone born free and equal, as the Constitution says, but everyone made equal. Each man the image of every other; then all are happy, for there are no mountains to make them cower, to judge themselves against.” – Captain Beatty

Political Correctness & Censorship

“It didn’t come from the Government down. There was no dictum, no declaration, no censorship, to start with, no! Technology, mass exploitation, and minority pressure carried the trick, thank God. Today, thanks to them, you can stay happy all the time, you are allowed to read comics, the good old confessions, or trade journals. Colored people don’t like Little Black Sambo. Burn it. White people don’t feel good about Uncle Sam’s Cabin. Burn it.” – Captain Beatty

Bradbury imagined a democratic society whose diverse population turns against books. He imagined not just political correctness, but a society so diverse that all groups were “minorities.” It was essential that all thought become like vanilla tapioca. First they condensed the books, stripping out more and more offending passages until ultimately all that remained were footnotes. Only after people stopped reading on their own did the state employ firemen to burn books. Once you sacrifice liberty to the state, the state will not restore it without a fight. Political correctness has been taken to the extreme by those in power in America. The text books used to educate our children have had all “offensive” facts extracted. History has been revised to satisfy the agendas of those in power. The truth is inconsequential when a minority group might be offended. History books used in our public schools have more references about Marilyn Monroe than George Washington. Bradbury was prescient in his ability to see the future denigration of those who sought wisdom.

Our public schools have the power to place students into roles such as runner, football player or swimmer. By being placed in a role, a person is doing what is expected of him and not being an individual. We dread the unfamiliar. To be an individual is to be unfamiliar. Thus, to conform is easier.

“With school turning out more runners, jumpers, racers, tinkerers, grabbers, snatchers, fliers, and swimmers instead of examiners, critics, knowers, and imaginative creators, the word `intellectual,’ of course, became the swear word it deserved to be. You always dread the unfamiliar. People want to be happy, isn’t that right? Haven’t you heard it all your life? I want to be happy, people say. Well, aren’t they? Don’t we keep them moving, don’t we give them fun? That’s all we live for, isn’t it? For pleasure, for titillation? And you must admit our culture provides plenty of these.” – Captain Beatty

The ruling elite and the mainstream media are openly scornful and antagonistic toward those they label intellectuals. Fox News and MSNBC prefer talking points, misinformation, and dogmatic ideology from their anchor entertainers and insipid guests. The numbskulls on these shows are never in doubt and always wrong. There is no true debate between reasonable people. These entertainment shows appeal to the baser emotional instincts of the public, not to their reason or intellect. The American public no longer has the capability to critically analyze what they are told by the mainstream corporate media. They gave up reading books decades ago, leading to a steady decline in critical thinking skills. No need to think when you can go bungee jumping, mountain biking, sky diving, yachting, or paint balling.

In the ultimate irony, Bradbury found out in 2003 that over the years editors from Ballantine had censored 75 separate sections of his novel, fearful that it would contaminate the minds of our young. The idea of today’s censorship is not to burn books, but to remove every controversial word or phrase that could offend anyone. Books are made so generic and bland that no one would want to read them anyway. Bradbury is still full of piss and vinegar, sixty years after writing his masterpiece:

“The point is obvious. There is more than one way to burn a book. And the world is full of people running about with lit matches. Every minority, be it Baptist/Unitarian, Irish/ Italian/ Octogenarian/ Zen Buddhist, Zionist/ Seventh-day Adventist, Women’s Lib/ Republican, Mattachine/ Four Square Gospel feels it has the will, the right, the duty to douse the kerosene, light the fuse. Every dimwit editor who sees himself as the source of all dreary blanc-mange plain porridge unleavened literature, licks his guillotine and eyes the neck of any author who dares to speak above a whisper or write above a nursery rhyme.”

Never Ending War

“Someday the load we’re carrying with us may help someone. But even when we had the books on hand, a long time ago, we didn’t use what we got out of them. We went right on insulting the dead. We went right on spitting in the graves of all the poor ones who died before us. We’re going to meet a lot of lonely people in the next week and the next month and the next year. And when they ask us what we’re doing, you can say, We’re remembering. That’s where we’ll win out in the long run. And someday we’ll remember so much that we’ll build the biggest goddamn steam-shovel in history and dig the biggest grave of all time and shove war in and cover it up. Come on now, we’re going to go build a mirror-factory first and put out nothing but mirrors for the next year and take a long look in them.” – Granger

Bradbury had known nothing but war from the time he was 18 until he wrote Fahrenheit 451 at the age of 30. He describes the sound of bombers continuously flying over the city. America had started two nuclear wars since 1990. The degenerative effects of mass media in today’s info-bite world can be clearly seen in how they are able to manipulate public opinion to support undeclared wars without question. If Americans were still able to think and interested in exercising their responsibilities as citizens of a Republic, they would have required that Congress exercise its responsibility to declare war rather than allow one man to declare and wage wars all over the globe. It is easy when the state controls the message.

“If you don’t want a man unhappy politically, don’t give him two sides to a question to worry him; give him one. Better yet, give him none. Let him forget there is such a thing as war.” – Beatty

Montag is stalked by the Mechanical Hound throughout the book. It was programmed to hunt down Montag and lethally inject him with poison. Bradbury didn’t know it, but he had described an early version of a predator drone. Today, a man can sit in front of his computer in the Pentagon and direct an unmanned predator drone to fire missiles at “enemies” without faces, halfway around the world. No danger, no consequences, no responsibility. The American public blindly believes the state is protecting them by murdering “enemies of the state”. They will think differently when predator drones circle the skies above their towns seeking out “domestic terrorists” and non-conformists.

The hunt for Montag was broadcast on national TV. Bradbury’s imagination produced a vision of fake reality TV, fifty years before it became an everyday reality.

“Mechanical Hound never fails. Never since its first use in tracking quarry has this incredible invention made a mistake. Tonight, this network is proud to have the opportunity to follow the Hound by camera helicopter as it starts on its way to the target…- TV announcer

They’re faking. You threw them off at the river. They can’t admit it. They know they can hold their audience only so long. The show’s got to have a snap ending, quick! If they started searching the whole damn river it might take all night. So they’re sniffing for a scape-goat to end things with a bang. Watch. They’ll catch Montag in the next five minutes! – Granger

The search is over, Montag is dead; a crime against society has been avenged. – TV announcer

They didn’t show the man’s face in focus. Did you notice? Even your best friends couldn’t tell if it was you. They scrambled it just enough to let the imagination take over. – Granger

As I read this passage visions of the OJ Simpson slow speed chase along the LA freeways appeared in my mind. It was immediately followed by the fake balloon boy video from a few months ago. Lastly, the streaming video of oil gushing into the Gulf of Mexico came into focus. When the cameras are turned off, the show is over. Cold blooded murderers are released due to political correctness. A child in danger was just a show. The effects of 200 million gallons of oil spilled in the Gulf of Mexico on the environment and the citizens of the Gulf region aren’t apparent when the cameras are turned off. So therefore, there are no effects. The world today is one big TV reality show. The populace wants to be entertained by its news. Sound bites are essential. Dazzling special effects are required. Beautiful people presenting the show are necessary. Facts are optional. The truth is a nuisance. There is only one requirement – THE SHOW MUST GO ON.

There are few builders left, while millions of burners lurk behind every bush. First it will be Korans and Mosques. Then it will be bibles and churches. Then it will be libraries. Eventually it will be your house. America was built by those who cherished liberty, freedom, responsibility, knowledge, and truth. A fog of complacency and malaise settled over America in the last six decades. It is almost as if Orwell’s 1984, Huxley’s Brave New World, and Fahrenheit 451 were used as instruction manuals rather than warnings by our society. The worst aspects from all three of these dystopian novels have been adopted or implemented in present day America. The citizenry has become dependent upon the state for information, direction, support, and protection. The unquestioning obedience toward the faceless, nameless, hapless state bureaucracy will lead to tyranny. The state will demand your compliance. The state will monitor your thoughts and movements. The state will tell you what to believe. The state will brutally punish anyone who attempts to think or question. The match is lit. The books are piled high.

“There was a silly damn bird called a Phoenix back before Christ: every few hundred years he built a pyre and burned himself up. He must have been first cousin to Man. But every time he burnt himself up he sprang out of the ashes, he got himself born all over again. And it looks like we’re doing the same thing, over and over, but we’ve got one damn thing the Phoenix never had. We know the damn silly thing we just did. We know all the damn silly things we’ve done for a thousand years, and as long as we know that and always have it around where we can see it, someday we’ll stop making the Goddamn funeral pyres and jumping into the middle of them. We pick up a few more people that remember, every generation.” – Granger

At the end of the novel, the city is destroyed by atomic bombs. The “Book People” begin to move back toward the city in an effort to rebuild their civilization and help it rise up from the ashes. Our society has gone so far off course that a peaceful reversal seems highly unlikely. A revolution that sweeps away the old order and provides an opportunity for America to start anew will occur during the next fifteen years. Just as in the novel, there are surely dark days ahead, with much suffering, pain and death. The majority do not see this revolution coming. Those in power are blinded by their own ignorance. It is up to the minority of thinkers, questioners, skeptics, and truth seekers to insure that America rises up based upon its founding principles of liberty, freedom and personal responsibility. I urge you to look up from your Blackberry. Turn off the TV. Take the iPod earbuds out of your ears. Log off your computer. Read Shakespeare, Twain, Orwell, Bradbury, Huxley, Dickens, Tolstoy, Hemingway, or Faulkner. Don’t believe anything that the mainstream media declares as fact without verifying it yourself. Question everything. Question everyone. Believe no one. The state is not your protector. Government cannot replace reason. Montag was responsible for memorizing the Book of Ecclesiastes in order to pass along that wisdom to future generations. Ask yourself – What are you leaving for future generations?

“To everything there is a season, and a time to every purpose under the heaven.” – Book of Ecclesiastes

“Those who don’t build must burn.” – Professor Faber – Fahrenheit 451

Looming Financial Catastrophe: A Real Inconvenient Truth (Oldie But Goodie)

Here is an oldie but goodie, written in August 2008 before I had a website. I find it interesting how overly optimistic I was regarding deficits and spending. The themes I addressed today in my new article were on my mind two years ago.

“Sometimes I wonder whether the world is being run by smart people who are putting us on….or by imbeciles who really mean it.” – Mark Twain

The United States of America is about as far from united as we’ve been since the Civil War. The two major parties agree on virtually no major issues. The only time they agree is when it involves tax rebates and pork projects for their constituents. They have no problem spending our grandchildren’s money to get re-elected in November. No politician is willing to tell the American people the blunt truth that we have an epic financial crisis that must be addressed in the next 10 years. When I watch the Republicans and Democrats respond to these issues by spinning them to make the other side seem evil, it infuriates me. We are wasting precious time. If you take a poll of Americans and ask them if they want make sacrifices for future generations, I can guarantee you that 85% would say no. Our society is dominated by present self interest to the detriment of the best interests of our future generations. We need leaders who are willing to speak the truth and convince the country to change course before it is too late.

Our fiscal crisis is complex, multi-faceted and dangerous to our long-term future. The major issues that we need to confront include the current fiscal situation, the colossal amount of unfunded liabilities that our politicians have obligated us to pay, our dependence on foreign oil, our education system, and a dearth of leadership and political courage. These issues are intertwined and cannot be addressed individually. To successfully solve these issues we need to ignore political affiliations and choose the best solutions. It seems strange to me that the best ideas for dealing with our crisis come mostly from billionaires. The people that we should believe in my opinion are: David Walker, Pete Peterson, Warren Buffett, Ross Perot, T. Boone Pickens, Matt Simmons, Bill Gates, and Ron Paul.

These men have put aside partisan politics and name calling to work together to save our country. They have an extremely difficult task. There are different challenges they must overcome. The largest hurdle is getting the attention of the majority of Americans who are apathetic towards the entire political process. These are the 71 million voting age citizens who decided not to vote in the last presidential election. If they don’t care enough to vote in the presidential election, they certainly won’t care about future unfunded liabilities. I think the only thing that will get the attention of this group is a major recession that negatively impacts their quality of life. There are millions of Americans living lives of silent desperation. They are living on the edge and the debt contraction that is underway is pushing many over that edge. The anger that is building will hopefully eliminate the apathy.

“The punishment of wise men who refuse to take part in the affairs of government is to live under the government of unwise men.” – Plato

The next obstacle is what I call the Great Deniers. They deny that there are any problems in America. They ignore the hard facts and spout rhetoric like: “We are the greatest country in the history of the world; There is nothing that’s going to occur to our economy except a continuance of the great economic success our great nation has always enjoyed; The sun is not setting on our great nation, it is rising!; It is morning in America.” It is difficult to have a logical discussion with these shills. They are disciples of the Ben Stein School of ignoring facts and figures. They are cheerleaders for America, when what we need are wide eyed realists. Many of these people have secure well paying comfortable positions in our society and fear a change in the status quo.

Using a baseball analogy is the best way I can describe our current situation. When I hear the denial gang speak, I see America as a baseball team on par with the NY Yankees dynasty. They have been the dominant team in baseball for decades, with 26 World Series championships in 39 World Series appearances. Their payroll is bigger than any other team. They start to read their press clippings, rely on their reputation and allow their minor league system to deteriorate. Their star players are getting long in the tooth, no longer in their prime. Changing managers (Presidents) hasn’t worked. They are still good, but the competition is younger, talented, and has greater desire to succeed. The upstart Devil Rays (Emerging Market Countries) and the reviled Red Sox (China) have moved past them. It is late August and they are 10 games out of 1^st place. It is time to trade the aging veterans for young minor leaguers and begin the rebuilding process. This is where America stands today. We are at a crossroads. We can continue on our current course and be in the middle of the pack in the future, or we can completely retool to compete in this 21^st Century world.

By far, the greatest challenge that our selfless patriots must overcome is the entrenched ruling elite that run this country. The ruling elite includes the crooked politicians in Washington, the lifetime bureaucrats who run the various governmental agencies, the paid lobbyists who write the laws for Congress, obscenely overpaid short-term profit driven corporate CEOs, media conglomerates, and the privileged Wall Street aristocracy. These privileged few are surrounded by leeches and parasites (media consultants, pollsters, spin artists, and PR agencies) that attack anyone who threatens their position of power. The only way to overturn their comfortable world is an uprising among the masses. An educated population would not allow them to herd us like the sheep they think we are.

Congress consists of 100 Senators and 435 Representatives. Based on the data below there are 32 lobbyists for every member in Congress. They spend $5.3 million per member of Congress every year. Lobbyists will spend $3 billion this year to persuade our noble politician leaders. PACs and 527 Plans will spend hundreds of millions of dollars pushing their agendas. Who is looking out for my senior citizen parents? Certainly not their Congressman or Senator. They are earning a pitiful 2% on their IRA money market fund because JP Morgan, General Electric and Fannie Mae have lobbyists to fight for their rights. When our government has to use your tax dollars in the next few months to take over Fannie Mae and Freddie Mac, it should warm your heart knowing that these two quasi-governmental entities have spent $175 million in the last 10 years lobbying Congress. Not much has really changed in the last hundred years. Will Rogers pegged politicians back in the 1920’s.

“Ancient Rome declined because it had a Senate; now what’s going to happen to us with both a Senate and a House?” (source)

“There’s no trick to being a humorist when you have the whole government working for you.” (source)

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Top Spenders on Lobbyists, 1998 to 2008 / Top 20 PACs by Total Expenditures, 2007-08

Lobbying Client	Total	PAC Name	Total Expenditures
US Chamber of Commerce	$398,224,680	Service Employees International Union	$31,293,521
American Medical Assn	$190,662,500	ActBlue	$31,154,631
General Electric	$172,650,000	EMILY’s List	$23,896,241
American Hospital Assn	$152,947,280	American Fedn of St/Cnty/Munic Employees	$21,102,211
AARP	$140,492,064	Moveon.org	$15,986,173
Pharmaceutical Rsrch & Mfrs of America	$135,663,400	American Federation of Teachers	$12,450,910
Edison Electric Institute	$120,195,999	Intl Brotherhood of Electrical Workers	$10,760,885
Northrop Grumman	$118,195,253	National Assn of Realtors	$8,904,369
Business Roundtable	$112,280,000	Laborers Union	$8,731,290
National Assn of Realtors	$107,960,380	Teamsters Union	$8,069,525
Blue Cross/Blue Shield	$100,266,172	Plumbers/Pipefitters Union	$6,558,978
Freddie Mac	$94,854,048	Operating Engineers Union	$6,361,124
Boeing Co	$92,578,310	Lyndon LaRouche PAC	$5,220,950
General Motors	$92,221,483	AT&T Inc	$5,170,071
Lockheed Martin	$90,871,735	United Auto Workers	$4,942,756
Exxon Mobil	$90,166,942	American Bankers Assn	$4,646,902
Verizon Communications	$88,295,610	American Assn for Justice	$4,413,52
Southern Co	$86,290,694	United Food & Commercial Workers Union	$4,392,065
SBC Communications	$79,851,656	National Rifle Assn	$4,161,518
Fannie Mae	$79,497,000	International Assn of Fire Fighters	$4,072,776

Current Fiscal Mess

I’m reminded of the lyrics to the Stealers Wheel song Stuck in the Middle with You, when I think about the “leaders” who have gotten us into this mess.

Trying to make some sense of it all,
But I can see that it makes no sense at all,
Is it cool to go to sleep on the floor,
‘Cause I don’t think that I can take anymore
Clowns to the left of me, Jokers to the right,
Here I am, stuck in the middle with you.

