Tag: Cash for Clunkers

No Cash for Your “Clunker”

Guest Post by Eric Peters

At least the Obama-era “cash for clunkers” program was voluntary.

People were paid to have their older vehicles – these were characterized as “clunkers” to make it seem as though they were on their last legs and ready for the scrapyard anyhow – destroyed in order to “stimulate” demand for new cars. In fact these old cars had a lot of life left in them, as evidenced by the requirement that to qualify for the cash, the “clunker” had to have been recently licensed and registered – and that meant capable of passing both state safety and emissions tests, absent which the owner could not get or renew registration in most states.

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What “Cash for Clunkers” Was Really All About

Guest Post by Eric Peters

You may recall the Obama-era “Cash for Clunkers” business. It was a very dirty business and a key element of Obama’s declared intention to fundamentally transform the United States – though to this day many people do not understand just how key it has proved to be.

The plan was sold to the public as a means of “stimulating” the then-flatlined American car industry, which was almost literally (and in GM’s case, actually) bankrupt. The idea was to get people to buy new cars by paying them to throw away their old cars.

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Corona Clunkers

Guest Post by Eric Peters

It’s going to take a whole lot of ether in the carburetor to restart the car business once the economy “reopens” (neat term, that; it conveys the horrid truth that government has successfully asserted – because people have accepted it – full Decider power to tell us whether and when we may live our economic lives – at its arbitrary whim.)

There is already talk of Cash for Clunkers II – though it probably won’t be cash, as part of the Plandemic’s goals, in addition to Advanced Servility Training, is to eliminate cash in the name of hygiene.

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The Coming Cash For Not-Clunkers

Guest Post by Eric Peters

What do you suppose will happen when they build them – but no one comes?

Within the next couple of years, almost every car company will be building – and trying to sell – electric  cars.

It won’t be just Tesla’s cars – which cars Tesla is already having trouble trying to sell. Chiefly, because there is a built-in limit to the number of $35,000 and up cars you can sell – regardless of the number you build.

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Cash for Clunkers Returns

Guest Post by Eric Peters

Bad ideas set bad precedents – the thing usually gets done again, or gets expanded on. So it’s no big surprise that Colorado has decided to emulate the federal “cash for clunkers” program that was conceived and implemented by Uncle to “stimulate” demand for expensive new cars by destroying as many affordable used cars as possible.

Of course, it’s not being presented that way – the honest way.

As before, it is being framed as an Earth-saving measure. Anything not new – with the latest emissions control equipment – is ipso facto “dirty,” in the brilliantly deceptive demagoguery of the government -corporate nexus.

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Cash for Clunkers II…

Guest Post by Eric Peters

Cash for Clunkers “stimulated” demand for new cars in the manner of digging holes – and then filling them up again. It reduced the available supply of good used cars – by paying people to throw away perfectly good used cars.

Something similar is under way right now, but it’s subtler and so most people haven’t noticed it yet.

Unless they’ve begun shopping around for a used car. If they have, they will have noticed an uptick in used car prices; that certain makes/models – and years – are not holding their value but gaining it.

That is contrary to the usual – natural – course of things. Cars age, accrue miles – and depreciate (lose value). People replace them with new cars. But the latest crop of new cars has technology many people don’t want – and so they’re not buying new but looking for old.

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Cash For Not Clunkers

Guest Post by Eric Peters

You’ve heard the saying that history repeats . . . as farce? Well, here we are. Not quite ten years after the government paid people to throw away perfectly good used cars to “stimulate” demand for new ones – the despicable Cash for Clunkers program – the government is doing the same thing again.

Only this time, the cars are not “clunkers” and the government is forcing VW to pay people to throw them away.

Almost 600,000 of them.

These cars are not high-miles and worn out, on their last legs. Many are only a year or two old. Nothing is wrong with any of them – other than their having been deemed “out of compliance” with Byzantine EPA emissions tests.

But only sometimes – and only slightly.

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HILLARY: DECEIT, DEBT, DELUSIONS (PART TWO)

In Part One of this article I addressed the deceit of Hillary Clinton and politicians of all stripes as they promise goodies they can never pay for, in order to buy votes and expand their power and control over our lives.

I created the chart below for an article I wrote in 2011 when the national debt stood at $14.8 trillion, with my projection of its growth over the next eight years. I predicted the national debt would reach $20 trillion in 2016 and was ridiculed by arrogant Keynesians who guaranteed their “stimulus” (aka pork) would supercharge the economy and result in huge tax inflows and drastically reduced deficits. As of today, the national debt stands at $19.7 trillion and is poised to reach $20 trillion by the time “The Hope & Change Savior” leaves office on January 20, 2017. I guess I wasn’t really a crazed pessimist after all. I guarantee the debt will reach $25 trillion by the end of the next presidential term, unless the Ponzi scheme collapses into financial depression and World War 3 (a strong probability).

The total disregard for the most perilous issue confronting the nation by politicians of all stripes is a national disgrace, proving beyond a doubt the elite ruling class has no conscience, no sense of morality, and no loyalty to the common people or future generations. The sociopaths who act as if they are in control addressed the 2008 global debt meltdown by adding tens of trillions in new debt to an already unsustainable system, setting the world on a course towards total financial collapse and world war.

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Buy Steel (Not Gold)

Guest Post by Eric Peters

Gold may not have the high rate of return that the casino called Wall Street offers … to insiders. But it is one way to store value – and that accounts for its popularity among people who may not get rich quick but manage to avoid becoming poor.buy-gold-lead

Used cars are another great way to transmute depreciating paper money into a durable asset that – like gold – is portable and fungible (i.e., easily converted into other things of value).

The government has inadvertently created a bull market for them, too.

First, it decreased supply via the infamous “Cash For Clunkers” program (a “clunker” being defined not by mechanical condition, incidentally, but by the car’s gas mileage numbers). The government paid people inflated sums of other people’s money (an estimated $3 billion) to turn in perfectly roadworthy used cars in for unwarranted, early destruction … in order to “stimulate” demand for new cars.

This was like burning down every third house in a neighborhood to create a “need” for new housing.

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The Car Bubble … and Cash for Clunkers II?

Guest Post by Eric Peters

A guy who smokes meth can pull a week of 15 hour days. But come next week… .meth head

That’s how artifical “incentives” work on the economy. On the macro level, it is the Boom – and Bust – business cycle, whose unnatural peaks and valleys are caused by manipulation of money and credit, which causes excessive and unwarranted “investment” that – inevitably – leads to a downturn (or even a crash) when the artificially induced supply is disproportionate to demand. The housing bubble of the early 2000s is an obvious example of this.

Cash for Clunkers (same era) is another – and its unfortunate effects are just now beginning to become obvious.

As with housing in the early 2000s, the federal government decided it would be a good idea to “stimulate” new car sales by enacting a program that paid people to throw away perfectly good used cars. The idea being that they would then buy new cars to replace the ones thrown away.

Many (but not all, bear with) did so. This created a boom in new cars sales. Not only because there were fewer good used cars available, but also because the ones that remained had gone up considerably in price due to (wait for it) limited supply. This artificial scarcity in turn became the artificial incentive to buy a new car.

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ADRIFT AT SEA

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

 

The big story this past week, besides the annual State of the Delusion speech by Barack “It won’t add a cent to the deficit” Obama, was the fate of the passengers on the Carnival Triumph as their skyscraper sized ship was left adrift at sea for days without power. This 900 foot long, 100,000 ton goliath is one of the largest passenger cruise liners in the world, carrying 3,400 passengers and 1,100 crew members in luxurious splendor through warm Gulf of Mexico seas to sun drenched exotic isles. These ships are practically floating countries, with passengers treated to an endless American buffet of never ending quantities of bacon, sausage, biscuits, gravy, fried chicken, mashed potatoes, waffles, pizza, cheesecake, soda, beer and the rum drink of the day. It’s as if all 3,400 passengers have a SNAP card with no limit. There are retail stores, restaurants, bars, ice skating rinks, movie theaters, showplaces, and staff waiting on you hand and foot. No cash changes hands. You charge everything to your room number and then just pay with one of your 13 credit cards at the conclusion of your voyage into debt. Then you pay 18% interest on the 25 Funky Monkeys you consumed for the next 14 years. Cruising captures the essence of America as we traverse our voyage to hell.

The ordeal at sea of the Carnival Triumph and the leadership displayed by the Carnival management and executive officers is a microcosm of our declining empire. The $420 million Carnival Triumph was put into service in 1999 and has run continuously for the last fourteen years, with only periodic dry dock maintenance. These massive ships are replenished within hours of docking and depart within twelve hours of dumping their 3,400 passengers back onshore. The CEO and top management of Carnival care only about ROI and whether their stock options are vested. Their goal is to bilk the passengers out of as much cash as possible, while paying their foreign slave labor crew members as little as possible. The ships are registered in foreign countries for tax purposes and the crew members are mostly from third world countries. Carnival executives and shipboard officers have a history of recklessness, mismanagement, and willingness to endanger its passengers in its greedy thirst for short term profits. Ask the families of the 32 passengers killed in the sinking of the Costa Concordia.

