LLPOH: Things I Believe

During my life, I have gradually developed a set of things that I believe. As a young person, I received very little in the way of help in developing these beliefs. In general, as a young person I never considered these things to be important. But somewhere along the line, I determined that what I wanted to be was an educated man, and that I wanted to make things, and be successful in business, and to have a happy, healthy, emotionally sound family. As a result, I gradually began to develop things I believe in. Following is a very truncated list of things I believe in. I add and subtract from things I believe in all of the time, and alter it based on things I learn and experience. The reason I have put this list forward is that these beliefs form the basis for my position on most issues. At the moment I am struggling to understand why some people take the positions that they do, as it seems to indicate that their belief set is extremely dissimilar to mine, and so I am confused. I welcome your comments and additions to this list.

I believe:

– in the general decency of the American people
– in the US form of government
– in the resilience of the American people
– in the obligation to conduct business honestly and with integrity
– that if one of my employees has the courage to ask me the question I need to have the courage to respond honestly
– in education
– in education for its own sake
– that the country needs to improve its education in the sciences, math, and engineering
– that governments should not fund college educations in the arts, but should funnel the money into science, math, and engineering
– that the general decency of the American people is being eroded by a growing welfare state
– that each person must be responsible for their own actions
– that each person should be responsible for meeting the costs of their retirement and old age
– in family
– in telling my children and my wife that I love them every day
– in becoming a better person each day
– in acting within the law
– in personal financial responsibility
– in spending less than you earn
– in paying your debts
– in staying debt free, except for financing an education and buying a home
– that building things is a noble pursuit
– in writing my representatives demanding change
– in books
– in reading every day
– in learning something every day
– in peaceful, lawful protest
– in protecting the weak
– in respecting the aged
– in loyalty to one’s family and friends
– in charity
– in being kind to animals
– in leaving a positive future for my children
– that making a profit is a good thing
– in capitalism
– in being polite to those providing me service
– that being rich is not a sin
– that being poor is not a sin
– in buying American-made
– that unions suck
– that everyone should have to pay taxes
– that we pay too much tax
– that the government spends too much
– that we should not be policing the world
– that we should secure our borders
– a man’s word is his bond
– in hard-work
– in no excuses
– in good planning
– in living life so that when I look back I will have no regrets

And this list goes on and on. Thanks for reading.

6 Critical Financial Miscalculations I’ve Made – That You May Be Making as Well

You might think I’m a hypocrite for what I’m about to admit (since I blog about personal finance), but this is reality.  In the past, I’ve made some wildly erroneous assumptions about our future ranging from how much we’d be making and spending each year to how our investments would perform.  Many of these misconceptions are still somewhat ingrained in my thinking because I took them for granted and it was “conventional wisdom” pounded into our heads for years, and I need to constantly reinforce that THEY ARE NOT TRUE – at least not anymore.  It’s a new world that many Americans haven’t yet accepted but after reading some Thomas Friedman economic reality books you will.  We’ve based our lives and major spending decisions like homes, cars and lifestyle on faulty assumptions.  On the plus side, we always spend less than we make and I’ve been putting away money for the kids’ college accounts for years, retirement, and we enjoy plenty of great life experiences.  However, many people with more discipline than us would have amassed a small fortune by now, while we let a lot of money slip away on questionable spending.  Here are some critical mistakes in financial assumptions I’ve made over the years and I’d interested in hearing about whether you find yourself in the same boat:

1. My Salary/Compensation Assumptions Were Shit …

Continue Reading: 6 Critical Financial Miscalculations I’ve Made – That You May Be Making as Well

Money in America, Part One

A romp through history

First there was the Spanish silver dollar

In colonial times, they used it as de facto money, as did many other places. Other specie was also commonly accepted. But the Spanish silver dollar was the most widely used coin in the colonies. It maintained a reputation as the most honest coin in the world from the 16th century to the 19th.

The early years also saw commodity money, beaver fur, wampum, fish, corn, rice and, most of all, tobacco.

Of course, as an outpost of the British empire, the official money was the British pound, based on a silver standard. Britain also coined gold, regulating its weight to silver ratio, effectively a bimetallic standard.

England also prohibited the colonies from minting coinage. Exporting of English coins was also prohibited – but that did not stop the colonies from obtaining them from other countries.

Fiat money raises its head

Massachusetts, in 1690, needing money to pay its soldiers for a raid on Quebec gone bad, could not raise the funds from Boston merchants. The quick fix was the issue of £7,000 of paper notes, with a promise to redeem in specie accrued from taxation. A year later, they printed £40,000 ‘for the ‘last time’.

No surprise, then, that the paper currency had depreciated by 40% against real money. The government’s answer was to enact a legal tender law.

The unintended but inevitable consequence was one more iteration of Gresham’s Law – Bad money drives out good.

Specie disappeared from the colony. Prices went up, exports declined.

Proving that no idea cannot be repeated, by 1711, Connecticut and Rhode Island had also issued paper money. In the two decades, about 20% more paper had been issued than the silver coinage, which had all but vanished from circulation.

Governmental response? Fines, confiscation of property (asset forfeiture is not new!) and imprisonment were the answers to people refusing fiat at par.

By 1750, all colonies had issued fiat paper, initiating an inflationary boom, followed by deflationary bust. Parliament had attempted to pull the colonies back to hard money and in 1764 required the retirement of paper. The usual doomsayers expected an “absence of money” and ruination of trade. The return of sound money actually enhanced trade, lower prices, more exports and inflow of specie.

As an amusing aside, Maryland issued new fiat in 1733 and distributed almost half of it to the people, to assure its acceptance. They didn’t have helicopters then but surely established the fallacy. Of course, the depreciation was quick.

Private banking in the colonies

The few that appeared in the early days did not last long, for various reasons. For instance, the Massachusetts Land Bank of 1740 issued irredeemible paper notes, and lending on real estate. Within six months, the public was refusing the fiat and Parliament outlawed it.

One wonders at the persistence of inflationary money. For the indebted, typically wealthy businessmen and land owners, a borrowed paper pound today can be paid back with interest in the same paper of less value tomorrow.

Nothing changes.

Money During the Revolution

When a war needs to be financed and the total money supply of the rebel colonies is but $12,000,000 (est.) the quick answer is more fiat! Thus, the irredeemable Continental was born. Initially promised to be retired in seven years by taxes from the states, the first issue in June, 1775, of $2 million had grown to $6 million by the end of the year. In five years, another $225 million had been added of fiat paper.

“Not worth a Continental” proved correct – by 1781, one silver dollar was worth 168 fiat paper notes.

Even worse, various states had issued their own paper money. A total of 210 million more depreciated dollars swelled the money supply.

When the Continental was not accepted by anyone, the Continental Army supplied itself by ‘paying’ with federal certificates, like it or not. Fortunately, when the dust settled, the state and federal governments rescinded taxing the citizens and all fiat vanished into oblivion.

Not precisely money were the Continental Congress issuance of ‘loan certificates’, some $600 million. Issued to pay for merchant supplies, these certificates became a type of currency but depreciated, one silver dollar worth 24 certificate dollars. Some were liquidated at depreciated rates but most became the federal debt.

This need not have happened, as natural attrition could have taken its course.

But no, Robert Morris, wealthy Philadelphia merchant – who had been Minister of Finance to the Continental Congress – had a plan: make the debt at par value to be repaid, principal and interest. This supported his advocacy for the taxing ability of Congress, a notion the Articles of Confederation had not allowed. A younger Alexander Hamilton had been his aide …

Morris introduced a bill to create the first commercial bank which also effectively would be a privately owned central bank. This scheme was chartered on December 31, 1781 by the Congress of the Confederation.

The Bank of North America

opened on January 7, 1782, not surprisingly headed by Robert Morris.

He deposited gold and silver coin of his own wealth, not enough to meet the charter requirements. Fortunately, and still also ‘treasurer’ of the Confederation, he undertook ‘loans’ from France and the Netherlands, of enough gold and silver to satisfy.

The Bank of North America was also set up as a fractional reserve operation and a monopoly to issue paper money. The first deposit account was the government itself, to which he loaned $1.2 million.

It only took a year of excess issuing of paper money – and depreciation – for people to lose confidence. Outside of Philadephia, their notes depreciated. Complaints of foreign influence and favoritism, and unfair practices added fuel to the fire.

The Bank of New York and Massachusetts Bank in Boston arrived in 1784.

Morris lost the central bank role in 1785 and ultimately became a private commercial bank with a charter from the state of Pennsylvania in 1787 .

A new nation, a new money

Custom is powerful – the term ‘dollar’ borne by the Spanish silver coin became the base unit of American money. The Continental Congress decided this in 1785, although the first American coinage was not struck until 1893.

Having had numerous bad experiences with unsupported fiat paper, the framers opted for a monetary system of intrinsic value. Enshrined in the Constitution:

  • Article 1, Section 8
  • 1. Coins; Weights; Measures
    To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures;

Also, Section 10 .1 unconditionally prohibited states from coining money … [nor]  make anything but gold and silver coin a tender in payment of debts …

In 1791, Secretary of the Treasury Alexander Hamilton submitted a Report on the Establishment of a Mint”. A year later, Congress passed the Coinage Act of 1792. This established the composition of gold and silver coins at a fixed ratio of 15-to-1, asserted both were legal tender, with the silver dollar and $10 gold eagle as the basic coinage.

Hamilton thought bimetallism a good idea at the time. Keeping both metals active should have increased the supply of money. Alas, Gresham’s Law prevailed – Mexican silver mining increased enough by 1810 to undervalue gold and gold coins virtually disappeared from American usage from then through 1834.

The fixed ratio in the Constitution had not taken into account market variations of the two metals.

The First Bank of the United States

Even before the ‘Mint Report’, Hamilton, who had always wanted a central bank, produced the “Report on a National Bank”. Congress chartered The First Bank of the United States in February 1791 for twenty years.

Hamilton’s real agenda was to initiate the role of paper money, claiming a scarcity of specie.

Showing that continuity and experience is important, Philadelphian Thomas Willing, who had been president of the Bank of North America, was appointed president of this new enterprise. Hamilton had planned a private institution but with the fig leaf of the government owning 20% of the shares.

The new bank’s notes were redeemable on demand and also acceptable for paying taxes. In practice, the operation was fractional reserve banking. Having issued millions of bank notes, and investing heavily in the government itself, the initial $2 million of capital was outmatched by the over $6 million of notes.

Needless to say, monetary inflation unleashed a 72% rise in prices within five years. Eighteen new banks arose in this period.

Enter a Constitutional crisis. In this corner we have Hamilton and the Federalists; adversaries, the Jeffersonian faction. Ultimately, McCulloch v. Maryland before the Supreme Court was ruled in favor of the Hamilton interpretation, ‘implied powers’.

But where did the money come from? a child of the 21st century might ask. All she’s known is Federal Reserve notes, and unlikely to have ever seen a silver certificate,

The real money, of course, was the gold and silver coins made by the mint. State banks were chartered and, in the fractional-reserve mode, were required to keep a certain amount of gold and silver on hand to redeem their paper notes when customers wanted real money.

By 1811, there were 117 state banks. Their combined reserve ratio had fallen to 0.23 due to expansion of easy credit. The recharter bill in Congress that year failed by one vote in the House and one in the Senate.

By 1815, the number of state banks had about doubled. So had their issue of unsupported paper. When New England banks demanded in 1814 that the other banks redeem their notes, the U.S. Government recognized those banks were insolvent in real money terms and allowed them to waive the contractual requirement.

The War of 1812 had been a factor in bank expansion and loose credit and now, de facto fiat paper, which lasted until early 1817.

The Second Bank of the United States

Third time lucky?

As we have seen, the love of an inflationary policy and subsequent depreciation of fiat recurs repeatedly. At this point in time, 232 banks played that game. Rather than bring them to heel, yet another ‘central bank’, the Second Bank of the United States began operation in January, 1817.

Similar to the predecessor, with one-fifth of the shares of this private bank owned by the federal government, this Second Bank enabled the state banks with immediate issuance of easy credit. Its bank notes were redeemable in specie and the notes were effective legal by way of being accepted by the federal government for the paying of taxes.