You would think that men with this type of education would have acted in a more intelligent manner. Instead, they have contributed greatly to the current financial crisis that engulfs our nation. I’m guessing Harvard won’t use this chart in their marketing materials.

Our debt is accelerating at such a rapid rate that we have reached $9.6 trillion since this chart below was produced in early 2008. The “Morning in America” crowd needs to wake up and look hard and long at this chart. When Ronald Reagan used this slogan in his re-election campaign in the early 1980’s, the National Debt was $1 trillion, and more importantly, equaled 34% of GDP. Today, the National Debt is $9.6 trillion and equals 70% of GDP. When George W. Bush sauntered into the Oval Office with a smaller government, non-interventionist foreign policy agenda in 2000, the National Debt stood at $5.6 trillion. During his administration the National Debt has increased by $4 trillion, or 71%, while our GDP has increased by 41%. The smaller government idea got lost somewhere in translation. This train is hurtling down the track at tremendous speed and we are headed for a wreck unless we slow the spending and debt accumulation. As a nation, we add $68,000,000 to the National Debt every hour. Please ponder that fact for one minute. Our government and our citizens are like crack addicts, except that debt is our drug of choice. We need an intervention now, or we will overdose on debt and destroy our way of life.

The Bush Administration recently announced that the budget deficit for FY09 will be $482 billion. White House spokeswoman Dana Perino said President Bush is determined to enforce greater fiscal discipline while pursuing a pro-growth economic strategy. It is hard to not laugh so hard that milk comes out your nose when listening to this gibberish. He has 4 months left in office and NOW he wants to enforce greater fiscal discipline. The $482 billion doesn’t include the $180 billion per year being spent on our non-interventionist wars in Iraq and Afghanistan. In the fantasy world of our government budget, the $180 billion doesn’t count. Since 2002, we have spent $700 billion in direct costs on the wars. Larry Lindsey, President Bush’s economic adviser and head of the National Economic Council, suggested that costs might reach $200 billion. But this estimate was dismissed as “baloney” by the Defense Secretary, Donald (Mission Accomplished) Rumsfeld. Lindsay was asked to leave the administration shortly thereafter. Joseph Stiglitz, Nobel Prize winner in economics, estimates that the final cost of the wars will reach $3 trillion. Congressman Ron Paul gets to the heart of the issue.

“The moral and constitutional obligations of our representatives in Washington are to protect our liberty, not coddle the world, precipitating no-win wars, while bringing bankruptcy and economic turmoil to our people.” – Ron Paul

George W. Bush should have taken Winston Churchill’s advice to heart.

“Never, never, never believe any war will be smooth and easy, or that anyone who embarks on the strange voyage can measure the tides and hurricanes he will encounter. The statesman who yields to war fever must realize that once the signal is given, he is no longer the master of policy but the slave of unforeseeable and uncontrollable events.”

The $482 billion deficit will prove to be optimistic. As we enter a deep recession, tax receipts from individuals and corporations will be plummeting in the next year. The official deficit will likely reach $600 billion. The new President will show his deep concern for his fellow citizens by signing another stimulus package that takes $150 billion from your grandchildren and gives it to you for the purchase of a new HDTV. After adding the $180 billion in war spending, we will be within spitting distance of a $1 trillion annual deficit. President Bush handed out $188 billion in rebate checks during his tenure.

Damn the future, full speed ahead. President Bush, Henry Paulson, and Ben Bernanke remind me of the Kevin Bacon character in Animal House. Yelling “all is well” will not keep them from getting flattened.

Besides the outrageous amount of spending by Congress and the Administration on wars and pork-barrel bribes for their constituents, the makeup of Federal Spending has taken a dramatically dire turn. In 1965 we were essentially in control of 73% of the spending. Now, 53% of the spending is on automatic pilot, with only 47% in our control. The only saving grace has been the tremendous fall in interest rates from 1985 to 2007, which has kept our interest cost in check at only $237 billion per year, or $27,000,000 per hour.

The composition of the current spending is such that we can’t get to a balanced budget without addressing the third rail of American politics – Social Security, Medicare, and Medicaid. On the discretionary side, we also have limited flexibility. When the war funding is taken into account, 59% of all discretionary spending is directly associated with the Military. We spend 7% of the budget on education and 6% on our crumbling infrastructure. The budget will continue to expand on the mandatory spending side because it is on autopilot, unless we act now. The entire Social Security, Medicare, and Medicaid system will need to be overhauled or scrapped. Benefits will be reduced and taxes will be raised. The military will need to be withdrawn from the 117 countries in which they are based. We will need to follow the Constitution and use the military to defend our country against aggression, not starting pre-emptive wars. The Bush Doctrine is dead.

Future Unfunded Liabilities

The only Federal Reserve member who has a streak of Paul Volker in him, Dallas Fed Chairman Richard Fisher, bluntly described our predicament in a recent interview.

“There is one issue I am outspoken about, and that is the unfunded liabilities of Medicare. And I have not heard any discussion of what is the largest liability ever incurred by any country in history, relative to their GDP. Just to give you the number, it is $85.6 trillion that is currently unfunded. … That’s a lot. Our total output as a country is roughly $14 trillion.

This prescription drug benefit alone – which was created 30-some odd months ago by a Republican, Harvard MBA from my state of Texas [President Bush] – is a larger liability now than all of Social Security. …

And why do I worry about it? Because it is in every politician’s blood – and this knows no party – if you can’t solve a problem, get the central bank to print your way out of it. And we won’t do that. I won’t do that anyway.”

With most of our spending on automatic pilot, the aging of the baby boom generation will put tremendous strain on our economic system. As you can see, Medicare costs will explode over the next 40 years. The increasing debt will result in interest payments on the debt becoming the largest expenditure in the federal budget. The longer we wait to address this unavoidable train wreck, the more likely it will result in generational war between the baby boomers and the younger generations. Mandatory spending for agriculture subsidies, unemployment benefits and civilian and military pensions and health benefits continues to grow.

The chart below proves beyond a shadow of doubt that we cannot grow our way out of this problem. As entitlements and net interest grow, discretionary spending gets squeezed. Non-defense programs, which include, activities related to children, transportation infrastructure, education, training and research that should promote future economic growth and prosperity, come under increasing funding pressure. We are forced to ignore investments in the future to pay for commitments made decades ago. The short term focus of our Washington politicians has ruined our fiscal future. Children don’t vote, and younger people are less involved in the political process. As a result, the potential political gain from immediate increases in spending or reductions in taxes outweighs the eventual economic benefits of more politically costly but fiscally responsible choices. This is a criminal and immoral act upon our future generations.

According to Pete Peterson and David Walker:

On average, more than 10,000 baby boomers will become eligible for Social Security benefits each day for the next two decades. As they do, there will be fewer workers supporting a growing number of retirees. This eventually will place an unfair burden on younger workers, who will end up bearing the brunt of future taxes.

Demographics are very easy to project. The only thing that could change the facts in the chart below is world war, epidemic, or catastrophe. The number of people 65 years or older will increase by 42% between now and 2020 and 84% between now and 2030. According to the Urban Institute; For every dollar that the federal government spends on children’s education, health care, income support, and other programs that help parents meet their children’s basic needs, it spends more than four dollars on behalf of older Americans. With political leaders who have a two to four year focus, long-term solutions with short term pain are never considered. Courage and fortitude is in short supply in Washington DC.

A liberal spending agenda will certainly not get us out of this mess. According to Pete Peterson and David Walker:

“Health care costs are growing faster than the population, the prices of other goods and services and the nation’s overall economy. Health care as a share of GDP has doubled since 1975. While the budgets of households, businesses and government are all under pressure, health care cost growth affects the federal budget in two ways: it increases the cost of federal health programs; and it stimulates greater interest in further expansions of the federal government’s responsibility for paying for health care. Politicians and the public may want the government to do more: however, the government has already promised more in health benefits than it can realistically afford to deliver. In addition, it is important to remember that transferring costs to the federal government does not make those costs disappear. When responsibilities are added to the budget without adequate financing (the recent enactment of the Medicare drug benefit, for example), it only serves to mortgage further the future of our country, children and grandchildren.”

Answer Given By 95% of all Congressmen

Our deficits are already surpassing the GAO estimates on the chart below. Adding new spending programs would be like being trapped in a deep hole and deciding to dig deeper. Demonizing the rich and corporations to extract more taxes from them will not work. Something called shared sacrifice for the benefit of future generations could work. Shared sacrifice is something that hasn’t been asked of U.S. citizens since World War II. They are known as the Greatest Generation. Now is time for the Next Great Generation.

Dependence on Foreign Oil

“Sometimes it takes a crisis to awaken us from our slumber. But once aroused, the American people can accomplish miracles.” – T. Boone Pickens

“I cried out but no one would listen and now Europe is devastated…There never was a war easier to win…Not a single shot needed to be fired…But, no one listened.” – Winston Churchill

These quotes are calls to action for America. We cannot keep our heads stuck in the Arabian sand. When Ben Stein and other non-thinking fools tell you that oil prices have risen due to greedy speculators, please take a look at the charts below. Consumption will continue to skyrocket no matter what the U.S. does. The spread of capitalism throughout the world has led to an explosion in worldwide GDP growth. The emerging markets of Asia, South America, and Eastern Europe have driven this growth. $2,500 cars are now becoming available in China and India and the rest of Asia. In a Chinese car ownership survey, 96% of respondents said they paid cash for their cars. How un-American like. More than 20,000 new cars per day are being sold to Chinese citizens who have never owned an automobile before. This is massive new demand being created for gasoline. China now has a middle class estimated at nearly 300 million people. 37% of people driving in China today did not know how to drive 3 years ago. Does this seem to be a recipe for declining oil prices?

On the supply side, the Larry Kudlows of the world, rant Drill, Drill, Drill. I agree that we must utilize all possible supplies of oil and gas, but it will be like pissing in the ocean. We must accept the fact that worldwide oil production has peaked and will inevitably decline over the long-term. New supplies will be discovered, but they will not be enough to replace the supplies being used. Matt Simmons, the man who put forth the Peak Oil concept many years ago and author of Twilight in the Desert – The Coming Saudi Oil Shock & the World Economy, is warning that we must act now or the inevitable decline in oil supply will lead to World War III over resources. This is not as far fetched as it sounds. When industries must shut down and gasoline rationed, anger will rise. Countries will use their military to acquire the precious remaining supplies.

“My grandfather rode on a camel, my father rode in a car, I ride in a jet, my children will ride in cars, my grandchildren will ride on camels.”

Sheikh Rashid bin Saeed Al Maktoum (1912 –October 7, 1990) was the Prime Minister of the United Arab Emirates from 1979 to 1990 and Emir (Ruler) of Dubai. He ruled for 32 years, until his death.

If this is the destiny of the nations with vast supplies of oil, what will be the destiny of the countries without vast supplies?

Source: Federal Reserve & International Energy Agency

The next chart shows that the United States, which makes up 4% of the world’s population, consumes 25% of the world’s oil on a daily basis. In 1970 we imported 24% of our oil. Today we import 70% of our oil. We are sending $700 billion per year to foreign countries every year to purchase this oil. According to T. Boone Pickens, projected over the next 10 years the cost will be $10 trillion — it will be the greatest transfer of wealth in the history of mankind.

A gander at the next chart should reveal some disturbing facts for the U.S. The massive Cantarell oil field in Mexico is declining at such a rapid rate that Mexico will have no oil to export within the next 5 years. Venezuela is ruled by a crazy dictator who hates the United States and American oil companies. Nigeria is in the midst of constant civil war. Iraq will be unstable for many years. Russia just invaded a sovereign country. And lastly, Saudi Arabia was home to 19 of the 9/11 hijackers. They are also likely covering up the decline in their oil fields.

The last chart reveals that the U.S. is no longer in control of our own destiny. We are hostage to dictators, kings, and lunatics. What these charts do not reveal is the non-supply related factors which will constrain our economy in the future.

According to Matt Simmons:

The existing energy infrastructure is rusting away.
80% to 90% of the system must be rebuilt.
The cost of rebuilding the infrastructure will be $50 – $100 trillion.
We have no blueprints, few supplies and fewer trained engineers and construction workers.

So what do we do now? Mr. Simmons has some practical general ideas on slowing the process of running out of oil:

Use less energy (world’s best future energy source).
Travel only for emergencies and fun.
Eat food grown locally –it is far tastier and fresher.
Make goods where they are used.
Rebuild the energy complex –melt down our guns and tanks for pipelines, refineries and rigs.

Mr. Pickens has more specific ideas on leading us towards an independent energy future:

Building wind facilities in the corridor that stretches from the Texas panhandle to North Dakota could produce 20% of the electricity for the United States at a cost of $1 trillion. It would take another $200 billion to build the capacity to transmit that energy to cities and towns.
In addition to creating new construction and maintenance jobs, thousands of Americans will be employed to manufacture the turbines and blades. These are high skill jobs that pay on a scale comparable to aerospace jobs.
Natural gas is our country’s second largest energy resource and a vital component of our energy supply. 98% of the natural gas used in the United States is from North America. But 70% of our oil is purchased from foreign nations.
We currently use natural gas to produce 22% of our electricity. Harnessing the power of wind to generate electricity will give us the flexibility to shift natural gas away from electricity generation and put it to use as a transportation fuel — reducing our dependence on foreign oil by more than one-third.
Building new wind generation facilities and better utilizing our natural gas resources can replace more than one-third of our foreign oil imports in 10 years.

These are some ideas. We also need more nuclear power, more solar power, more geothermal power, more refineries, more LNG terminals, and more research on battery powered vehicles.

Education System Failure

“Until we’re educating every kid in a fantastic way, until every inner city is cleaned up, there is no shortage of things to do.” – Bill Gates

“People always fear change. People feared electricity when it was invented, didn’t they? People feared coal, they feared gas-powered engines… There will always be ignorance, and ignorance leads to fear.” – Bill Gates

Bill Gates has put his money where his mouth is. He is trying to change the U.S. Educational system through his Gates Foundation. Instead of partisan bickering and power struggles with teacher’s unions, he is trying to figure out what works. When I hear people say that we have the best educational system in the world, I prefer to look at the facts. The data below doesn’t point to the best educational system in the world, with the U.S. finishing 26^th in math and 20^th in science. But we are closing fast on Latvia. Is it more important to win the most medals during the Olympics or to have the best educated youth in the world? It looks like we’ve made our choice.

The data in the following chart is the scariest, in my opinion. India and China combined have 217 million children under 5 years old. If just 10% of them become scientists, engineers, and mathematicians, they will overwhelm the U.S. in highly educated workers. The Asian countries are already making major inroads on the educational front. Four of the top business schools in the country have the following percentage of non-U.S. citizens in their MBA programs: Harvard – 34%; Wharton – 45%; Stanford – 34%; Chicago – 33%. Many of these brilliant students will return to their native countries and run companies competing against us in world markets.

It does not appear that the problem with the poor showing by the U.S. is due to lack of spending, with in excess of $500 billion spent on public education and billions more in private schools. This comes to $9,600 per student per year. That sounds like enough to provide a top notch education. According to UNESCO, Japan spends $4,830, China spends $2,728, UK spends $8,502, and India spends $400. These countries seem to be getting more bang for their buck.

Japan, South Korea, and Hong Kong have their 15 year olds score highest on tests of science, math, and problem solving. They far outpace U.S. 15 year olds, who finished near the bottom of the pack. Knowledge is the key to a country’s future success. Based on this data, we are headed for the back of the pack.

As a country we need to embrace whatever works in trying to maintain our standard of living through education, whether it be school vouchers, greater school choice or any other method that will succeed. The Gates Foundation is supporting the following efforts to change the course of education:

In the foundation’s home state of Washington, more than half our children enter kindergarten without the skills they need to succeed in school. Research shows that we can close this gap in school-readiness with high-quality early learning for children and support and education for parents. With public and private partners—including Thrive by Five: The Washington Early Learning Fund—we are working to ensure that children in our state have the greatest chance at success in school and life.
The foundation works with intermediary organizations that replicate these proven and promising model high schools. Though model schools differ, they engage all students with a rigorous curriculum. They offer coursework that is relevant to students’ lives and aspirations. And they foster strong relationships between students and adults. The schools can be grouped into one of three general categories: traditional, theme-based, and student-centered.
The United States relies on local school districts to guide education. The foundation supports efforts to understand what makes a successful school district and funds projects that help build strong education systems. Working with many partners, we focus on large urban districts committed to improving the school experience and success of all students—regardless of income, race, or ethnic background.
States can play an important role in education reform. They can challenge schools and districts—and vigorously support their efforts. The National Governors Association, Achieve Inc., and 34 states are working together to shape policies that will require college-ready coursework and help all students graduate with the education they need for success in work and life.
The foundation awards scholarships to promising students who don’t have the financial means to attend college.
We sponsor research that examines education in the United States to understand which practices best prepare students for high school graduation, college, and careers. We also commission regular evaluations of the initiatives we support so we can share our results and improve our grant making strategies.

