Tag: Freddie Mac

YOU AIN’T SEEN NOTHING YET – PART TWO

This is Part Two of a three part series trying to make sense of the Crisis period we entered in 2008. Click here to read: PART ONE

Catalyst of Change

“As late as December 1773, November 1859, and October 1929, the American people had no idea how close it was. Then sudden sparks (the Boston Tea Party, John Brown’s raid and execution, Black Tuesday) transformed the public mood, swiftly and permanently. Over the next two decades or so, society convulsed. Emergencies required massive sacrifices from a citizenry that responded by putting community ahead of self. Leaders led, and people trusted them. As a new social contract was created, people overcame challenges once thought to be insurmountable – and used the Crisis to elevate themselves and their nation to higher plane of civilization.” – Strauss & Howe – The Fourth Turning

 

 

 

Anyone who hasn’t sensed a mood change in this country since the 2008 financial meltdown is either ignorant or in denial. Millions of Americans fall into one of these categories, but many people realize something has changed – and not for the better. The sense of pure financial panic that existed during September and October of 2008 had not been seen since the dark days of 1929. Our leaders used the initial terror and fear to ram through TARP and stimulus packages that rewarded the perpetrators of the financial collapse rather than helping the middle class who lost 8 million jobs, destroyed by Wall Street criminality. The stock market plunged by 57% from its 2007 high by March 2009. What has happened since September 2008 has set the stage for the next downward leg in this Crisis. The rich and powerful have pulled out all the stops and saved themselves at the expense of the many. Despite overwhelming proof of unabashed mortgage fraud, rating agency bribery, document forgery on a grand scale and insider trading based on non-public information, the brazen audacity of Wall Street oligarchs is reminiscent of the late stages of the Roman Empire.    

“Crime, once exposed, has no refuge but in audacity.”
― Tacitus, Annals

The actions of the governing elite have provoked the darkening mood creeping across the land. The rise of the Tea Party in 2009 was fueled by anger over the bank bailouts, out of control federal spending and ever increasing taxes. The anger spilled over into town hall meetings, as Congressmen felt the wrath of public dissatisfaction. The fury propelled Tea Party Republicans to being elected in large numbers in 2010. But the movement was hijacked by the Republican establishment and defanged. As 2011 progressed, with Wall Street continuing to pillage the American middle class, the Occupy Movement spread to cities across America and around the world. The movement, led by Millenials, claims that mega-corporations and Wall Street manipulate the world in an unbalanced way that disproportionately benefits a super wealthy minority and is undermining democracy. They have shone a light upon the fact the 1% has used their wealth and power to plunder the national treasury, while impoverishing the 99%. The audacity of the 1% was on display for all to see when former Goldman Sachs CEO and former U.S. Senator Jon Corzine absconded with $1.2 billion of his customers’ money and continues to hide it in the vaults of his fellow robber baron Jamie Dimon at J.P. Morgan. To this day, no one has been jailed for this heist or any of the thousands of other crimes committed by the Wall Street titans. These psychopaths will not be satisfied until nothing remains of our country but a barren desert.

“They have plundered the world, stripping naked the land in their hunger… they are driven by greed, if their enemy be rich; by ambition, if poor… They ravage, they slaughter, they seize by false pretenses, and all of this they hail as the construction of empire. And when in their wake nothing remains but a desert, they call that peace.” – Tacitus, The Agricola and the Germania

A few weeks ago I watched The Grapes of Wrath movie for the first time in many years. The novel was written by John Steinbeck during the last Fourth Turning. It is as powerful today as it was in the 1941. It perfectly captures the mood of the country during the Great Depression. The message of the working class being exploited and manipulated by wealthy landowners resounds today. The Joads only sought an opportunity for a job, their own land, simple human dignity, and the chance for a better future. Wall Street has replaced the wealthy landowners as the exploiters of the working class. Steinbeck saw the Federal Government as a solution during the 1930s, but they are a major part of the problem today, as politicians have been captured by corporate and special interests. Their solutions do not benefit the average middle class American.

 

The feelings about our government and political system is reflected in Suzanne Collins’ Hunger Games novel, which captures the vein of government brutality, oppression of the working class, excessive wealth inequality, and the vapid shallowness of our American Idol culture. The Hunger Games was written in 2008 and the movie version has become a worldwide sensation. The immense divide between the wealthy ruling class, living an obscenely decadent lifestyle, and the exploited working class on the verge of starvation, is portrayed in a cruelly sadistic manner. The fact that it is appealing to Millenials and all generations says much about the changing of attitudes in the last four years. Hunger Games will be viewed as the modern day Grapes of Wrath by future generations.         

There is no denying the darkening disposition of the country, except by those whose job it is to deny the reality of our deteriorating situation. Those whose power and wealth are dependent upon a citizenry being kept in the dark and convinced the way out of this mess is to resume spending borrowed money, have pulled out all the stops since the initial catalyst for this Fourth Turning struck with its full fury in 2008. The frantic efforts by those in power to prop up the status quo were predictable. If our leaders had dealt with the initial crisis in a realistic manner, many wealthy powerful men would have gone broke. They have been able to temporarily fend off a full-fledged catastrophe as predicted by Strauss & Howe:

“At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where, during the Unraveling, America will have neglected, denied, or delayed needed action. Anger at “mistakes we made” will translate into calls for action, regardless of the heightened public risk. It is unlikely that the catalyst will worsen into a full-fledged catastrophe, since the nation will probably find a way to avert the initial danger and stabilize the situation for a while. Yet even if dire consequences are temporarily averted, America will have entered the Fourth Turning.”

