2011 – CATCH-22 YEAR IN REVIEW

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Posted on 30th December 2011 by Administrator in Economy |Politics |Social Issues

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“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” - Mark Twain

 

I published my predictions for 2011 on January 3, 2011 in my article 2011 – The Year of Catch-22. Humans evidently enjoy being embarrassed by how pitiful they are at predicting the future, because we continue to do it year after year. The mainstream media pundits don’t dare look back at their predictions or the predictions of the Wall Street shills that parade on CNBC and get quoted in the Wall Street Journal, eternally predicting 10% to 15% stock market gains. The multi-millionaire Wall Street strategists like the spawn of the squid, Abbey Joseph Cohen, have used all of their Ivy League brain power to predict at least a 10% stock price gain every year since 1999. The S&P 500 stood at 1,272 on January 6, 1999. As of this writing it currently stands at 1,261. ZERO appreciation over the last twelve years.

The Wall Street mantra of stocks for the long run is beginning to get a little stale. If Abbey Joseph Cohen had been right for the last twelve years, the S&P 500 would be 4,000. For this level of accuracy, she is paid millions. Her 2011 prediction of 1,500 only missed by16%. The S&P 500 began the year at 1,258 and hasn’t budged. The lowest prediction from the Wall Street shysters at the outset of the year was 1,333, with the majority between 1,400 and 1,500.

The same Wall Street clowns are now being quoted in the mainstream media predicting a 10% to 15% increase in stock prices in 2012, despite the fact we are headed back into recession, China’s property bubble has burst, and Europe teeters on the brink of dissolution. They lie on behalf of their Too Big To Tell the Truth employers by declaring stocks undervalued, when honest analysts such as Jeremy Grantham, John Hussman and Robert Shiller truthfully report that stocks are overvalued and will provide pitiful returns over the next year and the next decade.

I will take my chances with a few predictions for 2012 after reviewing my lack of foresight regarding 2011. I declared 2011 the year of Catch-22 because no matter what happened, it would not translate into a positive result for the American people. This was my thesis:

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.

My predictions for 2011 were as follows:

  • 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.

The payroll tax cut, extension of unemployment benefits and Bernanke’s gift to Wall Street criminal banks did nothing to help real Americans in the real world. The government manipulated GDP has languished between 0.4% and 1.8% in the first three quarters of 2011. Using a true measure of inflation, as detailed by John Williams at www.shadowstats.com, GDP has remained at a recessionary level of -2% to -3%.

 

Easy Ben accomplished his goal of pumping up the stock market with his QE2 gift to Wall Street bankers during the first six months of 2011, with the S&P 500 peaking at 1,364 in late April. The market began to fall the second Ben stopped handing Jamie Dimon and his friends $4 billion per day, with the market dropping 18% in three months. The market has risen back near the breakeven level for the year based on Ben’s promise to keep interest rates at zero forever and the hope of QE3.

  • 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.

The brainless twits on CNBC will dutifully report the number of completed foreclosure sales plunged by 24% in 2011, giving the impression to their non-critical thinking viewership that all is well on the housing front. What they will fail to point out is that the number of foreclosures in process went up in 2011 and now stands 59% ABOVE the level in 2009 at the height of our recession. The reason that completed foreclosures have fallen is twofold. The criminal Wall Street banks can’t prove they hold the mortgage notes on hundreds of thousands of homes and they have a few legal issues related to the massive robo-signing fraud they committed. Kicking old ladies and Iraq War veterans out into the street using fraudulent documentation has caused the Wall Street Too Evil To Believe Banks some public relations issues. Secondly, the Wall Street Plutocrats have these mortgage loans valued at 100% on their balance sheets due to the FASB gift of mark to fantasy accounting rules. Foreclosing actually reveals their assets to be overvalued by at least 50%. This may explain why millions of Americans are still in their homes after not making a mortgage payment for two years, as detailed by economist Tom Lawler:

Given the number of loans either seriously delinquent or in the process of foreclosure at the beginning of the year, the number of completed foreclosure sales in 2011 is almost absurdly low, reflecting the complete screw-up of the mortgage servicing industry, and the resulting dramatic slowdown in foreclosure resolutions. As of the end of October, 2011 LPS estimated that there were 1.759 million seriously delinquent loans with the average number of days delinquent at 388 (compared to 192 days in January 2008), and there were 2.210 million loans in the foreclosure process that had been on average delinquent for 631 days.

Completed Foreclosure Sales And Short Sales/DILs (thousands, estimates)
  2008 2009 2010 2011(E)
Completed Foreclosure Sales 914 949 1,070 815
Owner-occupied N.A. N.A. 785 608
Non-owner-occupied N.A. N.A. 285 207
Short Sales/DILs 105 270 354 380
Foreclosures plus Short Sales/DILs 1,019 1,219 1,424 1,195
Outstanding first liens: Jan-08 Jan-09 Jan-10 Jan-11
Seriously Delinquent (90+) 1,016 1,983 3,061 2,168
In Process of Foreclosure 860 1,386 2,110 2,203
 
The concerted effort to not complete foreclosures did nothing to slow the continued descent in home prices. As you can see in the chart below from http://www.calculatedriskblog.com/, real home prices will have fallen another 5% in 2011. Obama and his minions threw $50 billion of your tax dollars at the housing market in 2009 – 2010 with tax credits, loan modification programs, homebuilder tax loss carry-backs, and a myriad of other Keynesian claptrap solutions. They succeeded in pissing your tax dollars down the toilet as prices have declined another 12% in the last 18 months. Prices have fallen 42% nationally since 2006. I wonder who missed the boat on that development?
 
“We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit.” – Ben Bernanke – July 2005
 
 

There are approximately 48.5 million homes with mortgages in the United States and 10.7 million of them have negative equity. Another 2.4 million have less than 5% equity. Considering it costs more than 5% in closing costs to sell a house that means 27% of home occupiers with a mortgage are trapped like rats in a cage. With 2.2 million foreclosures still in the pipeline and a looming recession, home prices will continue to fall another 10% to 20% over the next two years and one third of all home occupiers will be underwater. That sounds like a recipe for 10% to 15% stock market gains.

  • 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.

Bennie and his Inkjets did a bang up job in 2011. He was able to expand his balance sheet from $2.47 trillion to $2.95 trillion in twelve short months. According to Ben and his Federal Reserve friends, increasing your balance sheet by $480 billion isn’t really printing money out of thin air and handing it to their Wall Street owners for free, so they can prop up the stock market and enrich their executives. Ben is now leveraged 57 to 1. He should move to Europe, where this level of leverage is commonplace. In comparison, Lehman Brothers and Bear Stearns were leveraged 40 to 1 when they went belly up.

There is absolutely no way that Ben Bernanke could ever reduce the Federal Reserve balance sheet to the pre-crisis level without destroying the U.S. economy. He knows that and will never sell off those toxic mortgage assets. Not only won’t he reduce the Fed balance sheet, but by mid-2012 he will institute QE3 and buy another $600 billion of mortgage debt. His hubris knows no bounds, as his reckless illegal actions thus far have not driven interest rates sky high – YET. He has only destroyed the finances of senior citizens, savers and people who eat food and use gasoline. He will surely go down in history, but not the way he envisions.

  • 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.

As Bernanke printed like a drunken sailor during the first six months of 2011, the USD fell by 9% and the price of oil did exactly as expected, rising to a peak above $125. The NATO “intervention” in Libya also added a few bucks to the price of a barrel of sweet crude.

                  DXY

One-Year Chart for DOLLAR INDEX SPOT (DXY:IND)

The complete implosion of Europe and the ensuing weakness of the Euro have given the false impression that the U.S. dollar is a safe haven. The USD has regained its losses and will end the year exactly as it started versus a Euro heavy basket of world currencies. With annual deficits equaling 10% of GDP, a national debt now exceeding 100% of GDP, and Ben Bernanke in perpetual printing mode, the USD is destined to reach its intrinsic value of zero. With Brent crude still above $108 a barrel, employment still weak, and double digit food and energy inflation slowing consumer spending, the ECRI knows a recession during 2012 is baked in the cake.  

 

  • 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.

It seems I was wrong about Europe. It turned out to be much worse than anyone envisioned, with Italy now the likely fuse that blows the whole thing sky high. The ECB has made Ben Bernanke look like a lightweight by increasing their balance sheet by 44% to over $3.5 trillion in a futile effort to solve a debt crisis with more debt. It seems central bankers are programmed to print until the very end (see Weimar). The European Union will not survive 2012. Too many countries, too much government debt, too many zombie banks, too many bureaucrats, too much austerity rammed down the throats of citizens, and not enough honesty or reality based solutions.

  • 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.

State and local governments have laid off 535,000 workers since 2008. With borrowed Federal government stimulus handouts evaporating into thin air during 2011 – 2012, this total will reach 800,000 by the end of the next year. The U.S. Postal Service will do their part by cutting 28,000 jobs in 2012, even though they need to cut 100,000. States and municipalities based their budgets on the revenues produced by the fake debt driven housing boom from 2003 – 2007. The tax revenue dried up, but the union jobs added are a gift that keeps on costing taxpayers billions. States and localities can’t print, so layoffs will continue.   

 

  • 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.

According to official government statistics China’s economy continued to boom in 2011. But, of course Chinese government reports make the BLS look honest. The fact is the Chinese stock market has fallen 28% since April as the property bubble deflates. If their economy has truly grown at an annual rate of 8% to 10% over the last five years, why is their stock market down 62% from its 2007 high?

   SHANGHAI INDEX

One-Year Chart for Shanghai Stock Exchange Composite Index (SHCOMP:IND)

The price inflation in food and energy prices, along with the property bubble bursting has led to breakouts of civil unrest across China. China’s two biggest markets – Europe & the United States – are in or near recession and are buying less of their crap. They can only build so many vacant cities and shopping malls to create the appearance of growth. The hard landing is about to get harder in 2012.

  • 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. 

It seems I got the timing wrong on this prediction, but the August showdown was a doozy. The threat of a government shutdown resulted in the stock market collapsing by 18% in a matter of weeks in August. Our beloved politicians then came up with another bullshit non-solution by creating a commission which, after months of negotiations, failed to do anything. The $1.2 trillion of automatic spending cuts will never happen. The slime that inhabit the hallowed halls of Congress will pretend to cut, while actually increasing spending. And so it goes. The stock market has risen from its October low based on Easy Ben’s assurances to keep interest rates at zero forever and the anticipation of QE3 in the new year.

  • 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.

Corporate profits did rise, mostly due to Ben Bernanke providing free money to the Wall Street Mega-Banks so they could generate risk free profits on the backs of senior citizens getting .15% on their savings. It also helps when the same Wall Street banks can make accounting entries declaring that future loan losses will be minimal and the toxic mortgages on their books aren’t really worthless. Who knew accountants could do so much for America? Abbey Joseph Cohen only missed her stock market projection by a smidgeon. The S&P 500 is essentially unchanged for the year, while the NASDAQ and Russell 2000 will finish in the red.

The country did not add 2 million new jobs. It added 1.4 to 1.5 new jobs. Too bad the working age population went up by 1.7 million people. But our friends at the BLS, when they aren’t manipulating away the inflation that real people in the real world experience every day, have the gall to declare the unemployment rate has fallen from 9.8% to 8.6% in the last twelve months. How could this be you might ask, since the working age population went up by more than the number of people who found jobs. Easy if you are a BLS government drone. Everyone knows that things are so good out in the real world that 1.8 million Americans decided to kick back and enjoy the good life by leaving the workforce. It wasn’t because they gave up looking for the jobs that were shipped to the Far East by the mega-corporations making record profits and paying record bonuses to their executives. It’s just a rumor that those long lines at food banks around the country have a few of these “lucky” non-members of the workforce in them.

The housing recovery is just around the corner. Larry Yun, chief liar for the National Association of Realtors, assures us that it’s the best time to buy. We all know that the NAR is a bastion of honesty and truth. Just because they reported 3 MILLION more home sales than actually occurred between 2007 and 2010, you can’t scorn, ignore and treat everything they say as a bald faced lie. If Larry says the housing recovery has arrived, it must be true.