No Leadership – A Samuel Adams Moment (not the beer)

“It does not require a majority to prevail, but rather an irate, tireless minority keen to set brush fires in people’s minds.” – Samuel Adams

As I watched the premiere of the brilliant documentary I.O.U.S.A., I was reminded of Samuel Adams’ words. David Walker and his fellow patriots have been tirelessly traveling to small towns throughout America on their Fiscal Wake Up Tour to try and set brush fires in people’s minds about the looming catastrophe that is our current and future fiscal obligations. Before the movie, as I tried to find a parking space for our 9 year old minivan, so my wife and I could grab a bite to eat, the spaces were filled with BMWs, Mercedes’, and Lexus’. Then we were told that there would be a 45 minute wait to get into the P.F. Chang restaurant. All of the restaurants were overflowing with people eating $14 burgers, $35 steaks and drinking beer and wine. I was reminded of the video in Thailand when the ocean strangely receded from the shoreline and people walked out to where the sea had been to pick up fish, shells, and other interesting trinkets, not knowing that a tsunami would sweep over them in minutes. Our national debt and future fiscal obligations are a tsunami that will sweep over our nation unless we move to higher ground.

“If ever a time should come, when vain and aspiring men shall possess the highest seats in Government, our country will stand in need of its experienced patriots to prevent its ruin.” – Samuel Adams

Never were truer words spoken by one of the original patriots. Vain and aspiring men now possess the highest seats in Government. As I watched the documentary and did my own research it has become clear to me that our entire political system has been corrupted by money and power. These people will not change the system, because they are the system. Lifetime politicians are bribed by lobbyists to vote for whatever special interest agenda that is put forth. There are a few dedicated Americans like Ron Paul in Congress, but they are few and far between.

“When the federal government spends more each year than it collects in tax revenues, it has three choices: It can raise taxes, print money, or borrow money. While these actions may benefit politicians, all three options are bad for average Americans. – Ron Paul”

I’m convinced that this system must be destroyed and “We The People” have to take charge of our country. We need to follow Warren Buffett’s advice.

“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.” – Warren Buffett

Let’s put this in perspective. There are 305 million people who live in the United States. We need to find 535 intelligent thoughtful people (100 Senators, 435 Representatives) who care more about the Constitution and their country than themselves. Money, power and influence are what drive decision making in Washington DC today. Throwing the existing bums out won’t work. New bums will be just as bad. I think some common sense solutions could dramatically reduce the partisan extremism in Congress.

Term limits for all elected officials would eliminate the lifetime politicians. This could attract a better caliber of candidates.
If the tent isn’t big enough to house all the views in a two party system, eliminate the two party system. Break the two parties into six parties and give voters greater choice. Coalition government would require cooperation.
Outlaw lobbyists and lobbying of public officials. Outlaw PACs and 527s. Take money influence out of the equation in Washington.
Provide limited public funding for elections and restrict what a candidate can spend so that all candidates are on an equal footing. No one could buy an election. Elections would be about ideas.

By taking the massive amounts of money out of politics, we could surely attract 535 patriots who could take a long term view of our great Republic and make the right decisions for our future generations.

Essentially, there are two main messages in the I.O.U.S.A movie:

The United States has no money
It is immoral to mortgage the entire future of our unborn children so we can live the good life today

Time to Get Involved

Please visit these websites to join the fight:

Time to Get Educated

Please read the writings of these people to get the truth:

IS AMERICA ON A BURNING PLATFORM? (Featured Article)

David Walker, the former Comptroller of the United States from 1998 until 2008, has been warning politicians, the media, and the American public for over a decade that we are off course and headed for disaster. In August 2007, before the financial system meltdown of 2008, Mr. Walker declared:

The US government is on a “burning platform” of unsustainable policies and practices with fiscal deficits, chronic healthcare underfunding, immigration and overseas military commitments threatening a crisis if action is not taken soon. There are striking similarities between America’s current situation and the factors that brought down Rome, including declining moral values and political civility at home, an over-confident and over-extended military in foreign lands and fiscal irresponsibility by the central government. The fiscal imbalance meant the US was on a path toward an explosion of debt. With the looming retirement of baby boomers, spiraling healthcare costs, plummeting savings rates and increasing reliance on foreign lenders, we face unprecedented fiscal risks. Current US policy on education, energy, the environment, immigration and Iraq also was on an unsustainable path. Our very prosperity is placing greater demands on our physical infrastructure. Billions of dollars will be needed to modernize everything from highways and airports to water and sewage systems.

Three years have passed since Mr. Walker sounded the alarm and issued his dire warning. The National Debt in August 2007 was $8.9 trillion. Today it stands at $13.6 trillion, a 53% increase in just over 3 years. It took 205 years as a country to accumulate $4.7 trillion of debt. We’ve added $4.7 trillion in the last 38 months. It doesn’t appear that anyone in government heeded Mr. Walker’s warnings.

The perpetually optimistic pundits that occupy the positions of influence on CNBC and the other MSM networks try to paint a rosy picture of the American state of affairs day after day. They urge citizens to spend money they don’t have. They are sure that extending unemployment benefits to 99 weeks will improve the unemployment situation. They declare that Cash for Clunkers and the Home Buyer Tax Credit were successful government programs. They are sure that invading countries in the Middle East will make America safer. Nobel Prize winners in economics declare that the government should undertake another $8 to $10 trillion of money printing because the first $5 trillion wasn’t enough.

The Federal Reserve is pulling out all the stops in attempting to invigorate the American economy. The stock market is surging. Everything is surging. The optimists are crowing that all is well. Deficits don’t matter. We can borrow our way to prosperity. Cutting taxes will not add $4 trillion to the National Debt if not paid for with spending cuts. All is well. So, the question remains. Was David Walker wrong? Are we actually on a perfectly sturdy solid platform? Or, are we on the Deepwater Horizon as it burns and crumbles into the sea? Let’s examine both storylines and decide which is true.

AMERICA ON A STURDY PLATFORM

The National Debt of $13.6 trillion is manageable because interest rates remain at historic low levels.
The addition of $1.6 trillion in debt per year is necessary because government must step in for the lack of spending in the private sector. This will jump start the economy. This is Keynesianism 101.
The debt to GDP ratio of 93% is not dangerous. Japan has a debt to GDP ratio of 200% and they are doing fine. This proves we have plenty of room to grow our debt.
The US dollar is the reserve currency for the entire world. We can systematically devalue the USD, which will reduce our foreign debt burden over time. The foreigners who leant us the money are on the hook and they have no way out.
A depreciating dollar will help our manufacturing industry by making American exports cheaper in foreign markets.
The $700 billion TARP plan saved the American financial system. The American taxpayer will end up making a profit in the long run from this program.
Cash for Clunkers was an astounding success. It increased demand for autos dramatically.
The Homebuyer Tax Credits resulted in a surge in home sales and stabilization of home prices.
The $800 billion Stimulus plan saved America from a 2nd Great Depression. Without it, we would have lost millions of jobs.
Consumer spending accounting for 70% of GDP is sustainable and desirable. If we can just get credit flowing again and encourage consumers that it is safe to use their credit cards to spend, the economy will come roaring back.
This is not the time to save. Nobel Prize winners in economics urge Americans to spend because of the Paradox of Thrift. It may be smart for one person to save more than they spend, but if everyone does it a consumer society will collapse. We can save later is the recommendation.
A QE2 of $8 to $10 trillion would surely increase the animal spirits of the dejected American people. The stock market would soar to 20,000 and everyone would feel rich. Spending would surge. All would be well again.
The Social Security Trust Fund is not broke. The money contributed by Americans over the decades is in a lockbox and the fund will be solvent for decades. A few tweaks and it will be solvent forever.
Medicare has been one of the best government programs ever conceived. It has sustained our senior citizens and delivered high quality care to all at a reasonable cost.
Baby Boomers are rational and realistic. The statistics that show they have not saved enough to sustain them in retirement is overblown. Social Security will suffice. If not, they’ll just work a little longer. No worries.
Obamacare will reduce healthcare costs, improve service, cover more people, and reduce the profits of insurance companies and drug companies.
We have the best educational system in the entire world. People from all over the world want to get into our best Universities. No Child Left Behind has been a huge success.
We are safer today than we were on September 11, 2001. We won the Iraq War and freed the Iraqis from the clutches of a madman. We are fighting them over there so we don’t have to fight them over here. The terrorists are in disarray and retreat.
The $1.1 trillion spent on the Middle East Wars, the trillions spent on the Dept of Homeland Security, and the expansion of government ability to protect its citizens through enhanced surveillance techniques and enhanced interrogation techniques on suspected terrorists has been beneficial to the safety and security of the American people.
A Defense budget of $900 billion per year is essential to our national security. We are surrounded by potential enemies.
It is a net positive for the US to allow illegal immigrants to stay in the country. Who else would we get to work in the fields picking lettuce and cutting our suburban lawns?
Gasoline is only $2.70 a gallon. We are awash in supplies of oil. Peak oil is a myth perpetuated by environmental nuts. We have centuries worth of oil in the Bakken Shale. If we would just open up Alaska to drilling, our troubles would be gone. Drill, Baby, Drill.
Our crumbling infrastructure is actually a fantastic opportunity. A 2nd Stimulus program to upgrade our infrastructure would create millions of high paying jobs.

AMERICA ON A BURNING PLATFORM

The National Debt is $13.6 trillion today. Interest expense for fiscal 2010 totaled $414 billion. Based upon the current spending path and assuming that the Bush tax cuts are extended, the National Debt will exceed $20 trillion by 2015. A reasonable expectation of 5% interest rates would result in annual interest expense of $1 trillion. The entire budgeted outlays of the US government are $3.5 trillion today.
Deficits exceeding $1 trillion per year are baked into the cake for the next decade. Non-Defense discretionary spending totals only $700 billion. Defense spending totals $900 billion. The remaining $1.9 trillion is on automatic pilot for Social Security, Medicare, Medicaid, and other entitlement programs. Politicians declaring they will freeze discretionary spending are treating you like fools. It will solve nothing.
Debt as a percentage of GDP will exceed 125% of GDP by 2015. Rogoff & Reinhart in their book This Time is Different point out the dangers once debt surpasses 90% of GDP: The relationship between government debt and real GDP growth is weak for debt/GDP ratios below 90% of GDP. Above the threshold of 90%, median growth rates fall by 1%, and average growth falls considerably more. The chances of bad things happening to a country increase dramatically after the 90% level is surpassed.
Japan began their 20 years of tears with a debt to GDP ratio of 52% and a National Savings rate of 15%. The Japanese people bought 90% of the debt that the government issued. Today, the debt to GDP ratio is 200% and the National Savings rate is 2%. The US entered this crisis with a debt to GDP ratio of 80% and a National Savings rate of 1%. We depend on foreigners to buy more than 50% of our new debt. We do not control our own destiny.
A depreciating US dollar is already creating inflation in many assets. Gold, silver, oil, and agricultural commodities are increasing in price faster than the stock market. The policy of the US government and Federal Reserve of devaluing the currency is being matched by similar efforts in countries across the globe. The result is a flood of liquidity creating bubbles which will pop. The American middle class will be squeezed harder as their wages stagnate, while their food, energy, and costs at Wal-Mart go higher.
TARP, the purchase of $1.5 trillion of Mortgage Backed Securities by the Federal Reserve, 0% interest rates, and accounting rule changes by the FASB have done nothing but paper over the fact that the biggest financial institutions in the US are insolvent. The assets on their books are worth 50% less than they are reporting. They are zombie banks. Their losses on residential real estate, commercial real estate and consumer credit continue to grow. The only beneficiaries of keeping zombie banks alive are the bankers who are receiving billions in compensation while the middle class dies a slow painful death.
Cash For Clunkers, Home Buyer Tax Credit and energy efficiency credits did nothing but shift demand forward and cost the American taxpayer $25 billion. The estimated cost to the tax payer per incremental home sold was $100,000. Auto sales and home sales plunged as soon as the credits ran out. Home prices are falling and used car prices have soared due to less supply, hurting the poor.
The borrowing of $800 billion from the Chinese to dole out to unions and political hacks all over the country has been a complete disaster. Unemployment has gone up by over 4 million since the stimulus was passed. Government spending has crowded out private spending. The economy hasn’t recovered because it was never allowed to bottom. Why look for a job when the government pays you for two years to watch Oprah in a house where you haven’t made a mortgage payment in 18 months?
Consumers’ spending money they don’t have, saving less than 5% of their disposable income, and putting away nothing for their retirement is unsustainable. The average credit card debt per household is about $15,700. In 1968, consumers’ total credit debt was $8 billion (in current dollars). Now the total exceeds $880 billion. Americans currently owe $917 billion on revolving credit lines and $80 billion of it is past due, according to the latest Federal Reserve statistics.
A scaling back of consumer spending to a sustainable 64% of GDP would reduce consumer spending by $500 billion per year. This would allow Americans to save and invest in the country. This is considered crazy talk in the Keynesian economic circles.
The anticipation of QE2 has already made the dollar drop 10% and gold, silver and oil jump 10%. Ben Bernanke and the Federal Reserve are conducting an experiment on the American people. What they are doing today has never been attempted in human history. It boils down to whether the authorities can cure a disease brought on by too much debt by doubling and tripling the dosage of debt. If this experiment fails, the dollar collapse and possible hyperinflation would lead to anarchy. Ben is confident it might work. Are you?
Social Security and Medicare have an unfunded liability exceeding $100 trillion. There is no money in a lockbox. Congress opened the lockbox and spent the money. Baby boomers are turning 50 years old at a rate of 10,000 per day. There is no possibility that the promises made to Americans by politicians can be honored. No politician of either party will tell the truth to the American public. A massive reduction in benefits or a massive increase in taxes would be required to deliver on this promise.
The 2,000 page Obamacare bill that no one in Congress read was sold to the American people as a cost saving, care enhancing package of goodies. The reality is that it will increase the national debt by hundreds of billions, ration care, drive more doctors into retirement, strangle small business with onerous regulations and enrich the insurance companies and drug companies. The unintended consequences will be devastating.
Total military expenditures for the entire world are $1.9 trillion annually. The US accounts for $900 billion of this expenditure. This is 7 times as much as the next largest spender – China.
The wars of choice in the Middle East since 2001 have cost unborn generations of Americans $1.1 trillion so far, with a final cost likely reaching $3 trillion. Just like Donald Rumsfeld estimated. Over 5,700 Americans have lost their lives and another 39,000 have been wounded. The casualties in the countries that have been invaded number in the hundreds of thousands. Are we better off than we were on September 10, 2001?
Defense spending in 2000 was $359 billion or 3.6% of GDP. Today it is $900 billion or 6.1% of GDP. Every dime of these expenditures is borrowed. Are we safer today?
The Department of Energy was created in 1979 in order to create an energy policy that would reduce our dependence on foreign oil. The United States, which makes up 4% of the world’s population, consumes 25% of the world’s oil on a daily basis. In 1970 we imported 24% of our oil. Today we import 70% of our oil.
Over 50% of our oil imports come from countries whose populations hate the US. Mexico, which accounts for 9% of our current oil supply, will become a net importer by 2015.
The US has not built a new nuclear power plant or oil refinery since 1980.
The existing energy infrastructure is rusting away. 80% to 90% of the system must be rebuilt. The cost of rebuilding the infrastructure will be $50 – $100 trillion. We have no blueprints, few supplies and fewer trained engineers and construction workers.
Peak oil is a fact. World liquid oil production peaked at 86 million barrels per day in 2006. It has not reached that level since, even when prices soared to $145 per barrel. Demand will move relentlessly upward as China and India and the rest of the developing world march forward.
The US Military has concluded in a report put out a few months ago that by 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 MBD. A severe energy crunch is inevitable without a massive expansion of production and refining capacity. While it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds.

THE SHIP OF STATE

David Walker was in a ship well ahead of the US Titanic crossing the Atlantic. He saw the dangerous icebergs floating in the ocean. He sent a message to the Captains (Bush, Obama) and Executive Officers (Greenspan, Bernanke, Paulson, Geithner) of the US Titianic that there was danger ahead. They should have reduced speed and doubled the lookouts. Instead they listened to the Managing Director of the cruise line (Wall Street) and increased speed. The US Titanic was unsinkable. When the inevitable collision with the iceberg occurred, those in command chose to disbelieve the possibility that the mighty ship could sink. The nearest ship was four hours away. If the US Titanic had stopped immediately after striking the iceberg, it would have remained afloat until the rescue ship arrived. Instead, the masters of the ship chose to keep going as the compartments below the surface continued to fill with water. Reputation and hubris drove them to take these actions.

Those in command knew that there was only room on the lifeboats for 1,100 people. There were 2,200 people onboard. It is interesting to note that 60% of the First Class (the ruling elite) passengers survived the sinking, while less than 25% of the Third Class (working middle class) and crew survived.

David Walker has presented a case for inter-generational sacrifice. Are today’s generations willing to keep robbing future generations of Americans by being fiscally irresponsible today? Every borrowed dollar spent today is a tax on future generations. Are we selfish enough to leave our children and grandchildren with an un-payable burden so that we can live well today? Don’t the Wall Street bankers and Washington politicians have children and grandchildren? It is immoral and despicable that American leaders and its citizens aren’t willing or able to make the tough choices needed to save the ship of state. Every great empire withered away due to the accumulation of bad decisions. Ask yourself whether this country has made the right choices in the last 30 years. Are we making the right choices today? If you are honest, the answer is NO. We’ve hit the iceberg. The ending is unavoidable.