But they have solved nothing. In fact, they have exacerbated the problem areas of debt, civic decay and global disorder with their “solutions”. Our leaders have added $5.6 trillion to the National Debt; the Federal Reserve tripled their balance sheet by taking on $2 trillion of Wall Street toxic debt; the Federal Government assumed trillions in new debt by taking over Fannie Mae, Freddie Mac and Sallie Mae; and real GDP went up by a mere $103 billion (.8%) between the 4th quarter of 2007 and the 4th quarter of 2011. Rescuing the 99% was never the focus of their solutions. It was to save the bankers and wealthy investors (1%) who took the world destroying risks and should have borne the losses of their risk taking. The oligarchs have been wildly successful in this effort. The stock market has doubled from its lows. Borrowing at 0% from the Federal Reserve has done wonders for banker bonuses.   Global disorder increases by the day, as politicians and bankers force austerity on their citizens, while continuing to harvest billions in profits and bonuses still waging wars of choice, further enriching the peddlers of debt and the peddlers of death (military industrial complex).

  

The Great Depression lasted from 1929 until 1940. The GDP of the country actually grew by 80% between 1933 and 1940. The stock market soared by 100% from the 1932 low to its 1933 high. It then soared another 100% from 1934 through 1937. Despite these fabulous economic statistics and investment riches scooped up by the 2.5% of the population that owned stocks, they still call this time period the Great Depression. With unemployment ranging from 15% to 25% during this entire time frame, the common man suffered greatly. There was no recovery for the 99%.

The net worth of the 99% is highly dependent on the value of their homes and their ability to increase their annual wages. Home prices have fallen 34% from their peak and continue to fall, recently reaching 2002 levels. Real median weekly earnings are lower than they were in 2003 and have fallen 3% since the economy supposedly entered its recovery in December 2009. Gas prices have doubled since early 2009. The 1% rejoices as they treat oil as an investment in their diversified portfolio. The 99% suffer as the average household is spending $2,500 per year more to fill up their vehicles. Food prices are up 15% to 25% in the last three years, even using the manifestly manipulated BLS figures.

It is essential for those in power to utilize their mainstream media propaganda machines, massaging of economic information and Ben Bernanke’s printing press to give the appearance of recovery to the masses. In the last three months the hyperbole and extreme spin from the corporate mainstream media has become exceedingly robust. It smells of desperation. Even as the media touts a recovery and Obama peddles drivel about millions of new jobs, Bernanke keeps the throttle of quantitative easing and zero interest rates wide open. Their actions are not consistent with their rhetoric. People who had jobs as accountants making $55,000 per year in 2007 are now stocking fertilizer in the garden center at Lowes making $20,000, with no benefits. This is the face of the jobs recovery. Only a corporate media doing the bidding of their masters could possibly rejoice at the February data showing consumers spending at a rate 450% higher than their income gains as a sign of recovery. There is a concerted effort to revive the auto market by the Federal Government (Ally Financial) and the Wall Street banks by employing exceptionally loose credit standards for auto loans and leases that are reminiscent of the subprime mortgage debacle. I’m sure it will turn out better this time. The downward spiral of trust is accelerating as predicted by Strauss & Howe:

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

The downward spiral of societal trust is well founded. The monied interests have captured the political process. The regulated have captured the regulators. Wall Street has always controlled the Federal Reserve. Corporations and the wealthiest among us select the politicians that will best serve their interests. The governing elite of psychopathic bankers, corrupt politicians, and powerful mega-corporations create crises, then save us from the crises they created, while accumulating more control, wealth and power. This perpetual swindle has been going on for decades and has reached its zenith as it did during the last Fourth Turning. Income inequality has reached the extreme levels last seen in the 1930s. The capitalism storyline has grown old and tired. Complete systematic capture is the reason for those at the top reaping all the benefits of our dysfunctional economic system.

The rampant mortgage fraud, the robo-signing crimes, trillions of shadowy derivatives, unfunded government pensions, unfunded Medicare and Social Security promises, and the bald-faced looting of customer accounts at MF Global have brought about a realization among those capable of critical thought that this Crisis is growing worse by the day. Strauss & Howe clearly understood the factors that would lead to this deficit of trust:

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

Here we stand, three and a half years since the catalyst of this Crisis. What event or events will produce the regeneracy stage of this Fourth Turning and when can we expect its arrival? I’ll try to make some educated guesses in Part Three of this series.

Click here to read: PART ONE

 



 

ASLEEP AT THE WHEEL

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

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

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

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

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

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

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

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

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

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

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

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

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

Source: TF Metals Report     

Pedal to the Metal

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Have credit problems? NO PROBLEM

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

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

Feb-12

 % Chg Feb’11 YTD 2012
Cars

612,145

23.9

1,080,466
Midsize

304,601

25.6

532,818
Small

225,061

26.5

397,838
Luxury

81,476

22.7

147,647
Large

1,007

-85.8

2,163
Light-duty trucks

537,251

7.6

982,217
Pickup

148,956

13.8

273,430
Cross-over

225,621

0.4

412,974
Minivan

64,849

15.3

111,764
Midsize SUV

54,827

15.3

101,813
Large SUV

16,783

-5.4

31,566
Small SUV

13,926

24

25,951
Luxury SUV

12,289

12.4

24,719

 

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

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

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

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

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

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



 

BAD WEEK FOR FREEDOM

“We have two American flags always: one for the rich and one for the poor. When the rich fly it means that things are under control; when the poor fly it means danger, revolution, anarchy.”– Henry Miller

  




Your Ad Here

With each passing week it seems this country spirals further into the depths of a frightening dystopian fantasy reminiscent of Huxley and Orwell’s dark world of isolation, fear and government brutality portrayed in their masterpieces Brave New World and 1984. I keep speculating whether it’s me that’s crazy and not the things I’m witnessing on a daily basis. The President signs the National Defense Authorization Act, passed by an overwhelming majority of Congress, which allows the government to imprison American citizens indefinitely without charge. And there is barely a squeak from the docile masses as they are soothed by Obama promising to never use that part of the law. I bet you $10,000 a President will invoke that portion of the NDAA in the very near future.