In practice, however, irredeemable state bank notes continued to circulate and attempts by the Second Bank to ask for specie was countered by ‘hardship’.

In two-and-a-half years of operation the Second Bank held $2.36 million in specie against an issuance of $19.2 million increase of the national money supply. Repeated fraud at two of its branches and no control of distant state banks, continuing their easy credit inflationary policy, led to the Panic of 1819-21. Unintended consequences of loose money reaped the inevitable crisis: rising unemployment, bank failures, mortgages foreclosed, investment, particularly in the western states all but ceased, and trade diminished.

Property values fell as much as half in some areas. The first urban poverty crisis saw debtor’s prison for some; soup kitchens; an estimated one million jobless; charity drives for clothes, shoes, and food; perhaps one-third of the national population of 9 million disadvantaged. Almost everyone blamed the banks. The southrons criticized protective tariffs. They and those of the western states complained about the Second Bank’s money tighterning.

One popular refrain was the ‘high cost of government’ and people demanded reduced state and federal budgets.

The outcome of economic depression led to the development of a new Democratic Party in the mid 1820s. Elderly Thomas Jefferson was onboard for the agenda of restoring sound money, minimal government-backed economics, paying off the national debt, and ultimately anticipating the ending of fraction-reserve banking. Others included Martin van Buren, old-line Virginians, Thomas Hart Benton of Missouri and Andrew Jackson.

Jackson won the election of 1828 and the first step was to attack the Second Bank, considered the initial source of inflation.

“Old Hickory” had won the presidency with a significant popular vote, a true man of the people. In his annual message to Congress in 1829, he declared his intentions toward the Second Bank. The battle lines were drawn. Nichola Biddle, head of the bank, and his attorneys Henry Clay and Daniel Webster, pushed a confrontation in 1831 to derail Jackson’s re-election campaign.

By insisting on an early re-charter, and getting a passing vote in Congress, followed by Jackson’s veto, their plan failed when Congress would not pass said bill over the veto.

Jackson had told Martin van Buren, “The bank is trying to kill me but I will kill it.”

The 1832 election confirmed Jackson’s position with another strong popular vote. It was the people and their president against the bank.

The Second Bank, having been structured like its predecessor, had the 20% public Treasury deposits there in. In 1833, Jackson removed the government money and spread it around to a number of private banks. His adversaries claimed this would produce inflation. The facts are, however, the record of the Second Bank repeated earlier excesses. Biddle’s Second Bank had already created more than enough inflation: the total money supply had nearly doubled in only a few years.

Although wholesale prices had remained relatively steady, this is explained by rising productivity.

Biddle’s Second Bank, having lost its mojo, ended up in 1836 getting a charter from the state of Pennsylvania.

In his second term, Jackson did fail in the goal of ending fractional-reserve banking. Even more significant, however, is that he paid off the national debt. Remember, the debt of the states after the Revolutionary War had become part of that national debt – and had been growing. The amounts due were withdrawn from the Second Bank and pro-rata distributed to the respective states.

A Generation of Monetary Experimentation

Martin van Buren succeeded Jackson in the presidency, and continued their agenda. He proposed an Independent Treasury early in 1837. although it did not pass until 1840. This sound money plan lasted until the Civil War.

The plan as accepted then made the national Treasury totally independent of the banks – it held specie in its own vaults for payment of trade debts and so on. A legal tender clause mandating specie payment was also included; public opinion against this was bipartisan. People always like easy money … and this was one of the reasons van Buren became a one-term president.

The expansion of the money supply in the 1830s stalled due to several factors. The Bank of England, confronted with inflation and the outflow of gold, raised interest rates, tightening its money supply. The resulting credit crunch impacted on American cotton exports; also, export of silver to China (due to that country’s shift to buying opium – a story for another day) dropped.

With trade affected, the Panic of 1837 ensued but ended by 1838 when Bank of England changed policy. Cotton prices rose again,

Meanwhile, state governments exacerbated the 1838 boom by spendthrift projects – “internal improvements” – due to the distribution of federal money in paying off the national debt.

Not only did they spend the unexpected payout, they borrowed and borrowed for more public works!

No one would be surprised that 1839 ushered in a crisis that lasted four more years of deflation overall. Foolish banks failed, uneconomic state projects died. Polk’s Whig administration, having succeeded Martin van Buren’s, elected to bail out the various states in danger of default.

Default in this era of course, was inability to pay gold and silver on demand from customers losing all confidence in fractional-reserve paper.

The Democratic Party continued to support hard-money principles of the Jacksonian persuasion; the Whigs countered with support for easy credit, especially in states issuing bonds. Banks eagerly bought this government, using it to expand their money supply. This in turn expanded the issue of state bonds, debt! States connived in this quid pro quo by permitting suspension of specie redemption and also legal tender laws accepting bank notes for taxes.

The Whigs were also active in various schemes and were fond of state usury laws, leading to more easy credit. Inflation and speculation grew.

The bimetallism trap

To compound money problems, the gold rush in California and new gold from Russia and Australia upset the gold-silver ratio in 1850. With gold cheaper in the market, silver dollars gained around 4-5 percent of true value and thus virtually vanished into arbitrage land. The only silver coinage left in U.S. Circulation were ‘junk silver’, worn Spanish and Mexican coins.

Congress reacted to the problem in 1853, keeping a Constitutional aspect of bimetallism but with a de facto gold standard and debased silver coinage. The silver quarter-dollar began minting and became popular.

By 1857, Congress outlawed the use of foreign coins. That year also saw a Panic due to the usual suspects, inflating money supply and states waiving specie redeeming.

The Civil War and Beyond

Suppose they gave a war and nobody could afford it? That’s the usual case, examples littered history. Lincoln had precedent for issuing an irredeemable currency, the Greenback. During the War of 1812 period, for two-and-a-half years, state and federal government suspended specie payment.

Banks loved this – they could inflate the money supply like there was no tomorrow.

More significantly, the federal government initiated use of greenbacks by outlaw new issue of state bank notes. And the Treasury offered a $150 million bond issue, expecting the state banks to subscribe and pay in specie – but they did not have the gold. ‘Sauce for the goose’, as it were and the Treasury suspended specie payment on its notes. By February, 1862, the Treasury issued the first Greenbacks. And they were declared legal tender.

From 1861’s federal expense of $66 million to $1.3 billion four years later.

To no one’s surprise, save the government experts, the greenbacks depreciated rapidly. Various interventions were tried, Treasury Secretary Chase even sold $11 million of gold bullion to lower the gold premium of greenbacks. The market barely noticed. Then he attempted a foreign exchange effort to lower the British pound to dollar ratio. Fail.

Like beating a dead horse into glue, the last manuever was to forbid gold futures contracts and regulate brokerage sales of gold and speculation. All Chase’s gold legislation succeeded in doing was to drive the value of the greenback further down, ultimately to forty cents in June, 1864.

Congress repealed this legislative mistake at the end of the month – and Secretary Chase found himself replaced.

During the war years, fiat experimentation even affected coinage. Silver coins left the country for better value elsewhere. The ignominy of a debased bronze penny appeared in 1864 also, all better coins had been exported.

The first federal income tax!

To supplement monetary magic, Lincoln signed on August 5, 1861, the first federal income tax law , the Revenue Act. A flat tax of three percent on annual income over $800 was imposed. The wording was carefully chosen to skirt around the Constitution’s limitation on a direct tax.

Proving that no bad idea cannot be improved, the Revenue Act of 1862 was progressive – three percent at $600 income and five over $10,000. This act also was intended to cease in 1866.

Not content with that, Lincoln also imposed additional sales and excise taxes as well as estate taxes. War is expensive! The income tax was finally repealed in 1872.

***

Part Two will continue with the inflationary games bankers play. And more.

Thoughts on a Modern Revolution

Part I.  Why it won’t come easy…

Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

–United States Declaration of Independence

There seems to be a division of thinking when it comes to the 1% vs everybody else.  Many people seem to think that their extreme advantage of resources, the power inherent in the existing structure, and the technology they have access to will ensure their continued dominance.  Others argue that because they are outnumbered 99 to 1 they can only maintain their control if the 99% remain compliant.  While I favor the latter view, questions remain: what percent need to resist in order for the existing power structure to be overthrown?   How does the average citizen overcome the massive advantages available to the existing authority?  Can this be accomplished with peaceful means, or will the conflict escalate into violence?  What does history teach us to expect in the resolution of this crisis?  If the existing structure is torn down, will it be replaced by something better or something worse?

In part 1 of this series, we will investigate the strength of the existing authority, and the inherent advantages that the authority holds over the average citizen who would consider resistance.  In part 2, we will look at the inherent strengths that the average citizen has in resisting the existing authority.  In part 3 we will look at some of the various methods and strategies that the resistance can pursue.  And in part 4 we will try to draw some conclusions about the path this crisis phase will take and what history teaches us to expect.

This is not authoritative commentary.  This is simply my observation and analysis of the challenges and opportunities that exist to the citizens that are contemplating resistance in an effort to restore the existing government to its constitutional origins or to another form entirely.  I welcome your commentary, perspective and wisdom in this study.

Let us look at the various ways in which the 1% are able to maintain their power.  First of all is momentum.  It is human nature to resist major changes.  Sure we like to change to the next new iPhone, but when it comes to major aspects of how we perceive our role in everyday life we ignore, deride, ridicule, or directly oppose both the change as well as those who are advocating it.  For that reason most of the major changes we have witnessed in our lifetimes are a result of tiny, seemingly insignificant changes that incrementally alter the way things are.  Freedom, taxation and legislation have all incrementally mutated from emancipated, transparent and accessible to incarcerated, opaque and ϋber statutory.

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It takes a major shock to convince people that a change is worthy of the effort required to enact it.  Normalcy bias, fear, laziness, and ambivalence all fight to keep things the way they are.  Our overall wealth as a society and the extreme amount of “assistance” given over to what has become a large percentage of the population—the disabled, unemployed, and derelict—have insulated us by and large from hardships that have driven other populations around the world to protest, resistance, and violence.  Our poor are not starving; they are obese.  Our unemployed are not desperate; they are better off with their benefits than with a job.  More people are added to the rolls of the disabled every day by the expansion of the definition of disabled, and by the fact that in many cases they can receive more income while doing nothing productive (SNAP, medical, and direct payments) than they could earn with hard work.

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Because of the distortion created and enforced by the various entitlement programs at the federal, state, and local levels, we have witnessed dramatic increases in the numbers of participants in these programs.  In turn we have seen the tax revenues that support these programs that are paid through the work of productive citizens drop as more and more  people become net recipients of government funds and fewer and fewer people are net contributors.  This trend is clearly unsustainable; however, each new person added to the dole is another person that would have to vote for change that would negatively impact their immediate circumstances.  History suggests that very few people will be willing to support actions that would hurt their personal short term circumstances in favor of society’s long term prosperity.  The consequence of this dynamic is that there will be no slow, transitional wind down of these programs.  Instead these programs and the numbers of people involved will continue to grow until the programs fail catastrophically.  For that reason, it is my assessment that the growing pool of beneficiaries will not be a significant part of any anti-establishment movement, protest, or revolution.

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A contributing factor to the momentum of the establishment and the slow response of the average citizen is the lack of hardship and suffering he faces.  Very few people in the United States go hungry.  Very few people are denied medical care.  Very few people lack clean water, sleep without shelter, lack adequate clothing, have no access to education, can afford no entertainment, or have no access to sanitation.  We are by global comparison a very rich country, and even the poorest in this country live beyond the means of billions worldwide.  In short we all have quite a bit to lose, and that changes the riskiness of choosing to resist.

In my personal situation I have a wife and two children, I own a business that employs 14 people, I have property and investments (not a lot), I have 5 sisters, my mom and pop are living, and I have many close ties in my community.  If I choose to resist the government I put all of those people, all of my property, and all of my ties at risk.  I also put my life and health at risk.  I put my freedom at risk (such as it is).  In essence I put everything that is near and dear to me at risk, and that does (and should) enter into my decision to resist or to comply.

