Greece – Page 6 – The Burning Platform

EPIC FAIL – PART ONE

“Facts are to the mind what food is to the body.” – Edmund Burke

No wonder one third of Americans are obese. The crap we are shoveling into our bodies is on par with the misinformation, propaganda and lies that are being programmed into our minds by government bureaucrats, corrupt politicians, corporate media gurus, and central banker puppets. Chief Clinton propaganda mouthpiece, James Carville, famously remarked during the 1992 presidential campaign that, “It’s the economy, stupid”. Clinton was able to successfully convince the American voters that George Bush’s handling of the economy caused the 1991 recession. In retrospect, it was revealed the economy had been recovering for months prior to the election. No one could ever accuse the American people of being perceptive, realistic or critical thinking when it comes to economics, math, history or distinguishing between truth or lies. Our government controlled public school system has successfully dumbed down the populace to a level where they enjoy their slavery and prefer conscious ignorance to critical thought.

The next six months leading up to the November elections will surely provide a shining example of the degraded society we’ve become. Both parties and their propaganda machines, SuperPacs, and corporate media sponsors will treat the igadget distracted masses to hundreds of hours of lies, spin, and vitriol, designed to divert the public from the fact that both parties act on behalf of the same masters and have no intention of changing course of the U.S. Titanic to avert the iceberg dead ahead. We will be treated to storylines about race, gun control, the war on women, energy independence, global warming, the war on terror, the imminent threat of Iran and North Korea, Obamacare, Romneycare, and of course the economy, stupid.

There are 240 million voting age Americans. About 130 million will likely vote in the 2012 election based upon recent voter participation results. This means that 110 million Americans don’t give a crap about who runs this country or they’ve come to their senses and realize our votes don’t matter. Between 1840 and 1900 voter participation ranged between 70% and 82% as Americans took their civic duty seriously and believed their vote counted. Since 1913, when the politicians relinquished control of our currency to a private bank controlled by a small group of powerful men, voter participation for President has ranged between 49% and 62%. It hasn’t surpassed 57% since 1968. Now that corporations are people and our candidates are selected by a few rich men, the transformation from a republic to a corporate fascist state is almost complete. During the coming interminable political campaign you will hear about jobs until your ears bleed. I can guarantee that 98% of the rhetoric will be false. Neither party wants the American people to understand the truth about what happened to our economy and jobs over the last 100 years. It has been a bipartisan screw job and ignoring the facts doesn’t change them.

The first fact that can’t be ignored is how many Americans are actually unemployed today. Here is some truth you won’t get from a politician or media talking head:

There are 243 million working age Americans.
There are 142 million employed Americans.
Only 101 million of the employed Americans are working more than 35 hours per week. This means that only 41.6% of all working age Americans have a full-time job.
According to the government drones at the BLS, 88 million Americans have “chosen” to not be in the labor force – the highest level in U.S. history.
The percentage of Americans in the workforce at 63.8% is the lowest since 1980 and down from a peak of 67.1% in 2000. The difference between these two percentages is 8 million Americans.
The BLS reports there are only 12.7 million unemployed Americans in the country, down from 15.3 million in 2009.
The BLS reports the unemployment rate has dropped from 10% in late 2009 to 8.3% today. Over this time frame the working age population grew by 5.7 million, while the number of employed Americans grew by 3.6 million. Only a government drone could interpret this data and report a dramatic decline in the unemployment rate.

Any critical thinking human being would examine the data being reported as fact by our government and regurgitated without question by the corporate mainstream media and conclude it is false, misleading and manipulated. The economy was booming in 2000 and 67.1% of the working age population were in the labor force. Today the economy is in much worse shape. More people NEED to work in order to just make ends meet, but according to the government, 8 million Americans have chosen to not work. Only an Ivy League economist or CNBC bimbo pundit would believe such a blatant distortion of reality. A comparison to prior decades provides all the evidence you need:

In 1980 the working age population was 168 million and the labor force totaled 107 million.
By 1990 the working age population grew by 21 million and the labor force grew by 19 million.
By 2000 the working age population grew by another 23 million and the labor force advanced by 17 million.
Since 2000 the working age population has grown by 30 million, but shockingly the labor force has supposedly grown by only 12 million.

This data is so twisted that there is absolutely no doubt the Federal Government is purposely manipulating the numbers to make the economic situation appear better than the reality. During the Great Depression propaganda and spin had not been perfected. There weren’t multiple definitions of unemployment designed to confuse and mislead the public. The peak level of unemployment in the 1930s was 25%. The current reported level is 8.3%. On a comparable basis to the 1930s, including short-term discouraged workers, those forced to work part-time, and the long-term discouraged workers which were defined out of existence in 1994 by the BLS, the real unemployment rate is 22% today. It feels like a depression for millions of Americans because it is a depression.

The rhetoric from the Obama administration about a jobs recovery is laughable. Full time employment peaked in July 2007 at 122.4 million. Today there are 113.9 million people classified as full-time, with only 101.3 million working more than 35 hours. There are 8.5 million fewer people with full time jobs today than there were in 2007. That fact is even more disheartening considering the working age population has grown by 10.5 million over the same time span. Taking an even longer term view provides the perspective needed to assess our true economic state. Total nonfarm employment hasn’t grown in twelve years, while the working age population has grown by 30 million people.

