Tag: GDP

THANK GOD I’M WHITE

Fascinating report put out by the Census Bureau this morning. Here are some key points:

  • The nation’s official poverty rate in 2010 was 15.1 percent, up from 14.3 percent in 2009, the third consecutive annual increase in the poverty rate.  
  • There were 46.2 million people in poverty in 2010, up from 43.6 million in 2009, the fourth consecutive annual increase and the largest number in the 52 years for which poverty estimates have been published
  • The number of people without health insurance coverage rose from 49.0 million in 2009 to 49.9 million in 2010, while the percentage without coverage -16.3 percent – was not statistically different from the rate in 2009.
  • Breaking it down by ethnicity, living in poverty were 27.4% of all blacks, and 26.6% of all Hispanics. White, non Hispanics and Asians were doing better at 9.9% and 12.1% respectively.

Looks like us white folks are doing better than those minorities. I find this data fascinating. The number of people in poverty rose for the fourth consecutive year to an all-time high. But how could that be? Our very own government reported that Real GDP grew 3.0% in 2010. How could more people go into poverty if the economy grew strongly? It’s because the economy did not grow. The GDP numbers are a lie. The government borrowed from the Chinese, transferred the money to the poor and called it income.

The only people who recovered in 2010 were Wall Street bankers and big corporation CEOs like Immelt. The average person’s life got worse – little or no pay increases, higher food costs, and higher energy costs. If the economy had actually recovered in 2010, why did 6 million MORE people go on food stamps since 2009?

Obama and his minions got everything they asked for in 2009. They had both houses of Congress and they passed their plan, lock, stock and barrel. But somehow their Keynesian solutions led to greater poverty, 23% unemployment, and declining household income. Are you shocked that blacks and hispanics have almost three times the poverty of whites? When more than half your population is born out of wedlock and 50% of your kids drop out of high school and you depend on the government to pay your way in the world, what do you expect. At least they still have their Direct TV, cell phones, and SNAP cards.

The most revolting figure in the report is the real median household income of $49,445. This means 50% of the households in the U.S. make less than $49,445 per year. Below is a chart showing the real median household income going back to 1975. It is now lower than it was in 1997 and 6% below the peak, reached in 1999. Imagine the result if we used the real rate of inflation, rather that the government manipulated piece of shit called the CPI. My educated guess would be that real median household income is lower than it was in 1986.  

Year No. of Households Nominal $ Inflation Adjusted $
2009 117,538,000 $49,777 $49,777
2008 117,181,000 $50,303 $50,303
2007 116,783,000 $50,233 $52,163
2006 116,011,000 $48,201 $51,473
2005 114,384,000 $46,326 $51,093
2004 113,343,000 $44,334 $50,535
2003 112,000,000 $43,318 $50,711
2002 111,278,000 $42,409 $50,756
2001 109,297,000 $42,228 $51,356
2000 108,209,000 $41,990 $52,500
1999 106,434,000 $40,696 $52,587
1998 103,874,000 $38,885 $51,295
1997 102,528,000 $37,005 $49,497
1996 101,018,000 $35,492 $48,499
1995 99,627,000 $34,076 $47,803
1994 98,990,000 $32,264 $46,351
1993 97,107,000 $31,241 $45,839
1992 96,426,000 $30,636 $46,063
1991 95,669,000 $30,126 $46,445
1990 94,312,000 $29,943 $47,818
1989 93,347,000 $28,906 $48,463
1988 92,830,000 $27,225 $47,614
1987 91,124,000 $26,061 $47,251
1986 89,479,000 $24,897 $46,665
1985 88,458,000 $23,618 $45,069
1984 86,789,000 $22,415 $44,242
1983 85,407,000 $20,885 $42,910
1982 83,918,000 $20,171 $43,212
1981 83,527,000 $19,074 $43,328
1980 82,368,000 $17,710 $44,059
1979 80,776,000 $16,461 $45,498
1978 77,330,000 $15,064 $45,625
1977 76,030,000 $13,572 $43,925
1976 74,142,000 $12,686 $43,649
1975 72,867,000 $11,800 $42,936

 

The average family in the US is making much less money than they were 12 years ago. This supports John Williams contention that the US has virtually been in a decade long recession, despite what the government and main stream media report.

The situation continues to deteriorate. These families made up for their decline in income, by increasing their credit card, auto loan and student loan debt from $1.4 trillion in 1999 to $2.5 trillion today. Without jobs, incomes can’t rise. The Obama solution will be to funnel more of your money to those classified as in poverty. The only solution that will work is to liquidate the banks, liquidate the debt, wipe out those who made bad decisions, and start over. No one wants to accept the reality of this solution. It is too painful. It is mean and brutish. Tough shit. It is the only way. We could soften the blow by withdrawing our troops from around the globe, protecting our own borders and freeing up hundreds of billions in war spending for domestic purposes. What a concept – building bridges in the U.S. rather than rebuilding bridges we blew up in Iraq.

Otherwise we will continue on a path of ever declining income and bankers enriching themselves at our expense. But, at least I’m white. I got that going for me.

Income, Poverty and Health Insurance Coverage in the United States: 2010

Summary of Key Findings

     The U.S. Census Bureau announced today that in 2010, median household income declined, the poverty rate increased and the percentage without health insurance coverage was not statistically different from the previous year.

     Real median household income in the United States in 2010 was $49,445, a 2.3 percent decline from the 2009 median.

     The nation’s official poverty rate in 2010 was 15.1 percent, up from 14.3 percent in 2009 ─ the third consecutive annual increase in the poverty rate. There were 46.2 million people in poverty in 2010, up from 43.6 million in 2009 ─ the fourth consecutive annual increase and the largest number in the 52 years for which poverty estimates have been published.

     The number of people without health insurance coverage rose from 49.0 million in 2009 to 49.9 million in 2010, while the percentage without coverage −16.3 percent – was not statistically different from the rate in 2009.

     This information covers the first full calendar year after the December 2007-June 2009 recession. See section on the historical impact of recessions.

     These findings are contained in the report Income, Poverty, and Health Insurance Coverage in the United States: 2010. The following results for the nation were compiled from information collected in the 2011 Current Population Survey (CPS) Annual Social and Economic Supplement (ASEC):

Income

  • Since 2007, the year before the most recent recession, real median household income has declined 6.4 percent and is 7.1 percent below the median household income peak that occurred prior to the 2001 recession in 1999. The percentages are not statistically different from each another.

Race and Hispanic Origin (Race data refer to people reporting a single race only. Hispanics can be of any race.)

  • Among race groups, real median income declined for white and black households between 2009 and 2010, while changes for Asian and Hispanic-origin households were not statistically different. Real median income for each race and Hispanic-origin group has not yet recovered to the pre-2001 recession all-time highs. (See Table A.)

Regions

  • Households in the Midwest, South and West experienced declines in real median income between 2009 and 2010. The apparent change in median household income for the Northeast was not statistically significant. (See Table A.)

Nativity

  • Median income for households maintained by native-born householders declined between 2009 and 2010 in real terms. The change in the median income of all foreign-born households was not statistically significant. (See Table A.)

Earnings

  • In 2010, the earnings of women who worked full time, year-round were 77 percent of that for men working full time, year-round, not statistically different from the 2009 ratio. The 2010 real median earnings of these men and women were not different from the 2009 earnings.
  • Since 2007, the number of men working full time, year-round with earnings decreased by 6.6 million and the number of corresponding women declined by 2.8 million.

Income Inequality

  • Based on the Gini Index, the change in income inequality between 2009 and 2010 was not statistically significant, while the changes in shares of aggregate household income by quintiles showed a slight shift to more inequality. The Gini index was 0.469 in 2010. (The Gini index is a measure of household income inequality; zero represents perfect income equality and 1 perfect inequality.)

Poverty

  • The poverty rate in 2010 was the highest since 1993 but was 7.3 percentage points lower than the poverty rate in 1959, the first year for which poverty estimates are available. Since 2007, the poverty rate has increased by 2.6 percentage points.
  • In 2010, the family poverty rate and the number of families in poverty were 11.7 percent and 9.2 million, respectively, up from 11.1 percent and 8.8 million in 2009.
  • The poverty rate and the number in poverty increased for both married-couple families (6.2 percent and 3.6 million in 2010 from 5.8 percent and 3.4 million in 2009) and female-householder-with-no-husband-present families (31.6 percent and 4.7 million in 2010 from 29.9 percent and 4.4 million in 2009). For families with a male householder no wife present, the poverty rate and the number in poverty were not statistically different from 2009 (15.8 percent and 880,000 in 2010).

