NJ – The Burning Platform

The House of Cards That is Noo Joisey

Saw this article this morning and laughed out loud, one person leaves the state and the collective butt-holes of the tax-munchers pucker up.

When people move (Tepper is a hedge-fund manager so he is likely a grade-A shitheel), it really hinders the ability of others to live off their neighbors…, gotta love it

Tepper’s Move May Affect New Jersey Budget, Forecaster Warns

The decision by billionaire hedge-fund manager David Tepper to quit New Jersey for tax-friendly Florida could complicate estimates of how much tax money the struggling state will collect, the head of the Legislature’s nonpartisan research branch warned lawmakers.

Tepper, 58, registered to vote in Florida in October, listing a Miami Beach condominium as his permanent address, and in December filed a court document declaring that he is now a resident of the state. On Jan. 1, he relocated his Appaloosa Management from New Jersey to Florida, which is free of personal-income and estate taxes.

His move has state revenue officials on alert.

“We may be facing an unusual degree of income-tax forecast risk,” Frank Haines, budget and finance officer with the Office of Legislative Services told a Senate committee Tuesday in Trenton.

New Jersey relies on personal income taxes for about 40 percent of its revenue, and less than 1 percent of taxpayers contribute about a third of those collections, according to the legislative services office. A one percent forecasting error in the income-tax estimate can mean a $140 million gap, Haines said.

Tepper lived in New Jersey for more than two decades, initially as an executive at Goldman Sachs Group Inc., where he helped run junk-bond trading during the late 1980s and early 1990s. He founded Appaloosa in 1993 and now has an estimated fortune of $10.6 billion, according to the Bloomberg Billionaires Index. That ranked him as the wealthiest person in New Jersey.

New Jersey residents bear the country’s third-highest tax burden, according to the Tax Foundation in Washington. Along with the nation’s highest property taxes, it’s one of two states that levy both an estate tax on the deceased and an inheritance tax on their heirs. The income-tax rate for top earners is 8.97 percent. Democratic legislators have repeatedly passed a millionaire’s tax that would increase the levy to 10.75 percent, but Republican Governor Chris Christie has vetoed it each time.

http://www.msn.com/en-us/news/other/teppers-move-may-affect-new-jersey-budget-forecaster-warns/ar-BBrovHB

Warrants? We Don’t Need No Stinkin’ Warrants!

Guest Post by Eric Peters

America is becoming unrecognizable. The landscape is still familiar; the flag looks the same. But it is a changed placed.

And some places are more changed than others.

In New Jersey, the state Supreme Court has just ruled that a cop can search your vehicle if you are pulled over for any reason – and without a warrant.

A defective turn signal, for instance.

Or a seatbelt “violation.”

Basically, the NJ court has ruled that once a cop turns on his emergency lights, your Fourth Amendment rights have been forfeited.

It used to be (and still is, in other states) that more in the way of evidence or at least, “reasonable suspicion” that the car’s driver or occupants had done something else (besides the alleged traffic infraction) was necessary before the cop could – legally – search the vehicle.

Not buckling up for “safety,” for instance, was insufficient, by itself, to legally justify searching either the driver or his vehicle.

The cop needed a warrant.

“I do not consent to any searches.”

“Am I free to go?”

Not anymore.

It used to be that the cop was empowered to check the driver’s papers (license, registration, proof of insurance) but – absent some additional grounds for suspicion – that was as far as he could take it.

Continue reading “Warrants? We Don’t Need No Stinkin’ Warrants!”

CHRISTIE LIKES HIS SNACKS & BOOZE

It seems the jolly governor of NJ really likes to eat and drink at sporting events.

Chris Christie racked up an $82,594 bill from the concessions operator at MetLife Stadium during the 2010 and 2011 football seasons, the New Jersey Watchdog reported on Monday as part of a broader look at how the New Jersey governor spent $360,000 of his state allowance over five years. Christie spent $300,000 of that amount on food and alcohol, the report said, pointing to the stadium bill as the most notable spending spree. The governor used a debit card on 58 occasions to pay Delaware North Sportservice, which handles concessions operations at MetLife Stadium during New York Giants and Jets games, according to the report.

A man’s gotta eat. Right? Why shouldn’t the taxpayers of NJ pay for the tons of food required to sustain this pig?

Why shouldn’t the King of NJ live better than the peasants? He deserves luxury boxes and unlimited hot dogs and beer. He don’t need no stinkin receipts. That’s for the rest of the government drones. I wonder if he’ll give the proceeds from his Weight Watchers commercials back to the citizens.

The Associated Press also reported last week about the use of public money for expenses associated with the luxury boxes. Both reports note that the New Jersey Republican State Committee later reimbursed the expenses.

A Christie spokesman defended the expenses, including the concessions, which the New Jersey Watchdog report said did not come with any receipts, business reasons or names of individuals who benefited from the spending allowance.