With our poorest tamed by the entitlements they would lose if they resist, the burden of resistance then falls upon a group of people with plenty to lose.  Their incentive is the awakening to the reality that not resisting may cost them all of the same things; however, the risk equation remains “if I resist I will risk all of my treasured people and possessions” vs. “if I resist I may risk all of my treasured people and possessions.”

Another significant factor in favor of maintaining control by the existing authority is force.  The establishment powers, whether behind the scenes (the bankers) or in full view (the politicians) have near complete capture of all the federal (the military, DHS, CIA, FBI, et al), the state (National Guard, SBI, State Troopers, et al) and local (sheriff, city police, et al) agencies.  While there is some question floating around the blogosphere about whether or not the members of those agencies will be willing to fire upon civilians history and recent events make it clear that at least the majority will comply with the orders they receive.  For the same reason that the average citizen is overwhelmed when thinking of how and when to resist authority, the front line soldier or officer is similarly daunted by thoughts of bucking the chain of command.  When you combine that with the very real threat of armed resistance, the possibility of significant violence cannot be ignored.

While any violence on the part of the agents of authority will likely escalate the overall level of resistance in the general population, it is certainly going to discourage any people who are caught up in the festival aspect of the resistance from continuing.  The real and present threat of violence and death is a great deterrent; it is not a coincidence that tyrannical governments across the globe and throughout history have made effective use of violence in putting down discontent.  While it will cement the resolve of the committed and work to increase the number of people who have suffered significant enough indignity and hardship to risk their lives, a large number of people will be too fearful to support the resistance and will in fact look to establish their own safety by actively helping the establishment root out the resistance.

Along with direct force there are force multipliers like air support, heavy weapons, command and control capabilities, control over the infrastructure, night vision and infrared tracking, satellite surveillance, the network of in place surveillance and traffic cameras, body armor, on-line intercepts of emails, phone taps, the ability to shut down transportation systems, forensic analysis, and training.  How does a single citizen cope with the myriad ways in which the governing authority can deploy massive resources and multiply their effectiveness?  When he realizes that he must join with others to pool resources and capabilities, how does he find or recruit his team without leaving a trace that will be detected by the government or co-opted to its benefit?  It is, to say the least, a daunting challenge.

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Non-defense government (federal, state, and local) consumption and gross investment as percentage of GDP, 1929-2008

Anyone who has ever gone on an extended hike in the wilderness has come face to face with the importance and the challenge of logistics.  Like a rocket that uses 90% of the fuel to lift the fuel that lifts the rocket into orbit, a hiker must carry more food to offset the extra energy expended by carrying a heavy load of food onto the trail.  Furthermore, any tools or materials he needs must be carried along if they cannot be fabricated or acquired along the way, so if the hiker has any desire to do much more than walk (eg. take pictures, drink, sleep, cook, or bandage a cut), he has to carry the means to do so along with him.

For that reason the modern day resistance movement will begin as a largely local phenomenon.  People cannot afford to deploy themselves to faraway places and risk their source of income and/or support the additional expense.  There will necessarily need to be help in the form of food, medicine, shelter, and materials above and beyond what the average resister will be able to provide, and that lifeline of support is easily constrained or severed by the power in authority.

Conversely the government in all of its forms and agencies has nearly unlimited resources (at least in the short to medium term) in the form of cash, supplies, transportation, and secure storage to support its activities.  It rules the air and roads and sea and rails, and it can deploy immense amounts of resources in a short period of time if needed.  Furthermore there is no opportunity for any single citizen to limit the reach and ability of the government to deploy those resources.  It is simply the case of only being able to stop one grain of sand in a landslide.

The powers that be also have complete authority and control over all of the major channels of communication.  They can manipulate, halt, or utilize all TV, radio (broadcast), newspaper, internet, radio (point to point), telephone, snail mail and satellite communications at will.  They can monitor, intercept, jam, encrypt or decrypt nearly any message that a modern day citizen can compose.  That leaves the resister the option of sending messages that are very difficult to hide and protect, or sending messages that travel at very slow speeds by off the grid methods.

Hand in hand with the ability to communicate is the ability to coordinate.  Existing agencies have command and control structures in place that allow orders from leadership to be executed quickly and reliably.  Those agencies have extensive practice and established methods for preserving their chain of command and those in the chain are well versed in the execution of the orders they receive.  The command structure is redundant and well insulated from the agents in the field of operations, and is virtually immune to any action on the part of the citizen that has chosen to resist.

That citizen in turn is working with other autonomous people and groups (if he is working with anyone at all) who’s participation is completely voluntary.  They may agree to carry out the requests he makes, but they may only agree to part of the action.  They may decide to change the time table.  They may decide to back out without notice.  Or they may become otherwise engaged and be limited in the sense of accountability they feel and/or be limited in their ability to communicate their change in direction.  It is very easy to take out the leadership since the leadership is also likely to be the operator in the field.  There is little or no redundancy, and there is little or no practice in cooperative action.  Furthermore the more cooperative and effective the group becomes, the more likely they are to become a target of strategic priority by the forces of the powers in place.

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The last major category of strength this analysis will address is financial.  Despite the overwhelming debt, the deficits, and the lack of solvency in the government at the federal, state, and local levels the fact remains that the financial powers can (and will) continue to create money to fund their activities.  There are many questions about whether or not this course of action is sustainable or effective; however, there is little doubt that it will continue.  The wealth of the United States is tremendous, and even though it is being steadily diluted by the devaluation of the dollar, there remains an enormous amount of wealth yet to dilute.  Consider that the total notional wealth of the United States is around $56T.  Even maintaining budget deficits that are funded by printing new dollars, it would take around 30 years to consume the wealth through the expansion of the currency.

Now I know that it is a good bit more complicated than that; however, the fact remains that there is massive wealth left that can be consumed.  Furthermore it is likely that the existing debt will be defaulted and wiped out.  While there are numerous disruptions inherent is such a scenario the government will be free of its encumbrances and will be able to continue to print new money (even if it is called something else or initially backed by other assets).  What this means is that for all practical purposes the government will remain unconstrained in its spending while the average citizen will be anything but.  More importantly, as the government creates more and more money, the wealth of the citizen will continue to decline further limiting him from saving or deploying his assets towards effective resistance even as the devaluation creates more and more people desperate enough to consider action.

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An average citizen faces an enormous, frightening and disheartening challenge if he chooses to resist; however, that has always been true throughout history when the brave and often tragic souls of the past have decided that enough was enough.  No government in world history has lasted very long; most have failed in a much shorter span than the United States has lasted.  Neither success nor failure is baked in the cake.  In the next part, we will look at the inherent strengths that the average citizen has in resisting the existing authority.

LLPOH’s Ruminations on Distribution of Wealth

Recently, I have been giving a lot of thought to the issue of wealth distribution, and consideration to whether or not the situation can be markedly improved. After much thought, I am reasonably convinced that there is little to be done to reverse the current distribution patterns, where the top 20% control around 88% of the nation’s wealth. Particularly, I am unable to see a way in which the wealth can be redistributed to the bottom half of population.

The factors that have contributed to my position include the following:

– The American middle class was largely built upon manufacturing. Manufacturing provided relatively well-paid jobs to a large number of unskilled and semi-skilled Americans. A large percentage of Americans had previously relied on low paid agricultural work. When the shift was made from an agrarian society to a manufacturing society, the middle class took off.

– Manufacturing employment has dwindled away markedly – jobs have been lost to low cost countries and as a result of technological development, and as a result of poor government decision-making and excess regulation.

– I do not see these jobs returning in bulk. There are some things that may happen around the fringe, but on the whole the ability of Americans to rely heavily on manufacturing to provide middle-class jobs has disappeared.

– I do not see any business sectors currently able to fill the void of middle-income jobs. There are some opportunities in the energy sector, in provision of educational services to the world, etc., but on the whole I do not believe that enough jobs will be created to offset the number of manufacturing jobs lost.

– Low-paid service sector jobs have replaced many of the more well-paid manufacturing jobs.

– Modern economies are tech driven and require considerable technical expertise

– The bottom half of economic society would have these basic characteristics (in general, where education levels attained correlate to intelligence and education attained correlates to income):
o A median IQ of around 89, and a top of 100
o Less than high school education

– My experience is that persons with IQs/education in this range are capable of menial or repetitive tasks, but cannot undertake tech jobs, operate high-tech equipment capably, be responsible for managing the quality of their own work, etc. As an example, these individuals are often unable to make change for a dollar without the use of a calculator or computer.

– The quality of the education that Americans receive is generally poor, and those in the bottom half are receiving an exceptionally poor education indeed.

So, looking at these factors, I simply cannot see large numbers of jobs to be created that will provide these people with work that will pay well enough to provide what we have come to understand as a middle class livelihood. The work available to them will largely be menial and very poorly paid. I simply see no other possibility. The result is that this group will be incapable of attaining a greater proportion of the nation’s wealth, and will be entirely dependent on capitalists to develop and provide employment.

So I then have considered the top half of the economic pool. At the upper end, the wealth is indeed highly concentrated. As an aside, I have no great problem with that. What I have a problem with is the extreme influence they have over the political system.

If these individuals were unable to influence the political process, then I believe a significant portion of their wealth might be redistributed. That is the good news. The bad news is that I believe that this wealth would make its way into the hands of the lesser wealthy – business owners, etc. I do not think that it would shift the balance of wealth outside of the hands of the top 10%. The top 1% would likely have somewhat less of the total wealth, but the top 10% would remain unchanged. That said, I think this is by far the best option, and needs to be implemented urgently.

Another option would be to “tax the rich” in one form or another. This might work. However, I expect that it would not redistribute wealth, but would rather tend to destroy it entirely. The rich would have less, and the receivers of the largesse would almost universally tend to spend the money and not create wealth, and in the end would be no better off. Additionally, there would be something of a disincentive created, which would result in reduced wealth creation over the long-term.

There may be other options re redistribution of wealth from the very wealthy, and I welcome thoughts on this. However, I do doubt that the redistribution would filter down to the bottom half of economic society.

With respect to those at the lower end of the top half, redistribution of wealth by elimination of the ability to wield political influence would greatly assist in economic mobility. People could start businesses, or grow existing business, without being hindered by influence peddlers. There would be some greater hope of attaining the American Dream.

In summation, I think that there are some issues which simply may be insurmountable. The combination of advanced technology and low-cost competition has created a situation where a significant proportion of the population will struggle mightily to earn a middle-class wage, given that they lack the skill and ability to thrive in such an economy. I truly hope that I am wrong in this, but I simply do not believe that the problem can be fixed.

QUOTE OF THE DAY

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

BAD MOON RISING

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

Creedence Clearwater Revival – Bad Moon Rising

 

“Human history seems logical in afterthought but a mystery in forethought.” – The Fourth Turning – Strauss & Howe

The above statement by historians William Strauss and Neil Howe is very significant as we try to make sense of the events unfolding before our very eyes in today’s world. On September 17, a mere six weeks ago, a few hundred young people showed up in Zucatti Park in Lower Manhattan to protest our corrupt, broken and Wall Street manipulated economic and political system. That first night, approximately 100 protestors occupied the park and were outnumbered by the NYPD in full riot gear. The idea to Occupy Wall Street began circulating on the internet in late August. The Millennial Generation used their social networks and put their tech savvy talents to work. Before long, thousands of protestors showed up in cities across the U.S. The model for this movement was the successful demonstrations in Egypt and Tunisia, earlier in the year.

 

The initial reaction among mainstream media and politicians across the land was bemusement. A bunch of young hippy throwbacks were going to make a meaningless statement and then fade away. The attention span of Americans is as long as the commercial break between contestants on Dancing With the Stars. Everyone knows the Millennials aren’t to be taken seriously. They are a bunch of spoiled, coddled, lazy college kids who need to get a job. But a funny thing happened during the commercial break. The kids held their ground. They didn’t leave. More young people arrived. More young people began protesting in cities across the country. Middle aged people began to get involved. Even some older people joined the cause. Before long there were thousands of people getting involved. It spread to Europe, with young people occupying London and Rome. Donations and supplies began to pour in from around the world. There’s something happening here, but what it is ain’t exactly clear.