  Revised Previous % Change
2007 5,022,000 5,652,000 -11.1%
2008 4,124,000 4,913,000 -16.1%
2009 4,334,000 5,156,000 -15.9%
2010 4,182,000 4,907,000 -14.8%

When the pundits on CNBC sum up the year, they will not be touting the fact that gasoline prices went up 10% in the past year and the average price for a gallon of gas was the highest in U.S. history. They will not be proclaiming that even the government manipulated CPI shows food prices up 6% and clothing prices up 5% in the last year. I’m sure glad Ben Bernanke doesn’t see any inflation on his radar. Maybe he should ask his chauffer about his inflation. Lastly, the stocks for the long run crowd will not be yakking about the fact that gold finished up 10% for the year and has been up for TEN consecutive years. I wonder whether the numbskulls on CNBC can look at the chart below and figure out why gold is up ten years in a row. The national debt reaching $20 trillion by 2015 is a given. I wonder whether the price of gold will be higher. Maybe I’ll give Abbey Joseph Cohen a call and ask for her prediction.

Overall, my assessment of what would happen in 2011 wasn’t too far off. But, it was the things that I and virtually everyone on the planet missed that will reverberate in 2012 and for the next ten years. Our 20 year Crisis deepened, became more violent, and clearly revealed that the establishment will use all their power to put down protests and crush opposition to their corrupt crony capitalistic policies. The major developments I missed regarding 2011 included:

  • The self-immolation of a young Tunisian man set off revolutions around the globe, toppling U.S. supported dictators in Tunisia and Egypt. Dictators attempted to retain power by killing citizens by the thousands. The self-immolation of a man in New Hampshire in front of a courthouse was completely ignored by the mainstream media. I wonder why.
  • The Arab Spring has resulted in revolutions in Yemen, Bahrain, Syria and Libya. Depending upon how much oil was at stake, the U.S. has supported the dictator or the people whenever it suited them. This is called democratic principles.
  • Young people across the U.S. were inspired by the Arab Spring and began to Occupy Wall Street and many other streets in 97 other U.S. cities this past Fall. The spirit of these protests was against Wall Street criminality, Washington corruption, and corporate malfeasance. Peaceful civil disobedience by citizens of this country was met with beatings, tear gas, mass arrests and bulldozing their encampments. Students were maced while sitting in front of a college building. Ultimately a Department of Homeland Security coordinated attack on all the protests squashed the movement. The American people were too distracted by Dancing With the Stars and the latest iGadget to notice. The corporate media did their part by spewing misinformation and propaganda about the Occupy Movement, while the Wall Street Elite giggled with delight from their NYC penthouse suites.
  • Shockingly, no bankers were prosecuted despite clear unequivocal evidence of the greatest financial fraud in world history. The former head of Goldman Sachs, U.S. Senator, and NJ Governor continues to eat caviar and drink champagne in his glorious mansion after stealing $1.2 billion directly from customers’ accounts. These funds now reside in the pocket of Jamie Dimon and his upstanding JP Morgan institution.
  • The Federal government methodically moved closer to a totalitarian regime by passing legislation that will enable them to imprison U.S. citizens without charges. The only remaining area that has allowed critical thinking Americans to find the truth – the Internet – is on the verge of being locked down by the Feds. Pending legislation will allow them to shut down any website that may inconvenience their agenda. We inch ever closer to Orwell’s vision of the future.
  • No one in the MSM or government anticipated that the only truthful, honest, forthright politician in Washington D.C. – Ron Paul – could possibly win the Iowa caucus. His message of freedom, liberty, self reliance, and non-interventionism has struck a chord with young people and those capable of distinguishing between MSM propaganda and reality. The establishment is terrified of Ron Paul and is now on a mission to destroy him. What they don’t realize is their time is coming to an end. The existing social order will be swept away in a violent manner. The youth of this country will lead the charge. 2012 should be a real doozy.

I’ll take another shot at predicting the unpredictable with my next article:  2012 – The Year of Living Dangerously.

TIME PERSON OF THE YEAR – THE PROTESTOR

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Posted on 14th December 2011 by Administrator in Economy |Politics |Social Issues

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Good choice by Time Magazine. History books will mark 2011 as a historical year when the people around the globe began to sweep away the corrupt existing social order in every country. The protests will grow more violent in 2012 as the world economic system falls apart and the fraud and corruption of politicians and bankers is revealed to all. Hold on tight.

‘Mohammed suffered a lot. he worked hard. But when he set fire to himself, it wasn’t about his scales being confiscated. It was about his dignity.’
—Mannoubia Bouazizi, Tunisia

Wednesday, Dec. 14, 2011

The Protester

By Kurt Andersen

Once upon a time, when major news events were chronicled strictly by professionals and printed on paper or transmitted through the air by the few for the masses, protesters were prime makers of history. Back then, when citizen multitudes took to the streets without weapons to declare themselves opposed, it was the very definition of news — vivid, important, often consequential. In the 1960s in America they marched for civil rights and against the Vietnam War; in the ’70s, they rose up in Iran and Portugal; in the ’80s, they spoke out against nuclear weapons in the U.S. and Europe, against Israeli occupation of the West Bank and Gaza, against communist tyranny in Tiananmen Square and Eastern Europe. Protest was the natural continuation of politics by other means. 

And then came the End of History, summed up by Francis Fukuyama’s influential 1989 essay declaring that mankind had arrived at the “end point of … ideological evolution” in globally triumphant “Western liberalism.” The two decades beginning in 1991 witnessed the greatest rise in living standards that the world has ever known. Credit was easy, complacency and apathy were rife, and street protests looked like pointless emotional sideshows — obsolete, quaint, the equivalent of cavalry to mid-20th-century war. The rare large demonstrations in the rich world seemed ineffectual and irrelevant. (See the Battle of Seattle, 1999.) 

There were a few exceptions, like the protests that, along with sanctions, helped end apartheid in South Africa in 1994. But for young people, radical critiques and protests against the system were mostly confined to pop-culture fantasy: “Fight the Power” was a song on a platinum-selling album, Rage Against the Machine was a platinum-selling band, and the beloved brave rebels fighting the all-encompassing global oppressors were just a bunch of characters in The Matrix. (See pictures of protesters around the world.) 

“Massive and effective street protest” was a global oxymoron until — suddenly, shockingly — starting exactly a year ago, it became the defining trope of our times. And the protester once again became a maker of history. 

Prelude to the Revolutions
It began in Tunisia, where the dictator’s power grabbing and high living crossed a line of shamelessness, and a commonplace bit of government callousness against an ordinary citizen — a 26-year-old street vendor named Mohamed Bouazizi — became the final straw. Bouazizi lived in the charmless Tunisian town of Sidi Bouzid, 125 miles south of Tunis. On a Friday morning almost exactly a year ago, he set out for work, selling produce from a cart. Police had hassled Bouazizi routinely for years, his family says, fining him, making him jump through bureaucratic hoops. On Dec. 17, 2010, a cop started giving him grief yet again. She confiscated his scale and allegedly slapped him. He walked straight to the provincial-capital building to complain and got no response. At the gate, he drenched himself in paint thinner and lit a match. (See pictures of Sidi Bouzid.) 

“My son set himself on fire for dignity,” Mannoubia Bouazizi told me when I visited her. 

“In Tunisia,” added her 16-year-old daughter Basma, “dignity is more important than bread.” 

In Egypt the incitements were a preposterously fraudulent 2010 national election and, as in Tunisia, a not uncommon act of unforgivable brutality by security agents. In the U.S., three acute and overlapping money crises — tanked economy, systemic financial recklessness, gigantic public debt — along with ongoing revelations of double dealing by banks, new state laws making certain public-employee-union demands illegal and the refusal of Congress to consider even slightly higher taxes on the very highest incomes mobilized Occupy Wall Street and its millions of supporters. In Russia it was the realization that another six (or 12) years of Vladimir Putin might not lead to greater prosperity and democratic normality. 

In Sidi Bouzid and Tunis, in Alexandria and Cairo; in Arab cities and towns across the 6,000 miles from the Persian Gulf to the Atlantic Ocean; in Madrid and Athens and London and Tel Aviv; in Mexico and India and Chile, where citizens mobilized against crime and corruption; in New York and Moscow and dozens of other U.S. and Russian cities, the loathing and anger at governments and their cronies became uncontainable and fed on itself. 

The stakes are very different in different places. In North America and most of Europe, there are no dictators, and dissidents don’t get tortured. Any day that Tunisians, Egyptians or Syrians occupy streets and squares, they know that some of them might be beaten or shot, not just pepper-sprayed or flex-cuffed. The protesters in the Middle East and North Africa are literally dying to get political systems that roughly resemble the ones that seem intolerably undemocratic to protesters in Madrid, Athens, London and New York City. “I think other parts of the world,” says Frank Castro, 53, a Teamster who drives a cement mixer for a living and helped occupy Oakland, Calif., “have more balls than we do.” 

In Egypt and Tunisia, I talked with revolutionaries who were M.B.A.s, physicians and filmmakers as well as the young daughters of a provincial olive picker and a supergeeky 29-year-old Muslim Brotherhood member carrying a Tigger notebook. The Occupy movement in the U.S. was set in motion by a couple of magazine editors — a 69-year-old Canadian, a 29-year-old African American — and a 50-year-old anthropologist, but airline pilots and grandmas and shop clerks and dishwashers have been part of the throngs. 

It’s remarkable how much the protest vanguards share. Everywhere they are disproportionately young, middle class and educated. Almost all the protests this year began as independent affairs, without much encouragement from or endorsement by existing political parties or opposition bigwigs. All over the world, the protesters of 2011 share a belief that their countries’ political systems and economies have grown dysfunctional and corrupt — sham democracies rigged to favor the rich and powerful and prevent significant change. They are fervent small-d democrats. Two decades after the final failure and abandonment of communism, they believe they’re experiencing the failure of hell-bent megascaled crony hypercapitalism and pine for some third way, a new social contract. 

During the bubble years, perhaps, there was enough money trickling down to keep them happyish, but now the unending financial crisis and economic stagnation make them feel like suckers. But this year, instead of plugging in the headphones, entering an Internet-induced fugue state and quietly giving in to hopelessness, they used the Internet to find one another and take to the streets to insist on fairness and (in the Arab world) freedom. (See a photographer’s journey through uprisings in seven countries.) 

All over the world they are criticized by old-schoolers for lacking prefab ideological consistency, which the protesters in turn see as a feature rather than a bug. Miral Brinjy, a 27-year-old blogger and TV-news producer who grew up in Saudi Arabia and arrived in Tahrir Square on the first day of protests 11 months ago, doesn’t presume to have a precise picture of the new Egyptian government and society she envisions, but as she told me in Cairo last month, “I know what I don’t want.” 

In each place, discontent that had been simmering for years got turned up to a boil. There were foreshadowings. In the U.S., the Obama campaign was in part a feel-good protest movement that galvanized young people, and then its shocking success and the Wall Street bailout produced an angry and shockingly successful populist protest movement in the Tea Party, which has far outlasted its expected shelf life. In 2009, after the regime in Tehran denied the antiregime election results, millions of Iranians, especially young ones, protested for weeks. The Web and social media were key tactical tools in all three instances. But they seemed at the time to be one-offs, not prefaces to an epochal turn of history’s wheel. (See TIME’s 2008 Person of the Year: Barack Obama.) 

The Iranian regime’s suppression of the Green Revolution must have reassured the dictators and monarchs in the Arab Middle East and North Africa and, you’d think, dispirited would-be democratic freedom fighters in those countries. The global spread of liberty hit a plateau a dozen years earlier, according to the international monitoring organization Freedom House. And the Middle East and North Africa remained the world’s tyranny belt: at the end of 2010, Freedom House declared three-fourths of the Arab countries “not free” — including Tunisia and Egypt. In Arab countries, the prosperity of the past decade — Egypt’s economy grew by 5% and more, even during the recession — was not widely shared; rising expectations that go unfulfilled are sociology’s classic explanation for protest. For a critical mass of people from Cairo to Madrid to Oakland, prospects for personal success — for the good life at the End of History that they’d been promised — suddenly looked very grim. They were fed up, and the frustration and anger exploded after the regimes overreached. 