Thresholds

  • As defined by the Office of Management and Budget and updated for inflation using the Consumer Price Index, the weighted average poverty threshold for a family of four in 2010 was $22,314.
    (See <http://www.census.gov/hhes/www/poverty/data/threshld/index.html> for the complete set of dollar value thresholds that vary by family size and composition.)

Race and Hispanic Origin (Race data refer to people reporting a single race only. Hispanics can be of any race.)

  • The poverty rate for non-Hispanic whites was lower in 2010 than it was for other racial groups. Table B details 2010 poverty rates and numbers in poverty, as well as changes since 2009 in these measures, for race groups and Hispanics.

Doubled-Up Households

  • Doubled-up households are defined as households that include at least one “additional” adult: a person 18 or older who is not enrolled in school and is not the householder, spouse or cohabiting partner of the householder. In spring 2007, prior to the recession, doubled-up households totaled 19.7 million. By spring 2011, the number of doubled-up households had increased by 2.0 million to 21.8 million and the percent rose by 1.3 percentage points from 17.0 percent to 18.3 percent.
  • In spring 2011, 5.9 million young adults age 25-34 (14.2 percent) resided in their parents’ household, compared with 4.7 million (11.8 percent) before the recession, an increase of 2.4 percentage points.
  • It is difficult to precisely assess the impact of doubling up on overall poverty rates. Young adults age 25-34, living with their parents, had an official poverty rate of 8.4 percent, but if their poverty status were determined using their own income, 45.3 percent had an income below the poverty threshold for a single person under age 65.

Age

  • The poverty rate increased for children younger than 18 (from 20.7 percent in 2009 to 22.0 percent in 2010) and people 18 to 64 (from 12.9 percent in 2009 to 13.7 percent in 2010), while it was not statistically different for people 65 and older (9.0 percent).
  • Similar to the patterns observed for the poverty rate in 2010, the number of people in poverty increased for children younger than 18 (15.5 million in 2009 to 16.4 million in 2010) and people 18 to 64 (24.7 million in 2009 to 26.3 million in 2010) and was not statistically different for people 65 and older (3.5 million).

Nativity

  • The 2010 poverty rate for naturalized citizens was not statistically different from 2009, while the poverty rates of native-born and noncitizens increased. Table B details 2010 poverty rates and the numbers in poverty, as well as changes since 2009 in these measures, by nativity.

Regions

  • The South was the only region to show statistically significant increases in both the poverty rate and the number in poverty — 16.9 percent and 19.1 million in 2010 — up from 15.7 percent and 17.6 million in 2009. In 2010, the poverty rates and the number in poverty for the Northeast, Midwest and the West were not statistically different from 2009. (See Table B.)

Health Insurance Coverage

  • The number of people with health insurance increased to 256.2 million in 2010 from 255.3 million in 2009. The percentage of people with health insurance was not statistically different from 2009.
  • Between 2009 and 2010, the percentage of people covered by private health insurance declined from 64.5 percent to 64.0 percent, while the percentage covered by government health insurance increased from 30.6 percent to 31.0 percent. The percentage covered by employment-based health insurance declined from 56.1 percent to 55.3 percent.
  • The percentage covered by Medicaid (15.9 percent) was not statistically different from 2009.
  • In 2010, 9.8 percent of children under 18 (7.3 million) were without health insurance. Neither estimate is significantly different from the corresponding 2009 estimate.
  • The uninsured rate for children in poverty (15.4 percent) was greater than the rate for all children (9.8 percent).
  • In 2010, the uninsured rates decreased as household income increased from 26.9 percent for those in households with annual incomes less than $25,000 to 8.0 percent in households with incomes of $75,000 or more.

Race and Hispanic Origin (Race data refer to those reporting a single race only. Hispanics can be of any race.)

  • The uninsured rate and number of uninsured in 2010 were not statistically different from 2009 for non-Hispanic whites and blacks, while increasing for Asians. The number of uninsured Hispanics was not statistically different from 2009, while the uninsured rate decreased to 30.7 percent. (See Table C.)

Nativity

  • The proportion of the foreign-born population without health insurance in 2010 was about two-and-a-half times that of the native-born population. The 2010 uninsured rate was not statistically different from the 2009 rate for native-born, the foreign-born overall and noncitizens but rose for naturalized citizens. Table C details the 2010 uninsured rate and the number of uninsured, as well as changes since 2009 in these measures, by nativity.

Regions

  • The Northeast and the Midwest had the lowest uninsured rates in 2010. Between 2009 and 2010, there were no statistical differences in uninsured rates for any of the regions. The number of uninsured increased in the Northeast, while there were no statistically significant changes for the other three regions. (See Table C.)

Historical Impact of Recessions

Since 2010 represents the first full calendar year after the recession that ended in June 2009, one can compare changes in income, poverty and health insurance coverage between 2009 and 2010 with changes during the first year after the end of other recessions:

  • Median household income declined the first full year following the December 2007 to June 2009 recession, as well as in the first full year following three other recessions (March 2001 to November 2001, January 1980 to July 1980 and December 1969 to November 1970). However, household income increased the first full year following the November 1973 to March 1975 recession, and the changes following the July 1990 to March 1991 and July 1981 to November 1982 recessions were not statistically significant.
  • The poverty rate and the number of people in poverty increased in the first calendar year following the end of the last three recessions. For the recessions that ended in 1961 and 1975, the poverty rate decreased in the next full calendar year.
  •      After the most recent recession, there was no significant difference in the uninsured rate during the first full year after the recession. However, in the year following the recessions that ended in 1991 and 2001, the uninsured rate increased.

Supplemental Poverty Measure

     The Census Bureau’s statistical experts, with assistance from the Bureau of Labor Statistics and in consultation with the Office of Management and Budget, the Economics and Statistics Administration and other appropriate agencies and outside experts, are now developing a Supplemental Poverty Measure. The Supplemental Poverty Measure, for which the Census Bureau expects to publish preliminary estimates in October 2011, will provide an additional measure of economic well-being. It will not replace the official poverty measure and will not be used to determine eligibility for government programs. See Income, Poverty, and Health Insurance Coverage in the United States: 2010 for more information.

     The Current Population Survey Annual Social and Economic Supplement is subject to sampling and nonsampling errors. All comparisons made in the report have been tested and found to be statistically significant at the 90 percent confidence level, unless otherwise noted.

     For additional information on the source of the data and accuracy of the estimates for the CPS, visit <http://www.census.gov/hhes/www/p60_239sa.pdf>.

BERNANKE PLEDGES TO SCREW YOUR GRANDMOTHER FOR AT LEAST TWO MORE YEARS

“A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank.” – Ron Paul

  

I wonder what goes through Ben Bernanke’s mind as he sits in his gold plated boardroom in the majestic Marriner Eccles building in Washington DC and decides to screw grandmothers in order to further enrich Wall Street bankers. He just pledged to keep interest rates at zero percent for two more years. Ben is a supposedly book smart man. Does he have no guilt or shame for what he has wrought? How does he sleep at night knowing he has created bloody revolutions around the globe due to his inflationary zero interest policy? People are dying because he has decided that an elite group of Wall Street bankers who recklessly brought down the worldwide financial system in 2008 deserve to be kept alive and enriched at the expense of the many.

He uses words like transitory to describe inflation. Even as the price of gold reveals his lies he continues to promote policies that will lead to the demise of the USD and our economic system. There is only one way to counter his lies – truth. With a corporate fascist government run by the few for the benefit of the few, telling the truth is treason as stated by Ron Paul:

“Truth is treason in the empire of lies.”