Obama will tout the fact that we’ve added 3.6 million jobs since the bottom of this recession. What he won’t tout is that hiring of temporary workers surged by 37% and accounted for 25% of all the jobs added since 2009. I’m sure these temporary workers, with no health or retirement benefits, are confident about their future. The facts about jobs and employment are consistent with the 47 million Americans on food stamps (up from 35 million when the recession supposedly ended). It’s a sure sign of recovery when spending on food stamps doubles in the last two years. No depression here, just move along.

Record numbers of Americans being added to the SSDI rolls for depression and other illusory disabilities is surely a positive development pointing to a strong economic recovery. In just the first four months of this year, 539,000 joined the disability rolls and more than 725,000 put in applications. “We see a lot of people applying for disability once their unemployment insurance expires,” said Matthew Rutledge, a research economist at Boston College’s Center for Retirement Research. The number of applications last year was up 24% compared with 2008, Social Security Administration data show. Why participate in the labor market when you can collect a government check for life because you are obese or depressed. These are the people no longer in the labor force. Once they go on SSDI, they rarely go back to work again.

The government reported figure of 12.7 million unemployed Americans is an utter falsehood. There are in excess of 30 million Americans that are either unemployed or working part-time that want full-time jobs. Government propaganda doesn’t change the facts.

“Facts don’t cease to exist because they are ignored.” – Aldous Huxley

Would You Like a Side Order of Facts with That Propaganda?

When you watch the Wall Street scam artists paraded on CNBC declaring the number of people not in the labor force is going up due to Baby Boomers retiring, you should understand they are propagating a falsehood. They are either intellectually dishonest or too lazy to do the most basic of research. They are paid millions to impart false storylines to anyone dumb enough to watch CNBC expecting facts or a smattering of truth. If you want some truth, turn to John Mauldin and John Hussman. CNBC doesn’t invite these outstanding honest analysts on their station when they can roll out a shill like Abbey Joseph Cohen or James Paulson. They wouldn’t want some factual analysis when they can have Becky Quick do one of her frequent handjob interviews with that doddering old status quo fool Warren Buffet.

A critical thinker might wonder how could real disposable income be dropping over the last three months and only have risen by 0.3% in the last year if we’ve had the strong job growth touted by Obama. Could it be the jobs being created are extraordinarily low-paying? There are signs of desperation everywhere you look. The two charts below, from one of John Mauldin’s recent articles, reveal the truth about the Baby Boomers retiring storyline. The first chart shows the employment level for those over the age of 55 since 2007. There were 25.3 million people over the age of 55 working in 2007 and there are 30.1 million working today. People over 55 have seen their total employment level rise by 4.8 million jobs since the beginning of the recession, and over 3 million jobs since the 3^rd quarter of 2009. Total employment is down by 4 million since 2007, while employment among those over 55 is up 19%. John Hussman described the reality about employment in his recent weekly article:

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“If you dig into the payroll data, the picture that emerges is breathtaking. Since the recession “ended” in June 2009, total non-farm payrolls in the U.S. have grown by 2.32 million jobs. However, if we look at workers 55 years of age and over, we find that employment in that group has increased by 3.04 million jobs. In contrast, employment among workers under age 55 has actually contracted by nearly one million jobs, regardless of which survey you use. Even over the past year, the vast majority of job creation has been in the 55-and-over group, while employment has been sluggish for all other workers, and has already turned down.”

I wonder how Larry Kudlow will spin this.

Now for the really eye opening facts. While the labor participation rate has been plunging, the Boomer participation rate has been skyrocketing. The participation rate for the over 65 age group is now at an all-time high. Do you think this has anything to do with home values dropping 36% since 2005, gasoline prices doubling since early 2009, food prices surging by 25%, the 1.4% annual return of stocks since 1999, or the .15% senior citizens can earn on their money today versus the 5% they could earn in 2007?

Intellectually dishonest ultra-liberal Ivy League defender of the Federal Reserve – Paul Krugman had this to say about Ben Bernanke’s zero interest rate policy on senior citizens:

“Finally, how is expansionary monetary policy supposed to hurt the 99 percent? Think of all the people living on fixed incomes, we’re told. But who are these people? I know the picture: retirees living on the interest on their bank account and their fixed pension check — and there are no doubt some people fitting that description. But there aren’t many of them.”

It must be comforting living in an ivory tower or penthouse suite and looking down upon the ignorant masses while caressing your Nobel Prize. The millions of senior citizens with $100,000 of savings could earn $5,000 of interest income in 2007 to supplement their $18,000 of Social Security income. Today, they can earn $150 while the Wall Street banks receive the benefits of ZIRP by borrowing for free from the Federal Reserve and earning billions risk free. Paulie doesn’t think the $4,850 reduction in income and the 15% increase in inflation since 2007 had a negative impact on senior citizens. They must be pouring into the work force because they are just bored, after working for the last 45 years. John Hussman has a slightly different viewpoint, based upon facts rather than a false disproven ideology:

“Beginning first with Alan Greenspan, and then with Ben Bernanke, the Fed has increasingly pursued policies of suppressing interest rates, even driving real interest rates to negative levels after inflation. Combine this with the bursting of two Fed-enabled (if not Fed-induced) bubbles – one in stocks and one in housing, and the over-55 cohort has suffered an assault on its financial security: a difficult trifecta that includes the loss of interest income, the loss of portfolio value, and the loss of home equity. All of these have combined to provoke a delay in retirement plans and a need for these individuals to re-enter the labor force.