Sing us a song of the century
That’s louder than bombs and eternity
The era of static and contraband
That’s leading us into the promised land
Tell us a story that’s by candlelight
Waging a war and losing the fight

They’re playing the song of the century
of panic and promise and prosperity
Tell me a story into that goodnight

Sing us a song for me …

Green Day – Song of the Century

REVOLUTION COMING TO YOUR NEIGHBORHOOD

The coming gridlock after the 2010 elections will not solve our problems. This ain’t 1994. The linear thinkers have no clue. Farrell’s article fits perfectly with the Fourth Turning scenario that we have entered. Revolution and war are on the way. The linearists are trying to figure out what the Dow will be tomorrow or next week. They will be completely blindsided, as usual. I can picture the clueless look on Maria Bartiromo’s face when the shit hits the fan. She’ll lash out angrily against the masses. They will turn her Escalade over and burn it.

America on the brink of a Second Revolution

Commentary: 2010 elections guarantee gridlock, anti-capitalist class war

By Paul B. Farrell, MarketWatch

ARROYO GRANDE, Calif. (MarketWatch) — “What’s distinctive about the Tea Party is its anarchist streak — its antagonism toward any authority, its belligerent self-expression, and its lack of any coherent program or alternative to the policies it condemns,” warns Jacob Weisberg in Newsweek. But why not three cheers for the Tea Party Express?

Admit it, something historic is brewing. And yes, it’s good for America, even the anarchy. Revolution is renewal. Tea-baggers want to take on both parties, “restore honor” and “take back the country.” Bring it on, the feeling’s mutual.

OK, maybe most Americans just silently mimic the words, “we’re mad as hell, won’t take it any more.” But watch out: After November the campaign’s shrill rhetoric explodes into action.

Tea-baggers are kicking the revolution into high gear. Debt is sinking America. Both parties are to blame. So vote out incumbents. Spare no one. We need new leadership, another Reagan or Truman. Congress better get the message: Cut that budget, or they’ll dump the rest of you in the coming Great Purge of 2012.

Unfortunately they’re tone deaf. Congress cannot see past the election. All that changes in November.

So thanks Tea Party, Vegas odds must favor a Second American Revolution. Actually, the revolution is already roaring, hot, it’s about time. The GOP and the Dems had more than a decade. But America’s worse off. We need a real revolution to restore sanity … or we can kiss democracy and capitalism good-bye, permanently.

Warning: Another revolution will cost investors 20% more losses

Yes, big warning, the Second American Revolution will extract painful austerity, not the “happy days are here again” future touted by tea-baggers. For years it’ll be impossible for most of America’s 95 million investors to develop a successful investment or logical retirement strategy.

Why? Political chaos will translate into extreme volatility and a highly unpredictable stock market. Result: Wall Street will lose another 20% of the value of your retirement portfolio in the next decade, just as Wall Street did the last decade. So if you think you’re “mad as hell” now, “you ain’t seen nuthin’ yet!”

Here’s the timeline:

Stage 1: The Dems just put the nail in their coffin by confirming they are wimps, refusing to force the GOP to filibuster the Bush tax cuts for America’s richest.

Stage 2: The GOP takes over the House, expanding its war to destroy Obama with its new policy of “complete gridlock,” even “shutting down government.”

Stage 3: Obama goes lame-duck.

Stage 4: The GOP wins back the White House and Senate in 2012. Health care returns to insurers. Free market financial deregulation returns.

Stage 5: Under the new president, Wall Street’s insatiable greed triggers the catastrophic third meltdown of the 21st century Shiller predicted, with defaults on dollar-denominated debt.

Stage 6: The Second American Revolution explodes into a brutal full-scale class war rebelling against the out-of-touch, out-of-control greedy conspiracy-of-the-rich now running America.

Stage 7: Domestic class warfare is compounded by Pentagon’s prediction that by 2020 “an ancient pattern of desperate, all-out wars over food, water, and energy supplies would emerge” worldwide and “warfare is defining human life.”

What’s behind our 2010-2020 countdown? It became obvious after reading the brilliant but bleak “Decadence of Election 2010” report by Prof. Peter Morici, former chief economist at the International Trade Commission. He sees no hope from America’s political parties, just a dark scenario ahead.

Here are the 10 points we see in his message:

1. Expect nothing positive from Dems, the GOP or Tea Party

Yes, we’re all “justifiably ticked off.” But “Democrats, Republicans, and yes the Tea Party offer little that is encouraging.” Earlier Morici warned: “Democratic capitalism is in eclipse. … Politicians have deceived voters,” and are “suffering from delusions of grandeur, self deception and good old-fashioned abuse.”

2. Democracy has become too-big-to-govern … by anyone

“The current economic quagmire is a bipartisan creation.” Bush failures led to a “Great Recession … reckless Wall Street pay and fraud, a breakdown in sound lending standards by Fannie Mae, Freddie Mac … Countrywide, and a huge trade deficit with China and on oil” leaving “Beijing and Middle East royals with trillions of U.S. dollars that they invested foolishly” in bonds “financing the housing and commercial real estate bubbles.”

3. Clinton, Bush, Obama policies all feeding revolutionary flames

Even before Bush, “all was set in motion by bank deregulation engineered by Clinton … Secretaries Robert Rubin and Lawrence Summers … Clinton’s deal to admit China into the World Trade Organization” handed “China free access to U.S. markets” while blocking exports. Earlier Dems blocked “domestic oil and gas development” and froze “auto mileage standards.” Obama “finally imposed higher mileage requirements,” but after pushing offshore drilling, he “punished the entire petroleum industry” for the BP disaster.

4. Bush’s biggest mistake: Goldman CEO Hank Paulson

Morici admits: If Bush is “culpable for anything, it was to not see the gathering storm on Wall Street.” Worse, his Treasury picks were disasters: [John] Snow was clueless, Paulson devious. He conned a clueless Congress into bailout trillions, “believing banks could borrow at 3% and lend at 5 and pay MBAs three years out of school five-million-dollar bonuses to create mortgage backed securities.” Greed drove the Bush Treasury.

5. All partisan political leaders are destined to sabotage America

One thing is clear to Morici: Not only were America’s leaders a “bunch of second-rate incompetents” on both the Clinton and Bush teams, “Obama’s ratcheting up government spending and taxes won’t fix what’s broke, and neither will the GOP prescription of tax cuts and deregulation.” Get it? Democracy is in a classic double-bind, no-win scenario.

6. America’s democratic capitalism trapped in systemic failure

Morici simply dismisses “Obama’s two signature initiatives — health-care reform and financial services reregulation.” They “simply don’t work.” Why? Politicians “failed to address the root problem, Americans pay 50% more for doctors, hospitals and drugs, than subscribers to national health plans in Germany, France and other decadent socialist European countries.” Yet, insurers hate reform, will self-destruct America first.

7. Wall Street’s insatiable greed is a virus that never sleeps

Wall Street banks are “back to their old tricks,” warns Morici, “hustling municipal governments into the kind of quick-fix budget schemes, like selling parking meters and airport fees.” Why? Wall Street’s “hustling shoddy corporate bonds that lack adequate collateral and may never be repaid” to justify their absurd mega-bonuses. And they’ll keep doing it till the revolution creates a new non-capitalist banking system.

8. New political leaders offer no hope — Wall Street rules America

GOP’s next leaders will fail: “Cutting taxes and mindless deregulation are not the answer.” We need the revenue. They have no real plan to trim “$1 trillion from federal spending … few believe deregulation will fix health care or Wall Street.” The GOP has no “effective government solutions to health care, Wall Street, fixing trade with China, and dependence on foreign oil.” And the Tea Party “only offers a purer form of failed Republicanism. Tax and spend less, and turn the country over to the robber barons.”

9. Praying for a messiah, we’re sleepwalking till the revolution

Morici’s solution: America “needs a prophet, another Harry Truman or Ronald Reagan.” But we’ll never get one, until a catastrophe hits. Wall Street’s so greedy, so corrupt, so untouchable, so much in control, they will bankroll and control all future “prophets.”

10. The Second American Revolution coming

Yes, extreme austerity: “Americans must accept fewer government-paid benefits — for the rich, the poor and those in between — and must acknowledge the market works best most of the time, but it is not working in health care, banking, China, and oil.” Huh? Sounds like classic economist’s double-speak: “The market works most of the time” … except the market doesn’t work at all in the four biggest economic sectors? Fuzzy thinking?

Morici warns, we need “new approaches to regulating, yes regulating, what the medical industry charges, bankers pay themselves, what Americans tolerate and buy” and “guiding big oil and car companies to sustainable solutions.”

Holy cow, he suddenly sounds more like a liberal politician than conservative economist. Yes, he’s reflecting the total chaos coming on the short road to the Second American Revolution.

In the end, however, you have to admit the good professor does make a lot of sense: “Sounds radical but running the world has never been a choice between statism and anarchy,” says Morici.

Choice? Unfortunately, he offers a false choice: Running America effectively means accepting “that the private sector is not the enemy and government is not evil, but neither can serve the other, and us, if value is not seen in each.”

Laudable, but impossible because once the GOP Tea Party of No-No is back in power, compromising is not on their agenda, “gridlock” is. So anarchy is the only choice — they will never, never work with Democrats … until forced by the Second America Revolution when the middle class finally rises up and overthrows the greedy wealth conspiracy of Wall Street, Washington, CEOs and the Forbes 400.

Till then, anarchy rules as the conspiracy keeps looting Treasury, stealing from taxpayers, conning us all.

LINEAR THINKERS ARE BAFFLED BY FOURTH TURNING

Crime rates are dropping dramatically in the last few years. With an ongoing recession the linear thinkers, that run this world, are baffled. They think that hard times would cause more crime. It is not so. What these linear thinkers fail to recognize is that we entered the Fourth Turning in the 2005 – 2008 time frame. Here is how Strauss and Howe describe what happens in a Fourth Turning. Remember they wrote the book in 1997. Crime rates always drop during a Fourth Turning. The author of this article makes a joke about the drop in crime because he has no idea why it is happening. I would suggest he buy a copy of The Fourth Turning so he’ll know what comes next.

A CRISIS arises in response to sudden threats that previously would have been ignored or deferred, but which are now perceived as dire. Great worldly perils boil off the clutter and complexity of life, leaving behind one simple imperative: The society must prevail. This requires a solid public consensus, aggressive institutions, and personal sacrifice.

People support new efforts to wield public authority, whose perceived successes soon justify more of the same. Government governs, community obstacles are removed, and laws and customs that resisted change for decades are swiftly shunted aside. A grim preoccupation with civic peril causes spiritual curiosity to decline. A sense of public urgency contributes to a clampdown on “bad” conduct or “anti-social” lifestyles. People begin feeling shameful about what they earlier did to absolve guilt. Public order tightens, private risk-taking abates, and crime and substance abuse decline. Families strengthen, gender distinctions widen, and child-rearing reaches a smothering degree of protection and structure. The young focus their energy on worldly achievements, leaving values in the hands of the old. Wars are fought with fury and for maximum result.

Eventually, the mood transforms into one of exhaustion, relief, and optimism. Buoyed by a new-born faith in the group and in authority, leaders plan, people hope, and a society yearns for good and simple things.

GHOST MALLS: COMING TO YOUR TOWN (Oldie but Goodie)

I wrote this article almost two years ago before I even had a website. I think it still applies today. I got in trouble at work because General Growth had made a substantial gift to my school and didn’t take kindly to someone from the school predicting their bankruptcy. This is when I stopped saying which school I worked for. Six months later, General Growth Properties declared bankruptcy.

The illustration of Old West ghost towns is something that every American can relate to. During the great gold rush of the mid 1800’s in California, Nevada, and Wyoming towns sprung up out of nowhere to support the gold mining efforts of those looking to strike it rich. General stores, bars, hotels, brothels, and jails appeared out of nowhere based on demand from delusional prospectors hoping to hit the jackpot. Thousands of malls emerged throughout suburban America in the last twenty years as delusional shoppers thought they could spend their way to prosperity and achievement. Both delusions will end in the same manner.

When the gold rush ended as quickly as it started, the artificial demand collapsed and the towns were abandoned. These ghost towns sat vacant for decades, slowly decaying and rotting away. As you drive around today, you notice more and more For Lease signs on vacant retail buildings. Strip malls, inhabited by mom and pop stores, karate studios, pizza joints, and video stores have felt the initial onslaught of consumer deleveraging. As the pace of retailer collapse accelerates in 2009, larger malls will begin to go dark. Once bustling centers of conspicuous consumption and material decadence, built upon a foundation of consumer debt, will become ghost malls. Decaying, rotting malls inhabited by rats, wild dogs, and homeless former retail employees, will be a blight on the suburban landscape for decades.

For the last twenty years, the American consumers have carried the burden of the world on their broad shoulders. This has been a heavy yoke, but when you take steroids it doesn’t seem so heavy. The steroid of choice for American consumers was debt. They have utilized home equity loans, cash out refinancing, credit card debt, and auto loans to live far above their means. It has been a wild ride, but the journey is over. They can’t score steroids from their dealers (banks) anymore. The pseudo-wealth created in the last twenty years has begun to unwind, and will increase in speed in 2009.

Average Americans, who saw their faux paper wealth growing rapidly as their home values increased, took advantage of this by refinancing their mortgages and extracting the equity from their homes and spending it. They mined $3 trillion of equity out of their houses. This spending of seed corn led to the vast majority of GDP growth between 2000 and 2007.

Source: John Mauldin

Major banks offered credit cards using your home equity as a way to pay everyday expenses like groceries, cigarettes, beer, gas and clothes. Eating your house was never so easy. The enormous amount of excess home sales and equity extraction led to titanic demand for home furnishings, remodeling services, appliances, electronic gadgets, BMWs, and exotic vacations. This led to immense expansion plans by retail and restaurant chains based on extrapolation of this false demand.

A permanent psychological change has occurred in American consumers. They have lost $30 trillion in value from their homes and investments in the last few years. No amount of fiscal stimulation will reverse this psychological trauma. The savings rate will increase from 0% to at least 8%. Mike Shedlock recently described the state of affairs.

Peak credit has been reached. That final wave of consumer recklessness created the exact conditions required for its own destruction. The housing bubble orgy was the last hurrah. It is not coming back and there will be no bigger bubble to replace it. Consumers and banks have both been burnt, and attitudes have changed.

Now the impact of a retrenching consumer will be felt far and wide, from Des Moines to Shanghai. Consumer spending has accounted for 72% of GDP. It will revert to at least the long term mean of 65%. David Rosenberg, the brilliant economist from Merrill Lynch, describes what will happen:

This is an epic event; we’re talking about the end of a 20-year secular credit expansion that went absolutely parabolic from 2001-2007. Before the US economy can truly begin to expand again, the savings rate must rise to pre-bubble levels of 8%, that the US housing stocks must fall to below eight months’ supply, and that the household interest coverage ratio must fall from 14% to 10.5%. It’s important to note what sort of surgery that is going to require. We will probably have to eliminate $2 trillion of household debt to get there, this will happen either through debt being written off, as major financial institutions continue to do, or for consumers themselves to shrink their own balance sheets.

Source: John Mauldin

Every major retailer in the United States has built its expansion plans on an assumption that American consumers would continue to spend at an unsustainable rate. One basic truth that never changes is that an unsustainable trend will not be sustained. That crucial assumption error will lead to the bankruptcy of any retailer that financed its expansion with excessive debt. Warren Buffett’s wisdom will be borne out:

Only when the tide goes out do you discover who’s been swimming naked.

There are at least 1.1 million retail stores in the United States according to the Census Bureau. There are approximately 1,100 malls in the United States, not counting thousands of strip centers. These numbers will be considerably lower by 2011. ICSC chief economist Michael Niemira explained, “In the midst of all this doom and gloom, it’s hard to imagine it getting better… But keep in mind, what happens in strong downturns is there’s a hefty pent-up demand. It’s wrong to extrapolate these conditions for the next year or two.” Mr. Niemira will be wrong this time.

There is no pent-up demand. If the phrase unpent-up demand existed, it would apply today. Americans have bought everything they’ve desired for the last twenty years. There is no pent-up demand if you own 20 pairs of jeans and 60 pairs of shoes. The over-spending and over-leverage will take a decade to unwind.

Source: Mike Shedlock

According to the ICSC, about 150,000 stores are anticipated to shut down in 2009, which adds to the 150,000 that closed in 2008 and 135,000 in 2007. Normally, 110,000 to 125,000 new stores open per year. At least 700,000 retail jobs will be lost. The opening of new stores will grind to a halt in 2009. Some major retailers that have closed or will close include: Circuit City -728 stores; Linens N Things – 500 stores; Bombay Company- 384 stores; Sharper Image-184 stores; Foot Locker (FL) -140; Pacific Sunwear – 153. Other large retailers are closing underperforming stores and scaling back expansion plans. By 2011, at least 15% of the existing retail base will have gone to retail heaven. With the amount of vacant stores likely to reach in excess of 200,000 and vacancy rates of new malls already at 28%, there will be no need for the construction of new stores for many years.

Most of the retailers that are closing, lease their locations from mall developers like General Growth Properties (GGP), Simon Properties (SPG), Mills Corp. (MLS), Pennsylvania REIT (PEI), Vornado Realty Trust (VNO). These developers have a quadruple whammy hitting them in 2009. Many borrowed heavily to finance massive mall expansion. The terms of these loans were generally five to seven years. The Wall Street whiz kids and their CDO machine generated the vast preponderance of financing in the last five years. According to commercial real estate expert Andy Miller, the collapse will come more rapidly than the residential collapse.