In short, 2011 was unlike any year since 1989 — but more extraordinary, more global, more democratic, since in ’89 the regime disintegrations were all the results of a single disintegration at headquarters, one big switch pulled in Moscow that cut off the power throughout the system. So 2011 was unlike any year since 1968 — but more consequential because more protesters have more skin in the game. Their protests weren’t part of a countercultural pageant, as in ’68, and rapidly morphed into full-fledged rebellions, bringing down regimes and immediately changing the course of history. It was, in other words, unlike anything in any of our lifetimes, probably unlike any year since 1848, when one street protest in Paris blossomed into a three-day revolution that turned a monarchy into a republican democracy and then — within weeks, thanks in part to new technologies (telegraphy, railroads, rotary printing presses) — inspired an unstoppable cascade of protest and insurrection in Munich, Berlin, Vienna, Milan, Venice and dozens of other places across Europe, as well as a huge peaceful demonstration of democratic solidarity in New York that marched down Broadway and occupied a public park a few blocks north of Wall Street. How perfect that the German word Zeitgeist was transplanted into English in that unprecedented, uncanny year of insurrection. 

During the battle of Dien Bien Phu in 1954, just as the French colonialists were about to lose to the communist revolutionaries and leave Indochina, President Dwight Eisenhower held a news conference. “You have a row of dominoes set up,” he said, positing Vietnam as the domino between fallen China and North Korea and the rest of Asia. “You knock over the first one, and what will happen to the last one is the certainty that it will go over very quickly.” But in 1975, after the communists won in Vietnam and Cambodia, no other countries followed, and the domino theory of contagious national-liberation movements was discredited forever. 

Forever, until now. This is how the dominoes fell in 2011 — and these are some of the people who pushed them. 

See Richard Stengel and Kurt Andersen discuss why TIME’s 2011 Person of the Year is ‘The Protester.’ 

The Year of Protests
The fire didn’t kill Mohamed Bouazizi right away. Passersby doused the flames and took him to the hospital. He was still alive, barely. 

That afternoon, other produce sellers and townspeople joined the Bouazizis in protest outside the governorate. A cousin posted a video of the demonstration. Word spread thanks to al-Jazeera and the Internet — a third of all Tunisians use the Internet, and three-quarters of those have Facebook accounts — inspiring protests in other towns and cities. After Bouazizi died on Jan. 4, the protests reached a critical mass, and more than a dozen protesters around the country were killed by police. “I’d watch TV,” Basma Bouazizi told me, “and say, ‘God, the Tunisian people have woken up!'” (See TIME’s 2010 Person of the Year: Facebook Founder Mark Zuckerberg.) 

Spontaneous protests? In 2011? In an Arab police state? Heroic, hopeless, doomed. Three weeks in, the nearly universal presumption about the protests’ implications was summed up in the Economist‘s first report: “Tunisia’s troubles are unlikely to unseat the 74-year-old president or even to jolt his model of autocracy.” 

Lina Ben Mhenni, 28, a linguistics teacher at Tunis University, had been blogging for a few years about Tunisian censorship and election rigging under the name “A Tunisian Girl.” She went to the town of Regueb, 25 miles from Sidi Bouzid, to photograph a young protester who had been shot dead and uploaded the image. “On that day I lost my fear completely,” she says. “I was ready for anything, even death.” By the end of the week, she was back in Tunis, protesting outside the old white stucco casbah that served as the seat of government. So was Hilme al-Manahe, 23, an unemployed baker. His mother, Sayda al-Manahe, says Bouazizi’s self-immolation had galvanized Hilme. “He used to say, ‘This poor man — I can understand why he did that. He just wanted to earn a living. His story is like my story, which is like my friend’s story.'” 

“I would tell him,” Sayda says, “Be quiet, sit down, and don’t even think about getting involved in this.” But on Jan. 13 he went to the demonstration in Tunis. He had just recorded a friend with his cell phone when a bullet, presumably fired by a police sniper, pierced his heart. (See profiles of protesters from around the world.) 

The next morning, Majdi Calboussi, a middle-class 29-year-old software developer and antiregime blogger, was there recording the protests and the police with his BlackBerry. “People started to say, ‘Ben Ali, dégage‘” (“Get out, Ben Ali”). He uploaded his video to Twitter, and it got half a million views in a day. Hours later, President Zine el Abidine Ben Ali flew to exile in Saudi Arabia. After just four weeks, the protesters had won. And the next domino was struck. 

Among all the Egyptians I met, there is absolute agreement that Tunisia was the spark of their revolution. “It wouldn’t have happened without them,” says Shady el-Ghazali Harb, a 32-year-old surgeon who was one of 13 main leaders in Tahrir Square. The lessons of Tunisia weren’t just inspirational; they were practical. “This was like a user’s manual in how to topple a regime peacefully,” says Wael Nawara, 50, a Web entrepreneur and longtime opposition political activist. In January, Tunisians “sent us a lot of information,” says Ahmed Maher, a Cairo civil engineer and one of Egypt’s most prominent activists, “like use vinegar and onion” — near one’s face, for the tear gas — “and how to stop a tank. They sent us this advice, and we used it.” 

The Egyptians had their own Mohamed Bouazizi: an underemployed middle-class 28-year-old named Khaled Said. One day last year, after apparently hacking a police officer’s cell phone and lifting a video of officers displaying drugs and stacks of cash, he was arrested and beaten to death. Wael Ghonim, then a 29-year-old Google executive, created a Facebook page called We Are All Khaled Said to memorialize him. It went viral, and in January, Ghonim returned from Dubai to Egypt to help plan a protest set for Jan. 25: a “day of rage” in Tahrir Square. Maher and other activists were invited to collaborate. They met online and face to face to work out the details. Brinjy told me she “was terrified. I thought we’d try but run away if necessary. Then we ran into huge crowds heading to Tahrir, and I knew it was going to be big.” (See pictures of 18 days that shook the world.) 

“From the start I thought it would succeed,” 29-year-old filmmaker Mohammed Ramadan says. “In my whole life I’d never seen protests like that. Girls! Some wore hijabs, some didn’t, Christians, Muslims — I’d never seen that.” The Muslim Brotherhood hadn’t endorsed the protest, but Khaled Tantawy, a 34-year-old Brotherhood apparatchik, came anyway. He also was struck by the diversity. “I saw all these different and surprising kinds of people protesting and thought, Wow, this can happen.” 

That night it happened. “The surprise,” according to Mohamed el-Beltagy, a member of the Brotherhood who went to Tahrir unofficially, “was that there was a new generation who could break the fear barrier. At midnight, when the [police's] violent clearing of the square happened and the protesters didn’t run away and go home, I knew it was a revolution.” 

The regime’s violent response surprised no one. As in Tunisia, when the crackdown escalated — from tear gas to rubber bullets to real bullets, to Ghonim’s detention for the duration, to a nationwide shutdown of Internet connections, to armed camel riders rampaging through Tahrir — so did the number of protesters in Cairo and all over the country. At least 4.5 million Egyptians protested during those three weeks — in other words, 8% of the population over 14. 

Hisham Kassem, a prominent 52-year-old independent journalist and publisher, had never been part of a street protest before. He is bracingly clear-eyed, a stiff-necked curmudgeon. On Jan. 28 he was teargassed and, he told me, still sounding amazed 10 months later, threw rocks at police. “I saw people shot next to me.” When he returned on “the day of the camel attack, it was war — I almost got mauled to death by the thugs.” And another day when he arrived at Tahrir, “This kid asked for my ID: ‘Whose side are you on?’ I said, ‘What the hell do you mean?'” But then and there on the edge of Liberation Square, he had an epiphany: he may have been a longtime pro-democracy VIP, but this was now democracy. “I felt a strange acceptance,” he says. “I didn’t begrudge them.” 

By then the army had announced, “Your armed forces, who are aware of the legitimacy of your demands … will not resort to use of force.” President Hosni Mubarak was finished — “Please go,” a Tahrir protest sign urged, “because I want to take a shower” — but it took 11 more days for Mubarak to pass through denial, anger, bargaining and presumably depression to arrive at the acceptance stage. “The day Mubarak stepped down,” says Abdo Kassem, 25, an unemployed Cairene who’d never been politically active until he followed the Facebook protest instructions last January, “I was crying. For me, that was like bringing down a fake god.” 

Millions protest. Armies stand down. Dictators leave. Impossible fantasies two months earlier — now they were coming true. The “days of rage” meme and democratic dream had achieved breathtaking momentum, spreading not just to the softer monarchical dictatorships — Jordan, Bahrain, Morocco — but also to Yemen, Algeria and the hardcore police states Syria and Libya. (Watch a video about why Bahrain, Tunisia and Yemen protest.) 

In the spring, they spread to Europe. On May 15, tens of thousands marched to Madrid’s Puerta del Sol plaza, along with tens of thousands more in dozens of other cities, united by slogans like “We are not goods in the hands of politicians and bankers.” They were frustrated by unemployment, a lack of opportunity and politics headed nowhere. They called themselves Los Indignados, the Outraged. 

Spain’s one-day march turned into a months-long self-governing encampment — one of the new defining characteristics of 2011’s brand of communal resistance. Throughout the country, about 6 million out of a population of 46 million participated in Indignados protests. Among those in Madrid was Olmo Gálvez, 31, an Internet entrepreneur just back from three years working in China and new to politics. He’d helped set up social-media networks for the protest. “It was marvelous to see people become the actors in their own lives,” he says. “You could watch them breaking out of their passivity.” 

Ten days after the Madrid protests began, the contagion spread to Greece. George Anastasopoulos, 36, has a Ph.D. in sociology but earns his living as a DJ. “That first Sunday when we saw 100,000 people show up, we were overwhelmed,” he says of the Athenians’ camp in Syntagma Square, in sight of Parliament. “And then the second Sunday, 500,000 people showed up. That enthused us so much, and we started dreaming really big.” (See pictures of Loukanikos, Athens’ Protest Dog.) 

“Our protests,” says Christina Lardikou, a 31-year-old Athenian who works in fashion, “all started from the Indignados.” But they drew from other inspirations too. Among the chants in the birthplace of democracy last spring were “Yes we can!” And Anastasopoulos has kept a banner reading “Let freedom ring” — that is, a quotation from Martin Luther King Jr. quoting “My Country ‘Tis of Thee.” 

The Greek protests continued for more than a month, until just about the time 150 young Israeli protesters started pitching tents in the median of Rothschild Boulevard in Tel Aviv. The grievance package was familiar: good jobs too scarce, cost of living too high, politicians corrupt, only the well-connected rich getting richer. Soon there were 100 such encampments all over Israel, in working-class towns as well as yuppievilles. For a finale in early September, an estimated 400,000 of the country’s 7.7 million citizens marched, chanting, “The people demand social justice!” When the Egyptian revolutionary leader el-Ghazali Harb told me how pleased he was that Tahrir Square had inspired copycat protests all over the world, I asked if his pride extended to Israel. He laughed and said, “I will say we were happy about that as well.” 

In early August, after police in London shot and killed a young black man they were arresting, riots broke out all over England. Naturally, the rioters’ instantly resorting to violence attracted little sympathy. Yet a new, three-month study by the Guardian and the London School of Economics concluded that these rioters were also protesters, motivated by anger about poverty, unemployment and inequality as well as overaggressive policing. 

Back in Madrid, the protesters recognized the diminishing returns of this protest phase and had started to decamp. By July, Gálvez says, they heard that Occupy Wall Street was going to happen. Online, the Indignados started explaining to the Americans how it’s done. (See pictures of the Occupy Wall Street protests.) 