The storyline being sold to you by Bernanke, his Wall Street masters, and their captured puppets in Washington DC is that deflation is the great bogeyman they must slay. They make these statements from their ivory jewel encrusted towers as the real people in the real world deal with reality. The reality since Ben Bernanke announced his QE2 policy in August 2010 is:

  • Unleaded gas prices are up 45%.
  • Heating oil prices are up 46%.
  • Corn prices are up 71%.
  • Soybean prices are up 26%.
  • Rice prices are up 13%.
  • Pork prices are up 31%.
  • Beef prices are up 25%.
  • Coffee prices are up 38%.
  • Sugar prices are up 48%.
  • Cotton prices are up 13%.
  • Gold prices are up 42%.
  • Silver prices are up 115%.
  • Copper prices are up 23%.

These are the facts and they fly in the face of the lies being spouted by Bernanke and his Federal Reserve cronies. Words like transitory, quantitative easing, extended period, and liquidity are used by Professor Bernanke to obscure what he is doing to the average American. He lives in a world of theories and models, while the rest of us live in the real world, where theories kill and impoverish millions. There are 40 million Americans over the age of 65 today. You might even know a few of them. There will be 10,000 people per day joining their ranks for the next nineteen years as the Baby Boomers retire en masse. The vast majority of these senior citizens are risk averse. Some disturbing facts reveal the true picture for seniors today:

  • Most senior citizens do not have a traditional pension plan because they have been going out of style over the past 30 years.  In 1980, some 39% of private-sector workers had a pension that guaranteed a steady payout during retirement. Today that number stands closer to 15%, according to the Employee Benefit Research Institute in Washington, D.C. 
  • 35% of Americans already over the age of 65 rely almost entirely on Social Security payments alone. 
  • Approximately 3 out of 4 Americans start claiming Social Security benefits the moment they are eligible at age 62.  Most are doing this out of necessity. This probably has something to do with the fact that the median retirement savings of households over the age of 65 is less than $45,000.   
  • The median household net worth of all Americans fell from $97,000 in 2005 to $70,000 in 2009. The median household net worth of households over 65 years old fell from $200,000 in 2005 to approximately $150,000 in 2009. Two thirds of seniors’ net worth is the equity in their primary residence, meaning they have $50,000 or less of financial assets (cash, stocks, bonds). 
  • 20% of all the households in the United States have zero or negative net worth.  

This data sets the scene for the crime of the century committed by Ben Bernanke and his co-conspirators on the Federal Reserve Board. The easiest way to understand how Ben has screwed seniors and savers to pay off his Wall Street and K Street benefactors is to use a real life example.

A seventy five year old widow living in her paid off row home, bought in 1955, gets by on her annual social security income of $17,000 and the income generated from the $125,000 in retirement savings left from her husband’s forty years working as a truck driver. She is a child of the Depression, financially unsophisticated and risk averse. This describes most senior citizens. The widow and her late husband were only comfortable investing their money in CDs and money market funds. In 2007, before the Wall Street created financial collapse, savers and risk averse senior citizens could earn 5% in a money market fund, 5.5% in a 2 year CD and 6% in a 5 year CD. The widow could supplement her meager social security income with an additional $6,000 of interest income. This money was used to pay the ever increasing real estate taxes, medical insurance premiums, upkeep on the old house, and necessities like food, fuel, insurance and heating.

Fast forward four years to 2011. Savers and seniors are getting average interest rates on 6-month CDs this week of 0.58% nationwide, according to Bankrate.com. Rates on one-year CDs fell this week to 0.86%, while 5- year CDs fetched 2.04%. Money market funds are paying a pitiful 0.16% on average. The widow that was able to generate a risk free $6,000 only four years ago has only been able to generate less than $500 per year for the last three years. In addition, the government manipulated CPI, as calculated by the drones at the Bureau of Labor Statistics, was used to deny senior citizens an increase in their Social Security payments for the last two years. Meanwhile, the prices of food, fuel, clothing, insurance, medical care, and local taxes have been skyrocketing due to Federal Reserve created inflation. Do you think the number of Americans on food stamps surging from 26.3 million in 2007 to 45.8 million today has anything to do with Bernanke’s zero interest rate, inflationary policies?

This is not a theoretical hypothesis. Ben Bernanke has purposely sacrificed the savers and seniors in this country at the satanic altar of his Wall Street high priests of debt. According to the BEA data on personal income, in the 3rd quarter of 2008 savers and seniors were able to earn $1.42 trillion of interest income. By the 3rd quarter of 2010 these same people were only able to earn $984 billion of interest income due to Ben Bernanke’s zero interest rate policy. Make no mistake about it, the $436 billion difference was taken out of the pockets of senior citizens and Americans trying to save for their futures and deposited into the accounts of the mega-Wall Street banks that destroyed our financial system with their reckless greed induced debt toga party. The beneficiaries of zero interest rates, QE1, QE2, and all future QEs are Wall Street bankers and heavily indebted entities – namely our profligate Federal Government, who make drunken sailors, seem fiscally responsible. The victims of zero interest rates and quantitative easing are savers and risk averse senior citizens as their income has plummeted and inflation has ravaged their everyday existence. Meanwhile, the Wall Street fat cats have paid themselves over $70 billion in bonuses since 2008.

The fantasy world of moderate inflation is a myth created by the Federal Reserve in conjunction with the government bureaucrats in Washington DC. These people have tortured the CPI calculation worse than a Muslim being water boarded at Guantanamo Bay. Alan Greenspan, bubble blower extraordinaire, began the process of systematically screwing grandmothers in the 1980s. As a way to hide and obscure the true level of inflation caused by running endless deficits supporting a welfare/warfare empire, Greenspan and Clinton implemented devious adjustments to the CPI in order to screw senior citizens and allow Big Government to get bigger while stealthily impoverishing the middle class. One man has pulled back the curtain on the Wizards of Inflation to reveal the truth. John Williams at www.shadowstats.com publishes the true rate of inflation as measured in 1980, prior to the fraudulent manipulation of the CPI. The reality is that inflation has not dropped below 5% since 1987 and currently exceeds 10%.

  

John Williams described the Greenspan/Clinton conspiracy to defraud Americans:

“The Greenspan argument was that when steak got too expensive, the consumer would substitute hamburger for the steak, and that the inflation measure should reflect the costs tied to buying hamburger versus steak, instead of steak versus steak. Of course, replacing hamburger for steak in the calculations would reduce the inflation rate, but it represented the rate of inflation in terms of maintaining a declining standard of living. Cost of living was being replaced by the cost of survival. The old system told you how much you had to increase your income in order to keep buying steak. The new system promised you hamburger, and then dog food, perhaps, after that. Over a period of several years, straight arithmetic weighting of the CPI components was shifted to a geometric weighting. The Greenspan benefit of a geometric weighting was that it automatically gave a lower weighting to CPI components that were rising in price, and a higher weighting to those items dropping in price.” 

Now we hear the latest bipartisan plan to “save” Social Security is to alter the CPI again and further defraud Americans by pretending inflation does not exist. Why address a problem when you can obfuscate, misinform and lie? Anyone with critical thinking skills can clearly see that since 2007 real inflation for our widow has ranged between 5% and 10%, while her subsistence level income has been slashed by 26% due to Ben Bernanke’s zero interest rate policy. The good news is our widow will have the peace of mind knowing the price of steak and hamburger hasn’t really risen as she decides on whether to dine on dog food or cat food tonight.

 

“Government spending is always a “tax” burden on the American people and is never equally or fairly distributed. The poor and low-middle income workers always suffer the most from the deceitful tax of inflation and borrowing.” – Ron Paul

 

The Road to Impoverishment & Authoritarianism

There is a direct connection between Federal Reserve policies and the impoverishment of the middle class and seniors. The average American does not appreciate the disastrous consequences of deficit spending and currency devaluation by the Federal Reserve. Ron Paul has been sounding the warning for over a decade, but no one has been listening:

“The greatest threat facing America today is the disastrous fiscal policies of our own government, marked by shameless deficit spending and Federal Reserve currency devaluation. It is this one-two punch– Congress spending more than it can tax or borrow, and the Fed printing money to make up the difference– that threatens to impoverish us by further destroying the value of our dollars.”

It is no longer a threat. It is reality. The chart below tells the story.