The engine room fire that disabled the Triumph was not an isolated instance. This was the fourth engine room fire on a Carnival owned ship resulting in a loss of power, the others being the Tropicale in 1999, the Carnival Splendor in 2010, and the Costa Allegra in 2012. The Carnival Triumph should not have been at sea. It had been plagued with mechanical problems for weeks prior to the engine fire. Voluntarily taking the ship out of service would have hurt the 1st quarter earnings per share of this public company, therefore the leadership of Carnival told the engineers to patch it up and get it back out on the seas. Two weeks prior to the engine room fire the Carnival Triumph experienced propulsion issues that caused it to be five hours late returning to its Galveston home port on January 28, 2013 and delaying the ship’s departure for its next cruise until 8:00 pm that night. The ship departed, but the problems had not been fixed. The Associate Press reported a story about that cruise that provides a different assessment than the public relations drivel released the corporate office:

An email informed Debbi Smedley and other passengers that the propulsion problem would prevent them from docking at two ports. “Due to the limited cruising speed, our itinerary will be impacted. Depending on the progress of the repairs, we will either visit Progreso or Cozumel,” stated the email, signed by Vicky Rey, vice president of guest services. Smedley said the ship was in poor condition overall. During her five-day cruise, a water line broke in the hallway ceiling near her cabin, and a separate sewer line broke outside the main dining hall, she said. Metal was protruding from handrails on the staircases, and the elevators often did not work. Rather than docking in Progreso for only a few hours as planned, the ship stayed in the port for two days, and cruise workers repeatedly told passengers they were waiting for parts to fix a mechanical problem, according to Smedley.

Carnival’s public relations machine then admitted to an electrical problem with the ship’s alternator in the last voyage before the fire, but claimed it was repaired. What they didn’t reveal is that it was a Coast Guard inspection that revealed there was a short in the high voltage connection box of one of the ships generators causing damage to cables within the connection box. A directive with a compliance due date of February 27, 2013 was issued following the inspection requiring that “the condition of the ship and its equipment shall be maintained to conform with the regulations to ensure that the ship in all respects will remain fit to proceed to sea without danger to the ship or persons on board.” The Coast Guard Marine Information Safety and Law Enforcement System showed that this deficiency remained unresolved at the time of the subsequent fire and loss of power while at sea on February 10. So you have a company PR maggot lying and you have another useless Department of Homeland Security branch not enforcing regulations that are supposed to protect passengers. This is par for the course in our corporate fascist states of America today.

Shit Happens

George: Aha. Aha. Could it be because you don’t want him to know that you have a friend who pees in the shower, is that it?!

Elaine: No, that’s not it!

George: Oh, I think it is! I think that’s exactly what it is!

Elaine: Why couldn’t you just wait?

George: I was there! I saw a drain!

Elaine: Since when is a drain a toilet?!

George: It’s all pipes! What’s the difference?!

George Costanza would have enjoyed sailing on the Carnival Triumph as passengers were left to piss in showers and shit in red plastic bags for days. It finally became socially acceptable to pee in the shower. Most of the ship’s electrical power went down after the engine room fire, causing extensive breakdowns of vital shipboard mechanical systems, including taking out sanitary systems. Passengers reported sewage sloshing around in hallways, flooded rooms and trouble getting enough to eat. Passengers waited in line for three hours to get a lousy hot dog. On the lower decks sewage came up through the shower drain, pooling in the sinks and flowing into the hallways. The allegory of the poor people on the lower decks being inundated with feces and living in wretched conditions, while the rich people living in luxury on the upper decks are blissfully ignorant of the fate of their fellow passengers is so easy to apply to our society in this day and age. The 1% glory in their stock market gains, while 20% of U.S. households are on food stamps.

These direct quotes from passengers and pictures taken onboard this voyage from hell provide a taste of what our future portends:

“We have to urinate in the shower. They’ve been passed out plastic bags to go to the bathroom. There was fecal matter all over the floor.”

“They’re walking around in a lot of urine and fecal matter, and the sewers are backing up.”

“The sanitation situation was gross and the stench was awful.”

“Just imagine the filth. People were doing crazy things and going to the bathroom in sinks and showers.”

“A lot of people were crying and freaking out.”

“We are trapped aboard a floating petri dish without power, air conditioning, or fresh water.”

“It’s degrading. Demoralizing, and then they want to insult us by giving us $500″

 Disgust: Guests were being forced to defecate into plastic bags and place it outside their rooms as toilets on board the Triumph backed up following the electrical failure Foul: Passengers on board the Carnival Triumph reported that floors were being flooded with raw sewage from overflowing bathrooms

 Where's my charger: After days without power a generator was airlifted unto the ship today and many people took the opportunity to charge their phones

After reading a number of articles describing what happened before, during and after the engine fire aboard the Carnival Triumph, the parallels between this Ship of Horrors and our Ship of State become self-evident. You have the CEO and top executives of Carnival only concerned about their wealth, power and control of the company. Rather than thinking long term and making decisions that might be detrimental to their short term quarterly earnings, but insure the long –term financial health and reputation of the company, their decision was driven by their true masters on Wall Street. Instead of taking the ship off-line to make vital repairs and  necessary investments, they just papered over signs of an imminent disaster and turned to public relations spin and propaganda as there preferred course of action. When disaster “suddenly” struck, the management and executive officers were unprepared, slow to react, and more concerned with their reputations than about the health, safety and welfare of the passengers. Much more could have been done to alleviate the misery of the 3,400 passengers. Carnival could have had a large generator helicoptered onto the deck and used to produce enough electricity to run some lights, ventilation, refrigeration and toilets. It appears that this ship had two engine rooms and only one was damaged by fire. They could have restarted the undamaged engine room and would have had enough power for most normal functions in the cabins of the ship, and probably some capability to propel the ship towards port. The disgraceful lack of urgency and refusal of top management to attempt every possible solution to this crisis is a lesson to be learned by passengers and citizens alike. They don’t care about you.

Rev. Wendell Gill’s experience onboard the Triumph provides a glimpse into our future. He immediately recognized the leadership of the ship was non-existent and it would be up to people helping people if they were to make it through the ordeal:

“What you had was a tale of two ships. You seldom saw a deck officer. I never saw the captain. Some of the people in the upper areas had plenty of air, but down below, it was unlivable. It was like a sauna of sewage. It was the people on the boat that saved Carnival. In an adverse situation, most people will rise to help — that’s just the human spirit.”  

Reverend Gill and his wife noticed that no one from Carnival was stepping up to help the elderly and sick get around. The Gills, along with other concerned passengers, decided to take matters into their own hands, carting mattresses and bedding up from the lower decks. They witnessed the worst side of human nature in the inaction of Carnival leadership, along with some people becoming drunk, disorderly and fighting over food. But they also witnessed people coming together under difficult circumstances, with many in the upper cabins sharing their space with those from the lower uninhabitable decks. The passengers created their own shanty town of tents on deck and in the cooler hallways. The vast majority of people acted like decent human beings. Kindness, sharing, and helping one another won the day. This voyage through hell is a precursor of what lies ahead for everyone in this country. When vital systems fail, the lights go out, and your beloved government leaders are nowhere to be found, how will you fare? Don’t count on someone from the government to lead when we are set adrift in a sea of chaos created by them. The politicians, bankers and bureaucrats will be scrambling to save themselves. Your family, friends, and neighbors will be the only people you can rely on. Your caring government doesn’t really care about you.

Cruisin for a Bruisin      

“Sometimes people don’t want to hear the truth because they don’t want their illusions destroyed.” – Friedrich Nietzsche

The similarities between the horrific voyage of the Carnival Triumph and the tragic voyage of the dysfunctional ship of state we call America are many. We have a ruling class consisting of the President, Congress, Judiciary, Central bankers, Media titans, and goliath corporation CEOs who care not for the citizens of this country. You are ignorant peasants in their eyes. They only care about maintaining and expanding their wealth, control and power through the complete capture of our financial markets, political system and media propaganda to the masses. The health and welfare of the peasants isn’t even on their radar screen. The ruling class steering this ship of fools have no interest in the truth or the best long –term interests of the country. The vast majority of the passengers on this impaired listing ship prefers to believe the propaganda and lies spewed by the captain and his minions. They prefer the illusion of safety and security to the truth about the real condition of this ship. When the engines of this ship come to a grinding halt, their illusions will be shattered. Big government will come up small when it counts. The government propaganda and public relations will be revealed as nothing but hot putrid air and fecal matter.

Michael Ramirez Cartoon

Speaking of fecal matter, President Obama’s State of the Union address, which was watched by 33 million (down from 52 million in 2009) believers, was a perfect reflection of the thinking that led to the Carnival Triumph disaster. The reality facing the country is: $220 trillion of unfunded entitlement liabilities; a $16.5 trillion national debt; annual deficits exceeding $1 trillion; 48 million citizens on food stamps; 11 million people on SSDI; a true unemployment rate of 23%; true inflation exceeding 5%; record high gasoline prices; 0% interest rates for senior citizen savers; free money for criminal bankers provided by their sugar daddy Bernanke; not one criminal prosecution of a Wall Street executive for the greatest financial fraud in history; a war department that spends $1 trillion per year and fights undeclared wars around the world; a chief executive that invokes dictatorial executive orders to murder Americans with his fleet of predator drones and imprison citizens indefinitely without charges; and a bureaucratic nightmare called Obamacare that will drive up deficits, drive up healthcare costs for every family, enrich the healthcare industrial complex, drive doctors into retirement, and drive small businesses into bankruptcy.

Rather than deal with this reality, Obama chose the Carnival Cruise Line method of public relations, misinformation, denial and delusion. He has embraced the Big Lie concept as if he had created it. With a straight face he proposes “investments” in infrastructure, new jobs programs, new education initiatives, more green energy projects, pollution control schemes, bailing out more underwater mortgages, and raising the minimum wage, all done for the children – and it won’t add one cent to the deficit. Instead of leveling with the American people and explaining the dire economic issues confronting our nation that require sacrifice, reality based thinking, and tough choices, we got more platitudes, class warfare, divide and conquer, phantom spending cuts, disingenuous twisting of the truth, intellectual dishonesty and fuzzy math. Public relations spin created by Madison Avenue maggots and pronounced grandly by corrupt puppet politician hacks will not prevent the catastrophic engine failure that will leave this country adrift in a sea of its own feces.