Jon Corzine, a card carrying member of the ruling elite .01%, remains free to roam one of his five palatial estates after stealing $1.6 billion from the accounts of farmers, widows, and thousands of other “clients” of MF Global. In his spare time he raises money for Obama’s re-election campaign. The Federal government, Federal courts and Wall Street banking cabal have circled the wagons and declared the money just vaporized, even though it sits in Jamie Dimon’s vaults at J.P. Morgan. No one is being prosecuted for this deliberate thievery. The psychopathic Wall Street criminals have been getting away with murder for so long they act invulnerable to societal mores and scoff at our laws, rules and regulations. Those are for the 99%. When you control the politicians, regulators, courts, and mainstream media, it’s easy to get away with murder. The jackals and hyenas are laughing in their NYC penthouse suites as they continue to collect $20 million bonuses for a job well done.

 

After this past week I’m apoplectic with rage and fury as the rule of law has been discarded and the Constitution trampled upon by a wealthy connected oligarchy bent upon using their absolute power to further enrich themselves. The Wall Street banks that committed the largest financial crime in history, including: fraud in the inducement, forgery, fabricating documents, bribing rating agencies to rate toxic mortgages as AAA, selling fraudulent derivatives to customers, shorting the derivatives they sold to their customers, throwing millions of Americans out of their homes, charging inflated and bogus fees during the foreclosure process, and conducting a colossal cover-up, were slapped on the wrist and made to pay a miniscule $5 billion to the millions of victims of their crimes. Not one banker has been prosecuted. Not one person has gone to jail. Justice in this country is a putrid joke. There has been no outrage from the general public. The propaganda spewed by the corporate media instructs the masses to rejoice at this fair and just verdict. The truth is that 95% of the population didn’t know or didn’t care about the 50 state foreclosure-gate settlement. They were engrossed by the huge controversy over M.I.A. flipping the bird during the Super Bowl halftime show and whether Madonna was upset about the incident.

“Free” Healthcare

While this travesty of justice was playing out, we were treated to a glimpse into the future of healthcare in America administered by politicians and bureaucrats based upon vote count expediency. The government drones at DHHS mandated from on high that every woman in America would receive “free” contraceptives from their employers. Obama had made this decision and instructed his minions to implement his visionary dictate. The outrage and anger from religious groups and employers was instantaneous. Obama saw the 2012 election slipping away and reversed course within a day. He is quite the man of principle. His “solution” was to force insurance companies to provide “free” contraception to any employee of a religious employer that didn’t provide that coverage in their insurance plan. When I hear these sociopathic politicians use the word “free” when describing healthcare or any of their thousands of bankrupt government programs, I have an overpowering impulse to smash something. Insurance companies will not provide “free” contraceptives to women. Insurance premiums will rise for everyone.

Remember Obama’s assertion about his government takeover of healthcare:

“As a consequence of the Affordable Care Act, premiums are going to be lower than they would be otherwise; health care costs overall are going to be lower than they would be otherwise.”

The next government program that reduces costs, provides better service, and is more efficient than the private market will be the first government program to do so. Examples of government ineptitude, corruption and waste include: Social Security, Medicare, Welfare, the Energy Dept., the Education Dept., and the Dept. of War. Jonathan Gruber, MIT economist and chief architect of Obamacare and Romneycare, recently admitted the truth about Obamacare:

“After the application of tax subsidies, 59% of the individual market will experience an average premium increase of 31%. My findings reflect the high cost of folding state high risk pools into the [federal government’s] exchange — without using the money the state was already spending to subsidize those high risk pools.”

Based on what Obamacare has done for the American people before its full implementation in 2014, you’ll be begging for a death panel to put you out of your misery. The following “free” healthcare services were required to be covered by insurance companies in 2010:

  • Cover preventive care without co-pays or deductibles.
  • Allow adult children to stay on parents’ policies until age 26.
  • Increase annual coverage limits.
  • Cover children without regard for preexisting conditions.

Obama’s promise that families would save $2,500 per year in the future might come up a tad short, as insurance premiums skyrocketed by 9% in 2011. Not only have premiums soared, but many companies have increased co-pays from $10 to $25 for doctor visits.

Source: Kaiser Family Foundation

Only a deceitful government busybody do-gooder would actually argue that forcing insurance companies to cover millions more Americans and cover pre-existing conditions would result in lower costs for the average family. I wonder what will happen in 2014 when 30 million more Americans are guaranteed “free” healthcare under Obamacare. The saddest part of this oncoming train wreck is that millions of willfully ignorant people actually believed the blatant lies and false storyline fed to them by sociopathic politicians who desire to control every aspect of their lives. These people believe they know what is best for you. They believe they are smarter than you. They do not care what means are required to achieve their ends of absolute domination over your life. Personal freedom, individual liberty and a critical thinking populace are the antithesis to the desires of the governing elite.

Home Sweet Home

The central planners within government and inhabiting the Federal Reserve are never in doubt that their theories, programs, solutions, mandates and schemes will achieve their desired outcome. The trouble for the American people is the desired result is not designed or planned to actually benefit them. The psychopaths drawn to politics, regulatory agencies, and government bureaucracies have no remorse or qualms about lying, utilizing propaganda, and instilling fear to achieve the ends that endorse their self serving agenda. Every dime of government spending is seized from the people by force or created out of thin air by an all knowing self-proclaimed Great Depression expert named Ben Bernanke. This Ivy League professor who has spent his entire life in academia and government thinks he knows which levers to pull to revive an economy that he destroyed. His wisdom is borne out in his prescient assessment of the U.S. housing market as it was imploding:

“We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.” – July 2005

“House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.” – October 2005

“Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.” – February 2006

“All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.  The vast majority of mortgages, including even subprime mortgages, continue to perform well.  Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable.” – May 2007

It should be clear to everyone that Ben is a goddamn genius. You can see why the mainstream corporate media hangs on his every utterance. He has accepted no responsibility for his part in producing an epic housing collapse and the subsequent recession that continues to this day. His lack of conscience comes in handy as he has destroyed the finances of millions of senior citizens dependent upon interest income to make ends meet. Having no guiding principles or ethics allows him to declare with a straight face that inflation is well contained as gas prices approach $4.00 per gallon, food prices surge 10%, and his inflationary policies contribute to revolutions around the globe.