The six weeks since September 17 have been chaotic, venomous, confusing, and verging on deadly. Wall Street gyrated wildly with stocks falling 8% by October 3 and rebounding by 15% by October 28 and plunging again this week. The Economic Cycle Research Institute (ECRI) declared the country was headed back into recession on September 30:

“It’s important to understand that recession doesn’t mean a bad economy – we’ve had that for years now. It means an economy that keeps worsening, because it’s locked into a vicious cycle. It means that the jobless rate, already above 9%, will go much higher, and the federal budget deficit, already above a trillion dollars, will soar. Here’s what ECRI’s recession call really says: if you think this is a bad economy, you haven’t seen anything yet. And that has profound implications for both Main Street and Wall Street.”

The ECRI has called the last three recessions with no instances of false alarms. Last week, the Conference Board announced the Consumer Confidence Index plummeted to two and a half year low of 39.8, last seen in March of 2009. The Dow Jones was trading at 6,500 in March 2009, some 47% below today’s level. It is an interesting dichotomy between how the average American feels about the world and how the Wall Street elite feel about their Ben Bernanke sheltered world. The Consumer Confidence Index was 110 in 2007 and 140 in early 2001. We’ve come a long way baby.

During these past six weeks the European Union has teetered on the verge of disintegration. Non-stop negotiations, agreements, plans, declarations, special purpose vehicles, bailout funds, and lies have poured forth on a daily basis. Greece still lives – on a ventilator – as it has been brain dead for months. The sole purpose of all the public relations efforts, press conferences, summit meetings and lies has been to keep European banks, their stockholders and bondholders from accepting the consequences of their irresponsible lending to the PIIGS. Essentially, the German people have been put on the hook for losses that should have been born by the stockholders and bondholders of the biggest French, German, Belgian and English banks. The EU has put a tourniquet over a cancerous tumor. The entire world is awash in bad debt and until this debt is liquidated, we will stagger from crisis to crisis like a drunken sailor. John Hussman describes the master plan:

In effect, European leaders have announced “We have agreed to solve our debt problem, leveraging money we do not have, to create a fund, which will then borrow several times that amount, in order to buy enormous amounts of new debt that we will need to issue.”

As politicians and central bankers around the world desperately try to keep their debt drenched ponzi scheme going for awhile longer, the mood darkens among the populations of developed countries around the world. I came across a quote from, of all people, Vladimir Lenin that describes how the last six weeks seemed to me: 

“There are decades where nothing happens; and there are weeks where decades happen.”

It seems like history is accelerating. Momentous events have been occurring regularly since 2007. Our political and financial leaders are blindsided on a daily basis by each new crisis. The majority of the American public continues to be apathetic, willfully ignorant, and constantly absorbed by their array of electronic gadgets and mindless drivel spewed at them by media conglomerates. Rather than think critically, most Americans allow left wing and right wing mainstream media to formulate their opinions for them through their propaganda and misinformation operations. Linear thinkers, who make up the majority of the political, social, media and financial elite in this country, believe the world progresses and moves ever forward. In reality, the world operates in a cyclical fashion, with generations throughout history reacting to events in a predictable manner based upon their stage in life. The reason the world has turned so chaotic, angry and fraught with danger since 2007 is because we have entered another Fourth Turning. Strauss & Howe have been able to document a fourfold cycle of generational types and recurring mood eras in American history back 500 years. They have also documented the same phenomenon in other countries.

The housing collapse, near meltdown of our financial system, revolutions in the Middle East, economic turmoil in Europe, poisoned political atmosphere in Washington DC, and most recently the Occupy Wall Street movement are part of a larger cycle. The four living generations have each entered the phases of their lives that will lead to a convulsive upheaval and destruction of the existing social order. We’ve entered a twenty year period of Crisis as described by Strauss & Howe:

“A CRISIS arises in response to sudden threats that previously would have been ignored or deferred, but which are now perceived as dire. Great worldly perils boil off the clutter and complexity of life, leaving behind one simple imperative: The society must prevail. This requires a solid public consensus, aggressive institutions, and personal sacrifice. People support new efforts to wield public authority, whose perceived successes soon justify more of the same. Government governs, community obstacles are removed, and laws and customs that resisted change for decades are swiftly shunted aside. A grim preoccupation with civic peril causes spiritual curiosity to decline. Public order tightens, private risk-taking abates, and crime and substance abuse decline. Families strengthen, gender distinctions widen, and child-rearing reaches a smothering degree of protection and structure. The young focus their energy on worldly achievements, leaving values in the hands of the old. Wars are fought with fury and for maximum result.” – Strauss & Howe

History is Cyclical, not Linear

“There is a mysterious cycle in human events. To some generations much is given. Of other generations much is expected. This generation of Americans has a rendezvous with destiny.” – Franklin Delano Roosevelt  

  

I’ve been trying to decipher which direction this Fourth Turning will lead, and the last six weeks has started to crystallize my thinking. I’ve been fascinated by the intense reactions, opinions and arguments that have taken place across the airwaves and internet regarding the true nature of the Occupy movement. Some of the reaction is based upon pure ideological grounds, with media outlets like Fox News, the Wall Street Journal, NY Post and CNBC, disparaging, ridiculing and demeaning the movement. The anti-rich tone of the protests may not sit well with the multi-billionaire owners (Rupert Murdoch, Mort Zuckerman, Roberts Family) of these mega-media corporations. The liberal media such as MSNBC, Huffington Post, and CNN have sometimes been fawning over the movement in an effort to co-opt it into liberal Tea Party for the benefit of Obama and the Democratic Party. The propaganda and misinformation coming from both these ideological camps is easy to discern for a critical thinking person. Sadly, the nation is filled with people that don’t want to think. Therefore, they let their opinions be formed by talking heads on a TV screen.

These reactions were predictable. What caught my attention was the generational reaction to Occupy Wall Street. I know all the rugged individualists out there chafe at being lumped into a generational cohort, but the fact remains that groups of people born during the same time frame encounter key historical events and social trends while occupying the same phase of life. Because members of a generation are molded in lasting ways by the eras they encounter as children and young adults, they also tend to share certain common beliefs and behaviors. Aware of the experiences and traits that they share with their peers, members of a generation also tend to share a sense of common perceived membership in that generation. To deny the reality that large clusters of human beings tend to act with a herd mentality is contrary to all visible evidence. The herd mentality can be observed in the Dot-com bubble, Americans unquestioningly allowing passage of the Patriot Act, the housing bubble, the mass hysteria over the latest iSomething, Black Friday riots at retail stores to obtain the “hottest” toy or gadget, and the slaves to the latest fashions and trends as directed by the corporate media machine. The masses don’t realize they are being manipulated by the few who understand the power of propaganda:

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

The Occupy movement is being driven by the Millennial Generation. They have used their superior technological and social networking skills to organize, educate, and inspire people to their cause while befuddling and confusing the authorities. They continue to rally more young people to their fight against Wall Street and K Street tyranny. The generational lines of battle are being drawn. The Baby Boom Generation, who is at the point of maximum power in society, fears this movement. They control Wall Street, corporate America, Congress, the courts, academia and the media. They have reached their peak of influence and power, which will rapidly wane over the next fifteen years. They see the Occupy movement as a threat to their supremacy and control of the system. The cynical, alienated, pragmatic Generation X is caught between the Boomers and the Millennials in this escalating conflict. It is likely the majority of this generation will side with the Millennials, realizing the future of the country depends on them and not the elderly Boomers. To clarify, not every Boomer, Gen Xer, or Millennial will act in concert with their generational cohort. But it doesn’t matter if a few cattle stray from the herd, when the herd is stampeding in one direction.

The chart below details the Strauss & Howe configuration of generations and turnings for the last two Saeculums in American history. They describe their generational theory in the following terms:

“Turnings last about 20 years and always arrive in the same order. Four of them make up the cycle of history, which is about the length of a long human life. The first turning is a High, a period of confident expansion as a new order becomes established after the old has been dismantled. Next comes an Awakening, a time of rebellion against the now-established order, when spiritual exploration becomes the norm. Then comes an Unraveling, an increasingly troubled era of strong individualism that surmounts increasingly fragmented institutions. Last comes the Fourth Turning, an era of upheaval, a Crisis in which society redefines its very nature and purpose.” – Strauss & Howe

Each new generation is born approximately three years prior to the next turning. This results in Strauss & Howe having a slightly different generational grouping than government demographers.

Great Power Saeculum (82)
Missionary Generation Prophet (Idealist) 1860–1882 (22) High: Reconstruction/Gilded Age
Lost Generation Nomad (Reactive) 1883–1900 (17) Awakening: Missionary Awakening
G.I. Generation Hero (Civic) 1901–1924 (23) Unraveling: World War I/Prohibition
Silent Generation Artist (Adaptive) 1925–1942 (17) Crisis: Great Depression/World War II
Millennial Saeculum (67+)
(Baby) Boom Generation Prophet (Idealist) 1943–1960 (17) High: Superpower America
13th Generation Nomad (Reactive) 1961–1981 (20) Awakening: Consciousness Revolution
(a.k.a Generation X)
Millennial Generation(Generation Y) Hero (Civic) 1982–2004 (22) Unraveling: Culture Wars, Postmodernism, Digital Technology
New Silent Generation (Generation Z) Artist (Adaptive) 2004–present (6+) Crisis: Great Recession, War on Terror, Declining Superpower, and Globalization

There is nothing mystical about their theory. Strauss & Howe are historians who have created a framework for understanding why people act a certain way to events differently, depending on which stage of life they occupy. The theory is so logical because it is based upon the average 80 year life cycle of a human being. A human being goes through four stages during their life: childhood, young adulthood, midlife, and elderhood. During each of these stages, you will react to the same event in a very different manner. During an 80 year cycle, there will be four generations at different stages of their life. The interaction between the generations at each 20 year turning determines how history is steered through the events of that cycle. The life cycle stages can be seen in this chart:

  Prophet Nomad Hero Artist
High Childhood Elderhood Midlife Young Adult
Awakening Young Adult Childhood Elderhood Midlife
Unraveling Midlife Young Adult Childhood Elderhood
Crisis Elderhood Midlife Young Adult Childhood

Strauss and Howe compare the saecular rhythm to the seasons of the year, which inevitably occur in the same order, but with slightly varying timing. Just as winter may come sooner or later, and be more or less severe in any given year, the same is true of a Fourth Turning in any given Saeculum. The theory does not predict the events which drive history, but it does predict the generational reaction to events depending upon their age. We entered the Fourth Turning Crisis in 2007 with the housing collapse and the implosion of our financial system. The configuration of elder self righteous Boomers at 60 years old, midlife pessimistic Gen Xers at 40 years old, and coming of age Millennials at 20 years old is an explosive mixture that will provide the impetus and fury to this period of catharsis and pain. Winter has arrived. There is no way to avoid it. The bitter winds have begun to blow. The first harsh front arrived in 2008 with the near meltdown of the worldwide economic system. There has been a lull in the biting gale force winds of this Crisis through the shoveling of massive amounts of newly created debt into a system already drowning in debt. The Occupy movement and the impending collapse of the European Union charade will usher in the next blizzard of pain and suffering. We hurdle towards are rendezvous with destiny.

“The ‘spirit of America’ comes once a saeculum, only through what the ancients called ekpyrosis, nature’s fiery moment of death and discontinuity.  History’s periodic eras of Crisis combust the old social order and give birth to a new. A Fourth Turning is a solstice era of maximum darkness, in which the supply of social order is still falling—but the demand for order is now rising.  It is the saeculum’s hibernal, its time of trial. Nature exacts its fatal payment and pitilessly sorts out the survivors and the doomed.  Pleasures recede, tempests hurt, pretense is exposed, and toughness rewarded—all in a season.” – Strauss & Howe

Millennials Rising

Over the last six weeks I’ve watched as the young protestors around the country have been called: filthy hippies, losers, lazy, coddled, socialists, communists, spoiled college kids, parasites, useful idiots, and tools of the left. Most of the wrath being heaped upon these young people for exercising their Constitutional right to free speech and freedom of assembly has been from the Baby Boom Generation, who are at the peak of their power in our society. Sixty percent of the Senate is made up of Baby Boomers, with the next closest generation being the Silent Generation with twenty five percent. Over 58% of the House of Representatives is made up of Baby Boomers, with the next closest generation being Gen Xers at 27%. They occupy the executive suites of the Wall Street banks (Blankfein, Dimon, Pandit, Monihan) and the Federal Reserve (Bernanke). They make up the majority of judges, local politicians and school boards. They run the Federal government agencies. And they dominate the airwaves as the high priced mouthpieces for their corporate bosses. This Prophet generation will lead the country through the trials and tribulations of this Fourth Turning.