Since 1989 the earnest, zany little bimonthly Adbusters — “an ad-free international magazine for activists fighting to change the way information flows and meaning is produced in our society” — had been preaching to its choir. In July the editors ran a full-page photo-illustration of a barefoot ballerina posed atop Wall Street’s Charging Bull statue — in the background were gas-masked insurgents in a tear-gas fog — along with four lines of copy: “What is our one demand? #occupywallstreet September 17th. Bring tent.” Adbusters also sent out an e-mail — “America needs its own Tahrir” — and on Independence Day urged on its smallish cadre of Twitter followers: “Dear Americans, this July 4th dream of insurrection against corporate rule.” 

If you tweet it, they will come. 

At the end of July, in an office in New York’s financial district, the proto-Occupiers met with some veterans of the protests in Spain, Greece and North Africa. To figure out what “Occupy Wall Street” might mean, they reconvened two days later at a come-one-come-all meeting — outdoors, for hours, in a park near that charging bronze bull, amid the thousands of unwitting passersby on an ordinary Wall Street workday. 

David Graeber, 50, a prominent anthropology scholar and soft-spoken pro-anarchism activist, showed up. Some standard leftists were pushing for a standard rally making a standard demand — no cutbacks in government social spending. Slowly but surely, Graeber and a pal, 32-year-old Greek émigré artist Georgia Sagri, nudged the group to a fresh vision: a long-term encampment in a public space, an improvised democratic protest village without preappointed leaders, committed to a general critique — the U.S. economy is broken, politics is corrupted by big money — but with no immediate call to specific legislative or executive action. It was also Graeber, a lifelong hater of corporate smoke and mirrors, who coined the movement’s ingenious slogan, “We are the 99%.” 

Until late September, 99% of New Yorkers had never heard of Zuccotti Park, a privately owned public plaza tucked between the Federal Reserve Bank and the World Trade Center site. On the last Saturday of the summer — sunny, mid-60s, perfect — a couple thousand people showed up, a hundred slept overnight, and the occupation was on. It seemed as though the world would little note nor long remember it. On the third day, the first arrests — of protesters wearing Guy Fawkes masks in violation of an antique New York anti-insurrection statute — got scant attention. (Watch TIME’s video about how a live stream about Zuccotti Park gained mainstream attention.) 

It was through my Twitter feed that I started noticing that something was going on in my city. The following weekend, I watched the YouTube video of a New York police deputy inspector casually pepper-spraying some random female protesters. A few days later, my 24-year-old nephew, Daniel Thorson, e-mailed from his small town in western New York: he was coming down to occupy Wall Street, and could he stay with us in Brooklyn? 

At Hobart and William Smith Colleges, Daniel was a philosophy major, lived in his frat house, volunteered for the Obama campaign and co-founded his campus’s chapter of the nonpartisan Americans for Informed Democracy. Since graduating, he’s held various minimum-wage and unpaid jobs and has grown deeply disappointed by how little the Obama Administration has been able to accomplish. In September he was stunned by the breadth and depth of the chatter on his Twitter and Facebook feeds about Occupy Wall Street and decided he wanted to be part of it. (See TIME’s 2010 Person of the Year: Facebook Founder Mark Zuckerberg.) 

As soon as he arrived at Zuccotti Park, he went to the information desk. “It was staffed by someone who wasn’t very articulate,” he told me, “who wasn’t the face of what I thought this should be.” He offered to pitch in and thus became a member of the information working group. He helped guide the general assemblies, OWS’s daily town meetings, reveling in the process of debating and deciding. To me it sounded like being a facilitator at a corporate management retreat — except outdoors, with everyone voting by means of kooky hand signals and making sure the anarchists are heard. Even if I were a 24-year-old idealist, I told Daniel, I would have zero patience for the process. He’d get annoyed from time to time by “craziness, by a sense of entitlement, anger, resentment,” he said. “But there are jerks in every organization no matter how ‘pure’ the organization.” 

After my wife and I kicked him out of our house — three weeks seemed like a fulfillment of avuncular duty — Daniel slept at the park most nights. At around 1 a.m. on the final night of the encampment in November, he was at a friend’s apartment when he got a text message — police en route, eviction imminent. He rushed downtown, but new police barricades kept him and other protesters a block away up Broadway. They were ordered to scram, most of them refused, the pepper spray came out, and the police announced they’d be arrested if they didn’t leave the sidewalk. Daniel spent 38 hours in custody, charged with resisting arrest, disorderly conduct and obstructing governmental administration. 

I found out about his arrest and release — via e-mail and a Facebook status update — in Cairo, as I walked through Tahrir Square during the first of the recent, huge anti-junta protests. My interpreter, a young Jordanian immigrant to Egypt, was excited about Occupy Wall Street. “It’s going viral,” he said. “I know it’s now like in 80 countries.” 

And in cities all over the U.S., of course, with all kinds of people protesting. Among the thousands occupying Oakland was Arthur Chen, 60, a family-practice physician. For him, “the expression of outrage was very on target with our current economic crisis and the way it’s impacting the 99%,” especially his low-income and uninsured patients. During his first day occupying Oakland, Chen remembers, “one of the announcers said, ‘You’re going to hear some things that you may totally disagree with.’ I chuckled, and then I thought, ‘This generation really is about inclusiveness and transparency.’ It was very moving.” 

In Cairo, meanwhile, there is Ahmed Harara, 31, a dentist who lost sight in both eyes to rubber bullets in Tahrir on two separate occasions — in January and November, when he returned for the anti-junta protests. What was the most memorable day of his whole annus mirabilis cum horribilis? “Actually,” he said, “there are two days — the 28th of January here in Egypt and the day when Americans occupied Wall Street. Because here in Egypt, we raised the slogan of social justice, and I see that Americans need it and did that too.” 

The Beginning of History
Bliss was it in that dawn to be alive,
But to be young was very heaven! — Oh! times,
In which the meagre, stale, forbidding ways
Of custom, law, and statute, took at once
The attraction of a country in romance!
 

— William Wordsworth, “The French Revolution as It Appeared to Enthusiasts at Its Commencement” 

Aftermaths are never as splendid as uprisings. Solidarity has a short half-life. Democracy is messy and hard, and votes may not go your way. Freedom doesn’t appear all at once. Just off Tahrir, when a couple of us were taking pictures of a graffito about a blogger the army had imprisoned, a scowling secret policeman appeared and waved us away. We were unwanted tourists at the revolution. 

Globalization and going viral have been the catchphrases of the networked 21st century. But until now the former has mainly referred to a fluid worldwide economy managed by important people, and the latter has mostly meant cute-animal videos and songs by nobodies. This year, do-it-yourself democratic politics became globalized, and real live protest went massively viral. But as they’ve rejuvenated and enlarged the idea of democracy, the protesters, and the rest of us, are discovering that democracy is difficult and sometimes a little scary. Because deciding what you don’t want is a lot easier than deciding and implementing what you do want, and once everybody has a say, everybody has a say. No one knows how the revolutions will play out: A bumpy road to stable democracy, as in America two centuries ago? Radicals’ taking over, as in France just after the bliss and very heaven? Or quick counterrevolution, as in France 60 years later? The mostly liberal, secular young people who made the revolutions in Tunisia and Egypt last winter have been subordinated, if not sidelined, by better-disciplined political organizations. And they all agree it’s partly their own fault, a function of naiveté about the realities of democratic politics. 

“The only good thing Mubarak did,” activist Mahmoud Adel Elhetta told me, “was unite us.” Mahmoud Salem, 30, who blogs and tweets under the name Sandmonkey — and who has an American B.A. and M.B.A. and works in business development for clients like Coca-Cola — told me he “had the hubris of youth. It was utopia that immediately descended into chaos.” He lost his election for a parliamentary seat representing a wealthy Cairo district two weeks ago. “We failed,” says el-Ghazali Harb, the surgeon-revolutionary. “What made the revolution happen is the youth. We handed it back to the seniors. We didn’t trust ourselves.” 

Watch TIME’s video “Why They Protest: American Movements.” 

In both Egypt and Tunisia, the freely elected new parliaments will be dominated by Islamists — sweet-talking moderates who secularists worry won’t stay that way. But as Tantawy of the Muslim Brotherhood told me, “It’s not just liberals vs. the Brotherhood now. The Islamists disagree among themselves.” To me, the mainstream Islamist parties in Egypt and Tunisia don’t appear much more fanatically religious than, say, Pat Robertson – esque Evangelicals in the U.S., and unlike the Republican hard-liners, they sound committed to a national consensus that includes secular liberals. “Democracy is a new culture, and we have to get used to it,” says Abdelhamid Jlassi, a Tunisian Islamist leader who spent 17 years as a political prisoner. “Now we have to get used to being hit by eggs.” 

And the secular revolutionaries remain hopeful that they will not turn out to have been useful idiots to new oppressors. Shadi Taha is a U.S.-educated civil engineer and major liberal Egyptian party official who’s running for parliament on a coalition slate with Muslim Brothers. “I don’t agree with some of their things,” he told me, “but in the 1980s, before they got into politics, they were as crazy as the Salafis” — the fundamentalists who are winning a quarter of the current parliamentary vote. He thinks democratic politics has an inherently moderating effect. Even Tunis University professor Dalenda Largueche, a feminist who could barely contain her horror at ascendant Islamism when we spoke, can eke out some hope. “They want to change Tunisia according to their vision,” she says, “but Tunisia will change them.” The secularists have a founding-fathers-and-mothers faith in freedom and democracy that is stirring: there’s no going back to tyranny, they’re sure. “In the end,” Wael Nawara says, “things will turn out all right, because the relationship between people and authority in Egypt has changed forever. People discovered that they can change and stop authority from going too far. That self-discovery changes everything. They learned they can replace a ruler. That’s the revolution.” 

Yet there is, for now, a self-sabotaging catch-22 operating among protesters all over the world. All the protests have been against systemic status quos. That has been their great strength. “If it was politicians who had led the movement,” Jlassi says of the Tunisian revolution, “it wouldn’t have succeeded, whereas the youths, who were unaffiliated, could appeal to everyone.” But because even free politics can be inherently unclean, the youth and other liberals don’t yet have the stomach for democratic hardball. Will the moral high ground keep working for them? It would be pretty to think so. U.S. Occupiers lack faith in the occupant of the Oval Office and aren’t entirely thrilled with their labor-union allies, and the indie generations’ need for absolute consensus can devolve into a feckless Bartlebyism — passive resistance, preferring not to. 

Ditto in Europe and the Arab countries. In Tunisia, says Lina Ben Mhenni, “we didn’t complete the revolution. We got rid of the dictator. Maybe the mistake that we made was that most of us rejected the idea of entering political life.” Absent dictatorships to overthrow, idealistic purity can carry a high political price, and if you leave the dull but essential business of governing to the squares and grownups, you lose. 

On the other hand, one of the unequivocal generational virtues of these movements has been their use of the Internet and social media. Two years ago, the scholars Nicholas Christakis (Harvard) and James Fowler (University of California, San Diego) published Connected, a groundbreaking study of social networks, which they summarize as “how your friends’ friends’ friends affect everything you feel, think and do.” The protests of the past 12 months look like a spectacular worldwide confirmation of those findings. 

Calling the Arab uprisings Facebook and YouTube and Twitter revolutions is not, it turns out, just glib, wishful American overstatement. In the Middle East and North Africa, in Spain and Greece and New York, social media and smart phones did not replace face-to-face social bonds and confrontation but helped enable and turbocharge them, allowed protesters to mobilize more nimbly and communicate with one another and the wider world more effectively than ever before. And in police states with high Internet penetration — Ben Ali’s Tunisia, Mubarak’s Egypt, Bashar Assad’s Syria — a critical mass of cell-phone video recorders plus YouTube plus Facebook plus Twitter really did become an indigenous free press. Throughout the Middle East and North Africa, new media and blogger are now quasi synonyms for protest and protester. (See TIME’s 2010 Person of the Year: Facebook Founder Mark Zuckerberg.) 

And then there was the Arab Spring’s other essential, not-quite-as-new media form — independent 24-hour TV news. When I asked the Islamist Jlassi why the revolution had not happened a decade earlier in Tunisia, he instantly answered, “Al-Jazeera and the Internet were the differences, especially al-Jazeera — everybody watches TV.” 