In short, what we’ve observed in the employment figures is not recovery, but desperation. Having starved savers of interest income, and having repeatedly subjected investors to Fed-induced financial bubbles that create volatility without durable returns, the Fed has successfully provoked job growth of the obligatory, low-wage variety. Over the past year, the majority of this growth has been in the 55-and-over cohort, while growth has turned down among other workers. Meanwhile, broad labor force participation continues to fall as discouraged workers leave the labor force entirely, which is the primary reason the unemployment rate has declined. All of this reflects not health, but despair, and helps to explain why real disposable income has grown by only 0.3% over the past year.”

Do you believe Krugman or Hussman? The key takeaway from the data is the desperation exhibited by average Americans, while the political governing elite and Wall Street pigs continue to gorge themselves at the trough of free money provided by the Federal Reserve, while paying themselves obscene bonuses for a job well done buying the corrupt Washington politicians.

Over the next six months we will hear unceasing rhetoric from Obama and Romney about how they are going to create jobs. Neither of these government apparatchiks have a clue about jobs or desire to change the course that was set one hundred years ago with the creation of the Federal Reserve. Obama never worked at a real job in his entire life, while Romney has spent his life firing people and spinning off heavily indebted companies to unsuspecting investors. The current deteriorating jobs picture has been decades in the making and a truly bipartisan effort. The rhetoric about America being an engine of growth and the world leader in innovation and entrepreneurship is laughable when examined with a critical eye. We are an aging empire living in the past as the facts portray an entirely different reality. Our fastest growing industries include:

Solar panel manufacturing (subsidized by your tax dollars)
For-profit universities (diploma mills subsidized by your tax dollars)
Pilates and yoga studios
Self-tanning product manufacturing
Social network game development
Hot sauce production

The “surge” in jobs in the last three months is being driven by these industries:

Food services and drinking places
Administrative and support services
Ambulatory health care services
Credit intermediation
Hospitals

Is this the picture of a world leading jobs machine or a delusional, paper pushing, self-involved, obese, sickly, overly indebted crumbling empire? The job openings in industries that actually produce something are barely identifiable on the chart below. Maybe the University of Phoenix can successfully retrain construction and manufacturing workers to be waiters, waitresses, and Wal-Mart greeters if the Federal government can funnel more of our tax dollars into student loans.

If you thought low wage work was only for Chinese, Indians, and Vietnamese, you haven’t been paying attention. The United States is a world leader. We are by far the world leader among developed countries in percentage of low wage workers at 24.8%. I find it hysterical that the dysfunctional insolvent countries of Greece, Spain, Portugal, and Italy have a much smaller percentage of low wage workers than the great American empire. We have 142 million employed Americans and 35 million are slaving away in low paying thankless jobs. This explains why the half the workers in the country make less than $25,000 per year.

The top three employment occupations in the country are:

Office and administrative support work
Sales & Related
Food preparation and serving related

There are high paying good jobs in America, but there aren’t many and on-line college graduates from the University of Phoenix aren’t going to get them. The highest paying jobs today require a high level of specialization and education, especially in the healthcare and technology industries. This disqualifies the vast majority of government run public school graduates. High paying manufacturing jobs which were the backbone of the country during the 1950s and 1960s are gone forever. The reasons for this transformation are multifaceted and will be addressed in Part Two of this article. It didn’t happen by accident and there are culprits to blame. The conversion of our country from making high quality things other countries needed to a debt driven service economy of paper pushers, hash slingers, and retail “specialists” has slowly but surely destroyed the middle class. The masses are distracted by the latest technological marvel that allows them to waste another two hours per day posting how they feel about the latest episode of America’s Got Something or America’s Top Whatever. We have become a country that glories in our materialism and shallow culture while acting like a thug around the world with our unparalleled military machine.

This result is not an accident. It was set in motion by the actions of a handful of rapacious, wealthy powerful men that have been calling the shots in this country for the last hundred years. It wasn’t a planned conspiracy but the logical result of man-made inflation, a fiat currency not backed by gold, the craving of rich men to become richer, a willfully ignorant populace, and a slow devolution of our society into a corporate fascist state. We praise and honor psychopathic criminals while scorning and ridiculing the middle class workers that built this country. The American dream has become a nightmare for the millions of unemployed and underemployed. The acceleration of debt accumulation and money printing guarantees this rotting carcass of a country will go belly up in the foreseeable future.

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

In Part Two of this article I will examine how we got to this point and what is likely to happen next.