Our cruise of illusions and delusions is headed for troubled water. The math challenged citizens on this ship have been enjoying the 24 hour pizza buffet without the labor required to pay for the bounty. When your leaders boldly lie and tell you we don’t have a spending problem, refer to proposed spending increases as “investments”, and hail $1.6 trillion of spending cuts that did not happen, you’ve got a ship that will be signaling SOS in the imminent future. Both political parties are laughable in their blathering about spending cuts as Bush and his Republican cronies drove spending from $1.9 trillion in 2001 to $3.0 trillion in 2008 with their unfunded wars, unfunded new entitlements (Medicare Part D), Wall Street bailouts, and creation of police state agencies (DHS); while Obama and his Democrat co-conspirators have driven spending up to $3.8 trillion in four years with new unfunded entitlements (Obamacare), expansion of warfare in the Middle East (they sit on top of “our” oil), $800 billion stimulus handouts, $60 billion hurricane relief pork handed out for $25 billion of uninsured losses, and bailing out banks, auto companies, homeowners, and other gamblers who took undo risks and lost to the tune of hundreds of billions. Politicians and the inhabitants of this country have forgotten there are consequences to their actions and inactions.

Carnival Cruise Line is trying to buy off the passengers with refunds and $500 bribes to keep them quiet and sedated, while protecting their continued hundreds of millions in profits and million dollar bonuses for their executives. The ruling class in the United States has bought off the American people with entitlement promises that can’t possibly be honored, food stamps, SSDI, tax rebates, homebuyer tax credits, loan modification programs, Cash for Clunkers, payroll tax cuts, $1 trillion of taxpayer financed student loans, taxpayer financed subprime auto loans, and a myriad of other handouts designed to keep the masses sedated, while the ruling class continues to pillage the national wealth. It’s as if the entire country has been charging their food, drinks, excursions, and purchases to their room number and the bill has reached $16.5 trillion, rising by $3 billion per day. This voyage is reaching an end and the bill is coming due. The engine is on fire but the captain is telling us all is well. Eventually, everyone will know the captain lied.

Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows that the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
That’s how it goes
Everybody knows
Everybody knows that the boat is leaking
Everybody knows that the captain lied
Everybody got this broken feeling
Like their father or their dog just died

Leonard Cohen – Everybody Knows

 

survival seed vault

SUBPRIME AUTO NATION

Have you heard the news? Auto sales are booming. Total sales for the month of August were 1,285,202 vehicles, according to Autodata Corp, the highest monthly sales figure for any August since 2007, when 1.47 million autos were sold in the United States. Year to date auto sales have totaled 9.7 million and are on track to reach 14.5 million. Between 2006 and 2007, auto sales ranged between 16 million and 18 million. They crashed below 10 million in 2009. The Keynesians running our government have pulled out all the stops to restart this engine of consumer spending. First they wasted $3 billion of taxpayer funds on the Cash for Clunkers debacle. Almost 700,000 perfectly good cars were destroyed in order to keep union workers happy.  This Keynesian brain fart distorted the used car market for two years, raising prices for cars needed by the working poor. After that miserable failure, they realized the true secret to selling vehicles is to give them away to anyone that can scratch an X on a loan document, with 0% interest for 60 months, financed by Federal government controlled banking interests. Add in some massive channel stuffing and presto!!! – You’ve got an auto sales boom.

General Motors sales are up 3.7% over 2011. Ford Motors sales are up 6% over 2011. The Obama administration continues to tout their saving of the U.S. auto industry with their bailout in 2009 that saved unions and screwed bondholders. If this strong auto recovery is not an illusion, how do you explain the two charts below? General Motors stock is down 42% since 2011. The highly proclaimed success story called Ford Motors has seen their stock collapse by 50% since 2011. This is surely a sign of tremendous success and anticipation of soaring profits for these bastions of American manufacturing dominance.

Chart forGeneral Motors Company (GM)

Chart forFord Motor Co. (F)

This is America, land of the delusional and home of the vain. The appearance of success is more important than actual success. The corporate mainstream media dutifully reports the surge in auto sales is surely a sign the economy is recovering and the consumer has finished deleveraging and is ready to spend again. The government propaganda machine proclaims the surging auto sales are due to their wise and forward thinking policies (like the Chevy Volt). Luckily for them, there are millions of gullible Americans who believe the storyline and are easily convinced that driving a $30,000 new car, financed over seven years, makes them a success. The decades of Bernaysian marketing propaganda has worked its magic on the government educated, math challenged citizenry. There are only two things that matter to the non-thinking auto buyer (renter) – the monthly payment and what the next door neighbor and his coworkers will think. Buying a fuel efficient car they can afford, paying it off in three or four years, and driving it for ten years, while saving the monthly car payment, is what a practical, rational thinking person would do. The fact that only 20% of the 9.7 million vehicles sold this year have been small cars and the average sales price of new cars sold is now $31,000 proves Americans are still living in a delusional fantasyland of cheap gas and monthly payments for eternity.

As gas prices surpass $4 per gallon across the country, somehow 4.7 million of the 9.7 million vehicles sold in 2012 have been pickups, vans, crossovers or SUVs. Three of the top eight selling vehicles are pickups. Luxury vehicle sales are booming, with Mercedes, BMW, Porsche, Land Rover and Audi showing double digit percentage sales gains over 2011. We’ve entered a recession, gas prices are approaching all-time highs, job growth is pitiful, and Americans continue to buy luxury gas guzzlers on credit. This will surely end well.

The average payment on a new car in 2012 is $461. For used cars, the average monthly payment is $346. Today, 77% of new car purchases are financed. About half of all used vehicles involve financing. Of those cars financed, 89% are through a loan vs. 11% with a lease. A critical thinking person might wonder how a country with 4 million less employed people than we had in 2007, median household net worth down 35%, and real wages lower than they were in 2007, could be experiencing an auto boom. The answer is a government/corporate/banker/media effort to funnel taxpayer funds to deadbeats across the land in a fruitless attempt to create a facade of recovery. Our governing elite are convinced that more debt peddled to the masses is the path to recovery for an economy that imploded due to excessive debt peddled to the masses in the first place. Essentially, it comes down to who benefits from the peddling of debt. It isn’t the masses, as they become enslaved in the chains of debt and monthly payments in perpetuity. Debt peddling benefits Wall Street bankers, politicians, and mega-corporations selling crap to the masses.

The storyline being sold to the vegetative dupes (watching Honey Boo Boo) that occupy space in this delusional paradise we call America, by the corporate media, is that consumers have deleveraged and are ready to resume their “normal” pattern of spending money they don’t have on stuff they don’t need. Of course, the facts always seem to get in the way of a good yarn. Consumers have never deleveraged. Consumer credit outstanding is at an all-time high of $2.58 trillion. The decline from $2.55 trillion in 2008 to $2.4 trillion in 2010 was NOT deleveraging. It was the Wall Street Too Big To Fail banks taking a big dump on the American taxpayers. They passed their bad debts to you through TARP, the Federal Reserve buying their toxic “assets”, and ZIRP. 

Revolving credit (credit card) debt peaked at just above $1 trillion in 2008 and “declined” to $850 billion during 2010.  The media storyline is that you buckled down and paid off your credit cards, therefore depressing consumer spending and creating a recession. Sounds convincing except for the fact that it’s a load of bullshit. The Federal Reserve’s own data proves it to be false. Your friendly Wall Street banks have written off $213 billion of credit card debt since 2008 and passed the bill to the few remaining taxpayers in this country. For the math challenged, this means that consumers have actually INCREASED their credit card debt by $68 billion since 2008. The bad news for our Chinese crap peddling mega-retailers is that the significantly poorer average middle class American household is using their credit cards to pay their property tax bills, IRS bills, and utility bills in order to survive.  

Credit Card Charge-off in Dollars 2005 – 2011 — Not Seasonally Adjusted:

Year Dollar Amount
2011 $46,017,459,671
2010 $75,090,106,350
2009 $83,179,901,000
2008 $53,506,353,600
2007 $38,149,440,000
2006 $32,111,934,400
2005 $40,634,994,400
Year & Quarter Dollar Amount
2012Q1 $8,772,385,443

 

The category of debt that barely budged in the 2009 collapse was non-revolving credit. It stayed in the $1.5 trillion range in 2009 and has since surged to over $1.7 trillion in 2012. What could possibly have made this debt skyrocket by $200 billion when the GDP has only grown by 12% over the same time frame? You guessed it – your corporate fascist friends in Washington DC and on Wall Street. Non-revolving debt consists of auto loan debt of $663 billion and student loan debt of approximately $1 trillion. Student loan debt has shot up by $300 billion since 2008. This student loan debt is being distributed, like candy by a pedophile, from the Federal government in an effort to artificially hold down the unemployment rate.

Approximately $500 billion of the student loan debt is held directly by the Federal government, up from $100 billion in 2008. The Feds guarantee the majority of the remaining student loan debt. Can you think of a more subprime borrower than a 40 year old former construction worker getting a liberal arts degree from the University of Phoenix, sitting at his computer in his underwear scratching his balls, and paying with a $10,000 Federal student loan from you? This fraudulent attempt to obscure the true employment situation will end in tears for the borrowers and the American taxpayer. It’s tough to make a loan payment without a job. The student loan bailout is just over the horizon and will cost you at least $300 billion. Delinquencies are already off the charts.

        

When has offering low interest debt in ample portions to people without jobs, income or assets ever backfired before? The bankers and politicians that control this country seem to be a one-trick pony. They will never admit that debt is the problem and reducing it the solution. The real solution would make them poorer, so their solution is to pour gasoline on the fire with more debt at lower interest rates to more people. The addict will keep injecting more poison into their system until sudden death. The bankers and politicians know we are a car-centric society and appeal to our vanity and poor math skills to keep the game going.     

