REVOLT AGAINST THE FED

STORMING THE BASTILLE

The populist rage being exhibited across the country needs to be focused on the real criminals. The Federal Reserve and the banks that control the Federal Reserve are responsible for the destruction of the middle class. All the other issues being used to distract from the truth need to be ignored. The country has been on a downward trajectory since 1913 as the banker created debt and inflation have enslaved and impoverished the middle class. It’s the middle class that is leading the charge on Wall Street. The entitlement masses aren’t protesting, as their welfare payments continue to flow and their SNAP cards continue to work at KFC and Taco Bell.

If the protestors want their own Bastille to storm in order to get this revolution going, it’s located at 33 Liberty Street, New York, NY.

NEW YORK FEDERAL RESERVE BLDG

Federal Reserve is a Cache of Stolen Assets

The American Revolution, in no small part, was a repudiation of the central banking tyranny exported to the New World by the Bank of England. Few legacies have grown more despotic than the consequences of living under the rule of fractional reserve banking. Many good willed conservatives understand that the system is imploding. Some envision a second American Revolution that expels the remnant Tories that have hijacked our Federalism separation of powers form of government. Woefully, the prospects for a States Rights revolt are slim. However, the scenario of a domestic French Revolution style carnage is brewing with every escalation of the pompous arrogance worthy of a Jean-Joseph, marquis de Laborde or the manipulative usury of the House of Rothschild.

The eruption of populist outrage is long overdue. The lack of objective mainstream media coverage is expected. Their attempt to spin the natural disguise for a corrupt establishment in the hearts of sincere and persecuted citizens is typical. The elite’s message is that they will either control the movement, or at the very least, strip it from any positive synergism. Send in the clowns, like Michael Moore. Wall Street Capitalism: A Love Affair explains the hideous agenda of the clueless socialists that condemn all things Wall Street, while advancing the ultimate goals of the New World Order globalists.

Street theater no longer is enough. The peasants are rallying their pitchforks, as they storm the Bastille; however, they got their GPS coordinates wrong. The correct address is 33 Liberty Street, New York, NY. That is the location of the dominate Federal Reserve temple. When the public finally comes to grips with the real cause of the unsustainable debt, they will understand that the private central banking system bears the ultimate redress for their sins against America and all humanity.

A Privatised Money Supply, presents an informative analysis.

Assuming a reserve ratio of 1:10 the table below shows how $100 of interest-free government created money (GCM), i.e. cash, is used by the banking system to create $900 of interest-bearing bank-created money (BCM) in the form of loans. The reserve ratio is the ratio of cash reserves (GCM) to deposits (mostly BCM). In our example the banking system consists of 50 banks, but the money creation process would be essentially the same for any number of banks from one to infinity.

Modern accounting uses double entry book keeping where liabilities and assets are kept exactly equal. A bank’s liabilities are its deposits. Its assets are its loans (including bonds which are loans to government) and its cash reserves. Here is how the banking system creates money. In column 1 $100 of cash is deposited in Bank 1. Bank 1 creates a $90 loan in the form of a deposit as shown in column 2. This deposit is pure BCM and, because it must be paid back with interest, is an asset. With a reserve ratio of 1:10 the bank puts aside $10 in cash (column 3) to meet cash demands from the person who deposited the $100. The remaining $90 in cash covers the $90 loan. The borrower proceeds to write cheques on his $90 deposit and these cheques get deposited in Bank 2. For these cheques Bank 2 demands and gets cash from Bank 1 until eventually all $90 ends up in Bank 2. (Naturally in real life more than two banks are involved. Thus the transactions are not so simple and orderly as they must be here for explanatory purposes, but everything comes out in the wash to give exactly the same result.) However the original $100 deposit still stands to the credit of the depositor (a liability for Bank 1) even though $90 of it has moved on to Bank 2. And the $90 loan Bank 1 created when it first received the original $100 deposit also stands (an asset for Bank 1). Banks 2, 3, 4, etc. then repeat this process eventually creating $900 of BCM in the form of loans (as shown in column 2) and dispersing the original $100 as cash reserves throughout the banking system (as shown in column 3).

Note that $900 of the $1000 of deposits in column 1 is BCM, i.e. credit created by the banks in the form of loans. (Banks make loans by “depositing money” in your account which you must pay back with interest. Thus they are loan/deposits.) Only the original $100 cash deposit is GCM. One other point. As a loan/deposit gets spent, a deposit in some other bank grows in inverse proportion. Thus the banks have increased the money supply by $900 and not by $1800. That would be double counting. The important points, however, are as follows: this ingenious system is called fractional reserve banking; it creates debt for the sole purpose of enriching the banking class; it is a subtle form of theft; historically it was condemned as a form of usury.

	Column 1		Column 2		Column 3
	L I A B I L I T I E S		A S S E T S		A S S E T S
	Deposits (90% BCM)	=	Loan/Deposits(100% BCM)	+	Cash Reserves(100% GCM)
Bank 1 Bank 2 Bank 3 . . . Bank 49 Bank 50 Totals	$100.00 90.00 81.00 . . 0.64 0.57 $994.85		$90.00 81.00 72.90 . . . 0.57 0.52 $895.36		$10.00 9.00 8.10 . . . 0.06 0.06 $99.43
Max Amount	$1000.00	=	$900.00	+	$100.00

This method of theft operates as the normal course of business. What the banksters do with the money they obtain from debt created money is even more repulsive. All the financial speculative instruments of leveraged trading just compound the heist. So what do these outlaws do with all the money?

The end net result is that they buy, especially at rock bottom prices, all the real assets that the filthy money can purchase. When you think of Wall Street greed, go beyond the usual suspects and focus on the controllers of the assets that are under the hegemony of the central bank. Here lies the reason why the rebellion must remove the engine of enslavement from the landscape for any future financial system of commerce.

Think about who really owns the land, the buildings and the resources in our country. In order to really understand the scope and extent of the economy, the differential between actual Main Street enterprise, that feeds, clothes and shelters the population, is minuscule when compared to the financial assets, both liquid and real property, that is under the command and control of the central bank.

Most individuals do not own property encumbrance free. Most debt is owed to the banksters. The middle class is in a tailspin because the Fed has a zero interest rate policy that effectively diminished your return on capital of your savings to nothing. The same is not true for the banks. The fact that they have in excess of a 2 Trillion Dollars cash hoard on their balance sheets and refuse to lend out money to the general public, demonstrates that the inside money is waiting to pick up even more real assets, when the signal comes for the total collapse.

TARP, QE2 and the Twist are all ploys to enrich the selective banks that are part of the orthodox Fed fraternity. Technically all federal charted banks have an ownership interest in the Fed. Who among us are so naive to think that every bank is equal to the sacredly held corporate interlocking directorates that make and direct monetary policy?

Only when the middle class takes to the streets with a spontaneous civil disobedience commitment that dwarfs the Tea Party movement, will the central banking tyranny be eliminated. All the fraudulent debt that funded the asset acquisitions of crooks must be clawed back. As long as the banksters hide behind the shield of corporation personhood, LLC liability exemption and government guaranteed loans, the ordinary family will continue to be reduced to perpetual and permanent poverty.

What kind of revolution is coming to America? The lesson of the French élan of bloodletting to remove an aristocratic class is not pretty. However, a national discussion needs to concentrate on:

1) Methods of eliminating the Federal Reserve fraud and restoring an honest money system for commerce

2) Repudiation of the corporatist “Free Trade” global business model and a return to a merchant class free enterprise independent domestic economy

3) Confiscation of assets and wealth acquired through illegal systematic RICO style schemes that demand treble damages from their ill-gotten gain

Americans deserve property right protections from the criminal extortion and the cold-blooded offenses that the banksters used, to steal the national wealth. The expanding protest must result in a true restoration of a traditional upwardly mobile society, not an expanded nanny state. The suffocating debt and the profane system that spawned it must end. The term “Citizen” does not apply to elitist plutocrats. If Americans want to stave off a 21st century version, of the Committee of Public Safety, get behind the “Revolt against the Fed”. Tear down the House of Rothschild. This is one time the concept of “Reparations” has standing in a legitimate court of law.

SARTRE – October 9, 2011

BERNANKE IS A CRIMINAL

John Hussman relentlessly tells the truth, week after week. He details why we are in the current situation. He also proves that Ben Bernanke and the Federal Reserve have broken the law. Criminals need to be incarcerated, whether they have robbed a liquor store at gunpoint in West Philly or whether they have robbed the American citizens with a computer in Washington DC. By the time this Fourth Turning is finished I hope to see Bernanke in cuffs or better yet being led to the gallows.

Hussman is supportive of the Occupy Wall Street movement and provides them with real talking points and real solutions. There is no one more sober and analytical than John Hussman. He’s not a socialist hippie, as the MSM likes to portray the protestors. He knows that Wall Street has screwed the American middle class. He has proved that Wall Street has screwed the middle class. His solutions are reasonable and implementable. They are just unacceptable to the super rich ruling elite and their puppets in Washington DC.

The result will be class war.

Talking Points for the “Occupy Wall Street” Protesters

John P. Hussman, Ph.D.
Just a note – by the end of last week, Greek 1-year yields had surged to 144%. European leaders have shifted from promising to prevent a Greek default to promising instead to ensure that European banks are well capitalized. Here, I would repeat that it is essential for policy makers to make a distinction between liquidity and solvency. Banks that are solvent, and countries that are solvent, should be within the ring-fence, in the sense that it is sensible for policy makers to follow Bagehot’s Rule – freely provide liquidity, but only at high rates of interest, and only to the solvent and well-collateralized. Those institutions and countries that are not solvent should not be “saved” by using public funds to make private bondholders whole. The proper policy is to restructure, not bail out, the debt of banks and countries that have no reasonable prospect of paying off those obligations.

It remains in the best interest of Greece to default, and to leave the euro so it can depreciate its currency, but if it is going to default, it would be well-advised to default big. The only way to get new international capital after a default is for Greece to clear out enough of its legacy obligations that investors reasonably expect it to make good on any new funding they might (eventually) provide.

Talking Points for the “Occupy Wall Street” Protesters

We’re all for a good peaceful protest. As long-time readers know, I’ve been an adamant critic of the bailouts of mismanaged financial institutions, as well as various illegal policy actions that have been pursued by the Fed since the financial crisis began in 2008. Undoubtedly, there is good and bad on Wall Street, and we know a lot of smart, well-meaning financial advisors who go to work every day with the goal of improving the financial security of their clients, who do careful research, avoid speculation, and provide a service to others through their profession. A functioning economy needs to allocate capital effectively, and there Wall Street can be essential.

Unfortunately, over the past 15 years or so, the basic function of the financial markets has been corrupted into what I’ve grown to view as a self-serving carnival of speculation, where many participants are interested in nothing except getting the next rally going at public expense, regardless of how badly market signals are distorted, how recklessly capital is misallocated, or even whether what they do has any positive effect on the economy or the country (some of the sleazier ones even have their own shows on basic cable).

There is no single source of this transformation. Part of it is a remnant of the dot-com and technology bubbles, when market valuations moved to nearly triple the historical norm, and investors began to view perpetual market advances and high returns as a birthright. The subsequent decade of zero overall returns for the stock market largely reflects a reversion to more normal (but still cyclically elevated) valuations.