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YOU AIN’T SEEN NOTHING YET – PART THREE

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

Seeking Regeneracy

“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. Regardless of its ideology, that new leadership will assert public authority and demand private sacrifice. Where leaders had once been inclined to alleviate societal pressures, they will now aggravate them to command the nation’s attention. The regeneracy will be solidly under way.” – Strauss & Howe – The Fourth Turning

The 2008 election happened in the midst of the catalyst events. A sweeping political realignment did not occur. In fact, the 2010 mid-term elections produced a result which has essentially gridlocked the political process in Washington D.C. The reunification and reenergizing of society has yet to occur. Neil Howe in his recent article pondered the question of regeneracy:

“We may like to imagine that there is a definable day and hour when America, faced by growing danger and adversity, explicitly decides to patch over its differences, band together, and build something new. But maybe what really happens is that everyone feels so numb that they let somebody in charge just go ahead and do whatever he’s got to do. I’m thinking of how America felt during the bleak years of FDR’s first term, or during Lincoln’s assumption of vast war powers after his repeated initial defeats on the battlefield.

The regeneracy cannot always be identified with a single news event. But it does have to mark the beginning of a growth in centralized authority and decisive leadership at a time of great peril and urgency. Typically, the catalyst itself doesn’t lead directly to a regeneracy. There has to be a second or third blow, something that seems a lot more perilous than just the election of third-party candidate (Civil War catalyst) or a very bad month in the stock market (Great Power catalyst). We are still due for such a moment. We have not yet reached our regeneracy. When it happens, I strongly suspect it will be in response to an adverse financial event. It may also happen in response to a geopolitical event. It may well happen over the next year or two.” – Neil Howe – Dating the Fourth Turning

Regeneracy occurred within five years of the outset of the three previous Crisis periods in U.S. history. The historic year of 1776 saw the colonies come together and declare independence from Great Britain. Group solidarity and willingness to die for their cause launched an eight year war and ultimately the formation of a new republic. The Civil War regeneracy occurred after the Union debacle at Bull Run in 1861. The Washington aristocrats had treated the battle like a show, where they could bring a picnic lunch and be entertained by an entertaining skirmish between two armies. After the resounding bloody defeat Abraham Lincoln assumed dictatorial like powers over the North and ordered the immediate enlistment of a half a million soldiers. He assumed unprecedented powers of taxation, forced conscription, suspension of due process and showed a willingness to administer maximum destruction to his foes. This would be no picnic in the park, as 700,000 men died in the next three years. The regeneracy during the Great Depression/WWII Crisis occurred in 1933 with the election of Franklin Roosevelt. He immediately declared a bank holiday and confiscated all the gold in the country. In a flurry of executive orders and bills sent to Congress he rammed through his New Deal, assuming new and broader powers for the Federal government and Executive branch.

Based on these examples in American history it is clear we have not entered the regeneracy stage of this Crisis. Also based on history, it is likely to occur by the end of 2013. A second blow to our nation and our psyches is the only thing that could possibly bring together a deeply divided nation. The country was struck by a category 3 hurricane in 2008. We have been in the eye of the hurricane for the last two years and have grown complacent. The eye will pass over us in the next year and we will again be buffeted by hurricane force winds – except the hurricane has strengthened to a category 5 as the “solutions” to the storm will make part two far worse. Those with a libertarian mindset are not likely to be happy with the Federal government and President taking on even greater powers in the coming years. The usurpation of more control over the citizens of this country in the last decade has been one of the major reasons for the ratcheting down of trust in our leaders. The upcoming presidential election will likely create the dynamic that propels the country into its regeneracy. If the next downward blow can be averted before the election, the country will end up with four more years of Obama. If the Crisis suddenly worsens before November, Romney assumes the mantle of Prophet Leader in January 2013.

I agree with Neil Howe that the country’s reaction to an adverse financial event will be the likely regeneracy moment. The explosive mixture of the five D’s will provide the spark for the next phase: Debt; Derivatives; Default; Devaluation; and ultimately Depression. There is no way to deny the $15.6 trillion of debt this country has accumulated, with $10 trillion of it added since 2000. The debt ceiling of $16.4 trillion will be breached in October 2012 at the current rate of extreme spending. This should set up an interesting dynamic just prior to the November elections. A replay of the August 2011 showdown could be disastrous for Obama if the stock market were to crater again.

We are accumulating debt at a rate of $3.7 billion per day, or $154 million per hour. No politician of either party, other than Ron Paul, has any plan to even moderate the spending, let alone make actual cuts. The CBO projections rolled out by these congressional weasels aren’t worth the paper they are printed on. The National Debt is on track to surpass $20 trillion in 2015 and $25 trillion by 2018. And this is before the Medicare and Social Security costs blast into orbit in 2020. Kicking the can down the road works until math catches up with you. It is insane to believe we can dig ourselves out of this debt induced mess with more debt, but empires tend to act insanely in their death throes.