During the first quarter of this year, total U.S. car loans totaled $52.5 billion. That’s 49% higher than the same period in 2009. Also during the first quarter, the average amount financed on new vehicles rose by $589, to $25,995, and for used cars by $411, to $17,050. Furthermore, buyers are stretching out payments for longer terms: The average length of new- and used-vehicle loans jumped a full month during the first three months of this year, to 64 and 59 months, respectively. The surge in auto sales is being completely driven by doling out more loans for a longer time frame to deadbeat borrowers. Subprime auto loans now make up 45% of all car loans and the vast majority of all used car loans.  They have even created a category called Deep Subprime. Borrowers classified as “deep subprime” (i.e. those with Vantage scores below 600) account for 10.7% of auto loans. You can also classify them as loans that will never be repaid.

 

Two thirds of all car sales are for used cars, so the fact that 37% of all new cars are being sold to subprime borrowers is exacerbated by the ridiculous lending practices for used cars. The fine folks at Zero Hedge have provided the outrageous data and a chart that proves beyond a shadow of a doubt what awaits the American taxpayer – another bailout. Zero Hedge has already revealed the GM fake recovery by detailing their channel stuffing over the last two years. Now they’ve dug up more dirt on why car sales are surging. What could possibly go wrong providing loans for more than the value of the asset to people with a history of not paying their debts?

  • Subprime borrowers received 56.46% of loans on used cars in the quarter, up from 52.70% a year earlier.
  • The average loan-to-value on new cars was 109.55%
  • The average used car loan-to-value ratio rose to 126.62%
  • 77% of Subprime Auto Loans are for a period greater than five years

It’s amazing how many cars you can sell when you aren’t worried about getting paid. This is the beauty of a fiat currency, a printing press, and a taxpayer available to pick up the tab after the drunken party gets out of hand. The chart below provides the details of our superhighway to disaster. The percentage of used car loans to prime borrowers is now at an all-time low, while the percentage of loans to subprime borrowers is near all-time highs reached just prior to the 2008 crash. When lenders cared about being paid back in the early 2000’s, they rarely made loans longer than five years. Today, more than 77% of all subprime used car loans are longer than five years and average FICO scores are now well below 600. Just to clarify – if your FICO score is below 600 – YOU ARE A DEADBEAT.

When you start to connect the dots, things that didn’t seem to make sense begin to crystallize. This is all part of the master plan concocted by Bernanke, Geithner, Obama and the Wall Street Shysters. The auto section of my local paper now makes sense. Offers of 7 year financing at 0% interest and monthly lease offers of $150 to $200 for brand new cars now are understandable. The newer model BMWs, Cadillac Escalades, Volvos, and Jaguars I see parked in front of the low income luxury gated townhome community in West Philadelphia now makes sense. A pizza delivery guy driving a new Lexus is now explainable.   

The master plan is fairly simple. The Federal Reserve lends money to the Wall Street banks for 0% interest. These banks then turn around and provide credit card debt at 13% interest, new & used car loans to prime borrowers at 5% interest, and new & used car loans to subprime borrowers at 16%. When you can borrow for free, you can take a chance that a significant number of your borrowers will default. Essentially, Ben Bernanke is screwing the prudent savers and senior citizens by paying them 0.15% on their savings in order to subsidize the bankers that destroyed the country so they can make auto loans to the same people who took out the zero percent down interest only no doc mortgage loans in 2005. In addition, Wall Street knows the Bernanke Put is still in place. If and when these subprime loans explode in their faces again, Bennie, Timmy and Obamaney will come to the rescue with your tax dollars. Its heads you lose, tails you lose, again.    

 The chart below is like a who’s who of TARP recipients. The top 20 auto lenders control half the market. And look at the leader of the pack. Our friends at Ally Bank are the market share leader. You remember Ally Bank – they conveniently changed their name from GMAC (also known as Ditech – biggest subprime mortgage lender) after losing billions and being bailed out by you. They still owe you $11 billion and are 85% owned by the U.S. Treasury. No conflict of interest there. You have the biggest auto lender on earth controlled by the Obama administration. Do you think they have an incentive to make as many loans as humanly possible to help Obama create the illusion of an auto recovery? The only downside is for the American taxpayer when we have to eat billions more in Ally/GMAC losses. This insolvent excuse for a lending institution has been extremely aggressive in the subprime auto lending market and has forced the other wannabes – Wells Fargo, JP Morgan, Capital One and Bank of America – to lower their lending standards. Does this scenario ring a bell? 

top_20_car_lenders_market_share

We’ve become a subprime auto nation, addicted to easy debt, living lives of hope, delusion and minimum monthly payments. Storylines about economic recovery, fraudulent government statistics showing lower unemployment, feel good propaganda from the corporate mainstream media, and a return to easy money debt fueled spending does not constitute a real recovery. Until the bad debt is purged from the system and saving takes precedence over spending, the country will stagger and ultimately fall under the weight of its immense debt. We are lost in a blizzard of lies. This subprime fueled engine of recovery will propel the country into the same canyon of reality we entered in 2008. The crack up boom approaches.

 

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ECONOMIC REPORT CARD – FAIL

We are now three and one half years into Barack Obama’s presidency. I thought a few pertinent charts would help us assess the success of his economic policies. Upon his election he demanded an $800 billion stimulus package in order to keep the unemployment rate from surpassing 8%. The $800 billion was to be spent over two years we were told and then government spending would be scaled back to pre-stimulus levels. There were 145 million Americans employed when Obama was elected. There are 9 million more working age Americans today than there were in 2008. There are now 142.4 million employed Americans. So, we’ve added 9 million potential workers and still have 2.6 less Americans employed. We have the same number of Americans employed as we did in early 2006, when there were 17 million less working age Americans.

The Obama stimulus plan was passed with everything he wanted. Democrats controlled the House and Senate and gave him exactly what he proposed. By October 2009, the unemployment rate was 10%. Obama’s stimulus package and economic policies have been so successful that he has been able to get the unemployment rate all the way down to 8.2% after three and one half years, even though he said his stimulus package would keep the unemployment rate under 8%. And all it took to get the unemployment rate down to 8.2% was for 8 MILLION Americans to leave the labor force. A critical thinking person who doesn’t swallow the crap peddled by the BLS and the rest of the government propaganda machine might question WHY 8 million Americans would leave the workforce when people desperately need income. If the labor participation rate had stayed constant, the current unemployment rate is 10.9%.

070612rbjune

The long-term chart below tells the true story. The BLS classifying millions as not in the labor force is a crock. The Obama apologists and sycophants peddle a false storyline about Baby Boomers retiring as the cause for this labor force decline. The fact is people over the age of 55 have the highest participation rate in history and it continues to rise. Of the 142.4 million employed Americans, only 114 million works more than 35 hours per week, with 28.4 million working part-time. That means that 20% of those employed are part time workers with no benefits. In 2008, prior to the ascendency of Obama, there were 125 million full-time workers and 20 million part-time workers. Obama has been able to increase the percentage of part-time workers from 14% to 20% in just over 3 years. Remember this fact when Obama touts the 3 million new jobs he’s created since 2010.

If you were wondering what the 8.5 million Americans who have left the labor force since 2008 were doing, look no further than the millions of bedrooms now functioning as classrooms for the University of Phoenix and the other on-line, for profit diploma mills that have proliferated with the doling out of hundreds of billions in cheap government student loans. These for profit diploma mills know how to game the system and get their money even if the students drop out after a few months. They educate 12% of students, receive 25% of federal student aid and account for nearly 50% of loan defaults. Sounds like a great business model.

Low interest Federal government loans have skyrocketed from $100 billion when Obama took office to $450 billion today. Total student loan debt has surpassed $1 trillion, with the average student graduating with $25,000 of debt and many more burdened with $100,000 or more of debt. Those part-time jobs making lattes at Starbucks aren’t cutting it. Default rates are already at a ten year high and are poised to skyrocket as more people graduate into a jobless job market. Not only is the American taxpayer on the hook for the $450 billion of direct Federal student loans, but the Federal government is guaranteeing another $450 billion. When the student loan bubble pops, the taxpayer financed bailout will be epic. And this is all being engineered by the Obama administration in order to artificially reduce the unemployment rate. Does this graph remind you of another bubble that resulted in a few problems for the American taxpayer?

After three and a half years, Obama’s policies have led to 11 million less full-time workers and 8 million more part-time workers – just like he drew it up on the board when he committed $800 billion of your tax dollars to saving our economy through classic Keynesianism. Obama declared the stimulus would be a two year jolt to get our economy back on track. Federal government spending was $2.7 trillion in 2006, $2.7 trillion in 2007 and $3.0 trillion in 2008, the last three years of Bush’s administration. If spending stayed on a standard trajectory, it would have been $3.1 trillion in 2009, $3.2 trillion in 2010, $3.3 trillion in 2011 and $3.4 trillion in 2012. With the end of the Iraq occupation in 2010, it should have dropped by $200 billion, resulting in total spending of $3.1 trillion in 2011 and $3.2 trillion in 2012.

Obama declared the stimulus would be short-term. Federal government spending should have risen to $3.5 trillion in 2009, $3.6 trillion in 2010 ($300 billion stimulus – $200 billion Iraq withdrawal), and then revert back to $3.3 trillion in 2011 and $3.4 trillion in 2012. Let’s see whether Obama was honest in his promises:

Federal Government Spending

2009 – $3.5 trillion

2010 – $3.5 trillion

2011 – $3.6 trillion

2012 – $3.8 trillion

After three and one half years of stimulus spending, Cash for Clunkers, Home Buyer Tax Credits, mortgage modification programs, Fannie, Freddie & FHA accumulating billions in bank losses, zero interest rates, QE1, QE2, Operation Twist, unlimited student loans, wars of choice in the Middle East, mark to fantasy accounting standards for Wall Street, and hundreds of billions in bonuses for criminal bankers, we are left with a $5.3 trillion (50% increase) higher national debt and a $300 billion (2.3% increase) higher real GDP. That’s not exactly a big bang for your Keynesian buck. The response you will get from the Obama apologists is, “Imagine how bad it would have been if we didn’t spend the money”. This is a classic liberal response when their solutions are a total failure. Krugman will declare that if we had only spent another $2 trillion all would be well.