So America’s great 21st century contribution to fomenting freedom abroad was not imposing it militarily but enabling it technologically, as an epiphenomenon of globalization. And for a second act, globalization returned the favor, turning democratic uprisings in developing countries into inspirational exports for the rich world. “We were on the receiving side,” Egyptian presidential candidate Amr Moussa told me, “and now we are on the sending side. We have contributed to this global movement for change. There’s a new spirit. The grassroots are revolting — young people on Wall Street and young people in Europe.” 

Ever since modern republican democracy was invented, astonishing protests and uprisings have spiked and spread once every half-century or so: the revolutions in America and France and Haiti; the revolutions of 1848; the revolutions of the 1910s (Russia, Germany, Ireland, Turkey, Egypt, Mexico); the postwar wave of worldwide revolt (the movements toward decolonization, Cuba, Hungary, American civil rights, countercultural militancy in America and Europe). It happens almost like clockwork, yet each time people are freshly shocked and bedoozled. So here we are again. History isn’t a very precise guide to how long it might persist this time. In 1848 the revolutionary moment was explosive but lasted only a year, extinguished by both dictatorial and democratic counterrevolutions. The revolutionary dream hatched around 1960, however, was still powerfully contagious a decade later. 

The nonleader leaders of Occupy are using the winter to build an organization and enlist new protesters for the next phase. They have shifted the national conversation. As Politico recently reported, the Nexis news-media database now registers almost 500 mentions of “inequality” each week; the week before Occupy Wall Street started, there were only 91. But what would count, a few years hence, as success? According to gung-ho Adbusters editors Kalle Lasn and Micah White, it’s already “the greatest social-justice movement to emerge in the United States since the civil rights era.” Yet it took a decade to get from the Montgomery bus boycott to the federal civil rights acts, which were just the end of the beginning. 

The wisest Occupiers understand that these are very early days. But as long as government in Washington — like government in Europe — remains paralyzed, I don’t see the Occupiers and Indignados giving up or losing traction or protest ceasing to be the defining political mode. After all, the Tea Party protests subsided only after Tea Partyers achieved real power in 2010 by becoming the tail wagging the Republican Party dog. When radical populist movements achieve big-time momentum and attention, they don’t tend to stand down until they get some satisfaction. (See a profile of Person of the Year Runner-Up: Paul Ryan.) 

Protesters are ready to rumble in Egypt and Tunisia if democracy and freedom seem too compromised. Emboldened protesters may yet sweep away regimes in places like Jordan and Yemen. In Libya, a bloody revolution, assisted by NATO, brought down the 42-year-old regime of Colonel Muammar Gaddafi. The protorevolution is still under way in Syria, where thousands of protesters have been killed. 

And in Russia, the recipe for surprising protest circa 2011 — pseudodemocratic regime overreach, high Internet use, robust new media and suddenly galvanized middle-class youth — is being baked and served. On Dec. 5, after Putin’s party, United Russia, did badly in parliamentary elections despite apparent ballot-box stuffing, more than 5,000 Muscovites gathered to chant, “Russia without Putin!” and called for his arrest. It was the largest Russian antiregime protest of the 21st century — and just as in Tunis and Madrid and New York City, nobody saw it coming. 

These Russian protesters are a new breed, not just nostalgic old communist grandmas or bullyboy nationalists but yuppies, students, the best and brightest. “So this is what they look like,” said Oleg Orlov, the 58-year-old head of Russia’s main human-rights organization, as he scanned the square at Chistye Prudy the night of Dec. 5. “I’ve never seen them at rallies before, at least not in such enormous numbers. It’s incredible.” 

Alexei Navalny, the blogger who coined a new United Russia moniker — “the party of crooks and thieves” — addressed the protesters. “They can laugh and call us microbloggers. They can call us the hamsters of the Internet. Fine. I am an Internet hamster. But I know they are afraid of us.” The protesters cheered. And then 300 of them and Navalny were arrested. The next night in Triumfalnaya Square, protesters returned, and 600 were arrested. A Putin spokesman declared that “unsanctioned demonstrations must be stopped.” (See TIME’s 2007 Person of the Year: Vladimir Putin.) 

On Dec. 10, five days after the first protest, tens of thousands gathered in Moscow in the largest demonstration since just after the fall of communism. There were simultaneous protests in dozens of other cities all over Russia. A letter written by Navalny from his Moscow jail cell was read to the crowd. “It’s impossible to beat and arrest hundreds of thousands, millions. We are not cattle or slaves. We have voices and votes, and we have the power to uphold them.” An even bigger protest is scheduled for Dec. 24. 

They are protesting corruption and the lack of real freedom and true democracy. Because Russia, like most of the world, has not quite totally arrived at the end of history. — With reporting by Rania Abouzeid / Tunis, Abigail Hauslohner / Cairo, Simon Shuster / Moscow, Lisa Abend / Madrid, Joanna Kakissis / Athens, Nilanjana Bhowmick and Jyoti Thottam / New Delhi, Nate Rawlings and Ishaan Tharoor / New York, Jason Motlagh / Oakland and Tim Padgett / Mexico City

THE GATHERING STORM

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Posted on 13th March 2011 by Administrator in Economy |Politics |Social Issues

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“Still, if you will not fight for the right when you can easily win without bloodshed, if you will not fight when your victory will be sure and not so costly, you may come to the moment when you will have to fight with all the odds against you and only a precarious chance for survival. There may be a worse case. You may have to fight when there is no chance of victory, because it is better to perish than to live as slaves.” – Winston Churchill The Second World War

A butterfly flapped its wings in Tunisia creating a hurricane that is swirling across the globe, wreaking havoc with the existing social order and sweeping away old crumbling institutions and dictatorships. The linear thinking politicians, pundits and thought leaders have been knocked for a loop. They didn’t see it coming and they don’t know where it’s leading. An examination and understanding of history would have revealed that we have been here before. We were here in 1773. We were here in 1860. We were here in 1929. We are here again. The Fourth Turning has returned in its predictable cycle, just as Winter always follows Fall.   

 

Winston Churchill wrote the definitive history of World War II in 1948. His six volume history detailed the years from the end of World War I through the unconditional surrender of the Axis powers in 1945. Volume I in the series was The Gathering Storm. It covered the second half of the Unraveling and the first ten years of the last Fourth Turning Crisis period. The title fits perfectly with the mood and inevitability of what was destined to occur. All Fourth Turnings resemble Winter, with bitter cold options, biting winds of change, dark days, and destructive storms. The seasons cannot be averted. The Seasons of a year are predictable, as are the seasons of a human life. We’ve entered the Crisis (Winter) season of the latest Saeculum that began in 1946 and will climax sometime around 2025.

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

The generations are aligned in such a way that an event, incident, or individual action that may have been disregarded or ignored ten years ago will now trigger a worldwide conflagration. The Boston Massacre occurred in1770 during Revolutionary Saeculum. Five colonists were slaughtered by British troops. The mood of the generations was not ready for a Crisis. It wasn’t until three years later that the Boston Tea Party ignited a spark that started a revolution. John Brown’s raid on Harper’s Ferry in 1859 was intended to start a revolution. The populace was not ready. One year later, the election of Abraham Lincoln lit the fuse on the most horrific war in modern history. America experienced a sharp depression in 1920-1921. The country did not spiral into a decade long downturn, culminating in a World War that killed 65 million people. The generational dynamic was not aligned in a way that would lead to that outcome. Instead, the roaring twenties commenced. On December 17, 2010 a man committed a seemingly inconsequential act that has ignited a worldwide firestorm. 

 

The spark that has enflamed the planet was struck by a 26-year-old Tunisian with a computer science degree named Mohamed Bouazizi, who unable to feed his family, was not allowed by his government to even get a permit to sell vegetables. Bouazizi publicly doused himself with gasoline, lit a match, and burnt not only his own body, but enflamed the consciousness of a world, and its inhabitants, being obliterated by the corrupt wealthy elites who rule the planet. In less than a month the brush fire started by this 26-year-old Tunisian had incinerated the despotic government of his country and forced its “president-for-life”, Zine El Abidine Ben Ali, to flee the country. The people’s coup in Tunisia, called the Jasmine Revolution, has sent shockwaves across the globe, spreading wildfires of freedom throughout the Arab world.  The firestorm started by Bouazizi has brought down Mubarak in Egypt and is lapping at the heals of Gaddafi in Libya. Tyrants throughout the world are quivering with fear. The mood of the people across the globe has turned dark and angry. The political class and media are persistently surprised by the reaction of citizens to events during the Fourth Turning.

Historians William Strauss and Neil Howe documented their generational theory in the 1997 book The Fourth Turning. People who prefer blind ideology and believe human existence is a straight line of progress scorn their work as fantasy and pure prophecy. So called progressives misrepresent the theory as predicting the future because they refuse to accept the fact that large groups of human beings of a similar age and having common experiences react in similar predictable ways. It irritates those with an unwavering belief in human individuality. They prefer to ignore the numerous example of mass hysteria throughout history. In just the last 10 years we have experienced an internet boom and a housing boom that convinced millions of Americans to act  simultaneously in a foolish manner . The theory is so logical and measurable that even the most vacuous blond bubble head on Fox News should understand it.

Strauss & Howe have been able to break Anglo-American history into 80 to 100 year (a long human life) Saeculums going back to 1435. Each Saeculum has four generations at different stages of their lives.  A turning is an era with a characteristic social mood, a new twist on how people feel about themselves and their nation.  It results from the aging of the generational constellation.  A society enters a turning once every twenty years or so, when all living generations begin to enter their next phases of life.  Like archetypes and constellations, turnings come four to a saeculum, and always in the same order. In 1997, Strauss & Howe knew when the next Fourth Turning would begin:

The next Fourth Turning is due to begin shortly after the new millennium, midway through the Oh-Oh decade. Around the year 2005, a sudden spark will catalyze a Crisis mood. Remnants of the old social order will disintegrate. Political and economic trust will implode. Real hardship will beset the land, with severe distress that could involve questions of class, race, nation and empire. The very survival of the nation will feel at stake. Sometime before the year 2025, America will pass through a great gate in history, commensurate with the American Revolution, Civil War, and twin emergencies of the Great Depression and World War II.”Strauss & Howe The Fourth Turning

They did not predict events that would ignite the next Fourth Turning. It was how the generations reacted to the events that mattered. The generational constellation is now in the once every 80 year alignment that will lead to chaos, violent change, the sweeping away of the existing social order, and likely war. Strauss & Howe answered why this would happen fourteen years ago: 

“What will propel these events? As the saeculum turns, each of today’s generations will enter a new phase of life, producing a Crisis constellation of Boomer elders, midlife 13ers, young adult Millennials, and children from the new Silent Generation. As each archetype asserts its new social role, American society will reach its peak of potency. The natural order givers will be elder Prophets, the natural order takers young Heroes. The no-nonsense bosses will be midlife Nomads, the sensitive souls the child Artists. No archetypal constellation can match the gravitational power of this one – nor its power to congeal the natural dynamic of human history into new civic purposes. And none can match its potential power to condense countless arguments, anxieties, cynicisms, and pessimisms into one apocalyptic storm.” – Strauss & Howe The Fourth Turning

I believe my generation is about to experience a rendezvous with destiny. Each generation’s life experiences have prepared them for this hour and the trials that await them. The mood of the country has shifted darkly into a crisis mode. The mainstream media pundits and progressive politicians try to put a positive spin on today’s events, when anyone with the ability to think can see that things will get severely worse in the next ten years. Trust in our institutions, politicians, corporate leaders, media and social order is disintegrating.   