“The official nature and business purpose of the event remains the case regardless of whether the event is at the State House, Drumthwacket or a sporting venue,” Christie’s press secretary, Kevin Roberts, said in a statement.

Imagine what this pig could do with the Presidential expense account.

DICEMBER REEPOR ON NJ PUBLIC SCHOOLS

I’m surprised the principal didn’t get promoted for creativity. We all know that Common Core would give a child an A for spelling December with an i, as long as they felt good about their answer. If you ever wonder why our public school system produces morons, dolts, and idiots while spending $15,000 of your tax dollars per year per child, just look at that sign. Now if you will just give the teachers union an extra $2,000 more per child, they’ll surely be smart.

Via Doug Ross

Best Public School Signage Evah

A post by Leslie Eastman at Legal Insurrection set me off an a hunt for the signage behind this story. It didn’t take long:

I suspect Santa will be bringing former New Jersey principal Antoinette Young a dictionary for Christmas this year.

A large sign outside a New Jersey elementary school that misspelled “December” appears to have cost the principal her $108,000 a year job.

The Bergen Record says the sign outside School 20 in Paterson also notified people of the date for “progress reepor” and contained a backward numeral 1.

City school board member Corey Teague circulated a photo of the error-filled signage and complained why nobody noticed for more than a week. December was spelled “Dicember.”

“If this is how the administration takes care of signage, how can we expect the students to do better? We must be held to a higher standard,” he wrote in an email accompanying the photo.

Days after Teague brought up the sign, education officials announced that the principal, Antoinette Young, was being demoted and transferred to another school.

By all means, libs, let’s make sure that the poorest kids and their parents have no choice when it comes to their education.

Let’s lock them into failing public schools where there’s literally no accountability for teachers or administrators.

Because teachers’ unions are for the children, right?

PENSION FIBS

There are only three possibilities regarding these pension obligations. You agree to let them double your real estate taxes, government employees agree to take cuts or the States declare bankruptcy and default on their promises. Which do you think will happen?

Chart of the Day

IL, CA, NJ, TX and PA Worst at Keeping Pension Promises

September 12, 2014: IL, CA, NJ, TX and PA are the five worst states at keeping their pension promises. These states continue to increase their pension debt instead of setting aside enough money to pay retired employees.

State	2012 Unfunded Pension Benefits Due	2013 Unfunded Pension Benefits Due
Illinois	$94.6B	$100.5B
California	$53.4B	$59.4B
New Jersey	$34.7B	$37.6B
Texas	$31.6B	$35.9B
Pennsylvania	$29.3B	$34.0B

· These States promise their employees pensions but do not set enough money aside to pay them

· Pensions should be fully funded yearly, since they are part of employee compensation.

· Future taxpayers will be responsible for paying for these debts – for services they never received

Government accounting rules allow these states (and others) hide much of their pension funding problem from public view. See Hidden Pension Debt: CA, IL, NJ, PA, TX 2009-2013 Check your state by selecting ‘Edit Chart Criteria’ below the chart, select your state, scroll down and ‘Generate Chart.’ READ MORE

CODE NAME PUFFERFISH

I find it hysterical that Romney’s campaign gave Christie the code name “PUFFERFISH” when they were vetting vice presidential candidates. Christie is an asshole. He is an obese prick. He blusters about unions and cutting spending, but it is a bullshit storyline. He kissed Obama’s bony ass for his Sandy relief and then spent it on campaign commercials. He loves photo ops, as long as the camera has a wide angle lense. His idea of consensus is to spend more of your money. His annual budget has more spending than Corzine’s last budget. He is positioning himself as the moderate Republican candidate in 2016. He kisses the asses of Democrats on social and spending issues, while acting like a neo-con on foreign affairs issues. The worst of both worlds wrapped in bacon. He would be a disaster as president. He is in the back pocket of Wall Street and they must have really big pockets to fit Pufferfish in there.

NEW BOOK ON ROMNEY CAMPAIGN AND RUNNING MATE SELECTION: Chris Christie’s Checkered Past “Littered With Land Mines”

http://directorblue.blogspot.com/2013/11/new-book-on-romney-campaign-and-running.html#more

A new book on the 2012 presidential campaign by Mark Halperin and John Heilemann will be released on Tuesday. In an excerpt published in Time, Romney strongly considered Chris Christie as a potential running mate. That is until the Romney team unearthed the New Jersey governor’s questionable background.

In the nine months since Christie’s endorsement of Romney in October 2011, Boston had formed a mixed view of the governor who George W. Bush had once nicknamed Big Boy. Christopher James Christie, 51, was less than two years into his first term as governor of New Jersey, suave as sandpaper and morbidly obese. He was also one of the most intriguing figures in American politics. His voice was like an air horn, cutting through the clutter. There was no one better at making the referendum case against Obama, at nailing the President to the wall with ferocity and caustic humor. Christie’s temperament was ideally suited to the unfolding tenor of the race. “We’re in a street fight, and he’s a street fighter,” Romney’s chief strategist Stuart Stevens told Romney. “He’s the best street fighter—and he’s comfortable saying things that you’re not comfortable saying.”