As you can see, Obama and all the politicians in Washington DC are really good at spending your money on pork projects, paying off campaign contributors and compensating their corporate cronies. Do you see any reversion back to normalized spending? How can current spending be $300 billion higher than the two stimulus years if Obama was telling the truth in 2009? The Obamanistas declare we are still in an emergency and must borrow and spend to save the economy. The emergency never ends for politicians of both parties. This is how they have bastardized John Maynard Keynes’ theory. They love to implement spending when the economy is in the dumper, but they forget his admonition to pay down debt during the good times. It never happens. There will always be another emergency. Even 2nd grade level Sesame Street fans can see the Federal government spending and debt accumulation never reverses. It couldn’t be any more obvious, unless you are an intellectually dishonest Keynesian ideologue hack (aka Krugman).

This brings us to the crowning economic achievement of the Obama administration. His most successful program is unequivocally the SNAP food stamp program. When Obama assumed power in January 2009 there were 32 million Americans on food stamps and the annual cost of the program was $44 billion. Today there are 46 million Americans on food stamps and the annual cost is pacing at $75 billion. He has been able to get fully 15% of the U.S. population enrolled in this fantastic program and the Department of Agriculture is even running advertisements to convince more people to join.

And don’t worry about any restrictions. You can buy as much soda, ice cream, cheetos, and fudge brownies with your SNAP card as you choose. Of course, you are still free to purchase higher end fare.

A cynical less trusting soul than me might even conclude that Obama’s goal is to provide government entitlements to as many people as possible in order to win votes in the upcoming election. One might ask how he can tout an economic recovery and the millions of “new” jobs he has created since 2010, when 6 million people have been added to the food stamp rolls since his economic recovery officially began in 2010. I’m confused by the Obama distinction between success and utter failure.

Not far behind the food stamp program, the SSDI program has been another resounding Obama success. He has been able to enroll twice as many participants in this program as jobs created since the end of the recession. There are already 10 million people on SSDI costing the American taxpayer in excess of $150 billion per year. There are 250,000 people per month applying for benefits and the program will be broke by 2015. In a shocking development, when people began to roll off the 99 week unemployment gravy train, the number of new SSDI applications soared. I guess they were depressed at not being able to collect unemployment for two more years.

Bob Adelman recently summed up the SSDI scam:

“The program, funded federally but administered by the states, is being milked by many who have run out of unemployment benefits and other resources and haven’t been able to find work. At present one out of every eight working-age, non-retired individuals receive disability payments, some for “mental disorders” and “back pain.” Claims for mental disorders, for instance, have more than tripled from 10 percent of cases in 1982 to 32.8 percent in 2012, with half of those based on “mood disorders” such as depression or anxiety. Back or neck “problems” have increased by 31 percent and were the top cause of disability for 50- to 64-year olds. Depression and anxiety and other emotional problems increased by 20 percent, and now constitute one-third of all disability claims. Once on the rolls, beneficiaries have little incentive to return to work because their disability entitles them to additional benefits such as food stamps, Medicaid, Section 8 housing, and student-loan forgiveness. As a result less than one half of one percent of those on disability ever go back to work.”

I’m depressed by the results of Obama’s economic policies. Maybe I should apply for SSDI.

It appears that former college professor Obama never paid attention in his macroeconomics undergraduate course. The “guns versus butter model” doesn’t enter the equation for a profound thinker like Barack. Why do hard choices need to be made when Ben Bernanke is manning the printing press? In the real world, a nation has to choose between two options when spending its finite resources. It can buy either guns (invest in defense/military) or butter (invest in production of goods), or a combination of both. This can be seen as an analogy for choices between defense and civilian spending in more complex economies. Politicians and bankers have been ignoring this rational model since 1971 when Nixon closed the gold window. Why make difficult choices when you can borrow and print your way to prosperity? As a country we’ve chosen guns, butter, BMWs, McMansions, free unfunded healthcare, unfunded pensions, unfunded sickcare, and DHS implemented security for all. In order to prove himself tougher than George W., Obama, the socialist, has actually increased war spending by 23% to an all-time high. Fiat currency is an amazing invention. Guns, butter and healthcare for all.

Mainstream media liberals like Ezra Klein dutifully trot out charts and storylines trying to convince the ignorant masses that Obama is not to blame for the soaring national debt. They declare it was the Bush tax cuts and his wars. This blame Bush storyline is growing old as Obama has already extended the Bush tax cuts once, ramped up wars in the Middle East and cut payroll taxes for the last two years. The Office of Management and Budget has calculated the total increase in the national debt will be $7.8 trillion after eight years of Obama, 269% more than was accumulated during the Bush reign of error. I believe the $7.8 trillion is ridiculously optimistic. The national debt has increased by $5.3 trillion since Obama took office. It will go up another $200 billion by the end of this fiscal year. It will surely exceed $1 trillion per year during a 2nd Obama term as he would extend most of the Bush tax cuts, extend the payroll tax cuts, continue to increase war spending, and the hidden delayed Obamacare costs would arrive. His eight year report card will show a $9.5 trillion increase in the national debt, reaching the magic grand total of $20 trillion. The national debt to GDP ratio will be close to 120%.

This scathing assessment of Obama’s economic policies is by no means an endorsement of Mitt Romney or his economic plan, since he has never provided a detailed economic plan. After four years of a Romney presidency, the national debt will also be $20 trillion as his war with Iran and handouts to his Wall Street brethren replace Obama’s food stamps and entitlement pork. There was only one presidential candidate whose proposals would have placed this country back on a sustainable path. The plutocracy controlled corporate mainstream media did their part in ignoring and then scorning Ron Paul during his truth telling campaign. The plutocracy wants to retain their wealth and power, while the willfully ignorant masses don’t want to think. The words of Ron Paul sum up what will occur over the coming years as the interchangeable pieces of this corporate fascist farce drive the country to ruin:

“Deficits mean future tax increases, pure and simple. Deficit spending should be viewed as a tax on future generations, and politicians who create deficits should be exposed as tax hikers.” 

“A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank.”

“Believe me, the next step is a currency crisis because there will be a rejection of the dollar, the rejection of the dollar is a big, big event, and then your personal liberties are going to be severely threatened.”

 

The politicians, bankers and corporate titans running this country are too corrupt and cowardly to reverse the course on our path to destruction. The debt will continue to accumulate until our Minsky Moment. At that point the U.S. dollar will be rejected and chaos will reign. The Great American Empire will be no more. At that time sides will need to be chosen and blood will begin to spill. Decades of bad decisions, corruption, cowardice, ignorance, greed and sloth will come to a head. The verdict of history will not be kind to the once great American Empire.

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ASLEEP AT THE WHEEL

Americans have an illogical love affair with their vehicles. There are 209 million licensed drivers in the U.S. and 260 million vehicles. The U.S. has a higher number of motor vehicles per capita than every country in the world at 845 per 1,000 people. Germany has 540; Japan has 593; Britain has 525; and China has 37. The population of the United States has risen from 203 million in 1970 to 311 million today, an increase of 108 million in 42 years. Over this same time frame, the number of motor vehicles on our crumbling highways has grown by 150 million. This might explain why a country that has 4.5% of the world’s population consumes 22% of the world’s daily oil supply. This might also further explain the Iraq War, the Afghanistan occupation, the Libyan “intervention”, and the coming war with Iran.

Automobiles have been a vital component in the financial Ponzi scheme that has passed for our economic system over the last thirty years. For most of the past thirty years annual vehicle sales have ranged between 15 million and 20 million, with only occasional drops below that level during recessions. They actually surged during the 2001-2002 recession as Americans dutifully obeyed their moron President and bought millions of monster SUVs, Hummers, and Silverado pickups with 0% financing from GM to defeat terrorism. Alan Greenspan provided the fuel, with ridiculously low interest rates. The Madison Avenue media maggots provided the transmission fluid by convincing millions of willfully ignorant Americans to buy or lease vehicles they couldn’t afford. And the financially clueless dupes pushed the pedal to the metal, until everyone went off the cliff in 2008.

America is proving itself to be insane as described by Albert Einstein:

“Insanity: doing the same thing over and over again and expecting different results.”

The 2008 cataclysm was created by the voracious greed and avarice of Wall Street, sustained by corrupt politicians in Washington, non-existent regulation by banking regulators, Federal Reserve easy money policies, unspoken guarantees of Fed bailouts if Wall Street excess risk taking blew up, and millions of delusional Americans with an unlimited credit line. Excessive debt created the problem. Adding debt is the present solution to the problem. And the accumulation of debt will lead to a tipping point that destroys the U.S. dollar and topples the Great American Empire.

This spiral of government sponsored debt financed debacles has shockingly accelerated as we have supposedly been experiencing an economic recovery for the last two years. The 2008 financial meltdown was the result of too much debt peddled to too many people who never had the means or intentions to repay the debt. The Wall Street peddlers of debt didn’t care if it got repaid because they had already packaged it, bribed Moodys and S&P to rate the toxic garbage as AAA, and sold it to their “clients”. Then they made derivatives bets that it wouldn’t be repaid and raked in billions more as their Ponzi scheme unwound. There was just one problem with their master plan. The Wall Street titans made their derivate weapons of mass destruction so complicated and confusing that their own evil organizations of Harvard MBAs didn’t understand them. Enough hubristic CEOs existed at enough financial firms (AIG, Lehman, Bear Stearns, Citicorp) to bring the entire system crashing down as the toxic derivatives intertwined every major institution in the worldwide banking cabal.