It’s a Matter of Trust

“An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction.” - Strauss & Howe – The Fourth Turning

 

The initial spark that ignited this Fourth Turning was the collapse of the housing market, which began in 2005 and continues today. Home prices collapsed, the fraudulent mortgage loans blew up in the faces of the Wall Street banks that birthed them, and millions of delusional Americans lost their houses in foreclosure. The cascading impact of this implosion brought the American empire of debt to its knees. On September 18, 2008 the U.S. financial system came within hours of complete collapse, as described by Congressman Paul Kanjorski on CPAN:

“On Thursday (Sept 18), at 11am the Federal Reserve noticed a tremendous draw-down of money market accounts in the U.S., to the tune of $550 billion was being drawn out in the matter of an hour or two. The Treasury opened up its window to help and pumped a $105 billion in the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account so there wouldn’t be further panic out there.

If they had not done that, their estimation is that by 2pm that afternoon, $5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed. It would have been the end of our economic system and our political system as we know it.”

The implosion of the financial system was created by the actions of the Wall Street financers that have been looting the country for decades. They created mortgage products (no doc, liar loans, Alt-A, negative amortization) designed to encourage people to commit fraud. They purposely promoted this massive fraud because they had perfected the art of derivatives. The issuers of these fraudulent mortgages bore none of the risk from their guaranteed default. They packaged them into MBOs and MBSs, bought AAA ratings from Moodys, and shilled them to pension managers, insurance companies, municipalities, states, and little old ladies. Then they bet against their own products with credit default swaps. Their greed and avarice was so extreme, they leveraged their own balance sheets 40 to 1 and then bought their own toxic waste. When their MBA created models proved to be defective, the entire house of cards collapsed. Strauss and Howe anticipated a financial catalyst related to immense levels of debt would trigger the next Fourth Turning:

It is unlikely that the catalyst will worsen into a full-fledged catastrophe, since the nation will probably find a way to avert the initial danger and stabilize the situation for a while.

After the near collapse of the financial system in September 2008, the authorities took unprecedented actions to avert a Second Great Depression. Henry Paulson, the Goldman Sachs U.S. Treasury Secretary, who had warned his own staff that a Wall Street derivative disaster would happen, immediately reacted like a former Wall Street CEO. He convinced his Harvard MBA boss, George W. Bush, that the only way to save the country was to fork over $700 billion to the Wall Street banks that created the manmade disaster. When Congress initially voted down this banker bribe, Wall Street showed who was boss by crashing the market by 777 points in one day. The bought off politicians in Washington DC then towed the line and passed TARP.

The two and one half years since September 2008 have set the stage for a far worse catastrophe. The Obama administration jammed an $800 billion pork filled stimulus bill down the throats of America, along with home buyer tax credits, loan modification programs, and a healthcare plan that will crush small businesses. The politicians, government bureaucrats, and mainstream media corporate mouthpieces proclaim that their wise and prompt actions averted a Second Great Depression. The government solutions used to “stabilize” the situation have wrought unintended consequences and planted the seeds of further pain and suffering to come. A summary of what has happened in the last few years is in order:

  • On September 18, 2008 the National Debt stood at $9.66 trillion. Today it stands at $14.16 trillion, a 47% increase in 2 1/2 years.
  • The country is running $1.5 trillion annual deficits and will continue to do so for the foreseeable future.
  • The States are running cumulative budget deficits of $130 billion in FY11 and expect deficits of $112 billion in FY12. This is leading to conflicts with unions, higher taxes and mass layoffs of government workers. 
  • The working age population has risen by 5 million, while the number of employed Americans has declined by 6.5 million. The true unemployment rate http://www.shadowstats.com/alternate_data/unemployment-charts has risen from 12% to 22%. 
  • In September 2008 there were 30.8 million Americans on food stamps. Today there are 44 million Americans on food stamps (14% of the U.S. population), a 43% increase in 2 1/2 years. The annual cost has risen by $37 billion, a 100% increase in 2 1/2 years.  
  • Real inflation  http://www.shadowstats.com/alternate_data/inflation-charts bottomed at 5% in early 2009, but has accelerated to 9% today, with further increases baked in the cake.
  • Gasoline prices bottomed out at $1.61 per gallon in January 2009 and have risen to $3.54 per gallon today, a 120% increase in just over two years.
  • Households have lost $6.3 trillion of real estate related wealth since the peak of the housing market. Home prices have fallen for six straight months.
  • Almost 3 million homes have been lost to foreclosure since 2007.
  • There are 11.1 million households, or 23.1% of all mortgaged homes, underwater on their mortgages today, with rates above 50% in Nevada, Arizona, California, and Michigan.
  • Fannie Mae and Freddie Mac were taken over by the US government and have lost $170 billion of taxpayer funds so far. Losses are expected to reach $400 billion. Along with the FHA, they continue to prop up a dead housing market with more bad loans.
  • The Federal Reserve balance sheet in September 2008 consisted of $895 billion of US Treasury bonds. Today it totals $2.55 trillion of toxic mortgages bought from Wall Street banks and Treasury bonds being bought under QE2.
  • The Federal Reserve and the Treasury Dept. intimidated the FASB into allowing Wall Street banks to account for worthless mortgage and real estate loans as fully collectible. Magically, insolvent banks became solvent – on paper.
  • The Dow Jones was 11,700 in late August 2008 and today stands at 12,000. The Dow has risen 84% from its March 2009 low. The top 1% wealthiest Americans own 40% of all the stocks in America, so they are feeling much better.
  • In late 2007, a risk averse senior citizen could get a 5% return on a 6 month CD. Today, after two years of no increases in their Social Security payments, a senior citizen can “earn” .38% on a 6 month CD.
  • The Federal Reserve lowered interest rates to 0% in order to allow the Wall Street banks to borrow for free and earn billions without risk.
  • Over 300 smaller banks have been closed by the FDIC, with losses exceeding $50 billion. There are another 900 banks on the verge of insolvency, with estimated future losses of $100 billion.
  • The Federal Reserve initiated QE2 in November 2010, purchasing $70 billion per month of  Treasury bonds and attempting to create a stock market rally. They have succeeded in creating a tsunami of energy, food, and commodity price inflation across the globe, sparking revolutions among the desperately poor in the Middle East. 
  • Wall Street banks “earned” record profits of $19 billion in 2010 after nearly destroying the worldwide financial system in 2008 and raping the American taxpayer in 2009.
  • No Wall Street executive has been prosecuted for the fraudulent actions committed by their banks.
  • Wall Street banks handed out $43.3 billion in bonuses in 2009/2010 for a job well done. The average Wall Street employee received a $128,000 bonus in 2010. In 2008, the year they crashed the financial system, they still doled out $17.6 billion in bonuses.
  • The median household income in 2007 was $52,163. Today the median household income is $46,326, an 11% decline in three years. Real average weekly earnings are lower today than they were in 1971.   

It is clear from the list above that the oligarchic players that wield the power in this country have chosen to prop up their tottering structure of debt-created-wealth on the backs of the working middle class. The people who have been screwed and continue to be screwed are growing angry and distrustful, as anticipated by Strauss & Howe:

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

The continuing foreclosure crisis has proven that the financial industry’s sole purpose in creating subprime loans, liar loans, Alt-A loans and packaging them into tranches with fake AAA ratings  to be sold off to whatever sucker they could find was to enrich themselves with no care about the future consequences. The owners of the debt can’t prove they own the debt. Lawsuits clog up the court system. Deadbeats occupy houses for longer than two years without making a mortgage payment. Wall Street has created so many complex confusing financial products in their greedy thirst for fees that Harvard MBAs can’t even figure out the mess they have created. The $1.4 quadrillion of outstanding derivatives is truly a weapon of mass worldwide destruction waiting to be triggered. The fraudulent actions of Wall Street, the lies told to the American people by government bureaucrats about the solutions needed, the overstep and obfuscation committed by Ben Bernanke, and the propaganda fed to the masses by the corporate mainstream have destroyed the remaining trust in our institutions. Distrust grows by the day, as Strauss and Howe foresaw in 1997:

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

The growing distrust of financial and governmental institutions was reflected in the angry and sometimes violent town hall meetings with Congressmen during the healthcare debate. An angry on-air rant by financial reporter Rick Santelli ignited the Tea Party movement that eventually swept dozens of candidates into office in a Republican landslide in the 2010 mid-term elections. Societal trust in promises made by politicians is ripping apart. The entitlement benefit promises can’t be kept. Senior citizen and government union beneficiaries are angry. Younger generations don’t want to be left with debt so older generations can have comfortable 25 year retirements. Taxpayers don’t want to pay higher taxes to support gold plated healthcare and pension plans for government union workers. The decades of compromise, denial, apathy and lethargy are over. The mood of the country has changed dramatically. Survival of the country is at stake.  

Volcanic Eruption

“America’s short-term Crisis psychology will catch up to the long-term post-Unraveling fundamentals. This might result in a Great Devaluation, a severe drop in the market price of most financial and real assets. This devaluation could be a short but horrific panic, a free-falling price in a market with no buyers. Or it could be a series of downward ratchets linked to political events that sequentially knock the supports out from under the residual popular trust in the system. As assets devalue, trust will further disintegrate, which will cause assets to devalue further, and so on. Every slide in asset prices, employment, and production will give every generation cause to grow more alarmed. With savings worth less, the new elders will become more dependent on government, just as government becomes less able to pay benefits to them.” - Strauss & Howe – The Fourth Turning

The country has withstood the initial onslaught of this latest Fourth Turning. The Great Devaluation resulted in a 50% stock market crash and a 30% decline in home values. Rather than allowing home values to fall to their fair value, the government used tax credits and loan modification programs to prop up home prices. Rather than liquidating insolvent Wall Street banks in an orderly bankruptcy, the government and Federal Reserve chose to use accounting gimmicks and borrowed taxpayer funds to save those who had taken excessive risks and reaped hundreds of billions in profits. The government has systematically “adjusted” every economic statistic in order to paint the most optimistic view possible. Unemployment, inflation, government debt, and GDP are all manipulated in the most positive light.

Many people understand that you cannot solve a debt problem by issuing more debt. They understand that politicians have overpromised Social Security and Medicare benefits to the tune of $100 trillion. They understand that if you cover 30 million more people in your healthcare system, it will cost hundreds of billions more. They understand that mega-corporations have shipped their manufacturing jobs overseas, and they aren’t coming back. They understand spending $800 billion per year, policing the world, fighting two wars of choice, with hundreds of military bases across the globe is unsustainable. They understand that running $1.5 trillion deficits will eventually result in a collapse of the U.S. dollar. They understand that an individual or a country cannot borrow their way to prosperity. The U.S. government is essentially bankrupt and dependent upon Ben Bernanke’s printing press to keep up the appearance of solvency.

Fingers of tension and instability run through every aspect of American society. Pressure is building beneath the surface. The last year and a half have proven to be a liquidity driven lull. The appearance of stability does not mean our situation has stabilized. The actions of those in power have created a vastly more dangerous scenario for the next decade. The volcano is erupting and the lava is flowing along the channels of distress, as described by Strauss & Howe:

Imagine some national (and probably global) volcanic eruption, initially flowing along channels of distress that were created during the Unraveling era and further widened by the catalyst. Trying to foresee where the eruption will go once it bursts free of the channels is like trying to predict the exact fault line of an earthquake. All you know in advance is something about the molten ingredients of the climax, which could include the following:

  • Economic distress, with public debt in default, entitlement trust funds in bankruptcy, mounting poverty and unemployment, trade wars, collapsing financial markets, and hyperinflation (or deflation)
  • Social distress, with violence fueled by class, race, nativism, or religion and abetted by armed gangs, underground militias, and mercenaries hired by walled communities
  • Political distress, with institutional collapse, open tax revolts, one-party hegemony, major constitutional change, secessionism, authoritarianism, and altered national borders
  • Military distress, with war against terrorists or foreign regimes equipped with weapons of mass destruction 

Strauss & Howe did not predict specific events that would occur during the next Fourth Turning. As trained historians and economists, they simply analyzed the environment created by our leaders over the last few decades. If the thought leaders in the country had not been blinded by their ideological biases, they would have seen that the next Fourth Turning Crisis would be channeled by un-payable debt obligations, reckless financial schemes, religious ideology, political corruption, class warfare, foreign conflicts, and terrorism. The molten ingredients are travelling along the channels outlined above. What happens next is anybody’s guess. 