He was also a fundraising dynamo, but he and his staff were overbearing and hard to work with, demanding in ways that would have been unthinkable from any other surrogate. Months earlier, Christie had banned Romney from raising money in New Jersey until Christie had given the O.K. to do so—a move Romney found galling, like something out of The Sopranos. Are you kidding me, Mitt thought. He’s going to do that? There were plenty of New Jersey donors who’d given money to Mitt in 2008; now Christie was trying to impose a gag order on talking to them? “He sounds like the biggest asshole in the world,” Stevens griped to his partner, Russ Shriefer. More recently, Trenton insisted on private jets, lavish spreads of food, space for a massive entourage. Romney ally Wayne Berman looked at the bubble around Christie and thought, He’s not the President of the United States, you know.

Chronically behind schedule, Christie made a habit of showing up late to Romney fundraising events. In May he was so tardy to a donor reception at the Grand Hyatt New York that Mitt wound up taking the stage to speak before Christie arrived. When the Jersey governor finally made his grand entrance, it was as if Mitt had been his warm-up act…

…The list of questions Myers and her team had for Christie was extensive and troubling. More than once, Myers reported back that Trenton’s response was, in effect, Why do we need to give you that piece of information? Myers told her team, We have to assume if they’re not answering, it’s because the answer is bad.

The vetters were stunned by the garish controversies lurking in the shadows of his record. There was a 2010 Department of Justice inspector general’s investigation of Christie’s spending patterns in his job prior to the governorship, which criticized him for being “the U.S. attorney who most often exceeded the government [travel expense] rate without adequate justification” and for offering “insufficient, inaccurate, or no justification” for stays at swank hotels like the Four Seasons. There was the fact that Christie worked as a lobbyist on behalf of the Securities Industry Association at a time when Bernie Madoff was a senior SIA official—and sought an exemption from New Jersey’s Consumer Fraud Act…

…There was Christie’s decision to steer hefty government contracts to donors and political allies like former Attorney General John Ashcroft, which sparked a congressional hearing. There was a defamation lawsuit brought against Christie arising out of his successful 1994 run to oust an incumbent in a local Garden State race. Then there was Todd Christie, the Governor’s brother, who in 2008 agreed to a settlement of civil charges by the Securities and Exchange Commission in which he acknowledged making “hundreds of trades in which customers had been systematically overcharged.” (Todd also oversaw a family foundation whose activities and purpose raised eyebrows among the vetters.) And all that was on top of a litany of glaring matters that sparked concern on Myers’ team: Christie’s other lobbying clients, his investments overseas, the YouTube clips that helped make him a star but might call into doubt his presidential temperament, and the status of his health.

Ted Newton, managing Project Goldfish under Myers, had come into the vet liking Christie for his brashness and straight talk. Now, surveying the sum and substance of what the team was finding, Newton told his colleagues, If Christie had been in the nomination fight against us, we would have destroyed him—he wouldn’t be able to run for governor again. When you look below the surface, Newton said, it’s not pretty…

…After 11 days of teeth-gnashing labor, several of the issues that the vetters had unearthed around Christie were still unresolved. Myers and her team were sticklers. Uncomfortable producing a final report they considered incomplete, they made a point of being meticulous about framing and flagging the problems, including a refrain in bold applied to a number of items. On Todd Christie’s securities-fraud settlement: “[Governor] Christie has been asked to disclose whether Todd Christie incurred any monetary or other penalty as a result of the SEC/NYSE action. If Christie’s possible selection is to move forward, this item should be obtained.” On Christie’s defamation lawsuit: “Christie has been asked to provide the terms of the settlement of this matter. If Christie’s possible selection is to move forward, this item should be obtained.” On Christie’s household help: “Christie has been asked to provide the names and documented status of all domestic employees. This material has not been received. If Christie’s possible selection is to move forward, these items should be obtained.” On Christie’s lobbying clients: “Christie has provided only one of the twelve or so [public disclosure] filings made [in the time he was a lobbyist] … If Christie’s possible selection is to move forward, these items should be obtained.”

Then there was this: “In response to the questionnaire, Governor Christie indicates that he has no health issues that would hinder him from serving as the vice-presidential nominee. Published reports indicate that Christie suffers from asthma and was briefly hospitalized last year after he suffered an asthma attack. He is also obese and has indicated that he struggles with his weight. ‘The weight exacerbates everything,’ he is quoted as saying. Christie has been asked to provide a detailed medical report. Christie has been asked to provide a copy of all medical records from his most recent physical examination. If Christie’s possible selection is to move forward, this item should be obtained.”