The Federal Funds rate was 6.5% when George W. Bush assumed the presidency in 2000. The economy was booming, unemployment was 4.2%, the country was running fiscal surpluses, and the National Debt stood at $5.7 trillion. Alan Greenspan was the Federal Reserve Chairman and had been in that position since 1987. The Federal Funds Rate averaged 5.25% from 1990 through 2000 as the country grew strongly and America came the closest to full employment in its history. In 2001 Greenspan set in motion the creation of a tsunami of debt that swept over the entire country in 2008. The short shallow 2001 recession convinced Greenspan to reduce rates to 1% and keep them below 3% until the middle of 2005. He did this with the full support of his right hand man at the Fed – Ben Bernanke.

“The failure of Chairman Greenspan and other FOMC members to address the fiscal and monetary problems of the United States during his almost two decades at the Fed has left the United States on a trajectory for economic stagnation, hyperinflation, and the attendant political and social costs of such policies.” – Chris Whalen – Inflated – How Money & Debt Built the American Dream 

Greenspan kept interest rates excessively low three years into an economic recovery, creating the largest bubble in world history. He handed the inflation baton to Bernanke in February 2006 and Ben has been sprinting at top speed for the last five years printing money faster than a Japanese bullet train. With a true rate of inflation running between 5% and 10% during the 2000 through 2011 time frame, market driven interest rates should have been in that same range. But Alan and Ben have kept the Federal Funds rate at an average level of 2.25% over this period. The result has been a consumer debt bubble, housing bubble and now a government debt bubble. Instead of accepting the consequences of excessive liquidity, excessive debt and mal-investment by the Wall Street banks and liquidating the toxic poison from our economic system with the resulting economic depression and losses borne by the stockholders and bondholders of the criminal Wall Street enterprises, Ben Bernanke and Tim Geithner chose to sacrifice the American taxpayer, savers, and seniors to keep their Wall Street masters in their NYC penthouses and Hamptons estates.

The shrieking liberal left blames capitalism and demands more social welfare benefits for their entitled constituents. The fact is we have not had true capitalism in this country since 1913.

“Capitalism should not be condemned, since we haven’t had capitalism. A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank.” – Ron Paul

 

The Day the Dollar Died – August 15, 1971

“With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people.” – F.A. von Hayak 

“The road paved with inflation and debt is also the road to authoritarianism.” – Chris Whalen – Inflated – How Money & Debt Built the American Dream 

On August 15, 1971, exactly forty years ago this week, Richard Nixon closed the gold window and removed the last vestiges of restraint on politicians and central bankers. Politicians were free to make promises that couldn’t be kept to buy votes and central bankers were free to print fiat dollars and create inflation to support an ever growing warfare/welfare state. On that date the non-manipulated CPI was 40.8. Today, forty years later, the highly manipulated CPI is 225.7, a 553% increase. In reality, true inflation has risen more than 700% since August 1971. Some other facts put this relentless inflation into perspective:

  • GDP has ascended from $1.1 trillion to $15.0 trillion today, a 1,364% increase in forty years.
  • The National Debt has risen from $400 billion to $14.5 trillion, a 3,625% increase in forty years.
  • Total wage income has grown from $588 billion to $6.627 trillion today, a 1,127% increase in forty years.
  • Consumer credit outstanding has accumulated from $141 billion to $2.446 trillion today, a 1,735% increase in forty years.
  • War spending has increased from $95 billion to $966 billion today, a 1,017% increase in forty years. The U.S. was in the midst of the Vietnam War in 1971.
  • Social welfare transfers from the Federal government for Social Security, Medicare, Medicaid, Veterans, and Unemployment increased from $87 billion to $2.305 trillion today, a 2,649% increase in forty years.

These facts prove how twisted and warped our economic system and society have become. Real wages are lower than they were in 1971 as families were forced to put two parents into the workforce forcing children to be raised by strangers, with the resultant social consequences. The corporate media, financial industrial complex and housing industrial complex convinced Americans they had to keep up with the Joneses with new luxury automobiles, extravagant McMansions, and the expensive accoutrements that went along with these representations of fake wealth. The financial plundering of the country by the peddlers of debt on Wall Street could not have happened without the easy money, no regulation policies of the Federal Reserve for the last decade. The National Debt is increasing at a rate of 10% per year while GDP is increasing at a rate of less than 2% per year. Anyone with even the most basic math skills can see this train is going to go off the tracks. Our spending on social welfare benefits has grown at a rate twice as high as our GDP growth for the last forty years and the establishment in Washington has no resolve to address these un-payable promises. The liberals squealed like stuck pigs over the horrific non-cuts in the recent joke debt ceiling compromise. The neo-cons who control the Republican agenda think $1 trillion per year for their war machine is far too little and endangers our very existence. Consumers refuse to accept the reality of their precarious existence balanced on the edge of their 13 credit cards.

Americans of all parties, ages, races, persuasions, education and beliefs have shirked their civic and moral responsibility to future generations. The rampant greed on Wall Street, corruption in Washington DC, shallowness of the American people and cowardice of all in not accepting responsibility for their actions will lead to the end of this country as we know it. There is no courage among the political class in Washington DC to truly take the steps required to save this country from the most predictable cataclysm in history. The politicians and citizens they represent have decided to delegate their civic responsibility to Ben Bernanke. He has tripled the Federal Reserve’s balance sheet by acquiring the toxic mortgage “assets” of the Wall Street banks and buying $600 billion of U.S. Treasuries. The Federal Funds Rate is .07%. His announcement of zero interest rates for two more years proves he has run out of theories and ammo. Jim Rickards, in 2010, pointed out the danger in Bernanke’s reckless policies:

“Fed Chairman Bernanke wakes up every morning and tries to trash the dollar with quantitative easing, zero interest rates and swap lines with the central banks. But it has not been working. The Fed has never taken it to the next step and asked what happens when quantitative easing does not work.”

The utter failure of QE2, hollow Congressional spending “cuts” that will keep the National Debt on track towards $23 trillion by 2021, S&P downgrade and recent plunge in the stock market are the first cracks in the façade of the great American Empire. We have entered a period of institutional crisis and this fiscal spiral will lead us further into the clutches of a more centralized authoritarian form of government unless the people stand up to the junta of mercantilist oligarchs that control this country. Do we want to relinquish our remaining freedoms and liberties for the cloak of corporate fascist authoritarian central planning disguised as safety and security? The Romans chose security over freedom. The time has come to make a choice about what we will become. Ben Franklin stated the obvious two centuries ago:

 Those who would give up Essential Liberty
to purchase a little Temporary Safety,
deserve neither Liberty nor Safety.

– Ben Franklin

 

LAND OF THE SETTING SUN

The linear thinkers that dominate the mainstream media and the halls of power in Washington D.C. are assessing the series of disasters in Japan without connecting the dots of history. Their ideological desire to convince people that things will go back to normal in short order flies in the face of the facts. It makes me wonder whether these supposed thought leaders lack true intelligence or whether their ideological biases convince them to lie. At the end of the day it comes down to wealth, power and control. If those in power were to tell the truth about the true consequences of demographics, debt, disasters, and devaluation, their subjects would revolt and toss them out. Before the multiple disasters struck Japan last week, the sun was already setting on this empire. The recent tragic events will accelerate that descent.  

 

Japanese Beetle Meet Windshield

 

Smart financial minds have been expecting a Japanese economic tsunami for the last few years. John Mauldin described Japan’s predicament in early 2010:

“I refer to Japan as a bug in search of a windshield. I am not so sure about the timing, however, as the economic and fiscal insanity that is Japan may be able to go on for longer than many think possible. But to me it is not a question of whether there will be a crisis, but when there will be one. This year? 2011? 2012? I doubt Japan makes it to the middle of the decade with a very serious and sad day of reckoning.

The downside to the continuation of running massive deficits is that when the break does come, it will be all the more painful and difficult to deal with as the debt mounts. If there is an upside, it is for the rest of the world to see what can happen to a developed country like Japan when massive deficits are allowed to pile up one after another. It will be a morality play writ large upon the walls, which cannot be dismissed.”