The disdain and contempt for these Millennial protestors flies in the face of the facts about this generation. They use drugs at a lower rate than their parents did at the same age. Teen crime rates and teen pregnancies have declined. They will have the highest level of college education in U.S. history. They were protected during their youth as organized sports taught them teamwork. They are the most technologically savvy generation in history. They volunteer at a higher level than previous generations. They have been more upbeat and engaged than their predecessors (Gen X). And they are much closer to their parents than Boomers were at the same age. They reject the negativism and cynicism of their parents and believe positive change is possible in our society. They have shown respect for authority up until the last six weeks. They were primed to be led by Boomers that could articulate a positive vision of the future based on reality and a better tomorrow. They were ready to make sacrifices in order to create a brighter future. But a funny thing happened. The Boomer generation failed to deliver on their part of the bargain.

Prior Hero Generation Americans had braved the winter at Valley Forge and stormed the beaches of Normandy as Prophet leaders like Ben Franklin and Franklin Roosevelt provided inspirational guidance and the vision of a better tomorrow. Strauss & Howe accurately assessed the Millennial Generation in their book Millennials Rising: The Next Great Generation, published in 2000 when the 1st Millennials were graduating high school:

“As a group, Millennials are unlike any other youth generation in living memory. They are more numerous, more affluent, better educated, and more ethnically diverse. More important, they are beginning to manifest a wide array of positive social habits that older Americans no longer associate with youth, including a new focus on teamwork, achievement, modesty and good conduct. Only a few years from now, this can-do youth revolution will overwhelm the cynics and pessimists … will entirely recast the image of youth from downbeat and alienated to upbeat and engaged — with potentially seismic consequences for America.” – Strauss & Howe

The youth of America listened to their parents and stayed in school. They’ve racked up over $1 trillion in student loan debt getting college educations. Meanwhile, our Baby Boomer leadership had an opportunity to address the country’s unsustainable fiscal path by accepting the consequences of a thirty year debt binge and liquidating the banks that took extreme risks with extreme leverage. An orderly liquidation (aka Washington Mutual) would have punished the stockholders, bondholders and management of the Wall Street banks, while leaving the depositors whole and purging the system of debt that can never be paid off. Our politicians could have ended our wars of choice in the Middle East and cut our war spending by hundreds of billions without sacrificing one iota of safety for the American people. The political leadership could have put the country on a deficit reduction path that would have insured the long-term viability of our republic.

Instead of doing the right thing, our Baby Boomer leaders did the exact opposite of the right thing. They held the American taxpayer hostage and absconded with trillions of their tax dollars and handed it over to the same Wall Street banks that had run the largest fraud scheme in world history and blew up the worldwide financial system. The Boomer Chairman of the Federal Reserve decided to not only save the Wall Street banks but to purposefully try to pump up the stock market, while destroying the lives of savers and senior citizens with his zero interest rate policy. His policies have led to a surge in energy and food prices and contributed to revolutions in the Middle East. The Wall Street banks have used the accounting gimmick of relieving loan loss reserves to create fake profits over the last two years. Wall Street celebrated by paying themselves $60 billion in bonuses between 2008 and 2010. The poster boys for the .1% Jamie Dimon and Lloyd Blankfein “earned” $23 million and $19 million respectively in 2010.

The politicians borrowed trillions from future unborn generations to inflict a Keynesian nightmare of solutions on the American economy that included: an $800 billion porkulus program, $22 billion pissed down the toilet on a homebuyer tax credit as home prices are now lower, $3 billion for Cash for Clunkers that cost $24,000 per car sold, loan modification schemes, tax credits for windows, doors and appliances, and payroll tax cuts. The result of all the Federal Reserve and politician “solutions” has been to increase the National Debt by $5.3 trillion in three years, a 55% increase. It took the country over 200 years to accumulate the first $5.3 trillion in debt. Everything done thus far has benefitted only the top 1%. The real unemployment rate is 23%. The real inflation rate is between 5% and 10%. The economy is headed back into recession. But at least the top 1% are doing well, as the stock market has risen 84% from its 2009 lows. Somehow, the oligarchy that runs this country is taken aback by the protests growing increasingly contentious across the country. It is not a surprise to those who understand the cyclical nature of history and the darkening mood in this country, which has been deepening since the Tea Party protests of 2009.

Hope You Are Quite Prepared To Die

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

Creedence Clearwater Revival – Bad Moon Rising

  

It seems the young people in this country have realized they have no future when the system is run for the benefit of an oligarchy consisting of Wall Street banks, mega-corporations, media conglomerates, and puppet politicians in Washington D.C. These people will stop at nothing to retain their wealth and power. Not only do they want to retain it, they are actively trying to increase it. They have achieved their goal beyond all expectations, and are still able to convince a large portion of the population through their propaganda machine they deserve every penny. The chasm between the “Haves” and “Have Nots” has never been greater in U.S. history. The truth is that Americans have always admired entrepreneurs like Steve Jobs and Bill Gates who created businesses, created jobs, and ended up with vast wealth. But, that is not the wealth protestors on Wall Street and across the country are angry about. They are angry at the hyper-concentration of wealth in the hands of men that have rigged the system in their favor through bribery (lobbying & contributions), fraud (no-doc loans & AAA rated toxic derivatives), accounting schemes (special purpose vehicles & suspending mark to market) and holding the American middle class hostage (TARP & zero interest rates). When the 400 wealthiest Americans own more than the “lower” 150 million Americans put together, you have a system that is badly broken.

Do the Millennials have a right to be angry? The table below shows how the economic solutions of the oligarchy have worked out for the youth of our country. There are 19 million young people between the ages of 18 and 29 that are not working. Some are still in college, but most are not. That is a lot of potential Occupiers.

Age Group %  not employed
18 to 19 65%
20 to 24 40%
25 to 29 27%

After observing the reactions to the OWS movement over the last few weeks, I’m more convinced than ever that different generations view the same event through the prism of their own life experiences, beliefs, prejudices, and biases. I’ve found the Baby Boomers have generally been doubtful of the protestors’ motives, condescending towards their intelligence, scornful about their appearance, and derogatory regarding their flaunting of authority. This is fascinating considering that Boomers love to reminisce about their glory days protesting the Vietnam War. The Boomer generation was at this same age configuration in 1970. Their GI Generation parents probably had the same opinions about the long haired, drug using, sex crazed youthful Boomers in 1970. Now the Boomers are the establishment and they don’t like seeing their authority challenged by these naïve troublemakers. Strauss & Howe saw the likelihood of this conflict back in 1997 when the oldest Millennials were only 15 years old:

“When young adults encounter leaders who cling to the old regime (and who keep propping up senior benefit programs that will by then be busting the budget), they will not tune out, 13er-style. Instead they will get busy working to defeat or overcome their adversaries. Their success will lead some older critics to perceive real danger in a rising generation perceived as capable but naïve.” –  Strauss & Howe

The Millennials spearheading these protests are most certainly capable. In a matter of six weeks they have created a worldwide movement occupying every major city in the world. The biggest complaints coming from the Boomers is they are naïve, misguided, immature, and don’t understand the real problem. The bitter condemnation of the protestors for breaking a myriad of minor administrative laws, regulations, ordinances, and curfews is beyond laughable. Fox News, CNBC, the Wall Street Journal, NY Post and the other mouthpieces of the ruling oligarchy are apoplectic about the young protestors camping out in public parks, but they were not too concerned by the Wall Street banks systematically defrauding millions of people by creating mortgage products designed to deceive.

They weren’t irate when Wall Street held Congress hostage for a $700 billion ransom. They weren’t enraged when Ben Bernanke bought a trillion dollars of toxic mortgage debt from the Wall Street banks at 100 cents on the dollar. They weren’t furious when the government officials forced the FASB to abandon mark to market rules, allowing the Wall Street banks to falsely report their financial statements. But, they are outraged by young people exercising their right to free speech and right to assembly. When their paid armies of thugs attack the protestors with tear gas and billy clubs, they declare the protestors had it coming. It seems the 150 year old American tradition of civil disobedience to protest unjust laws, defined by Henry David Thoreau, is not too popular among Boomers or the corporate mainstream media.

“Unjust laws exist: shall we be content to obey them, or shall we endeavor to amend them, and obey them until we have succeeded, or shall we transgress them at once?” –  Henry David Thoreau 

Many of the protestors are naïve, misinformed about the true causes of the financial crisis, impulsive, and seeking solutions that would result in more government control. Their critics say they should be in Washington DC, not on Wall Street. The Boomers don’t like their flaunting of rules and regulations imposed by local authorities. Again, the older generations have conveniently forgotten how naïve, impulsive and rebellious they were at the age of 20. The amazing thing to me is this generation never showed this side during their younger years. Their slogans like “Tax the Rich” are misguided. They need assistance from older generations, but instead they are getting beaten and arrested by the older generation. Some Boomers, like William Black, have opened a dialogue with the protestors, but the majority of Boomers are resistant to the movement. In prior Fourth Turnings, the Hero archetype followed the orders of the Prophet archetype. I fear the Boomer Generation, through their intransigence and refusal to proactively address our structural problems, have set in motion a revolutionary chain of events that will lead to class warfare and possibly civil war in this country. The real danger, as experienced in other countries (France, Russia, China), is that a demagogue could gain control. Strauss & Howe envisioned that possibility in 1997:

“This youthful hunger for social discipline and centralized authority could lead Millenial youth brigades to lend mass to dangerous demagogues. The risk of class warfare will be especially grave if the 20% of Millenials who were poor as children (50% in the inner cities) come of age seeing their peer-bonded paths to generational progress blocked by elder inertia. Unraveling era adults who are today chilled by school uniforms will be truly frightened by the Millennials’ Crisis-era collectivism.” –  Strauss & Howe

The most outrageous accusation made against the protestors is they are somehow responsible for their current plight. The Boomers declare they are spoiled kids who need to get a job. A critical thinking analysis of the Millennial Generation demographics reveals how ridiculous it is for Boomers to blame Millennials in any way for our current economic debacle. There are 97 million Millennials and 54 million of them are under the age of 20. Another 21 million are between the ages of 20 and 24, barely getting started in the real world. Only 39 million of them were eligible to even vote in the last Presidential election. It should be clear to even the most dense CNBC anchor that the young people protesting in the streets are not to blame for the raping and pillaging of the U.S. economic system by the barbarians on Wall Street over the last thirty years, with the consent and encouragement of the bought off politicians in Washington D.C.

Generation Age Total Pop.(mil)
G.I. 86–109 6
Silent 69–85 22
Boomer 51–68 73
Gen-X 30–50 83
Millennial 7–29 97
Homeland – 6 29

After placing the living generations in their assigned age buckets, I was shocked to see the Millennials being, by far, the largest generation. I had assumed it was the Baby Boom Generation. At their peak in 1970 they totaled 76 million and made up 37% of the U.S. population. But, time has not treated them well. Approximately 3 million have left this earth and they only make up 24% of the population. Both Gen X and the Millennials now outnumber the Baby Boomers. They will continue to see their power wane as the years roll by. The Millennial power will grow as the Fourth Turning progresses, since they make up 31% of the population today and will see that ratio grow as the G.I. and Silent generations die off. There are very few people remaining that lived through the last Fourth Turning. The initial phase of this Crisis has revolved around the Wall Street induced housing collapse with the consequences of not enforcing the rule of law by liquidating insolvent banks and prosecuting the white collar criminals that reaped ungodly profits by committing fraud on an epic scale. This has left the country with an unsustainable level of debt, a hollowed out economy, and unemployment at Great Depression era levels, while Wall Street bankers, media titans, and career politicians reap compensation packages fit for kings. Jesse from Jesse’s Café Americain describes our political system perfectly: 

Kleptocracy:“rule by thieves” is a form of political and government corruption where the government exists to increase the personal wealth and political power of its officials and the ruling class at the expense of the wider population, often without pretense of honest service.No outside oversight is possible, due to the ability of the kleptocrats to personally control both the supply of public funds and the means of determining their disbursal. 