By contrast, in the commercial world, the properties are fewer and much bigger. For example, you may have ten properties in a commercial pool that ultimately works its way into CDOs. Those loans are huge. You may have a shopping center loan in there for $25 million and an office building loan for $30 million dollars. As a result, if you have a default on just one of those loans, you can effectually wipe out all of the subordinate tranches. And that is why when you see the problems begin to appear on the commercial front, it’s going to be a much quicker sort of devolution than we saw on the residential side. In the commercial world, most of the financing that happened outside of the apartment business was done by conduits, and there are no more conduits left, and conduits were doing the stupidest loans you could find. They were doing an advertised 80% loan-to-value, which was usually more closely aligned to a 100% loan-to-value. They were dealing with no coverage. They were all non-recourse loans. Many of them were interest-only loans. Those loans are now gone. You can’t refinance them, and if you could, the terms would be onerous.

Source: Mike Shedlock

Billions of debt needs to be refinanced in the next two years and there is no one willing to make those loans. The major mall developers are so terrified they have made an all out press to get their fair share of the TARP. As retailers go bankrupt, vacancy rates have reached 9.4% for shopping centers, according to CoStar Group. With virtually no demand, rental income is plunging. With cap rates eroding and operating expenses going up, a perfect storm will hit mall developers in 2009.

The negative feedback loop will accelerate as the year progresses and will spiral out of control by late 2009 and early 2010. The negative feedback loop will lead to major developer bankruptcies and ultimately to Ghost Malls, particularly in the outer suburbs. The positive feedback loop that got us here, made people feel wealthy, smart, and overconfident. It was awesome! The negative feedback loop is going to suck. The collapse of developers will result in more major write-offs by regional banks that financed their expansion. This go around, many smaller regional banks will feel the major pain. The U.S. taxpayer will be required to step up to the plate again and assume financial responsibility for their own lack of spending. Talk about screwed if you do, screwed if you don’t.

Mall owners and commercial developers are on the brink of bankruptcy. Commercial developer CB Richard Ellis (CBG) didn’t sound too optimistic in a recent 10Q filing:

We are highly leveraged and have significant debt service obligations. Although our management believes that the incurrence of long-term indebtedness has been important in the development of our business, including facilitating our acquisitions of Insignia and Trammell Crow Company, the cash flow necessary to service this debt is not available for other general corporate purposes, which may limit our flexibility in planning for, or reacting to, changes in our business and in the commercial real estate services industry. Notwithstanding the actions described above, however, our level of indebtedness and the operating and financial restrictions in our debt agreements both place constraints on the operation of our business.

As Americans realize that they don’t “need” a $5 Starbucks latte, IKEA knickknacks, Jimmy Choo shoes, Rolex watches, granite counters, and stainless steel appliances, our mall centric world will end. Major mall anchor retailers Macy’s (M), JC Penney (JCP), and Sears (SHLD) are in for a heap of trouble in the next few years. As low prices become the only factor that drives retail sales, retailers will have minimal profits in the future, further restricting expansion and renovations.

Mall developer General Growth Properties, which owns or operates 200 malls, added $4 billion of debt in the last three years and is teetering on the brink of bankruptcy. Simon Properties, which owns or operates 320 malls, added $3 billion of debt in the last three years and will be greatly affected by the coming downturn. Many smaller developers will be in even more dire straits. With shrinking cash flow, looming debt refinancing, and dim prospects for a resumption of conspicuous consumption, Mall developers are destined for a bleak future. Picture Clint Eastwood from his spaghetti western days riding a horse through the middle of your local mall with tumbleweeds blowing past the vacant KB Toys and Victoria’s Secret.

MOST STRESSFUL CITIES

I’m pissed off. Philly didn’t make the top 10 most stressed cities. Detroit won again. I didn’t know anyone still lived in Detroit. NYC was the worst for commuting at 34 minutes. I would kill for a 34 minute commute. NYC came in 6th place overall. I predict they will move to 4th next year when the Phillies kick the Yankees asses in the World Series this Fall.

A Stress Test for America

by G. Scott Thomas Sep 07 2010

In an exclusive analysis of the nation’s 50 largest metropolitan areas, Detroit ranks as the most stressful place to live and work, while Salt Lake City lays claim to have the least stress-inducing attributes.

Many factors go into creating a stressful environment: high unemployment, commuting times, crime, pollution, and even limited sunshine.

Image: iStockphoto

Millions upon millions of Americans are stressing out.

Forty percent of the nation’s workers say they experience stress on a daily basis, according to a Gallup Poll from June. That number climbs to 50 percent among the unemployed. And the problem seems to be getting worse. Forty-eight percent of U.S. adults believe the stress in their lives has escalated during the past half-decade, says the American Psychological Association.

Several factors contribute to the daily pressure that Americans feel, ranging from unemployment and shaky personal finances to traffic, crime, and pollution. The intensity of this toxic mixture varies from market to market across the country, as does the level of stress.

Nowhere is the situation worse than in Detroit, which ranks as the most stressful metropolitan area in America, according to a new study by Portfolio.com and bizjournals.

Detroit is burdened with a hefty unemployment rate, 14.3 percent at midyear, the third-worst figure in the nation’s 50 largest markets. It’s also among the 10 places with the most murders, the most robberies, the most heart attacks, the most families in poverty, and the fewest sunny days.

The result, to Detroit’s misfortune, is America’s ultimate recipe for stress.

Portfolio.com and bizjournals created a 10-part formula to estimate the stress levels in the nation’s 50 biggest metros, using the latest data available from several government agencies and private firms. (To get details on the methodology used to construct this study, click here.)

The runner-up on the stress index is Los Angeles, which is saddled with the most expensive housing and second-worst air pollution among the 50 biggest metros. It’s also afflicted with an unemployment rate of 11.6 percent.

Rounding out the list of America’s 10 most stressful markets are Cleveland, California’s Riverside metro, St. Louis, New York City, New Orleans, Chicago, Birmingham, and Miami-Fort Lauderdale.

Life is considerably calmer in Salt Lake City, which ranks as the nation’s least-stressful metropolitan area.

Salt Lake City has the lowest murder rate of any major metro, 94 percent smaller than Detroit’s. It also ranks among America’s four best markets for short commutes, low unemployment, and low incidence of circulatory-system diseases.

Virginia Beach-Norfolk holds second place on the low-stress list. It enjoys the strongest pace of income growth in any of the 50 biggest metros, as well as the smallest robbery rate.

Other markets with low levels of stress, ranking from third through 10th place, are Minneapolis-St. Paul, Raleigh, Austin, Oklahoma City, Denver, San Antonio, Kansas City, and Phoenix.

(To see how the nation’s 50 largest metropolitan areas ranked on the stress test, download a pdf by clicking here.)

Portfolio.com and bizjournals analyzed a broad range of factors to pinpoint the metros that subject their residents to unusually high or low amounts of stress. The following are the 10 indicators included in the study, along with a brief summary of the worst and best markets.

—Unemployment: The recession has taken a toll all across the country, leaving 20 of the 50 biggest metros with double-digit unemployment. Las Vegas is the worst at 14.5 percent, followed by Riverside at 14.4 percent, based on midyear data from the U.S. Bureau of Labor Statistics. Washington, with 6.4 percent unemployment, fares the best.

—Income growth: Income levels dropped in 47 of the 50 markets between 2008 and 2009, says the U.S. Bureau of Economic Analysis. The worst drops belong to Las Vegas, Charlotte, and San Jose. Who are the three fortunate gainers? Virginia Beach, Pittsburgh, and Baltimore.

—Poverty: Memphis has the worst poverty problem in the study group, with 13.9 percent of its families officially classified as poor by the U.S. Census Bureau. San Antonio and Houston are next on the poverty scale. Washington, on the other hand, has the lowest metropolitan poverty rate, 4.7 percent.

—Deaths from circulatory-system diseases: New Orleans has the highest number of deaths caused by heart failure, hypertension, and stroke, a rate of 414.4 per 100,000 residents, based on Centers for Disease Control records for 2006. Pittsburgh and Cleveland are almost as bad. The lowest rates belong to Austin, Raleigh, and Salt Lake City.

—Sunshine: Pittsburgh is the gloomiest market, attracting only 45 percent of possible sunshine in a typical year, according to the National Climatic Data Center. Seattle, Buffalo, and Portland, Oregon, are nearly as dark. The sunniest metros are Las Vegas and Phoenix at 85 percent.

—Unhealthy air: A sweep for California. Sacramento, Los Angeles, and Riverside suffer the worst ozone problems in the study group, as measured in 2008 by the U.S. Environmental Protection Agency. Another California metro, San Francisco, has the smallest ozone level, followed by Minneapolis-St. Paul and Portland.

—Robberies: Cleveland has the worst rate, 827.5 robberies per 100,000 residents, based on central-city records compiled in 2009 by the Federal Bureau of Investigation. St. Louis and Cincinnati are the next worst, while Virginia Beach has the lowest robbery rate, 103.6 per 100,000.

—Murders: New Orleans is the deadliest city on the list, with 51.7 murders per 100,000 residents in 2009. St. Louis and Detroit are the runners-up. The safest city is Salt Lake City, with 2.2 murders per 100,000. The rates in Austin and San Jose are nearly as low.

—Commuting: Traffic is a grind in the New York City area, where the typical commute to work takes 34.55 minutes, according to the U.S. Census Bureau. Washington and Chicago also have serious congestion. Roads run free and easy in Buffalo (20.78 minutes) and Oklahoma City (21.35).

—Housing costs: Affordability is based on a comparison of median home values and median household incomes, as reported by the U.S. Census Bureau. Three California markets (Los Angeles, San Francisco, and San Jose) have the worst ratios, while Buffalo, San Antonio, and Pittsburgh enjoy the most affordable housing.

To download a PDF that shows how the nation’s 50 largest metropolitan areas rank according to our stress test, click here.

DOUG CASEY UNLOADS

Doug Casey in a no-holds barred interview. He makes the case for gold, silver and gold stocks.

Editor’s Note: Just recently, our friends at The Gold Report interviewed Doug on his thoughts about the precious metals bull market, how high gold will go, his views on gold stocks, and much more. Some of what he says below is not new to longtime readers, but we think his comments on gold investments being a potential exception to the rule for what’s coming are well worth bringing to your attention.

* * *

The Gold Report: Doug, at a recent conference you said that the U.S. ought to default on its national debt now. Why that rather than letting it play out?

Doug Casey: Several other things almost equally radical should be done besides defaulting on the debt. I recognize that an outright default is most unlikely, but the national debt should be defaulted on for several reasons.

To start with, once the U.S. government defaults on its debt, people will think twice before lending it any more money; giving politicians the ability to borrow is like giving a teenager a bottle of whiskey and the keys to a Corvette. A second reason is that the debt is an albatross around the necks of the next several generations; it’s criminal to make indentured servants out of people who aren’t even born yet. A third reason would be to overtly punish those who have been lending money to the government, enabling it to do all the stupid and destructive things that the government does with that money.

The debt will be defaulted on one way or another. The trouble is they’re almost certainly going to default on it through inflation, by destroying the currency, which is much worse than defaulting on it overtly. That’s because inflation will wipe out the relatively few people who are prudent in this country, those who are actually saving money. Because they generally save in the form of dollars, they’re going to wipe them out financially.

It’s just horrible. Runaway inflation will reward the profligates who are in debt – people who’ve been living above their means. And punish the producers who’ve been saving and trying to build capital. That’s in addition to the fact it will destroy millions of productive enterprises. A runaway inflation is the worst thing that can happen to a society, short of a major war. They just should default on it honestly, as it were.

TGR: But your belief is we’ll try to inflate our way out of it to pay for it.

DC: Don’t say “we.” Say the U.S. government. I don’t consider myself part of the problem. Americans have to learn that the government isn’t “us.” It’s an entity that has its own interests, its own life, its own agenda. It views citizens as milk cows – or perhaps even beef cows – strictly as a means to its ends.

TGR:Whether it’s overt or by default, doesn’t that end up in the same place down the line?

DC: There are two ways they can default – one by saying, “We don’t have the money and we’re not going to pay you,” and the other by continuing to print up money and giving people the number of dollars that they’re owed, except the dollars are worthless. The first alternative is by far better, for many reasons we can’t fully explore now. But it’s going to be traumatic either way.

TGR: But the assumption that we could actually just print more dollars and pay off the debt implies that somewhere the debt will stabilize.

DC: Oh no. It doesn’t have to stabilize. To pay interest on the national debt, and to pay for additional spending, all the Federal Reserve has to do is buy bonds from the U.S. government. It doesn’t have to stabilize at all. The government is most unlikely to cut back on its spending, most of which has become part of the social fabric – Medicare, Social Security, unemployment benefits, food stamps, corporate bailouts, continuing foreign wars, domestic “security”…These people are crazy enough that it could get like Germany in the ‘20s or Zimbabwe a few years ago.

TGR: At what point do we tip over and turn into a situation such as Zimbabwe or the Weimar Republic?

DC: At the moment we’re in an economic twilight zone or, if you wish, the eye of a hurricane. There is apparent stability in the economy. The stock market’s high. The bond market’s high. Only the real estate market is in visible trouble. Retail prices are level; they’re not going up and maybe they’re even going down in some cases. This is a temporary situation. We will inevitably – and soon – hit the other side of the storm. At some point those trillions of dollars created by the U.S. government – and many other governments around the world have created trillions of currency units – are going to have an effect. When will that be? The timing is uncertain. But I think it’s going to be soon.

TGR: Will it be rapid?

DC: If these things were perfectly predictable, it would be easier to dodge the bullet. This is an almost unique time in world economic history, and I think we’re not only going to have economic consequences, but social and political consequences, and very likely military consequences. So hold on to your hat.

TGR: To protect what individual wealth we may have, you’ve recommended selling real estate and renting, holding assets outside the United States, owning gold, etc. When we’re out of the eye and in the thick of this economic hurricane, what types of equity investments should people be holding?

DC: Now is a very bad time to have most kinds of equities; stocks in general are very overpriced, by almost every parameter. I’m not looking to sell my gold until I can buy solid blue chip stocks for dividend yields in the 8% to 10% area. That’s after they cut their current dividends. Although it’s certainly not the bargain it was 10 years ago. Nonetheless gold will go higher. Stocks will go lower. I don’t know exactly when I’ll sell my gold and buy stocks, but it will be when there’s a panic into gold and when stocks are bargains. I’m sure I’ll be afraid to make the trade when the time comes – but good trades almost always run counter to your emotions. Perhaps the tipoff will be when Newsweek or Time – if either still exists then – run a front cover with a golden bear tearing apart the New York Stock Exchange.

I think it will be a generation before American real estate is a solid buy again. And the world at large will likely have quite a different character then.

TGR: I take your point about equities in general, but are you also staying away from gold equities? Or do you maybe see an opportunity there?

DC: They’re a special situation; on the one hand they are a play on gold, but on the other hand they’re stocks. There’s an excellent chance that with the trillions of currency units being created, the government inevitably will wind up inflating other bubbles. There’s a very good chance for a bubble in gold and a very big bubble in gold stocks. So I would say that they are an exception to other equities. We could see these juniors go up by an order of magnitude or more, even while most other stocks are going down.

Historically, junior resource stocks are the most volatile class of securities in existence.

TGR: Might other sectors also be in that situation?

DC: My crystal ball is hazy, but it seems to me that junior resource stocks are the best speculative place in the equities market. There’ll probably be others, but I don’t see them very clearly at this time. I’m waiting to see what materializes. You have to look at all markets of all types, everywhere in the world, to find things that are overpriced, as well as things that are underpriced.

Most of the time the trend in any given market is uncertain. I prefer to act only when, in my subjective opinion, the odds are greatly in my favor, and when the potential return is a multiple of my investment. In other words, most people invest 100% of their capital in hope of a 10% return. I prefer to wait until I can invest 10% of my capital for a 100% return.

As to what’s going to happen over the next few years, I feel confident that we’ve entered into the Greater Depression in earnest. It will be an extended period of time when most people’s standard of living drops significantly. But as I said, I think there’s an excellent chance of a bubble igniting in resource stocks. That will build on the bubble that’s going to come in gold.

High levels of inflation make “investing,” in the Graham-Dodd sense of the word, very hard. And inflation makes speculation almost necessary. Just don’t confuse speculation with gambling – they’re very different. Speculation is the art of capitalizing on politically created distortions in the market.

TGR: What’s your definition of resource stocks? For some, it’s very broad and includes metals, agricultural commodities, and such. Are you referring specifically to gold?

DC: I’m most friendly toward gold; it’s the only financial asset that’s not simultaneously someone else’s liability. I’m friendly toward silver, too, because silver is kind of poor man’s gold. I’m very friendly toward oil because I do believe a good, solid argument can be made for what was first defined by M. King Hubbert as “peak oil.” Also, oil is likely to be a major player in the next major Mideast conflict. I like uranium; nuclear is certainly the safest, cheapest, and cleanest form of mass power generation.

There’s an excellent case to be made for agricultural commodities in general, and live cattle in particular. I’m not very friendly toward base metals such as lead, zinc, copper, aluminum, iron, and so forth. Usage of industrial metals could drop considerably in the ongoing depression.

TGR: You mentioned earlier that you thought it would be a generation before real estate represents a good investment again. Many economic theories, though, tell us that real estate is a good thing to have in an inflationary environment. How do you reconcile those two schools of thought?

DC: The problem is that we’ve just finished a decade-long real estate boom. Actually, there’s been a property boom, largely driven by debt, since the end of World War II. There’s been immense overbuilding and it’s got to be absorbed. A lot of the overbuilding will have to be bulldozed, quite frankly, because it’s completely uneconomic. I think the economic contraction we’re going in to is so serious that in this country you’ll be able to buy real estate for back taxes, much like in the last depression.