Another part of this transformation is due to the activist policies of Federal Reserve, which has continually attempted to short-circuit every instance of short-term economic discomfort by distorting the menu of investment returns (e.g. zero interest rate policies) in an effort to provoke investors to accept fresh speculative risk. Ironically, the long-term effect of distorting market signals has been to drive good, potentially productive capital into wholly unproductive uses – the housing bubble being a prime example. As a result, real U.S. gross domestic investment has not grown at all since 1998, and the portion financed by domestic U.S. savings has collapsed, so much of the new capital we’ve accumulated is owned by foreigners.

Undoubtedly, one of the greatest rhetorical victories of Wall Street has been to successfully plant in the minds of the public the idea that some financial institutions are simply “too big to fail,” and that the “failure” of “systemically important” institutions will result in global financial meltdown and Depression. The reality is much different.

So, with the hope of providing the Occupy Wall Street protesters with some talking points, what follows are some perspectives that might be useful in framing the issues that we are facing as an economy.

1) “Failure” only means that corporate bondholders don’t get every penny

Background: When Wall Street talks about the “failure” of a bank or other financial institution it means the failure of the company to pay off its own bondholders. It does not mean that depositors, counterparties or other bank customers lose money (See Recession, Recovery, and the Ring-Fence ). A bank is essentially a big portfolio of assets, about 70% which are typically financed by depositors, customers and other liabilities, about 20% by the bank’s own bondholders, and about 10% with the capital of the bank’s stockholders. In a typical bank “failure,” the bank is taken into receivership by regulators, the liabilities to stockholders and bondholders are cut away, the remaining package of assets and liabilities is sold as a single entity to some other firm (or can be reissued to investors as a new company), the old bondholders get the proceeds of that sale, and the stockholders are wiped out. When investors willingly take a risk, and buy the stocks and bonds issued by an institution that goes on to mismanage its business, this is the appropriate outcome. Depositors and customers typically don’t lose a penny (See the section on “How to Restructure A Major Bank” in Not Over By A Longshot ).

If public funds are provided during a financial crisis, and it cannot be clearly demonstrated that the institution is solvent, the funds should be provided post-failure, as senior loans to a restructured institution where shareholders and existing bondholders have already been subject to losses. The interest rate should be relatively high, to encourage replacement of public funds with private ones. With few exceptions, when public funds are used to avoid major restructuring and shield private investors from losses, the result is almost inevitably a larger, less transparent, and more recklessly managed institution.

The same is true for government or “sovereign” debt. When Wall Street talks about “failure” of Greece, for example, it means failure of Greece to pay off its own bondholders. In trying to avoid this failure, Greece is instead forced to impose extreme austerity and depression on its citizens. From the standpoint of those citizens, Greece has already failed them painfully. Those are the choices – let bad debt “fail” or force depression on innocent citizens.

Of course, there is a cost to any financial crisis, which is “contagion” where the failure of one institution or government calls others into question. The main way to contain this is to follow the century-old “Bagehot’s Rule” – lend freely, at high rates of interest, but only to institutions that are solvent and able to provide collateral for the loans. When policy makers behave as if every institution, solvent or not, is within the ring-fence, or that some institutions are simply “too big to fail,” saving these institutions comes at enormous costs, because true economic losses that should properly be taken by private investors are instead forced upon the public.

Keep in mind that money is fungible – not all losses are taken directly by the institution that created them. Many of the losses that should have been borne by banks were instead assumed by Fannie Mae and Freddie Mac. This allowed TARP to seem largely successful even while hundreds of billions of public funds are still being spent to bail out Fannie and Freddie. Recent efforts by government overseers of Fannie Mae to claw back these losses from the banking system are appropriate, but they also demonstrate how easy it is for private institutions to transfer their mistakes onto the public balance sheet.

2) The Federal Reserve’s purchases of Fannie Mae’s and Freddie Mac’s debt obligations were illegal

Background: Beginning in 2009, the Federal Reserve began buying nearly $1.5 trillion in obligations of Fannie Mae and Freddie Mac, both which were insolvent and in government receivership. The Fed justified these purchases by appealing to Section 14.2 of the Federal Reserve Act, which allows the Fed to purchase securities which are a “direct obligation of, or fully guaranteed as to principal and interest by, any agency of the United States.” Now, Ginnie Mae, the financing arm of the Federal Housing Administration (FHA) is a bona-fide government agency. So there would have been no legal problem if the Fed had purchased Ginnie Maes. In contrast, however, Fannie Mae and Freddie Mac were not, and are not, U.S. government agencies. Nor are the obligations held by the Fed “fully guaranteed as to principal and interest” by the U.S. government. At best, the obligations of these GSEs have implicit and informal backing, as any member of Congres will tell you, and simply taking a failing institution into conservatorship doesn’t confer government backing to its debt. In fact, the stop-gap measure enacted by Congress during the crisis only provides temporary backing for the obligations of Fannie and Freddie maturing by the end of 2012. Very simply, the Fed broke the law by buying Fannie and Freddie’s debt.

3) Creating shell companies to buy Wall Street’s bad assets is not “discounting,” and was therefore also illegal

Background: In 2008, the Federal Reserve created a set of off-balance sheet shell companies called “Maiden Lane” to buy undesirable long-term assets of Bear Stearns and other financial companies, justifying the purchases by appealing to Section 13.3 of the Federal Reserve Act. But if you actually read Section 13, it is clear that under the law, “discounting” means (as it has always meant) providing short-term liquidity by essentially providing a check-cashing service for obligations that are short-dated, well-collateralized, and promptly collectible (See also Outside the Oval / The Case Against the Fed ). The Fed’s creation of the Maiden Lane companies to purchase bad assets was, and remains, illegal under the language and intent of the Federal Reserve Act.

Keep in mind that we have only three branches of government: the executive, the legislative, and the judicial. The Federal Reserve is not an independent fourth branch of government, but operates under the legislation of Congress and therefore cannot be “independent” of Congressional control. While nobody wants monetary policy to be “politicized” in the sense of Congress telling the Fed what policy actions should be taken and before which election, it is quite a different matter to require the Fed to operate within the law. Here, Congress could use some encouragement.

4) The skewed distribution of wealth in the U.S. is worsened by policies that misallocate capital and divert public funds to bail out investments that have already gone bad.

Background: If you think about the “standard of living” in a country, you can roughly define it as the amount of goods and services that individuals are able to consume in return for their work. If you think about the “productivity” of a country, you can roughly define it as the amount of goods and services that individuals are able to produce for their work. Clearly, over the long-term, the productivity and the standard-of-living of a country go hand in hand. The best way to create both, over the long-term, is for an economy to build a stock of productive capital (inventions, new technologies, plants, equipment, public infrastructure, etc), and human capital (labor skills, education).

Still, even a generally productive economy can produce a skewed distribution in the standard of living enjoyed by its citizens. In a competitive and undistorted economy, the distribution of wealth is determined by the ability of each individual to a) provide a useful service, b) distribute the services they provide over a large number of “units”, and c) maintain the scarcity of what they provide.

So for example, professional football players earn more than teachers not because playing football has more virtue, but because professional football players are among a very small group, and distribute their “services” over millions and millions of spectators, each which implicitly pays a few cents to each player per game. Mark Zuckerberg at Facebook is able to distribute his services across hundreds of millions of users, each which implicitly pays him a tiny amount by viewing advertising. Bill Gates distributed his services over every computer that ran Windows, while the factory workers who built those computers were each able to distribute their skills over a smaller number of units. Teachers represent a large professional group, but are typically able to distribute their services over a limited number of students, each which implicitly pays a portion of their family’s income to the teacher. One-on-one aides tend to earn less, despite often being extremely skilled, because in order for them to earn a high income, their earnings would have to capture much of the income of their single student’s family.

The distribution of wealth has become increasingly skewed as trade has become more globalized and technology has allowed the innovations of a single person to be spread across millions of consuming “units.” At the same time, the economic emergence of China and India has brought forth literally billions of new workers who dilute the scarcity of the existing labor force. An economy where capital is scarce, protectable, and can easily be distributed over numerous units, while labor is plentiful, homogeneous and can only be applied to a smaller number of units, is an economy that is prone to an enormously skewed distrbution of wealth.

This process takes on a grotesque character when it becomes possible for a company to distribute its impact over a very large number of units, and government policy protects that ability even when the impact of the company reflects not skill but ineptitude. This is essentially what has happened with the “too big to fail” institutions. Despite inflicting massive damage on the economy, they are afforded a protected status that allows them to extract “rents” that don’t reflect the cost they have imposed. From that standpoint, the Occupy Wall Street protests are a welcome reflection of public frustration over Washington’s slavish coddling of reckless financial institutions.

Policy Responses

The proper way to address the present economic imbalances is pursue policies that encourage the restructuring of bad debt, the allocation of public funds and private savings to productive investment and new research, the accumulation of education and labor skills (“human capital”) to allow workers to capture a greater share of their own productivity, and the continuation of social safety nets to ease the economic adjustments that are necessary in a deleveraging economy. In my view (which not everyone will like), this requires:

Monetary policies that abandon the constant pursuit of new financial bubbles, which distort investment opportunities and misallocate capital;

Housing policies to coordinate the restructuring of mortgage debt for homeowners capable of servicing a restructured mortgage (we’ve advocated breaking the mortgage into a lower principal loan plus a right of the lender to a portion of future appreciation), and unfortunately, foreclosure for homeowners unable to service even a restructured mortgage, with associated losses being taken by lenders;

A return to a reasonably smoothed form of mark-to-market accounting (say, 3-year averaging) so that financial institutions cannot let a bad loan book deteriorate while still reporting those loans at amortized cost.

A requirement that banks hold a significant amount of their capital in the form of mandatorily convertible debt, so if the assets deteriorate, the debt converts to equity immediately and provides a capital cushion against losses without risking default to senior bondholders. Yes, this will result in a slightly higher cost of capital to the banks, but it is a reasonable alternative to more intrusive forms of regulation.

A major increase in government-sponsored research in basic sciences (as opposed to huge pick-the-winner bureaucratically-awarded grants to companies like Solyndra). Recall that research and innovations coordinated through government initiatives such as the Advanced Research Projects Agency (which largely originated the internet), the National Science Foundation, and the National Institutes of Health have been the basis for much of the industry that has built upon that foundation;

Continuous investment in public infrastructure – although the long lead times simply to obtain permits for major projects largely rules out much near-term stimulative effect from the Administration’s proposed Jobs Bill even if it were enacted immediately;

Efforts among workers to increase their own protectable level of scarcity, ideally through increased education and labor skills, but if necessary through collective bargaining in industries that are reliant on locally-sourced employees (understanding, however, that this alternative also has the effect of reducing employment);

Incentives for capital investment and R&D such as tax credits and immediate expensing of new investment;

Tax policies that reduce distortions by applying a sufficient but relatively constant tax rate to every dollar of income regardless of the source (wages, profits, financial gains), with large exclusions at initial income levels – essentially taxing all dollars and all people according to the same rules, broadening the tax base by including all forms of income and avoiding the need for class warfare;

Broadening the tax base but substantially reducing the tax rate on Social Security and Medicaid (which are a larger tax burden than the income tax for 75% of American families) and applying that lower rate to all forms of income – not just wage income. This would stop the regressive treatment of payroll workers, which exists only to perpetuate what economist Alvin Rabushka has called “the fiction that Social Security is a retirement insurance program in which contributions are linked to benefits, rather than what it is — a transfer of income from workers and the self-employed to retired people.”

