ABNORMALCY BIAS

“The real hopeless victims of mental illness are to be found among those who appear to be most normal. Many of them are normal because they are so well adjusted to our mode of existence, because their human voice has been silenced so early in their lives that they do not even struggle or suffer or develop symptoms as the neurotic does. They are normal not in what may be called the absolute sense of the word; they are normal only in relation to a profoundly abnormal society. Their perfect adjustment to that abnormal society is a measure of their mental sickness. These millions of abnormally normal people, living without fuss in a society to which, if they were fully human beings, they ought not to be adjusted.” – Aldous Huxley – Brave New World Revisited

The political class set in motion the eventual obliteration of our economic system with the creation of the Federal Reserve in 1913. Placing the fate of the American people in the hands of a powerful cabal of unaccountable greedy wealthy elitist bankers was destined to lead to poverty for the many, riches for the connected crony capitalists, debasement of the currency, endless war, and ultimately the decline and fall of an empire. Ernest Hemingway’s quote from The Sun Also Rises captures the path of our country perfectly:

“How did you go bankrupt?”
Two ways. Gradually, then suddenly.”

The 100 year downward spiral began gradually but has picked up steam in the last sixteen years, as the exponential growth model, built upon ever increasing levels of debt and an ever increasing supply of cheap oil, has proven to be unsustainable and unstable. Those in power are frantically using every tool at their disposal to convince Boobus Americanus they have everything under control and the system is operating normally. The psychotic central bankers, “bought and sold” political class, mega-corporation soulless chief executives and corporate controlled media use propaganda techniques, paid “experts”, talking head “personalities”, captured think tanks, and the willful ignorance of the majority to spin an increasingly dire economic descent as if we are recovering and getting back to normal. Nothing could be further from the truth.

There is nothing normal about what Ben Bernanke and the Federal government have done over the last five years and continue to do today. Truthfully, nothing has been normal since the mid-1990s when Alan Greenspan spoke the last truthful words of his lifetime:

“Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?”

The Greenspan led Federal Reserve created two epic bubbles in the space of six years which burst and have done irreparable harm to the net worth of the middle class. Rather than learn the lesson of how much damage to the lives of average Americans has been caused by creating cheap easy money out of thin air, our Ivy League self-proclaimed expert on the Great Depression, Ben Bernanke, has ramped up the cheap easy money machine to hyper-speed. There is nothing normal about the path this man has chosen. His strategy has revealed the true nature of the Federal Reserve and their purpose – to protect and enrich the financial elites that manipulate this country for their own purposes.

Despite the mistruths spoken by Bernanke and his cadre of banker coconspirators, he can never reverse what he has done. The country will not return to normalcy in our lifetimes. Bernanke is conducting a mad experiment and we are the rats in his maze. His only hope is to retire before it blows up in his face. Just as Greenspan inflated the housing bubble and exited stage left, Bernanke is inflating a debt bubble, stock bubble, bond bubble and attempting to re-inflate the housing bubble just in time for another Ivy League Keynesian academic, Janet Yellen, to step into the banker’s box. This genius thinks Bernanke has been too tight with monetary policy. It seems inflated egos are common among Ivy League economist central bankers who think they can pull levers and push buttons to control the economy. Results may vary.

The gradual slide towards our national bankruptcy of wealth, spirit, freedom, self-respect, morality, personal responsibility, and common sense began in 1913 with the secretive creation of the Federal Reserve and the imposition of a personal income tax. Pandora’s Box was opened in this fateful year and the horrors of currency debasement and ever increasing taxation were thrust upon the American people by a small but powerful cadre of unscrupulous financial elite and the corrupt politicians that do their bidding in Washington D.C. The powerful men who thrust these evils upon our country set in motion a chain of events and actions that will undoubtedly result in the fall of the great American Empire, just as previous empires have fallen due to the corruption of its leaders and depravity of its people. Creating a private central bank, controlled by the Wall Street cabal, and allowing the government to syphon the earnings of workers through increased taxation has allowed politicians the ability to spend, borrow, and print money at an ever increasing rate in order to get themselves re-elected and benefit the cronies, hucksters and bankers that pay the biggest bribes. None of this benefit the average American, who sees their purchasing power systematically inflated and taxed away. This is not capitalism and it is not a coincidence that war and inflation have been the hallmarks of the last century.

“A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank. It is no coincidence that the century of total war coincided with the century of central banking.” – Ron Paul

As you can see, the bankruptcy of our country and our culture began gradually, accelerated after Nixon closed the gold window in 1971, really picked up steam in 1980 when the debt happy Baby Boom generation came of age, and has “suddenly” reached maximum velocity as we approach the true fiscal cliff. There were many checkpoints along the way where fatefully bad choices were made. They include the New Deal, Cold War, Great Society, Morning in America, Dotcom New Paradigm, Housing Wealth Retirement Plan, Obamacare, and present belief that creating more debt will solve a problem created by too much debt. The Federal Reserve allowed interventionist politicians to fight two declared wars (World War I, World War II), fight five undeclared wars (Korea, Vietnam, Gulf, Afghanistan, Iraq), conduct hundreds of military engagements around the globe, occupy foreign countries, begin a war on poverty that increased poverty, begin a war on drugs that increased the amount of available drugs, and finally start a war on terror that has increased the number of terrorists and pushed us closer to national bankruptcy. The terrorists have already won, as the explosion of stupidity and irrational fear has allowed those in power to acquire more power and dominion over our lives.

Abnormality Reigns

“We live surrounded by a systematic appeal to a dream world which all mature, scientific reality would reject. We, quite literally, advertise our commitment to immaturity, mendacity and profound gullibility. It is as the hallmark of the culture. And it is justified as being economically indispensable.” – John Kenneth Galbraith

When I critically scrutinize the economic, political, financial, and social landscape at this point in history, I come to the inescapable conclusion that our country and world are headed into the abyss. This is most certainly a minority viewpoint. The majority of people in this country are oblivious to the disaster that will arrive over the next decade. Some would attribute this willful ignorance to the normalcy bias that infects the psyches of millions of ostrich like iGadget distracted, Facebook addicted, government educated, financially illiterate, mass media manipulated zombies. Normalcy bias refers to a mental state people enter when facing a disaster. It causes people to underestimate both the possibility of a disaster occurring and its possible effects. This often results in situations where people fail to adequately prepare for a disaster, and on a larger scale, the failure of governments to inform the populace about the impending disaster. The assumption that is made in the case of the normalcy bias is that since a disaster hasn’t occurred yet, then it will never occur. It also results in the inability of people to cope with the disaster once it occurs. People tend to interpret warnings in the most optimistic way possible, seizing on any ambiguities to infer a less serious situation.

The unsustainability of our economic system built upon assumptions of exponential growth, ever expanding debt, increasing consumer spending, unlimited supplies of cheap easy to access oil, impossible to honor entitlement promises, and a dash of mass delusion should be apparent to even the dullest of government public school educated drones inhabiting this country. I don’t attribute this willful ignorance to normalcy bias. I attribute it to abnormalcy bias. In a profoundly abnormal society, adjusting your thinking to fit in appears normal, but is just a symptom of the disease that has infected our culture. There is nothing normal about anything in our society today. If you were magically transported back to 1996 and described to someone the economic, political, financial and social landscape in 2013, they would have you committed to a mental institution and given shock therapy.

Even though we’ve been in a 100 year spiral downwards, things still appeared relatively normal in 1996 when Greenspan uttered his “Irrational Exuberance” faux pas that so upset his Wall Street puppet masters. The ruling class had not yet repealed Glass-Steagall (pre-requisite for pillaging the muppets), created the internet bubble, fashioned the greatest control fraud in world history (housing bubble unrecognized by Ben Bernanke), or taken advantage of mass hysteria over 9/11 to begin the never ending war on terror and expansion of the Orwellian state. The citizens, and I use that term loosely, of this country have allowed those in control of the government and media to convince them the situation confronting us is just a normal cyclical variation that will be alleviated by tweaking existing economic policies and trusting that Ben Bernanke will pull the right monetary levers to get us back on course. The stress inflicted on their brains in the last thirteen years of bubbles and wars has made the average person incapable of distinguishing between normality and abnormality. What they need is slap upside of their head. Is there anything normal about these facts?

The Federal Reserve’s balance sheet in 1996 consisted of $422 billion, of which 91% were Treasury securities. Today it consists of $3.25 trillion, of which only 56% are Treasury securities, and the rest is toxic home mortgages, toxic commercial mortgages, and whatever other crap the Wall Street banks have dumped on their books. Their balance sheet is leveraged 57 to 1 and Bernanke has promised his Wall Street bosses he will add another $750 billion before the year is out. Is there anything normal about a central bank adding twice as much debt to its balance sheet in less than twelve months than existed on its entire balance sheet in 1996?
The National Debt at the end of fiscal 1996 was $5.25 trillion. It increased by $250 billion that year. The GDP of the country was $7.8 trillion. Our national debt as a percentage of GDP was only 67% and our annual deficit was only 3% of GDP. At the time, the country was worried about these outrageous levels of debt. Today the National Debt stands at a towering $16.8 trillion. It has increased by a staggering $1.12 trillion in the last twelve months. The GDP of the country today is $15.7 trillion. Our national debt as a percentage GDP has soared to 107%. Our annual deficits now exceed 7% of GDP on a consistent basis. Our budgets are on automatic pilot, with the $20 trillion level to be breached by 2016. Is it a normal state of affairs when the GDP of your country rises by 100% over seventeen years, while your debt rises by 320%?

Total government spending (Federal, State, Local) in 1996 totaled $2.7 trillion, or 35% of GDP. Today total government spending is $6.3 trillion, or 40% of GDP. In 1979, before the belief in government became a religion, total government spending was only 31.5% of GDP (27% in 1965). Are you receiving twice the service from government than you received in 1996? Are you safer from terrorists due to the massive expansion of the police state? Are your kids getting a much better education than they did in 1996? Have the undeclared wars benefitted you in any way, other than tripling the price of gas? Are the higher wage taxes, real estate taxes, school taxes, sewer fees, utility fees, phone fees, gasoline taxes, permit fees, and myriad of other government charges worth it? Is it normal for government to account for almost half of our economy?

In 1996 personal consumption expenditures accounted for 67% of GDP, while private domestic investment accounted for 16% of GDP and we ran small trade deficits of 1% of GDP. Today, consumer spending accounts for 71% of GDP (despite the storyline about consumer retrenchment), while domestic investment has contracted to 13% of GDP and our trade deficits have surged to almost 4% of GDP. The Federal government has expanded their piece of the GDP pie by 130% since 1996, with the Department of War accounting for the bulk of the increase. Saving and capital investment is now penalized in this country. Is it normal for a country to borrow, consume and bleed itself to death?
Consumer credit outstanding totaled $1.2 trillion in 1996, or $4,500 per every man, woman and child in the country. Today, the austere balance is now $2.8 trillion, or $8,800 per every man, woman and child inhabiting our debt saturated paradise. The more than doubling of consumer debt would be acceptable if wages were rising at a similar rate. But that hasn’t been the case, as wages have only advanced from $3.6 trillion in 1996 to $7.0 trillion today. With even the massively understated CPI showing 50% inflation since 1996 and 23% more Americans in the working age population (45 million), real wages have advanced by 30%. Using a true measure of inflation, real wages have fallen. Total credit market debt in 1996 was $19 trillion, or 243% of GDP. Today total credit market debt sits at an all-time high of $56.2 trillion, or 358% of GDP. Is it normal for credit market debt to increase at three times the rate of GDP?

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In 1996, personal income totaled $6.6 trillion, with wages accounting for 55% of the total, interest income on savings accounting for 12% and government entitlement transfers accounting for 14%. Today personal income totals $13.6 trillion, with wages accounting for 51% of the total, interest income on savings plunging to 7% due to Bernanke’s “Screw a Senior Zero Interest Policy”, and Big Brother entitlement transfers skyrocketing to 18%. In what Orwellian dystopian society is taking money from wage earners and redistributing it to non-wage earners considered personal income? Is it normal for a government to punish savers and makers in order to benefit the borrowers and takers?
Prior to the financial collapse and during the mid-1990s prudent risk-averse savers could get a 4% to 5% return on money market accounts. Since the Wall Street created worldwide financial collapse, Ben Bernanke, at the behest of these very same Wall Street banks, has reduced short term interest rates to 0%. The result has been to transfer $400 billion per year from the pockets of savers and senior citizens into the grubby hands of bankers that have destroyed our economy. The prudent are left earning .02% on their savings, while the profligate bankers can borrow for 0% and earn billions by re-depositing those funds at the Federal Reserve. In what bizarro world this be a normal state of affairs?

Total mortgage debt outstanding in 1996, before the epic Wall Street produced housing bubble, was $4.7 billion. Today, even after the transfer of almost $1 trillion of bad debt to the balance sheet of the American taxpayer, the amount of mortgage debt is an astounding $13.1 trillion. Despite home values rising since 1996, there are 20% of all households still in a negative equity position. Total household real estate equity was 60% in 1996, plunged below 40% in 2009, and has only slightly rebounded to 47% today because Wall Street dumped the bad mortgages on the backs of the American taxpayer. Is it normal for mortgage debt to triple and home equity to plunge in a rationally functioning world? Is it normal when 25% of all existing home sales are distressed sales and another 30% are sales to Wall Street hedge funds like Blackrock?

In 1996 there were 200 million working age Americans, with 134 million (67%) in the labor force, 127 million (63.5%) employed, and 66 million (33%) not in the labor force. Today there are 245 million working age Americans, with 155 million (63%) in the labor force, 143 million (58%) employed, and 90 million (37%) supposedly not in the labor force. The number of working age Americans has increased by 22.5%, while the number of those employed has advanced by only 12.5%. The population to employment ratio has reached a three decade low as millions have given up, been lured into college by cheap plentiful government debt, or developed a mysterious ailment that has gotten them into the SSDI program. Is it normal for millions of Americans to leave the labor force when the economy is supposedly recovering?

In 1996 there were 25.5 million Americans on food stamps, or 9.6% of the population, costing $24 billion per year. Today there are 47.8 million Americans on food stamps, or 15% of the population, costing $75 billion per year. Historically, the number of people in this program would rise during recessions and recede when the economy recovered, just as a safety net program should function. According to our government keepers the economy has been in recovery since late 2009. The number of people entering the food stamp program has gone up by 7 million since the recession officially ended. This is not normal. Either the government is lying about the recession or they are screwing the taxpayer by encouraging constituents to enter the program in an effort to gain votes. Which is it?

The price of oil averaged $20 per barrel in 1996 and it cost you $1.20 per gallon to fill your tank. Oil averaged $85 per barrel in 2012 and currently hovers around $90 per barrel. Most Americans are now paying between $3.50 and $4.00 per gallon to fill their tanks. This result seems abnormal considering the propaganda machine is proclaiming we are on the verge of energy independence. After two Middle East wars, 6,700 dead American soldiers, 50,000 wounded American soldiers, and $1.5 trillion of national wealth wasted, this is all we get – a tripling in gas prices and creation of thousands of new terrorists?