What has happened since those dark days of 2008 is mind blowing in its epic proportions and epic stupidity. To quote Doug Casey, “Not only haven’t we done the right thing, we’ve done the exact opposite of the right thing.” It is absurd and ultimately suicidal to cure a debt disease by administering massive doses of more debt. But that is exactly what those in power have done. The National Debt has risen from a $9.7 trillion to $15.6 trillion, a 61% increase in three and a half years, while our real GDP has grown by $244 billion, a 1.9% increase. Not exactly a fabulous return on investment. But at least there are 7 million less people employed today than there were at the peak in 2008. Plus, senior citizens and middle class savers have seen $450 billion of annual interest income they were earning in 2008 pilfered from their savings accounts and handed to the Wall Street banking elite through Ben Bernanke’s ZIRP.

The Federal Reserve has tripled their balance sheet (actually your liability) from $950 billion to $2.9 trillion. Various other Federal government controlled bureaucracies (Fannie Mae, Freddie Mac, FHA) have stealthily subsidized hundreds of billions in losses on behalf of the criminal Wall Street banks. Other Federal government run agencies (BLS, BEA, CBO) exist solely to massage, manipulate, misuse, and malign economic data and financial projections in order to muddle, misinform and mislead the American people about the true nature of our ongoing economic calamity. Propaganda and obfuscation are the scheme of choice by the powers that be. They are counting on decades of government run public education to insure that millions of non-critical thinking dullards will be unqualified or uninterested in the truth about our grim economic prospects. The oligarchy’s master plan has centered on houses, automobiles, and the illusion of a jobs recovery.

Whenever I’m trying to understand the motivations of the sociopathic Washington politicians, Wall Street bankers and mega-corporation CEOs, I always come back to the words of master manipulator Edward Bernays:

“The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. …We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of. This is a logical result of the way in which our democratic society is organized. Vast numbers of human beings must cooperate in this manner if they are to live together as a smoothly functioning society. In almost every act of our daily lives, whether in the sphere of politics or business, in our social conduct or our ethical thinking, we are dominated by the relatively small number of persons…who understand the mental processes and social patterns of the masses. It is they who pull the wires which control the public mind.” – Edward Bernays, Propaganda, 1928

The relatively small number of wealthy men thinks they are smarter than the masses and can manipulate them through their control of the government, the financial system and the media. The players in this game remain the same, but they have switched positions. The debt accumulation which led to the 2008 collapse was heavily concentrated on the books of the ruthless Wall Street psychopathic banks and on the backs of a readily pliable public. Today, the Federal government and the Federal Reserve have switched positions with their banker puppet masters, essentially shifting all past and future debt onto the backs of the American middle class. The Federal Reserve Flow of Funds Report, issued two weeks ago, reveals the extent of this blatant scheme to screw the American people in order to save and further enrich the Wall Street psychopaths who won’t be satisfied until their looting and pillaging leads to complete collapse and the world erupting into a world war. The despicable facts are as follows:

  • Total U.S. credit market debt has RISEN from $50.9 trillion in 2007 to $54.1 trillion as of 12/31/11, a $3.2 trillion increase.
  • Household debt has declined from $13.8 trillion in 2007 to $13.2 trillion as of 12/31/11. The mainstream media would point to this $600 billion decline as proof that Americans have embraced austerity and have learned their lesson. Of course that would be a lie. The Wall Street banks have written off $200 billion of credit card debt and the 5 million completed foreclosures extinguished another $800 billion of mortgage debt. The truth is that consumers have continued to pile up debt.
  • Much has been made of corporate America being flush with cash. If they are so flush, why have they added $900 billion of debt since 2007, an increase of 13% to an all-time high of $7.8 trillion?
  • The revealing data shows up in the financial company data. These Wall Street national treasures have reduced their debt from $17.1 trillion in 2008 to $13.6 trillion as of 12/31/11. How were they able to do this, while writing off $1 trillion of consumer debt?
  • You guessed it. They dumped it on the American taxpayer. The Federal government increased their debt from $5.1 trillion to $10.5 trillion. And our old friends called government sponsored enterprises (Fannie, Freddie, Student loans) increased their debt from $2.9 trillion to $6.2 trillion. Wall Street banks and millions of deadbeats who chose to game the system and live the good life have effectively foisted their $4.5 trillion of debt upon the backs of middle class taxpayers who lived within their means. Another $4.2 trillion has been pissed down the toilet by Obama with his $800 billion Keynesian porkulus program, home buyer tax credits, cash for clunkers, green energy boondoggles, 47 million people on food stamps success story, 99 weeks of unemployment, doubling of SSDI membership, and his multiple wars of choice in the Middle East.

The average hard working, taxpaying American has been enslaved in debt of such proportions that they will never be able pay it off. Your share of the $15.6 trillion National Debt is now $50,000, and growing by $4,500 per year. Your share of the future unfunded liabilities, created by the people you elected, is approximately $350,000. This crushing burden is in addition to the $13.8 trillion of mortgage, credit card, student loan, and auto loan debt Americans have accumulated in the last three decades of delusion. Forty percent of all credit card users do not pay-off their credit card every month and carry an average balance of $16,000 at an average interest rate of 15%. Good to see the Wall Street banks passing along some of their 0% borrowing windfall to their “customers”.

Source: TF Metals Report     

Pedal to the Metal

You may have noticed the corporate mainstream media, crooked politicians and lying Wall Street shills attempting to pound the economic recovery storyline into the consciousness of a terminally distracted populace. This is part of the Bernays inspired master plan of a small cabal of powerful men to control the public mind and keep our mass consumer society functioning smoothly so these corporate fascists can continue to gorge upon the carcass of a once vital republic. Decades of mass media consumer indoctrination, dumbing down of children through public school education and the conscious manipulation of attitudes and opinions of the malleable masses has succeeded. The invisible government of the rich and powerful has effectively converted responsible citizens into mindless consumers of products, bought with debt, peddled by associates of the invisible government. The crowded shopping malls, automobile showrooms, and restaurants are a testament to the power of propaganda and the intellectual bankruptcy of a vast swath of the American population.

Only psychopaths would encourage and condone behavior that would financially enrich themselves while destroying the lives and personal wealth of millions. The invisible government (Wall Street bankers, D.C. political hacks, mega-corporate executives, mass media titans) exhibits all the traits of a psychopath as described in a recent Harvard Business Review article:

  • Glibness and superficial charm
  • Lack of empathy
  • Consistent decisions in their self-interest, even where it is ethically questionable
  • Chronic, sometimes transparent lies, even with regard to minor things
  • Lack of remorse
  • Failure to take responsibility for their actions, and instead blaming others
  • Shallow emotions
  • Ignoring responsibilities
  • Persistent focus on gratifying their own needs at the expense of others
  • Conning and manipulative behavior

Do you recognize any of these traits in our president (Obama), congressmen (Weiner, McCain) Wall Street bankers (Dimon, Blankfein), corporate CEOs (Immelt), and mass media titans (Murdoch)? These people and many more like them will stop at nothing to further their self-serving agenda. They are intelligent and highly skilled at lying and manipulation. They lack empathy and don’t care what others think as they relentlessly pursue riches and power no matter the damage they inflict upon the people they so casually abuse, scorn and look down on. These are the people attempting to convince you that the path to economic recovery is through increased spending by consumers, utilizing debt supplied by them.

The entire recovery theme is a sham, financed by the Federal government with your tax dollars and the tax dollars of future unborn generations. I’ve arrived at this conclusion after pondering what I’ve been seeing with my own two eyes and through the insightful analysis found in the non-mainstream media (Zero Hedge, Jesse, Mish and many others). The mantra being pounded relentlessly by the mainstream media is that retail sales are booming and the unemployment rate has declined significantly, therefore an economic recovery is at hand. The chart below reveals the dramatic surge in vehicle “sales”. The annual pace is all the way back to 15 million, from the low below 10 million in 2009. The brief surge in mid-2009 was due to Obama’s highly successful Cash for Clunkers program that cost taxpayers $2.8 billion or $24,000 per car sold. It was highly successful for Government Motors (GM) and their union workers (Obama voters).

This rapid surge in auto sales has also resulted in a boost to overall retail sales, which have reached an all-time high. Automobile “sales” make up 18% of the retail sales number, by far the largest segment. The “record” retail sales are the result of surging gasoline sales, swelling food inflation, and a somewhat confusing cascade of car sales. It’s somewhat confusing until you realize how and why the 50% rise in vehicle sales has been accomplished by our Bernaysian masters. Retail sales in the first two months of 2012 are up 8.2%, led by a 9.2% wave of motor vehicle sales. Auto sales are at levels last seen in early 2008. This seems peculiar, since there are still 7 million less employed people in the country than in early 2008 and the real median household income is 9% lower than it was in early 2008. Real average hourly earnings have fallen for the last three months and are 1.2% lower than they were in October, 2010. A critical thinking person might ask himself, how could American households with less jobs and lower wages increase their purchases of automobiles by 50% in the last two years?

The answer is just what you expected. A phenomenal amount of debt peddled to people without the means or intent to ever repay the debt by the usual suspects: Ally Financial, Capital One, Wells Fargo, JP Morgan and Bank of America. These fine upstanding institutions control 25% of the auto loan market. They doled out $24 billion of new car loans in the 4th quarter of 2011, with an outpouring of loans to those downtrodden subprime borrowers and an extension in the average loan length beyond 6 years. Subprime borrowers now account for 45% of all auto loans. As a refresher, subprime borrowers generally have little or no assets, have a history of late payments or defaulting on obligations, and have low incomes. No worries there. When has making hundreds of billions in subprime loans ever caused a problem before. Ally Financial CEO Michael Carpenter had this to say about the market:

“We have seen crazy, irrational competition in the subprime end of the marketplace, which is one reason why more banks are targeting the lower end of the market.”