Again, long-term improvements in living standards require improvements in productivity, through the accumulation of capital, inventions, education and labor skills. The reason that wages are lower in developing countries is primarily because Americans are blessed to have an economy that has a legacy of accumulating productive investment and educating its workers. If we allow those advantages to slide, by misallocating investments, and diverting public funds from research, development, education and infrastructure in order to bail out reckless speculations gone bad, there is no inherent reason why other countries cannot rise to economic dominance. It’s our choice. We have far too great a need for productive investment than to use our scarce resources to bail out poor stewards of capital who gambled the nation’s savings and look to the government to make them whole.

Market Climate

As of last week, the Market Climate in stocks remained negative, with our economic measures still solidly anticipating an oncoming recession. Strategic Growth and Strategic International remain tightly hedged. Strategic Total Return continues to hold about 18% of assets in precious metals shares, accounting for the majority of day-to-day fluctuations in the Fund, with an average duration of about 1.5 years in Treasury securities, and less than 5% of assets in utility shares and foreign currencies.

As a final note, the chart below updates one of our composite measures of U.S. economic activity, reflecting a broad set of ISM and regional Fed surveys. While the slight uptick in a few of these survey measures has been the basis of a strikingly premature “all clear” attitude taken on by Wall Street analysts, the fluctuation has been entirely negligible, and represents a tiny fraction of typical random month-to-month noise. It is equally important to recognize that the ISM indices tend to lag our Recession Warning Composite and our broader ensemble models (and also lag ECRI’s measures) by nearly 13 weeks, while payroll employment demonstrates a slightly greater lag. Given that the earliest signal – the Recession Warning Composite – deteriorated at the beginning of August, the October ISM, and even more likely the November reading, is really the window of concern. Suffice it to say that the recent evidence is generally more confirming than contradictory of recession concerns.

OWS STIMULUS PLAN

The Occupy Wall Street movement is a Keynesian dream. Having 15,000 people camped out around Wall Street has resulted in $2 million of overtime for the NYPD. This is great news for the economy. As the protests spread across the country there will be millions of overtime for police. They will then spend that money at Olive Garden, generating profits and requiring Olive Garden to hire more busboys. The busboys will spend their pay at Gamestop, resulting in Gamestop hiring a few more geeks, and so on and so on. OWS is the best thing to happen for to our economy since Obama’s $800 billion shovel ready jobs.

Occupy Wall Street: major protest against minority rule

Published: 09 October, 2011, 09:40

The collective voices of American dissent has manifested into a movement impossible to ignore. “Occupy Wall Street” began in the world’s financial capital, but this week protests have blazed through dozens of cities nationwide.

In the Big Apple, over a thousand of “Occupy Wall Street” demonstrators marched into Washington Square Park on Saturday afternoon. Unlike protests on previous two Saturdays, this demonstration finished quite peacefully. Police, who were heavily present at the area and along the whole route, declares that no arrests were made.

Meanwhile, lower Manhattan can no longer camp the over 15,000 Americans gathered there for anti-bank protets. On Saturday, the campaigners had to discuss whether they should expand to other public spaces in New York.

“This seems pretty revolutionary to me. The spirit of revolution is here and so I need to be a part of it,” says campaigner Talib Kweli.

Labor unions, transport workers, teachers, nurses and US veterans standing shoulder-to-shoulder with young activists, spearheading a fight against US wealth inequality and corporate greed.

“Young people right now have no hope in our society. I just want to see a fair and more just society for the young people coming up, and all Americans that are suffering through these hard economic times,” a US army veteran told RT during the protests.

The “Occupy” movement has gained such momentum even the president, who promised change, has been forced to address the issue.

“I think people are frustrated, and the protesters are giving voice to a more broad-based frustration about how our financial system works,” Barack Obama told a press conference. “The American people understand that not everybody has been following the rules; that Wall Street is an example of that.”

“These days, a lot of folks who are doing the right thing aren’t rewarded, and a lot of folks who aren’t doing the right thing are rewarded,” he added.

While the US has encouraged and supported democratic uprisings in the Arab world, the same events playing out at home have been met with batons, pepper spray and the mass arrest of nearly 800 peaceful protesters on the Brooklyn Bridge. A scene that reminded some of Egypt’s Tahrir Square.

“We can follow the lead of our brothers and sisters all over the world: the Arab Spring, in Greece, in Spain. We can see that it did send a powerful message. It’s sending a message,” says Makeba Judge, an OWS activist. “Ordinary people are not going to stand for corporate greed anymore, and we are getting up and we are doing something about it.”

Three weeks into the “Occupy” movement, the New York City Police Department has pumped $2 million into overtime pay. Funds, some critics say, are being used to repress freedom. But this does not abash the campaigners.

“Once you are not afraid of being arrested anymore, the whole entire control of the police state disappears. When that happens, there are credible possibilities for us. Suddenly you can imagine a different world and you believe you can be an agent of change,” says Robert Cammiso, who was arrested during an “Occupy Wall Street” demonstration.

Two miles from the chaos, at the United Nations, even financier and billionaire George Soros weighed in on the populist uprising.

“Actually, I can understand their sentiments, frankly,” he said. “The decision not to inject capital into the banks but to effectively relieve them of their bad assets, and them allow them to earn their way out of a hole, gave the banks bumper profits and that allowed them to pay bumper bonuses. As I say, I can sympathize with their grievances.”

Grievances spreading so loud and large that mainstream media outlets have been left with no other choice but to cover the protests.

In a matter of weeks, “Occupy Wall Street” has not only mobilized international attention. Many believe this ongoing event could become a turning point in the US, where a mass movement goads American politicians into working for the majority of the people – a passionate collective demanding democracy from the very leaders that promote it.

HUNGER HOAX

I’d like to report from West Philly that I again saw no emaciated starving poor lying on the sidewalks as I travelled to and from work this week. I did notice a tremendous number of obese poor shuffling along talking on their cell phones headed to their local KFC or Pizza place. The government drones certainly need to spend billions of your tax dollars to educate the poor to eat fruits and vegetables. I just know this will work.

The ‘Hunger’ Hoax

by Thomas Sowell

Twenty years ago, hysteria swept through the media over “hunger in America.”

Dan Rather opened a CBS Evening News broadcast in 1991 declaring, “one in eight American children is going hungry tonight.” Newsweek, the Associated Press and the Boston Globe repeated this statistic, and many others joined the media chorus, with or without that unsubstantiated statistic.

When the Centers for Disease Control and the Department of Agriculture examined people from a variety of income levels, however, they found no evidence of malnutrition among those in the lowest income brackets. Nor was there any significant difference in the intake of vitamins, minerals and other nutrients from one income level to another.

That should have been the end of that hysteria. But the same “hunger in America” theme reappeared years later, when Senator John Edwards was running for Vice President. And others have resurrected that same claim, right up to the present day.

Ironically, the one demonstrable nutritional difference between the poor and others is that low-income women tend to be overweight more often than others. That may not seem like much to make a political issue, but politicians and the media have created hysteria over less.

The political left has turned obesity among low-income individuals into an argument that low-income people cannot afford nutritious food, and so have to resort to burgers and fries, pizzas and the like, which are more fattening and less healthful. But this attempt to salvage something from the “hunger in America” hoax collapses like a house of cards when you stop and think about it.

Burgers, pizzas and the like cost more than food that you can buy at a store and cook yourself. If you can afford junk food, you can certainly afford healthier food. An article in the New York Times of September 25th by Mark Bittman showed that you can cook a meal for four at half the cost of a meal from a burger restaurant. So far, so good. But then Mr. Bittman says that the problem is “to get people to see cooking as a joy.” For this, he says, “we need action both cultural and political.” In other words, the nanny state to the rescue!

Since when are adult human beings supposed to do only those things that are a joy? I don’t find any particular joy in putting on my shoes. But I do it rather than go barefoot. I don’t always find it a joy to drive a car, especially in bad weather, but I have to get from here to there.

An arrogant elite’s condescension toward the people – treating them as children who have to be jollied along – is one of the poisonous problems of our time. It is at the heart of the nanny state and the promotion of a debilitating dependency that wins votes for politicians while weakening a society.

Those who see social problems as requiring high-minded people like themselves to come down from their Olympian heights to impose their superior wisdom on the rest of us, down in the valley, are behind such things as the hunger hoax, which is part of the larger poverty hoax.

We have now reached the point where the great majority of the people living below the official poverty level have such things as air-conditioning, microwave ovens, either videocassette recorders or DVD players, and own either a car or a truck.

Why are such people called “poor”? Because they meet the arbitrary criteria established by Washington bureaucrats. Depending on what criteria are used, you can have as much official poverty as you want, regardless of whether it bears any relationship to reality.

Those who believe in an expansive, nanny state government need a large number of people in “poverty” to justify their programs. They also need a large number of people dependent on government to provide the votes needed to keep the big nanny state going.

Politicians, welfare state bureaucrats and others have incentives to create or perpetuate hoaxes, whether about poverty in general or hunger in particular. The high cost to taxpayers is exceeded by the even higher cost of lost opportunities for fulfillment in their lives by those who succumb to the lure of a stagnant life of dependency.

October 5, 2011

Thomas Sowell is a senior fellow at the Hoover Institution at Stanford University. His Web site is www.tsowell.com. To find out more about Thomas Sowell and read features by other Creators Syndicate columnists and cartoonists, visit the Creators Syndicate web page.

WHAT THIS COUNTRY NEEDS NOW IS HOPE

Finch: Why are you doing this?
Evey Hammond: Because he was right.
Finch: About what?
Evey Hammond: That the world needs more than just a building right now. It needs hope.

The dialogue above occurred at the end of the dystopian movie V for Vendetta. It is a tale of revenge and restoring hope among citizens who had chosen safety and security over freedom and liberty. Even though this movie was fictional and adapted from a comic strip, its message and warnings should be heeded. Millions of middle class citizens in the U.S. sink deeper into despair every day. Day by day hope is being lost that the future for our children will be better than our past. The political, financial, and corporate leaders of our country are intellectually and morally bankrupt. The major Wall Street banks are bankrupt. Social Security is bankrupt. Medicare is bankrupt. The whole damned world is bankrupt. Anyone with an unbiased view of our planet would conclude that we are in unfathomable danger. The list of impending catastrophic issues that will blow up the world for millions in the U.S. and across the globe is virtually endless:

U.S. Debt

The national debt is currently $14.6 trillion, up from $5.7 trillion in 2000. It took over 200 years to accumulate the first $5.7 trillion of debt and only 11 years to tack on another $8.9 trillion.
With the new $450 billion jobs package proposed by President Obama, the deficit in FY12 will likely exceed $1.8 trillion, or 12% of GDP. Greece’s 2010 deficit was 10.5% of GDP.
Kenneth Rogoff and Carmen Reinhart in their book This Time is Different: Eight Centuries of Financial Folly, using data from 44 countries over 200 years, concluded that once a country’s national debt exceeds 90% of GDP, the economy stagnates and ultimately makes that country vulnerable to a debt crisis. The U.S. national debt as a percentage of GDP is currently 97% and will reach 107% in 2012. This does not count state and local debt, Fannie Mae and Freddie Mac debt, and the unfunded liabilities for Social Security and Medicare. We are at the same place Greece was in 2007. But we’re no Greece, right? This time is different.