You have to have a really bad case of normalcy bias to be able to convince yourself that everything that has happened since 1996 is normal. Every fact supports the reality that we’ve entered a period of extreme abnormality and our response as a nation thus far has insured that a disaster of even far greater magnitude is just over the horizon. Anyone with an ounce of common sense realizes the social mood is deteriorating rapidly. We are in the midst of a Crisis period that will result in earth shattering change, but the masses want things to go back to normal and don’t want to face the facts. The cognitive dissonance created by reality versus their wishes will resolve itself when the next financial collapse makes 2008 look like a walk in the park. But, until then most will just stick their heads in the sand and hope for the best.

Loving Your Servitude

“Liberty is lost through complacency and a subservient mindset. When we accept or even welcome automobile checkpoints, random searches, mandatory identification cards, and paramilitary police in our streets, we have lost a vital part of our American heritage. America was born of protest, revolution, and mistrust of government. Subservient societies neither maintain nor deserve freedom for long.” – Ron Paul

The most disgraceful example of abnormality that has infected our culture has been the cowardice and docile acquiescence of the citizenry in allowing an ever expanding police state to shred the U.S. Constitution, strip us of our freedoms, and restrict our liberties. Our keepers have not let any crisis go to waste in the last seventeen years. They have also taken advantage of the willful ignorance, childish immaturity, extreme gullibility, historical cluelessness, financial illiteracy and techno-narcissism of the populace to reverse practical legislation and prey upon irrational fears to strip the people of their constitutionally guaranteed liberties and freedoms. If you had told someone in 1996 the security measures, laws, and police agencies that would exist in 2013, they would have laughed you out of the room. Every crisis, whether government created or just convenient to their agenda, has been utilized by the oligarchs to expand the police state and benefit the crony capitalists that profit from its expansion. The character of the American people has been found wanting as they obediently cower and beg for protection from unseen evil doers. The propagandist corporate media reinforces their fears and instructs them to submissively tremble and implore the government to do more. The cosmic obliviousness and limitless sense of complacency of the general population with regards to a blatantly obvious coup by a small cadre of sociopathic financial elite and their army of bureaucrats, lackeys and jackboots is a wonder to behold.

The 1929 stock market crash and ensuing Great Depression was primarily the result of excessively loose Federal Reserve monetary policy during the Roaring 20’s and the unrestrained fraud perpetrated by the Wall Street banks. The 1933 Glass-Steagall Act was a practical 38 page law which kept Wall Street from ravenously raping its customers and the American people for almost seven decades. The Wall Street elite and their bought off political hacks in both parties repealed this law in 1999, while simultaneously squashing any effort to regulate the financial derivatives market. The day trading American public didn’t even look up from their computer screens. Over the next nine years Wall Street went on a fraudulent feeding frenzy rampage which brought the country to its knees and then held the American taxpayer at gunpoint to bail them out. The Federal Reserve arranged rescue of LTCM in 1998 gave the all clear to Wall Street that any risk was acceptable, since the Fed would always bail them out. Just as they did in the 1920’s, the Federal Reserve set the table for financial disaster with excessively low interest rates and non-existent regulatory oversight.

The downward spiral of our empire towards an Orwellian/Huxley merged dystopian nightmare accelerated after the 9/11 attacks. Within one month those looking to exert hegemony over all domestic malcontents had passed the 366 page, 58,000 words Patriot Act. Did the terrified masses ask how such a comprehensive destruction of our liberties could be written in under one month? It is apparent to anyone with critical thinking skills that the enemy within had this bill written, waiting for the ideal opportunity to implement this unprecedented expansion of federal police power. Electronic surveillance of our emails, phone calls and voice mails, along with warrantless wiretaps, and general loss of civil liberties was passed without question under the guise of protecting us. Next was the invasion of a foreign country based upon lies, propaganda and misinformation without a declaration of war, as required by the Constitution. Our government began torturing suspects in secret foreign prisons. The shallow, self-centered, narcissistic, Facebook fanatic populace has barely looked up from texting on their iPhones to notice that we have been at war in the Middle East for eleven years, because it hasn’t interfered with their weekly viewing of Honey Boo Boo, Dancing With the Stars, or Jersey Shore. They occasionally leave their homes to wave a flag and chant “USA, USA, USA”, as directed by the media, when a terrorist like Bin Laden or Boston bomber is offed by our security services, but for the most part they can live their superficial vacuous lives of triviality unscathed by war.

The creation of the Orwellian Department of Homeland Security ushered in a further encroachment of our everyday freedoms. They attempted to keep the masses frightened through a ridiculous color coded fear index. Little old ladies, people in wheelchairs and little children are subject to molestation by lowlife TSA perverts. Military units conduct “training exercises” in cities across the country to desensitize the sheep-like masses, who fail to acknowledge that the U.S. military cannot constitutionally be used domestically. DHS considers military veterans, Ron Paul supporters, and Christians as potential enemies of the state. The use of predator drones to murder suspected adversaries in foreign countries, while killing innocent men, women and children (also known as collateral damage), has just been a prelude to the domestic surveillance and eventually extermination of dissidents and nonconformists here in the U.S. We are already becoming a 1984 CCTV controlled nation. DHS has been rapidly militarizing local police forces in cities and towns to supplement their jackbooted thugs. Obama’s executive orders have given him the ability to take control of industry. He can imprison citizens without charges for as long as he deems necessary. Attempts to control gun ownership and shutdown the internet is a prologue to further government domination and supremacy over our lives when the wheels come off this unsustainable bus.

The last week has provided a multitude of revelations about our government and the people of this country. The billions “invested” in our police state, along with warnings from a foreign government, and suspicious travel patterns were not enough for our beloved protectors to stop the Boston Marathon bombing. After stumbling upon these amateur terrorists by accident, the 2^nd responders, with their Iraq war level firepower, managed to slaughter one of the perpetrators, but somehow allowed a wounded teenager to escape on foot and elude 10,000 donut eaters for almost 24 hours. The horde of heavily armed, testosterone fueled thugs proceeded to bully and intimidate the citizens of Watertown by illegal searches of homes and treating innocent people like criminals. The government completely shut down the 10^th largest metropolitan area in the country for an entire day looking for a wounded 19 year old. The people of Boston obeyed their zoo keepers and obediently cowered in their cages.

The entire episode was an epic fail. The gang that couldn’t shoot straight needed an old man to find the bomber in his backyard boat. The people of Boston exhibited the passivity and subservience demanded by their government. Since the capture of the remaining terrorist, the shallow exhibitions of national pride at athletic events and smarmy displays of honoring the police state apparatchiks who screwed up – allowing the attack to occur and looking like the keystone cops during the pursuit of the suspects, has revealed a fatal defect in our civil character. We are living in a profoundly abnormal society, with millions of medicated mindless zombies controlled by a vast propaganda machine, who seemingly enjoy having their liberties taken away. Most have willingly learned to love their servitude. For those who haven’t learned, the boot of our vast security state will just stomp on their face forever. We’re realizing the worst dystopian nightmares of Orwell and Huxley simultaneously. This abnormalcy bias will dissipate over the next ten to fifteen years in torrent of financial collapse, war, bloodshed, and retribution. Sticking your head in the sand will not make reality go away. The existing social, political, and financial order will be swept away. What it is replaced by is up to us. Will this be the final chapter or new chapter in the history of this nation? The choice is ours.

“If you want a vision of the future, imagine a boot stamping on a human face – forever.
– George Orwell

“There will be, in the next generation or so, a pharmacological method of making people love their servitude, and producing dictatorship without tears, so to speak, producing a kind of painless concentration camp for entire societies, so that people will in fact have their liberties taken away from them, but will rather enjoy it, because they will be distracted from any desire to rebel by propaganda or brainwashing, or brainwashing enhanced by pharmacological methods. And this seems to be the final revolution” –Aldous Huxley, 1961

ADRIFT AT SEA

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

The big story this past week, besides the annual State of the Delusion speech by Barack “It won’t add a cent to the deficit” Obama, was the fate of the passengers on the Carnival Triumph as their skyscraper sized ship was left adrift at sea for days without power. This 900 foot long, 100,000 ton goliath is one of the largest passenger cruise liners in the world, carrying 3,400 passengers and 1,100 crew members in luxurious splendor through warm Gulf of Mexico seas to sun drenched exotic isles. These ships are practically floating countries, with passengers treated to an endless American buffet of never ending quantities of bacon, sausage, biscuits, gravy, fried chicken, mashed potatoes, waffles, pizza, cheesecake, soda, beer and the rum drink of the day. It’s as if all 3,400 passengers have a SNAP card with no limit. There are retail stores, restaurants, bars, ice skating rinks, movie theaters, showplaces, and staff waiting on you hand and foot. No cash changes hands. You charge everything to your room number and then just pay with one of your 13 credit cards at the conclusion of your voyage into debt. Then you pay 18% interest on the 25 Funky Monkeys you consumed for the next 14 years. Cruising captures the essence of America as we traverse our voyage to hell.

The ordeal at sea of the Carnival Triumph and the leadership displayed by the Carnival management and executive officers is a microcosm of our declining empire. The $420 million Carnival Triumph was put into service in 1999 and has run continuously for the last fourteen years, with only periodic dry dock maintenance. These massive ships are replenished within hours of docking and depart within twelve hours of dumping their 3,400 passengers back onshore. The CEO and top management of Carnival care only about ROI and whether their stock options are vested. Their goal is to bilk the passengers out of as much cash as possible, while paying their foreign slave labor crew members as little as possible. The ships are registered in foreign countries for tax purposes and the crew members are mostly from third world countries. Carnival executives and shipboard officers have a history of recklessness, mismanagement, and willingness to endanger its passengers in its greedy thirst for short term profits. Ask the families of the 32 passengers killed in the sinking of the Costa Concordia.

The engine room fire that disabled the Triumph was not an isolated instance. This was the fourth engine room fire on a Carnival owned ship resulting in a loss of power, the others being the Tropicale in 1999, the Carnival Splendor in 2010, and the Costa Allegra in 2012. The Carnival Triumph should not have been at sea. It had been plagued with mechanical problems for weeks prior to the engine fire. Voluntarily taking the ship out of service would have hurt the 1^st quarter earnings per share of this public company, therefore the leadership of Carnival told the engineers to patch it up and get it back out on the seas. Two weeks prior to the engine room fire the Carnival Triumph experienced propulsion issues that caused it to be five hours late returning to its Galveston home port on January 28, 2013 and delaying the ship’s departure for its next cruise until 8:00 pm that night. The ship departed, but the problems had not been fixed. The Associate Press reported a story about that cruise that provides a different assessment than the public relations drivel released the corporate office:

An email informed Debbi Smedley and other passengers that the propulsion problem would prevent them from docking at two ports. “Due to the limited cruising speed, our itinerary will be impacted. Depending on the progress of the repairs, we will either visit Progreso or Cozumel,” stated the email, signed by Vicky Rey, vice president of guest services. Smedley said the ship was in poor condition overall. During her five-day cruise, a water line broke in the hallway ceiling near her cabin, and a separate sewer line broke outside the main dining hall, she said. Metal was protruding from handrails on the staircases, and the elevators often did not work. Rather than docking in Progreso for only a few hours as planned, the ship stayed in the port for two days, and cruise workers repeatedly told passengers they were waiting for parts to fix a mechanical problem, according to Smedley.

Carnival’s public relations machine then admitted to an electrical problem with the ship’s alternator in the last voyage before the fire, but claimed it was repaired. What they didn’t reveal is that it was a Coast Guard inspection that revealed there was a short in the high voltage connection box of one of the ships generators causing damage to cables within the connection box. A directive with a compliance due date of February 27, 2013 was issued following the inspection requiring that “the condition of the ship and its equipment shall be maintained to conform with the regulations to ensure that the ship in all respects will remain fit to proceed to sea without danger to the ship or persons on board.” The Coast Guard Marine Information Safety and Law Enforcement System showed that this deficiency remained unresolved at the time of the subsequent fire and loss of power while at sea on February 10. So you have a company PR maggot lying and you have another useless Department of Homeland Security branch not enforcing regulations that are supposed to protect passengers. This is par for the course in our corporate fascist states of America today.

Shit Happens

George: Aha. Aha. Could it be because you don’t want him to know that you have a friend who pees in the shower, is that it?!

Elaine: No, that’s not it!

George: Oh, I think it is! I think that’s exactly what it is!

Elaine: Why couldn’t you just wait?

George: I was there! I saw a drain!

Elaine: Since when is a drain a toilet?!

George: It’s all pipes! What’s the difference?!

George Costanza would have enjoyed sailing on the Carnival Triumph as passengers were left to piss in showers and shit in red plastic bags for days. It finally became socially acceptable to pee in the shower. Most of the ship’s electrical power went down after the engine room fire, causing extensive breakdowns of vital shipboard mechanical systems, including taking out sanitary systems. Passengers reported sewage sloshing around in hallways, flooded rooms and trouble getting enough to eat. Passengers waited in line for three hours to get a lousy hot dog. On the lower decks sewage came up through the shower drain, pooling in the sinks and flowing into the hallways. The allegory of the poor people on the lower decks being inundated with feces and living in wretched conditions, while the rich people living in luxury on the upper decks are blissfully ignorant of the fate of their fellow passengers is so easy to apply to our society in this day and age. The 1% glory in their stock market gains, while 20% of U.S. households are on food stamps.

These direct quotes from passengers and pictures taken onboard this voyage from hell provide a taste of what our future portends:

“We have to urinate in the shower. They’ve been passed out plastic bags to go to the bathroom. There was fecal matter all over the floor.”

“They’re walking around in a lot of urine and fecal matter, and the sewers are backing up.”

“The sanitation situation was gross and the stench was awful.”

“Just imagine the filth. People were doing crazy things and going to the bathroom in sinks and showers.”

“A lot of people were crying and freaking out.”

“We are trapped aboard a floating petri dish without power, air conditioning, or fresh water.”

“It’s degrading. Demoralizing, and then they want to insult us by giving us $500″

After reading a number of articles describing what happened before, during and after the engine fire aboard the Carnival Triumph, the parallels between this Ship of Horrors and our Ship of State become self-evident. You have the CEO and top executives of Carnival only concerned about their wealth, power and control of the company. Rather than thinking long term and making decisions that might be detrimental to their short term quarterly earnings, but insure the long –term financial health and reputation of the company, their decision was driven by their true masters on Wall Street. Instead of taking the ship off-line to make vital repairs and necessary investments, they just papered over signs of an imminent disaster and turned to public relations spin and propaganda as there preferred course of action. When disaster “suddenly” struck, the management and executive officers were unprepared, slow to react, and more concerned with their reputations than about the health, safety and welfare of the passengers. Much more could have been done to alleviate the misery of the 3,400 passengers. Carnival could have had a large generator helicoptered onto the deck and used to produce enough electricity to run some lights, ventilation, refrigeration and toilets. It appears that this ship had two engine rooms and only one was damaged by fire. They could have restarted the undamaged engine room and would have had enough power for most normal functions in the cabins of the ship, and probably some capability to propel the ship towards port. The disgraceful lack of urgency and refusal of top management to attempt every possible solution to this crisis is a lesson to be learned by passengers and citizens alike. They don’t care about you.