“In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule.” – Friedrich Nietzsche

Strauss & Howe made preparation recommendations back in 1997 that would have lessened the impact of this Crisis, but they fell on deaf ears. Their common sense suggestions included:

Work to elevate moral and cultural standards. Toddlers with Tiaras and The Kardashians were not an elevation.
Shed and simplify the federal government by cutting back sharply on its size and scope.
All levels of government should prune legal, regulatory and professional thickets.
Politicians should define our challenges bluntly and stress duties over rights.
Require community teamwork to solve local problems without federal government intervention.
Treat children as the nation’s highest priority.
Tell future elders they will need to be more self-sufficient, save more, and expect fewer entitlements.
Shift government pension plans from defined benefit plans to defined contribution plans.
Begin to trim Medicare, Medicaid and Social Security benefits.
Raise the national savings rate, reduce consumption and work towards federal budget surpluses.
Expect the worst, conserve our forces, and be prepared for an epic struggle down the road.

I would reckon we went 0 for 11 on the preparation front. We took the exact opposite course in most cases. Each generation has their own crosses to bear. No one will escape the bitter gale force winds of this Crisis. Strauss and Howe must have had a crystal ball looking fifteen years into the future when they made this supposition:

“The Boomers’ old age will loom, exposing the thinness in private savings and the unsustainability of public promises. The 13ers will reach their make or break peak earning years, realizing at last that they can’t all be lucky exceptions to their stagnating average income. Millenials will come of age facing debts, tax burdens, and two tier wage structures that older generations will now declare intolerable.”

Thus far the older generations have refused to yield. They demand promises made be promises kept. The Boomers did not save enough to sustain themselves during their retirement. Many are entirely reliant upon Social Security and Medicare as their only savings and health insurance. Generation X is caught between aging parents and indebted jobless children. The Millenials are saddled with $1 trillion of student loan debt and few decent job opportunities. In prior Fourth Turnings the Prophet generation led and the Hero generation followed, doing the heavy lifting. This dynamic is yet to be realized during this Crisis. Maybe the regeneracy event will create this dynamic.

That event will likely be triggered by another debt crisis. Rogoff and Reinhart studied 44 countries over 200 years and concluded that once government debt exceeded 90% of GDP economic growth slowed and the likelihood of disaster rose dramatically.

“Those who remain unconvinced that rising debt levels pose a risk to growth should ask themselves why, historically, levels of debt of more than 90% of GDP are relatively rare and those exceeding 120% are extremely rare. Is it because generations of politicians failed to realize that they could have kept spending without risk? Or, more likely, is it because at some point, even advanced economies hit a ceiling where the pressure of rising borrowing costs forces policy makers to increase tax rates and cut government spending, sometimes precipitously, and sometimes in conjunction with inflation and financial repression (which is also a tax)? Historical experience and early examination of new data suggest the need to be cautious about surrendering to “this-time-is-different” syndrome and decreeing that surging government debt isn’t as significant a problem in the present as it was in the past.”

On this date the U.S. debt to GDP ratio is 102%. Our debt accumulation is on automatic pilot and the national GDP is incapable of growing above 3%. Anyone with the most basic math skills (this excludes Wall Street economists, CNBC bimbo anchors, and Bernanke) can determine the ratio will pass 120% in 2015. This doesn’t even include the Fannie, Freddie, and Student Loan debt that are guaranteed by the Federal government, along with trillions of unfunded social program liabilities and state and local debts. In reality the true debt obligations of this country exceed 500% of GDP, as no politician plans to willingly renege on Medicare and Social Security promises made to voters who would boot them if they voted to cut these entitlements.

The linear thinking deniers of reality (Krugman) will use Japan as their example of a country whose debt ratio is above 200%, without disastrous consequences. I guess a 22 year recession is not considered disastrous. Japan has been able to fund themselves internally because their citizens had a 15% savings rate in and they have run gigantic trade surpluses for decades. That game is over and they will hit the wall in the near future. The savings rate in the U.S. is 3.7% and we run $550 billion trade deficits, or 3.7% of GDP. The United States has no advantages other than the U.S. dollar currently being regarded as the worldwide reserve currency. We are hanging our hat on being the best looking horse in the glue factory.

The cracks in the façade are already painfully visible. The U.S. ran a $1.4 trillion deficit in 2009; $1.3 trillion in 2010; and $1.3 trillion in 2011. In the chart below you can see foreigners’ appetite for U.S. debt since 2007 has plunged. Maybe it has something to do with getting a negative real return by investing in U.S. Treasuries paying 2%. Maybe it has something to do with Ben Bernanke attempting to inflate away our debt burden. Maybe it has something to do with Congress and the President accelerating spending and creating massive deficits for as far as the eye can see. Maybe they are losing trust and confidence in the American Empire.