Total credit market debt of $52.5 trillion is 3.5 times GDP, versus a long-term leverage ratio of 1.6. This is called living well above your means on borrowed money. We have a long way down before we reach the bottom of this mountain of debt.

Despite the rhetoric out of Washington D.C. by the thieves and knaves about cutting deficits, the National Debt is on course to increase by $9 trillion in the next 10 years. It will reach $20 trillion by 2015.

Entitlements

The commitments made by politicians over decades in order to get elected have resulted in unfunded liabilities for Social Security and Medicare exceeding $100 trillion.

In 1980, just 11.7% of all personal income came from government transfer payments. Today, 18.0% of all personal income comes from government transfer payments. Wages and salaries paid by private industries totals $5.5 trillion per year, while wages paid by government total $1.2 trillion and social welfare payments from the government total $2.3 trillion. Only ten years ago wages and salaries from private industries totaled $4.1 trillion, while government wages were only $800 billion and welfare payments totaled $1.1 trillion. In ten years the percentage increases paint the true picture:
- Private wages & salaries increased 34%
- Government wages & salaries increased 50%
- Government social welfare transfer payments increased 109%
Despite the rhetoric from politicians, there is no lock box and there is no cash in the Social Security fund. John Mauldin summed it up nicely: “Social Security funds are an entry into a government accounting book that don’t really exist except as an IOU. Politicians of all stripes have used the Social Security money to pay for other government expenses. Those funds were even counted to offset the deficit, although now that Social Security is no longer in a surplus that has gone away.”
This year, about 3.3 million people are expected to apply for federal Social Security Disability benefits. That’s 700,000 more than in 2008 and 1 million more than a decade ago. Today, about 13.6 million people receive disability benefits through Social Security or Supplemental Security Income. Last year, Social Security detected $1.4 billion in overpayments to disability beneficiaries, mostly to people who got jobs and no longer qualified, according to a recent report by the Government Accountability Office, the investigative arm of Congress.

Employment

The official unemployment rate in the U.S. is 9.1% with 14 million people unemployed. The true unemployment rate, taking into account discouraged workers, part time workers who want a full time job, and people who have dropped out of the work force, is above 20%, or 31 million people.
It now takes the average unemployed worker in America about 40 weeks to find a new job.

Even after a supposed recovery, there are approximately 7 million less people employed today than there were in 2007.
The employment to population ratio of 58.2% is at the same level as 1969, before women entered the workforce in record numbers. As wages stagnated and inflation drove costs higher, families were forced to send two parents into the workforce, with predictable consequences to their latchkey children. The ratio peaked in 2001 at 64.4% and has declined precipitously since 2008.

Poverty

The number of people on food stamps has gone from 27 million people receiving $30 billion of aid in 2007 to 45 million people (14.5% of U.S. population) receiving $72 billion in aid today.

The number of uninsured Americans totals 49.9 million.
Those covered by employer-based insurance continued to decline in 2010, to about 55%, while those with government-provided coverage continued to increase, up slightly to 31%. Employer-based coverage was down from 65% in 2000.
One out of every six elderly Americans now lives below the federal poverty line.
Another 2.6 million people slipped into poverty in the United States last year and the number of Americans living below the official poverty line, 46.2 million people, was the highest number in the 52 years the Census Bureau has been publishing figures on it.
The percentage of Americans living below the poverty line last year, 15.1%, was the highest level since 1993. (The poverty line in 2010 for a family of four was $22,314)
Blacks experienced the highest poverty rate, at 27%, up from 25% in 2009, and Hispanics rose to 26% from 25%. For whites, 9.9% lived in poverty, up from 9.4% in 2009. Asians were unchanged at 12.1%.

Income

Median household income fell 2.3% to $49,445 last year and has dropped 7% from the peak of $53,252 reached in 1999.
Median household income for the bottom tenth of the income spectrum fell by 12% from a peak in 1999, while the top 90th percentile dropped by just 1.5%.
Between 1969 and 2009, the median wages earned by American men between the ages of 30 and 50 dropped by 27% after you account for inflation.
Median income fell across all working-age categories, but the sharpest drop was among young working Americans, ages 15 to 24, which experienced a decline of 9%.
When you adjust wages for inflation, middle class workers in the United States make less money today than they did back in 1971.

Wealth Inequality

The wealthiest 1% of all Americans now controls 43% of all the financial wealth in this country.
According to the Federal Reserve, the richest 1% of all Americans has a greater net worth than the bottom 90% combined.

The fact is that many people in the bottom half of the top 1% wealthiest Americans usually achieved their success after decades of education, hard work, saving and investing as a professional or small business person. A recent article by William Domhoff quotes an investment manager who works with very wealthy clients regarding the top 0.1%:

Unlike those in the lower half of the top 1%, those in the top half and, particularly, top 0.1%, can often borrow for almost nothing, keep profits and production overseas, hold personal assets in tax havens, ride out down markets and economies, and influence legislation in the U.S. They have access to the very best in accounting firms, tax and other attorneys, numerous consultants, private wealth managers, a network of other wealthy and powerful friends, lucrative business opportunities, and many other benefits. Membership in this elite group is likely to come from being involved in some aspect of the financial services or banking industry, real estate development involved with those industries, or government contracting.

Until 1980, the U.S. economic system was reasonably balanced, with manufacturing still the driving force in creating wealth for the middle class. In the three decades since, our political, banking and corporate elite have gutted our industrial base, shipped millions of jobs overseas and have used financial schemes and scams to suck the vast majority of middle class wealth into their grubby little hands. Wall Street has slowly and methodically pillaged the nation’s wealth, hollowing out a once vibrant nation, and their insatiable greed driven appetite drives them to want more.

Consumer Debt

Total consumer debt in the United States at $2.45 trillion is now more than 8 times larger than it was just 30 years ago. The recent leveling off is completely due to hundreds of billions in write-offs by the Wall Street banks. The chart below is a Keynesian dream of government borrowing to create prosperity. The fallacy of Keynesianism is evident for all to see.

According to the Federal Reserve, between 2007 and 2009 household net worth in the United States fell by 25%, or $16.4 trillion.
The Federal Reserve says that median household debt in the United States has risen to $75,600.
Of U.S. households that have credit card debt, the average amount owed on credit cards is $15,800.
The top 10 credit card issuing banks control 80% of the credit card market, with Bank of America, Citicorp, JP Morgan Chase and Wells Fargo accounting for almost 60% of the market.

The average APR on credit card with a balance on it is 13.1%. These same banks are borrowing at 0% from the Federal Reserve.
Penalty fees from credit cards added up to over $21 billion in 2010.
There are 610 million credit cards held by U.S. consumers, with 3.5 credit cards per cardholder.
Americans now owe more than $887 billion on student loans, which is even more than they owe on credit cards.

Real Estate

U.S. home values have fallen an astounding $6.6 trillion since the peak of the real estate market.
National home prices have fallen 31% from their peak in 2005.
Approximately 11 million households, or 23% of all households with a mortgage, are underwater on their mortgage.
Household percent of equity is at 38.6% today, down from 60% in 2006. There are 87 million households in the U.S. Approximately 25 million of these houses have no mortgage, so the 52 million have significantly less than 38.6% equity.

Americans were so sure their houses would appreciate to infinity during boom years of 2005 through 2008 they withdrew over $3 trillion of equity from their homes and spent it like drunken sailors. The hangover will last for decades.

Savings & Retirement

The S&P 500 Index reached 1,100 on March 24, 1998. The S&P 500 Index on October 4, 2011 is 1,100. Wall Street convinced millions of dupes that they needed to buy stocks for the long run. Thirteen years later, the average investor has nothing, while the shysters on Wall Street have reaped hundreds of billions in fees.
The stock market is priced to return 5% over the next decade, while bonds are priced to deliver no more than 2%.
1 out of 3 Americans has no savings at all.
Workers estimate their retirement savings needs at $600,000 (median), but in comparison, less than one-third (30%) have currently saved more than $100,000 in all household retirement accounts.
The average 401k balance at the end of 2010 was $71,500. Aon Hewitt estimates that it will take retirement savings of 15 times your final salary to maintain your current lifestyle. Someone making $50,000 per year would need $750,000.
50% of all the households in the U.S. (57 million households) have a total net worth less than $70,000.
Robert Novy-Marx of the University of Chicago and Joshua D. Rauh of Northwestern’s Kellogg School of Management recently calculated the combined pension liability for all 50 U.S. states. What they found was that the 50 states are collectively facing $5.17 trillion in pension obligations, but they only have $1.94 trillion set aside in state pension funds.
Every single day more than 10,000 Baby Boomers will reach the age of 65. That is going to keep happening every single day for the next 19 years.
Approximately 3 out of 4 Americans start claiming Social Security benefits the moment they are eligible at age 62. Most are doing this out of necessity.
35% of Americans already over the age of 65 rely almost entirely on Social Security payments alone.

Foreign Trade

The U.S. trade deficit is now running at approximately $600 billion per year. It is clear that with the shift from a manufacturing based saving society in the 1960s and 1970s to a Wall Street finance based, debt driven consumption society from 1980 onward has led to massive trade deficits.

The gutting of the American middle class can again be traced back to 1980 when manufacturing employment peaked at 19.5 million. Once corporate CEOs embraced “globalization” in the late 1990s and realized they could reap obscene profits and compensation packages by utilizing slave labor in China to do American manufacturing jobs at 10% of the cost, the jobs disappeared. There are less than 12 million manufacturing jobs in the U.S. today, replaced by jobs at Wal-Mart and McDonalds.

The U.S. imports 9.5 million barrels per day of oil, more than 50% of our daily consumption. At an average price of $90 for 2011, we are sending $300 billion per year to countries that hate us and despise our way of life.

Energy

The U.S consumes 22% of the world’s oil output despite having only 4.5% of the world’s population.
The U.S. has less than 3% of the world’s proven oil reserves.
The Department of Energy was created in 1977 with the mission to reduce our dependence on foreign oil. The country has not built a new oil refinery or nuclear power plant since 1980.
In 1980 the U.S. imported 37% of our oil consumption. We now import 51% of our oil consumption.
In 1980 the price of a gallon was $0.58 per gallon ($1.90 adjusted for inflation). Today, the price of a gallon of gasoline is $3.40.
The DOE employs 16,000 workers & 100,000 contract workers, and operates on a mere $27 billion per year. Ironically, the DOE spends $300 million per year for energy in its 9,000 buildings around the country.
Despite being created to create a comprehensive energy policy, the DOE has no plan or strategy to address peak cheap oil. The impact on U.S. society from declining world oil supply will be devastating to the U.S. economy within the next five years.

Foreign Interventionism

America’s two wars of choice in the Middle East have cost $1.3 trillion in direct costs, thus far. The long-term costs will total over $3 trillion.
The United States annual military spending is 8 times as large as China and Russia. We spend 73 times as much as the supposed dire threat of Iran. The U.S. accounts for over 44% of worldwide military spending.