The economic distress worsens for the average American every day. The recovery propaganda circulated by the power elite through the mass media is a fraud. Only those with wealth and power have recovered. The middle class sinks further into poverty and despair. Unemployment remains at Depression levels and the entire economic faux recovery rests with Ben Bernanke’s printing press. The only question that remains is whether the United States experiences a deflationary collapse or a hyper-inflationary collapse. The country is currently experiencing stagflation as the things we need (energy, food, clothing) inflate, while wages stagnate and our home values deflate. Bernanke and his minions at the Federal Reserve will choose inflation as their poison because it will allow their banker masters to pilage the remaining wealth of the middle class before the final collapse of the U.S. dollar.

Social distress has manifested itself over the last year in Arizona as the illegal immigration issue has turned violent, with State government and Federal government in conflict. The social welfare net is being strained through the payment of billions in unemployment compensation, food stamps, and other welfare programs. When this net breaks, all hell will break loose in the decaying urban Mecca’s. Political distress is at historic levels as the Tea Party battles liberals and its own neo-con Republican establishment. States are refusing to implement the Federally mandated Obamacare. Governors are battling teacher’s unions, firemen unions, and police unions in an effort to regain control of their out of control budgets. The 2012 elections could prove to be a tipping point for the country.

Military distress is already extreme, even before a major conflict is thrust upon the country. The two wars of choice in the Middle East have drained trillions from the treasury of a declining empire. The all volunteer military has been stretched to the breaking point. The multi-billion dollar high tech weaponry has proven useless against “terrorists” who fade into mountains until they can strike again. As revolution erupts across the Middle East, the U.S. is helpless and has no credibility, as they have propped up the thugs and dictators who are slaughtering their people. The daily  intensification of volcanic eruptions across the globe is clearly evident to all but the most linear thinkers. We’ve entered the Fourth Turning and there is no turning back.     

Prophecy or Destiny

“Soon after the catalyst, a national election will produce a sweeping political realignment, as one faction or coalition capitalizes on a new public demand for decisive action. Republicans, Democrats, or perhaps a new party will decisively win the long partisan tug of war. This new regime will enthrone itself for the duration of the Crisis. Regardless of its ideology, that new leadership will assert public authority and demand private sacrifice.  Eventually, all of America’s lesser problems will combine into one giant problem. The very survival of the society will feel at stake, as leaders lead and people follow. The emergent society may be something better, a nation that sustains its Framers’ visions with a robust new pride. Or it may be something unspeakably worse. The Fourth Turning will be a time of glory or ruin.” - Strauss & Howe – The Fourth Turning

The election of Barack Obama in 2008 did not usher in a sweeping political realignment of the country. The actions he has taken in the last two years have maintained the status quo. The financial industry complex, military industrial complex, and big pharma complex are stronger and more powerful today than they were in 2008. The 2010 midterm elections were a decisive rejection of Obama’s policies. Those who think he will be re-elected in 2012 are not seeing the big picture. Previous Fourth Turnings have ushered in strong dominating Prophet (Boomer) leaders who used any means necessary to bring the country through the Crisis. Wishy washy politically calculating compromiser leaders do not cut it during a time of intense Crisis. The number of vulnerable Democratic Senators up for re-election in 2012 virtually insures that Republicans will control both houses of Congress in 2012. A legitimate 3rd Party candidate does not appear to be on the horizon. The onset of phase two of the economic meltdown will determine the next President of the United States.

Before the 2012 elections, I expect a violent downturn in our economic fortunes spurred by a continued fall in real estate values, generating more debt losses for the financial industry, and a loss of confidence in the U.S. fiat currency, as our foreign creditors balk at lending more money to an already insolvent empire that is incapable of taking corrective budgetary actions. The resulting economic turmoil, crashing stock market, rising interest rates, and massive unemployment will lead the nation to seek a strong, decisive, authoritative leader who will boldly lead the country through the remainder of the Crisis. Will it be Newt Gingrich, Mitt Romney, Chris Christie, or a Lincoln like figure who hasn’t even entered the national stage yet? This question is unanswerable today. But, the country will turn to someone with answers. Strauss and Howe clearly state how important the next 10 to 15 years will be:  

“Decisive events will occur – events so vast, powerful, and unique that they lie beyond today’s wildest hypotheses. These events will inspire great documents and speeches, visions of a new political order being framed. People will discover a hitherto unimagined capacity to fight and die, and to let their children fight and die, for a communal cause. The Spirit of America will return, because there will be no other choice. Thus will Americans reenact the great ancient myth of the ekpyrosis. Thus will we achieve our next rendezvous with destiny.”

I’m convinced that decisive events will transpire over the next decade that will push our country to the brink. The country is on an unsustainable path and we will either crash and burn or take the actions needed to avert catastrophe. Vast powerful events on an incomprehensible scale await. Events as farfetched as a Weimar like hyperinflationary economic collapse, the detonation of a nuclear bomb in a major American city, the secession of one or more States from the Union, the collapse of our oil based economy due to peak oil and/or revolution and turmoil in the Middle East, or a worldwide pandemic, will become not only realistic, but probable. Are these events any more improbable than a 9.0 earthquake, leading to a 33 foot high tsunami wave, which triggers nuclear meltdowns at two separate nuclear power plants? If you had outlined that scenario a week ago, you would have been classified as a crazy prophet of doom.   

At this point in time, it doesn’t seem possible that a communal cause could rejuvenate the Spirit of America in a manner that would lead me to be willing to fight and die or send my three sons to fight and die. An imminent threat, such as the Axis Powers during World War II, the North and South seeing each other as a threat during the Civil War, or the threat from a foreign empire during the American Revolution, does not appear evident today. The war on terror is a concept, rather than a real war. The absence of a known foreign adversary makes me think that the conflict could center on our own soil between Americans. Strauss and Howe point out that history does not offer much hope in avoiding armed conflict during this Fourth Turning:  

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

When it comes to what kind of armed confrontation, how about all of the above? The wealth distribution of the country is more heavily skewed to the “Haves” versus the “Have Nots” than any time in history. The austerity measures that are being proposed on the backs of the middle class and senior citizens, while ultra-rich bankers have been bailed out and allowed to continue pillaging the countryside, will surely lead to class conflict. Generational warfare between the Boomers who want what they are “owed” and younger generations stuck with the bill will flare up in the coming years. The country has become so ideological that it can be easily split into Red States and Blue States. Could this ideological divide result in the country splitting into two or three independent countries? Would the Federal government use the armed forces to maintain one country? It happened before.

The war on terror concept has been in place for the last ten years and has resulted in draining the Treasury of trillions, exhausting our limited volunteer forces, and creating more terrorists than existed on September 10, 2001. The revolutions sweeping across Northern Africa and the Middle East are not cause for celebration in Washington DC. American foreign policy has centered on supporting thugs, despots, and dictators across this region with financial aid and weapons. The aid was absconded and sent to bank vaults in Switzerland. The weapons are being used to kill the poor revolutionaries across the region. Two American backed dictators have been deposed thus far, with Yemen likely to follow. Our allies in the region are falling with lightening speed. The loss of Saudi Arabia would portend dire consequences for the U.S. If the Middle East oil spigot is turned off, the American way of life will wither and die. 

The myth of American Exceptionalism will not protect the country from the revolutionary tsunami that is sweeping the globe. America was not chosen by God as the country that would lead the world for eternity. The hubris and overreach of the American empire has bankrupted the nation. Greed, corruption and arrogance are not limited to North African dictatorships. Crony capitalism supporting a vast military empire, financed by a banker controlled Federal Reserve has failed. Its failure will become clear as the Fourth Turning intensifies and sweeps away the old order. Who or what replaces the old order is unknown. Much will depend on the generations and their response to the Crisis.   

Bad Moon Rising

Robert Strauss and Neil Howe had no interest in trying to predict the future. As historians, they wanted to understand how the past could give clues to what would happen in the future. They discovered a pattern of behavior by generational archetypes across centuries of Anglo-American history. They identified the issues that would drive the next Fourth Turning. They predicted the timing. The accuracy of their prophecy thus far, has been uncanny. The rhythms of history continue. The outcome of this Crisis is unknowable, but there is most certainly a bad moon rising. 

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

I see the bad moon arising.
I see trouble on the way.
I see earthquakes and lightning.
I see bad times today.

Don’t go around tonight,
Well, it’s bound to take your life,
There’s a bad moon on the rise.

I hear hurricanes ablowing.
I know the end is coming soon.
I fear rivers over flowing.
I hear the voice of rage and ruin.

Hope you got your things together.
Hope you are quite prepared to die.
Looks like we’re in for nasty weather.
One eye is taken for an eye.

Credence Clearwater Revival – Bad Moon Rising

 

HOW MANY SENATORS DOES IT TAKE TO SCREW A TAXPAYER? (Featured Article)

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Posted on 15th January 2011 by Administrator in Economy |Politics |Social Issues

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“Today, the government decides and they misdirect the investment to their friends in the corn industry or the food industry. Think how many taxpayer dollars have been spent on corn [for ethanol], and there’s nobody now really defending that as an efficient way to create diesel fuel or ethanol. The money is spent for political reasons and not for economic reasons. It’s the worst way in the world to try to develop an alternative fuel.” - Ron Paul

When bipartisanship breaks out in Washington DC, check to make sure your wallet is still in your pocket. Every time you fill up your car this winter you are participating in the biggest taxpayer swindle in history. Forcing consumers to use domestically produced ethanol is one of the single biggest boondoggles ever committed by the corrupt brainless twits in Washington DC. Ethanol prices have soared 30% in the last year as the supplies of corn have plunged. Only a policy created in Washington DC could drive up the prices of gasoline and food, with the added benefits of costing the American taxpayer billions in tax subsidies and killing people in 3rd world countries.

The grand lame duck Congress tax compromise extended a 45-cent incentive to ethanol refiners for each gallon of the fuel blended with gasoline and renewed a 54-cent tariff on Brazilian imports. The extension of these subsidies, besides costing American taxpayers $6 billion per year, has the added benefit of driving up food costs across the globe, causing food riots in Tunisia, and resulting in the starving of poor peasants throughout the world. This taxpayer boondoggle is a real feather in the cap of that fiscally conservative curmudgeon Senator Charley Grassley. He was joined in this noble effort by another fiscal conservative, presidential hopeful John Thune. It seems these guys hate wasteful spending, except when it benefits their states. The bipartisanship in this effort was truly touching, as Democrats Kent Conrad and Tom Harkin also brought home the pork for their states.

A bipartisan group of 15 senators signed a letter in late November demanding an extension of U.S. ethanol subsidies. I wonder if the fact they have received hundreds of thousands of dollars in campaign contributions during the past six years from pro-ethanol companies and interest groups like ADM, Monsanto, the National Corn Growers Association, and the Iowa Renewable Fuels Association had anything to do with this demand. You can always count on a Senator to do what’s best for his re-election campaign rather than what is best for the country. These symbols of political integrity will always spout the standard talking points:
  • Promoting ethanol reduces our dependence on foreign oil
  • Ethanol is green renewable energy
  • Ethanol is cheaper than gasoline

As we all know when dealing with a politician, “half the truth, is often a great lie.”

Amaizing 

Corn is the most widely produced feed grain in the United States, accounting for more than 90% of total U.S. feed grain production. 81.4 million acres of land are utilized to grow corn, with the majority of the crop grown in the Midwest.  Although most of the crop is used to feed livestock, corn is also processed into food and industrial products including starch, sweeteners, corn oil, beverage and industrial alcohol, yogurt, latex paint, cosmetics, and last but not least, fuel Ethanol. Of the 10,000 items in your average grocery store, at least 2,500 items use corn in some form during the production or processing. The United States is the major player in the world corn market providing more than 50% of the world’s corn supply. In excess of 20% of our corn crop had been exported to other countries, but the government ethanol mandates have reduced the amount that is available to export.