The Millennials were raised by parents who believed government could solve all our problems. The welfare-warfare state became monolithic during the Boomer reign of error. Therefore, it is understandable these young naïve revolutionaries still cling to the belief the government can solve our problems through more taxes or new programs. The point being missed by all the doubters and detractors of the OWS movement is these young people have zeroed in on the right culprits. They are not stupid. They understand these basic facts:

  • The $15 trillion National Debt, headed to $20 trillion by 2015, is the gift we are leaving to the Millennials.
  • The $100 trillion of unfunded entitlement liabilities will never be honored by the time the Millennials retire.
  • The Millennials know the $1 trillion per year spent maintaining our military empire is more than the next 18 countries’ spending combined, and it benefits only the corporations peddling armaments, while making us less safe.
  • The soldiers getting killed and wounded in our wars of choice in the Middle East are predominantly Millennials.
  • There are 14,000 professional lobbyists in Washington D.C. representing mega-corporations, unions, trade groups and other special interests, which have doled out $30 billion over the last decade influencing (bribing) politicians to write the laws in their favor, and not one lobbyist was working for the Millennials.
  • Millennials know Wall Street has spent $154 million on political contributions and $383 million on lobbying in the last decade. The buying of political influence by our bastions of crony capitalism was as follows: Goldman Sachs – $46 million; Merrill Lynch – $68 million; Citigroup – $108 million; J.P. Morgan Chase – $65 million; Bank of America – $39 million.
  • The Millennials know the 71,000 page Federal tax code and 140,000 pages of Federal regulations are written to protect the interests of the few, not the many.
  • Millennials know the financial industry consciously created products designed to induce mortgage fraud, knowingly packaged toxic mortgages into derivatives, bribed the rating agencies to rate them AAA, sold these worthless instruments to their customers, shorted these same derivatives, and pocketed billions in fees and ill gotten gains. After blowing up the financial system and costing taxpayers trillions, not one person has gone to jail.
  • Millennials know how to read a chart:

  • Millennials know that Barack Obama and Mitt Romney are the same face of a never changing oligarchy. Change brought about through opposing political parties and elections has been rendered obsolete as the oligarchy chooses the candidates, uses their wealth to create policies and programs, and is able to control the masses with their propaganda message machines.

So here we stand, about five years into this Fourth Turning, with protests in the U.S. growing increasingly violent and intense. The calls for civility after the Gabrielle Giffords assassination attempt in January of this year went unheeded as the political vitriol has grown increasingly nasty. January seems like a lifetime ago. Revolutions have overthrown rulers in Tunisia, Egypt, and Libya. Unrest and bloodshed continues in Syria, Gaza, Yemen, Bahrain and Saudi Arabia. The European Union is disintegrating before our very eyes and violent protests against austerity measures flare up on a daily basis in Greece, Italy and Spain. There is no doubt we have entered the 2nd stage of this Crisis – the more violent and dangerous stage. I can sense fear and uneasiness among the more connected members of society. The drones, which constitute a large portion of America, are highly focused on Kim Kardashian’s divorce after 72 days and a $10 million wedding. The Millennials leading the protest movement are connected. They understand what is at stake. Strauss and Howe had it figured out 14 years ago:

“Of all today’s generations, the Millenials probably have the most at stake in the coming Crisis. If it ends badly, they would bear the full burden of its consequences throughout their adult lives. Yet if the Crisis ends well, Millenials will gain a triumphant reputation for virtue, valor and competence.” – Strauss & Howe

So what happens next? The truth is that no one knows what will happen next. We can only try to connect the dots and peer into a foggy future. We know that our leaders have not solved any of the financial imbalances that existed in 2007. They have made them worse, as have leaders across the world from China to Japan to Europe. We await the next Lehman moment, except this time it will be a sovereign nation and the contagion will be ten times greater than the 2008 meltdown. Our already fragile economy will be brought to its knees in a replay of the 1930s. As nations plunge into economic chaos, civil strife will likely lead to authoritarian figures rising from the ashes of the turmoil. Could Russia and China take advantage of this turmoil to acquire new resources through military means? Possibly. When the American middle class sees their remaining wealth dwindle to nothing, will they take to the streets? Revolution seems too remote to fathom, but it seemed remote in 1764 and 1855 too. When people have nothing left to lose, anything is possible. The collapse of our economic system is baked in the cake. Our current fiscal path is destined to end in fatality. Strauss & Howe knew the outcome of this Fourth Turning would depend upon the wisdom, strength and fortitude of the American people:

 “The risk of catastrophe will be very high. The nation could erupt into insurrection or civil violence, crack up geographically, or succumb to authoritarian rule. Thus might the next Fourth Turning end in apocalypse – or glory. The nation could be ruined, its democracy destroyed, and millions of people scattered or killed. Or America could enter a new golden age, triumphantly applying shared values to improve the human condition. The rhythms of history do not reveal the outcome of the coming Crisis; all they suggest is the timing and dimension.” – Strauss & Howe

Winter has arrived. There will be difficult hurdles with many trials and tribulations in front of us. You may have to choose sides in a generational war. No one wants to face bitter choices. No one wants bloodshed and war. But it really doesn’t matter what we want. There is no real justice in a country that attacks and incarcerates young people for exercising their right to free speech and dissent, while allowing a psychopathic Wall Street banking cartel to wreak havoc upon our nation. The generational alignment is such that the existing social order will be swept away in a violent manner. What replaces the existing order will be up to the American people. You may lose your wealth, security, freedom, or life during the coming struggle. The years ahead will require steely determination and courage like our forefathers exhibited on the frigid barren fields at Valley Forge, the undulating wheat fields at Gettysburg, and the bloody beaches of Normandy. I have three teenage sons at home. My choices will be dictated by what I feel will be best for their futures. I will do WHATEVER it takes to secure a better tomorrow for my boys. If that means standing beside them in battle, so be it. Lines are being drawn. You will not be able to avoid choosing sides, just as you cannot avoid Winter if you ever want to see the dawn of another Spring.

 

“History offers no guarantees. We should not assume that Providence will always exempt our nation from the irreversible tragedies that have overtaken so many others: not just temporary hardship, but debasement and total ruin. Since Vietnam, many Americans suppose they know what it means to lose a war. Losing in the next Fourth Turning, however, could mean something incomparably worse. It could mean a lasting defeat from which our national innocence – perhaps even our nation – might never recover.” – Strauss & Howe

 

When Faith Kills – Life, Death and Your Finances

I watched with surprise the 60 Minutes interview this weekend with the Steve Jobs biographer Walter Isaacson on how Jobs’ “faith” in himself and how special he was allowed him to accomplish incredible things, but also likely accelerated his demise. Some key points of the interview which are outlined in detail in his #1 Best-Selling book, “Steve Jobs” include the following points:

  • Steve Jobs was abandoned by his father. Upon learning about being adopted, not only was he initially distraught over being abandoned, but he also derived strength from the notion that he was also “chosen”. After all, his adoptive parents did choose him. That reinforced in him the belief that he was in fact special.
  • Various stories were recounted where Steve would show up and demand some feat be accomplished by his employees which was deemed impossible. He seemingly arbitrarily picked a timeframe and an accomplishment like, “complete all the coding for X by the end of this month.” When questioned, he would shout them down and say it must be done and it will be done. As impossible as it seemed, people would toil away at all hours trying to make it happen and in the end, it did. This type of success further reinforced his belief that he was able to accomplish unimaginable feats if he wanted it to happen badly enough.
  • Fast-forward to his cancer diagnosis…..

Continue Reading When Faith Kills – Life, Death and Your Finances

BERNANKE’S PINK SLIP

Smokey, don’t get excited, it’s the paper pink slip, not the one he wears 🙂
Bernanke, we’re making changes. You’re one of them.

You should have gotten both of Captain Obvious’s memos—one titled “Arab Spring,” the other going by “#Occupy Wall Street.” Just the very fact that we are having this conversation clearly indicates that your complete lack and understanding is not limited to just our economy.

Let me spell this out for you.

The memos indicate that 99% of the world has had enough with the Federal Reserve system and its “leadership”. Together the two account for 99% of the world’s ills.

Former Comptroller General David Walker said: “The fourth and most serious of all [of America’s deficits] is our leadership deficit.” Bernanke, you and former Fed Chairman Alan Greenspan are poster boys for personifying America’s “Most Serious Leadership Deficit.”

That’s really putting it too kindly though. After all, you helped create the Second Great Depression, so we don’t have to be polite about this, and I’m not going to be.

The Millennials—those 75 million kids our son’s and daughter’s age; that majority protesting; the ones camping out in tents with sleeping bags on cold hard cement sidewalks; the kids and old farts occupying our city parks; little unarmed girls that are our children’s age obeying the law only to get pepper-sprayed in their eyes by oppressive law-breaking New York City Cops; kids carrying around signs that read “End the Fed” and “Osama Bin Bernanke”; those born between 1977-1998 that now face an unemployment rate between 37%-50%, most of who have student loans up the proverbial.

osama bin bernanke

I don’t think they like you.

Why? It’s very simple—Congress gave the Fed two mandates in 1913:

  1. To Maintain Maximum Employment.
  2. To Maintain Stable Prices.

Two mandates, but you and Greenspan added a third—worshiping the banks. By doing so you’veroyally screwed up the first two. You’ve revealed that the corrupt banksters who own the Federal Reserve are really the gods you worship. (Read The Sander’s Report of the Fed audit here)

As a result, the consumer who contributes to 70% of the economy has become the sacrifice to your evil gods. Without a consumer we’ll all wind up in a living hell.

Let me break it down to three main points:

Point #1: Maximum Employment. We now have a depressionary unemployment rate of 23.1%.The tragically comical part is we have a student of [or do you now call yourself a scholar of] The Great Depression, who refuses to address the real (unadjusted) unemployment rate.

23.1% NOT 9.1%.

You know that it is 23.1%. You just lie about it by using the Bureau of BS Labor Statistics 9.1% numbers!

shadow govenment stats unemployment

How can you miss the fact that we have 46,000,000 Americans on food stamps? Many of whom collect in Wal-Marts an hour before midnight creating modern day electronic breadlines. Their carts filled with baby formula for their starving children. At the stroke of midnight their “EBT” cards are refilled and their “benefit” is transferred from the government to the poor by one of the big banks who skims off the top for their “services.” Ironic, after they blew up the economy they now get to profit off the poor who got stuffed with the 10.4++ trillion dollar tab of bailing them out. (Link to Wal-Marts CEO’s description of this.)

Let’s address the substance in Point #3: Housing & Lying before we move onto Point #2: Stable Price Mandate.

Point #3: Housing & Lying. Many financial bloggers have observed and written about your voice crackling or shaking whenever you mention ‘9.1% unemployment’ or just the word ‘unemployment.’

I first noticed the crackling voice phenomena in 2005. On CNBS you were asked if housing was in a bubble. I knew it was. Ron Paul knew back in 2003. I knew because I ran the Hyman Minsky Bubble Checklist and the only “indicator” unchecked was “Revulsion.” Number 7 of 7. Judging by the subprime reset dates we knew that revulsion wasn’t going to be too far down the road.

We were correct.

So there you are on CNBS being asked: “Tell me sir, is housing in a bubble?” And you flat out lie. You, the self-professed “scholar of the Great Depression”, tell Maria Barta-What-Ever-Her-Name-Is (incidentally, whose voice I can’t stand) that, “home prices have never declined on a nationwide basis before.”

BS!

They have. A fourth grader can read the chart below and see that.

history of home values

The instant you said house prices have never declined on a nationwide basis your voice faltered. It got all feebly. It cracked. Look, I’m a former airline captain, company instructor and check airman with around 15,000 hours. I know what fear sounds like. I know what a weasels voice sounds like when they screw up and try to cover it over. Just because people didn’t go to Harvard or teach at Princeton doesn’t mean they’re stupid and that they can be played for a fool Ben.