In the year 2000, the U.S. spent $359 billion on Defense, including veterans and foreign aid ($17 billion). The 2011 expenditure is $965 billion, with $45 billion in foreign aid. Do the politicians in Washington D.C. recognize the irony of borrowing $45 billion from foreigners and then giving the $45 billion to other foreigners?
The U.S. operates 11 large carriers, all nuclear powered. In terms of size and striking power, no other country has even one comparable ship. The displacement of the U.S. battle fleet – a proxy for overall fleet capabilities – exceeds, by one recent estimate, at least the next 13 navies combined, of which 11 are our allies or partners.
The U.S. military empire is vast. Officially, more than 190,000 troops and 115,000 civilian employees are massed in approximately 900 military facilities in 46 countries and territories (the unofficial figure is far greater). The US military owns or rents 795,000 acres of land, with 26,000 buildings and structures, valued at $146 billion.
With the collapse of the Soviet Union in the early 1990s, the military industrial complex needed to create a new enemy in order to keep the billions in profits flowing to the arms manufacturers. The War on Terror has been a windfall for the military industrial complex. The American people did not heed President Eisenhower’s warning.

Monetary Policy

The Federal Reserve was created in 1913 with the purpose of stabilizing the country’s financial system, eliminating financial panics, keeping prices steady, and insuring maximum employment. The result has been more instability, depressions, recessions, market crashes, unemployment as high as 25%, and inflation that has reduced the purchasing power of the U.S. dollar by 96% since 1913.

The Consumer Price Index was 10.0 in December 1913 when the Federal Reserve was created. Today, the index stands at 227. Prices have risen 2,270% in the almost 100 years since the Federal Reserve’s inception, or inversely the dollar can buy what it took $.04 to buy in 1913. Somehow, the banking syndicate that has “achieved” this result has convinced the public that inflation is good for them.
When Richard Nixon closed the gold window in 1971, the last check and balance on politicians and bankers was scrapped. The result has been predictable. The National Debt swelled from $400 billion in 1971 to $14.6 trillion today, a 3,650% increase in 40 years. The GDP grew from $1.13 trillion to $15.0 trillion today, a 1,332% increase in 40 years. Politicians have bought the votes of their constituents by making promises and financial commitments that have made debt slaves out of future unborn generations. Without a restraint on money printing, politicians will always choose to not worry about tomorrow.
The Federal Reserve policies of Alan Greenspan and Ben Bernanke were the single biggest cause of the 2008 financial catastrophe and their current policies have set the country up for the final cataclysmic disintegration of our economic system. By bailing out Wall Street every time they made a high risk bet and lost (1987 Crash, Latin America, S&L Crisis, Asian Crisis, LTCM, Dot Com, 9/11, Housing collapse, Lehman) the Federal Reserve has proven to be a tool for the super rich power elite. By keeping interest rates below where they would be in a free market, the Federal Reserve created the climate for gambling on Wall Street, the home price 3 standard deviation bubble, and the current screwing of senior citizens and savers to boost the profits of Wall Street bankers.
In August 2008 the Federal Reserve balance sheet consisted of $940 billion of mostly U.S. Treasury securities. Today, the Federal Reserve balance sheet totals $2.9 trillion and is filled with toxic mortgage debt shoveled from the insolvent Wall Street banks onto the plate of the American taxpayer. The Federal Reserve balance sheet is leveraged 55 to 1, meaning a 2% loss would wipe out their capital. Lehman Brothers and Bear Stearns were leveraged 30 to 1 when they went belly up.

During the recent financial crisis the Federal Reserve secretly loaned $16 trillion to the biggest banks in the world, including $4 trillion to foreign banks. This goes far beyond the mandate they were given by Congress in 1913. The Fed had no regulatory authority or ability to judge the credit worthiness of these foreign banks, but risked $4 trillion of U.S. taxpayer funds propping them up. With European banks on the verge of bankruptcy, the Federal Reserve risks losing even more money if they become the lender of last resort.

In the 3^rd Quarter of 2008 American savers were able to generate $1.4 trillion of interest income on their savings. Much of this interest went to risk adverse senior citizens who depended on this income to make ends meet after two years of no increases in their Social Security payments. Three years later savers are only generating $1 trillion of interest income or 30% less, while their costs for food and energy have risen 5% to 10%. The Federal Reserve instituted a zero interest rate policy in order to enrich their Wall Street masters, while further impoverishing the middle class and senior citizen savers that are the true backbone of the nation. Ben Bernanke has purposely transferred $400 billion from the prudent to the profligate.

When I started to detail the issues facing our country today, I expected to come up with 10 to 20 bullet points of key concerns. As I methodically worked through the categories of challenges facing the American Empire, the total reached 76 bullet points. The facts as presented above paint a picture of impending doom for America. The slogans and vapid “solutions” proposed by political candidates and entrenched Washington politicians do not even scratch the surface of what would need to be done to save this country from economic collapse. Many of these problems took decades to create and are not solvable in a reasonable time frame. With the country still delusional, overleveraged, and underemployed, it seems like the existing economic and social structure will need to be blown up to restore hope in this country.

“A building is a symbol, as is the act of destroying it. Symbols are given power by people. A symbol, in and of itself is powerless, but with enough people behind it, blowing up a building can change the world.” – V in V for Vendetta

Look In the Mirror

After accepting the fact that the economic situation as presented above is beyond repair, two questions come to mind:

How did we get in this predicament?
How do we get out of this predicament?

The difficulty with trying to explain how we got here is that people want simple answers and a bad guy to blame. People want to blame the rich or blame the poor or blame the phantom ruling elite or blame the other political party. They prefer to blame someone else, rather than looking in the mirror. It took a century of bad decisions, delusional thinking, unparalleled hubris, greed, sloth and willful ignorance to place the country on the precipice of ruin. The American people are responsible for the situation they find themselves in today. We elected the politicians that passed the laws, created the agencies, borrowed the money, and spent the country into oblivion. The truth is human beings are flawed creatures. We are prone to greed, laziness, seeking power, worrying about what others think about us, delusional thinking, herd mentality, shallowness, and cognitive dissonance. All of these human weaknesses have contributed to our current dilemma.

Until the twentieth century the United States generally kept their nose out of foreign conflicts, only getting involved in small regional conflicts. The country experienced tremendous growth during the 1800s and early 1900s with virtually no inflation and no central bank. The country experienced this remarkable expansion with no personal or corporate income tax. The nation also benefitted tremendously from the discovery of oil in Titusville, PA in 1859, as oil fueled the industrial revolution in the U.S. The election of Woodrow Wilson in 1912 marked a dramatic turning point in U.S. history. Within one year the country had a personal income tax and a central bank. As with most things created by politicians, they seemed harmless at first. The tax rate for 99% of Americans was 1%. The central bank was given a limited mandate to keep our banking system stable. Within a century we have a 60,000 page Federal tax code and a myriad of taxes at the Federal, State and local level. The Federal Reserve has more power and control over our lives than any entity on earth.

Giving politicians the ability to tax its citizens and print money allowed them to do things and make commitments that would have been impossible prior to 1913. After being re-elected in 1916 on a platform of keeping the country out of World War I, Wilson committed the country to that war. By 1919 the tax rate was already at 4% for most Americans and the Federal Reserve was printing money to finance the war, generating inflation of 16% per year between 1917 and 1920. Thus began a century of foreign interventionism and debt financed social welfare programs. The Federal Reserve created the easy monetary conditions of the 1920s which brought about the boom and bust of the 1929 stock market collapse. This precipitated the Great Depression and the conditions that led to the rise of fascism and World War II. The tinkering by politicians with our monetary system created more problems, which politicians attempted to solve by passing new laws and creating new programs and agencies. Without an unlimited supply of taxes and money printed by the Federal Reserve, politicians would have been constrained.

The somewhat logical reaction to the Great Depression by Franklin Delano Roosevelt was to create make work programs, housing agencies and social welfare programs to keep the citizens from revolting. He did this through the creation of debt, doubling the National Debt from $22 billion in 1932 to $44 billion by 1940. This is when the entitlement mindset took root. The creation of OASDI (Old Age, Survivors, and Disability Insurance) in 1935 was not supposed to be a retirement plan. People didn’t retire in 1935. It was created to make sure widows and orphans did not starve to death during the Great Depression. Again, the rate was only 1% at the outset. The age at which you were eligible to receive assistance was 65, four years greater than the average life expectancy of 61 years old. It was created as an insurance program and has morphed into a glorified retirement plan that convinced millions of Americans they didn’t need to save for their own retirement. It is $17.5 trillion in the hole because life expectancy is now 79 years old, politicians expanded coverage and refused to level with the American public for fear of losing elections.

The psychology of entitlement has grown over the decades as politicians made promises with borrowed money. They created Social Security, Medicaid, and Medicare to provide pension and healthcare to all senior citizens. They created Fannie Mae, Freddie Mac and Section 8 housing because everyone deserved to own a home. They created unemployment compensation, SNAP, and SSDI to sustain the disabled and down on their luck. Veterans are entitled to benefits as a result of their military service. These entitlements have become ingrained in our society. Charles Hugh Smith captured the essence of our entitlement mindset in a recent article:

“The entitlement mindset is thus firmly established in the American psyche. If we experience bad luck and/or the negative consequences of poor choices, we have been trained to expect the government at some level to alleviate our suffering, cut us a check or otherwise address our difficulties. The poisonous problem with the entitlement mindset is intrinsic to human nature: once we “deserve” something, then our minds fill with resentment and greed, and we focus obsessively on creating multiple rationalizations for why we deserve our fair share.”

The ability to tax and print trillions of dollars has enabled politicians to convince Americans they don’t need to save for their own retirement, they don’t need to worry about the cost of their healthcare, they don’t need to educate themselves, and they don’t need to help their neighbors because the government will do it for them. Once the entitlement mindset became ingrained in our society, self reliance, the ability to adapt to adverse circumstances, charitable acts, and taking responsibility for your own health and welfare rapidly declined among the populace. Government programs have been sold to the American people as acts of compassion for the less fortunate. Instead they have become a bureaucratic nightmare, creating dependence and a permanent underclass with no incentive, ability or desire to raise themselves up.

Human weakness and failings have also led to an over-class that have done far more damage to the country than those in society dependent on the state for their subsistence. The best description of this country at this point in history is a Warfare-Welfare-Corporatocracy. Since World War II the undue influence of the military industrial complex has led to almost constant conflict and foreign interventionism on a grand scale never matched in world history. President Eisenhower’s warning went unheeded:

“In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.”

The people of this country have traded liberty and freedom for the appearance of safety and security by allowing the corporate military establishment and their bought political cronies to use fear and phantom threats to convince the non-critical thinking masses to beg for protection. The Cold War was replaced by the War on Terror, while the truth is that we keep our troops in the Middle East to protect “our” oil under “their” sand. Attempting to maintain an empire through troops garrisoned in countries across the globe, patrolling the seas with our navies, buying the “friendship” of dictators, and saber rattling or invading countries we don’t like is a folly that has brought down many empires before ours.