This year, the US will harvest approximately 12.5 billion bushels of corn. More than 42% will be used to feed livestock in the US, another 40% will be used to produce government mandated ethanol fuel, 2% will be used for food products, and 16% is exported to other countries. Ending stocks are down 963 million bushels from last year. The stocks-to-use ratio is projected at 5.5%, the lowest since 1995/96 when it dropped to 5.0%. As you can see in the chart below, poor developing countries are most dependent on imports of corn from the US. Food as a percentage of income for peasants in developing countries in Africa and Southeast Asia exceeds 50%. When the price of corn rises 75% in one year, poor people starve.

The combination of an asinine ethanol policy and the loosest monetary policy in the history of mankind are combining to kill poor people across the globe. I wonder if Blankfein, Bernanke, and Grassley chuckle about this at their weekly cocktail parties while drinking Macallan scotch whiskey and snacking on mini beef wellington hors d’oeuvres. The Tunisians aren’t chuckling as food riots have brought down the government. This month, the U.N. Food and Agricultural Organization (FAO) reported that its food price index jumped 32% in the second half of 2010 — surpassing the previous record, set in the early summer of 2008, when deadly clashes over food broke out around the world, from Haiti to Somalia.

Let’s Starve a Tunisian

“What is my view on subsidizing ethanol and farmers? Under the constitution, there is no authority to take money from one group of people and give it to another group of people for so called economic benefits. So, no, I don’t think we should do that. Besides, bureaucrats and the politicians don’t know how to invest money.” - Ron Paul

The United States is the big daddy of the world food economy. It is far and away the world’s leading grain exporter, exporting more than Argentina, Australia, Canada, and Russia combined. In a globalized food economy, increased demand for corn, to fuel American vehicles, puts tremendous pressure on world food supplies. Continuing to divert more food to fuel, as is now mandated by the U.S. federal government in its Renewable Fuel Standard, will lead to higher food prices, rising hunger among the world’s poor and to social chaos across the globe. By subsidizing the production of ethanol, now to the tune of $6 billion each year, U.S. taxpayers are subsidizing skyrocketing food bills at home and around the world.

The energy bill signed by that free market capitalist George Bush in 2008 mandates that increasing amounts of corn based ethanol must be used in gasoline sold in the U.S. This energy legislation requires a five-fold increase in ethanol use by 2022. Some 15 billion gallons must come from traditional corn-blended ethanol. Nothing like combining PhD models and political corruption to cause worldwide chaos. Ben Bernanke and Charley Grassley have joined forces to bring down the President of 23 years in Tunisia. People tend to get angry when they are starving. Bringing home the bacon for your constituents has consequences. In the U.S. only about 10% of disposable income is spent on food.  By contrast, in India, about 40% of personal disposable income is spent on food. In the Philippines, it’s about 47.5%.  In some sub-Saharan Africa, consumers spend about 50% of the household budget on food. And according to the U.S.D.A., “In some of the poorest countries in the region such as Madagascar, Tanzania, Sierra Leone, and Zambia, this ratio is more than 60%.”

  

The 107 million tons of grain that went to U.S. ethanol distilleries in 2009 was enough to feed 330 million people for one year at average world consumption levels. More than a quarter of the total U.S. grain crop was turned into ethanol to fuel cars last year. With 200 ethanol distilleries in the country set up to transform food into fuel, the amount of grain processed has tripled since 2004. The government subsidies led to a boom in the building of ethanol plants across the heartland. As usual, when government interferes in the free market, the bust in 2009, when fuel prices collapsed, led to the bankruptcy of almost 20% of the ethanol plants in the U.S.

People fed by US ethanol grain

The amount of grain needed to fill the tank of an SUV with ethanol just once can feed one person for an entire year. The average income of the owners of the world’s 940 million automobiles is at least ten times larger than that of the world’s 2 billion hungriest people. In the competition between cars and hungry people for the world’s harvest, the car is destined to win. In March 2008, a report commissioned by the Coalition for Balanced Food and Fuel Policy  estimated that the bio-fuels mandates passed by Congress cost the U.S. economy more than $100 billion from 2006 to 2009. The report declared that “The policy favoring ethanol and other bio-fuels over food uses of grains and other crops acts as a regressive tax on the poor.” A 2008 Organization for Economic Cooperation and Development (O.E.C.D.) issued its report on bio-fuels that concluded: “Further development and expansion of the bio-fuels sector will contribute to higher food prices over the medium term and to food insecurity for the most vulnerable population groups in developing countries.” These forecasts are coming to fruition today.

It Costs What?

The average American has no clue about the true cost of ethanol. They probably don’t even know there is ethanol mixed in their gasoline. The propaganda spread by the ethanol industry and their mouthpieces in Congress obscures the truth and proclaims the clean energy mistruths and the thousands of jobs created in America. The truth is that producing ethanol uses more energy than is created while driving costs higher. The jobs created in Iowa are offset by the jobs lost because users of energy incur higher costs and hire fewer workers as a result. It takes a lot of Saudi oil to make the fertilizers to grow the corn, to run the tractors, to build the silos, to get the corn to a processing plant, and to run the processing plant. Also, ethanol cannot be moved in pipelines, because it degrades. This means using thousands of big diesel sucking polluting trucks to move the ethanol – first as corn from the fields to the processing plants, and then from the processing plants to the coasts.

The current ethanol subsidy is a flat 45 cents per gallon of ethanol usually paid to the an oil company, that blends ethanol with gasoline. Some States add other incentives, all paid by the taxpayer. On top of this waste of taxpayer funds, the free trade capitalists in Congress slap a 54 cent tariff on all imported ethanol. Ronald R. Cooke, author of Oil, Jihad & Destiny, created the chart below to estimate the true cost for a gallon of corn ethanol. Cooke describes a true taxpayer boondoggle:

It costs money to store, transport and blend ethanol with gasoline. Since ethanol absorbs water, and water is corrosive to pipeline components, it must be transported by tanker to the distribution point where it is blended with gasoline for delivery to your gas station. That’s expensive transportation. It costs more to make a gasoline that can be blended with ethanol. Ethanol is lost through vaporization and contamination during this process. Gasoline/ethanol fuel blends that have been contaminated with water degrade the efficiency of combustion. E-85 ethanol is corrosive to the seals and fuel systems of most of our existing engines (including boats, generators, lawn mowers, hand power tools, etc.), and can not be dispensed through existing gas station pumps. And finally, ethanol has about 30 percent less energy per gallon than gasoline. That means the fuel economy of a vehicle running on E-85 will be about 25% less than a comparable vehicle running on gasoline.

Real Cost For A Gallon Of Corn Ethanol

   
Corn Ethanol Futures Market quote for January 2011 Delivery $2.46
Add cost of transporting, storing and blending corn ethanol $0.28
Added cost of making gasoline that can be blended with corn ethanol $0.09
Add cost of subsidies paid to blender $0.45
Total Direct Costs per Gallon $3.28
   
Added cost from waste $0.40
Added cost from damage to infrastructure and user’s engine $0.06
Total Indirect Costs per Gallon $0.46
   
Added cost of lost energy $1.27
Added cost of food (American family of four) $1.79
Total Social Costs $3.06
   
Total Cost of Corn Ethanol @ 85% Blend $6.80

 

Multiple studies by independent non-partisan organizations have concluded that mandating and subsidizing ethanol fuel production is a terrible policy for Americans:

  • In May 2007, the Center for Agricultural and Rural Development at Iowa State University released a report saying the ethanol mandates have increased the food bill for every American by about $47 per year due to grain price increases for corn, soybeans, wheat, and others. The Iowa State researchers concluded that American consumers face a “total cost of ethanol of about $14 billion.” And that figure does not include the cost of federal subsidies to corn growers or the $0.51 per gallon tax credit to ethanol producers.
  • In May 2008, the Congressional Research Service blamed recent increases in global food prices on two factors: increased grain demand for meat production, and the bio-fuels mandates. The agency said that the recent “rapid, ‘permanent’ increase in corn demand has directly sparked substantially higher corn prices to bid available supplies away from other uses – primarily livestock feed. Higher corn prices, in turn, have forced soybean, wheat, and other grain prices higher in a bidding war for available crop land.”
  • Mark W. Rosegrant of the International Food Policy Research Institute, testified before the U.S. Senate on bio-fuels and grain prices. Rosegrant said that the ethanol scam has caused the price of corn to increase by 29 percent, rice to increase by 21 percent and wheat by 22 percent. Rosegrant estimated that if the global bio-fuels mandates were eliminated altogether, corn prices would drop by 20 percent, while sugar and wheat prices would drop by 11 percent and 8 percent, respectively, by 2010. Rosegrant said that “If the current bio-fuel expansion continues, calorie availability in developing countries is expected to grow more slowly; and the number of malnourished children is projected to increase.” He continued, saying “It is therefore important to find ways to keep bio-fuels from worsening the food-price crisis. In the short run, removal of ethanol blending mandates and subsidies and ethanol import tariffs, in the United States—together with removal of policies in Europe promoting bio-fuels—would contribute to lower food prices.”

The true cost of the ethanol boondoggle is hidden from the public. The mandates, subsidies and tariffs take place out of plain view.  The reason blenders (and gas stations) will pay the same for ethanol is because they can sell it at the same price as gasoline to consumers. A consumer will pay the same for ten gallons of E10 as for ten gallons of gasoline even though the E10 contains a gallon of ethanol. Consumers pay the same for the gallon of ethanol for three reasons. (1) They don’t know there’s ethanol in their gasoline. (2) There is often ethanol in all the gasoline because of state requirements, so they have no choice. (3) They never know the ethanol has only 67% the energy of gasoline and gets them only 67% as far. The result is that drivers always pay much more for ethanol energy than for gasoline energy, simply because they pay the same amount per gallon. When gasoline prices are $3.00 per gallon, Joe Six-pack pays $4.50 for the same amount of ethanol energy.

You know a politician, government bureaucrat or central banker is lying when they open their mouths. Whenever evaluating a policy or plan put forth by those in control, always seek out who will benefit and who will suffer. Who benefits from corn based ethanol mandates and subsidies? The beneficiaries are huge corporations like Archer Daniels Midland and Monsanto, along with corporate farming operations (80% of all US farm production), and Big Oil. The mandated ethanol levels are set in law. By providing tax subsidies we are bribing oil companies with taxpayer dollars to do something they are legally required to do, resulting in a $6 billion windfall profit to oil companies.  The other beneficiaries are the Senators and Representatives from the farming states who are bankrolled by the corporate ethanol beneficiaries and their constituents who will re-elect them. The environment does not benefit, as many studies have concluded that it requires more fossil fuel energy (oil & coal) to produce a gallon of ethanol than the energy created. The jobs created in the farm belt at artificially profitable ethanol plants are more than offset by job losses due to the added costs in the rest of the economy. When subsidies are removed or oil prices drop, the ethanol plant jobs disappear, resulting in a massive capital mal-investment. 

Our supposedly wise PhD and MBA leaders have created a perfect storm. The unintended consequences of government intervention in the markets are causing havoc, food riots, starvation and intense suffering for the poor and middle class. Brazil produces sugar cane ethanol in vast quantities and can export it to the U.S. much cheaper than we can produce corn ethanol. Fuel prices would be lower without tariffs on Brazilian ethanol imports. The average cost of food as a percentage of disposable income for an American is 10%. Averages obscure the truth that the cost is probably .0001% for Lloyd Blankfein, Ben Bernanke and Chuck Grassley, while it is 30% for a poor family in Harlem. America’s horribly misguided ethanol policy combined with Ben Bernanke’s Wall Street banker subsidy program are resulting in soaring fuel and food prices across the globe. Poor people around the world suffer greatly from these policies. Below are two assessments of ethanol.     

 “Everything about ethanol is good, good, good.”Senator Chuck Grassley, Iowa

“This is not just hype — it’s dangerous, delusional bullshit. Ethanol doesn’t burn cleaner than gasoline, nor is it cheaper. Our current ethanol production represents only 3.5 percent of our gasoline consumption — yet it consumes twenty percent of the entire U.S. corn crop, causing the price of corn to double in the last two years and raising the threat of hunger in the Third World.”Jeff Goodell

Who do you believe?