Rev. Wendell Gill’s experience onboard the Triumph provides a glimpse into our future. He immediately recognized the leadership of the ship was non-existent and it would be up to people helping people if they were to make it through the ordeal:

“What you had was a tale of two ships. You seldom saw a deck officer. I never saw the captain. Some of the people in the upper areas had plenty of air, but down below, it was unlivable. It was like a sauna of sewage. It was the people on the boat that saved Carnival. In an adverse situation, most people will rise to help — that’s just the human spirit.”

Reverend Gill and his wife noticed that no one from Carnival was stepping up to help the elderly and sick get around. The Gills, along with other concerned passengers, decided to take matters into their own hands, carting mattresses and bedding up from the lower decks. They witnessed the worst side of human nature in the inaction of Carnival leadership, along with some people becoming drunk, disorderly and fighting over food. But they also witnessed people coming together under difficult circumstances, with many in the upper cabins sharing their space with those from the lower uninhabitable decks. The passengers created their own shanty town of tents on deck and in the cooler hallways. The vast majority of people acted like decent human beings. Kindness, sharing, and helping one another won the day. This voyage through hell is a precursor of what lies ahead for everyone in this country. When vital systems fail, the lights go out, and your beloved government leaders are nowhere to be found, how will you fare? Don’t count on someone from the government to lead when we are set adrift in a sea of chaos created by them. The politicians, bankers and bureaucrats will be scrambling to save themselves. Your family, friends, and neighbors will be the only people you can rely on. Your caring government doesn’t really care about you.

Cruisin for a Bruisin

“Sometimes people don’t want to hear the truth because they don’t want their illusions destroyed.” – Friedrich Nietzsche

The similarities between the horrific voyage of the Carnival Triumph and the tragic voyage of the dysfunctional ship of state we call America are many. We have a ruling class consisting of the President, Congress, Judiciary, Central bankers, Media titans, and goliath corporation CEOs who care not for the citizens of this country. You are ignorant peasants in their eyes. They only care about maintaining and expanding their wealth, control and power through the complete capture of our financial markets, political system and media propaganda to the masses. The health and welfare of the peasants isn’t even on their radar screen. The ruling class steering this ship of fools have no interest in the truth or the best long –term interests of the country. The vast majority of the passengers on this impaired listing ship prefers to believe the propaganda and lies spewed by the captain and his minions. They prefer the illusion of safety and security to the truth about the real condition of this ship. When the engines of this ship come to a grinding halt, their illusions will be shattered. Big government will come up small when it counts. The government propaganda and public relations will be revealed as nothing but hot putrid air and fecal matter.

Speaking of fecal matter, President Obama’s State of the Union address, which was watched by 33 million (down from 52 million in 2009) believers, was a perfect reflection of the thinking that led to the Carnival Triumph disaster. The reality facing the country is: $220 trillion of unfunded entitlement liabilities; a $16.5 trillion national debt; annual deficits exceeding $1 trillion; 48 million citizens on food stamps; 11 million people on SSDI; a true unemployment rate of 23%; true inflation exceeding 5%; record high gasoline prices; 0% interest rates for senior citizen savers; free money for criminal bankers provided by their sugar daddy Bernanke; not one criminal prosecution of a Wall Street executive for the greatest financial fraud in history; a war department that spends $1 trillion per year and fights undeclared wars around the world; a chief executive that invokes dictatorial executive orders to murder Americans with his fleet of predator drones and imprison citizens indefinitely without charges; and a bureaucratic nightmare called Obamacare that will drive up deficits, drive up healthcare costs for every family, enrich the healthcare industrial complex, drive doctors into retirement, and drive small businesses into bankruptcy.

Rather than deal with this reality, Obama chose the Carnival Cruise Line method of public relations, misinformation, denial and delusion. He has embraced the Big Lie concept as if he had created it. With a straight face he proposes “investments” in infrastructure, new jobs programs, new education initiatives, more green energy projects, pollution control schemes, bailing out more underwater mortgages, and raising the minimum wage, all done for the children – and it won’t add one cent to the deficit. Instead of leveling with the American people and explaining the dire economic issues confronting our nation that require sacrifice, reality based thinking, and tough choices, we got more platitudes, class warfare, divide and conquer, phantom spending cuts, disingenuous twisting of the truth, intellectual dishonesty and fuzzy math. Public relations spin created by Madison Avenue maggots and pronounced grandly by corrupt puppet politician hacks will not prevent the catastrophic engine failure that will leave this country adrift in a sea of its own feces.

Our cruise of illusions and delusions is headed for troubled water. The math challenged citizens on this ship have been enjoying the 24 hour pizza buffet without the labor required to pay for the bounty. When your leaders boldly lie and tell you we don’t have a spending problem, refer to proposed spending increases as “investments”, and hail $1.6 trillion of spending cuts that did not happen, you’ve got a ship that will be signaling SOS in the imminent future. Both political parties are laughable in their blathering about spending cuts as Bush and his Republican cronies drove spending from $1.9 trillion in 2001 to $3.0 trillion in 2008 with their unfunded wars, unfunded new entitlements (Medicare Part D), Wall Street bailouts, and creation of police state agencies (DHS); while Obama and his Democrat co-conspirators have driven spending up to $3.8 trillion in four years with new unfunded entitlements (Obamacare), expansion of warfare in the Middle East (they sit on top of “our” oil), $800 billion stimulus handouts, $60 billion hurricane relief pork handed out for $25 billion of uninsured losses, and bailing out banks, auto companies, homeowners, and other gamblers who took undo risks and lost to the tune of hundreds of billions. Politicians and the inhabitants of this country have forgotten there are consequences to their actions and inactions.

Carnival Cruise Line is trying to buy off the passengers with refunds and $500 bribes to keep them quiet and sedated, while protecting their continued hundreds of millions in profits and million dollar bonuses for their executives. The ruling class in the United States has bought off the American people with entitlement promises that can’t possibly be honored, food stamps, SSDI, tax rebates, homebuyer tax credits, loan modification programs, Cash for Clunkers, payroll tax cuts, $1 trillion of taxpayer financed student loans, taxpayer financed subprime auto loans, and a myriad of other handouts designed to keep the masses sedated, while the ruling class continues to pillage the national wealth. It’s as if the entire country has been charging their food, drinks, excursions, and purchases to their room number and the bill has reached $16.5 trillion, rising by $3 billion per day. This voyage is reaching an end and the bill is coming due. The engine is on fire but the captain is telling us all is well. Eventually, everyone will know the captain lied.

Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows that the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
That’s how it goes
Everybody knows
Everybody knows that the boat is leaking
Everybody knows that the captain lied
Everybody got this broken feeling
Like their father or their dog just died

Leonard Cohen – Everybody Knows

FISCAL FARCE, FAILURE, FANTASY & FORNICATION

I’ve put off writing an article about what is likely to happen in 2013 so I could peruse the thousands of other articles by reputable bloggers, paid pundits, Wall Street shills and captured charlatans to gather their wisdom. It’s essential that I make predictions for 2013 so I can write another article in December rationalizing why 90% of my predictions failed to materialize. Reading all of these 2013 prediction articles made things much clearer for me. I now know for sure:

The stock market will reach an all-time high.
The stock market will fall 42%.
The economy will strengthen as the year progresses.
The economy will descend into a depression.
The USD will strengthen.
The USD will collapse.
Gas prices will set new highs.
Gas prices will fall below 2012 levels.
Gold will rise to $10,000 per ounce.
Gold will drop below $1,000 per ounce.
We will experience hyperinflation.
We will experience horrific deflation.
Obama will compromise with the Republicans and put the country on a path to prosperity.
Obama will create a debt ceiling crisis and assume dictatorial powers as a result.
Snooki will be a better mother than Kim Kardashian.
Honey Boo Boo will beat I Didn’t Know I Was Pregnant in the Neilson ratings.

The majority of 2013 prediction articles are written to support the agenda of the writer. Many are trying to sell newsletter subscriptions or investment services. Their predictions will match the theme of their newsletter. Others are Wall Street paid shills who will predict what they are paid to predict by their owners. Then there are the political hacks who tow the party line with their predictions. But no one can top the predictive powers of the CBO. They just put out their ten year updated forecast reflecting the fabulous fiscal cliff deal that saved the country. According to the CBO, the “compromise” to reduce our deficits will add a mere $4 trillion to the national debt over the next ten years. I’m sure this will prove to be accurate. Just take a look at their 2002 projection, after passage of the Bush tax cuts:

The CBO predicted the FY2012 surplus would be $641 billion, the national debt would total $3.5 trillion, the debt held by the public would total $1.273 trillion, and GDP would total $17.2 trillion. They missed by that much.

The actual FY12 results were:

The true deficit was $1.37 trillion (amount national debt increased – not the phony deficit number reported by the mainstream media).
The national debt was $16.1 trillion.
The debt held by the public was $11.3 trillion.
GDP was $15.8 trillion.

Based on these results, I won’t be asking the CBO for help with my Super Bowl bet. Making ten year predictions is beyond worthless, but public policy in Washington DC is based on these useless CBO projections. The entire fiscal cliff kabuki theater fictitious crisis reveals the politicians and mainstream media pundits to be liars, fools and frauds. The tax the rich to cut the deficit storyline was sold to the public and won the day. Of course, the highly accurate CBO immediately revealed that the Orwellian named American Taxpayer Relief Act of 2012 adds $4 trillion to the national debt over the next ten years. Based on the accuracy of their previous predictions, it’s a guarantee the national debt goes up by $8 trillion, as the rich take advantage of the thousands of loopholes in the IRS code they paid for to avoid paying the taxes expected by the CBO.

Hypocrisy abounds on both sides of the aisle in Washington DC and on the media company propaganda channels. As the national debt soared from $10.6 trillion on the day Obama took office to $16.4 trillion today, I heard shrieking liberal talking heads on MSNBC, CNN, and the rest of the liberal media blame the debt on the Bush tax cuts and the Bush wars. If the Bush tax cuts were so horrific, why did Obama and his minions just make 98% of these tax cuts permanent? Liberals held protest marches across the country against Bush’s wars and burned him in effigy. Obama’s defense budgets have been larger than Bush’s and he doubled down on our miserable failure in Afghanistan. You don’t hear a peep from the liberals about the warmongering Barack Obama who has kill lists and unleashes predator drones, killing women and children across the globe. Liberals pretend to be concerned about the welfare of the citizens, but continue to support a President that uses executive orders to imprison citizens indefinitely without charges, has expanded surveillance on citizens, has kept Guantanamo open, signs the continuation of the Patriot Act, and proposes overturning the Second Amendment by executive order. Liberals shriek about the evils of an unregulated Wall Street, while remaining silent as Obama hasn’t prosecuted a single banker for the greatest financial fraud in world history. You don’t hear a peep about Jon Corzine, who stole $1.2 billion from the accounts of farmers and ranchers. Liberals talk about regulation and then stand idly by while Wall Street lobbyists wrote the Dodd Frank law and insurance and drug company lobbyists wrote the Obamacare law. Liberal hypocrisy knows no bounds and is only matched by Neo-Con hypocrisy.

The Neo-Con controlled Republican Party is a pathetic joke. They have the guts to declare themselves the party of fiscal responsibility, after Bush’s eight year reign of error. He and his fiscally responsible party were handed a budget in surplus and managed to add $4.9 trillion to the national debt by waging undeclared wars, encouraging Wall Street to create the biggest fraudulent financial bubble in history, creating a new $16 trillion unfunded entitlement (Medicare Part D), cutting taxes without paying for them, and creating a massive new government agency (DHS) to take away our liberties and freedom. Federal government spending grew from $1.9 trillion to $3.0 trillion under Bush and the Republicans. Does that sound fiscally responsible?

Does anyone believe the Republican Party is serious about cutting anything? Tough guy Republicans like Big Chris Christie preach fiscal responsibility when going to war with teachers’ unions, but he squeals like a stuck pig when a $60 billion pork filled, unpaid for, Sandy Relief bill is held up in Congress. The courageous fiscally responsible Congress critters passed the entire pork filled, unfunded, bloated, vote buying joke. It included $28 billion to mitigate future disasters, $3 billion to repair or replace Federal assets, and $6 billion for transportation projects completely unrelated to Sandy damage. The hypocrisy of politicians who proclaim the $50 billion of 2013 fiscal cliff tax revenue as deficit cutting, and then immediately piss it away by paying people to rebuild their houses yards from the Atlantic Ocean while funding billions of non-disaster related projects is disgusting to behold. There is nothing like compromise to add another $60 billion to the national debt.

Our entire economic and political system is a farce. The American people are being played by the powerful interests that provide them with an illusion of choice. Both parties serve the interests of their masters and the fiscal cliff show and debt ceiling show are a form of reality TV to keep the masses alarmed, fearful, and believing there is actually a difference between the policies of the ruling class. The charade has played out in its full glory in the last few weeks with Obama convincing the masses he had stuck it to the rich, while in reality the working middle class got it good and hard when they got their January paychecks. This chart details the tax changes that went into effect on January 1.

The funniest part this fiscal fiasco farce is watching the reaction of the sheep who believed Obama and the mainstream media storyline. Obama was able to raise the published top rate on people making over $400,000. The newly defined “rich” laughed heartily as they know only fools pay anywhere near the top rate. The rich just call their tax advisor and instruct them to use one of the thousands of tax loopholes in the 75,000 page IRS tax code to “legally” avoid the new Obama rates. Meanwhile, both parties and their mainstream media mouthpieces downplayed the 2% payroll tax increase on every working American. This tax increase has been a complete surprise to the reality TV zombies and Facebook aficionados. Even college educated professionals in my office had no idea their next monthly paycheck was going to be $150 to $200 lighter. This will wipe out most, or all, of the annual raise they received. The tax will fall heavily on the 75% of households that make less than the $113,700 Social Security cutoff. For a struggling family of four earning the median income of $50,000, the $1,000 less in their paychecks will mean less food, putting off trips to the doctor, driving on bald tires, or not taking the family on a vacation to the Jersey shore. The $2,274 increase in taxes (.57%) for the Wall Street banker making $400,000 probably won’t put too much of a crimp in his Hamptons lifestyle.

The joke is on the American people as the rich will ante up maybe $50 billion of taxes in 2013, while the working middle class will be skewered for $125 billion. How’s that “Tax the Rich” slogan working out for you?