The most decisive factor in the disastrous financial predicament we are experiencing today is the tsunami of Wall Street greed and avarice that was unleashed upon the nation starting in 1971 with Nixon closing the gold window and allowing the Federal Reserve to “manage” the currency with no hindrances like gold to keep them from going too far. Prior to the 1980’s Wall Street investment banks were partnerships. If a partner took an extreme risk he would endanger the personal assets of all the partners. This insured prudent lending practices. Once they became corporations the risk was passed to shareholders and as we’ve recently found out – taxpayers, while bank executives could reap obscene compensation by taking world shattering risks. The repeal of the Glass Steagall Act in 1999 and the obstruction in regulating the derivatives market by Alan Greenspan and Larry Summers created the playing field that allowed Wall Street go on a drunken rampage, pushing the worldwide financial system to the point of collapse in 2008.

What Happens Next?

“I felt like I could see everything that happened, and everything that is going to happen. It was like a perfect pattern, laid out in front of me. And I realized we’re all part of it, and all trapped by it. With so much chaos, someone will do something stupid. And when they do, things will turn nasty.” – Inspector Finch – V for Vendetta

The chart above explains why anger and rage are beginning to bubble to the surface in cities across the country. It is clear there are no simple explanations or one answer to why the country is facing such calamitous circumstances. Essentially, human failings that have existed for all eternity have conspired to drain the vitality, risk taking, self reliance, personal responsibility and common sense from a once great nation. We know the uneducated, unmotivated lower classes, after decades of being kept down through our entitlement system, are unable and unwilling to do anything about their situation, as long as the entitlements keep flowing. It is the richest .01% that has accumulated the wealth, power and undue influence over the management of country. Either through inheritance, intelligence, connections, hard work, or luck, a few hundred thousand individuals out of 310 million people control the system. Immense wealth in the hands of the few has created a system where the few control the media, politicians, banking system, and mega-corporations that dominate our economy. Their human weaknesses include being egomaniacal power hungry materialistic greedy men who will stop at nothing to retain and increase their vast wealth. They have succeeded beyond their wildest dreams in pillaging the wealth of the middle class. But, they’ve gone too far.

They’ve manipulated the tax code in their favor. They make up most of the Senate, House and Judiciary. They own the mainstream media outlets. They are the masters of the universe on Wall Street. They run the mega-corporations that have shipped American jobs overseas. They pay millions to have the laws and regulations written for their benefit. They created the social welfare system, the public education system, and the healthcare system that keeps a vast swath of the population impoverished, ignorant and dependent upon the mutant organism that enriches the few. They’ve convinced the bulk of non-critical thinking Americans that the government can create jobs and make their lives safe and secure. This is the point where critical thinking Americans need to honestly answer a few questions to decide what happens next.

Did Social Security make our retirements more secure? Did the Department of Education make our children smarter? Did the Department of Energy reduce our dependence on foreign oil? Would there be more or less than 160,000 structurally deficient bridges in the U.S. without the Department of Transportation? Does paying unemployment compensation for 99 weeks increase employment or create jobs? Did Medicare and Medicaid make people healthier and reduce healthcare costs? Has putting our faith in mega-corporations for health insurance, drugs and job creation benefitted middle class workers? Has the War on Terror made the average American safer? Did the War on Drugs reduce the usage and availability of illegal drugs? Did passing more laws lead to a more law abiding society? Does incarcerating more criminals in more prisons reduce crime? Does a 60,000 page IRS tax code result in more taxes being collected? Has issuing more debt to solve a debt induced crisis resulted in a stronger financial system? Does the Republican or Democratic parties have your best interests at heart? Does it matter who is elected President in 2012?

There are solutions to the issues facing our country but they all would result in painful choices, tremendous sacrifice, a willingness to rebalance our economy and lives, and the loss of vast stores of wealth by the top .01% richest Americans. The steps needed would be:

A nationalization of the Too Big To Fail banks with the required losses inflicted upon shareholders, bondholders and executives.
Re-institution of mark to market accounting rules requiring companies to truthfully report the losses on their loan portfolios.
The re-institution of Glass-Steagall to insure that no bank could become too big to fail.
Instituting a transparent regulated derivatives market that would insure that no single entity could threaten to crash the worldwide financial system.
Scrapping the existing individual personal income tax and replacing it with a flat, fair and/or consumption tax would take away the power of politicians.
The elimination of all corporate tax breaks so that multi-billion dollar conglomerates could not get away with paying no corporate taxes (GE).
The withdrawal of thousands of U.S. troops from across the globe and a dramatic decrease in military spending would be a voluntary reduction in our empire.
A renegotiation of the social contract with changes in eligibility based on age and financial means is the only way to retain a semblance of a social net to protect those who are truly needy. Otherwise the social welfare system will crash.
The population would need to accept a dramatic decrease in their standard of living as interest rates would need to be raised and saving would need to replace borrowing as our economic mantra.
Acceptance of the impact from peak oil would require a complete restructuring of our suburban sprawl existence with communities forced to become more locally self sufficient.
The political system would need to be overhauled with term limits and the elimination of corporate and special interest control over the election process.
The Federal Reserve would need to be constrained through the re-introduction of gold and/or a basket of hard currencies as a check on their ability to print money.

Sadly, we all know that none of these solutions would ever be willingly implemented by the existing ruling class. Anyone with an ounce of common sense can see the system is crumbling. The .01% went too far and stole too much. An unsustainable system will not be sustained. The debt load is too burdensome. The peasants are growing restless. Young people have occupied Wall Street. They are beginning to occupy other cities. 700 were arrested on the Brooklyn Bridge. Older people are joining the protests. There isn’t a cohesive message coming from the protestors other than the system is rigged in favor of the top .01%. Those who think they are in control are losing their grip. They see their power and wealth slipping away. They’ve had their way for decades and will not willingly submit to a change in the existing social order. Last night Jim Cramer voiced the concerns of the .01% by saying the Occupy Wall Street protests were worrisome. They are worrisome to the moneyed interests. They are a reason for hope to the 99.9%. We are approaching our moment of truth. There is something terribly wrong with this country. A new American Revolution has begun. It is time to stop being afraid and take this country back. What happens next? The choice is ours.

While the truncheon may be used in lieu of conversation, words will always retain their power. Words offer the means to meaning, and for those who will listen, the enunciation of truth. And the truth is, there is something terribly wrong with this country, isn’t there? Cruelty and injustice, intolerance and oppression. And where once you had the freedom to object, to think and speak as you saw fit, you now have censors and systems of surveillance coercing your conformity and soliciting your submission. How did this happen? Who’s to blame? Well certainly there are those more responsible than others, and they will be held accountable, but again truth be told, if you’re looking for the guilty, you need only look into a mirror. I know why you did it. I know you were afraid. Who wouldn’t be? War, terror, disease. There were a myriad of problems which conspired to corrupt your reason and rob you of your common sense. Fear got the best of you, and in your panic you turned to….. – V’s speech to the British people in V for Vendetta

OCCUPY

This movement is growing. You can try to rationalize who these people are, but you will be wrong. This isn’t about Republican or Democrat. It isn’t about socialism or capitalism. This is about the mood of the country. The people protesting are young and old. They are liberal and conservative. This is about anger raging against the machine. This is the beginning of the end for the old order. They don’t know it yet, but they will be swept away by the mood change in this country. These small protests will morph into something bigger. They are peaceful so far, but someone will do something stupid. A protestor will kill a cop or a cop will kill a protestor and then things will explode. This is a Fourth Turning. Bad shit happens during Fourth Turnings and people die. Don’t think for one moment these protests mean nothing.

Occupy Los Angeles protesters camp for second night at City Hall

October 2, 2011 | 10:07 pm

Protesters who have camped outside Los Angeles City Hall since Saturday, inspired by on-going Occupy Wall Street demonstrations in New York, will spend a second night sleeping on the pavement this evening.

Loosely organized by a group called Occupy Los Angeles, several hundred people marched and rallied Sunday, holding signs that blasted corporate influence on government. They used Internet sites to mobilize and get attention.

Photos: Sunday’s protest and parade downtown

Tents and blankets dotted the lawn in front of City Hall on Sunday, as people came and went from the encampment. Some stood on the sidewalk holding signs. Sunday night passing cars periodically honked in a show of support.

“It’s been a very peaceful demonstration,” Los Angeles Police Department Sgt. Mitzi Fierro said. “They’re out there exercising their First Amendment right, so we’re going to allow them to continue as long it doesn’t become an unlawful assembly.”

Following a procedure established Saturday night, the protesters were to be moved from the grass on the south lawn of City Hall to the sidewalk at 10:30 p.m. Sunday, and back from the pavement to the lawn at 6 a.m. Monday.

Occupy Boston protesters march through downtown Boston

Suzanne’ Kreiter/The Boston Globe
Protesters with Occupy Boston marched through downtown Boston today.

By Brian R. Ballou and John R. Ellement, Globe Staff

About 100 people are marching through downtown Boston this morning as part of the Occupy Boston protest.

Accompanied by Boston police officers who stopped traffic at key intersections, the protesters first gathered in the city’s Financial District this morning and then marched to the State House where they stood on the steps, chanting slogans and holding signs.

Some of the signs included “capitalism is organized crime” and “where’s my golden parachute?”

Most of the protesters appeared to be in their 20s. As they walked through the streets they called out to passersby.

“We are the 99 percent,” one group would shout.

“So are you,’’ another group shouted in response.

During the walk, a handful of people apparently heading to work, briefly joined the protest. One woman handed to the marchers the cookies she had made for co-workers.

The group, called Occupy Boston , is inspired by Occupy Wall Street, a demonstration entering its third week in Manhattan’s Financial District that led to the arrest of 700 people Saturday on charges of blocking the Brooklyn Bridge. The effort has spread to dozens of communities nationwide, with tens of thousands of people participating.

In Boston, the protests had been building for several days, and on Friday swelled to about 1,000 in Dewey Square. Police arrested 24 people on trespassing charges when they refused to leave the Bank of America building nearby.

The demonstration, largely fueled by social media, is aimed at calling attention to what protesters call the ‘‘bottom 99 percent’’ of America who are hammered by rising costs for education, housing, and health care.

“Occupy Wall Street” protest movement seeks a Philadelphia foothold

October 02, 2011|By Harold Brubaker, Inquirer Staff Writer

Ahuviya Harel wore a Soviet flag Thursday to the first Occupy Philadelphia planning meeting, one of many efforts nationwide aiming to echo New York’s two-week-old Occupy Wall Street protest against the “greed and corruption” of the richest 1 percent of Americans.

Communism is “my ultimate goal, in many years, for this country,” Harel said, glancing down at the flag, because “the rich keep getting richer, and everybody else is just struggling to get by or getting poorer.”

Later, after the meeting of about 200 in the soaring, ornate sanctuary of the Arch Street United Methodist Church, Shawn McMonigle, who overheard Harel’s comment, urged:

“Don’t skew us with that communist dude.”

McMonigle and the young men he was standing with outside the church said they were not sure how they would change the economic and political systems, though they agree that socialism and communism had been tried in other countries and were not the answer.

McMonigle, an unemployed Fishtown resident, expressed common ground for his group, which comprised a paralegal student stressed about the debt he is taking on to get a degree and a job, a business consultant who said he had seen firsthand the traps financial companies set for the poor, and a retail manager.

“Whatever is happening in the world is not working for the majority of people,” McMonigle said.

In that, the would-be occupiers of Philadelphia, mostly in their 20s, sounded much like many 60-something businessmen who are terrified of the future and convinced that the “dysfunction of our political system,” in the words of former Secretary of Defense Robert M. Gates, has stacked the economy against them.