Last week this sage spoke to the Home Builders Association and left no doubt that he has no interest in what is best for the American people. His economic remedies are the exact opposite of what is needed to cure the disease of a debt ravaged society. Dr. Bernake’s prescription is more debt fueled spending by consumers to refill the coffers on Wall Street. This is not surprising considering he is nothing but a puppet of Dimon, Pandit, Blankfein and the rest of the Wall Street cabal. His speech revealed his allegiances:

“One of the effects of declines in housing wealth is to reduce the ability and willingness of households to spend. It appears that recent declines in housing wealth may be reducing consumer spending between $200 billion and $375 billion per year. That reduction corresponds to lower living standards for many Americans. And, importantly, lower sales of goods and services also reduce the incentives of firms to invest and hire, thereby slowing the recovery. Low or negative equity creates additional problems for households. It reduces financial flexibility: Homeowners who are underwater on their mortgages cannot tap home equity to pay for emergency health expenses or their children’s college educations.”

Whenever I read Bernanke’s words, I’m reminded of George Orwell’s quote about intelligent people:

“There are some ideas so wrong that only a very intelligent person could believe in them.”

This is a man who believes he knows better than the market. He’s an economics professor that doesn’t believe in the law of supply and demand as taught in Econ 101. He thinks he can control home prices. He thinks he knows the ideal interest rate. He thinks he knows just how much money printing will revive the economy. He believes a healthy economy is driven by artificially propping up home prices, encouraging people to spend money they don’t have, recommending that homeowners borrow against their homes ($3 trillion borrowed and pissed away from 2003 through 2008), and forcing banks to make loans to subprime borrowers – again. His solution to the millions of bank owned homes is to use the taxpayer owned Fannie and Freddie to initiate bulk discount sales of these homes to his friends in the .01% so they can turn around and rent them to their former owners. I wish someone could explain to me how this helps the 99%. It is another backdoor bailout of Wall Street on the straining backs of the American taxpayer.

Obama’s housing solutions in 2009-2010 included multiple home buyer tax credits, loan modification programs, and a myriad of other Keynesian claptrap spending schemes. Bernanke supported all of those measures. They spent $30 billion of your tax dollars in an effort to artificially prop up home prices. Home prices have fallen 10% since they threw your money down the rat hole where all government programs reside, and they continue to fall. These central government planners don’t like to publicize the fact they continue to operate Fannie Mae, Freddie Mac, and the FHA as a way to shift losses from Wall Street to Main Street. Fannie and Freddie have lost $160 billion of your tax dollars since 2008, but amazingly the losses don’t show up in the Federal budget because reality has no place in politics or governmental accounting. The FHA just announced they will require a taxpayer bailout for the first time in their 78 year existence, as they lose $5 billion of your money per year on behalf of the Wall Street banking cartel. The toxic mortgages that don’t reside on the books of Fannie, Freddie and the FHA are sitting on Ben’s balance sheet. They reside, hidden from public view, in the “Other Assets” section of the chart below. His tripling of the Federal Reserve balance sheet was done for one reason only – to save the Wall Street bankers, their shareholders, and their bondholders. His actions have in no way benefitted the American people or the American economy.

It is mind boggling the degree to which central planners like Bernanke, Geithner, Obama and Congress will inflict their vision of how the economy and world in general should operate upon the trusting masses. The American people want to believe their leaders are doing what is best for them. They like dwelling in a land of delusion, security and luxury, where government guarantees to protect them from: terrorists; Iranian invasion; saving for retirement; looking out for their own health; educating themselves; and accepting the consequences of living above their means. Their ability to distinguish between truth and propaganda has been thoroughly degraded by years of government proscribed education. We have chosen to become a knowingly ignorant nation of true believers. There is no time for critical thinking while we anticipate our next tweet about the death of drug addicted pop singer. We have been taught to love our servitude.

“…most men and women will grow up to love their servitude and will never dream of revolution.”– Aldous Huxley – Brave New World

The fallacy of government protecting you, taking care of you and providing you “free” benefits is so ingrained in the American psyche that it is virtually impossible to voluntarily reverse the trend. The truth that Americans refuse to acknowledge is that nothing is free in this life. We are not entitled to own a home, a free education, free healthcare, or a comfy privileged existence. Everything government provides is taken by force from someone else. Everything government does has a cost. Americans have traded freedom and liberty for the appearance of safety and security.The cost is constant war, getting groped by TSA perverts, surveillance by government agencies, threat of imprisonment without charges and a $1 trillion price tag per year. The cost of “free” healthcare is mind numbingly ludicrous rules and regulations for doctors and patients, massive fraud, outrageously expensive procedures and medications, and a $100 trillion unfunded liability left for future generations. The ultimate cost of an overbearing, all controlling government will be economic collapse and revolution.

Who Decides?

“Those who vote decide nothing. Those who count the vote decide everything.” – Joseph Stalin

The concluding act during this bad week for freedom occurred on Saturday in the great state of Maine. When it became clear that Ron Paul was going to win the Maine caucuses, the GOP establishment, that has already anointed Mitt Romney the Republican nominee, decided the people of Maine would be told who won. Using the excuse of an impending snowstorm (less than 1 inch), the powers that be cancelled the caucuses in Washington County where a large contingent of youthful Ron Paul supporters dominated. The Girl Scouts didn’t cancel their event in the same county that day. The men who cancelled the caucus are strong Romney supporters. This was a blatant Stalinist act of voter disenfranchisement. The GOP leaders declared those votes would not count in the totals. Despite this despicable act of rigging an election, Ron Paul doubled his vote percentage from 2008. His message of freedom, liberty, non-interventionism, sound money and self-reliance is reverberating across the land among young people who have not been programmed by the governing elite and the corporate mass media. The establishment will do everything in their power, including vote fraud, to prevent Ron Paul’s anti-establishment message from being heard.