Despite the language in the report indicating that Christie had not been sufficiently forthcoming with his medical records, Romney and Myers agreed that what he had provided put their minds at ease about his health. But the dossier on the Garden State governor’s background was littered with potential land mines. Between that and the pay-to play snag, there was no point in thinking about Christie further. With the clock running out, Romney pulled the plug again, this time for good…

Conservatives who’ve been following Christie already knew his background was extremely problematic.

File this story away for the run up to 2016 where the Karl Rove-led consultant class will tell us that Christie’s the only one who can win. Just like they told us McCain and Romney were the only ones who could win.

Hat tip: BadBlue News.

OBAMA, GOV’T UNIONS & THE SHRILL LIBERAL MSM LOSE AGAIN

They’ve used every liberal fear mongering tactic in the book. Obama has bashed Governor Walker. The weasel Democratic legislators fled the state to avoid doing their jobs. MSNBC and their flock of screeching talking heads have called Walker a tyrant who is killing babies with his heartless policy of balancing the state budget without increasing taxes or firing thousands of government drones. Even the old Democratic cigar lover, Bill Clinton, has been rolled out.

And guess what? The people of Wisconsin are going to keep Governor Walker. This proves there are millions of people who can see through the Democratic bullshit and realize that government unions are the problem, not the solution. The free shit needs to come to an end.

It’s the same old shit from the same old liberals. Walker was left with a $3.6 billion budget deficit by the Democrat that had been in office for 8 years. He has taken the actions he needed to take without increasing tax on the citizens. The exact same thing happened in Pennsylvania. Governor Corbett was left with a huge budget deficit by the Democrat standard bearer – Fast Eddie Rendell, who destroyed the finances of the state in 8 short years. He has taken the same corrective action of reducing spending and not increasing taxes on the citizens. The liberal rag – Phila Inquirer – is accusing him of throwing the poor children under the bus. They never address how the state got into this situation – Democratic nanny state spending.

Play it again Sam. Governor Christie inherited one of the largest state deficits in the country. Guess who destroyed the finances of the state of New Jersey before he destroyed MF Global and the lives of thousands of farmers? That’s right – Democratic torchbearer and top fund raiser for Barack Obama – Jon Corzine. Christie comes in and kicks the shit out of government unions and every Democratic legislator in the state in order to fix the budget and the shrill liberal press brands him a bully and thug.

Do you recognize a theme? Democratic governors fuck up the state and the new Republican guy has to fix it. The liberal MSM calls him a tyrant and heartless. Yawn.

The gig is up for the liberal nanny state. The money is gone. The people are tired of getting taxed into oblivion to pay for the gold plated pension and health benefits of government drones.

The libs are losing. Krugman is so sad.

Wisconsin recall: Did Tom Barrett close gap with Scott Walker in debate?

Milwaukee Mayor Tom Barrett (D) took an aggressive tone toward Gov. Scott Walker (R) in the last debate before Tuesday’s recall election. Polls give Walker a seven-point lead over Barrett.

By Mark Guarino
posted June 1, 2012 at 11:38 am EDT

Milwaukee, Wis.Tom Barrett, the Democratic challenger to Gov. Scott Walker (R) of Wisconsin, took a chance in Thursday night’s televised debate, and came out swinging. It was without doubt his last big opportunity to persuade Wisconsin voters that kicking the incumbent governor out of office halfway through his term represents the best end to a bitter partisan battle that has engulfed the state for the past two years.

Down in the latest polls, Mr. Barrett, whose groomed image some political observers describe as “bland nice guy,” adopted a confrontational posture toward Governor Walker, accusing him of divide-and-conquer governance and repeatedly reminding voters of an investigation stemming from Walker’s tenure while Milwaukee County executive.

Whether it was effective won’t be known until Tuesday, when voters go to the polls in the denouement of Wisconsin’s long-running political saga. But Barrett’s strategy was not without peril.

IN PICTURES: Wisconsin Capitol protests of 2011

Barrett, who is mayor of Milwaukee, took a risk in adopting the more antagonistic tone because it runs counter to his image as a unifier, says John McAdams, a political scientist at Marquette University here. “When he starts looking harsh or aggressive, that could hurt him,” Mr. McAdams says. “An aggressive tone works for someone like [New Jersey Gov.] Chris Christie, but it’s a risky thing for Barrett.”

The debate’s fiery tone is likely to light up the respective political bases for both candidates, even if both men’s performances were ultimately “a reiteration of well-known talking points,” McAdams says.

The recall election has drawn national – and even international – attention. Minutes before the debate began Thursday, the producer stepped in to inform the audience gathered at Marquette Law School that television affiliates throughout the state would broadcast the next hour live, national cable networks would periodically check in, and that the feed would be carried in real time from as far away as Japan.