The Philadelphia group aims to capture the spirit of Occupy Wall Street, which was inspired by Adbusters, a Canadian activist magazine hoping to spark street demonstrations of the kind that toppled Arab regimes in the spring. Protesters began occupying a park near Wall Street in Manhattan’s Financial District on Sept. 17.

Dozens of such groups have since formed across the United States, spurred by anger at the power of giant corporations, frustration at joblessness, and exasperation with politicians who refuse to increase taxes on the richest 1 percent of Americans while slashing programs for the poor.

DEFLATION CRACKS IN “LOGIC”

On why Schilling sees deflation on the horizon:

“In my new book, I identify seven different types of deflation. Now five of those are already in place — we’re having financial asset deflation, tangible asset deflation, commodities are coming down, wages are coming down. The one that hasn’t kicked in yet is goods and services deflation. The point is that the whole world is really marking down assets. It’s marking down the whole spectrum. I don’t think goods and services are going to hold up in terms of inflation. I think that will move to deflation fairly soon.” Link

Let’s just run with this “deflation” assumption. Let’s assume <del>Smokey</del> (slip) Schilling is right – for a second. So we have deflation. Super. Prices come down, the dollar strenghtens and that is a good thing.

Right?

Well, not for government revenues. Our government debt doesn’t deflate. Professor Kotlikoff pegs our debt at 200 trillion, I’ve said 128 trillion and Bill Gross says 60 trillion off balance sheet and to that we can add another 14.6 for the non-Enron accounted for debt.

Let’s be conservative and go with Gross’s numbers.

We now take in 2 trillion and we piss away 4 trillion. Or more. What’ll happen when we take in less than 2 trillion in tax revenues because we have deflating prices?

We could default. That would be massively inflationary as Greece is about to show us. We import half of our 20 million barrels a day in oil. Wonder how much gas will cost when our dollar goes from .04 cents in value to .00000000000000000000000000000000000004 cents in value?

We could continue to print the difference. Zimbabwe here we come.

We could raise rates. Oops, our interest on debt service would kill us and kiss the economy goodbye as commercial credit along with every other type of interest rate would be a firehouse on an already smoldering economy. And seriously, we’d be at Greek numbers. Triple digit interest numbers in order to entice enough people to invest in a country that holds more debt than any other country on the globe.

We could cut Grannies Social Security and all her other benefits, cut 46 million people getting food stamps, toss the 99’rs off unemployment. Oops, we’d have massive social unrest and even less in tax revenues.

The Perfect Storm In A Kondratieff Long Wave Winter

Excellent article on Seeking Alpha from David Knox Barker. I can’t believe Seeking Alpha printed it since it is realistic and not pumping some stock idea. I don’t know much about the Kondratieff Wave Theory, but it seems to have some resemblance to the Fourth Turning dynamic. Maybe someone on the site has a better understanding of the theory. But, if he’s right we’re in for some tough sledding this winter.

Crashing global stock markets, debt defaults, overproduction, falling prices, tumbling interest rates, global debt deleveraging, and the clear necessity for austerity are all classic long wave forces now in full tilt, producing the perfect storm in a Kondratieff long wave winter. Only long wave theory explains the economic and financial events now unfolding daily in the global economy and financial markets.

You still have time to prepare for the final crisis phase and debt collapse, but don’t delay. The global economy is now unequivocally in the final years of the long wave winter debt purge and what will be a sharp decline in corporate efficiency. Once this storm passes the global long wave economic reset button will be tripped, and the new global long wave spring season will begin.

The Russian economist Nikolai Kondratieff was the first to observe and document the remar

kable recurring long wave patterns in the global boom and bust cycle, driven by global debt and overproduction. He published his findings in the 1920s. His work anticipated the next downturn that unfolded as the Great Depression. Politicians appear to be incapable of seeing beyond a single election cycle. Politicians have ignored the evidence for the long wave once again. Most economists have as well, although a few are starting to pay more attention as the long wave facts are now difficult to ignore.

Some of Kondratieff’s original charts indicate just how far ahead of his contemporaries Kondratieff was in understanding the dynamic ebb and flow of international free market capitalism. There are those that claim he only discovered an agricultural commodity cycle. The charts below and his own words suggest he discovered a long wave dynamic cycle that permeates the entire economy and all of society. He wrote, “The long waves, if existent at all, are a very important and essential factor in economic development, a factor the effects of which can be found in all the principal fields of social and economic life.”

Click to enlarge charts

Political and monetary policies have exacerbated and magnified the natural long wave forces at work in the global economy and financial markets. The global economy now finds itself in a blinding blizzard in the Kondratieff long wave winter season. Many are unprepared and under the delusion that government intervention can and will save the day. Government meddling only makes matters worse. Investors or businesses that count on government policies to save them will be sorely disappointed. The long wave winter season will run its course and the current perfect storm will shatter the illusions of government as the savior of international free market capitalism. Keynesianism will die a merciless death in this long wave winter storm.

Federal Reserve Chairman Bernanke has admitted that he does not understand why the economy has not responded to the aggressive monetary stimulus of lower interest rates and quantitative easing, so now he tries the twist. Bernanke should read Kondratieff and the findings at the System Dynamics program at MIT, which has validated long wave theory. The long wave is the natural cycle of creative destruction in a free market economy; ignore it at your peril.

The long wave turn from winter to spring is just as natural as winter invariably giving way to spring in the natural seasons of the year. Only long wave theory explains the combination of the current economic and financial market conditions, where excessive debt levels and overproduction are now chipping away at corporate efficiency, forcing investors around the world to discount the present value they are willing to pay for future cash flows. Future corporate margins and therefore cash flows are rapidly becoming uncertain as prices received a plunge from overproduction funded with too much debt. In short, global financial markets are getting an old fashion haircut, maybe even a buzz cut.

The fact that free market capitalism goes through a long wave rough patch is a natural law of sorts in free market capitalism. Don’t mess with mother nature. The Obama Administration has been shocked to discover that fiscal stimulus has failed to generate the expected jobs. The President should expand his reading list. He is now in line to lose his job along with millions of others around the world. In addition to Kondratieff, the President should put Ludwig von Mises’ Human Action, Adam Smith’s Wealth of Nations, and Bastiat’s The Law, on his reading list. Government should not try to do what only a free market, free trade and individuals in pursuit of purpose are capable of doing. Human liberty and freedom, unhampered by government intervention, can achieve great things. It is the only solution to the global problems produced by a long wave winter.

Entrepreneurs, new businesses and innovation in existing businesses are the only viable engines of growth and job creation. Substantially lowering corporate taxes for small business and closing tax loopholes will cause the economy to boom and create jobs. Enterprises funded by government in exchange for their political contributions are destined for failure. The politicians involved in any such bribery and conspiracy with taxpayer funds should be sent to jail. Without free market forces and individual responsibility, and swift and harsh punishment for failure, capitalism will not function correctly. Seed stolen from farmers and planted in winter is doomed to failure. It only harms the real farmers and reduces future crops in their natural season.

On the bright side, corporate profits have held up remarkably well in light of the long wave winter forces in play, a testimony to management and the resilience of free market capitalism in crisis. Profits have been driven by emerging market demand, increases in efficiency, lower interest rates, payroll reductions through layoffs and low wage growth. Business has cut to the bone to deliver profits, and there is nothing left to cut. Unfortunately, the global economy is now in a long wave winter storm. Businesses are facing a global collapse in demand, in addition to political interference and stifling regulation. These forces are idling production and putting extreme downward pressure on prices. The CRB is plunging as overproduction swamps global markets with an excess supply of products and services. The long wave forces in play are now beginning to erode corporate profits.

Global leaders are in shock at the specter of a sovereign debt default that is shaking the global financial system to its core. The hopes pinned on emerging markets are fading fast, as even the economies in China, Brazil, Russia and India cool as anticipated during the long wave winter. The perfect storm is gaining strength. Emerging markets are stumbling; corporate profits will now take a hit when the global economy can least afford it.

The global economy is now in the final crisis years of the long wave winter season that will be cruel to corporate profits. The long wave is essentially at its heart a boom and bust cycle of corporate efficiency produced by human action. The winter season is driven by overproduction; this exists in goods and services, which puts downward pressure on prices received. Prices paid are also falling, but in a long wave winter storm prices received will fall much faster. This occurs when excessive debt and the inevitable debt deleveraging by consumers, businesses and governments is creating a severe decline in demand. The overproduction feeds additional price declines and additional contracting corporate margins.

The long wave boom and bust cycle of corporate efficiency is eventually recognized by global investors searching for a piece of corporate profits to buy in the form of publicly traded stocks. This is occurring now. Every long wave contains two bull markets and two bear markets. The spring and fall seasons of the long wave of rising corporate efficiency and expanding margins are bull markets, the summer and winter seasons of declining corporate efficiency and declining margins produce bear markets.

It takes a while for investors to catch on. The bear market of the global long wave winter began in the late 1990s in most developed markets. It is now in its final years of rapidly deteriorating corporate efficiency and investors around the world are recognizing the squeeze facing corporate profits. There are other long wave forces at work, but the ebb and flow of corporate efficiency and profits is critical to bull and bear markets. Profits are the mother’s milk of stocks, and the milk production will plunge as this long wave winter storm plays out.

The current bear market will run its course along with deteriorating corporate efficiency. The demand destruction of global debt deleveraging will drive corporate margins and profits lower into the expected long wave bottom of 2012-13. A severe global bear market will take stock markets much lower as corporate efficiency and profits are squeezed into the long wave winter bottom.

If you have never seen a long wave in real data, you have never seen a long-term graph of the U.S. 30-Year long bond. Interest rates are the price of money. During a long wave advance, the demand for money is growing and its price is rising; during a long wave decline, the demand for legitimate uses for money is shrinking and its price is falling. The U.S. long bond is a great proxy for the price of money. The demand for borrowing money and its price is falling.

The demand to borrow money by legitimate borrowers that understand what it takes to earn a dollar, i.e., those that have a chance of paying it back, is declining. They do not want to borrow money at this time. For years, my call for a U.S. 2% 30-Year bond and a 1% 10-Year bond at the bottom of this long wave winter has been in place. I see no reason to change that call now. The low in the price of money will coincide with a low for stock prices from late-2012 to mid-2013. The perfect storm of this long wave winter season is driving the price of money lower. Since Chairman Bernanke has called for low rates into mid-2013, maybe someone showed him this chart. Kondratieff would no doubt have loved this chart, which confirms his theory concerning the dynamic ebb and flow of international free market capitalism is not subject to the vagaries of misguided Keynesian manipulation.

The current business cycle is the final business cycle of the long wave cycle. What few investors and traders are aware of is a method of technical analysis that suggests that a Kondratieff long wave divided by 144 produces a miniature long wave cycle, a Wall cycle. There are nine Wall cycles in every business cycle. By tracking these Wall cycles both investors and traders can discover more optimal times to buy and sell to reduce risks and maximize returns. This applies whether they buy stocks for the discounted present value of future cash flows, growth, or just to trade the cycles. Unfortunately, global markets are in Wall cycle number six of the current business cycle. This is a third last and weakest cycle, so prepare for outsized volatility and price declines into the bottom of this cycle.