In the last three years we have run $4 trillion in deficits and foreigners have only funded $1.4 trillion of that debt. That means someone else had to buy $2.6 trillion of our long term Treasuries. Some of it was funded by little old ladies and pension funds that are setting themselves up for enormous losses. The vast swath was purchased by Ben Bernanke with his QE for eternity programs. As foreigners rationally reduce their Treasury holdings and we continue to run $1.3 trillion deficits, Bernanke must keep buying the debt. This cycle will continue until we reach our Minsky Moment, then Strauss & Howe’s forecast will be realized:

“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.” – Strauss & Howe – The Fourth Turning

Who will buy our debt in the coming months and years? Europe is saturated with debt and doesn’t have the means to purchase our debt. Japan is a train wreck waiting to happen. China’s customers aren’t buying their crap, so their economic miracle is about to go in reverse. The Federal Reserve cannot buy $1 trillion of Treasury bonds per year forever without creating more speculative bubbles and raging inflation in the things people need to live. The Minsky Moment will be the point when the U.S. Treasury begins having funding problems due to the spiraling debt incurred in financing perpetual government deficits. At this point no buyer will be found to bid at 2% to 3% yields for U.S. Treasuries; consequently, a major sell-off will ensue leading to a sudden and precipitous collapse in market clearing asset prices and a sharp drop in market liquidity. In layman terms that means – the shit will hit the fan. The Federal Reserve and Treasury will be caught in their own web of lies. The only way to attract buyers will be to dramatically increase interest rates. Doing this in a country up to its eyeballs in debt will be suicide. We will abruptly know how it feels to be Greek.

Linear thinkers like Krugman and most of the mainstream media opinion leaders can’t fathom the possibility of a complete collapse of our economic system. Most of their little models and economic data points don’t even go back to the last Fourth Turning period. They make projections about a housing recovery based on historical data that starts in 1962. Housing sales linger at historical lows with mortgage rates at 4%. The entire housing market would cave in if mortgage rates reached 6%, where they were in 2008. The forty year average mortgage rate has been 9%. Everything about our economic system is abnormal. Even reversion to the mean would be disastrous. The Minsky Moment headed our way will not be a single uncorrelated event. The entire financial world is hopelessly entangled by the $700 trillion of derivatives that ensure mass destruction if one of the dominoes falls. This is the reason an otherwise inconsequential country like Greece had to be “saved”.

Everyone knows Greece, Portugal, Spain and Italy are broke. One or more will eventually default on their debt. It is highly likely that a butterfly will flap its wings in Europe and cause a hurricane in the U.S. The default will spark a worldwide contagion as trust in a system of false promises disintegrates. China’s already crumbling real estate market will implode. As interest rates soar and stock markets plunge, global tensions will intensify. Continued oil supply constraints will be the cherry on top. Based on historical precedent, this is likely to strike before 2014 arrives. The wealth destruction and pain will be so intense a regeneracy will be at hand. Our very survival will feel at stake.

“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

And here is the rub for those who argue for less government intervention in our lives. Which leaders will lead and who will follow? The actual events do not matter as much as how the people react to the events. Fourth Turnings are always chaotic and tumultuous. In the frenzied period during the next leg down, people will demand order. They will call for the government to do something. Obama or Romney will use the fear and uncertainty to assume more power over our lives. Executive orders, new legislation, and another stripping of our liberties will be attempted. How the generational cohorts react to these deeds will determine what happens next. There are 97 million Millenials, 83 million Generation X and 73 million Boomers. The Boomers hold most of the positions of power, but their credibility as leaders has been damaged by their actions over the last two decades.

How the Millenials react to Boomer commands will determine the course of this Fourth Turning. The great devaluation will provide our leaders the opportunity to address the structural imbalances that haunt our nation. They could force Wall Street bankers, shareholders and bondholders assume their losses. They could rewrite the social contract with all generations, balancing the needs of elders with the futures of our youth. They could dramatically scale back the military industrial complex. They could completely scrap the ridiculous tax code and shift from taxing income to taxing consumption. They could revamp our political system and remove money from the political process. They could choose to balance budgets and reduce the size of government. They could ask for proportional sacrifice from everyone in order to keep this ship from sinking. If you believe this will happen, I have nice home near an Iranian nuclear power plant I’d like to sell you.

The regeneracy does not mean the actions taken by our leaders will be wise, well thought out, rational or beneficial to all people. Many believe the actions taken by Abraham Lincoln and Franklin Roosevelt during the previous Fourth Turning Crisis periods were detrimental, foolish, and enhanced the power of the state at the expense of liberty for the people. The leader when the regeneracy events strike is more likely to respond with more government control as the solution. He will invoke executive orders giving government control over important industries and crucial institutions. The government politician leaders will pick the winners and losers, with their cronies and contributors winning again. Dissent will not be acceptable. The NDAA will be invoked to imprison those who disagree with the mandates handed down by those in power. Congress would pass SOPA and lock down the internet and shutdown any websites they consider dangerous to their central authority. Lastly, with the biggest and baddest military machine on earth, the leader will attempt to rally the masses and distract them from our dire economic situation by seeking an external threat to confront. It just so happens that China is also in the midst of their own Fourth Turning. History has shown that armed confrontation is likely around the climax of the Crisis:

“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.” – Strauss & Howe – The Fourth Turning

No one knows the exact events that will mark this Crisis period in our history. But there is no turning back. We’ve entered the Winter season and the beautiful calm days of autumn are long past. Nothing but turmoil, bitterness and sacrifice lie ahead. We entered this Winter of our discontent unprepared like the grasshopper in the fable. This has insured this Crisis will be far worse than it needed to be. The grasshoppers want solutions and easy answers to problems created over decades of ignorance, sloth, greed and stupidity. It’s too late. There are no easy answers and the solutions are all painful and bitter. This is not some theoretical exercise. This is the reality of our situation. I have three teenage sons and their futures depend on the outcome of this Crisis. I will do whatever it takes to support them. I will not allow them to be cannon fodder in some war for oil in the Middle East. If their future requires me to oppose a tyrannical government, so be it. If their future requires me to give up my Social Security and Medicare security blanket, so be it. If I have to die so they may live, so be it. There are no guarantees in this life. We get about 80 years on this planet to make a difference. The choices we make in the next few years will matter. Are you ready? I am.