Only in the Orwellian capital of Washington DC would a bill that was supposed to provide tax relief to the middle class and spending cuts to reduce the deficit, actually increase the tax burden of a median household by $1,000 and perpetuate the pork spending payoffs to campaign contributors and friends of the slimy politicians that slither through the halls of Congress. The list of pork and bribes should be nauseating to hard working Americans across the country:

$30 billion extension of the 99 weeks of unemployment benefits, even though we are supposedly in the 3^rd year of economic recovery. Continuing to pay people to not work for two years will surely boost employment.

$14.3 billion for a two-year extension of the corporate research credit benefiting large technology companies like IBM and Hewlett Packard.

$12.2 billion one-year extension of the production tax credit for wind power.

$11.2 billion two- year extension of the active financing exception, which lets GE, Caterpillar Inc. (CAT) and Citigroup Inc. (C), among others, defer taxes on financing income they earn outside the U.S.

$1.9 billion extension of the Work Opportunity Tax Credit for hiring workers from disadvantaged groups, benefitting mega-restaurant chains like McDonalds.

$1.8 billion extension of the New Markets Tax Credit for investments in low- income areas, benefitting JP Morgan and other Wall Street shyster banks.

$650 million tax credit for manufacturing energy-efficient appliances, benefitting mega-corps like Whirlpool.

$430 million for Hollywood through “special expensing rules” to encourage TV and film production in the United States. Producers can expense up to $15 million of costs for their projects. NBC thanks you.

$331 million for railroads by allowing short-line and regional operators to claim a tax credit up to 50% of the cost to maintain tracks that they own or lease.

$248 million in special expensing rules for films and television programs.

$222 million for Puerto Rico and the Virgin Islands through returned excise taxes collected by the federal government on rum produced in the islands and imported to the mainland.

$78 million for NASCAR by extending a “7-year cost recovery period for certain motorsports racing track facilities.”

$59 million for algae growers through tax credits to encourage production of “cellulosic biofuel” at up to $1.01 per gallon.

$4 million for electric motorcycle makers by expanding an existing green-energy tax credit for buyers of plug-in vehicles to include electric motorbikes.

So when you see the cut in your take home pay, just comfort yourself knowing that JP Morgan, Citigroup, GE and hundreds of mega-corporations were able to retain their tax breaks. As they have done for decades, Congress and the President agreed to address spending cuts at a future date. Of course, a government spending cut isn’t actually a cut. It’s a lower increase than their previous projection. Nothing is ever cut in Washington DC. The austerity storyline is a lie. Not a dime has been cut from the Federal budget. Intellectually dishonest ideologues try to peddle the wind down of the Obama $800 billion porkulus program as a cut in Federal spending. They sold this Keynesian “shovel ready” crap to a gullible public as stimulus to jumpstart the economy. Federal spending was $3.0 trillion before the Obama stimulus. After the two year stimulus was pissed away without helping the economy one iota, the baseline should have been back in the $3.2 trillion range. Instead, FY13 Federal spending will be $3.8 trillion. This hasn’t kept liberal ideologues like Krugman and his minions in the mainstream media from blaming crazy Tea Party Republicans for inflicting horrendous austerity measures on the poor and disadvantaged.

The chart above reveals a few truths:

The country has been blessed with two of the worst presidents in U.S. history over the last twelve years.
When Federal spending as a percentage of GDP is beyond two standard deviations over the normal range during the last sixty years, your problem is not lack of tax revenue.
Obama and the current Congress are spending at a level of 24% of GDP versus the 18% of GDP when Clinton left office. This amounts to a nose bleed altitude $950 billion higher than the level Clinton was spending in his final year in office.

The Op-eds in liberal rags across the land decry the lack of civility in Washington DC and plead for politicians on both sides of the aisle to come together and compromise for the good of the country. This line of bullshit would be laughable if it wasn’t so wretched in its falsity. Compromise is what has left this country with a $16.4 trillion national debt, $200 trillion of unfunded liabilities, and $1 trillion deficits as far as the eye can see. Democrats have compromised and let the Republicans create a warfare state. Republicans have compromised and let Democrats create a welfare state. The two headed monster living in the swamps of Washington DC just voted to increase taxes on all Americans. They voted to hand criminal Wall Street banks $700 billion. They voted to pass the Patriot Act. They voted to pass the NDAA. They’ve allowed the President to wage undeclared wars in Iraq, Afghanistan, Libya, and now Iran. They voted for a $663 billion Defense bill that includes tens of billions the Secretary of Defense doesn’t even want. They will vote to raise the debt ceiling in the next two months. The last thing this country needs is more compromise. We can’t afford any more compromise. The chart above proves what can happen when gridlock ensues, spending restrictions are enforced, and confrontation displaces compromise. After the 1994 Republican takeover of Congress, gridlock ensued for the next six years. PAYGO restrictions in the Omnibus Budget Reconciliation Act of 1990 didn’t allow unfettered spending increases. The result was Federal spending falling from 22% of GDP to 18% of GDP and a budget surplus. The Pay-Go restrictions expired in 2002 and Democrats and Republicans have compromised to the tune of a $10.2 trillion increase in the national debt in ten years. The hypocrisy of pandering deceitful politicians is boundless and shows utter contempt for the intelligence of the American populace.

“Raising the debt ceiling does not authorize more spending. It simply allows the country to pay for spending that Congress has already committed to. If congressional Republicans refuse to pay America’s bills on time, Social Security checks, and veterans benefits will be delayed. We might not be able to pay our troops, or honor our contracts with small business owners. Food inspectors, air traffic controllers, specialist who track down loose nuclear materials wouldn’t get their paychecks. Investors around the world will ask if the United States of America is in fact a safe bet. Markets could go haywire, interest rates would spike for anybody who borrows money – Every homeowner with a mortgage, every student with a college loan, every small business owner who wants to grow and hire. We are not a deadbeat nation.

It would be a self-inflicted wound on the economy. It would slow down our growth, might tip us into recession. And ironically it would probably increase our deficit. So to even entertain the idea of this happening, of the United States of America not paying its bills, is irresponsible. It’s absurd. Republicans in Congress have two choices here. They can act responsibly, and pay America’s bills, or they can act irresponsibly and put America through another economic crisis. But they will not collect a ransom in exchange for not crashing the American economy.” – President Barack Obama – January 14, 2013

“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. The Senate continues to reject a return to the common sense Pay-go rules that used to apply. Previously, Pay-go rules applied both to increases in mandatory spending and to tax cuts.

The Senate had to abide by the common sense budgeting principle of balancing expenses and revenues. But we must remember that the more we depend on foreign nations to lend us money, the more our economic security is tied to the whims of foreign leaders whose interests might not be aligned with ours. Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘‘the buck stops here.’’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.” – Senator Barack Obama – March 16, 2006

I could have shown quotes from George W. Bush during the 2000 Presidential campaign talking about a non-interventionist foreign policy and no need for the U.S. to get involved in nation building and then proceeding to pre-emptively attack sovereign countries while wasting trillions and impoverishing unborn generations trying to create “democracy” in the Middle East at the point of a gun as a cover to protect “our” oil. The point is that we are being given the illusion of choice. Everyone knows the debt ceiling will be raised after another episode of Washington DC Kabuki Theater, presented by the corporate mainstream media in breathtaking detail, because the politicians are beholden to their owners and those owners want more of our money. That is why spending will never be willingly cut by the spineless puppet congressmen, as their strings are pulled by the corporate puppet masters and they dance to the tune of the banking oligarchs that own this country.

After witnessing the fighting of undeclared never ending wars, passage of freedom destroying legislation like the Patriot Act & NDAA, approval of pork barrel spending to the tune of hundreds of billions, rule by Executive Order, using ZIRP to extract hundreds of billions from senior citizen savers and give it to criminal Wall Street banks, forcing the American people at gunpoint to replenish the Wall Street banks with $700 billion after they had committed the greatest financial fraud in history, and a continuing trampling of the U.S. Constitution, the American people continue to remain willfully ignorant of the truth. The American Dream is dead. We’ve allowed a rich, privileged, elite few to achieve hegemony over our economic and political system with their control of the media and manipulation of our financial markets. They will collapse the country because they will never be satisfied with the amount of wealth and power they’ve accumulated. Their voracious greed will be their downfall. The sooner we can channel the anger of George Carlin, the sooner we can put an end to this corporate fascist reign of terror.

“Politicians are put there to give you that idea that you have freedom of choice. You don’t. You have no choice. You have owners. They own you. They own everything. They own all the important land, they own and control the corporations, and they’ve long since bought and paid for the Senate, the Congress, the State Houses, and the City Halls. They’ve got the judges in their back pockets. And they own all the big media companies so they control just about all the news and information you get to hear. They’ve got you by the balls.

They spend billions of dollars every year lobbying to get what they want. Well, we know what they want; they want more for themselves and less for everybody else. But I’ll tell you what they don’t want—they don’t want a population of citizens capable of critical thinking. They don’t want well informed, well educated people capable of critical thinking. They’re not interested in that. That doesn’t help them. That’s against their interest. You know something, they don’t want people that are smart enough to sit around their kitchen table and figure out how badly they’re getting fucked by a system that threw them overboard 30 fucking years ago.

It’s a big club and you ain’t in it! You and I are not in the Big Club. By the way, it’s the same big club they use to beat you in the head with all day long when they tell you what to believe. All day long beating you over the head with their media telling you what to believe, what to think and what to buy. The table is tilted folks, the game is rigged. And nobody seems to notice, nobody seems to care. That’s what the owners count on, the fact that Americans are and will probably remain willfully ignorant of the big red, white, and blue dick that’s being jammed up their assholes every day. Because the owners of this country know the truth, it’s called the American Dream, because you have to be asleep to believe it.” – George Carlin

I never did get around to making my 2013 predictions. I’ll give it a stab in my next article: Apparitions in the Fog.

2012 – YEAR OF LIVING DANGEROUSLY IN REVIEW

On January 8 of this year I posted my annual prediction article for this year – 2012 – The Year of Living Dangerously. Now it’s time to assess my complete and utter cluelessness when it comes to predicting things within a given time frame. Despite the fact that myself and everyone else acting like they know what lays ahead are proven wrong time and time again, we continue to make predictions about the future. It makes us feel like we have some control, when we don’t. The world is too complex, too big, too corrupt, too lost in theories and delusions, and too dependent upon too many leaders with too few brains to be able to predict what will happen next. This is the time of year when all the “experts” will be making their 2013 predictions. I haven’t seen too many of these experts going back and honestly assessing their 2012 predictions, which didn’t happen.

What I’ve learned is that “experts” usually have an agenda. Their predictions are designed to convince you to buy the stocks they recommend or purchase their newsletter. Many of these “experts” work for Wall Street, the corporate MSM, a political party or corporate interest. Half of the “experts” represent the status quo and want the masses to think everything is just fine and will steadily improve. The other half are fear mongers that want to scare you into buying their products with predictions of impending collapse at any moment. I like to read the predictions of a wide variety of pundits, bloggers, and so called journalists, while understanding they probably have an agenda.

Personally, I try to make my predictions based on the facts I observe and try to gather. My agenda is to prepare my family for whatever these facts tell me is likely to happen. My website is just a place for me to post my thoughts. I don’t depend upon it for a living and I have nothing to sell. That doesn’t mean that my biases, hopes, and desires do not color my predictions. As I reread my article yesterday, I found myself thinking, “when is this long winded gasbag going to actually make some predictions?” My article was supposed to make 2012 predictions but ended up trying to tie 2012 into the Fourth Turning Crisis paradigm. When I eventually got to the predictions, I realized that a monkey throwing darts could have done just as well. If I was one of those “experts”, I’d say that I wasn’t wrong, I was just early. Of course, that is a cop-out. Being early is the same as being wrong.

I’m more interested in why I was wrong. It seems I always underestimate the ability of sociopathic central bankers and their willingness to destroy the lives of hundreds of millions to benefit their oligarch masters. I always underestimate the rampant corruption that permeates Washington DC and the executive suites in mega-corporations across the land. And I always overestimate the intelligence, civic mindedness, and ability to understand math of the ignorant masses that pass for citizens in this country. It seems that issuing trillions of new debt to pay off trillions of bad debt, government sanctioned accounting fraud, mainstream media propaganda, government data manipulation and a populace blinded by mass delusion can stave off the inevitable consequences of an unsustainable economic system. But enough excuses. Let’s see how wrong I was:

All the episodes which will occur in 2012 will have at their core one of the three elements described by Strauss & Howe in 1997: Debt, Civic Decay, or Global Disorder.

This was a generic prediction. Those are a lot easier to take credit for as being right. Considering the country is about to go over the fiscal cliff, I’d say that debt has had a major impact in 2012. The disgusting political campaign, the anger over efforts to ban guns, urban violence, 20% of nation on food stamps, and real unemployment rate of 23% certainly prove that civic decay is accelerating. Uprisings in Egypt, Syria and across the Middle East intensified. Israel and Iran got closer to inevitable war. Japan and China are on the verge of conflict. The U.S. is still bogged down in Afghanistan and has failed miserably in efforts to democratize the Middle East. I’d say we have had a bit of global disorder.

At best, the excessive levels of sovereign debt will slow economic growth to zero or below in 2012. At worst, interest rates will soar as counties attempt to rollover their debt and rolling defaults across Europe will plunge the continent into a depression.

The best case scenario for European bankers and politicians came to pass in 2012. The GDP for the European Union went negative in the 3rd quarter of 2012. The southern European nations are experiencing depression level conditions with soaring unemployment, social unrest, and higher interest rates. But even Germany is experiencing a dramatic slowdown. The bankers continue to call the shots, with various debt schemes designed to keep the bankers whole, while throwing the people to the wolves. They have postponed the day of reckoning, but it is coming. They do not have a liquidity problem. They have a solvency problem. You cannot resolve a debt problem by creating more debt.

The truth that no one wants to acknowledge is the standard of living for every person in Europe, the United States and Japan will decline. The choice is whether the decline happens rapidly by accepting debt default and restructuring or methodically through central bank created inflation that devours the wealth of the middle class. Debt default would result in rich bankers losing vast sums of wealth and politicians accepting the consequences of their phony promises. Bankers and politicians will choose inflation.

This was an easy one. Bankers and politicians will never choose pain for themselves when they can shift it to the people. Bernanke and the rest of the world’s central bankers, in cooperation with their captured politicians, have chosen to inflate the debt away by printing money. They trust in the shallowness and ignorance of the masses to not notice as their standard of living steadily declines.

Controlling the distribution of data allows the oligarchs to falsify the true level of inflation and the corporate MSM dutifully spews the propaganda to the masses.

The European Union will not survive 2012 in its current form. Countries are already preparing for the dissolution. Politicians and bankers will lie and print until the day they pull the plug on the doomed Euro experiment.

I was 100% wrong in this assessment. The politicians and bankers are most certainly lying, but they have succeeded in keeping the EU intact. The dissolution would imperil too many bankers. Whether they can keep it intact through 2013 is another question.