A small delegation of authoritative, rich men continues to pull the strings in this country. The examples I’ve sited in the last week prove we are moving ever more rapidly towards what Friedrich Hayek described as a‘dictatorship of the proletariat’. The actions of the governing class point to no other conclusion as described by Simon Black:

  • Hundreds of thousands of mortgage contracts abrogated by the Federal government;
  • Suspension of gun rights by several local governments;
  • The continued criminalization of protest and free assembly;
  • Increased surveillance and police state tactics;
  • Authorization of military force and detention against the citizens;
  • Seizing and/or voiding pension systems into which workers have paid lifelong contributions;
  • Rejection of long-standing senior debt positions in favor of labor unions;
  • Executive and police agencies ruling by regulation and policy, not by legislative process;

When you pose the possibility of a dictatorship in America, the defender of freedom and democracy, old timers scoff and laugh off the possibility. We are the bright shining light on the mountaintop – that preemptively invades other countries; murders suspected foes with predator drones; imprisons and tortures foreigners in secret prisons; and plans to have 30,000 spy drones patrolling the skies over U.S. cities within the next few years. The government now has the authority to imprison U.S. citizens without cause for as long as they see fit. The government plans to lock down and control the internet. How could we possibly descend toward dictatorial rule? The conditions are perfect for sociopaths dwelling in government bureaucracies to make their move, as elucidated by Doug Casey:

“You may be thinking that what happened in places like Nazi Germany, the Soviet Union, Mao’s China, Pol Pot’s Cambodia and scores of other countries in recent history could not, for some reason, happen in the US. Actually, there’s no reason it won’t at this point. All the institutions that made America exceptional – including a belief in capitalism, individualism, self-reliance and the restraints of the Constitution – are now only historical artifacts.On the other hand, the distribution of sociopaths is completely uniform across both space and time. Per capita, there were no more evil people in Stalin’s Russia, Hitler’s Germany, Mao’s China, Amin’s Uganda, Ceausescu’s Romania or Pol Pot’s Cambodia than there are today in the US. All you need is favorable conditions for them to bloom, much as mushrooms do after a rainstorm.”- Casey Report

Call me a raging optimist, but I see positive signs that an irate tireless minority of Americans are coming to their senses and preparing for a showdown with the ruling oligarchy. The tremendous support for Ron Paul’s message among those under the age of 30 is inspiring. His devoted followers have incredible enthusiasm and will be a force to be reckoned with. The upcoming election will be won or lost based upon whether Ron Paul decides to run as a 3rd Party candidate, spreading his inspirational message. The Occupy Movement is also being driven by people under the age of 30. Their courage and audacity in standing up to brutal establishment military tactics and focusing the attention of the world on the greed, avarice and corruption rampant throughout our economic and political system has given me hope that the good guys can win. Every day the Millenial generation gains strength as the power of the older generations slowly wanes.

The internet has proven to be the best weapon in the fight against the governing elite. It offers people the freedom to ignore government sponsored propaganda being blasted by the corporate media. Critical thinkers can connect with other critical thinkers, while seeking the truth and spreading ideas. You can examine websites like Zero Hedge, Jesse’s Café Americain, Of Two Minds, and Mish to comprehend what is really happening in your world. The tumult and outrage exhibited by millions when the despotic Congressional jackals attempted to pass SOPA and PIPA was inspirational. The people’s voice was heard loud and clear. The politicians ruling over our lives have no guiding principles or moral code. They peddle their votes to the highest bidder. They conduct polls to determine what their constituents want to hear and then shockingly tailor a message that voters find to be exactly what they think. These sociopaths only respond to one thing – being exposed as liars and thieves. When they are confronted by an irate citizenry they scatter like roaches in a West Philly row house kitchen when you turn the light on. Yes votes on SOPA turned to No votes quicker than the Federal government can spend a billion of your tax dollars (10 hours). Obama showed how principled his positions are by backtracking on his “free” contraception mandate in less than 24 hours. If we speak loud enough they will listen, or else.

The “or else” is reflected in the chart below showing gun purchases over the last ten years. Millions of good law abiding Americans are armed. The accelerating trend is a hopeful sign that we will not allow a small contingent of corrupt politicians backed by shadowy rich men (22 men have contributed 67% of all the Super Pac money in the GOP primaries), hiding from public view, to treat this country as their personal playground.

It was a bad week for freedom loving people, but I believe there are enough patriots left in this country to change our course. We are being buried under a blizzard of lies on a daily basis. We have a choice. We can support the existing corrupt crony capitalist establishment (Obama & Romney) or we can declare war on lies, deceit and misinformation by rallying behind the only person who would truly attempt to reverse decades of corruption, sleaze, incompetence, bloat, debt accumulation, and a warped version of free market capitalism – Ron Paul. He is the only public figure willing to level with the American people and tell them the truth. Will we let the concept of truth fade out of the world? The choice is ours.

“In our age there is no such thing as ‘keeping out of politics.’ All issues are political issues, and politics itself is a mass of lies, evasions, folly, hatred and schizophrenia. The very concept of objective truth is fading out of the world. Lies will pass into history.” –   George Orwell

  

“Truth is treason in an empire of lies.” – Ron Paul

THE BENNIE WHO STOLE CHRISTMAS (Featured Article)

Ben Bernanke is a highly educated PhD from Princeton who has never worked a day in the real world since he graduated from college in 1975. His entire life has been spent in the ivory tower of academia surrounded by models and theories that work perfectly in the comfort of his office. After building his reputation as an “expert” on the Great Depression by studying it and reaching the wrong conclusions, he came down from his ivory tower in 2002 to join an organization that has systematically destroyed the value of the US currency, thereby undermining the well being of the once vibrant middle class.