But it’s much more serious than what happened in the 1930s when real estate taxes were de minimis. Now many people have to pay $10,000, $20,000, even $30,000 a year in taxes on their houses before they even start paying the mortgage and the utilities and maintenance. And municipalities are likely to try raising the mill rate, because they’re largely bankrupt, and assessed values are way down.

There’s a great deal more I could say about what’s yet to come in the real estate sector. But let me just say the real estate bubble has a long way to deflate yet.

TGR: Is it both residential and commercial or is it worse in one sector?

DC: That’s tough. Is emphysema worse than Parkinson’s? I suspect, however, that commercial is going to be worse than residential.

People’s shopping habits are one of the things that the Internet has changed and will continue to change. It makes more sense to buy things online and have them delivered to you, than to take the time and expense of going shopping, and the merchant having to deal with retail space, inventory, a geographically limited clientele and so forth. I wouldn’t be surprised to see prices on a lot of commercial property come down 80% or 90%. You’ll see a lot of properties permanently shuttered. That’s a disaster for owners, who will still have to pay taxes. There will be no money for maintenance.

TGR: We spoke earlier about inflation and the likelihood of the U.S. government printing its way out of debt. Do you see a point in time where the United States or even other governments will go back to the gold standard?

DC: It’s both essential and inevitable. That’s because they have no reason to trust one another. They need a medium of exchange and a store of value that’s not faith-based.

All the other governments of the world know that the U.S. is bankrupt and the dollar is nothing but a floating abstraction. Why should they hold billions or in some cases trillions of these things on their balance sheets? They’re going to go back to gold because it’s the only financial asset that’s not simultaneously somebody else’s liability.

It’s not because gold is magic in any way. It’s just because it has characteristics that among the 92 naturally occurring elements make it uniquely well suited for use as money. It’s durable. It’s divisible. It’s convenient. It’s consistent. It has use value in and of itself. And it can’t be created out of thin air by some government. It’s a better combination of those things than any of the 92 elements. It’s infinitely better than paper. So yes, I think they’ll go back to gold within this generation.

TGR: You were speaking of buying things online. Most people today don’t even use paper bills. We do everything electronically in terms of banking. Aren’t those properties of gold that you described irrelevant in the electronic era?

DC: To the contrary. Gold is an asset. You can put it in your bank account and transfer it. You can buy and sell it electronically. The fact that it can be transferred electronically today makes it a better money than ever before. So no, not at all, gold is quite relevant. It’s not in any way an anachronism. I pity fools like Bernanke and Geithner who don’t understand that. If they totally destroy the dollar, they may end up hung by their heels from a lamp post.

TGR: You said you’re very partial to oil and uranium. Are you attracted to any other energy resources?

DC: Yes. My friend Rick Rule has justifiably and very intelligently been a big promoter of geothermal energy, because it’s actually superior to even nuclear in some ways. It should have a huge future. There’s very little geothermal being generated right now, and a great deal could be generated in the future. Many other forms of power generation are possible – tides, ocean currents, heat differentials in the ocean, solar microwaved down from collectors in high orbit – there are many, many innovative technologies out there.

Of course as technology keeps advancing, conventional solar will become cheaper and more efficient. Energy shortages, and high energy costs, are totally caused by political issues. In a true free market world they wouldn’t even be worth talking about.

TGR: But will technology-reliant sources such as solar and wind power be able to sustain through this downturn that you’re expecting?

DC: Well, most of the power we have is now generated via coal. Coal is very problematical as an energy source – it’s dirty, bulky, and could be used for better things than burning. Stupidly, most new plants will be running on coal, not nuclear.

That said, you can expect that the average guy will be cutting his standard of living, driving less, turning down his heat in the winter, turning down his air conditioning in the summer, and turning off the lights when he leaves the room. So I’m not sure that electricity consumption will be going up for years to come, especially with a lot of stores being shuttered and so forth.

Wind and solar are trivial sources of power. Good for certain applications in certain locations, but not suitable for mass power in an industrial civilization with anything like our present technology.

TGR: So if electricity consumption goes down… wind and solar are barely economically viable now.

DC: That’s right. It’s just a question of the alternatives. You weigh what you pay for a kilowatt hour on the grid versus what it costs an individual to put up private wind or solar, or for utility to put up commercial wind or solar. I see no reason to invest in these alternatives other than economics.

The way I see it, arguments made about saving the planet and so forth are basically ridiculous, even if naively well intended. All the blather about “carbon footprints” is scientifically nonsensical. It’s not a matter of tree hugging. If you’re paying more for something than necessary, you’re misallocating capital. You’re destroying capital. That’s a real crime against humanity.

To me, it’s strictly a matter of economics. If at some point technology makes a great breakthrough, maybe solar will become the best and cheapest power source; that would be wonderful. That’s not the case right now. As I said before, maybe they’ll be able to put solar collectors into geostationary earth orbit and beam down solar to earth by microwave. There are lots of possibilities for solar to become economic. It’s just that right now, it costs several times what other forms of power do. It doesn’t make sense, except in certain places, in certain applications.

TGR: Given that, would we expect to see any solar in your portfolio?

DC: If somebody makes a cosmic breakthrough, I’m happy to buy the stock. I’m certainly not inclined against solar on any philosophical grounds.

TGR: The Chinese recently announced that they will start selling gold coins through their banking system. What do you make of that? Is it really big news?

DC: I think it is. The Chinese know that one of the reasons Mao took over is because the government of Chiang Kai-shek destroyed the national currency. The Chinese can see the problems with the U.S. dollar. That it could blow up in their hands. They also see the problems they’re creating for themselves by creating trillions of new renminbi. So I think that they’re encouraging the average guy in the street to do some saving with gold so that if things go sideways with these paper currencies, the average guy isn’t left too destitute and too angry. At least he’ll have some gold coins. I think they’re being quite intelligent about encouraging their people to buy gold.

TGR: What do you make of the fact that a country with a communist orientation encourages its citizens to buy gold, while the world’s supposedly premier democracy does not?

DC: First of all, let’s recognize that communism was a very short-term aberration in the 5,000-year grand scheme of Chinese history. Mao only ruled the country for about 30 years. Since the late ‘70s, China’s been returning to its old ways. Everybody knows that the Communist Party in China is nothing but a scam for its members to cream something off the top of everything. It’s ludicrous to say China is a communist country. It’s easier to do business in China than it is in the U.S. – lower taxes, less regulation, fewer legal hassles.

In point of fact, the Chinese are reverting to the mean. For many centuries, up until the Industrial Revolution, China was much wealthier than the West. Now it’s rising again.

As far as the United States is concerned, unfortunately it’s going the other way. The issue has nothing to do with democracy. Democracy is just mob rule dressed up in a sports coat. It’s much overrated. The U.S. government is becoming more powerful, and the U.S. is radically departing from the economic philosophy of free markets that made it great. It’s simultaneously becoming more politically repressive. The Chinese are just reverting to their traditional economic philosophy, which is not communism, it’s capitalist trade and production.

TGR: Presumably, participants will get a lot more of what we’ve been talking about at the Casey Summit that you have scheduled for October 1–3 in Carlsbad, California.

DC: For sure. We’re going to be talking about specific ways to take advantage of the problems that we have today. It’s important to remember that as the Greater Depression deepens, most of the real wealth in the world still will be here. It’s just going to change ownership. The key for this conference is we’re going to examine why things are the way they are. But perhaps even more important is how to capitalize on them, how to take advantage of them.

TGR: Of course you’ll be at the conference too. And your lineup includes Bob Bishop, Eric Sprott, Richard Russell, Bob Prechter, and obviously Rick Rule.

DC: And Neil Howe, who with William Strauss wrote The Fourth Turning and Generations: the History of America’s Future, 1584 to 2069. It’s among the most brilliant, and original, analyses of long-term trends of history I’ve ever seen.

TGR: And I understand you’ll be introducing the Casey NexTen. How does that complement your Casey Explorers’ League?

DC: When Ross Beaty, Bob Quartermain, Simon Ridgway, and the other members of our Explorers’ League come out with a new deal, it automatically carries a huge premium because they’re proven commodities – highly technically competent, honest guys with good work habits, who have found and made economic more than three mines.

With the Casey NexTen, we’ve done a lot of work on finding the next generation, guys who have all the makings of these veterans, the young editions of our Explorers’ League. With this group, you can still buy in cheap and get them as they’re just moving into the most productive stages of their lives as opposed to moving toward retirement.

Getting to know them personally, which is possible for people who attend the conference, would be one of the most financially productive things that you’ll be able to do if you have any interest at all in resource stocks.

THE FOURTH TURNING – SKIES DARKENING

William Strauss and Neil Howe published The Fourth Turning in 1997. This was before the internet bubble, before the housing bubble, before 9/11, before the two wars in the Middle East, and before the financial collapse of 2008. They made a strong case for their generational theory of history. Everything that has happened since 1997 supports their theory. We are currently in the early stages of the Fourth Turning. In the last two chapters of their book, they describe the possibilities during a Fourth Turning. In the last section of the book they provide guidance on how to prepare responsibly for a Fourth Turning. Without preparation, the Fourth Turning is much worse. Below is a description of Fourth Turning possibilities, the preparations that were recommended by Strauss & Howe, and my assessment of how prepared we are as a country.

“What will America be like as it exits the Fourth Turning?

History offers no guarantees. Obviously, things could go horribly wrong – the possibilities ranging from a nuclear exchange to uncurable plagues, from terrorist anarchy to high tech dictatorship. We should not assume that Providence will always exempt our nation from the irreversible tragedies that have overtaken so many others: not just temporary hardship, but debasement and total ruin. Since Vietnam, many Americans suppose they know what it means to lose a war. Losing in the next Fourth Turning, however, could mean something incomparably worse. It could mean a lasting defeat from which our national innocence – and perhaps even our nation – might never recover.

If America plunges into an era of depression or violence which by then has not lifted, we will likely look back on the 1990s as the decade when we valued all the wrong things and made all the wrong choices.”

“However sober we must be about the dark possibilities of Crisis, the record of prior Fourth Turnings gives cause for optimism. With five of the past six Crises. it is hard to imagine more uplifting finales. Even after the Civil War, the American faith in progress returned with a new robustness. As a people, we have always done best when challenged. The New World still stands as a beacon of hope and virtue for the Old, and we have every reason to believe this can contine.

By the middle 2020s, the archetypal constellation will change, as each generation begins entering a new phase of life. If the Crisis ends badly, very old Boomers could be truly despised. Generation X might provide the demagogues, authoritarians, even the tribal warlords who try to pick up the pieces.

History is seasonal, but its outcomes are not foreordained. Much will depend on how tall we stand in the trials to come. But there is more to do than just wait for that time to come. The course of our national and personal destinies will depend in large measure on what we do now, as a society and as individuals, to prepare.”

Preparations Needed (1997 – 2006)

In their chapter on preparations for the Fourth Turning, Strauss and Howe essentially tell Americans to grow up. Give up the bad habits that had become part of our life during the Unraveling. We needed to prepare as if a blizzard was headed our way.

“Reflect on what happens when a terrible winter blizzard strikes. You hear the weather warning but probably fail to act on it. The sky darkens. Then the storm hits with full fury, and the air is a howling whiteness. One by one, your links to the machine age break down. Electricity flickers out, cutting off the TV. Batteries fade, cutting off the radio. Phones go dead. Roads become impossible, and cars get stuck. Food supplies dwindle. Day to day vestiges of modern civilization – bank machines, mutual funds, mass retailers, computers, satellites, airplanes, governments – all recede into irrelevance. Picture yourself and your loved ones in the midst of a howling blizzard that lasts several years. Think about what you would need, who could help you, and why your fate might matter to anybody other than yourself. That is how to plan for a saecular winter. Don’t think you can escape the Fourth Turning. History warns that a Crisis will reshape the basic social and economic environment that you now take for granted.”

Their suggested preparations as a country and as individuals were:

America’s Recommended Preparations

Prepare values: Forge the consensus and uplift the culture, but don’t expect near-term results.
Prepare institutions: Clear the debris and find out what works, but don’t try to building anything big.
Prepare politics: Define challenges bluntly and stress duties over rights, but don’t attempts reforms that can’t now be accomplished.
Prepare society: Require community teamwork to solve local problems, but don’t try this on a national scale.
Prepare youth: Treat childrenas the nation’s highest priority, but don’t do their work for them.
Prepare elders: Tell future elders they will need to be more self-sufficient, but don’t attempt deep cuts in benefits to current elders.
Prepare the economy: Correct fundamentals, but don’t try to fine tune current performance.
Prepare the defense: Expect the worst and prepare to mobilize, but don’t precommit to any one response.

How America Prepared

No consensus on values was forged. The culture became more decadent and materialistic between 1997 and 2006. Get rich quick became the rallying cry. Institutions became larger and more unwieldy. Federal and state governments doubled in size between 1997 and 2006. They became addicted to tax revenue from the Internet and housing booms. They enacted thousands of new rules, regulations and laws. The debris has not been cleared. The country failed miserably in preparing politics. Blunt truthfulness about our national problems was needed from our leaders. Public purpose and collective duties should have been preached by our leaders. Instead, personal rights and entitlements were promised to every constituent. Corrupt politicians in Washington DC have fed the slide into cynicism, apathy and malaise with their false rhetoric and spineless inability to own up to the truth about the financial obligations that cannot be honored.

Society has not prepared for the Fourth Turning by stressing teamwork, civic duty, and self sacrifice for the betterment of our country. Local communities have not improved schools, housing, or transportation. People have continued to group themselves along party lines. The Millenial generation who will do the heavy lifting during this Fourth Turning have not been raised to understand how important their efforts will be needed in the next 15 years. We have not educated them properly and they have not been made to understand their importance. The elderly have not become more self sufficient. They have become more dependent. More entitlements have been passed for the elderly, making our fiscal picture much worse than it was in 1997. The elderly are prepared to wage a generational war for their goodies.

The preparation of our economy for the Fourth Turning has been a complete and utter disaster. We needed to raise the national savings rate in preparation for the difficult times ahead. Instead it went to 0%. We needed to reduce debt. We doubled it. We needed to balance the budget. The deficits are beyond comprehension. We needed to under consume. We consumed at hyper speed levels. Lastly, we needed to prepare for the inevitable major war that always accompanies a Fourth Turning. We needed to conserve our resources and build up our forces for the coming test. Instead, we wasted trillions of dollars and thousands of lives on worthless wars of choice in the Middle East. Our military is stretched to the breaking point. We are completely unprepared for a new major conflict.

Recommended Individual Preparations

Rectify: Return to classic virtues.
Converge: Heed emerging comunity norms.
Bond: Build personal relationships of all kinds.
Gather: Prepare yourself (and your children) for teamwork.
Root: Look to your family for support.
Brace: Gird for the weakening or collapse of public support mechanisms
Hedge: Diversify everything you do.

How Individuals Prepared

Only you would know whether you are prepared for the Fourth Turning. Can you be counted on by your neighbors? Do you have a reputation as a person of honor and integrity? Are you a good citizen? Lone wolves will not fare well during a Fourth Turning. Team, brand and standard will be new catchwords. Appearances will matter. Society will deal justice in a brutal way. You need to know people who can help you. Personal relationships will be crucial. Face to face interaction with neighbors, fellow workers, the public, and the police will determine whether you are a good guy or bad guy.

People who work well in teams will more successfully navigate the Crisis. Children will need to be taught to excel in groups. They are likely to be indoctrinated by the government when danger rises. Your family members will be essential to your survival. Being a loner will not bode well for you during the Fourth Turning. Young and old will likely occupy the same household as other supports will disappear. Government benefits are likely to be dramatically cut. Dependence on authority should not be assumed. You will need to protect your wealth. Healthcare services could be limited. Being physically fit will be important. Being a generalist that can do many things well will make you more valuable during the Crisis. Having less debt will allow you more flexibility. The USD is likely to be devalued, so hedging your bets will be important. If the financial markets crash, will you survive?

As a country, we were completely unprepared for the onset of the current Fourth Turning. We were warned in 1997. We had time to prepare. Instead, we did the exact opposite of what needed to be done. We pressed the accelerator to the floor. Our actions have ensured that this Fourth Turning will be more deadly and brutal than it needed to be. Considering the two previous Fourth Turnings were Depression/WWII and the Civil War, the next 15 years will be grim. As Strauss & Howe point out, this test cannot be avoided:

“Don’t think you can escape the Fourth Turning the way you might today distance yourself from news, national politics, or even taxes you don’t feel like paying. History warns that a Crisis will reshape the basic social and economic environment that you now take for granted. The Fourth Turning necessitates the death and rebirth of the social order. It is the ultimate rite of passage for an entire people, requiring a liminal state of sheer chaos whose nature and duration no one can predict in advance.”

The economic news worsens by the day. Worldwide tensions grow. There are fingers of instability throughout the system. All it will take is a grain of sand falling on the wrong part of the pile to initiate an avalanche of pain and suffering. Our Archduke Ferdinand moment awaits.

“Thus might the next Fourth Turning end in apocalypse – or glory. The nation could be ruined, its democracy destroyed, and millions of people scattered or killed. Or America could enter a new golden age, triumphantly applying shared values to improve the human condition. The rhythms of history do not reveal the outcome of the coming Crisis; all they suggest is the timing and dimension.