Ambrose Evans-Pritchard expected a 9.0 debt earthquake to strike Japan in 2010:

“Weak sovereigns will buckle. The shocker will be Japan, our Weimar-in-waiting. This is the year when Tokyo finds it can no longer borrow at 1% from a captive bond market, and when it must foot the bill for all those fiscal packages that seemed such a good idea at the time. Every auction of JGBs will be a news event as the public debt punches above 225% of GDP. Finance Minister Hirohisa Fujii will become as familiar as a rock star.

Once the dam breaks, debt service costs will tear the budget to pieces. The Bank of Japan will pull the emergency lever on QE. The country will flip from deflation to incipient hyperinflation. The yen will fall out of bed, outdoing China’s yuan in the beggar-thy-neighbor race to the bottom.”

Mr. Pritchard was either wrong or early, depending upon your point of view.  

                                       JAPAN INTEREST RATES

Japan can still borrow for 10 years at 1%. Despite the highest government debt as a percentage of GDP on the planet at 225%, Japan has not felt the wrath of the bond vigilantes. Not only did the Yen not fall out of bed, but it soared to a post-war high against the USD last week after the earthquake/tsunami. Investors drove the value of the yen higher, anticipating a huge rebuilding program in Japan. Japanese financial institutions would need to convert foreign assets into yen to pay for damage claims and construction expenses, a process that would strengthen the currency. In anticipation, investors piled into yen, helping drive up its value. Central banks across the globe intervened and weakened the currency, for the time being. When the world comes to its senses, the Yen will weaken on its own.

Japanese Yen (JPY) to 1 US Dollar (USD)

Debt & Demographics

 

Japan is a one trick pony that just broke two legs and is waiting to be put down. They have experienced a two decade long recession. Their stock market is still 70% below its 1990 peak. They have no natural resources. They allow virtually no immigration. And their population is in a death spiral. The one and only thing they have going for them is their phenomenal ability to manufacture high quality products and export them to the rest of the world. The earthquake and tsunami that struck Japan severely damaged their just in time manufacturing machine. A surging yen would destroy their export machine by making their products more expensive. Hundreds of high tech Toyota, Honda, and Sony factories are shut. Four hundred miles of ports and harbors have been wiped out. There are rolling blackouts, with one million households without electricity. Over 500,000 people are still homeless.

The short-term impact of this disaster will push Japan into recession. The rebuilding efforts over the coming years will create a positive GDP figure, but will not do anything to benefit Japan over the long haul. The billions designated to rebuild will be money not invested in a more beneficial manner. The linear thinkers conclude that over the long-term Japan will be OK. These people are ignoring the double D’s – Debt and Demographics. When Japan entered its two decades of recession and experienced the Kobe earthquake in 1995, its government debt stood at 52% of GDP. Today it stands at 225% of GDP. Twenty one years ago, the Japanese population was still relatively young, with only 12% of the population over 65 years old. The population of Japan peaked in 2004 and now is in relentless decline. Over 23% of the population is over 65 and the median age is 45 years old. For comparison, the median age in the U.S. is 37 years old, with only 13% over 65. The projection portion of the chart below paints a picture of death. The population of Japan is aging rapidly and will decline by 4.4 million, or 3.5% in the next ten years. 

Table 2.2 Trends in Population

The question I pose to the mainstream thinkers is, “How can a country with a rapidly aging population and nearly one quarter of its population over 65 years old generate the necessary dynamic enthusiasm for rebuilding a shattered country?” Youthful enthusiasm and hope for a brighter future is essential to any enormous rebuilding effort. Japan does not have it in them. News reports already indicate a lethargic and seemingly insufficient response by emergency workers. The devastation seems to have overwhelmed this aging country. The psychological impact of this type of natural disaster will likely have two phases. Psychology professor Magda Osman describes the expected human response:

“After a disaster, typically small communities become incredibly co-operative and pull together to help each other and start the rebuilding process. There’s an immediate response where people start to take control of the situation, begin to deal with it and assess and respond to the devastation around them. The problem is that we aren’t very good at calculating the long-term effects of disasters. After about two months of re-building and cleaning up we tend to experience a second major slump when we realize the full severity of the situation in the longer term. This is what we need to be wary of because this triggers severe depression.”

This would be the normal response of a traumatized populace. An aged populace is likely to experience worse depression and not bounce back from this tragedy. Japan is still the 10th most populated country on earth, with the 3rd largest economy. China just passed Japan to become the 2nd biggest economy in the world. India will pass Japan by 2012.

Table 2.1 Countries with a Large Population (2009)

Youthful countries across the world are gaining on Japan. The wisdom of the elderly doesn’t cut it in a global economy. Global competition is cutthroat. China, India and the other emerging Asian countries will take advantage of Japan’s misfortune by filling the hole left by Japanese manufacturers. The short-term issues of power, supply lines, and reconstruction are minor when compared to a mass die off of the Japanese population that will result in a population that is 25% smaller in 2050 than it is today. Demographics are a bitch. 

Figure 2.4 Proportion of Elderly Population by Country (Aged 65 years and over)

With the amount of debt hanging over the Japanese empire, it might be a good strategy to commit hari-kari. The non-thinking pundits on CNBC contend that since Japan hasn’t had any detrimental effects from running their debt to 225% of GDP, running it to 300% won’t be a problem. Reinhart and Rogoff studies concluded that once a country breaches the 90% level, growth slows and a debt crisis is likely to ensue. Japan has been stuck in a 20 year recession, as they chose Keynesian shovel ready projects, quantitative easing, currency manipulation, and covering up the true financial condition of its banks over accepting the consequences of a debt bubble. Remind you of anyone? The result is their real GDP is lower today than it was in 1995. The Paul Krugmans of the world would contend that they just didn’t spend enough.

 

The only reason Japan has not collapsed is due to its homogeneous population willing to buy virtually all of the debt issued by its government for the last twenty years and its prodigious ability to produce high quality products that the rest of the world wants. Japan has maintained a consistent trade surplus, and its government debt has been held mainly by its own people, with 95% of Japanese government bonds in the possession of Japanese, meaning the country was able to finance itself without depending upon fickle foreign investors who might prefer a return greater than 1%. This ain’t 1990. The savings rate of the Japanese population had already declined from 14% in 1990 to 2% by 2008. In a recent article, Mike Shedlock explained the situation prior to the recent devastation:

“The Government Pension Investment Fund, which oversees 117.6 trillion yen ($1.4 trillion), in September forecast that it would sell 4 trillion yen in assets in the business year ending March 31 to fund payouts. Sales by the fund, which helps oversee public pension funds for Japan’s 37 million retirees, come as the first of Japan’s baby boomers is set to turn 65 in 2012, making them eligible for pension payments. Japan choices are to default on its debt, print money to fund interest on the debt, raise taxes effectively robbing savers of their money, or undertake huge spending cuts. The dilemma stems from years of Keynesian and Monetarist stupidity.”

The new tragedy will just accelerate the conversion of Japanese savers into forced spenders. Millions of Japanese savers will be forced to spend their savings on survival, as many have lost their jobs and businesses due to the monumental damage to northern Japan.

Setting Sun – Race to the Bottom

 

Traders figured out what must happen over the coming years. A large swath of Japanese insurers and companies will begin repatriating assets held in other currencies to begin the rebuilding effort at home, driving the value of the Yen higher. At a time of crisis a stronger Yen would severely damage Japan’s export based economy even further. Therefore, Central Banks around the world jointly intervened. The Bank of Japan spent Y2 trillion ($25 billion), while central banks across Europe contributed $5 billion and the Federal Reserve spent $600 million to push down the yen on Friday. The Bank of Japan is doing what they do best – printing money. Quantitative easing is an art form perfected by all Central Banks across the globe. Every disaster over the last twenty years, whether man made (wars, internet collapse, housing collapse, debt meltdown) or caused by nature, are met with the exact same solution – PRINT MONEY.