Frankly, that whole “Harvard, Princeton, Columbia Card” doesn’t get much mileage after Charles’s fine documentary “Inside Job” where he showed how scholars are now just being paid off for their favorable opinions.

I emailed Pamela Meyer and asked her to look into you. Pamela Meyer did a phenomenal-speech on TED, it was titled: “How to Spot a Liar”.

Her reply totally floored me: “I will take a look at Bernanke….many [emphasis mine] have sent comments similar to yours as well regarding his “tells”.”

Many have sent comments.

Many.

If it lies like a rug…

I say, “What else do you lie about?” because I know you were lying about housing. The FY2005 FOMC minutes reveal that the Fed knew housing was in an impending bubble and any idiot who read one book on the Great Depression would have known that housing prices HAVE declined in our nation’s history.

Frankly, any idiot who read one book on the Great Depression would also be capable of recognizing that we’ve entered into the world’s Second Great Depression.

Just curious, are David Walkers’ leadership deficit words ringing loud and clear here?

They should be.

America is suffering. Millions have been foreclosed upon, kids go to bed starving in motels, and tent cities are springing up all over the place. In California they have a school for homeless kids whose parents peddle them to on their bikes. The kids steal food to take to their parents tents. Just how much more Grapes of Wrath-“ish”” can we get when reading the news?

More responsible prime borrowers were hurt than were subprime borrowers because 1 in 6 jobs were housing related and Wall Street sold this stuff to cities, pension funds, and entire countries.

While betting against it.

Who was in charge while all this went down?

Point #2: Stable Prices. You’ve decimated the value of the dollar. Since 1913, our dollar is now worth mere pennies. Over that time we’ve seen a 2,191.8% increase in inflation. You’ve robbed 2,191.8% from my grandfather, father and I. Perhaps Americans should demand reparations for stripping generations of our families’ wealth?

inflation calculator

(By the way, we know it is way worse than 2,191.8%. Enron was more honest about its books than the BLS is with its inflation or unemployment calculations.)

2,191.8%.

If isn’t inflation, then what is it?

real cost of living

The BEA and BLS should be abolished and a portion of that money should go to John Williams of Shadow Statistics—who does what those clowns are supposed to do.

etrade babyYou know the problem? You all have NO real world experience. Hell, the E*Trade baby has more trading experience than you momos combined.

Un-effing believable that this has been going on for over 100 years.

Nice job Champ.

I’m going to end it here. I could go on, and on. I could write a book called The Second Grapes of Wrath and in it include all the many ways the Fed hurts and then laughs at decimating the consumer who supports 70% of our economy.

I could reveal how the Fed laughs about exploiting workers through globalization. I could expose how the Fed laughs and jokes about which political party likes to borrow more money. But, I’ll stop here. Maybe if I hear from a good agent I’ll do a book.

In Summary: Bernanke if you had 1 one trillionth of a leadership gene you’d have taken command in 2008 and said:

  1. We have bad news: We have a major structural problem. But we are Americans so we have good news: We have a fix for it. For now, we’re bailing out the banks to keep credit from freezing up.
  2. But, we’re bailing out the banks vis-a-vis underwater homeowners in order to prevent 1 in 6 jobs related to housing from cratering and becoming 23.1% unemployment which puts 46 million Americans on an electronic breadline at Wal-Mart.
  3. We’ve identified structural problems in the economy that were caused by mistakes made by the Federal Reserve.
  4. Alan created too much cheap money, he muzzled Brooksley Born when she wanted to regulate derivatives, and he also helped get rid of Glass-Steagall. All this contributed to the mess. We’ve had Fed members who took money and wrote BS reports so lawmakers would look favorably at what were really dangerous instruments that let bankers shoot up.
  5. He failed to recognize a perverse incentive structure where CEOs with a fleet of personal jets, fancy yachts, and a dozen homes had no concern over the financial products they sold.
  6. Politicians have fed off the system buying votes with borrowed Federal Reserve Notes. The bread and circus show is so far gone that it is beyond balancing. Beyond cuts. Beyond repair. We’ve hidden more debt off balance sheet than a million Enron’s could of hoped for. Thus, our new dollar will be revalued to wipe away this debt.
  7. The root cause of our money system is that money is loaned into existence. This means that each second more money must be created in order to service the interest or the system implodes. It causes bubbles. It creates boom to bust cycles. It creates inflation which is outright theft. While no system is perfect, our new system will be better.
  8. Exponential growth is not sustainable. Our economy is nothing more than digging up finite resources and selling them. With 7 billion people on this planet 3% compounding growth each year is not sustainable. We’re seeing this now in higher oil prices. The difference between global oil production and global oil consumption is an economic resource canary.
  9. We must get well-paying manufacturing jobs back from China.
  10. We must create a few “Manhattan” projects to redefine banking and to promote a stable sustainable economy.

But you’re not a dynamic leader.

You’re a clown, and you’ll wait until Europe or some other force breaks the camel’s back and then declare, like the housing bubble, no one could have seen this coming.

About the Author

80 YEARS LATER – SAME CULPRITS, SAME RAGE

The young man stands on the edge of his porch
The days were short and the father was gone
There was no one in the town and no one in the field
This dusty barren land had given all it could yield

I’ve been kicked off my land at the age of sixteen
And I have no idea where else my heart could have been
I placed all my trust at the foot of this hill
And now I am sure my heart can never be still
So collect your courage and collect your horse
And pray you never feel this same kind of remorse

Dust Bowl Dance – Mumford & Sons

langesquatter.jpg (31737 bytes) 

The song from Mumford & Sons called Dust Bowl Dance is as pertinent to today as it was in describing the Great Depression.   I was taken by the lyrics and the rage in the song. The setting for the song is the Dust Bowl of the 1930’s in the US Midwest. Picture the Joads in Grapes of Wrath. As I listened to the song again this morning I was struck by the similarities between the time period described in the song and our present situation.

The lyrics by Marcus Mumford tell the story of a young man who’s lost everything. His family is either dead or forced off their land. My interpretation of the lyrics is that the bank has foreclosed on his farm after their crops failed during the dust bowl. I picture a Mr. Potter like character who held the mortgages on all the farms and houses in a small community. The evil banker didn’t care that families had lived on this land for decades, raising their families along with the crops. These hard working farmers had done nothing wrong. They were victims of circumstances. But bankers didn’t care about ruining lives. The family farmers didn’t participate in the Roaring 20’s, borrow on margin to invest in stocks, or reap ungodly profits. The farmers were victims of land speculators and bad weather. The only son in the song took the law into his own hand and shot the evil banker. He was ready to do his time, because his act was righteous payback.

Eighty years ago the last Fourth Turning was also in its infancy. They generally last 15 to 20 years. The catalyst for the last Fourth Turning was the great stock market crash of 1929.   The 1920s “boom” enriched only a fraction of the American people. Earnings for farmers and industrial workers stagnated or fell. Farmers were barely getting by during the roaring 20s. Only the Wall Street crowd was getting rich.  The economic growth of the 1920s did not reach most Americans: 60% of American families earned less than the amount necessary to support their basic needs ($2,500 was considered enough to support a family’s basic needs). The agricultural sector was similarly stagnant: farm prices dropped after World War I when Europe again began to feed itself and new grain exports from South American further depressed prices. The lack of purchasing power of rural people and farmers resulted in declines in consumer purchasing in those areas, as well as increased defaults on debt. Rural, urban, and suburban consumers began to increase their personal debts through mortgages, car loans, and installment plans to buy consumer goods, such as radios.

The ever-growing price for stocks was, in part, the result of greater wealth concentration within the investor class. Eventually the Wall Street stock exchange began to take on a dangerous aura of invincibility, leading investors to ignore less optimistic indicators in the economy.  Over-investment and speculating (gambling) in stocks further inflated their prices, contributing to the illusion of a robust economy.

The crucial point came in the 1920s when banks began to loan money to stock-buyers since stocks were the hottest commodity in the marketplace. Wall Street banks encouraged Wall Street investors to use the stocks themselves as collateral. When stocks dropped in value, and investors could not repay the banks, the banks were left holding near-worthless collateral. Banks went broke, pulling productive businesses down with them as they called in loans and foreclosed mortgages in a desperate attempt to stay afloat. The Federal Reserve was responsible for regulating the banks. They were responsible for the easy money policies during the 1920s. The biggest financial institutions in the country included: Citibank, Bank of America, Goldman Sachs, JP Morgan & Co., Chase National Bank, and Wells Fargo. Sound familiar?

The Great Depression was caused by the Federal Reserve and their owners, the biggest Wall Street banks, aiding and abetting reckless speculation, greed and extreme risk taking with mountains of debt. The rich got richer and the poor got poorer. The income inequality in the U.S. reached an all-time peak in 1928. It stayed at a high level until World War II. The glory years of the American Empire were from 1941 through 1979, when the middle class was growing, and the income distribution in the country was fair and equitable, as our manufacturing based economy raised all boats.

The income inequality in the country reached the same extreme level in 2007, just prior to the Wall Street created financial implosion. It has not improved in the last four years. In the early 1930s there was the feeling of revolution in the air. With unemployment at 25% and people in desperate straits, the government feared communists or fascists gaining power. The New Deal was really a way to keep the citizens occupied so that a revolution would not take hold. There was much anger towards the bankers and aristocracy who caused the Great Depression. The anger is reflected in the Mumford & Sons lyrics:

Your oppression reeks of your greed and disgrace
So one man has and another has not
How can you love what it is you have got
When you took it all from the weak hands of the poor?
Liars and thieves you know not what is in store

Dust Bowl Dance – Mumford & Sons

The 2008 financial crash was caused by loose Federal Reserve monetary policies, lack of Federal Reserve regulation over criminally reckless Wall Street banks, and incredible levels of bad debt rampant throughout our economic system. The true unemployment rate today is 23%. Another parallel between the early 1930s and today can be seen in the chart below. Almost 11,000 banks, or 40% of all the banks in the U.S., went out of business. Predictably, these were all small banks. None of the connected Wall Street banks went out of business. They benefitted, as 40% of their competition disappeared. Too Big to Fail existed 80 years ago. You may also note that savers were punished, as interest paid on savings plunged from 5% to below 1% and the earnings of middle class workers collapsed.

1929 1933
Banks in operation 25,568 14,771 
Prime interest rate 5.03% 0.63%
Volume of stocks sold (NYSE) 1.1 B 0.65 B
Privately earned income $45.5B $23.9B
Personal and corporate savings $15.3B $2.3B

Historical Statistics of the United States, pp. 235, 263, 1001, and 1007.

 

During the early years of the current depression more than 400 banks have gone insolvent and another 800 banks are on the FDIC endangered species list. Therefore, approximately 15% of all the banks in the U.S. will no longer compete with the Wall Street banks that caused the financial crisis. Since 2008, the top five biggest banks in the U.S. have dramatically increased their market share and power. They are: Bank of America, JP Morgan Chase, Citigroup, Wells Fargo, and Goldman Sachs. Amazing how the exact same banks that caused the 1929 and the 2008 market crashes came out unscathed and more powerful after each crisis.

  FDIC Bank Failures

The mainstream media tries to convince the American public that the stock market going up means the economy is improving and they are doing better. The chart below shows that the stock market bottomed in 1932 and proceeded to go up almost 500% by 1937. It’s too bad only the bankers and richest people in society could afford to own stocks. While the stock market soared, the average person struggled to survive. Only the privileged stock owners prospered. The common man suffered.

The unemployment rate remained at elevated levels until World War II. The New Deal policies of Franklin Roosevelt did not end the Great Depression. The common man had trouble putting bread on their table during the entire decade of the 1930’s. The storyline about FDR’s Keynesian spending ending the Depression is false.

The 1930s were filled with seething anger. The Liberty League and Father Charles Coughlin, the Rush Limbaugh of his time, used anti-communist and socialist rhetoric to convince millions of Americans that the model used in Nazi Germany was better than FDR’s New Deal policies. This pushed Roosevelt further to the left against big business and toward more socialist programs to insure getting the votes of the poor. These were bleak days in our country’s history. General Smedley Butler revealed a plot to overthrow the Roosevelt administration and replace it with a fascist dictatorship. The country roiled with furious rage.