He became a member of the Federal Reserve and has served his masters (Wall Street Banks, Mega-corporations, Washington politicians) unswervingly since. When he makes his now regular appearances on 60 Minutes, he tries to give the appearance of being someone concerned about the average American. The facts in the real world completely obliterate the lies he nervously mouths while answering softball questions underhanded to him by corporate media mouthpieces. His quivering lip and nervous ticks reveal his true nature. How could Bernanke blatantly take measures that destroy the lives of millions of Americans?  Maybe Dr. Seuss had the answer: 

 

It could be his head wasn’t screwed on just right.
It could be, perhaps, that his shoes were too tight.
But I think that the most likely reason of all,
May have been that his heart was two sizes too small.
Whatever the reason, His heart or his shoes,
He stood there on Christmas Eve, hating the Whos,
Staring down from his cave with a sour, Grinchy frown – Dr Seuss

If the Grinch had been pimping for a small pack of Grinchsters who impoverished the honest people of Whoville, then the Dr. Seuss poem would have perfectly described Ben Bernanke, the Federal Reserve and the banksters that run the show here in the USA. The actions taken by Ben Bernanke, Alan Greenspan and their brethren on the Federal Reserve over the last quarter century have destroyed the middle class and left senior citizens impoverished, while enriching its Wall Street masters. Now he is stealing Christmas from the hard working middle class of this country.

Bernanke’s latest theoretical venture into manipulating the puppet strings of the economy began with his speech at Jackson Hole in August and concluded with his Op-Ed on November 4. His master plan to buy an additional $600 billion of Long-term Treasuries is being implemented on a daily basis. This QE2 follows his previous QE1, which consisted of buying $1.4 trillion of toxic mortgage securities from his masters, the insolvent Wall Street banks. What follows are Ben Bernanke’s own words:   

“I believe that additional purchases of longer-term securities, should the FOMC choose to undertake them, would be effective in further easing financial conditions.” – Ben Bernanke – August 27, 2010 –  Jackson Hole

“Given the Committee’s objectives, there would appear–all else being equal–to be a case for further action. For example, a means of providing additional monetary stimulus, if warranted, would be to expand the Federal Reserve’s holdings of longer-term securities. Empirical evidence suggests that our previous program of securities purchases was successful in bringing down longer-term interest rates and thereby supporting the economic recovery.” – Ben Bernake – October 15, 2010 – Boston Speech

“To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month.” – Ben Bernanke Fed Announcement – November 3, 2010

“This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.” – Ben Bernanke – November 4, 2010 – Washington Post Op-Ed

Ben and his friends on the Federal Reserve have a PR machine to help sell their lies. Let’s assess whether Ben and his Federal Reserve have helped or hurt the average American.

Throwing Senior Citizens Under the Bus

Then he slunk to the ice box. He took the Whos’ feast, he took the who pudding, he took the roast beast. He cleaned out that ice box as quick as a flash. Why, the Grinch even took their last can of Who hash. – Dr Seuss

 

There are approximately 40 million senior citizens living in 25 million households in the US. According to the Census Bureau, more than 12 million of these households survive on less than $30,000 of income per year. The median household income in the US is $49,777. A full 70% of all over 65 households make less than the median income.  A recent study found that 58% of those between 60 and 84 will at some point fail to have enough liquid assets to allow them to get through unanticipated expenses or declining income.

The vast majority of their income is from Social Security payments. Most senior citizens are rightly risk adverse and dependent upon income from certificates of deposit. During the 1990’s and as recently as 2007, a senior citizen could get a 5% return on a CD. Many of these people depended on this interest income to pay their everyday expenses. Below is a chart that plots the average interest rate for 6 month CDs since 1964. Today the average rate on a 6 month CD is .30%.

Ben Bernanke is to thank for this poverty enhancing rate. He reduced the discount rate to 0% while paying interest on deposits at the Fed. The affect of this policy has been to transfer hundreds of billions to the Wall Street criminal banks from the pockets of senior citizens and other Americans dependent upon interest income to sustain their meager lives. A brainless CNBC anchor can look at this chart and realize that the Federal Reserve caused the housing crisis by driving down rates from 2002 through 2005. Ben Bernanke, who never saw the housing collapse coming and personally had an exploding adjustable rate mortgage, has learned nothing from the prior disaster. He has driven rates down to 0% in order to force people into speculative investments. The Federal Reserve is a perennial bubble blower. This will likely be the final bubble of Bennie’s career.

 Graph: 6-Month Certificate of Deposit: Secondary Market Rate

These recent actions by the Federal Reserve are just the tip of the iceberg. Alan Greenspan, the Federal Reserve and the US Government have systematically screwed senior citizens for decades by purposely understating CPI. The result has been that the cost of living adjustments to Social Security has seriously lagged real inflation. For the 2nd consecutive year senior citizens will get no cost of living increase on their Social Security. The average monthly Social Security payment is $1,074. While seniors struggle to make ends meet, Wall Street banks are handed billions in free money by Ben Bernanke. The chart below details the COLA increases since 1975. Alan Greenspan and his commission began manipulating the CPI in the early 1980s. 

Social Security Cost-Of-Living Adjustments
Year COLA
1975 8.0
1976 6.4
1977 5.9
1978 6.5
1979 9.9
1980 14.3
1981 11.2
1982 7.4
1983 3.5
1984 3.5
1985 3.1
1986 1.3
1987 4.2
1988 4.0
1989 4.7
Year COLA
1990 5.4
1991 3.7
1992 3.0
1993 2.6
1994 2.8
1995 2.6
1996 2.9
1997 2.1
1998 1.3
1999 2.5
2000 3.5
2001 2.6
2002 1.4
2003 2.1
2004 2.7
Year COLA
2005 4.1
2006 3.3
2007 2.3
2008 5.8
2009 0.0
2010 0.0
a The COLA for December 1999 was originally determined as 2.4 percent based on CPIs published by the Bureau of Labor Statistics. Pursuant to Public Law 106-554, however, this COLA is effectively now 2.5 percent.