“The seasons of time offer no guarantees. For modern societies, no less than for all forms of life, transformative change is discontinuous. For what seems an eternity, history goes nowhere – and then it suddenly flings us forward across some vast chaos that defies any mortal effort to plan our way there. The Fourth Turning will try our souls – and the saecular rhythm tells us much will depend on how we face up to that trial. The saeculum does not reveal whether the story will have a happy ending, but it does tell us how and when our choices will make a difference.” – Strauss & Howe – The Fourth Turning

Click here to read: PART ONE or PART TWO

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WHAT THIS COUNTRY NEEDS NOW IS HOPE

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

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

U.S. Debt

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

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

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

Entitlements

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

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

Employment

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

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

Poverty

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

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

Income

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

Wealth Inequality

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

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

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

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

Consumer Debt

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

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

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

Real Estate

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

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

Savings & Retirement

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

Foreign Trade

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

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

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

Energy

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

Foreign Interventionism

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

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

Monetary Policy

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

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

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

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

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

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

Look In the Mirror

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

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

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

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

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

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

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

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

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

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

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

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

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

What Happens Next?

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

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

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

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

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

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

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

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

THE OTHER CRISIS

As the mainstream media tries to convince the masses that all is well, the truth telling blogger world is still hard at work. Mike Shedlock http://globaleconomicanalysis.blogspot.com/ reports that Europe’s fake solution to the Greek fiasco is already collapsing two weeks after being announced. Interest rates are soaring all over Europe. Guess what is fatal to countries with massive levels of debt? That’s right – RISING INTEREST RATES. The worldwide system is stuffed with bad debt – un-payable debt. When this European house of cards collapses, it will destroy European banks and US banks who have guaranteed much of this bad debt with their creative derivatives.

Americans have a way of focusing on themselves, thinking the rest of the world doesn’t matter. How myopic and egotistical of us. I suggest you skip the MSM and stick to the sites that deal with facts and realism. By the way, China’s real estate bubble is popping and the Middle East turmoil is getting worse.

Fourth Turnings do not get less intense as they progress. They get more intense until the final crescendo. We are, at most 5 or 6 years into this Fourth Turning. Only 15 years to go. Hang on tight. It’s gonna be bumpy.

Spain, Italy, Belgium Bond Spreads Hit Euro Record; Italy 10-Year Bond Yield Highest Since 1997; Self-Fulfilling Crisis

The idea that the latest Greek bailout plan would solve anything is officially dead. Government bond spreads of Spain, Italy, and Belgium are at all-time highs. The yield on 10-year bonds of Spain and Italy are now both well North of 6%. Here are a few charts to consider.

Belgium 10-Year Government Bonds

Spain 10-Year Government Bonds

Italy 10-Year Government Bonds

Germany 10-Year Government Bonds

Portugal, Greece, and Ireland are now a sideshow. However, as a point of interest, 2-Year Greek bonds are 32.35% down from a record high of over 40% but well above the lows in the high 20’s following the Greek bailout agreement.

Self-Fulfilling Crisis

Bloomberg reports Italy, Spain 10-Year Bond Spreads Are at Euro-Era Record on Growth Concern

Italian and Spanish 10-year bonds dropped, pushing yields up to euro-era records versus benchmark German bunds, on concern that slowing growth will hamper efforts to tame the nations’ debt loads.

“This has all the features of a self-fulfilling crisis,” said Harvinder Sian, a senior bond strategist at Royal Bank of Scotland Plc in London. “The rise in yields looks pretty relentless, and it doesn’t look as if the politicians are anywhere near to getting ahead of the curve.”

The yield on 10-year Italian bonds jumped 18 basis points to 6.18 percent as of 8:48 a.m. in London, the most since November 1997.

Spanish 10-year yields surged 16 basis points to 6.36 percent, pushing the spread over similar-maturity German debt up 19 basis points to 393 basis points. A 6.5 percent yield will be a key level for Spain, RBS’s Sian said.

The yield premium investors demand to hold Belgian 10-year bonds instead of benchmark bunds widened to a euro-era record of 202 basis points before an auction of as much as 2.8 billion euros of 105-and 168 day bills.

Expect a “stern warning” from ECB president Jean-Claude Trichet soon. Also expect the market to laugh in his face.

Any bets on when the EU has another emergency meeting? I suspect two more days of this action might do it. Now answer this: what can they do that makes any sense?