Some of the far-flung interest is explained by the fact that only three sitting governors have been unseated through recalls in all of US history. And there’s no denying that the stakes are high for both sides in the national arena. Republican interest groups across the US have rallied to Walker’s defense, seeing his anti-union, government-shrinking policies as a bold blueprint that other governors and Congress should heed, even as labor groups have dedicated their resources behind ousting him. Wisconsin is also a battleground state in for the presidential election in the fall.

The latest poll, released Wednesday, showed Walker moving ahead – and raised the debate stakes for Barrett. The poll from Marquette Law School showed Walker at 52 percent to Barrett’s 45 percent among likely voters.

One problem for Barrett is that some voters may cast their vote for Walker simply to show their distaste for the recall process itself and to signal that, despite any problems they may have with Walker’s policies, Democrats overreached.

Jim Kramers of Kenosha, Wis., says he is voting for Walker not because he is “against Barrett” but because the recall has had “a very negative impact on the state locally and nationally.” “We’ve become a laughingstock,” Mr. Kramers says of his state.

For Jeff Krien, a customer service representative in the suburb of South Milwaukee, “the recall should never have happened to begin with.” Mr. Krien says the protests that began in February 2011 “started out about [preserving] collective bargaining [rights for public-sector unions], but that hasn’t been talked about for months.”

During Thursday’s debate, Barrett did not dwell on the perceived damage of eliminating collective bargaining rights, but instead framed the issue as an example of Walker’s “divide and conquer strategy” in trying to transform Wisconsin into the “capital” of the tea party movement.

“You wanted to pit people against each other because that’s the way you operate, and you wanted to use a crisis [involving collective bargaining] to do that,” he told Walker.

Walker insisted, as he has in the past, that reforms were needed to address the state’s $3.6 billion budget deficit he inherited, and that he did it without raising taxes or wholesale job cuts.

“The mayor has a moral obligation to tell people what exactly he would have done differently … the mayor doesn’t have a plan and all he has is attacking me,” Walker said.

Barrett often addressed Walker directly, and he returned frequently to an ongoing investigation into Walker’s previous tenure as the Milwaukee County executive, involving allegations that workers campaigned on county time and embezzled money from veterans groups. The so-called “John Doe” ethics investigation has not targeted Walker for wrongdoing, but he has transferred about $160,000 from his campaign to a legal defense fund, which, according to state law, is lawful only if the campaign gets prior approval from donors.

Walker has so far declined to say which contributors gave their blessing.

“This is all about trust,” Barrett said before turning to Walker: “Tell us who is paying your legal defense fund … you owe it to the people of this state.”

Later, Barrett hammered Walker for a television commercial that shows a blurred image of a 2-year-old who spent almost a week in intensive care after being severely beaten. The aim of the ad was to criticize Milwaukee’s track record on preventing violent crime.

“He is running a commercial showing a picture of a dead baby. This is Willie Horton stuff,” Barrett said to Walker, referring to a crime-related ad in the 1988 presidential campaign, widely seen as inflammatory, that proved devastating to Democrat Michael Dukakis. “The person who killed that baby was arrested by Milwaukee police.… You should be ashamed,” he said.

Walker defended the ad, saying Barrett campaigned in the primary on his work to reduce the violent crime rate. “I think if it was worth to say that people should vote for you in the primary because it had gone down, the same question is completely legitimate in reverse. Violent crime has gone up, sadly,” Walker said.

The Marquette poll that shows Walker up by seven percentage points was conducted May 23-26, before the first gubernatorial debate. However, “if the Marquette poll is accurate, it’s going to be tough for Barrett,” McAdams says.

“There’s a very small number of undecided voters, so there’s not a lot of people out there to be moved,” he says.

One such resolute voter is Karen Stardy, a farmer from Union Grove. Earlier in the day, while manning her booth at a farmer’s market in South Milwaukee, Ms. Stardy said her disgust was not necessarily with Barrett but with how the recall election is dividing her community but not offering real solutions to turning the economy around.

“There’s arguments all over the place. It’s like, nobody’s really right and nobody’s really wrong,” she said. “I’d rather not see people arguing over politics. We have to tough it out. There’s no instant solution to the problems that we’ve got.”

2011 – THE YEAR OF CATCH-22

I wrote this on January 3. It was my outlook for 2011. Whenever I think I’m too pessimistic about the world, I go back and read old articles. This article is less than 4 months old and the situation has gotten much worse, much faster than I anticipated. The economy has slowed dramatically, even with the payroll tax cut and Ben’s QE2. I now think the 2nd half of 2011 will be outright recession. Again, my own words prove than I’m actually an optimist compared to what really happens. Think about that the next time you get depressed by one of my articles.