Investors are panicking, even though global markets are experiencing something as natural as a winter blizzard in January. Before it is over, this global bear market will present investors with the greatest discounted buying opportunities for future cash flows since the early 1930s. Keep much of your power dry; 8-16% dividend yields on great global franchise companies are coming to a stock market near you before the perfect long wave winter storm gives way to a global long wave spring in 2013. Those great buys and dividend yields will be compounded many times over during the coming long wave spring season.

POLICE STATE

The NYC police mace peaceful protestors. Imagine what they will do when the protests are no longer peaceful. The anger and rage is building.

Sunday, September 25, 2011

Welcome to the Police State: NYC Cops Mace Peaceful Protestors Against Wall Street

I’m beginning to wonder whether the right to assemble is effectively dead in the US. No one who is a wage slave (which is the overwhelming majority of the population) can afford to have an arrest record, even a misdemeanor, in this age of short job tenures and rising use of background checks.

Now at least in New York (and I hope readers in other cities will chime in) the right to assemble seems to be pretty much a dead letter. I was in Sydney during the global protests against the Iraq War, and I was told that the New York demonstrations (which were already hindered by typically lousy winter weather) were pretty much blocked by the police. Protestors were tying to gather at the UN, and the cops put up a cordon at Second Avenue. The result was the turnout was far lower than the number who tried to show their opposition and were stopped.

The latest New York City protest is OccupyWallStreet. Even though its turnout last week fell well short of hopes (the estimates from the group were that 2000 participated; the New York Times suggests numbers more like “hundreds” but the photos from the 17th make figures larger figures seem plausible), making it a nuisance level demonstration rather than a major statement, the powers that be seem to be trying a bit too hard to prevent it from getting traction.

The organizers were using Twitter to promote participation and visibility. And so Twitter intervened. From AmpedStatus:

On at least two occasions, Saturday September 17th and again on Thursday night, Twitter blocked #OccupyWallStreet from being featured as a top trending topic on their homepage. On both occasions, #OccupyWallStreet tweets were coming in more frequently than other top trending topics that they were featuring on their homepage.

This is blatant political censorship on the part of a company that has recently received a $400 million investment from JP Morgan Chase.

The protestors were relegated to Zucotti Park, west of Liberty. If you know Lower Manhattan that is technically near Wall Street but well away from any offices buildings. It is on the periphery. The New York Times depicts the demonstrators as naive and ineffective, i.e, harmless:

Occupy Wall Street, a diffuse and leaderless convocation of activists against greed, corporate influence, gross social inequality and other nasty byproducts of wayward capitalism not easily extinguishable by street theater, had hoped to see many thousands join its protest and encampment, which began Sept. 17….

By Wednesday morning, 100 or so stalwarts were making the daily, peaceful trek through the financial district, where their movements were circumscribed by barricades and a heavy police presence. (Various arrests for disorderly conduct were made.) By Thursday, the number still sleeping in Zuccotti Park, the central base of operations, appeared to be dwindling further.

Members retained hope for an infusion of energy over the weekend, but as it approached, the issue was not that the Bastille hadn’t been stormed, but that its facade had suffered hardly a chip.

So the protest is only in the low hundreds. In a separate story, the Times reports that the police arrested 80 as they moved to Union Square (notice how high a percentage that is) and even the anodyne Times makes the policing sound heavy-handed:

The police made scores of arrests on Saturday as hundreds of people, many of whom had been encamped in the financial district as part of a lengthy protest, marched north to Union Square….

Protest organizers estimated that about 85 people were arrested and that about five were struck with pepper spray. Among those was Chelsea Elliott, 25, who said that she was sprayed after shouting “Why are you doing that?” as an officer arrested a protester at East 12th Street….

Nearby, two other protesters standing handcuffed on Fifth Avenue told a reporter that they had both been arrested on sidewalks and were not aware of having broken any law.

“They put up orange nets and tried to kettle us and we started running and they started tackling random people and handcuffing them,” said Kelly Brannon, 27, of Ridgewood, Queens. “They were herding us like cattle.”

Next to her, David Smith, from Maine, said that he had been chanting “Let them go” as people were handcuffed, and was then arrested by a senior officer who told him that he was being charged with obstructing governmental administration.

The article included this tweet:

@DustinSlaughter there’s 50+ of us arrested in a caravan, netted & maced by police after standing on sidewalk where they told us to

This video show police macing women who were already corralled and who made no aggressive or threatening moves

The authorities apparently felt that the response was so low that they could get rough with the protestors, meaning that their perception was that even unflattering coverage would not incite much bigger turnout. Sadly, they may have judged this correctly.

DIABETES, ALZHEIMERS, GENERATORS, RON PAUL & TBP

It has been a very weird week. I spent last weekend writing my Old Man and the Sea article. I wanted to make it the best article I’d ever written as I hoped to convince more people to support Ron Paul. You might not think that writing an article is tiring, but after writing one I’m mentally and physically drained for at least two days. Then I had to head to the shore after work and clean the condo. I don’t know if this is why I’ve been so tired all week. I haven’t had the desire to log onto the site when I get home at night. My eyes have been closing by 9:00 pm every night. The markets were falling all week and the world seems like it is falling apart. I felt like there was a darkness clouding my thinking all week. I just don’t feel normal. Is it just me, or are other people feeling this way?

I also ran across the story below during the week. Japanese researchers have discovered that people with diabetes have a 74% greater chance of getting Azheimers. Just the news I needed to hear to cheer me up. My Dad died of Alzheimers. His brother died of Alzheimers. His sister has Alzheimers. My mother has two sisters with Alzheimers. Every time my mom tells me the same story for the 3rd time, I find myself thinking about when it will get me. When I’m at my desk and I can’t remember someone’s name or what it was I was about to do, a pang of doubt creeps into my mind. I was diagnosed with diabetes about five months ago. So now I have a 74% even greater chance of getting Alzheimers. My Dad got it in his early 70’s. That means I have maybe 25 good years left.

I could choose to be depressed by this situation, but it gives me a sense of urgency. As I walk to my office every morning I look down at the Ben Franklin quotes which have been inserted in the walkway and this one inspires me to keep plugging ahead:

“Lost Time is Never Found Again”

When I was diagnosed with diabetes, my doctor told me to lose weight and sign up for a diabetes class to learn about how I would need to live my life. I’ve been partially successful, as I’ve lost some weight, but I never signed up for the course. I tend to put off things that I don’t want to do. I think everyone tends to do this to some extent. I’ve also been writing for three years about the impending disaster that awaits our country due to our fiscal policies and massive debt. But again, I would put off preparations because in the back of my mind I hoped I was wrong. I’ve done more than most, but not enough.

I’m done wasting time. I called and scheduled my diabetes class at the local hospital. It’s time to really get in shape and give myself the best chance to fight off Alzheimers for as long as possible. I truly think things are going to go downhill faster than most people think. So I got off my ass and went out to buy a gas powered generator at Lowes. This purchase generated some interesting comments from a few people. As I pushed it up to the cash register, the cashier looked at it and asked, “Are you expecting something bad to happen?” I responded that I was trying to prepare in case of trouble. I pulled my Honda Insight up to the door and the nice guy from Lowes and I picked up the generator and slid it into the back of the car. A guy stopped as he was walking into the store and asked me what that was. I told him it was a generator. He thought it was funny that I was loading a big honking generator into a hybrid car.

Then I started to get in my car and a middle aged lady suddenly yelled out to me that she supports Ron Paul. She had seen my Ron Paul 2012 Magnet on the side of my car. I responded that he was our only hope. She said it wasn’t fair that he wasn’t getting enough air time on the MSM. She asked me if I was involved in his campaign. She wanted to know how to get involved. I gave her the website of the local Ron Paul support group. Then I told her to look for my Old Man and the Sea Op-Ed which will be in the local paper this week. It gives me hope when I see that middle aged suburban housewives with their daughters are understanding that Ron Paul has the right message.

Lastly, I’ve been somewhat annoyed by the fact that as the popularity of TBP has skyrocketed in the last few months, with visitor counts at all-time highs, the site makes less money every month. For someone with a business background, my efforts in generating revenue from this site have been a miserable failure. The google ads were doing well until google pulled the plug. No one seems to be clicking the new ads, as they are generating about $1 per day. The Amazon ad was pulling in a couple hundred per month and now is generating less than $100 a month. Not one person has opened an account at Everbank. The donation button resulted in an initial flurry of donations, mostly from the regulars on the site (thanks to everyone who made a donation), but there has been virtually no activity since. I did get one donation from a really famous political figure who I have the utmost respect for (I will not reveal his name). It blows me away that famous people read this site.

So, somehow I’ve turned the whole internet dynamic of increasing visitor counts into increased revenue on its head. The truth is that I could probably write articles with the specific purpose of generating revenue, but I have no interest in doing so. I’m trying to make a difference. Whenever I start to get annoyed by the lack of income, I think back to the reason I started writing in the first place. I want to leave my sons a country where they have a chance for a better life than I’ve had. My research for The Old Man and the Sea article has convinced me that winning or losing doesn’t matter. Fighting for the truth and fighting the good fight to the end is all that matters at the end of the day. I might get dejected, depressed, angry, and moody, but I’ll keep battling for the future of my kids.

I think we’ve created a somewhat dysfunctional support group at TBP, but it’s our dysfunctional support group. As things get worse over the coming months and years, hopefully our little community will function as a possible backbone for a new dynamic in our country based on local communities being self supportive. The government will not be the answer. Supporting local charities, helping your neighbors, and supporting your family are what matters. The ending will be the same for everyone who walks this earth. What matters is the course chosen on the voyage through life. Lost time is never found again.

I try to help the people in my community by donating to http://www.mannaonmain.org/.

I’m trying to help my country by donating to https://secure.ronpaul2012.com/.

We know bad times are ahead. Do what you can do to help make this a country you can be proud of.

Diabetes can Lead to Dementia

By Lenina C. | September 22, 2011 9:01 AM EST

We all know that Diabetes is a metabolic condition wherein the person has high glucose levels, the body has difficulty utilizing insulin, or simply because the body just can’t produce adequate amounts of insulin. This disease can lead to several complications like heart attack, kidney failure, and erectile dysfunction, to name a few.

But on top of these complications, the Japanese researchers found out that Diabetes can also lead to Alzheimer’s disease and Dementia. Alzheimer’s disease is a condition associated with loss of cognitive ability and has something to do with abnormal protein and tissue accumulation in the cerebral cortex of the brain. This is the most common type of Dementia.

There were studies conducted to justify the link between Diabetes, the risk of Alzheimer’s disease, and Dementia however, there were no conclusive results revealed. This is exactly the reason why a group of Japanese investigators decided to do a thorough search for answers themselves.

The Japanese researchers have been conducting studies on heart diseases since 1961 in Hisayama. Then in the year 1988, a glucose tolerance test was done to more than 1,000 adult residents of Hisayama to observe the status of the glucose production of their bodies. After 15 years, the researchers, performed a follow up assessment and, found out that 232 of the 1000 participants had dementia.

Those who were diagnosed with Diabetes had a 74% risk of developing dementia compared to a person with normal glucose levels. Prediabetics or those who have abnormal glucose levels but not classified as a diabetic have a 35% tendency to develop dementia.

In the whole course of the study, researchers discovered that Alzheimer is the most common type of Dementia.

“Our findings emphasize the need to consider diabetes as potential risk factor for all-cause dementia,” the researchers said.