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

CRISIS INTENSIFIES

The linear thinkers continue to be knocked for a loop. They do not understand the dynamics of a Fourth Turning. These people think the world continuously progresses. They think things will just settle down in the Middle East, Europe, China and the US. They think there are no consequences to the horrible decisions of our leaders and the pillaging of the common people by bankers, mega-corporations and politicians. They are badly mistaken.

Fourth Turnings ALWAYS sweep away the old order. Fourth Turnings are ALWAYS violent. Greece is just a preview. The intensity is increasing by the moment. And do not think for a moment that the video in the link below is not coming to America. It is inconceivable to the linear thinkers, but not to those with their eyes wide open.

Does this look like a decrease in intensity?

http://www.telegraph.co.uk/news/newsvideo/8203692/Petrol-bombs-and-tear-gas-at-Greek-protest.html

Greek Prime Minister George Papandreou offers to resign as austerity protests swell

Violence breaks out in Athens as thousands of Greek workers swarm downtown to protest a package of budget cuts and tax increases for the financially strapped nation.

Protesters try to remove a fence protecting the Greek parliament during a demonstration in Athens. Thousands of demonstrators besieged the Greek parliament on Wednesday in a large anti-austerity protest marred by violence. (Louisa Gouliamaki / AFP/Getty Images / June 15, 2011)

By Henry Chu and Anthee Carassava, Los Angeles TimesJune 16, 2011

Reporting from London and Athens—

Angry protesters pushed the Greek government close to collapse Wednesday, putting Europe on notice that deep budget cuts to tame the region’s debt crisis face heavy public resistance and could crash on the rocks of national politics.

Thousands of people packed downtown Athens in an effort to block lawmakers from debating brutal austerity measures that European finance officials say are essential if near-bankrupt Greece wants their help to pay its bills. The gathering descended into violence — with some protesters hurling water bottles, rocks and firebombs — that took riot police hours to quell and helped spark a dramatic offer by Prime Minister George Papandreou to quit in favor of a unity government.

The volatile situation offered a stark example of the predicament facing the European Union as it tries to contain a debt crisis that has rattled markets for more than a year.

The EU has demanded painful spending cutbacks by Greece, Ireland and Portugal as the price of bailing out their cash-strapped governments. Spain and Italy also have passed major belt-tightening measures to avoid getting sucked into the euro mess.

But public opposition is growing in some of these countries, threatening to topple governments and to torpedo at home the collective solutions approved by EU leaders in Brussels.

In Athens, Papandreou’s Socialist government is seeking parliamentary approval of the austerity plan, including tax hikes, deep cuts in public-sector wages and a fire sale of state assets. Papandreou says the package is crucial if Greece wants additional bailout funds on top of the $146-billion lifeline promised by the EU and the International Monetary Fund last year.

But opposition leaders indicated Wednesday that they expected Papandreou’s resignation and the renegotiation of the bailout package.

After first offering to step down to make way for a government of national unity, Papandreou said on national television Wednesday night that he would reshuffle his Cabinet and seek a vote of confidence in Parliament.

“I have made repeated proposals to political parties for consensus. Today I renewed that attempt…. Despite my stance, the main opposition party handled this attempt like a public-relations drill,” said Papandreou, who is facing his lowest public approval ratings since taking office in 2009. “I will continue on the same path I charted.”

Outraged by previous budget reductions, thousands of Greeks have filled Syntagma Square in the heart of Athens over the last three weeks in protest. On Wednesday, the number ballooned to about 30,000 people, including members of the country’s two largest labor unions, which staged a 24-hour nationwide strike.

After three hours of scuffles, at least 12 protesters were arrested, shop windows around the square were shattered and thick plumes of tear gas hovered over the city, sending tourists scrambling for cover in side streets and alleyways.

“It wasn’t supposed to be this way,” lamented Stella Stamati, 43, a government-employed chemist who joined the protest with three colleagues.

Many of the demonstrators had been inspired by recent peaceful mass protests in Spain, where thousands of young people camped out in a Madrid plaza for days to shake their fists at government austerity policies and to express their frustration over a high level of joblessness that has hit the young the hardest.

Last month, Spain’s ruling Socialists were routed in regional and local elections widely seen as a rebuke of Prime Minister Jose Luis Rodriguez Zapatero‘s plan to slash state spending to bring down the public deficit.

In neighboring Portugal, voters booted the government in a general election last week out of unhappiness with the terms of the country’s bailout from the EU and IMF, which will require difficult structural reforms to the economy. The new government, however, has largely pledged to stick to the conditions.

For their part, Ireland’s new leaders are pushing hard for a renegotiation of the EU-IMF rescue package their predecessors had agreed to, further widening the cracks in the veneer of European unity.

Critics blame Germany, Europe’s paymaster, for having dithered over rescuing Greece last year, when the crisis looked more containable, because of political considerations at home. Many Germans oppose the use of their tax money to bail out their fiscally troubled neighbors.

Markets have reacted to Europe’s infighting and Greece’s woes by pushing borrowing costs for Athens to unheard-of highs. On Wednesday, the cost of insuring $10 million in Greek bonds rose to a record $1.725 million a year, according to data provider Markit. This week, the Standard & Poor’s ratings firm downgraded Greek bonds to the lowest rating of any of the 131 states on its books.