As I began to think about what might happen in 2011, the classic Joseph Heller novel Catch 22 kept entering my mind. Am I sane for thinking such a thing, or am I so insane that asking this question proves that I’m too rational to even think such a thing? In the novel, the “Catch 22” is that “anyone who wants to get out of combat duty isn’t really crazy”. Hence, pilots who request a fitness evaluation are sane, and therefore must fly in combat. At the same time, if an evaluation is not requested by the pilot, he will never receive one (i.e. they can never be found “insane”), meaning he must also fly in combat. Therefore, Catch-22 ensures that no pilot can ever be grounded for being insane – even if he were. The absurdity is captured in this passage:

There was only one catch and that was Catch-22, which specified that a concern for one’s own safety in the face of dangers that were real and immediate was the process of a rational mind. Orr was crazy and could be grounded. All he had to do was ask; and as soon as he did, he would no longer be crazy and would have to fly more missions. Orr would be crazy to fly more missions and sane if he didn’t, but if he was sane, he had to fly them. If he flew them, he was crazy and didn’t have to; but if he didn’t want to, he was sane and had to. Yossarian was moved very deeply by the absolute simplicity of this clause of Catch-22 and let out a respectful whistle. “That’s some catch, that Catch-22,” he observed. “It’s the best there is,” Doc Daneeka agreed. – Catch 22 – Joseph Heller

The United States and its leaders are stuck in their own Catch 22. They need the economy to improve in order to generate jobs, but the economy can only improve if people have jobs. They need the economy to recover in order to improve our deficit situation, but if the economy really recovers long term interest rates will increase, further depressing the housing market and increasing the interest expense burden for the US, therefore increasing the deficit. A recovering economy would result in more production and consumption, which would result in more oil consumption driving the price above $100 per barrel, therefore depressing the economy. Americans must save for their retirements as 10,000 Baby Boomers turn 65 every day, but if the savings rate goes back to 10%, the economy will collapse due to lack of consumption. Consumer expenditures account for 71% of GDP and need to revert back to 65% for the US to have a balanced sustainable economy, but a reduction in consumer spending will push the US back into recession, reducing tax revenues and increasing deficits. You can see why Catch 22 is the theme for 2011.

It seems the consensus for 2011 is that the economy will grow 3% to 4%, two million new jobs will be created, corporate profits will rise, and the stock market will rise another 10% to 15%. Sounds pretty good. The problem with this storyline is that it is based on a 2010 that gave the appearance of recovery, but was a hoax propped up by trillions in borrowed funds. On January 1, 2010 the National Debt of the United States rested at $12.3 trillion. On December 31, 2010 the National Debt checked in at $13.9 trillion, an increase of $1.6 trillion.

The Federal Reserve Balance Sheet totaled $2.28 trillion on January 1, 2010. Today, it stands at $2.46 trillion, an increase of $180 billion.

Over this same time frame, the Real GDP of the U.S. has increased approximately $350 billion, and is still below the level reached in the 4th Quarter of 2007. U.S. politicians and Ben Bernanke spent almost $1.8 trillion, or 13% of GDP, in one year to create a miniscule 2.7% increase in GDP. This is reported as a recovery by the mainstream corporate media mouthpieces. On September 18, 2008 the American financial system came within hours of a total meltdown, caused by Wall Street mega-banks and their bought off political cronies in Washington DC. The National Debt on that day stood at $9.7 trillion. The US Government has borrowed $4.2 since that date, a 43% increase in the National Debt in 27 months. The Federal Reserve balance sheet totaled $963 billion in September 2008 and Bernanke has expanded it by $1.5 trillion, a 155% increase in 27 months. Most of the increase was due to the purchase of toxic mortgage backed securities from their Wall Street masters.

Real GDP in the 3rd quarter of 2008 was $13.2 trillion. Real GDP in the 3rd quarter of 2010 was $13.3 trillion.

Think about these facts for one minute. Your leaders have borrowed $5.7 trillion from future unborn generations and have increased GDP by $100 billion. The financial crisis, caused by excessive debt creation by Wall Street and ridiculously low interest rates set by the Federal Reserve, 30 years in the making, erupted in 2008. The response to a crisis caused by too much debt and interest rates manipulated too low was to create an immense amount of additional debt and reduce interest rates to zero. The patient has terminal cancer and the doctors have injected the patient with more cancer cells and a massive dose of morphine. The knowledge about how we achieved the 2010 “recovery” is essential to understanding what could happen in 2011.

Confidence Game

Ben Bernanke, Timothy Geithner, Barack Obama, the Wall Street banks, and the corporate mainstream media are playing a giant confidence game. It is a desperate gamble. The plan has been to convince the population of the US that the economy is in full recovery mode. By convincing the masses that things are recovering, they will begin to spend and buy stocks. If they spend, companies will gain confidence and start hiring workers. More jobs will create increasing confidence, reinforcing the recovery story, and leading to the stock market soaring to new heights. As the market rises, the average Joe will be drawn into the market and it will go higher. Tax revenues will rise as corporate profits, wages and capital gains increase. This will reduce the deficit. This is the plan and it appears to be working so far. But, Catch 22 will kick in during 2011.