The National Debt will be $16.5 trillion when the next president takes office in January 2013.

Barack Obama will be inaugurated on January 20, 2013. As of December 26, 2012 the National Debt stood at $16.34 trillion and according to Turbo Tax Timmy will hit the debt limit of $16.4 trillion on December 31. He will use accounting gimmicks and not fund government pensions to not exceed the limit, but the debt will continue to accumulate at a rate of $3.5 billion per day. The National Debt will be at approximately $16.47 trillion when Obama starts his 2nd term. Close enough for government work.

As debt servicing grows by the day, the economy losses steam. The excessive and increasing debt levels will lead to a renewed recession in 2012.

Despite the fact that the government and corporate media continue to report economic growth and a barely positive GDP, a recession did begin this past summer. Using a true level of inflation, GDP has been negative since 2006.

The horrific Christmas retail sales and declining corporate profits reveal the truth. Fourth quarter GDP will be negative and the government will eventually adjust the prior quarters lower. Excel spreadsheet models, fake inflation figures and seasonal adjustments cannot deny reality or the facts.

As foreclosures rise a self-reinforcing loop will develop. Home prices will fall as banks dump houses at lower prices, pushing millions more into a negative equity position. Home prices will fall another 5% to 10% in 2012, with a couple years to go before bottoming.

Another 100% wrong prediction. I again underestimated the willingness of corrupt Wall Street bankers, in cahoots with the Federal government, to fraudulently boost home prices by withholding foreclosures from the market and creating a fake housing shortage. The Feds have willingly used Fannie, Freddie and the FHA to guarantee more bad mortgage loans and put the taxpayer further on the hook for the billions of bad debt. Bennie has swooped in and bought up billions of toxic mortgage debt from the criminal Wall Street banks, while driving mortgage rates to record low levels. With this massive intervention, they have managed to increase home prices by 4% and increase home sales to levels 60% below the peak. Job well done.

The working age population will increase by 1.7 million, the number of people employed will go up by 1 million, but the official unemployment rate will drop to 7% as the BLS reveals that 10 million people decided to relax and leave the workforce. Surely I jest. The government manipulated unemployment rate will rise above 9%, while the real rate will surpass 25%.

I made what I thought was an outrageous prediction as an attempt at humor, but my outrageous prediction was closer to the truth. The working age population has grown by 3.7 million people, the number of employed people has gone up by only 2.7 million, 2.4 million people decided to kick back and leave the workforce, resulting in the unemployment rate “plunging” from 8.7% to 7.7%.

Measuring unemployment on par with the method used during the 1930s would put the level at 23% today. But you should trust the BLS. Why would they lie?

Ben Bernanke, Wall Street shysters and Barack Obama want you to be drawn in by the allure of short-term gains based on hopes of QE3. The stock market will be volatile in 2012 with stocks falling 20% when it becomes evident the country is going back into recession. Ben will try to ride to the rescue with QE3 as he buys up more toxic mortgage debt. Wall Street will do their usual touchdown dance celebration, but the bloom will fall off this rose fast, as quantitative easing has proven to be a failure in stimulating economic growth.Gridlock in Washington D.C., chaotic national conventions, and the implosion of Europe will contribute to the market finishing down by at least 15% for the year.

I hope you didn’t follow my stock market advice as it looks like I missed by only 25% or 30% with this prediction. It is amazing what zero interest rates for Wall Street banks, QE to infinity, high frequency trading supercomputers, and fake Wall Street earnings can do for a stock market. Since the recession has not been acknowledged and rigged corporate profits still sit near their peak, the stock market has continued to rise. I applaud the oligarchs for their ability to extract every last dime from the pockets of the middle class in their avaricious plundering of America. Bernie Madoff is proudly admiring their work from his prison cell.

The average price of oil will exceed $100 during 2012 resulting in the highest average gas price in history for American drivers. These high prices, along with various weather related issues will keep food prices elevated, with 5% or higher increases likely. This should spur a few more peasant revolutions around the globe.

I nailed this prediction. Americans paid the highest average price for a gallon of gasoline in history during 2012. Agricultural commodities like corn, wheat and soybeans soared by 7% to 20%, as the high oil prices and drought drove food prices higher. Meat prices will rise in 2013 as herds had to be thinned in 2012 because of the high feed costs. But don’t worry. The BLS will just adjust the food inflation away as they assume you switch from hamburger to cat food.

Gold will finish the year higher. As always, it will be volatile and manipulated by the powers that be. A drop below $1,500 in the beginning of the year is possible, but when Ben announces QE3, it will be off to the races. I expect gold to reach $1,900 by year end. Silver will be more volatile, but will likely reach $40 by year end.

Gold will finish the year higher for the twelfth consecutive year. It was volatile, with a high of $1,796 and a low of $1,527. It will finish the year in the mid $1,600s. Silver was equally volatile, but also up for the year. It ranged between $37.50 and $26. It will finish the year in the $30 range. The powers that be know that rising gold and silver prices reveal their deceitful inflationary master plan, so they use all of their market manipulative powers to suppress the prices of these metals. The higher our debt, the higher their prices will go. When the confidence game is revealed to be a Ponzi scheme, the prices of gold and silver will be unleashed.

Old line mall based retailers like Sears and J.C. Penney die a slow agonizing death as they stagger into the sunset like Montgomery Ward, Circuit City and thousands before them.

I was wrong about JC Penney. They are dying a fast agonizing death as the idiot savant from Apple has driven them straight into the ground, with sales plunging by 26% versus last year. It isn’t a matter of if, but when this employer of 159,000 declares bankruptcy. The “brilliant” (Jim Cramer says so) Eddie Lampert has Sears on a glide path to liquidation. This Christmas season will reveal these CEOs to be frauds.

The Occupy Movement will become more extreme with more disruptions of the economic system with less warning so the authorities don’t have time to prepare. I expect more cyber hacking into Wall Street, government, and media computer networks, causing disarray and uncertainty regarding financial information. I expect the Democratic and Republican presidential conventions to be overrun by protestors. The authorities will respond with excessive force, resulting in further violent protests in other cities.

Another 100% miss. The Occupy Movement splintered and petered out after being brutally dismantled by the armed mercenaries of the status quo. There were some cyber-attacks, but they caused minimal disruption. The masses are satiated with their techno-gadgets and reality TV shows. No one protested. No one cared.

The Federal government grows ever more panicked by the knowledge that its Ponzi scheme economy is going to collapse. This is why passage of the NDAA and the future passage of SOPA are so important to them. Imprisonment of citizens without charge and shutting down the only remaining means of truth – the Internet – are essential to retaining their power and control over the masses. At the same time, gun sales are at record levels. Critical thinking Americans can see the writing on the wall and no longer trust corrupt politicians of either party. Arming yourself and buying physical gold and silver is a prudent act in today’s world.

The outrage over SOPA, led by the alternative online media, stopped it from being passed. The tyrants continue their efforts to suppress free speech on the internet, as Facebook shuts down pages that do not conform to the corporate fascist government agenda. Gun sales are off the charts, as critical thinking people no longer trust the corrupt government. Physical gold and silver sales are soaring as critical thinking people no longer trust our corrupt economic system.

The ruling elite hand selected puppets for the 2012 presidential election are Obama and Romney. They are virtually interchangeable and both are acceptable to the Wall Street oligarchs. The monkey wrench in the gears is Ron Paul. He will run as a 3^rd Party candidate and focus a light on the crony capitalism that passes for free markets in America today. He will be vilified by both parties and their media mouthpieces, but if he gains traction I fear an unfortunate accident will befall him. Either way, he will have a dramatic impact on the debate and the outcome of the 2012 election.

With this prediction I allowed my hope to overcome reason. The oligarchs are too powerful. Ron Paul’s grassroots campaign made the oligarchs extremely uncomfortable. He drew huge crowds of young people on college campuses across the country. His message of liberty and freedom resonated with millions, but he was no match for the billionaires that call the shots in this country. He was silenced by the Republican establishment and chose not to run as a 3rd party candidate. The puppet on the left won the election. The puppet on the right retreated to one of his six mansions. Ron Paul rode off into the sunset knowing he gave it his best shot.

It seems more likely by the day that someone will do something stupid in or around Iran and the Persian Gulf will explode into a virtual hell on earth. The unintended consequences of such a development will far outweigh the intended consequences. The revolutions, protests, and brewing civil wars in Egypt, Syria, Libya and Iraq will flare up even if Iran doesn’t explode into a shooting war. The tensions in the Middle East will keep oil prices above $100, despite a world plunging into recession.

The showdown between Israel and Iran did not happen in 2012, despite increasingly angry rhetoric. The stealth war with Iran began, as economic sanctions and cyber warfare have begun to destroy their economy and impoverish their people. Revolutions, riots, protests and civil war spread across the Middle East throughout 2012 resulting in high oil prices and a worldwide economic contraction which is picking up speed as 2012 comes to a conclusion.

China’s hard landing will arrive in 2012. Keynesianism on steroids has failed as they’ve built more than enough vacant malls, vacant cities, vacant condo towers, and bridges to nowhere. Property prices will plunge, exports will decline, and peasants will revolt as food and energy prices push them over the edge.

China has come in for a hard landing. With a government more corrupt than even ours, their reported economic data would make a BLS drone blush with pride. Property prices are falling. Exports are falling. But somehow they report economic growth of 7%. And the MSM dutifully reports this gibberish as truth. Unrest and protests are a daily occurrence in China, but they are immediately crushed. The Chinese authorities continue to clamp down on the internet and media. China’s economic system is a rotting Keynesian nightmare.

I also raised the generic possibilities of earthquakes, hurricanes, pandemics and terrorist attacks. I noted that a terrorist attack in a public venue might cause a government over-reaction. Even though the slaughter of young school children by a deranged mental defective doesn’t constitute a terrorist attack, the reaction by government officials and their liberal control freak allies in the mainstream media are exactly what I feared. Every tragedy is used to gain more control over our lives and take away our Constitutional rights in the name of safety and security. The ignorant masses willingly give up their freedom and liberty, believing their Orwellian government protectors will look out for them. As we enter 2013, time grows shorter. The power hungry psychopaths continue to pillage and plunder. Our unsustainable economic system struggles under the weight of debt, despair and delusion as the endgame approaches. The willfully ignorant populace is lost in their techno-narcissistic dream world.

Will 2013 be the year it all collapses in a flaming heap of rubble? I don’t know. Maybe you should ask an “expert”.

It guarantees to be an interesting year. I’ll be hiring Bonzo the chimp to help me make my 2013 predictions in the next week or so.

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OVERDRAFT

I bet you were wondering what Admin does in his spare time for fun.

After spending my weekend writing a depressing article about the decline and fall of the American Empire, I got up at 5:15 am, got in my itsy bitsy Hybrid and dodged 18 wheelers on my hour drive into the killing fields of West Philly. I put in a full day at work and then for fun I walked over to the Annenberg Center at 5:00 pm to watch a documentary about the impending collapse of our country because of our debt and a panel discussion with four Wharton professors. The conclusion – we’re fucked.

The documentary was extremely well done. It was similar to David Walker’s I.O.U.S.A. which came out in August 2008, just before the financial collapse. Here’s the problem. David Walker’s documentary showed the perils of our national debt and the impending disaster if we didn’t address our unfunded liabilities related to Medicare, Social Security and future deficits. The National debt in August 2008 was $9.6 trillion. Today it is $16.2 trillion. I don’t think Walker’s recommendation was to increase the Debt by 69% over the next four years. Obamacare was passed, adding millions of people into Medicare and digging us deeper into debt. When you’re in a hole, you’re supposed to stop digging. We dug faster.

They can make documentaries until they are blue in the face, but Americans will yawn and flip the channel to Dancing With the Stars to see Bristol Palin self destruct. If this documentary comes on your local PBS station (until Romney pulls the plug) I recommend you watch it. They are going to 20 different colleges to promote this film. It is the Millenials who get fucked the worst, so they should get angry. We’ve left them a shit sandwich with a side of shit.

We have no leaders willing to level with the American people. We have an American people who want to be lied to. Nothing will be fixed until the entire system implodes. Sad but true. The panelists seemed to hold out hope that after the election the Simpson/Bowles plan would be resurrected and enacted. I doubt it.

http://www.youtube.com/watch?v=MqW628w_z4w&feature=share&list=PL681B1D0A84320023

PBS documentary ‘Overdraft’ explores U.S. debt situation

After the screening, Wharton professor Michael Useem moderated a discussion

By Fiona Glisson · October 9, 2012, 12:32 am

In last week’s presidential debates, Governor Mitt Romney said that he would cut funding for PBS as part of his plan to balance the budget and decrease the national debt.

Last night in the Zellerbach Theatre, The Wharton School and the Penn Institute for Urban Research hosted a screening of Overdraft — a PBS documentary — which discusses the causes and dire consequences of the United States’ soaring national debt.

After the screening, management professor Michael Useem — who is also the director of the Center for Leadership and Change Management — moderated a panel discussion.

The documentary, which can also be found on YouTube, was commissioned and funded by the Travelers Institute, a think tank founded by Travelers Insurance Company. It applies the company’s management, experts and knowledge to issues of public policy.

“We wanted to raise awareness about the importance of public policy decision-making and things that our experts can help with,” said Joan Woodward, the president of the Travelers Institute and executive vice president of public policy for Travelers.

Though the Traveler’s Institute funded and contributed information to the documentary, they had little say in its editorial content. WTVI-TV — Charlotte, North Carolina’s PBS affiliate — produced the film in partnership with Susie Films.

The documentary outlined how the housing crisis, the resulting economic downturn and unbridled government spending contributed to the burgeoning national debt.

It then showed various perspectives concerning how portions of the government’s budget such as health care, defense and social security were not solvent.

Heather Huang, a junior exchange student in Wharton, found pharmacy owner Tom Miller’s story particularly effective. His pharmacy in Marion, Illinois, went under because the state government could not afford to reimburse him for patients’ Medicare and Medicaid prescriptions. She liked that the film interviewed “common people and related [national debt] to their lives.”

While it did not provide specific solutions, the film stressed that something must be done.

Introducing the film, Chairman and Chief Executive Officer of Travelers Companies Inc., 1974 Wharton bachelor’s and MBA graduate Jay Fishman stressed that we are on an “unsustainable path to $2 trillion [yearly] deficits if we don’t do something about it.”

Echoing a quotation from Revolutionary-era financier Robert Morris, University President Amy Gutmann commented while introducing the film, “Our own interest and the public good still go hand and hand.”

Wharton is the first stop on a nationwide tour of a growing list of business schools that include the Institute for Economic Policy Research at Stanford University and MIT’s Sloan School of Management.

Producer and Susie Films founder Scott Galloway hopes the film will serve to educate students and encourage them to be involved in public policy. “My hope is that they get a better understanding of the issues,” he said. “I do hope that they recognize that a lot of these issues are solvable.”