This method works until it doesn’t work. Japan’s central bank cannot reverse the demographics. From this point forward the population of Japan will be net sellers of government debt. Japanese insurance companies will be on the hook for $33 billion in claims. They will need to sell government bonds in order to make those payments. The World Bank has estimated the cost of rebuilding to be $235 billion. The government will need to borrow this money. At least 30% of its energy needs are off-line. It already imports 95% of its oil and coal. They will need to increase energy imports to make up for the nuclear energy shortage. Its positive trade balance was already in decline.  The clueless CNBC pundits can drone on about how this natural disaster will be good for the Japanese economy because of the substantial rebuilding program, but they are dead wrong. Japan is trapped, with no way out. They will need to issue hundreds of billions in new debt, which cannot be bought by its citizens, pension funds, or insurance companies. How many foreign investors will buy a 10 Year Japanese government bond paying 1%, knowing that Japan wants to weaken its currency? NONE. The only choices are to raise interest rates to attract buyers or print more money. With an already suffocating level of debt, they can’t allow interest rates to rise. They would choke on the interest.

The Bank of Japan will follow the same script as Ben Bernanke. They will print new Yen and buy the newly issued debt. What an original idea. Japan is caught in a debt stranglehold and demographic nightmare. Their currency will ultimately collapse like a nuclear reactor after a tsunami. When Japan defaults on their debt, the pain will be intense, as they will be throwing their own aged population under the bus. America, on the other hand, will throw the whole world under the bus when we default.

The Japanese own $886 billion of US Treasuries and have bought $256 billion of our debt since October 2008. Timmy Geithner will need to issue $1.5 trillion of new bonds per year. Japan will no longer be a buyer. They will be a seller. This will put upward pressure on U.S. interest rates. Japan’s reconstruction needs will put pressure on commodity and energy prices. Production and supply problems for Japanese parts and goods are already creating problems for GM and other car companies in the U.S. Lack of supply leads to higher prices. The great earthquake/tsunami/nuclear meltdown of 2011 will result in more quantitative easing in Japan and the U.S. This will result in even more inflation than we are experiencing today. Once the inflation genie is out of the bottle, the race to the bottom will accelerate. Gold will decide who wins the race. It has been a neck and neck race since 2001. I’m not sure it is a race anyone wants to win. But the destination is certain.

 

“The endeavors to expand the quantity of money in circulation either in order to increase the government’s capacity to spend or in order to bring about a temporary lowering of the rate of interest disintegrate all currency matters and derange economic calculation.” – Ludwig von Mises

THE GATHERING STORM

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

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

 

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

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

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

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

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

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

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

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

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

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

It’s a Matter of Trust

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Volcanic Eruption

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

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

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

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

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

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

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

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

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

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

Prophecy or Destiny

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

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

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

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

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

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

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

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

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

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

Bad Moon Rising

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

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

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

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

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

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

Credence Clearwater Revival – Bad Moon Rising

AMERICAN EULOGY (Featured Article)

The Founding Fathers described the kind of country they were shaping on July 4, 1776 with the most well known sentence in the English language:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. – Declaration of Independence

In 1776, America was an idea born of noble intentions. An idea that every citizen had the opportunity to succeed, prosper and achieve based upon their hard work and abilities. The government did not provide advantages or a safety net for its citizens. People were free to succeed or fail based upon their own merits. America had a frontier spirit because it was still a frontier. Individual effort, intellect and willingness to sweat allowed you to move up the socio-economic ladder. The government provided a National Defense, and very little else. In 1794, the country had a population of 4.4 million and a GDP of $310 million. Government spending totaled $7.1 million, or 2.3% of GDP, and was split between Defense and interest on the Revolutionary War debt. Today, Federal Government spending totals $3.7 trillion, or 25% of GDP.

James Truslow Adams in his 1931 Epic of America described the America that once existed in reality, but only exists as a phantom today: 

“The American Dream is that dream of a land in which life should be better and richer and fuller for every man, with opportunity for each according to ability or achievement. It is a difficult dream for the European upper classes to interpret adequately, also too many of us ourselves have grown weary and mistrustful of it. It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.”

“The American Dream that has lured tens of millions of all nations to our shores in the past century has not been a dream of material plenty, though that has doubtlessly counted heavily. It has been a dream of being able to grow to fullest development as a man and woman, unhampered by the barriers which had slowly been erected in the older civilizations, unrepressed by social orders which had developed for the benefit of classes rather than for the simple human being of any and every class.” – James Truslow Adams – Epic of America

His assessment of the American Dream was made in 1931. He saw signs that the American Dream had begun to die. He was right. The American Dream began to develop a terminal illness in 1913 with the creation of the Federal Reserve and the passage of the 16th Amendment to the Constitution, creating a permanent income tax.

Song of the Century

Sing us a song of the century
It sings like American Eulogy
The dawn of my love and conspiracy
Forgotten hope and the class of 13
Tell me a story into that goodnight
Sing us a song for me – American Eulogy – Green Day

 

At the outset of the last century America was still a vital, free, growing country on the rise. The song of the century began as a joyous ballad and ended as a funeral dirge. The creation of a Central Bank, which could create inflation on demand, and allowing politicians the ability to buy votes through pork spending, paid for with ever increasing taxation, have sucked the life out of the American Dream. According to the Federal Reserve’s own website, their mandates were clear. Below are those mandates and an assessment of their success.

Conducting the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates.

  •  Due to loose monetary policy in the 1920’s, the Federal Reserve created a stock bubble, a stock market crash of 89%, a decade long Great Depression, and unemployment of 25% in the 1930’s.
  • Due to loose monetary policies in the 1970’s, the Federal Reserve created raging inflation that reached 14% in the early 1980’s and needed to raise interest rates to 18% in order to break the back of inflation, resulting in unemployment surging to 9.7% in 1982.
  • Due to loose monetary policies in the early 2000’s, the Federal Reserve created the largest housing bubble in history, with the subsequent collapse bringing the financial system to within hours of collapse, and driving unemployment to 9.9% in 2009.
  • Due to the loosest monetary policy in history, today, inflation has begun to rage across the globe, leading to riots, protests and bloody revolutions, with more on the way.
  • The Federal Reserve has achieved their stable prices mandate by inflating away 96% of the purchasing power of the US dollar in less than 100 years. The price of gold continues to soar, as faith in the US dollar diminishes by the minute. I guess stability is in the eye of the beholder. 

Supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers.

Historical US Bank Failures thru 2010

  •  The Federal Reserve’s supervisory and regulatory expertise can be observed in the graph above. This graph doesn’t do the Fed justice, as it begins in 1934. Sixteen years after its origination, the Fed managed to let 10,000 out of 25,000 banks in the country fail between 1929 and 1932.
  • Their glorious history also includes residing over the failure of 2,800 banks during the 1980’s S&L crisis.
  • While protecting their mega-bank Wall Street masters, the Fed has allowed over 300 small banks to go under so far. There are 900 banks on the troubled list that will eventually meet their maker.  

Maintaining the stability of the financial system and containing systemic risk that may arise in financial markets.

  • Generally, maintaining the stability of the financial system and containing systematic risk doesn’t include allowing the worldwide financial system to come within hours of collapse as described by Rep. Paul Kanjorski:

    • “On Thursday [the 18th], at about 11 o’clock in the morning, the Federal Reserve noticed a tremendous drawdown of money market accounts in the United States to a tune of $550 billion being drawn out in a matter of an hour or two. The Treasury opened up its window to help. They pumped $105 billion into the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks.

    They decided to close the operation, close down the money accounts, and announce a guarantee of $250,000 per account so there wouldn’t be further panic and there. And that’s what actually happened. If they had not done that their estimation was that by two o’clock that afternoon, $5.5 trillion would have been drawn out of the money market system of the United States, would have collapsed the entire economy of the United States, and within 24 hours the world economy would have collapsed.

    Now we talked at that time about what would have happened if that happened. It would have been the end of our economic system and our political system as we know it.”

Providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system.

  • It seems this is the only mandate the Federal Reserve has taken seriously is providing services to its owners, the banks. Did the bankers and politicians that met on Jekyll Island to mastermind this Central Bank envision that those services would include: buying $1.5 trillion of toxic mortgages from the banks; allowing the mega-banks to borrow from the Fed at 0% and reinvest those funds at 2.5% risk free; pumping $600 billion directly into the stock market through their QE2 scam; allowing banks to falsely overstate the value of their mortgage and commercial loans; and never ever enforcing basic risk management regulations.
  • While providing Wall Street banks with billions of unearned risk free profits, 0% interest rates further impoverish the savers and senior citizens of the country. The Federal Reserve has fulfilled their unstated mandate of enriching bankers at the expense of middle class Americans.  