Retail sales are up 6.5% over 2009 as consumers have been convinced to whip out one of their 15 credit cards and buy some more iPads, Flat screen TVs, Ugg boots and Tiffany diamond pendants. Consumer non-revolving debt for autos, student loans, boats and mobile homes is at an all-time high as the government run financing arms of GMAC and Sallie Mae have issued loans to anyone that can fog a mirror with their breath. Total consumer credit card debt has been flat for 2010 as banks have written it off as fast as consumers can charge it. The savings rate has begun to fall again as Americans are being convinced to live today and not worry about tomorrow. Of course, the current savings rate of 5.9% would be 2% if the government was not dishing out billions in transfer payments. Wages have declined by $127 billion from the 3rd Quarter of 2008, while government transfer payments for unemployment and other social programs have increased by $441 billion, all borrowed.

Both the government and its citizens are living the old adage:

Everybody wants to get to heaven, but no one wants to practice what is required to get there.

The government politicians and bureaucrats promise to cut unsustainable spending as soon as the economy recovers. The economy has been recovering for the last 6 quarters, according to GDP figures, but there are absolutely no government efforts to cut spending. This is proof that politicians always lie. It will never be the right time to cut spending. Another faux crisis will be used as a reason to continue unfunded spending increases. Having consumer spending account for 70% of GDP is unbalanced and unsustainable. Everyone knows that consumer spending needs to revert back to 65% of GDP and the Savings Rate needs to rise to 8% or higher in order to ensure the long-term fiscal health of the country. Savings and investment are what sustain countries over time. Borrowing and spending is a recipe for failure and bankruptcy. The facts are that consumer expenditures as a percentage of GDP have actually risen since 2007 and Congress and Obama just cut payroll taxes in an effort to encourage Americans to spend even more borrowed money. Catch 22 is alive and well.

The first half of 2011 is guaranteed to give the appearance of recovery. The lame-duck Congress “compromise” will pump hundreds of billions of borrowed dollars into the economy. The continuation of unemployment benefits for 99 weeks (supposedly to help employment) and the 2% payroll tax cut will goose consumer spending. Ben Bernanke and his QE2 stimulus for poor Wall Street bankers is pumping $75 billion per month ($3 to $4 billion per day) directly into the stock market. Since Ben gave Wall Street the all clear signal in late August, the NASDAQ has soared 25%. Despite the fact that there are 362,000 less Americans employed than were employed in August 2010, the mainstream media will continue to tout the jobs recovery. The goal of all these efforts is to boost confidence and spending. Everything being done by those in power has the seeds of its own destruction built in. The Catch 22 will assert itself in the 2nd half of 2011.

Housing Catch 22

Ben Bernanke, an Ivy League PhD who should understand the concept of standard deviation, missed a 3 standard deviation bubble in housing as ironically pointed out by a recent Dallas Federal Reserve report.

Home prices still need to fall 23%, just to revert to its long-term mean. That is a fact that even Bernanke should be able to grasp (maybe not). Anyone who argues that housing has bottomed and will resume growth either has an agenda (NAR) or is a clueless dope (Bernanke). A new perfect storm is brewing for housing in 2011 and will not subside until late 2012. You may have thought those bad mortgages had been all written off. You would be wrong. There will be in excess of $200 billion of adjustable rate mortgages that reset between 2011 and 2012, with in excess of $125 billion being the dreaded Alt-A mortgages. This is a recipe for millions of new foreclosures.

According to the Dallas Fed, in addition to the 3.9 million homes on the market, there is a shadow inventory of 6 million homes that will be coming on the market due to foreclosure. About 3.6 million housing units, representing 2.7% of the total housing stock, are vacant and being held off the market. These are not occasional-use homes visited by people whose usual residence is elsewhere but units that are vacant year-round. Presumably, many are among the 6 million distressed properties that are listed as at least 60 days delinquent, in foreclosure or foreclosed in banks’ inventories.