Bank of America and Capital One increased their market shares of the auto loan market by 40% in the 4th quarter as they attempt to keep up with Ally Financial in reckless lending to deadbeats. If you aren’t familiar with Ally Financial, then you should be. You own 74% of this POS. Here is a brief summary:

  • GMAC, after contributing mightily to the financial crash of 2008 through their reckless subprime mortgage (Ditech) and auto lending and requiring a $16 billion bailout from American taxpayers, changed its name to Ally Financial in 2009. It’s sort of like John Dillinger using acid to try and change his fingerprints.
  • Ally Financial provides financing for all GM and Chrysler customers and dealers and is the market share leader in auto lending.
  • Ally Financial still owes the American taxpayers $12 billion.
  • Ally Financial is a ward of the Federal government and will do anything it is told to do by Obama. The recent foreclosure fraud settlement required Ally to pay $250 million to the customers it defrauded. They will only pay $110 million based on their inability to pay $250 million. Sounds like a company that should be increasing their subprime loan portfolio. Obama and his minions instead received a commitment from a lender they own and control to cut principal for delinquent borrowers and refinance underwater borrowers. And Obama didn’t even offer us a cigarette afterwards.
  • Ally Financial, along with Capital One, failed the Federal Reserve stress test last week. Ally, Capital One, Bank of America, and Citicorp are dead banks walking. Brilliant bank analyst Chris Whelan succinctly sums up their fate after analyzing the Federal Reserve stress test results:

“When you get to junior liens and HELOCs you will understand why I have been saying that Ally Financial and BAC need to be restructured. With a plus 20% loss rate on second liens, Ally has substantial capital issues to put it mildly. But look at C right behind them with a loss rate in the mid-teens followed by BAC. Yikes. This type of loss rate is typical for credit cards and both of these second lien portfolios are > $100 billion.

And the real lesson, dead friends, is that the good old USA is a subprime nation, a society of individuals whose aggregate probability of default is probably around a “B” to “CCC.” Convert the loss rates in the stress tests to bond ratings using the break points from Moody’s or S&P and tell me what you see.

Last point on Ally Financial: Yikes. Probably the weakest results of the whole group. Memo to POTUS: File Ch. 11, sell auto biz and bank to GM in 365 sale. Liquidate ResCap. Declare success. But do not be surprised if BAC follows if Ally goes into bankruptcy. The one thing that the Fed almost completely ignores is the vast financial risk facing BAC and Ally, and to a lesser degree, WFC, JPM and C.”

When you understand this background, anecdotal evidence that seems absurd starts to make sense. I spend two hours per day on the road and have plenty of time to observe my surroundings. I drive through the Mantua section of West Philadelphia every day. The average household income in this neighborhood is $16,000. The average home value is $25,000. The true unemployment rate exceeds 40%. At least 20% of the properties are vacant and the neighborhood resembles Baghdad. Last week, I counted six brand new vehicles with registration tags in their back windows in a one block radius of this neighborhood. Every block has newer model Ford Expeditions, GMC Sierras, BMWs, Acuras, Cadillacs, and Mercedes sprinkled among the squalor. Someone is loaning these people the money to buy these $40,000 vehicles or approving them for leases. This neighborhood puts the SUB in subprime. No financial firm worth spit would make a six year $35,000 auto loan to someone in this neighborhood unless they were instructed to do so by the Federal government or were guaranteed that the future loss would be borne by someone else – YOU.

The GM, Chevy and Chrysler car dealer ads in my local paper actually have the following headline in bold:

Have credit problems? NO PROBLEM

Most of the ads don’t even list the prices of the vehicles. They either tout the 72 month 0% financing or they list the monthly lease cost. It seems that virtually any vehicle can be leased for $300 per month or less these days. This might explain why 25% of all vehicles are leased today. In reality, 25% of the cars being “sold” today are really just being rented for three years. Both the lessors and lessees are basing these transactions upon delusions and assumptions which will likely blow up in their faces and again cost – YOU.

An auto lease payment is based upon interest rates, the cost of the car, subsidies from the auto makers, and the expected residual value of the vehicle at the end of the three year lease. When have financial companies ever miscalculated any of these assumptions? How about 2001-2002 and 2008-2009? The reason auto leases are ridiculously low is because Ben Bernanke’s zero interest rate policy is providing free money to Ally Financial and the rest of the Wall Street zombie banks and creating huge mal-investment – Again. The auto makers see no risks, as the used car market has been extremely strong for the last year and they anticipate continued strong demand for cars as they come off their three year leases. Therefore, they have estimated the residual values three years out at a very high level. The strong used car market may have been slightly impacted by the destruction of 700,000 vehicles under Obama’s Cash for Clunkers debacle. The combination of excessively low interest rates and excessively high residual value estimates leads to ridiculously low lease rates. The sales statistics for the first two months of 2012 reveal why this will blow up in the faces of lessors and the predictably incompetent financial drug dealers.

Feb-12

 % Chg Feb’11 YTD 2012
Cars

612,145

23.9

1,080,466
Midsize

304,601

25.6

532,818
Small

225,061

26.5

397,838
Luxury

81,476

22.7

147,647
Large

1,007

-85.8

2,163
Light-duty trucks

537,251

7.6

982,217
Pickup

148,956

13.8

273,430
Cross-over

225,621

0.4

412,974
Minivan

64,849

15.3

111,764
Midsize SUV

54,827

15.3

101,813
Large SUV

16,783

-5.4

31,566
Small SUV

13,926

24

25,951
Luxury SUV

12,289

12.4

24,719

 

It seems the delusional American public and their love affair with big SUVs, pickups, and their 8 cylinder luxury wheels will continue until they are hit over the head with the baseball bat of $5 a gallon gas. The Madison Avenue Bernays disciples have molded the minds and formed the opinions of millions of easily influenced, financially ignorant superficial Americans into believing the vehicle they drive is a true measurement of success. These people choose being up to their eyeballs in auto debt or perennial renters of luxury vehicles to appear prosperous to their neighbors and coworkers rather than actually achieving real success through the time honored tradition of earning more than you spend and saving the difference. The fact is that 80% of all the vehicles being sold in the U.S. are SUVs, pickups, crossovers, minivans, and larger cars that get 25 mpg or less.

As gas prices continue to rise towards $5 per gallon, a war with Iran looming in the near future, interest rates beginning to rise, and the country headed back into recession (MSM is wrong about the recovery), the car makers are poised to again experience enormous losses. Auto makers will have a sense of déjà vu as they have committed an epic blunder by overestimating the future value of the gas guzzlers they have been leasing. As a result, when the leases expire and auto makers take back the SUVs and pickups that get 15 mpg and attempt to resell them, the losses will run into the billions of dollars. There will be no one buying used gas guzzlers, with gas costing $5 per gallon. As the millions of subprime borrowers realize they can’t afford car payments, paying 40% more for gas, and trying to put food on the table, auto loan delinquencies will soar. This is as predictable as the housing market collapse in 2005. None of this matters to the psychotic governing elite who only care about the illusion of recovery today. These vampire squids will not be satisfied until every drop of blood is sucked out of the national carcass.

Ally Financial is part of the Federal Government and is being used to promote the agenda of the governing elite. They join Fannie Mae, Freddie Mac, and the Federal student loan peddlers as the primary tools of the corporate fascist powers that control this country. The nominal private ownership of these companies is a sham, as the state dictates how they will be run and who they will benefit. This corporate fascist empire is built upon an unholy alliance between big banks, big business, big media and big government, with each protecting and enriching each other. The psychopaths who are drawn to these organizations want to control people. They desire power, wealth, and the ability to manipulate public opinion. Their tactics include spreading fear and an atmosphere of paranoia in order to convince the populace that more government action will improve their lives. We are headed towards economic and financial collapse as these psychopaths will never willingly reverse course and the majority of our population has become so degraded (have you been to a Wal-Mart lately) that they are incapable or unwilling to confront the psychopaths.

Doug Casey in the latest Casey Report explains how evil and stupidity are a deadly combination:

“I would like to suggest that what really distinguishes political elites from normal people is not just a predilection for stupidity but a real capacity for evil. Evil might best be defined as the intentional and usually gratuitous commission of acts that are cruel or unjust. A person who commits many evil acts is a sociopath. The sociopaths who are naturally drawn to government eventually come to dominate it. They’re very dangerous people. They reset the social mores of the country they control. After a certain point, a critical mass is reached, and it’s GAME OVER. I suspect we’re approaching that point.”

The next time you hear a government drone, Wall Street shyster, or corporate mainstream media whore declare we are experiencing an economic recovery try not to laugh out loud. Their agenda doesn’t include making your life better. You are not in the club. Prepare accordingly.  



 

WHO ARE THE EXTREMISTS?

“Deficits mean future tax increases, pure and simple. Deficit spending should be viewed as a tax on future generations, and politicians who create deficits should be exposed as tax hikers.” – Ron Paul

 

The Debt Ceiling Reality Show approaches its grand finale in the next week. The world breathlessly awaits the shocking conclusion. The debt ceiling will be raised. The world will be saved. Wall Street will rejoice. Americans can focus on the important stuff again, like Casey Anthony’s upcoming book, who will win this week’s Toddlers and Tiaras pageant, and the latest app created for their iPads. Based on my observations over the last few weeks, I’m absolutely sure that 90% of the politicians in Washington DC would lose on Are You Smarter than a 5th Grader?