A Fourth Turning harnesses the seasons of life to bring about a renewal in the seasons of time. In so doing, it provides passage through the great discontinuities of history and closes the full circle of the saeculum. The Fourth Turning is when the Spirit of America reappears, rousing courage and fortitude from the people. History is seasonal, but its outcomes are not foreordained. Much will depend on how tall we stand in the trials to come.”

THE AGE OF MAMMON (Featured Article)

“Financiers – like bank robbers – do not create wealth. They merely distribute it. While the mob may idolize holdup men in good times, in the bad times it lynches them. What they will do to the new money men when their blood is up, we wait eagerly to find out.” – Mobs, Messiahs and Markets

As our economy hurtles towards its meeting with destiny, the political class seeks to assign blame on their enemies for this Greater Depression. The Republicans would like you to believe that Bill Clinton, Robert Rubin, Chris Dodd, and Barney Frank and their Community Reinvest Act caused the collapse of our financial system. Democrats want you to believe that George Bush and his band of unregulated free market capitalists created a financial disaster of epic proportions. The truth is that America has been captured by a financial class that makes no distinction between parties. These barbarians have sucked the life out of a once productive nation by raping and pillaging with impunity while enriching only them. They live in 20,000 square foot $10 million mansions in Greenwich, CT and in $3 million dollar penthouses on Central Park West.

These are the robber barons that represent the Age of Mammon. The greed, avarice, gluttony and acute materialism of these American traitors has not been seen in this country since the 1920’s. The hedge fund managers and Wall Street bank executives that occupy the mansions and penthouses evidently don’t find much time to read the bible in their downtime from raping and pillaging the wealth of the middle class. There are cocktail parties and $5,000 a plate political “fundraisers” to attend. You can’t be cheap when buying off your protection in Washington DC.

Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal: But lay up for yourselves treasures in heaven, where neither moth nor rust doth corrupt, and where thieves do not break through nor steal: For where your treasure is, there will your heart be also. No one can serve two masters, for either he will hate the one and love the other; or else he will be devoted to one and despise the other. You cannot serve both God and Mammon. – Matthew 6:19-21,24

It seems that Lloyd Blankfein, the CEO of Goldman Sachs, may have been overstating the case in saying his firm is doing God’s work. With his $67.9 million compensation in 2007 and payment of $20.2 billion to his co-conspirators, Blankfein appears to be a proverbial camel trying to pass through the eye of a needle. This compensation was paid in the year before the financial collapse brought on by the criminal actions of Lloyd and his fellow henchmen. After having his firm bailed out by the American middle class taxpayer at the behest of fellow Goldman alumni Hank Paulson, Lloyd practiced his version of austerity by cutting compensation for his flock to only $16.2 billion ($500,000 per employee) in 2009. I’m all for people making as much money as they can for doing a good job. But, I ask you – What benefits have Goldman Sachs, the other Wall Street banks, and hedge funds provided for America?

Never have so few, done so little, and made so much, while screwing so many.

In 2005, the top 25 hedge fund managers “earned” $9 billion, or an average of $360 million. One year after a financial collapse caused by the financial innovations peddled by Wall Street, the top 25 hedge fund managers paid themselves $25 billion, or an average of $1 billion a piece. For some perspective, there were 7 million unemployed Americans in 2006. Today there are 14.6 million unemployed Americans. While the country plunges deeper into Depression, the barbarians pick up the pace of their plundering and looting of the remaining wealth of the nation. Bill Bonner and Lila Rajiva pointed out a basic truth in 2007, before the financial collapse.

“On the Forbes list of rich people, you will find hedge fund managers in droves, but no one who made his money as a hedge fund client.” – Mobs, Messiahs and Markets

Ask the clients of Bernie Madoff how they are doing.

1920’s Redux

The parallels between the period leading up to the Great Depression and our current situation leading to a Greater Depression are revealing. When you examine the facts without looking through the prism of party politics it becomes clear that when the wealth and power of the country are overly concentrated in the clutches of the top 1% wealthiest Americans, financial collapse and depression follow. This concentration of income and wealth did not cause the Stock Market Crash of 1929 or the financial system implosion in 2008, but they were a symptom of a sick system of warped incentives. The top 1% of income earners were raking in 24% of all the income in America in 1928. After World War II until 1980, the top 1% of income earners consistently took home between 9% and 11% of all income in the country. During the 1950’s and 1960’s when average Americans made tremendous strides in their standard of living, the top 1% were earning 10% of all income. A hard working high school graduate could rise into the middle class, owning a home and a car.

From 1980 onward, the top 1% wealthiest Americans have progressively taken home a greater and greater percentage of all income. It peaked at 22% in 1999 at the height of the internet scam. Wall Street peddled IPOs of worthless companies to delusional investors and siphoned off billions in fees and profits. The rich cut back on their embezzling of our national wealth for a year and then resumed despoiling our economic system by taking advantage of the Federal Reserve created housing boom. By 2007, the top 1% again was taking home 24% of the national income, just as they did in 1928. When the wealth of the country is captured by a small group of ruling elite through fraudulent means, collapse and crisis becomes imminent. We have experienced the collapse, while the crisis deepens.

Continue reading “THE AGE OF MAMMON (Featured Article)”

THE GREAT DELEVERAGING LIE

You can’t open a newspaper or watch a business news network without seeing or hearing that consumers and businesses have been de-leveraging. The storyline as portrayed by the mainstream media is that consumers and corporations have seen the light and are paying off debts and living within their means. Austerity has broken out across the land. Bloomberg peddled this line of bull last week:

US Household Debt Shrank 1.5% in the Second Quarter

American households pared their debts last quarter, closing credit card accounts and taking out fewer mortgages as unemployment persisted near a 26-year high, a survey by the Federal Reserve Bank of New York showed.Consumer indebtedness totaled $11.7 trillion at the end of June, a decline of 1.5 percent from the previous three months and down 6.5 percent from its peak in the third quarter of 2008, according to the New York Fed’s first quarterly report on household debt and credit.The report reinforces forecasts for a slowing economy in the second half of 2010 as consumers hold back on spending and rebuild savings.

One has to wonder whether the mainstream media and the clueless pundits on CNBC actually believe the crap they are peddling or whether this is a concerted effort to convince the masses that they have done enough and should start spending. Consumer spending as a percentage of GDP is still above 70%. This is well above the 64% level that was consistent between 1950 and 1980. Consumer spending was entirely propped up by an ever increasing level of debt. The American economy will never recover until consumer spending drops back to the 64% range that indicates a balanced economic system. For the mathematically challenged on CNBC and in the White House, this means that consumers need to reduce their spending by an additional $850 billion PER YEAR. Great news for the 1.5 million retailers in America.

Below is a chart that shows total credit market debt as a % of GDP. This chart captures all of the debt in the United States carried by households, corporations, and the government. The data can be found here:

http://www.federalreserve.gov/releases/z1/current/accessible/l1.htm

Total credit market debt peaked at $52.9 trillion in the 1st quarter of 2009. It is currently at $52.1 trillion. The GREAT DE-LEVERAGING of the United States has chopped our total debt by 1.5%. Move along. No more to see here. Time to go to the mall. Can anyone in their right mind look at this chart and think this financial crisis is over?

During the Great Depression of the 1930’s Total Credit Market Debt as a % of GDP peaked at 260% of GDP. As of today, it stands at 360% of GDP. The Federal Government is adding $4 billion per day to the National Debt. GDP is stagnant and will likely not grow for the next year. The storyline about corporate America being flush with cash is another lie. Corporations have ADDED $482 billion of debt since 2007. Corporate America has the largest amount of debt on their books in history at $7.2 trillion.

Now we get to the Big Lie about frugal consumers paying off debts, cutting up those credit cards, and eating Raman noodles 5 nights per week. Household and non-profit debt, which includes mortgages, credit card debt, auto loans, home equity loans, and student loans peaked at $13.8 trillion in 2008. After two years of supposed deleveraging, frugality and mass austerity, the balance is $13.5 trillion. Consumers have buckled down and have paid off 2.2% of their debts, it seems. Not exactly going cold turkey, but it is a start.

But wait. Consumer debt outstanding is $300 billion lower. If you hadn’t noticed, the banks in the United States have been taking a few losses on their loans over the last couple years. A simple search of the Federal Reserve website reveals that banks have charged off 5.66% of all their loans in the last two years. The charge off rate in the 2nd quarter of 2010 was 6.66%. To verify for yourself go to the Federal Reserve website:

http://www.federalreserve.gov/releases/chargeoff/chgallsa.htm

So, let’s get down to the nitty gritty. If consumer debt was $13.8 trillion at the end of 2008 and the banks have since written off 5.66% of that debt, total write-offs were $800 billion. If total consumer debt now sits at $13.5 trillion, then consumers have actually taken on $500 billion of additional debt since the end of 2008. The consumer hasn’t cut back at all. They are still spending and borrowing. It is beyond my comprehension that no one on CNBC or in the other mainstream media can do simple math to figure out that the deleveraging story is just a Big Lie.

The truth is that the debt has simply been shifted from criminal Wall Street Banks to the American taxpayer. These consumer debts were created in a private transaction between individuals and these banks. When the loans went bad, the consumer should have lost their home, car, etc., and their credit rating should have been ruined, keeping them out of the credit market for a number of years. If the banks that made these bad loans made too many, they should have failed and had their assets liquidated in bankruptcy. Instead, the Federal Government has inserted the American taxpayer into the equation by using our tax dollars to prop up insolvent Wall Street banks and allowing screw-ups who took on too much debt to live in houses for over two years without making a mortgage payment.

The Big Lie will eventually lose out to the grim truth. America’s economy is built on a debt based foundation of sand and the tide of reality is relentlessly eating away at that foundation of debt. Collapse is just a matter of time. The charts below from the Federal Reserve paint a grim picture of reality.

Total Debt Balance and its Composition

Total Balance by Delinquency Status

New Seriously Delinquent Balances by Loan Type

WORLD WAR III

Patton: Men, all this stuff you’ve heard about America not wanting to fight, wanting to stay out of the war, is a lot of horse dung. Americans traditionally love to fight. All real Americans love the sting of battle. When you were kids, you all admired the champion marble shooter, the fastest runner, big league ball players, the toughest boxers. Americans love a winner and will not tolerate a loser. Americans play to win all the time. I wouldn’t give a hoot in hell for a man who lost and laughed. That’s why Americans have never lost, and will never lose a war… because the very thought of losing is hateful to Americans.

Again, I’m very impressed that Marketwatch allows Paul Farrell to write articles like this. No one in the MSM has the guts to tell it like it is. Paul Farrell is absolutely right. The hysterics over mosques and the threat of Iran are signs of what is coming. The American people are being stirred into a war frenzy based on fear of Muslims. This frenzy of fear is being led by the far Right neo-cons like Gingrich and Cheney. They will regain power in 2012. I don’t know if Mr. Farrell has read the Fourth Turning, but his scenario is exactly what would be expected during a Fourth Turning. Gingrich is a Boomer Prophet. He fits the bill as the leader that takes the US into a world war. Peak oil, dwindling fresh water supplies, Muslim extremists, nuclear weapons, and a worldwide economic Depression are the deadly mix that will lead to World War III.

You can stay in the delusion of hope camp, but it won’t stop history. We are headed into dark dark days. Americans are completely unprepared for what awaits them in the next 10 years. War is just over the horizon.

WWIII ahead: Warfare defining human life by 2020

Commentary: ‘Mother of all national security issues: desperate wars over food, water, energy’

By Paul B. Farrell, MarketWatch

ARROYO GRANDE, Calif. (MarketWatch) — World War III is coming. Iraq and Afghanistan? Just warm-up acts. Foreign-policy blunders with huge economic consequences: Massive domestic debt handicapping future generations. But still just warm-up acts.

The main event: WWIII will engulf America in a “New Age of Warfare” with trillions and trillions and trillions of new debt, year after year after year. Yet we’re silent, in denial. Nobody’s talking about all this new debt ahead.

World War III: The Pentagon warns of “the mother of all national security issues … By 2020 there is little doubt something drastic is happening,” military officials told Fortune. “As the planet’s carrying capacity shrinks, an ancient pattern of desperate, all-out wars over food, water, and energy supplies would emerge … warfare is defining human life.” This is a real game-changer, a paradigm shift, a turning point in human history, altering civilization. Listen closely:

WWIII: ‘The mother of all national security issues’

Still you’re in denial? Can’t see, hear, believe? You hope we come back?

WWIII: ‘By 2020 there is little doubt something drastic is happening’

More denial. We think short-term, this quarter, this election cycle. It’ll work out.

WWIII: ‘The planet’s carrying capacity is shrinking’

And yet still you refuse to listen. It all sounds too eco-freak lefty.

WWIII: ‘Desperate, all-out wars over food, water, and energy supplies’

Still you dismiss it as hype, propaganda, brainwashing from the Pentagon war machine.

And, yes, historians and shrinks agree you will stay in denial … till it’s too late.

Proof? Remember Jeremy Grantham. A savvy investor managing $100 billion in assets. Listen to his take on the 2008 meltdown: “Several dozen people saw this crisis coming for years. It seemed so inevitable and so merciless. Yet the bosses of Merrill Lynch and Citi, even Paulson and Bernanke, none saw it coming.”

Greed blinds us. So we will be unprepared, miss the next disaster, meltdown, catastrophe … the coming WWIII.

Why can’t we open our eyes? Wake up before it’s too late? Why don’t we learn the lessons of history? Sadly, centuries of history prove we never change … till it’s too late.

Proof? Remember “This Time is Different: Eight Centuries of Financial Folly” by Carmen Reinhart and Kenneth Rogoff, two brilliant economists. They warn: “The lesson of history is there will always be a temptation to stretch the limits. One common theme, excessive debt accumulation — whether government, banks, corporations, or consumers — often poses greater systemic risks than it seems during a boom. We merrily roll along for an extended period, when bang … confidence collapses, lenders disappear, a crisis hits. History does point to warnings signs that policy makers can look to access risk — if only they do not become too drunk with their credit-bubble-fueled success and say, as their predecessors have for centuries, ‘This time is different.'”

We’re addicts, more is never enough, we ignore history lessons

Humans are addicted to greed, success, wealth. More is never enough: “The lesson of history is there will always be a temptation to stretch the limits.” Leaders always stretch the limits, like gamblers who just can’t go home till they lose everything.

Besides, that “mother of all national security issues won’t happen till 2020?” Too far in the future, so our short-term brains dismiss it. … So what if “the planet’s carrying capacity in shrinking?” … So what if “an ancient pattern of desperate, all-out wars over food, water, and energy supplies is emerging?” … So what if “warfare defines human life?”

So what else is new? Wars: WWII, Korea, Vietnam, Grenada, Kosovo, Iraq, Afghanistan. Think positive. Wars create new economic opportunities. The “green revolution.” Job growth. Commodity deals. Innovations. Think positive. Technology will solve all future problems. Have faith. Trust. Wait. Enjoy life now.

Yes, WWIII is coming. And in 2020 we may wake up and remember we were warned about the disastrous consequences of invading Iraq back during the invasion when Nixon advisor Kevin Phillips wrote in Wealth and Democracy, warning: “Most great nations, at the peak of their economic power, become arrogant, wage great world wars at great cost, wasting vast resources, taking on huge debt, and ultimately burning themselves out.”

The real reason … we love wars, it’s a macho ego thing

Now shift from the lessons of history to the lessons of psychology. Forget everything the Pentagon says. It’s a distraction. The real reason WWIII is coming is not because “they” are attacking “us.” … Not because the GOP, Tea-Party, Reaganites and their beloved Reaganomics all love a crisis. … Not because the Right believes it’s written in Revelations … Not because a secret conspiracy of the superwealthy believe wars are great for economic recovery.

No, WWIII is coming because Americans love war; it’s in our psyche, genes, DNA, blood, our cultural mythology. Deep in our souls we are greedy war-mongers, war-profiteers … we love wars.

WWIII is coming because America needs a war to prove that we really are still “king of the hill,” the world’s sole superpower. That we’re not falling second to China and the rest of the world. Forget economics, politics, ideologies: WWIII is a macho ego thing.

We want to revive the days when John Wayne, Patton, “The Dirty Dozen,” “Apocalypse Now” defined us; we were a nation of war heroes. Now our “heroes” are corrupt Wall Street fat-cat CEOs who lose billions and still retire rich, con men for Treasury secretaries, bought presidents, governors who resign early, lie to grand juries and walk the Appalachian trail, ad infinitum. We have lost face, lost faith in our heroes, in our world. Unlike thousands indicted after the S&L and Enron disasters, our dark heroes “get away with murder.”

Destiny knocks … the Righteous Right will lead us into WWIII

WWIII is coming because America needs a war, another great war. Admit it. We all sense it at a deep level. Yes we hate to admit the truth. It hurts too much to admit our moral weakness: America’s losing power, swagger, mojo, cohones. We don’t like feeling impotent, weak, vulnerable. So the bullying Right, the insecure, defensive and full-of-hate, dark side of the Party-of-No-No has decided to be the champion-of-the-return-to-the-glory-days … and they are itching for new wars.

First: before WWIII we prepare with internal civil wars. The Right attacks the Left, spewing lies, feeding rage everywhere like the angry high school bully who lost the election for class president because his future was pure self-serving narcissism. Now ego bruised, second-best, he’s consumed by hatred and revenge. Anything to regain the throne, no matter how immoral, corrupt, mean-spirited — the end justifies the means.