Students who attended the event echoed Galloway’s thoughts, discussing the film’s education value. Dan Clay, a Wharton MBA student said the film was “really helpful in explaining why the debt matters.”

Second-year Wharton MBA student William Wang said the film stressed that “fiscal responsibility goes a long way.”

Katie Willis, a graduate student in the School of Social Policy and Practice studying non-profit leadership, appreciated that the film motivates viewers to take action. “The urgency of the speakers within the film felt like a call to arms, which I enjoyed because this is such a pressing problem.”

DECLINE, DECAY, DENIAL, DELUSION, & DESPAIR

The majority of Americans seem OK with just waddling through life, accepting the lies and misinformation blasted from the boob tube and their various iGadgets by their owners, gorging themselves to death on Twinkies and Cheetos, paying 15% interest on their $10,000 rolling credit card balance, and growing ever more dependent on the welfare/warfare state to provide and protect them from accepting personal responsibility for their lives. A minority of critical thinking people have chosen to question everything they see and hear being spewed at us by the propagandist mainstream media, the corporate fascist government, and the powerful banking cabal that has an iron grip upon our throats as they choke the life out of the global economy in their never ending desire for more riches and more power.

The decline of the Great American Empire cannot be attributed to one factor or one bogeyman. There are a multitude of factors, villains, and choices made by the American people that have led to our moral, civil, social, and economic decline. The kabuki theater that passes for our electoral process is little more than a diversion from our imminent fate. Neither candidate for President has any intention of changing the course of the U.S. Titanic. Our rendezvous with destiny has been charted, and there aren’t nearly enough lifeboats. Those who built the ship and recklessly navigated it into a sea of icebergs will be the 1^st into the few lifeboats. The leaders we’ve chosen, the choices we’ve made, and our unwillingness to deal with facts and reality have set in motion a disaster that cannot be averted. It’s a shame the majority of Americans have the math aptitude of a 6^th grader, because the unsustainability of our empire can be calculated quite easily. Math is hard for Americans, but denial and delusion are easy.

Oddly, a couple of late September days in Wildwood NJ were able to crystalize many of the aspects of our cultural and economic decline in my mind. I should have just enjoyed the 72 degree temperatures, a few beers, and the freedom to read a book on my deck. I wish I was just oblivious to my surroundings, but my weekend in Wildwood NJ was an eye opener. Everywhere I turned I saw something that made me laugh, shake my head in disgust, or wonder how our government could have become so inane, incompetent and out of control. We all generalize based upon our preconceived beliefs, but sometimes what you see is what you get. The weekend started normally with a morning bike ride on the boardwalk with my wife and son to the Hereford lighthouse in North Wildwood. Along the way we passed the usual suspects on the boardwalk: the obese, the tattooed, the pierced, and the blue haired. I wish I was exaggerating, but I saw a dozen hoveround and rascal scooters carrying extremely obese Americans on par with this person:

If I wanted to be politically correct, I’d call the fat asses cruising on their “free” rascal scooters, the weight challenged disabled on their powered mobility enhancement vehicles. You know a trend has become a massive scam, when South Park dedicates an entire show to the shame of obesity and the scooter brigade. The majority of the scooter squad jamming up the boardwalk was less than 50 years old. They weren’t disabled. They were just too obese and lazy to wobble down the boardwalk to the next junk food joint. They were certainly in the right place. The Wildwood boardwalk is home to pizza topped with cheese fries, chocolate covered bacon, fried Oreos, funnel cake topped with powdered sugar, and 64 ounce sugar laced lemonade. The place would make Nanny Bloomberg’s head explode.

We’ve all seen the commercials for the Scooter store urging anyone on Medicare to rush in and get a power scooter or wheelchair “at little or no cost to you”. The entitlement “free shit” mentality permeates our culture. There is a cost and it is over $800 million per year, paid for by the 53% who pay Federal taxes. Records from the Centers for Medicare and Medicaid Services show that the cost of motorized scooters and wheelchairs to the government health service for senior citizens rose 179% between 1999 and 2009, the last year for which full records are available. This data is fascinating as the number of Americans over the age of 65 only increased by 18% over this same time frame. The bill in 1999 was $259 million; in 2009 it was $723 million – and is surely over $1 billion today. This is another billion dollar scam being funded by your tax dollars, but there are no spending cuts possible according to our beloved Congressmen.

A recent report by Medicare’s inspector general also showed that 61% of the motorized wheelchairs provided to Medicare recipients in the first half of 2007 went to people who didn’t qualify for them. (Only people who cannot get around without one are supposed to be eligible.) The inspector general found that Medicare is billed an average of $4,018 for a motorized wheelchair that normally sells for $1,048. As a taxpayer, you will be shocked to find out that people are selling their “no cost” Rascal 600 B mobility scooters on eBay. I’m sure the keen eyed government drones working in the Health & Human Services agency are policing the resale of taxpayer paid for scooters. I find it amusing that scooters have various naming classes, just like BMW and Mercedes. The vast majority of people I see tooling around on their “mobility scooters” are just plain fat. They aren’t over 65 years old. On my Sunday bike ride I was flabbergasted and amused by the sight of a 350 pound woman on a Rascal with the pedal to the metal pulling a 275 pound man in a wheelchair attached by rope. The plague of slow metabolism is sweeping the countryside.

While I was relaxing on my deck reading and trying to blot out the nightmare visions of obese boomers in Rascal formation like German panzers invading Poland, a brand new SUV pulled into the parking lot across the street. After five minutes, the driver’s side door opened and out sidled a four foot five, two hundred and fifty pound female senior citizen in all her girth. She waddled to the back of the SUV and opened the hatch to extract her walker with wheels. She began berating the three hundred pound dude that got out of the passenger side to come and get his walker. Then she motored off towards Laura’s Fudge, while her hubby conserved his energy waiting by the SUV. Minutes later she scooted her way back hauling a sack of fudge. They then trundled off towards the boardwalk, most likely headed for Kohrs Bros for a double dipped fudge ice cream cone or some Boardwalk fries smothered in cheese.

Based upon my unscientific assessment of the people walking on the Wildwood boardwalk, I would conclude that 35% of the people are obese, 40% are overweight by 20 or 30 pounds (myself included), and 25% are in relatively good shape. After checking the government statistics, my assessment appears to be accurate. Who is to blame? The easy answer is to just blame the individual for their lack of self-restraint and inability to contain their impulses. But when you consider that 160 million out of 232 million adults in this country are either overweight or obese, along with 11 million adolescents, there must be something more sinister behind the phenomenon. There is no doubt that a major portion of the blame must be laid at the fat feet of those who could have exercised restraint over their cravings, but the words of master propagandist Edward Bernays provides another factor in the equation:

“If we understand the mechanism and motives of the group mind, it is now possible to control and regiment the masses according to our will without them knowing it.” – Edward Bernays

Bernays reveals a truth that is self-evident to those with critical thinking skills. Sadly, few Americans exhibit any thinking skills whatsoever. Our society has bifurcated into those who control and those who are controlled. The overlord Double Plus Alphas in our society consist of the Wall Street banker cabal, the executives of our mega-corporations, Federal Reserve governors, Washington DC politicians, Federal government apparatchiks, the propaganda experts in the mainstream corporate media, and the secretive billionaire set that manipulate and maneuver behind the scenes. The first step in controlling the Gammas, Deltas and Epsilons, as Aldous Huxley knew in 1931, was to indoctrinate them with propaganda in our government run schools. This mission has been accomplished. The vast majority of school children graduate from the government school system with no ability to think critically or question what has been spoon fed to them as facts. The fascist alliance of corporations and the state begin in the public schools, with product advertisements by corporations now subsidizing school budgets. The road to obesity is paved with chicken nuggets, fries and pizza dispensed by the government schools on a daily basis.

Just as in Huxley’s Brave New World, America has been built upon the principles of Henry Ford’s assembly line—mass production, homogeneity, predictability, and consumption of disposable consumer goods. In the dystopian novel, members of every class, from birth, are indoctrinated by recorded voices repeating slogans while they sleep. Huxley didn’t imagine the power of TV and other mass media outlets to do the same while we are awake. We are bombarded day and night by propaganda from mega-corporations to buy their products. Mass consumption of processed food sold by the likes of multi-billion dollar corporations Kraft, Pepsico, Coca Cola, General Mills, Nestle, and Unilever is the chief cause of the obesity epidemic in America. The few know how to manipulate the many through messaging, repetition and persistently molding the opinions of the feeble minded non-thinking masses. The billions spent by corporations on advertising to convince the masses that eating a Wendy’s Baconator, KFC extra crispy bucket, or Double Quarter Pounder with Cheese, washed down with a two liter Mountain Dew or Cherry Coke, is a tribute to the invisible government running the show. Huxley and Bernays had it all figured out eighty years ago:

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

The conscious and intelligent manipulation of the masses by the invisible government Alphas has transmuted citizens into overweight, non-thinking, debt dependent, egocentric consumers. This was not a mistake. The powerful interests used their control over the banking system, media outlets, and political system to lure the willfully ignorant into a debt financed lifestyle through the Federal Reserve created inflation, Wall Street peddled credit cards, auto loans and “creative” mortgages. The manipulators convinced the manipulated that borrowing today to buy houses, cars, bling, tech gadgets, clothing, and fast food was preferable to what previous generations of Americans had done – save to buy things they wanted or needed. This behavior seems to be completely irrational as a people that once saved 12% of their income and carried a moderate amount of debt chose to reduce their savings to 0% and not worry about tomorrow.

It is easier to understand when you realize who benefitted from this purposeful shift in societal norms. The low debt, high savings, production era from 1950 through 1980 benefitted the working middle class, allowing millions to improve their standard of living. The rising debt, low savings, consumption era, from 1980 through today, benefits the 1% Alphas while impoverishing the middle class and sentencing the lower class to a lifetime of dependent servitude to the state. Who benefitted from debt fueled conspicuous consumption and continues to benefit today? The peddlers of consumer debt on Wall Street and the mega-corporations that convinced Americans they couldn’t live without that 5,500 square foot McMansion, BMW X5, stainless steel appliances, 84 inch 3D HDTV, iPhone 5, diamond encrusted Coach handbag, and thousands of other Chinese made trinkets that pile up in underwater homes across the land, benefitted tremendously. The proliferation of debt resulted in obscene profits for the financial sector, record profits for the mega-corporations that shipped production to Asia in order to take advantage of the slave labor, and three decades of wage stagnation and increasing debt for the average working middle class American.

The financialization of America was a conscious decision by the oligarchs. They controlled the issuance of credit. They controlled the currency and level of inflation inflicted upon the masses. They controlled the corporations selling consumer goods on credit. They controlled the Congress, courts, and government agencies with their deep pocket lobbying and buying of influence. Lastly, they controlled the media messages and molded the opinions and tastes of the masses through their Bernaysian propaganda techniques perfected over the decades. In one of the boldest and most blatant acts of audacity in world history, the Wall Street/K Street oligarchs wrecked the world economy in their insatiable thirst for profits, shifted their worthless debt onto the backs of taxpayers and unborn generations, threw senior citizens and savers under the bus by stealing $400 billion per year of interest from them, and enriched themselves with bubble level profits and bonus payouts. Meanwhile, median household income continues to fall, real GDP is stagnant, true unemployment exceeds 22%, and 47 million people are living on food stamps.

The propaganda being flogged by the oligarchs since 2009 is the supposed deleveraging by the American consumer and trying to convince the ignorant masses to resume borrowing and spending. It’s working. Consumer credit outstanding is at an all-time high of $2.73 trillion as the Federal government has dished out billions in student loans to 50,000 University of Phoenix MBA aspirants sitting in their basements quivering with anticipation of on-line graduation and future six figure job with Goldman Sachs. The Feds have also added the impetus to the “strong” auto sales through their 85% TARP ownership of Ally Financial by doling out 7 year 0% auto loans to subprime borrowers in urban enclaves around the country. The oligarchs aren’t worried about these loans being paid back, because they are reaping the profits today. The future losses will just be foisted onto the taxpayer, as always. Total credit market debt of $55 trillion now exceeds 350% of GDP. The National Debt of $16.2 trillion will exceed $20 trillion in 2015 no matter who wins the Presidency in November. The oligarchs adapt and control whoever occupies the White House. It is essential for our owners to keep debt growing at an exponential rate or the Ponzi scheme collapses.

Narrow minded ideologues want a simple answer to a complex interaction of generational, cultural, economic, political, and criminal factors that have conspired to put the country into a predicament that, at this point, will inevitably lead to economic collapse. The truth is the American people have learned to love their servitude. They have willfully chosen ignorance over truth. They’ve chosen to believe what their keepers have instructed them. They’ve chosen to trust the storylines generated by the corporate media rather than think critically and question everything. They’ve chosen obesity and sickness over health. They’ve chosen debt financed faux wealth over savings based real wealth. They’ve chosen safety and security over liberty. They’ve chosen dependency over self-reliance. These choices were aided, abetted and promoted by the Alphas through their ability to manipulate and control the unthinking masses. Huxley understood the power of propaganda and brainwashing decades before it was perfected by our owners.

The saddest part of this episode of the Decline & Fall of the American Empire reality show is the continued delusion of the majority of the populace, as their desire for material goods and fair share of the entitlement pie outweighs their sense of obligation to their children and grandchildren. Their chosen ignorance is fulfilled through their attachment to their personal digital ignorance gadgets and supported by what passes for government education. The truth is obscured and hidden under waves of triviality, reality TV, and data manipulation by our government masters. The dystopian nightmare that engulfs our country has thus far resembled Huxley’s vision of a shallow populace easily distracted by consumerism, pleasure seeking, cultural trivialities, and a never ending ability to be distracted by meaningless minutia. Orwell’s darker vision of surveillance, captivity, information control, authoritarianism and pain will become the norm once the existing social order falls.

“What Orwell feared were those who would ban books. What Huxley feared was that there would be no reason to ban a book, for there would be no one who wanted to read one. Orwell feared those who would deprive us of information. Huxley feared those who would give us so much that we would be reduced to passivity and egotism. Orwell feared that the truth would be concealed from us. Huxley feared the truth would be drowned in a sea of irrelevance. Orwell feared we would become a captive culture. Huxley feared we would become a trivial culture, preoccupied with some equivalent of the feelies, the orgy porgy, and the centrifugal bumblepuppy. As Huxley remarked in Brave New World Revisited, the civil libertarians and rationalists who are ever on the alert to oppose tyranny “failed to take into account man’s almost infinite appetite for distractions.” In 1984, Orwell added, people are controlled by inflicting pain. In Brave New World, they are controlled by inflicting pleasure. In short, Orwell feared that what we fear will ruin us. Huxley feared that our desire will ruin us.” – Neil Postman – Amusing Ourselves to Death

I despair for my country that has chosen to eat, amuse and borrow itself to death. But my despair is deepest for my children and their future. The greed, corruption, myopia, selfishness, and disregard for the well-being of future generations by current and past generations has left a barren and bleak landscape for my children. The Huxley vision of America consuming and amusing itself to death is coming to a painful conclusion, as the limits of a fiat currency and debt based lifestyle become evident. Those in power are preparing the masses for a more Orwellian vision of America when they are forced to pull the plug on the existing paradigm. The Patriot Act, NDAA, military exercises in our cities, militarization of local police forces, warrantless surveillance of our communications, searches and seizures in our airports and train stations, purchase of millions of rounds of ammo by government agencies, implementation of drone technology, camera surveillance, attempts to control the internet, manipulation of economic data, and executive orders allowing the President to take over all commerce while imprisoning citizens indefinitely without charges, are the next step in our descent into a dictatorship of tears.