The coup de grace for the housing market will be Ben Bernake’s ode to Catch 22. In his November 4 OP-ED piece he had this to say about his $600 billion QE2:

“Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance.” – Housing sage Ben Bernanke

On the day Bernanke wrote these immortal words 30 Year Mortgage rates were 4.2%. Today, two months later, they stand at 5.0%. This should be a real boon to refinancing and the avalanche of mortgage resets coming down the pike. It seems that money printing and a debt financed “recovery” leads to higher long-term interest rates. The more convincing the recovery, the higher interest rates will go. The higher interest rates go, the further the housing market will drop. The further housing prices drop, the number of underwater homeowners will grow to 30%. This will lead to more foreclosures. Approximately 50% of all the assets on banks books are backed by real estate. Billions in bank losses are in the pipeline. Do you see the Catch 22 in Bernanke’s master plan? The Dallas Fed sees it:

This unease highlights the housing market’s fragility and suggests there may be no pain-free path to the eventual righting of the market. No perfect solution to the housing crisis exists. The latest price declines will undoubtedly cause more economic dislocation. As the crisis enters its fifth year, uncertainty is as prevalent as ever and continues to hinder a more robust economic recovery. Given that time has not proven beneficial in rendering pricing clarity, allowing the market to clear may be the path of least distress. – Dallas Fed

Quantitative Easing Catch 22

Ben Bernanke’s quantitative easing (dropping dollars from helicopters) is riddled with Catch-22 implications. Bernanke revealed his plan in his 2002 speech about deflation:

“The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost.”

The expectations of most when reading Ben’s words were that his helicopters would drop the dollars across America. What he has done is load up his helicopters with trillions of dollars and circled above Wall Street for two years continuously dropping his load. Bernanke’s quantitative easing, which will triple the Fed’s balance sheet by June of 2011, began in earnest in early 2009. The price for a gallon on gasoline was $1.62. Today, it is $3.05, an 88% increase in two years. Gold was $814 an ounce. Today, it is $1,421 an ounce, a 61% increase in two years. In the last year, the prices for copper, silver, cotton, wheat, corn, coffee and other commodities have risen in price by 30% to 90%.

Quantitative easing has been sold to the public as a way to avoid the terrible ravages of deflation. The fact is there are less jobs, lower wages, lower home prices, zero returns on bank deposits, higher fuel costs, higher food costs, higher real estate taxes, higher medical insurance premiums and huge jaw dropping bonuses for the bankers on Wall Street. Somehow the government has spun this toxic mix into a CPI which has resulted in fixed income senior citizens getting no increases in their pitiful Social Security payments for two years. You can judge where Ben’s Helicopters have dropped the $2 trillion. Quantitative easing has benefited only Wall Street bankers and the 1% wealthiest Americans. The $1.4 trillion of toxic mortgage backed securities on The Fed’s balance sheet are worth less than $700 billion. How will they unload this toxic waste? The Treasuries they have bought drop in value as interest rates rise. Quantitative easing’s Catch 22 is that it can never be unwound without destroying the Fed and the US economy.

The USD dollar index was at 89 in early 2009. Today, it stands at 79, an 11% decline, which is phenomenal considering that Europe has imploded over this same time frame. Bernanke’s master plan is for the USD to fall and ease the burden of our $14 trillion in debt. He just wants it to fall slowly. Foreigners know what he is doing and are stealthily getting out of their USD positions. This explains much of the rise in gold, silver and commodities. The rise in oil to $91 a barrel will not be a top. The Catch-22 of a declining dollar is that prices of all imported goods go up. If the dollar falls another 10%, the price of oil will rise above $120 a barrel and push the economy back into recession. Then there is the little issue of at what level of printing and debasing the currency does the rest of the world lose its remaining confidence in Ben and the USD.

A few other “minor” issues for 2011 include:

The imminent collapse of the European Union as Greece, Ireland, Portugal and Spain are effectively bankrupt. Spain is the size of the other three countries combined and has a 20% unemployment rate. The Germans are losing patience with these spendthrift countries. Debt does matter.
State and local governments were able to put off hard choices for another year, as Washington DC handed out hundreds of billions in pork. California will have a $19 billion budget deficit; Illinois will have a $17 billion budget deficit; New Jersey will have a $10.5 billion budget deficit; New York will have a $9 billion budget deficit. A US Congress filled with Tea Party newcomers will refuse to bailout these spendthrift states. Substantial government employee layoffs are a lock.

There is a growing probability that China will experience a hard landing as their own quantitative easing has resulted in inflation surging to a 28 month high of 5.1%, with food inflation skyrocketing to 11.7%. Poor families spend up to half of their income on food. Rapidly rising prices severely burden poor people and can spark civil unrest if too many of them can’t afford food.
The Tea Party members of Congress are likely to cause as much trouble for Republicans as Democrats. If they decide to make a stand on raising the debt ceiling early in 2011, all hell could break loose in the debt and stock markets.

The government’s confidence game is destined to fail due to Catch-22. Will the consensus forecast of a growing economy, rising corporate profits, 10% to 15% stock market gains, 2 million new jobs, and a housing recovery come true in 2011? No it will not. By mid-year confidence in Ben’s master plan will wane. He is trapped in the paradox of Catch-22. When you start hearing about QE3 you’ll know that the gig is up. If Bernanke is foolish enough to propose QE3 you can expect gold, silver and oil to go parabolic. Enjoy 2011. I don’t think Ben Bernanke will.

“That’s some catch, that Catch-22.” -Yossarian