 

Since 2000, seniors have seen their monthly payment increase by 27%, or less than 2.5% per year. I challenge anyone to convince me that inflation has been 0% for the last two years. I have calculated my real inflation and it is four times the government reported figure. I suppose government bureaucrats and Federal Reserve Chairmen don’t fill up their gas tanks or go food shopping. John Williams at www.Shadowstats.com calculates the CPI as it was calculated prior to the Greenspan fraud. Based on this true assessment of inflation, prices have increased by 100% since 2000, or 8% per year.

Only an Ivy League academic could examine the following yearly price data and conclude, as Bernanke has, that inflation is well contained:

  • Unleaded gas up 24%
  • Heating Oil up 28%
  • Corn up 50%
  • Wheat up 48%
  • Coffee up 56%
  • Sugar up 27%
  • Soybeans up 30%
  • Beef up 26%
  • Pork up 22%
  • Cotton up 101%
  • Copper up 33%
  • Silver up 72%

I wonder what a can of Who Hash will cost in 2011?

The truth is that senior citizens spend a much higher percentage of their limited income on the basics of housing, transportation, food, and insurance. So, these increases have a much greater impact on seniors than rich bankers and Princeton scholars. The figures for key items over the last decade prove the point that seniors have fallen further due to the inflationary policies of the Federal Reserve.

Category Expense Cost in 2000 Cost in 2010 % Increase, 2000 – 2010
Housing Homeowner’s insurance (annual) $508.00 $1,059.00 108%
  Real estate tax (annual) $690.00 $1,223.88 77%
  Heating oil (gallon) $1.15 $2.88 150%
  Natural gas (per thousand cubic foot) $6.37 $10.39 63%
  Electricity (per kw hr) $0.08 $0.12 50%
Transportation Regular gas (gallon) $1.26 $2.75 118%
Medical Medicare Part B premiums (monthly) $45.50 $110.50 143%
Food 10 lbs. potatoes $2.98 $4.98 67%
  Eggs (dozen) $0.93 $1.79 93%
  Ground chuck (lb.) $1.90 $2.83 49%
  Bread, white loaf $0.91 $1.36 50%

 

Helping Housing?

And the one speck of food That he left in the house,
Was a crumb that was even too small for a mouse.
Then He did the same thing To the other Whos’ houses
Leaving crumbs Much too small For the other Whos’ mouses! – Dr. Seuss

Not only was Ben Bernanke complicit in aiding Greenspan in creating the housing bubble by keeping interest rates too low for too long, completely missing a two standard deviation (PhDs love this stuff) price bubble right in front of his eyes, telling Americans that we had a strong housing market, telling Americans that housing price declines would not affect the economy, not regulating or policing the rampant mortgage fraud that was happening under his nose, and aiding and abetting the very criminal banks that created the bubble, but now he has blatantly lied by saying his QE2 $600 billion monetization of our debt is to support the housing market. If you believe this, I have some prime real estate with great views in the mountains of Afghanistan to sell you. 

In his October 15 speech, Bernanke assured the world that QE2 would reduce long term interest rates. On November 4, he stated:

“Lower mortgage rates will make housing more affordable and allow more homeowners to refinance.” 

On October 7, one week before Bernanke gave the green light to QE2, the 10 Year US Treasury rate was 2.38%. Today it stands at 3.3%, almost 100 basis points higher. I’m guessing this guy isn’t very good picking his weekly football pool. Interest rates have done the exact opposite of what he proclaimed they would do. These rates have surged in the face of an already weakening economy, as unemployment continues to rise and home prices continue to fall. A 100 basis point rise in Treasury bonds piles approximately $120 billion more interest expense per year onto the backs of future generations.

 Chart forCBOE Interest Rate 10-Year T-No (^TNX)

The rate on 30 year fixed mortgages has surged to 5.07% from 4.4% in mid-October. That should do wonders for refinancing and home purchases. Bernanke’s actions have priced millions of people out of the market. He has inflicted more damage on an already teetering housing market and has insured that home prices will plunge by another 20% in the next year.

Mortgage rates for Dec. 15, 2010

Despite the trillions of dollars thrown at the housing market by Bernanke and Obama through home buyer tax credits, mortgage modification programs, purchasing toxic mortgages from the criminal banks at 100 cents on the dollar, artificially reducing mortgage rates, and forcing those government run disasters Fannie Mae, Freddie Mac and the FHA to backstop more bad loans, home prices are resuming their downward trajectory to fair value. That value is at least 20% lower. With 22.5% of all properties (10.8 million properties) with a mortgage having negative equity, the housing market was already in dire straits. With the surge in mortgage rates caused by Ben Bernanke’s actions, a rapid plunge in prices can be expected in 2011, resulting in more foreclosures and negative equity swamping millions.  

The truth is that Ben Bernanke could care less about the average American homeowner making $48,000 per year. The real purpose of QE2 was to further enrich his masters on Wall Street and the ruling elite who control the wealth in this country.

Wall Street Wealth Bailout

 

 

“When the Fed uses QEII to subsidize the largest players on Wall Street, it is disadvantaging the smaller, better run banks, and it is also playing with politics. Priyank Gandhi and Hanno Lustig, in a National Bureau of Economic Research working paper issued in November (No. 16553), suggest that the implicit collective guarantee extended to large U.S. financial institutions reflects an annual subsidy to the largest commercial banks of $4.71 billion per bank, measured in 2005 dollars. But, even more important, the paper notes that subsidies for the “too big to fail” banks shows the Fed’s willingness to support the equity markets, an extraordinary and ultimately political act that requires further hearings by the Congress.” – Chris Whalen

Chris Whalen and a few other brilliant analysts realize the true purpose of Ben Bernanke’s actions. Bernanke even revealed his true intentions in his November 4 Op-Ed:

“Higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending.”