The question is whether we will stand idly by, fiddling with our gadgets, tweeting about Honey Boo Boo, or will we regain our sense of duty to the future generations of this country. The manipulators are powerful, rich, connected and FEW. Those being manipulated, controlled, and abused are MANY. There will be a revolution in this country whether you like it or not. The existing social order will dissolve during the next fifteen years. What replaces it is up to us. George Carlin described what our owners want.

They’ve got you by the balls.

What do “We the People” want?

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A FISTFUL OF DOLLARS – PART TWO

It is not easy to destroy the greatest empire in the history of mankind. The 20^th Century was the American Century, but as with all empires, the combination of hubris, monetary debasement, imperial overreach and delusional overconfidence have set in motion the inevitable downfall of the American Empire. The policies, decisions, beliefs, and institutions implemented over decades have led the country to the threshold of financial disaster. Based on my observations, a catastrophic combination of demographics, fiat currency debasement, titanic levels of debt, smothering taxation, power in the hands of the few and Wall Street greed have led us to peak Empire. It will be downhill from here as we experience collapse, revolution and ultimately, retribution for the guilty and presumed guilty. I have already addressed the Baby Boomer generation’s contribution to our current plight, to the delight and accolades of Boomers across the land in For a Few Dollars More – Part One. The Boomers were a victim of their size and the timing of their arrival on the scene of empire collapse. Their delusions of debt based wealth and me first attitude could not have been satiated without the creation of the Federal Reserve and the institution of the personal income tax in 1913.

“When a man’s got money in his pocket he begins to appreciate peace.” – Joe – Fistful of Dollars

“Every town has a boss.” – Joe – Fistful of Dollars

In the Old West of the 1800’s, before the creation of the Federal Reserve, money in your pocket meant gold or silver. If Joe were to repeat that line today, he would change it slightly:

“When a man thinks he’s got money in his pocket he begins to appreciate the good things in life like McMansions, BMWs, government provided retirement, government provided healthcare, and delusions of ever increasing wealth.”

Man made inflation is a glorious invention for the men who invented it. For the people who deal with it every day, not so much. Joe knew that every town had a boss. If you didn’t know who the boss was in the United States of America before 2008, you know now. Ben Bernanke and the Federal Reserve Bank of the United States is the boss of this town.

Crony Capitalism Pays for the Cronies

Without Federal Reserve intervention in the financial markets since September 2008, the biggest banks in the world would have entered bankruptcy liquidation. The U.S. economy would have experienced a 10% to 20% fall in GDP. The unemployment rate would have soared above 15%. The stock market would have fallen 70%. Wealthy bondholders and stockholders would have seen their wealth cut in half. Incumbent politicians would have all been thrown out of office. The richest Americans, constituting the ruling class, would have borne the brunt of the pain.

In a true capitalist system, organizations and people who assumed too much risk and made poor decisions would have failed. But the United States does not have a capitalist system. We have a corporate fascist economic system where a small cartel of bankers, military weapons suppliers, and mega-corporations set the agenda for the country through their complete capture of politicians and the mainstream corporate media. At the height of the crisis in 2008, President George Bush revealed whose side he chose:

“I’ve abandoned free-market principles to save the free-market system, to make sure the economy doesn’t collapse. I feel a sense of obligation to my successor to make sure there is not a, you know, a huge economic crisis. Look, we’re in a crisis now. I mean, this is — we’re in a huge recession, but I don’t want to make it even worse.”

George Bush was born with a silver spoon in his mouth. He was not trying to save the free-market system, because we didn’t have a free market system. He was saving his fellow billionaires under the cover of saving the average American. Bush knew as much about saving our economic system as he knew about when to declare mission accomplished in Iraq. He turned the task of saving the free market system over to his multi-billionaire Goldman Sachs Secretary of Treasury Hank Paulson and the real boss of Washington DC, Ben Bernanke. These noble American patriots proceeded to save the top 1% richest Americans on the backs of the American middle class. They did it under the guise of keeping the country out of a Depression. Those who committed the crimes and destroyed the worldwide financial system not only didn’t get punished, they were enriched by the actions of Paulson and Bernanke. This entire sordid chapter in the history of the American empire from 2008 until the imminent collapse, sometime before 2015, will leave future historians dumbfounded at the utter insanity and foolishness of the decisions that were made during the death throes of the empire. Not only did George Bush not save the free-market system, but he drove a stake thru its heart.

To boil the entire 2008 financial collapse down to one word, it would be: DEBT.

Three decades of ever increasing levels of consumer, corporate, and government debt eventually led to an unprecedented implosion. It was as predictable in 2008, to those who understand the fiat monetary system, as it was to Ludwig von Mises decades ago:

“There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

Federal Reserve – Destroyer of Worlds

The 2008 crash and the 1929 crash were manmade disasters. Alan Greenspan and Ben Bernanke created the atmosphere and conditions that led to the risk taking by bankers, home buyers and consumers. Monetary expansion, excessively low interest rates, the Greenspan/Bernanke Put, disinterest in regulation, and pandering to politicians allowed the party to get out of control. Taking away the punch bowl never crossed their mind. The Federal Reserve is controlled by the major Wall Street banks. These banks were partnerships until the 1980s, with partners personally liable for the actions of their banks. Excessive risk taking meant possible personal bankruptcy. Once they became corporations, excessive risk meant excessive compensation for the executives, with the downside being borne by the shareholders.

But that wasn’t enough. The executives were large shareholders, so they convinced the Federal Reserve to bail their corporations out whenever they made bad bets. It was a sweet deal if you were a banker. Knowing their lackeys at the Fed had their back, the goliath Wall Street banks used their power and wealth to convince the SEC to waive the 12 to 1 leverage rules so they could leverage their balance sheets 40 to 1. This meant that a 5% loss in their capital and they would be insolvent. The Harvard MBA CEO titans of the financial world created the housing bubble through their creation of fraud inducing mortgage products, a bewildering array of derivative products that even their MBA geniuses didn’t understand, and betting against the derivatives they were selling to their clients. When this toxic brew of fraud and debt exploded in their faces, the value of the assets on their books plunged by 30% to 40% in 2008 and 2009. The 10 biggest financial institutions in the country were effectively bankrupt. An orderly bankruptcy liquidation that wiped out the bondholders, stockholders and top executives was the solution to excessive risk taking and failure.

This was an unacceptable solution to the billionaire class that owns half the financial wealth in the country. The President was a multi-millionaire. The Treasury Secretary was a billionaire. There were 250 millionaires in Congress. The top executives of the banks that own and control the Federal Reserve are multi-millionaires. The owners and talking head pundits of the mainstream media are all in the billionaire/millionaire class. The cover story used to bilk $700 billion from middle class taxpayers into the coffers of Wall Street mega-banks was that if we didn’t hand over the loot, the financial system would collapse and a Great Depression would ensue. Every program, policy, and rule change that has been rolled out since September 2008 by the Federal Reserve, Treasury, and Congress has benefitted billionaires, bankers, and politically connected corporations. The Federal Reserve has printed over $2 trillion out of thin air to save the billionaires that have been pillaging the middle class for decades.

The Federal Reserve bought $1.25 trillion of toxic mortgages from Wall Street, allowed these banks to borrow at 0%, threatened the FASB into suspending mark to market accounting so banks could fake the value of their loans, instructed banks to rollover commercial real estate loans as if they weren’t really worth 40% less than the value on their books, and rolled out $600 billion of QE2 in order to create a stock market rally, benefitting their billionaire constituents. The $800 billion stimulus program was shoveled to the corporate friends (contributors) of Congressmen across the land. Cash for Clunkers benefitted government owned car companies. The home buyer tax credit and changing loss carry back rules benefitted mega home builders. Every one of these deeds enriched bankers and billionaires while further impoverishing the working middle class. Real middle class wages continue to fall, unemployment remains near record levels, real inflation in food and energy is running above 10%, senior citizens haven’t gotten a Social Security increase in two years, savers are getting .25% on their savings, home prices continue to fall, and future generations will be stuck with the bill for the billionaire bailout.

The standard of living for the average American continues to fall. Real household income is lower than it was in 1999. The only reason it increased in the 1980s and 1990s was the huge influx of women into the workforce. Two earners were needed to try and maintain a constant standard of living. Real average weekly earnings are lower today than they were in 1970, even using the government bastardized CPI calculation that has been so massaged since 1982 that it has only resulted in a happy ending for government bureaucrats at the BLS. Calculating the CPI exactly as it was calculated in 1980 reveals the truth of what the Federal Reserve has wrought on working class America, a drastic decrease in their standard of living. The insidiousness of Federal Reserve created inflation has sucked the life out of the middle class and enriched the cocktail party class.

The stealth transfer of wealth from the working middle class to the richest in our society was done through convincing the middle class that buying things with debt made you richer. This delusion was sold by the billionaire owned corporate mainstream media and peddled by billionaire bankers to the masses through credit cards, “creative” mortgage products, easy access to home “equity”, auto leases, and easy financing products. Only in a society where a fiat currency could be printed by a central bank with no requirement that it be pegged to an anchor such as gold, could such a staggering amount of debt be accumulated.

Delusions of Debt

The bill that has been rung up is in the form of a national debt that has increased by $4.6 trillion since September 2008, a 48% increase in two and a half years. Over this same time frame real GDP has increased by $200 billion, a 1.6% increase in two and a half years. Over this same period, the Federal Reserve has tripled their balance sheet by adding $2 trillion of debt. Think about this for one second. The leaders of the great American empire have burdened future generations with $6.6 trillion of new debt and increased the Gross Domestic Product by $200 billion. Is this a good return on investment? Did the 30 million unemployed and underemployed Americans benefit? Did the 45 million people on food stamps benefit? Did the 11 million households who are underwater in their mortgage benefit? Did the 3 million people who lost their homes in foreclosure since 2008 benefit? Are Americans paying twice as much for groceries and gasoline benefitting? Did the Tunisians, Egyptians, and other poor people around the world benefit?

The answer to all these questions is NO. The only beneficiaries have been bankers, billionaires, mega-corporations and the politicians who were bought off by these greedy traitors to the Republic. Anyone with an ounce of sense knows the country got into this mess due to the issuance of mountains of debt that was un-payable based upon any reasonable assessment of future cash flows to service the debt. Consumers could never have increased their wages enough to pay off the credit card, mortgage, home equity, student loan, and auto debt they accumulated since 1980. The government could never collect the amount of taxes needed to pay for the $100 trillion of entitlement promises they have made over the last four decades. By 2008 we had reached peak debt delusion.

The only questions that remained were how would the debt be defaulted on and who would bear the brunt of the default. The Federal Reserve Chairman and the U.S. Treasury Secretary rolled out a master plan that revolved around convincing the masses they were being saved, while actually enriching their masters on Wall Street. Their PR machine and captured mouthpieces throughout the mainstream media and in Congress spun the fear mongering message of Depression if the mega-banks were not handed trillions of taxpayer funds.

The proof of what did not happen is borne out in the chart below, showing the total credit market debt in the U.S.at $52.6 trillion, $200 billion higher than it was in 2008. If those who had collected billions in fraudulent profits while using unprecedented levels of debt were rightfully required to take responsibility for the catastrophe they caused, the debt levels would have dropped dramatically. The losses would have been borne by those responsible. The economy would have taken a body blow, all Americans would have been hurt, and many billionaires would have become millionaires or even paupers. The debt would have been written off and lessons would have been learned. The remaining banks (there are 8,000 others besides the 10 who control 50% of the deposits) would have followed traditional risk mitigation methods and the economy would have recovered.

But, as you can see, debt was not written off. No bankers were harmed during the making of this fake recovery. No criminal bankers were prosecuted. No government drones took responsibility for their failure. While the masses were distracted by stimulus packages, mortgage moratoriums, Obamacare and reality TV, the debt was shifted from the criminally negligent banks to you. The proof is right on the Federal Reserve website for all to see:

Financial institutions reduced their debt from $17.1 trillion in 2008 to $14.2 trillion today.
The Federal & state governments increased their debt from $8.7 trillion in 2008 to $11.9 trillion today.
The GSEs (Fannie, Freddie, Sallie) increased their debt from $3.2 trillion in 2008 to $6.4 trillion today.
Corporations increased their debt from $7.0 trillion in 2008 to $7.4 trillion today.
Household debt declined from $13.8 trillion in 2008 to $13.4 trillion as the Federal Reserve backstopped the write-off of $600 billion of bad debt by the banks.

Over $6 trillion of toxic debt was shifted from the insolvent financial industries to the middle class taxpayers under the guise of “Saving the System”. Bad debt does not become good by shifting it to taxpayers. The story line about Americans embracing austerity is false. Household debt rose from $8 trillion in 2000 to $13.8 trillion in 2008, a 72% increase, and has declined by 3% due to write-offs, not austerity.

Champion of the Middle Class

By extending the debt, shifting it to the taxpayer and pretending it is payable, the Federal Reserve and your government have chosen, to use its weapon of choice since inception in 1913 – INFLATION, to default on the debt. It is not a new tactic, it is their only tactic.

The Federal Reserve has slowly and methodically destroyed the American middle class through relentlessly printing more money and purposefully creating inflation, since its reprehensible creation in 1913. For the last three decades only one voice in the wilderness of Washington DC has fought this banking cabal.

“Since the creation of the Federal Reserve, middle and working-class Americans have been victimized by a boom-and-bust monetary policy. In addition, most Americans have suffered a steadily eroding purchasing power because of the Federal Reserve’s inflationary policies. This represents a real, if hidden, tax imposed on the American people.

From the Great Depression, to the stagflation of the seventies, to the burst of the dotcom bubble last year, every economic downturn suffered by the country over the last 80 years can be traced to Federal Reserve policy. The Fed has followed a consistent policy of flooding the economy with easy money, leading to a misallocation of resources and an artificial “boom” followed by a recession or depression when the Fed-created bubble bursts. In conclusion, Mr. Speaker, I urge my colleagues to stand up for working Americans by putting an end to the manipulation of the money supply which erodes Americans’ standard of living, enlarges big government, and enriches well-connected elites, by cosponsoring my legislation to abolish the Federal Reserve.” – Ron Paul – Sept 10, 2002

His colleagues in Congress did not stand up to the Federal Reserve in 2002. Instead, they cheered them on as Greenspan’s ultra loose monetary policy led to the greatest housing bubble in history and a financial collapse unparalleled in human history. As the collapse was hurdling down the track in 2006, Representative Paul once again rose in protest against an organization that is rapidly destroying the American dream.