In 1932, approximately 80 years ago, 43,000 marchers (17,000 veterans) descended upon Washington D.C.  The Bonus Expeditionary Force, also known as the “Bonus Army”, marched on Washington to advocate the passage of the “soldier’s bonus” for service during World War I.  They set up a camp with tents to bring attention to their cause. After Congress adjourned, bonus marchers remained in the city and became unruly. On July 28, 1932, two bonus marchers were shot by police, causing the entire mob to become hostile and riotous. The government turned the U.S. military upon its citizens. Army cavalry units led by General Douglas MacArthur dispersed the Bonus Army by riding through it and using gas. Fifty five veterans were injured and 135 were arrested. Critics of the marchers described them as communists, troublemakers, and criminals.

Fast forward 80 years and we have protestors setting up camp in a public square, not far from where the same exact banks that caused the Great Depression have created the Greater Depression. The biggest Wall Street banks have gotten bigger. The Federal Reserve, in collusion with the Wall Street banks, has engineered a two year stock market rally, while the average American has seen their wages decline, food and energy prices soar, home prices fall, and banks paying them .1% on their savings. Anger and disillusionment continue to build in this country like a volcano preparing to blow. Some people are angry at Washington politicians. Some are angry at Wall Street. Others aren’t sure who to be angry at. The evil oligarchy of bankers, corporate titans, and bought off Washington politicians that control the agenda and mainstream media, continue to scorn, ridicule and denigrate the middle class of America. Their financial engineering is failing. They’ve gone too far. The debt accumulation is unsustainable. The mood of the country has darkened and talk of revolution and the shadow of impending violence is growing.

The Great Depression was not an event, it was an era. It was an era of discontent, pain, suffering, and ultimately war and death. The people who lived through this era have mostly died off. We have entered a new similar era. The average citizen sees the American Dream of a better life slipping away due to the corruption, greed, and immorality of our political and financial systems. The Federal Reserve’s current chosen mandate is to make the stock market go up, while impoverishing the middle class. The 1% better hope the police and military continue to obey their orders, because the 99% are angry and heavily armed. This Fourth Turning has ten to fifteen years to go. Every previous Fourth Turning has included violence, war and death on an epic scale. Winter has arrived and it will be a long arduous journey until we reach Spring. The choices we make in the next few years will decide the fate of our country. I hope we choose wisely.

 

“Thus did a handful of rapacious citizens come to control all that was worth controlling in America. Thus was the savage and stupid and entirely inappropriate and unnecessary and humorless American class system created. Honest, industrious, peaceful citizens were classed as bloodsuckers, if they asked to be paid a living wage. And they saw that praise was reserved henceforth for those who devised means of getting paid enormously for committing crimes against which no laws had been passed. Thus the American dream turned belly up, turned green, bobbed to the scummy surface of cupidity unlimited, filled with gas, went bang in the noonday sun.”

― Kurt Vonnegut, God Bless You, Mr. Rosewater

There will come a time I will look in your eye
You will pray to the God that you always denied
The I’ll go out back and I’ll get my gun
I’ll say, “You haven’t met me, I am the only son”

Dust Bowl Dance – Mumford & Sons

QUOTE OF THE DAY

“Now, there’s one thing you might have noticed I don’t complain about: politicians. Everybody complains about politicians. Everybody says they suck. Well, where do people think these politicians come from? They don’t fall out of the sky. They don’t pass through a membrane from another reality. They come from American parents and American families, American homes, American schools, American churches, American businesses and American universities, and they are elected by American citizens. This is the best we can do folks. This is what we have to offer. It’s what our system produces: Garbage in, garbage out. If you have selfish, ignorant citizens, you’re going to get selfish, ignorant leaders. Term limits ain’t going to do any good; you’re just going to end up with a brand new bunch of selfish, ignorant Americans. So, maybe, maybe, maybe, it’s not the politicians who suck. Maybe something else sucks around here… like, the public. Yeah, the public sucks. There’s a nice campaign slogan for somebody: ‘The Public Sucks. F*ck Hope.”
― George Carlin

THE ONLY CANDIDATE WITH A REAL PLAN

I watched the GOP debate last night. Here are my impressions:

  • Perry came across as a very angry man. I really thought he and Romney were going to physically attack each other over the illegal immigrant accusations. If Perry were to be elected president, I would say the chances of World War III would be 75% during his term. He’s scary.
  • Romney did his usual smooth talking. He manages to take both sides of every issue. I was left with the vision of 50 illegal Mexicans with lawnmowers descending upon his 1,000 acre palatial estate. Then him acting like he understands the plight of the middle class.
  • Herman Cain was absolutely shellshocked by the beatdown he received regarding his ridiculous 999 plan. Giving politicians a new sales tax without eliminating the income tax is like locking up a 5 year old in a candy store. Cain’s 999 plan will become 12 12 12 and then 15 15 15 and before long 25 25 25. He denied what he had said just a few hours before. The man has absolutely no problem with lying, as he proved when Ron Paul confronted him at the last debate. Lying is a great trait in a President.
  • John Huntsman seemed quiet. Where the fuck was he? He has higher poll numbers than that jackoff Santorum.
  • Michelle Bachman scared the living shit out of me. She is absolutely clueless. If she tells me one more time that she raised 23 foster kids, I might go ballistic. She is vacuous.
  • Rick Santorum essentially foams at the mouth and pretends to be a good Catholic, but wants to blow up or invade every country in the Middle East. He cares deeply about marriage and the American families, but he has no problem shooting missiles at Muslim families.
  • Newt Gingrich is the smartest guy on the stage. That is clear to anyone being unbiased. He understands the problems. He knows how to get things done in Washington. He even seems to be softening his stance on war mongering. His personal baggage and smugness will never allow him to get enough support from the Republican base.
  • I thought that Ron Paul had his best performance yet. Whenever the other idiots would talk about how they are going to fix the problems with new programs and more government intervention, he brought them back to the reality of our debt, the Federal Reserve created inflation and our Empire. He has proposed a budget plan that will balance the books in three years. None of the other jackoffs would dare propose something so concrete. I loved his response to the OWS question. His views are 90% aligned with the views of the people at OWS. He was always against the bailouts. He has always been against the Federal Reserve, which is owned by the Wall Street banks. He was always against the wars that have bankrupted our country. Ron Paul is the candidate of OWS. Here is a video of his best moments.

 

MODERN MAN

“I’m a modern man, a man for the millennium. Digital and smoke free. A diversified multi-cultural, post-modern deconstruction that is anatomically and ecologically incorrect. I’ve been up linked and downloaded, I’ve been inputted and outsourced, I know the upside of downsizing, I know the downside of upgrading. I’m a high-tech low-life. A cutting edge, state-of-the-art bi-coastal multi-tasker and I can give you a gigabyte in a nanosecond!
I’m new wave, but I’m old school and my inner child is outward bound. I’m a hot-wired, heat seeking, warm-hearted cool customer, voice activated and bio-degradable. I interface with my database, my database is in cyberspace, so I’m interactive, I’m hyperactive and from time to time I’m radioactive.

Behind the eight ball, ahead of the curve, ridin the wave, dodgin the bullet and pushin the envelope. I’m on-point, on-task, on-message and off drugs. I’ve got no need for coke and speed. I’ve got no urge to binge and purge. I’m in-the-moment, on-the-edge, over-the-top and under-the-radar. A high-concept, low-profile, medium-range ballistic missionary. A street-wise smart bomb. A top-gun bottom feeder. I wear power ties, I tell power lies, I take power naps and run victory laps. I’m a totally ongoing big-foot, slam-dunk, rainmaker with a pro-active outreach. A raging workaholic. A working rageaholic. Out of rehab and in denial!

I’ve got a personal trainer, a personal shopper, a personal assistant and a personal agenda. You can’t shut me up. You can’t dumb me down because I’m tireless and I’m wireless, I’m an alpha male on beta-blockers.

I’m a non-believer and an over-achiever, laid-back but fashion-forward. Up-front, down-home, low-rent, high-maintenance. Super-sized, long-lasting, high-definition, fast-acting, oven-ready and built-to-last! I’m a hands-on, foot-loose, knee-jerk head case pretty maturely post-traumatic and I’ve got a love-child that sends me hate mail.

But, I’m feeling, I’m caring, I’m healing, I’m sharing– a supportive, bonding, nurturing primary care-giver. My output is down, but my income is up. I took a short position on the long bond and my revenue stream has its own cash-flow. I read junk mail, I eat junk food, I buy junk bonds and I watch trash sports! I’m gender specific, capital intensive, user-friendly and lactose intolerant.

I like rough sex. I like tough love. I use the “F” word in my emails and the software on my hard-drive is hardcore–no soft porn.

I bought a microwave at a mini-mall; I bought a mini-van at a mega-store. I eat fast-food in the slow lane. I’m toll-free, bite-sized, ready-to-wear and I come in all sizes. A fully-equipped, factory-authorized, hospital-tested, clinically-proven, scientifically- formulated medical miracle. I’ve been pre-wash, pre-cooked, pre-heated, pre-screened, pre-approved, pre-packaged, post-dated, freeze-dried, double-wrapped, vacuum-packed and, I have an unlimited broadband capacity.

I’m a rude dude, but I’m the real deal. Lean and mean! Cocked, locked and ready-to-rock. Rough, tough and hard to bluff. I take it slow, I go with the flow, I ride with the tide. I’ve got glide in my stride. Drivin and movin, sailin and spinin, jiving and groovin, wailin and winnin. I don’t snooze, so I don’t lose. I keep the pedal to the metal and the rubber on the road. I party hearty and lunch time is crunch time. I’m hangin in, there ain’t no doubt and I’m hangin tough, over and out!”
― George Carlin

QUOTES OF THE DAY

“We’re so self-important. So arrogant. Everybody’s going to save something now. Save the trees, save the bees, save the whales, save the snails. And the supreme arrogance? Save the planet! Are these people kidding? Save the planet? We don’t even know how to take care of ourselves; we haven’t learned how to care for one another. We’re gonna save the fuckin’ planet? . . . And, by the way, there’s nothing wrong with the planet in the first place. The planet is fine. The people are fucked! Compared with the people, the planet is doin’ great. It’s been here over four billion years . . . The planet isn’t goin’ anywhere, folks. We are! We’re goin’ away. Pack your shit, we’re goin’ away. And we won’t leave much of a trace. Thank God for that. Nothing left. Maybe a little Styrofoam. The planet will be here, and we’ll be gone. Another failed mutation; another closed-end biological mistake.”
― George Carlin

“I like it when a flower or a little tuft of grass grows through a crack in the concrete. It’s so fuckin’ heroic.”
― George Carlin

“I went to a bookstore and asked the saleswoman, ‘Where’s the self-help section?’ She said if she told me, it would defeat the purpose.”
― George Carlin

“Some people see the glass half full. Others see it half empty.
I see a glass that’s twice as big as it needs to be.”
― George Carlin

“Honesty may be the best policy, but it’s important to remember that apparently, by elimination, dishonesty is the second-best policy.”
― George Carlin

“Scratch any cynic and you will find a disappointed idealist”
― George Carlin

“Laugh often, long and loud. Laugh until you gasp for breath.”
― George Carlin

“Life gets really simple once you cut out all the bull shit they teach you in school.”
― George Carlin

I AM the 53% – Share Your Story

There’s a great site worth checking out.  In the same vein as the Occupy Wall Street crowd who claim to represent 99% of Americans, there’s another site dedicated to the JUST 53% of Americans that actually pay federal income taxes.  After all, if it weren’t for those 53%, who would pay for the 47% of Americans who presently pay no federal income taxes?

It’s a culmination of pictures and stories outlining how Americans who started from humble beginnings have pulled themselves up and made something of themselves.  They have had their challenges, and they still do – but they are contributing back to society by starting businesses, working long hours and notably, paying federal taxes and living the American dream.

Here’s my Story, Share Yours