To strengthen U.S. standing in the world economy.

  • The Federal Reserve’s affect on the world economy is best revealed in a pictorial tribute to their policies:

                                    TUNISIA

                                     ALGERIA

                                         EGYPT

The Federal Reserve has not been alone in killing the American Dream. Politicians since 1913 have done their part in suffocating the dream. The tax code consisted of 400 pages in 1913 and tax rates ranged from 1% to 7%. In less than a century politicians of both parties have carved out 70,000 pages of payoffs, entitlements, and bribes for their contributors and constituents. Tax rates now range from 10% to 35%. Those 70,000 pages of rules, regulations and tax breaks do not benefit the average middle class American. They benefit those who had the money and power to buy off a Congressman.

The Federal Reserve and the US Tax Code bastardized the American Dream, created barriers to economic advancement, and supported the accumulation of wealth and power by a select few. The ruling elite have used their power and control over the media to convince the majority of Americans that the American Dream is about accumulating material possessions with debt. The American Dream no longer meant attaining the fullest measure of your capabilities, but living in the biggest McMansion, driving the nicest BMW, watching the biggest TV and wearing the latest fashions, all acquired with debt. America is dying. 

Mass Hysteria

Red alert is the color of panic
Elevated to the point of static
Beating into the hearts of the fanatics
And the neighborhood’s a loaded gun
Idle thought lead to full-throttle screaming
And the welfare is asphyxiating
Mass confusion is all the new age and it’s creating a feeding ground for the bottom feeders of hysteria

Hysteria, mass hysteria!
Mass hysteria!
Mass hysteria!
Mass hysteria! –  American Eulogy – Green Day

 

Green Day captures the essence of America since the turn of the century. The country has been in the throes of mass hysteria since 9/11. The once independent, self sufficient individualists that populated this country have become dependent, government reliant, quivering shadows of the frontiersmen that created this country. In the name of safety and security, the American people have allowed their government to accumulate complete control over every aspect of our lives. Only a country in the grip of mass hysteria would allow their leaders to run the National Debt from $5.8 trillion to $14.1 trillion in less than 10 years. Only a country in the clutches of mass hysteria could believe they could get rich by trading internet stocks and houses to a greater fool. Only a country seized by mass hysteria would allow its leaders to promote democracy at the point of a cruise missile as we continue to fight $3 trillion wars in the Middle East, while nearly tripling the amount spent on Defense to more than $1 trillion per year.

 Defense Budget Breakdown for 2011

Defense-related expenditure 2011 Budget request & Mandatory spending Calculation
DOD spending $721.3 billion Base budget + “Overseas Contingency Operations”
FBI counter-terrorism $2.7 billion At least one-third FBI budget.
International Affairs $10.1–$54.2 billion At minimum, foreign arms sales. At most, entire State budget
Energy Department, defense-related $20.9 billion  
Veterans Affairs $66.2 billion  
Homeland Security $54.7 billion  
NASA, satellites $3.4–$8.5 billion Between 20% and 50% of NASA’s total budget
Veterans pensions $58.4 billion  
Other defense-related mandatory spending $7.5 billion  
Interest on debt incurred in past wars $114.8–$454.2 billion Between 23% and 91% of total interest
Total Spending $1.060–$1.449 trillion  

 

If you had told someone on September 10, 2001 that ten years later America would be running $1.5 trillion annual deficits, fighting two wars of choice in countries that despise our presence, and had not only not addressed the $100 billion of unfunded welfare liabilities but added billions more with Medicare D and Obamacare, they would have thought you were a crazy doomster predicting the end of the world. They would have put you away in a padded cell if you had further predicted that politicians would cut taxes three separate times, that the Wall Street banks that leveraged themselves 40 to 1 and destroyed the financial system were handed $2 trillion of taxpayer funds so they could pay themselves multi-million dollar bonuses, and that the Federal Reserve would triple its balance sheet to $2.45 trillion by running its printing presses at hyper-speed and handing the money to those same Wall Street Mega-Banks. 

What caused the mass hysteria that has destroyed the soul of America? Was it just the madness of crowds? Or was it something more sinister? 

True sounds of maniacal laughter
And the deaf-mute is misleading the choir
The punch-line is a natural disaster
And it’s sung by the unemployed
Fight fire with a riot
The class war is hanging on a wire because the martyr is a compulsive liar
When he said “it’s just a bunch of niggers throwing gas into the ….” – American Eulogy – Green Day

Whenever an act doesn’t make sense and seems irrational, you need to ask yourself, “who benefits?” Who has benefitted from the hysteria? The answer is in plain sight. The moneyed interests benefitted. The military industrial complex benefitted. The Federal Government bureaucracy benefitted. Wall Street bankers benefitted. Mega-corporations and their CEOs benefitted. The top 1% ruling elite gained more wealth and more power. They created the mass hysteria with the assistance of their corporate owned mainstream media and completed their pillaging of the middle class with the cooperation of regulators, rating agencies and their ultimate weapon, the privately owned Federal Reserve bank, that has enriched its owners while impoverishing those whose only aspiration was to do an honest day’s work, raise their families, and live in relative comfort, safety, and happiness.

I Don’t Wanna Live In The Modern World

I don’t wanna live in the modern world!
I don’t wanna live in the modern world!
I don’t wanna live in the modern world!
I don’t wanna live in the modern world!

I am a nation without bureaucratic lies
Deny the allegation as it’s written (fucking lies!)

I want to take a ride to the great divide
Beyond the “up to date” and the neo-gentrified
The high definition for the low resident
Where the value of your mind is not held in contempt
I can hear the sound of a beating heart
That bleeds beyond a system that’s falling apart
With money to burn on a minimum wage
I don’t give a shit about the modern age – American Eulogy – Green Day

 

The modern world in no way resembles the world  James Truslow Adams wrote so passionately about in 1931. Green Day’s version of bureaucratic lies, high definition TVs for the poor, contempt for those who use their minds, and a debt flooded system that is falling apart is an accurate assessment of America today. The modern world is ruled by the few with wealth and power, sustained by government. The misinformation and propaganda dished out by the mainstream media creates a smokescreen that obscures who wields the true power in this country. The corporate mainstream media has done such a good job spreading the Big Lie that a vast number of Americans actually admire and worship the ultra-rich.

Most Americans still believe the fairy tale of the American Dream, that no matter how humble your beginnings, everyone has a fair chance to become rich in America. The truth is that the wealthy ruling class owns the country. The top 1% control 43% of the financial wealth of the nation. The top 10% control 83% of the financial wealth of the nation. There is a  misperception that the ultra-rich earn their wealth. The facts show otherwise. In 2008, only 19% of the income reported by the 13,480 individuals or families making over $10 million came from wages and salaries. Remember the financial crisis of 2008-2009 that wiped out 7 million jobs, cut the value of many homes in half, and required a taxpayer bailout of Wall Street? According to research done by economist Edward Wolff, “there has been an “astounding” 36.1% drop in the wealth (marketable assets) of the median household since the peak of the housing bubble in 2007. By contrast, the wealth of the top 1% of households dropped by far less: just 11.1%. So as of April 2010, it looks like the wealth distribution is even more unequal than it was in 2007.”

Source: William Domhoff

The bottom 90% own less than 19% of stocks and mutual funds in the country. Reality is that the 10% richest Americans own the country. The top 1% control 50% of the investment assets and only 5% of the total debt in the country. The bottom 90% control 12% of the investment assets and are burdened with 73% of the total debt. You can clearly see that the Wall Street bailout and the current Federal Reserve QE2 plan to boost stock prices have only benefitted the top 10% richest Americans. What is good for Wall Street is  not good for Main Street. The American middle class has been lured into debt by the purveyors of debt, the ultra-rich elite who control the financial industry. The further into debt the bottom 90% descend, the greater the enrichment of the ruling class. This is why Wall Street shysters, political hacks and the corporate mainstream media have urged Americans to whip out those credit cards and “Save America” by spending money they don’t have, again. It is reminiscent of President Bush’s heartfelt plea to the American public to defeat terrorism by buying a GM car with 0% down.