Still, the mainstream media and the performing puppet politicians need to create a fearful frenzy among the masses to insure maximum public relations exposure for their lies, misinformation, and mistruths. Wall Street will exert their control over the debate by threatening to crash the market if they don’t get what they want (aka TARP). I generally ignore the talking heads on Fox, MSNBC, CNN, and CNBC, as I could learn more from watching Cash Cab than listening to ideologues spouting their talking points. But, last night I happened to see an hour or so of Fox, CNN and MSNBC. I saw the full spectrum of right wing and left wing rhetoric and fear mongering. These stations should be ashamed to call themselves news organizations. They do not even purport to report the news. They spew talking points generated by the left and right, depending on the station’s bias. Truth is unavailable on the mainstream media.

What the public doesn’t see is the rooms filled with PR maggots in the bowels of Congress generating talking points and testing them in over night polls of the public. Their sole purpose is to generate a message that will convince the public the fiscal debacle is the fault of the other party. The goal is to gain an advantage in the next elections. The long term future of our country is unimportant to the soulless autobots that get paid to misinform and mislead the masses. Leaving unborn generations with an un-payable debt so we can selfishly cling to benefits promised to us by corrupt politicians who only made the promises so they could be elected, is the ultimate in egocentric myopia.

The deceptive talking points created in smoky backrooms in Washington DC and vetted by Madison Ave maggots are easy to detect. Each side pounds home the exact same phrases on every “news” station:

Republican Talking Points

  • We refuse to increase taxes on all Americans to fix a spending problem.
  • Spending has been out of control since Obama took control of the White House (reference $800 billion stimulus package, home buyer tax credit, and Obamacare).
  • Say that Obama doesn’t have a plan and mention his ten year budget.
  • Tell the American people Republicans are fiscally responsible and the real party of change.
  • The people told them to change Washington with the 2010 election.

Democratic Talking Points

  • The Tea Party EXTREMISTS have hijacked the Republican Party and want to destroy the country by forcing the country to default on its debt.
  • The Bush tax cuts and the Bush wars are to blame for the entire increase in debt and deficits.
  • The Republicans want to protect the richest Americans while cutting Medicare and Social Security benefits for the poor.
  • The Democratic Party will never cut Medicare or Social Security.
  • The Democrats are willing to compromise and act like adults, while the evil Republicans resist all offers to strike a deal.

Depending on your ideology, you will find yourself agreeing with the talking points that strike your fancy. Don’t worry; they’ve all been tested on sample groups of ignorant Americans in order to strike the right nerve. As I listened to that bald headed prick – James Carville – screeching on CNN last night about Bush’s wars and tax cuts causing our economic peril today, I wanted to reach into the TV screen and throttle the weasel faced demagogue. The National Debt on the day Bush took office was $5.7 trillion. On the day he left office the National Debt was $10.6 trillion, a $4.9 trillion increase in eight years. Today, the National Debt stands at $14.4 trillion, a $3.8 trillion increase in two and a half years. That sounds bipartisan to me.

Bush certainly did get the U.S. into two wars of choice and his tax cuts, tax rebate checks and expansion of Medicare have contributed trillions to our deficits. He deserves scorn and contempt. But, I do recall that Democrats supported the invasion of Afghanistan and Iraq. I do recall that Democrats voted for the tax cuts. I do recall that Democrats were gaga about expansion of the Medicare program. A funny thing didn’t happen when Obama was elected. Defense spending did not go down. He increased spending on our war machine. His war budgets put Bush’s to shame. He doubled the war effort in Afghanistan. He upped the ante from two wars to three wars in Libya. The difference between most Bush and Obama policies has been indecipherable.   

Carville’s shrill diatribe against the Tea Party freshman in Congress was the most humorous piece of misinformation of his entire rant. He inadvertently struck upon the most revealing point of this entire debt ceiling farce. He said:

“These Tea Party congressmen act as if they don’t care if they are re-elected in 2012.”

And there you have it. These people are not doing what is in their own best interest to get re-elected. They have shocked the vested interests in Washington by sticking to their principles and not playing the games that left the country bankrupt. This is an outrage to non-principled shills like Carville and Rove. This behavior is declared EXTREMIST by the liberal pundits and self interested Washington hacks. People acting in the long- term best interests of the country are seen as EXTREME by neo-cons like Charles Krauthammer and moderate RINOs like John “Crash” McCain. The entrenched Washington ruling class is uncomfortable with any change. The establishment would prefer to lie to the American public again and let future generations worry about the $100 trillion unfunded obligations they’ve created.

Only in America would people trying to balance the national budget be branded extremists. Is the average American who spends less than they make an extremist? In the eyes of Washington politicians and mainstream media talking heads, you would be an extremist. Let’s peruse some facts and judge who the extremists are:

  • Federal government spending has risen from $1.9 trillion in 2001 to $3.8 trillion in 2011, a 100% increase. Federal government revenues grew from $2.0 trillion in 2001 to $2.5 trillion in 2008, before collapsing to $2.2 trillion today. GDP over this same time frame has grown 47%.
  • The annual Federal budget deficit in 2007 was $160 billion. Annual deficits between 2002 and 2008 ranged between 1% and 4% of GDP. Since 2009, annual budget deficits have exceeded $1.1 trillion and will continue to exceed $1 trillion as far as the eye can see. Annual deficits now exceed 10% of GDP.
  • The Federal government spends in excess of $1.2 trillion per year on the cost of present and past wars, or 55% of all tax revenues.
  • With a gun to their head from Wall Street banks, Congress handed over $700 billion of taxpayer money to the criminal banks that had just crashed the worldwide economic system with their casino gambling. These banks have been getting free money from the Federal Reserve since 2008 and have rewarded themselves with in excess of $70 billion in bonuses since 2008.
  • Obama handed $800 billion of pork to his constituents across the country in order to create 3.5 million jobs. The $800 billion is gone and we’re still waiting for the jobs.
  • The home buyer tax credit scheme cost Americans $22 billion, or $100,000 per additional home sold, and home prices are now 5% lower than they were before this worthless Keynesian scam. And prices continue to fall.
  • The Cash for Clunkers debacle cost Americans $3 billion, or $24,000 per junked car, as a payoff to Government Owned Motors and Obama’s union backers.
  • The taxpayer bailout of Fannie Mae and Freddie Mac has cost Americans $160 billion so far, with at least another $150 billion to go.
  • The Federal Reserve tripled their balance sheet to $2.7 trillion and is now leveraged 55 to 1, twice the leverage of Bear Stearns and Lehman Brothers when they failed. A 2% decline in the value of their assets wipes out their capital.
  • The government and Federal Reserve threatened the FASB into changing the accounting rules so the Too Big To Fail Wall Street banks could fraudulently report the value of the assets on their books, to appear solvent.
  • Obamacare will add 30 million people to the government controlled healthcare system, while adding mountains of new bureaucracy, and trillions of added costs.
  • And last but not least, the country goes $4 billion further into debt every day. Or for further perspective: $166 million per hour; $2.8 million per minute; $46,000 per second.

These are the facts of our current economic situation and the liberal mainstream media and slimy politicians like Chuck “I Love Wall Street” Schumer brand the Tea Party congressmen as EXTREMISTS for demanding an end to this out of control Roman orgy of spending. It would be hilarious if it wasn’t so utterly disgusting and sad. The only serious proposal to reverse our course and steer away from the approaching iceberg was made by Tom Coburn a couple weeks ago. It was scorned by the ideologues on both sides of the aisle, as it slashed military spending, closed corporate and individual tax loopholes, ended subsidies, and really addressed Medicare and Social Security rather than changing the CPI index. It was DOA and so is this country.

The Boehner plan and the Reid plan are absolute jokes. The Boehner plan cuts $900 billion over ten years with, shockingly, a whole 2.5% of the savings in 2012. Why cut today when you can pretend to cut in the future? We are on track to add $10 trillion of debt over the next ten years and Boehner’s plan will only add $9.1 trillion to the national debt. That is cutting in Washington DC speak. Harry Reid’s plan is even funnier. His $2.2 trillion in “cuts” includes $1 trillion for wars that won’t be fought and the $375 billion of interest expense that won’t be expended for the wars that won’t be fought. No smoke and mirrors in that proposal. These revolting excuses for leaders have both proposed new commissions to recommend spending cuts that won’t be implemented. These brilliant ideas never grow tiresome and old.

The chart created by Mike Shedlock after Paul Ryan offered an alternative ten year budget three months ago shows you everything you need to know about who the real extremists in Washington DC are. The Ryan budget included much deeper cuts than anything proposed by Boehner or Reid and would still add $9 trillion to the National Debt by 2021. After examining this chart it is clear the establishment of both parties in Washington DC have no plan to cut anything. The good news is the national debt will never reach $23 trillion because our economic system will implode long before we approach that figure.  

When you see the old time party hacks and the shrill pundits declare that an agreement must be reached on these fake distant theoretical cuts, you know they just want to protect the status quo. These people have gotten rich from keeping the status quo intact. If EXTREMISM is living within your means, spending less than you bring in, addressing unfunded liabilities, and leaving a country where our children have a fair chance to have a decent future, then count me in the extremist camp. The time is approaching when we need to stand up and be counted. What kind of country shall we be? Do you care? 

“The issue boils down to this: do we care about freedom? Do we care about responsibility and accountability? Do we care that our government and media have been bought and paid for? Do we care that average Americans are being looted in order to subsidize the fattest of cats on Wall Street and in government? Do we care? When the chips are down, will we stand up and fight, even if it means standing up against every stripe of fashionable opinion in politics and the media? Times like these have a way of telling us what kind of a people we are, and what kind of country we shall be.” – Ron Paul

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