On August 26, the day before Bernanke’s Jackson Hole speech, the S&P 500 was at 1,047. Today, it stands at 1,247, a 19% increase in the face of  weakening economic conditions for the middle class worker. The more speculative NASDAQ stood at 2,119 on August 26, and today sits at 2,649, a phenomenal 25% increase as more middle class Americans have lost their jobs. Over this same time frame, according to the BLS, there are 500,000 less Americans employed.

The truth is that Ben Bernanke’s sole reason for implementing QE2 is to enrich the few at the expense of the many. The chart below paints the picture clearer than the lies and misinformation you will get from CNBC and Fox. The top 1% wealthiest Americans own 60.6% of all the stocks in America, with the next 9% wealthiest owning 37.9% of the stocks in America. That leaves a full 1.5% of stocks in the hands of the remaining 90% of Americans. Who is benefitting from QE2?

Part 2 of the table clarifies who Bennie is working for. The 90% of Americans have 42.3% of the liquid deposits, 61.5% of residential investment and 73.4% of the debt in the country. Ben Bernanke’s actions have resulted in liquid deposits paying 0% interest (19 largest banks out of 7,700 banks control 50% of all deposits), residential real estate prices declining, and the cost of carrying debt to rise. Meanwhile, the top 1% convinced the public they needed a tax cut so they could continue to buy  gifts like Clive Christian’s $247,000 Imperial Majesty perfume, packaged in a diamond-encrusted Baccarat crystal bottle.

Table 2: Wealth distribution by type of asset, 2007
  Investment Assets
Top 1 percent Next 9 percent Bottom 90 percent
Business equity 62.4% 30.9% 6.7%
Financial securities 60.6% 37.9% 1.5%
Trusts 38.9% 40.5% 20.6%
Stocks and mutual funds 38.3% 42.9% 18.8%
Non-home real estate 28.3% 48.6% 23.1%
TOTAL investment assets 49.7% 38.1% 12.2%
 
  Housing, Liquid Assets, Pension Assets, and Debt
Top 1 percent Next 9 percent Bottom 90 percent
Deposits 20.2% 37.5% 42.3%
Pension accounts 14.4% 44.8% 40.8%
Life insurance 22.0% 32.9% 45.1%
Principal residence 9.4% 29.2% 61.5%
TOTAL other assets 12.0% 33.8% 54.2%
Debt 5.4% 21.3% 73.4%
 
From Wolff (2010).

 

 Of course, we all know the rich create all the jobs. Too bad they were created in India and China. No more conclusive evidence of the Federal Reserve destroying the American middle class can be found on the US Census Bureau site. The median household income in the US reached its all-time peak in 1999 at $52,388, in today’s dollars (key data point). Ten years later the median household income is $49,777. The standard of living for the median household in the US has fallen by 5% in the last decade, even using the government manipulated CPI.

The mainstream media will not report this fact. They will report the non-inflation adjusted figures that show a 22% increase in the median household income. They do this because they know that the average American has no clue what the term “inflation adjusted” means. Ben Bernanke, the Federal Reserve, and the ruling oligarchy can only retain their power through the use of inflation, while slowly destroying the currency, impoverishing the masses and enriching them. The website www.mybudget360.com has suggested the proper mission statement for Bennie and the Feds should be:

“To aggregate as much wealth into the banking system while eliminating the American middle class by a slow systematic dilution of their currency and financial well being and standard of living.”

   
Table H-6.  Regions–All Races by Median and Mean Income: 1999 to 2009
(Households as of March of the following year.  Income in current and 2009 CPI-U-RS adjusted dollars (28))
Region and year Number (thousands) Median income Mean income
Current dollars 2009 dollars Current dollars 2009 dollars
 
2009 117,538 49,777 49,777 67,976 67,976
2008 117,181 50,303 50,112 68,424 68,164
2007 116,783 50,233 51,965 67,609 69,940
2006 116,011 48,201 51,278 66,570 70,819
2005 114,384 46,326 50,899 63,344 69,597
2004 113,343 44,334 50,343 60,466 68,662
2003 112,000 43,318 50,519 59,067 68,886
2002 111,278 42,409 50,563 57,852 68,976
2001 109,297 42,228 51,161 58,208 70,521
2000 108,209 41,990 52,301 57,135 71,165
1999 106,434 40,696 52,388 54,737 70,462

 

While real average weekly earnings for the average American are lower today than they were in the early 1970s, you will be happy to know that Wall Street bonuses have recovered nicely from the dip in 2008.  Compensation at Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America, and Citicorp increased by 31% in 2009. Average compensation rose by 27% to more than $340,000. Bonuses jumped above the $20 billion mark in 2009, but sadly trail the record of $35.5 billion in 2006 just before Wall Street destroyed the financial system of the entire world. According to the NYT, 2010 will be a banner year:

“Wall Street’s five biggest firms have put aside nearly $90 billion for bonuses. Whether it’s for jewelry, high-end clothing or apartments, bonus spending has long fed a post-holiday boom in January and February, especially in Manhattan and expensive suburbs like Greenwich.”

I’m sure this information warms the cockles of your heart.

At the end of Dr. Seuss’ poem, the Grinch repents and brings a happy ending to Whoville:

That the Grinch’s small heart Grew three sizes that day!
And the minute his heart didn’t feel quite so tight,
He whizzed with his load through the bright morning light,
And he brought back the toys! And the food for the feast!
And he, HE HIMSELF! The Grinch carved the roast beast! – Dr. Seuss

Even if Ben Bernanke’s heart was to grow three sizes, he would be discarded by the other Grinchsters (banksters) like piece of Whoville tinsel. The truth of our current situation is better captured by Mick Jagger in his song Sympathy for the Devil:

I’m a man of wealth and taste
I’ve been around for a long, long year
Stole many a man’s soul and faith

But what’s confusing you
Is just the nature of my game

The people running the show in this country will not be bringing joy to Whoville. You need to understand the nature of their game.