The propaganda that is constantly pounded into the brains of Americans about “death taxes” and the rich paying more than their fair share of taxes is part of the Big Lie perpetrated by the powerful ruling class. The “huge” issue of estate tax impacts only the few thousand richest Americans.  According to a study published by the Federal Reserve Bank of Cleveland, only 1.6% of Americans receive $100,000 or more in inheritance. Another 1.1% receive $50,000 to $100,000. On the other hand, 91.9% receive nothing (Kotlikoff & Gokhale, 2000). The richest families in the country provide the funding for the mainstream media propaganda needed to eliminate estate taxes.

 The lies about the ultra-rich paying more than their fair share of taxes are refuted in the graph above. The top 1% actually pays a lower percentage of their income than the next 9%. The tax code isn’t 70,000 pages for nothing. The ultra-rich have used their wealth to great advantage by having loopholes and tax dodges inserted into the tax code by their bought off congressmen. The average American can’t afford high powered tax specialists and lawyers to help them stash their wealth in off-shore tax havens in the Caribbean and Switzerland. The consistent theme in America today is that the middle class gets screwed and the ultra-rich ruling class accumulates more wealth and power.

The Death of America

“Remember, democracy never lasts long. It soon wastes, exhausts, and murders itself. There never was a democracy yet that did not commit suicide.” – John Adams

Two hundred and thirty five years ago, our Founding Fathers declared that we all had the unalienable rights of life, liberty and the pursuit of happiness. These rights have been restricted and bastardized over two centuries. Liberties have been severely restricted as your government tracks you through your social security number, is able to monitor your phone and internet communications, and regulates your education, healthcare, business, and a thousand other daily activities. The right to happiness was based upon James Treslow Adams’ view that we were free to attain “the fullest stature of which they are innately capable”. The happiness of becoming a success through your individual exertion, intelligence and efforts has been subverted by the happiness of material goods acquired through the use of debt, peddled by the ruling class.

The American Dream where every person had the opportunity to live a richer and fuller life began to die in 1913. Every generation born in this country had an excellent chance to live a better life than their parents. Relentless progress was the American way. I have three teenage sons. Based on the actions of this country’s ruling oligarchy, I doubt that my sons will live a richer and fuller life than myself. The debts are too extreme, the military overreach too excessive, the looting by the financial class too great, the political corruption too extensive, and the opportunities too few. The dream of a social order where everyone could rise to the highest level of their capabilities regardless of their birth has been systematically squashed. With 66% of households making less than $65,000 and college costs out of reach for 80% of Americans without incurring crushing levels of debt, the chances for most Americans to climb the social ladder through educational advancement are nil. Even if they do graduate from college, the CEOs in corporate America, who “earn” 300 times the average worker, have outsourced their jobs to China and India.

 The ruling class provides their children with private schooling and necessary preparation to keep their place in the social order. Wealth begets wealth. The elite send their kids to the elite Ivy League schools and use their connections with their fellow ruling elite to get them jobs on Wall Street, the prestigious connected corporations or government jobs in Washington DC. The wealth of the few has erected barriers to advancement of the many. America has progressively become a stratified class oriented society that has begun to spiral downward as the ruling class has gone too far. The revolutions flaring across the globe are occurring because the ruling class went too far and took too much. The ruling class in America should take note. They have shattered the American Dream and the retribution from those who have been swindled will be unexpected and violent.

http://www.youtube.com/watch?v=bunhVPAXcJA

THE GREAT DELEVERAGING LIE

You can’t open a newspaper or watch a business news network without seeing or hearing that consumers and businesses have been de-leveraging. The storyline as portrayed by the mainstream media is that consumers and corporations have seen the light and are paying off debts and living within their means. Austerity has broken out across the land. Bloomberg peddled this line of bull last week:

US Household Debt Shrank 1.5% in the Second Quarter

American households pared their debts last quarter, closing credit card accounts and taking out fewer mortgages as unemployment persisted near a 26-year high, a survey by the Federal Reserve Bank of New York showed.Consumer indebtedness totaled $11.7 trillion at the end of June, a decline of 1.5 percent from the previous three months and down 6.5 percent from its peak in the third quarter of 2008, according to the New York Fed’s first quarterly report on household debt and credit.The report reinforces forecasts for a slowing economy in the second half of 2010 as consumers hold back on spending and rebuild savings.

One has to wonder whether the mainstream media and the clueless pundits on CNBC actually believe the crap they are peddling or whether this is a concerted effort to convince the masses that they have done enough and should start spending. Consumer spending as a percentage of GDP is still above 70%. This is well above the 64% level that was consistent between 1950 and 1980. Consumer spending was entirely propped up by an ever increasing level of debt. The American economy will never recover until consumer spending drops back to the 64% range that indicates a balanced economic system. For the mathematically challenged on CNBC and in the White House, this means that consumers need to reduce their spending by an additional $850 billion PER YEAR. Great news for the 1.5 million retailers in America.

Below is a chart that shows total credit market debt as a % of GDP. This chart captures all of the debt in the United States carried by households, corporations, and the government. The data can be found here:

http://www.federalreserve.gov/releases/z1/current/accessible/l1.htm

Total credit market debt peaked at $52.9 trillion in the 1st quarter of 2009. It is currently at $52.1 trillion. The GREAT DE-LEVERAGING of the United States has chopped our total debt by 1.5%. Move along. No more to see here. Time to go to the mall. Can anyone in their right mind look at this chart and think this financial crisis is over?

During the Great Depression of the 1930’s Total Credit Market Debt as a % of GDP peaked at 260% of GDP. As of today, it stands at 360% of GDP. The Federal Government is adding $4 billion per day to the National Debt. GDP is stagnant and will likely not grow for the next year. The storyline about corporate America being flush with cash is another lie. Corporations have ADDED $482 billion of debt since 2007. Corporate America has the largest amount of debt on their books in history at $7.2 trillion.

Now we get to the Big Lie about frugal consumers paying off debts, cutting up those credit cards, and eating Raman noodles 5 nights per week. Household and non-profit debt, which includes mortgages, credit card debt, auto loans, home equity loans, and student loans peaked at $13.8 trillion in 2008. After two years of supposed deleveraging, frugality and mass austerity, the balance is $13.5 trillion. Consumers have buckled down and have paid off 2.2% of their debts, it seems. Not exactly going cold turkey, but it is a start.

But wait. Consumer debt outstanding is $300 billion lower. If you hadn’t noticed, the banks in the United States have been taking a few losses on their loans over the last couple years. A simple search of the Federal Reserve website reveals that banks have charged off 5.66% of all their loans in the last two years. The charge off rate in the 2nd quarter of 2010 was 6.66%. To verify for yourself go to the Federal Reserve website:

http://www.federalreserve.gov/releases/chargeoff/chgallsa.htm

So, let’s get down to the nitty gritty. If consumer debt was $13.8 trillion at the end of 2008 and the banks have since written off 5.66% of that debt, total write-offs were $800 billion. If total consumer debt now sits at $13.5 trillion, then consumers have actually taken on $500 billion of additional debt since the end of 2008. The consumer hasn’t cut back at all. They are still spending and borrowing. It is beyond my comprehension that no one on CNBC or in the other mainstream media can do simple math to figure out that the deleveraging story is just a Big Lie.

The truth is that the debt has simply been shifted from criminal Wall Street Banks to the American taxpayer. These consumer debts were created in a private transaction between individuals and these banks. When the loans went bad, the consumer should have lost their home, car, etc., and their credit rating should have been ruined, keeping them out of the credit market for a number of years. If the banks that made these bad loans made too many, they should have failed and had their assets liquidated in bankruptcy. Instead, the Federal Government has inserted the American taxpayer into the equation by using our tax dollars to prop up insolvent Wall Street banks and allowing screw-ups who took on too much debt to live in houses for over two years without making a mortgage payment.

The Big Lie will eventually lose out to the grim truth. America’s economy is built on a debt based foundation of sand and the tide of reality is relentlessly eating away at that foundation of debt. Collapse is just a matter of time. The charts below from the Federal Reserve paint a grim picture of reality.

Total Debt Balance and its Composition

Total Balance by Delinquency Status

New Seriously Delinquent Balances by Loan Type