WWIII is coming because once the Right gets back in power — and they will soon — a new Righteous Right White House will act swiftly to reestablish its sole superpower role. Remember “bomb, bomb, bomb Iran?” Under the laughter a hidden agenda. Some foreign-policy pundits agree we’d already be at war with Iran (and Islam) if the Bullying Right won the presidency.

When they win back the commander-in-chief role it will happen again, a repeat of the Cheney deceits that drove America into the Iraq-Afghan Wars.

WWIII will be intoxicating … but will bankrupt the drunk’s soul

Chris Hedges captures America’s bizarre collective addiction to war. In “War is a Force that Gives Us Meaning” this former war correspondent describes how a “communal march against an enemy generates a warm, unfamiliar bond with our neighbors, our community, our nation, wiping out unsettling undercurrents of alienation and dislocation.”

He reminds me of my days going off to the Marine Corps and Korea. As one reviewer put it, Hedges looks “at what makes war so intoxicating for soldiers, politicians and ordinary citizens,” the “outbreaks of nationalism, the wartime silencing of intellectuals and artists, the ways in which even a supposedly skeptical press glorifies the battlefield and other universal features of war.” Yes, yes, we love war.

WWIII is coming not because we have terrorists, dictators and evil men wanting to destroy and depose us. Not because “they” are attacking “us.” WWIII is coming because we have surrendered the fight, surrendered our honor, our integrity, our values, our moral compass as a democracy. We have surrendered to a new god, to the almighty dollar, the new Invisible Hand that controls not just capitalism but our nation’s very soul.

Bottom line: We are at war with ourselves. Split souls, a hero, a demon. But we do not like ourselves, can no longer face ourselves in the mirror. Why? Our dark side is winning. The other has surrendered. We have lost our “self” in denial. Now the Righteous Right is bullying us with hope of redemption. False hope. That’s suicide.

Still we are waiting to start World War III. And if the wait is too long, the Right will start to “bomb, bomb, bomb” someone and trigger WWIII. It’s a macho “ego thing.” They got a lot to prove. Don’t care if they destroy America in the process … because they know they are Right. Yes, folks, the real “mother of all national security issues” is within us.

ATTACK ON IRAN – UNINTENDED CONSEQUENCES

I read the article in the Atlantic about Israel attacking Iran by Jeffrey Goldberg. It attempted to be a propaganda piece on Israel and their dire predicament in the Middle East. The same Israel that possesses 100 nuclear warheads. They are truly in mortal danger from Iran. By the way, Mr Goldberg, who served in the Israeli Army, wrote an article in 2002 saying that Sadaam Hussein had links to al Qaeda, so we know he never gets his facts mixed up with lies and propaganda. The article actually makes Netenyahu look like a nutjob seeking his 100 year old daddy’s approval. His “reasoning” for going to war with Iran is based on emotional proclamations about the Holocaust. When you don’t have facts to back up your position, fall back on mushroom clouds and the holocaust. That is the Israeli playbook.

Mr. Wright does a fantastic job pointing out that all of the Israeli arguments for attacking Iran are weak, invalid, and based upon false propaganda. The Israelis don’t care. They are on a mission to destroy Iran. They know that Obama is a weak man. They will attack without his approval and force him into conflict with Iran. Obama, being the weak political hack that he is, may actually think an attack will benefit him politically. When your domestic agenda is in tatters, find a foreign bogeyman to distract the masses. The Jewish controlled media in the US supports war with Iran. They blare the propaganda from the loudspeakers 24 hours a day.

News stories are slanted to make the masses think Iran is actually a threat to the US. Recent polls show 60% approval for attacking Iran. It is beyond delusional that a country that spends $2.5 billion per year on their military is a threat to a country that spends $895 billion per year on their military. Our military spends $2.5 billion on toilet seats.

The part of the story that no one addresses are the unintended consequences of attacking Iran. Neo-cons aren’t big on thinking through the consequences of their actions. It gets too messy for their neat little world domination game of Risk. Before I get to the unintended consequences, let’s address the known consequences:

The US military is already fighting 2 wars and has stretched our soldiers beyond the breaking point. I wonder if the neo-cons are ready to re-institute the draft for more cannon fodder. It is much easier to set up recruiting stations in poor neighborhoods where youth unemployment is 50%. See, there are benefits to a depression.
We’ve borrowed $1.067 trillion from the Chinese to fight our two current wars of choice. How many more billions will it cost to destroy Iran. Maybe we should ask Donald Rumsfeld. Secretary Rumsfeld estimated the costs of the Iraq War to be in the range of $50 to $60 billion, a portion of which they believed would be financed by other countries. Pretty close for a government bureaucrat.
The combination of further borrowing with a definite spike in oil prices to over $100 a barrel would be the final nail in the coffin for the US Economy. A deep lasting Depression would ensue and unemployment would soar.

There is no doubt that air strikes by Israel and/or the US would set back the Iranian nuclear program for years. The MSM would declare success and the Neo-cons on Fox News would be doing back flips. Then reality would set in. the Iranian leaders have plenty of options to make life really miserable for the US and Israel. Here are possible unintended consequences:

Iran would immediately launch a torrent of long range missiles into the Green Zone and other US bases in Iraq where 65,000 troops sit. Thousands of American casualties would result.
Iranian fighter jets would launch Exocet missiles at every oil tanker within reach in the Strait of Hormuz and possibly block the Strait.
Iranians would unleash thousands of mines into the Strait of Hormuz, effectively stopping the shipments of oil to the world.
Iranian fighters would fire their Russian built Sunburn missiles that fly just above the surface of the water and sink a couple of our multi-billion dollar aircraft carriers.
Insurgents in Iraq would start blowing up everything that moved in Baghdad. Shias and Sunnis would be at war within hours of the attack on Iran.
Hezbollah would launch thousands of missiles into Israel and the all out war would resume in Lebanon and Gaza.
Venezuela would declare an oil embargo on the US. Gas prices in the US would go from $2.75 to $5.00 overnight.
Pro-Iranian factions within Pakistan would topple the American supported President. Nuclear weapons would now be in the hands of Iranian sympathizers. India would immediately mobilize for possible war.
Pro-Iranian factions within Saudi Arabia and other unstable Middle East countries would unleash their fury on anyone supporting Israel or the US.
Russia and China would condemn the actions of the US and Israel and offer no support within the United Nations.
North Korea would use this opportunity to ratchet up tensions with South Korea and possible war.
If the oil flow from the Middle East is interrupted for longer than a week, the US economy will come to a grinding halt. Gas lines will form. Riots would ensue when food is unable to be transported to grocery stores.
$200 oil would break the back of the fragile US economic system. Gold prices would soar.
Muslims in Europe would take to the streets in violent protests.
Sleeper cells of Muslim terrorists would be activated in the US and bombs would go off on subways and in shopping malls.

Will all of these things happen? No. Will some of them happen? Yes. Are there other possible consequences I haven’t considered? Yes. An attack on Iran would be an extremely stupid thing to do with the world economic situation so fragile and tensions already high. I believe it will happen in the near future. I also believe it will mark the start of the violent portion of the Fourth Turning. Below is a link to a war game conducted by the Brookings Institute earlier this year. Enjoy.

http://www.brookings.edu/~/media/Files/rc/reports/2010/02_iran_israel_strike_pollack/02_iran_israel_strike_pollack.pdf

August 17, 2010, 9:00 pm

Why Not to Bomb Iran

By ROBERT WRIGHT

Has the Atlantic magazine become a propaganda tool — “a de facto party to the neoconservative and Israeli campaign to initiate a global war with Iran”? That question was being discussed last week on The Atlantic’s own Web site, among other places, after the magazine unveiled a cover story saying that Israel is likely to bomb Iran within a year.

The article wasn’t an argument for bombing, just a report on Israel’s state of mind. So why all the outrage — why, for example, did Glenn Greenwald of Salon title his slashing assessment of the Atlantic article “How Propaganda Works: Exhibit A”?

In part because the author of the article is Jeffrey Goldberg, who has previously been accused of pushing a pro-war agenda via ostensibly reportorial journalism. His 2002 New Yorker piece claiming to have found evidence linking Saddam Hussein to al Qaeda is remembered on the left as a monument to consequential wrongness. And suspicions of Goldberg’s motivations only grow when he writes about Israel. He served in the Israeli army, and he has more than once been accused of channeling Prime Minister Bibi Netanyahu.

There is certainly a bit of channeling in Goldberg’s Atlantic piece. For example: “Netanyahu’s belief is that Iran is not Israel’s problem alone; it is the world’s problem, and the world, led by the United States, is duty-bound to grapple with it.” Still, the piece is no simple propaganda exercise. Indeed, what’s striking is that, for all the space given to the views of hawkish Israeli officials, they don’t wind up looking very good, and neither does their case for bombing Iran. The overall impression is that, as Paul Pillar, a former C.I.A. official, put it after reading Goldberg’s piece, Israel’s inclination to attack Iran is “more a matter of the amygdala and emotion than of the cortex and thought.”

For starters, Netanyahu comes off in Goldberg’s article as so psychologically enslaved by his uberhawk father as to be incapable of making autonomous policy decisions. (One Israeli politician told Goldberg that there can be no two-state solution until the 100-year-old father dies.) So the elder Netanyahu’s manifest enthusiasm for military action against Iran may be one of the most powerful forces behind it. This shouldn’t inspire American confidence in such a policy — and one thing the Atlantic article drives home is that Israel very much wants America to support air strikes or, better yet, actually conduct them.

The debate becomes about who should bomb Iran, not about whether Iran should be bombed.

When the subject turns from Netanyahu’s psychology to Israel’s psychology, the inclination to bomb Iran still looks none too cerebral. One of the prime movers behind it is that Israel’s regional nuclear monopoly has “near-sanctity, in the public’s mind” because it has “allowed the Jewish state to recover from the wounds of the Holocaust.” This is an understandable reaction to the trauma of the Shoah, and it helps explain the political pressure to bomb Iran, but it’s not a sound strategic reason to do so.

Memory of the Holocaust also, of course, informs Israel’s Iran policy in another way. “The Jews had no power to stop Hitler from annihilating us,” an anonymous Israeli official tells Goldberg. “Today, 6 million Jews live in Israel, and someone is threatening them with annihilation. But now we have the power to stop them. Bibi knows that this is the choice.”

Actually, my own sources tell me that, though many Israelis take seriously this prospect of Iran trying to annihilate them, Israel’s policy elites by and large don’t. They realize that Iranian leaders aren’t suicidal and so wouldn’t launch a nuclear strike against a country with at least 100 nukes. On close reading, as others have noted, the Atlantic piece suggests that this sober view indeed prevails in Israel’s higher echelons. Though Netanyahu warns us about a “messianic apocalyptic cult” possessing nuclear weapons, he doesn’t seem to be seriously imagining the “cult” launching a first strike. Goldberg writes: “The challenges posed by a nuclear Iran are more subtle than a direct attack, Netanyahu told me.”

So what are those challenges? For one thing, “Iran’s militant proxies would be able to fire rockets and engage in other terror activities while enjoying a nuclear umbrella.” Whether heading off this prospect would justify bombing Iran is an interesting question, but we don’t need to ask it, because the prospect isn’t real. There’s no way Iran’s having a nuclear weapon would keep Israel from taking out Hezbollah missile sites in Lebanon as missiles from them rained down on Tel Aviv. If the Holocaust has left Israelis with an exaggerated fear of Iran’s intentions, it has also left them with an absolute refusal to be cowed.

One “existential” threat that Israel’s policy elites do seem to take seriously is that a nuclear Iran might render Israel such a scary place to live as to induce a brain drain. “The real threat to Zionism is the dilution of quality,” defense minister Ehud Barak tells Goldberg. Here again, I think the threat is overstated. After a year or two, Iran’s possession of nukes would become background noise for the average Israeli, less salient than periodic flurries of missiles from Lebanon or Gaza — flurries that so far have failed to noticeably drain Israel of intellectual capital.

The “brain drain” issue illustrates what weak “propaganda” much of Goldberg’s piece is: America is supposed to support — or even conduct — a military attack designed to keep talented people from immigrating to America? If I were Israel, I’d hire a new propagandist.

So, if this piece, read closely, makes for such an ineffectual pro-bombing pamphlet, why is Goldberg being pilloried as a propagandist?

For starters, there’s the claim that, though he spends a fair number of bullet points on the blowback from an attack on Iran, he still understates it. No mention, for example, of how an American-backed attack (and America would surely stand by Israel in the end) would feed the war-on-Islam narrative that is already starting to fuel home-grown terrorism in America.

But the main charges against Goldberg aren’t about loading the cost-benefit analysis. They’re about framing the future debate. His piece leaves you thinking that Israel will attack Iran very soon unless America does the honors. So the debate becomes about who should bomb Iran, not about whether Iran should be bombed.

And this is the way Israel’s hawks want the debate framed. That way either they get their wish and America does the bombing, or, worst case, they inure Americans to the prospect of a bombing and thus mute the outrage that might otherwise ensue after a surprise Israeli attack draws America into war. No wonder dozens of Israeli officials were willing to share their assessments with Goldberg, and no wonder “a consensus emerged that there is a better than 50 percent chance that Israel will launch a strike by next July.”

Yossi Alpher, an Israeli peace activist and a 12-year veteran of the Mossad, has opined that Goldberg was “naïve” in not realizing that these officials were using him as part of a public relations campaign. As accusations against Goldberg go, “naïve” is pretty flattering, and I do think it may be more apt than “cynical.” I’ve long felt that most ulterior motives are subconscious, and Goldberg seems to be a case in point. Back in 2002, when he was vociferously arguing for an invasion of Iraq, he just wanted to believe that his Kurdish sources were giving him solid evidence of Saddam Hussein’s links to Al Qaeda — notwithstanding the fact that they, as fellow invasion advocates, had an interest in fabricating evidence. Now Goldberg again seems eager to accept the testimony of people whose testimony is obviously suspect.

In any event, his article shouldn’t distract Americans from the real question: Given that the United States would almost certainly be drawn into war with Iran in the wake of an Israeli strike, and given that America would be blamed for the strike whether or not it had green-lighted it, and given the many ways this would be bad for national security, how can American leaders keep it from happening?

Here, at least, Goldberg has performed a service. His article, read closely, suggests that even from Israel’s point of view, there’s no sound rationale for bombing Iran, especially when you consider the long-term downside: an attack would radically dim what prospects there are for lasting peace in the Middle East; Israel’s downward spiral — in which regional hostility toward it leads to conflicts that only deepen the hostility — would be sustained big time. If appealing to America’s interests isn’t enough to keep Israel from attacking Iran, maybe appealing to Israel’s interests will help.

Postscript: If you want to read a more ringing defense of Goldberg’s journalistic integrity than I am able to mount, here is The Atlantic’s James Fallows on the subject, and here is Time’s Joe Klein.

Attack Iran? Don’t even consider it

August 03, 2010 6:00 AM

THE POINT — An already overextended military and budget means we can’t afford another war.

U.S. Rep. Ron Paul, a conservative champion of free markets and limited government, explained in 2007 how our government’s foreign policy would inevitably get us into war with Iran. Paul, of course, opposes interventionist wars.
As a nation, we can hope the wise physician was wrong. More and more, he looks like a prophet.
Newspapers throughout the country recently carried an Associated Press story about an interview CNN conducted with Michael Hayden, former head of the CIA under president George W. Bush. Hayden said a U.S.-led attack on Iran was low priority during his tenure. Today, said the AP story, Hayden believes war with Iran is “inexorable.”
A spokesperson for Hayden later said the statement was misrepresented; Hayden meant Iran’s completion of a nuclear program, not war with Iran, seems inexorable. Either way, considering U.S. policy regarding the Middle East, an intervention in Iran seems likely. As Paul said in 2007: “I think if our policies don’t change it’s about as inevitable as you can expect because we’re unwilling to talk to them and every week we’re passing more sanctions and rules and intimidations and accusations and provocations…. The American people don’t know how we have been involved since 1953 in interfering with their government and it has hurt us.”
Hayden predicts Iran will build its nuclear program to the point where it’s just below having weapons. That would destabilize the region, he said. Considering the fact U.S. foreign policy is first and foremost obsessed with more stability in the Middle East, not less, it’s hard to imagine President Barack Obama, Secretary of State Hillary Rodham Clinton, the Department of Defense and our allies will resist the urge to use force. U.S. officials have said as much, assuring the world that military action remains on the table if sanctions continue failing to deter Iran — which they will.
So the writing is on the wall. Iran continues advancing a nuclear program the United States will not tolerate and our foreign policy has become no less interventionist under Obama and Clinton.
Let’s hope our nation’s leaders will let facts stand in their way. Here are the facts:

1. We cannot afford another war because we are far beyond broke, buried under debt;

2. Iran would be a more difficult foe than Afghanistan or Iraq;

3. The wars we’re fighting have crippled our economy and taken the lives of American men and women for little in return;

4. A nation cannot prosper while remaining in a perpetual state of war because death and destruction, while sometimes essential for a nation’s survival, do not produce wealth. The list could go on.
Iran will have nuclear capacity and we must accept that fact. Fortunately, the United States, Israel and other U.S. allies are capable of deterring aggression with threats of retaliation so forceful it’s unthinkable. We cannot afford to impose our agenda on every rogue nation that develops nuclear power. If we do, we will destroy ourselves Soviet style. We will fritter time, energy and wealth on interventionist adventures. Attack Iran preemptively? No way.