“The coming dollar crisis is not likely to be “fixed” by politicians who are unwilling to make hard choices, admit mistakes, and spend less money. Demographic trends will place even greater demands on Congress to maintain benefits for millions of older Americans who are dependent on the federal government.

Faced with uncomfortable financial realities, Congress will seek to avoid the day of reckoning by the most expedient means available – and the Federal Reserve undoubtedly will accommodate Washington by printing more dollars to pay the bills. The Fed is the enabler for the spending addicts in Congress, who would rather spend new fiat money than face the political consequences of raising taxes or borrowing more abroad.

The irony is that many of the Fed’s biggest cheerleaders are the same supposed capitalists who denounced centralized economic planning when practiced by the former Soviet Union. Large banks and Wall Street firms love the Fed’s easy money policy, because they profit at the front end from the resulting loan boom and artificially high equity prices. It’s the little guy who loses when the inflated dollars finally trickle down to him and erode his buying power. Someday Americans will understand that Federal Reserve bankers have no magic ability – and certainly no legal or moral right – to decide how much money should exist and what the cost of borrowing money should be.” – Ron Paul – July 11, 2006

The dollar crisis is upon us. Congress and President Obama are avoiding the day of reckoning. The Federal Reserve is enabling profligate spending by politicians, while at the same time enriching their masters on Wall Street. Everything being done in Washington DC seems to be the exact opposite of what should be done. I think the fable of the scorpion and the frog describes our situation best. The scorpion asks a frog to carry him across a river. The frog is afraid of being stung, but the scorpion argues that if it stung, the frog would sink and the scorpion would drown. The frog agrees and the scorpion stings the frog during the crossing, dooming them both. When asked why, the scorpion points out that this is its nature. The Federal Reserve is printing money, creating inflation, enriching billionaire bankers, and dooming the country to certain collapse because that is its nature.

My intentions have been foiled again. I realize that my attempt to put our current economic predicament into perspective will now need to be a five part series. . For a Few Dollars More addressed the Baby Boomer impact on America’s decline. A Fistful of Dollars examined how the Federal Reserve’s actions over the last few decades have impoverished the middle class and has placed the country at the brink of collapse, The Good, the Bad, and the Ugly will address the nefarious creation of a central bank and the implementation of a personal income tax in the dreadful year 1913. Outlaw Josey Wales will scrutinize the looting of America by a small group of powerful, connected, super rich men lurking in the shadows, but pulling the strings on our puppet politicians. Lastly, Unforgiven will detail the impending collapse of our economic system and the retribution that will be handed out to the guilty.

I can’t wait to see how it ends.

OUTLAW JOSEY WALES – PART FOUR

“Now remember, when things look bad and it looks like you’re not gonna make it, then you gotta get mean. I mean plumb, mad-dog mean. ‘Cause if you lose your head and you give up then you neither live nor win. That’s just the way it is.” – Josey Wales – Outlaw Josey Wales

To hell with them fellas. Buzzards gotta eat, same as worms. – Josey Wales – Outlaw Josey Wales

There is a war underway in this country. The working middle class that built this country from the ground up are being systematically eliminated by a small cabal of super rich powerful elite. The middle class was much like Josey Wales, a peaceful Missouri farmer just working his land trying to make an honest living. Then a band of lawless thugs come along and kill his wife and son and burn down his farmhouse. A man can only take so much before he gets mean and vengeful. The rich and powerful, the corrupt Wall Street bankers, the banker controlled Federal Reserve and the bought off politicians in Washington D.C. have been pillaging the middle class for decades.

They’ve killed the middle class and in 2008 they essentially burned down the worldwide financial system. Somehow, they convinced the American public the war was over. A small band of super wealthy individuals on the boulevard of greed, Wall Street, and in the putrid swamp of Washington D.C. blackmailed the American middle class taxpayers by threatening to bring down the financial system unless they were handed $700 billion, saved from bankruptcy by the Federal Reserve buying $1.2 trillion of toxic mortgage debt, and provided free money by their sugar daddy at the Federal Reserve. The politicians then absconded with another $800 billion of taxpayer funds and handed it out to their corporate political cronies in the name of shovel ready projects and adding 3 million new jobs.

At the end of the Civil War, the Confederate guerrillas that Josey Wales had joined agree to lay down their arms with a promise of freedom. Instead the Union thugs began to mow them down with a Gatling gun. This is perfect symbolism for what the ruling elite have perpetrated in the last three years. Within months of nearly destroying the worldwide financial system, the Wall Street desperados were paying themselves hundreds of billions in bonuses for a job well done plundering and sacking the American middle class taxpayer. They certainly earned the bonuses, considering they could borrow from the Fed at 0% and earn 2.5% on Treasuries or pile into stocks and commodities, knowing Uncle Ben would guarantee profits with QE2.

Jim Grant, in early 2009, described the excessive response by those in power to a crisis caused by them:

“To try to exorcise the Great Depression, President Herbert Hoover deployed fiscal and monetary stimulus equivalent to 8.3% of gross domestic product. To banish the demons of 2008-9, successive administrations have spent, or encouraged to printed, the equivalent to 28.9% of GDP. A macroeconomist from Mars, judging by these data alone, would never guess how much more severe was that depression than this recession. The decline in real GDP from August 1929 to March 1933 amounted to 27%; that from December 2007 to date, just 1.8%… so for a slump 1/15 as severe as the Depression, our 21st-century economy doctors administered a course of treatment more than three times as costly.”

Ultimately, GDP fell 3.1% between the 3^rd quarter of 2008 and the 3^rd quarter of 2009. The government response has amounted to throwing $7 trillion ($4.2 trillion increase in national debt, $700 billion of TARP bailouts, $200 billion of losses taken by Fannie Mae & Freddie Mac, $100 billion of losses taken by the FDIC, and the Federal Reserve increasing their balance sheet by $1.8 trillion) of your tax dollars at the problem. As a side benefit, they have thrown senior citizens under the bus by paying them 0% on their savings, not providing a cost of living increase to their social security for two years, and hitting them over the head with 10% levels of inflation on food and energy.

At this point it looks bad for the working middle class and it looks like they aren’t going to make it through the next banker made financial crisis. The middle class just wants the chance for a new beginning. They want jobs. They know the country has been hijacked by the banking corporatocracy, supported by the corrupt political class in D.C. It is time for the middle class to channel their inner Josey Wales and get plumb mad-dog mean. It is not time to lose your head and give up. The middle class are being pursued by Wall Street bounty hunters and government crooks trying to finish them off. It is time to make a stand and fight. It is essential that we know our enemies and how they achieved their power. It all began in 1913 with the creation of the Federal Reserve and the implementation of the personal income tax. I’ve previously detailed how the baby boom generation contributed to our fiscal plight in Part One – For a Few Dollars More, how the actions of the Federal Reserve’s over the last few decades have impoverished the middle class and placed the country at the brink of collapse in Part Two – Fistful of Dollars and addressed the nefarious creation of a central bank in Part Three – The Good, the Bad, and the Ugly.

How to Buy a Tax Break

“There’s another old saying, Senator: Don’t piss down my back and tell me it’s raining.” – Fletcher – Outlaw Josey Wales

When the Federal government spends more each year than it collects in tax revenues, it has three choices: It can raise taxes, print money, or borrow money. While these actions may benefit politicians, all three options are bad for average Americans. – Ron Paul

The Senator pissing down the backs of Americans while telling us it was raining was named Nelson Aldrich, from Rhode Island. He was a Republican lackey of J.P. Morgan who was the driving force behind the creation of the Federal Reserve and the passage of the Sixteenth Amendment, creating the personal income tax. His daughter married John D. Rockefeller, Jr. and his son became the Chairman of Chase National Bank. I wonder how beholden he was to the banker class. A decade before 1913 Aldrich had declared an income tax as communistic. He was right. Karl Marx published his Communist Manifesto in 1848. It included ten planks. Two of the ten planks were as follows:

A heavy progressive or graduated income tax.
Centralization of credit in the hands of the State by means of a national bank with State capital and an exclusive monopoly.

The United States had tinkered with an income tax during the Civil War and the 1890’s, but the Supreme Court declared it unconstitutional. Until 1913, the Federal government was restrained from overspending because it was completely reliant on tariffs and duties to generate revenue. Without the ability to print money and tax its citizens, politicians could not roll out new programs and fight foreign wars of choice.The Sixteenth Amendment changed the game forever.

“The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”

Politicians pulled the old bait and switch on the American people. The initial tax rates of 1% to 7% were low. That did not last long. By 1918, the top marginal rate was 77%, as Woodrow Wilson needed to fund his war of choice. The top tax rate reached 92% during the Eisenhower Administration and today rates are still 500% to 1,000% higher than they were in 1913. The government is addicted to tax revenue. In 2009, they absconded with $1.2 trillion in taxes from American individuals. Does anyone think the bloated government bureaucracy spends these funds more efficiently or for a more beneficial purpose than its citizens could have? The income tax distorts financial planning and business investment, and it encourages tax avoidance and evasion.

Partial History of U.S. Federal Income Tax Rates Since 1913
Applicable Year	Income brackets	First bracket	Top bracket	Source
1913-1915	–	1%	7%	IRS
2003-2009	6 brackets	10%	35%	Tax Foundation

Source: Wikipedia

The average American thinks income taxes are essential because politicians tell them so. The only discussion is about what the rates should be. But, the country grew tremendously between 1789 and 1913 without a personal income tax. Income taxes do not benefit the average American, they drain wealth from the citizens and hand it to politicians who then use them to bribe constituents for votes with handouts and fund foreign wars of choice. The IRS tax code has progressively been utilized by the rich and influential class to skew it in favor of those with the most lobbyists. Politicians get elected by promising benefits to the masses while being funded by rich people and big corporations. A tax code of 60,000 pages, with over 600 IRS tax forms, and filled with tax breaks for influential constituents (farmers, oil companies, homeowners, foreign corporations, etc.) is not designed to benefit the average American. The tax code is used to pay off those who “contribute” to the politicians that control the tax code.

Congress frequently holds hearings on tax simplification so members can denounce the tax code’s complexity. Congressional experts and impartial think tanks provide useful simplification ideas. When the TV cameras are turned off, Congress swiftly ignores them and votes for more special interest breaks for their biggest contributors. The storyline that is pounded into the minds of all Americans is that 50% of the population pays no taxes and the rich pay an inordinate amount of taxes. The Republicans and Democrats fight a battle of false talking points to confuse and obscure the truth.

The Republican mantra since the Reagan era has been to cut taxes and allow the “free market” to work its magic. They have succeeded in convincing a vast swath of Americans that lowering the highest tax rates have benefitted the masses. This is completely untrue. An unfunded tax cut today is just a tax increase on future generations. Democrats went along with tax cuts as long as the Republicans went along with spending increases. The Democrats hit the jackpot, with a supposedly fiscal conservative president signing a Medicare D bill that added trillions of unfunded liabilities to our national balance sheet. The Republicans are on cloud 9, as a supposedly liberal anti-war president has increased war spending to $1 trillion per year while ramping up our foreign wars of choice. Everyone gets what they want in Washington D.C. This is called bi-partisanship.

The Big Lie

As the chart above shows, at least before Reagan the top marginal rates were kept high to pay for the social programs instituted by Congress and the wars of choice fought by our Presidents. After 1980, in some sort of warped Twilight Zone episode, politicians across the land convinced themselves and the masses they could have lower taxes, more entitlement goodies, never ending war, and an unlimited heaping of material goods, with no adverse consequences. Well, it was a lie.

The GDP in 1981 was $3.1 trillion, today it is $14.7 trillion.
The National Debt in 1981 was $907 billion, today it is $14.4 trillion.
The amount of annual Federal income tax revenue in 1981 was $347 billion, today it is $1.1 trillion.
The amount of annual Federal spending in 1981 was $678 billion; today it is $3.8 trillion.
Total consumer debt in 1981 totaled $353 billion, today it is $2.4 trillion.
Total mortgage debt outstanding grew from $1.5 trillion in 1981 to $14.6 trillion by 2008.
Median household income was $17,710 in 1980 and is now $49,777.

These facts reveal an empire spiraling out of control, delusional and living on borrowed time with borrowed money. The output of the country has grown by 474% in the last 30 years, while the National Debt has grown by 1,588%. Those two facts alone paint a picture of eventual collapse. The lesson of allowing politicians and bankers unfettered access to unlimited amounts of fiat currency backed by nothing but a hollow promise to pay is clear, in the divergence of income tax revenue and spending. The dramatic slashing of top marginal rates from 70%, which had been in place for a fifty year period when the U.S. economy boomed, was supposed to invigorate the economy and unleash the free market spirit of our entrepreneurs. A funny thing happened on the way to prosperity for all. Federal income tax revenue has only grown by 317% in the thirty years since the Reagan Revolution. The CPI has grown by 289% over this same time frame. Therefore, tax revenue is essentially flat with 1980 on an inflation adjusted basis. This wouldn’t be a problem, except that the politicians we elected ramped up spending by 560% over these same thirty years. Federal spending has grown at almost twice the rate of income tax revenue. Bug meet windshield. I guess this is called supply side economics.

Politicians of both parties have promised the American public they could have low taxes, unlimited social welfare benefits, a house that always appreciated in price, electronic gadgets galore, and the true American dream of getting something for nothing. And it was all made possible by your friendly Wall Street banker and their friends at the Federal Reserve. The data above already paints a dire picture for the American Empire, but the next ten years will finish the job. GDP is stagnant as Federal government spending props up the teetering edifice of economic activity. The National Debt will reach $20 trillion by 2015 and is on course to reach at least $25 trillion by 2019. Both the Republican and Democratic “plans” to “reduce” the deficit are a joke. They don’t reduce anything. They add to the debt.

The citizens of this country should be outraged by such fiscal irresponsibility, and marching on Washington D.C. with pitchforks and torches. But, there is no outrage across the countryside. This is because the vast majority of Americans followed the example of their beloved government leaders and lived far beyond their means in a delusional attempt to borrow their way to material prosperity. The median household income has risen by 281% since 1981, less than inflation over the same time frame. The median household is taking home less than they did in 1981 on an inflation adjusted basis. The McMansions, BMWs, computers, 52 inch HDTVs, and 15 other essential electronic gadgets that represent the current American Dream were financed. Consumer debt, used to buy (rent) luxury automobiles and essentials like 4 TVs and 3 computers, grew by 680%, more than twice the rate of median household income. Mortgage debt grew by an astounding 973% in the last thirty years.

The last thirty years have been a faux American Dream. The madness of crowds has been replaced by the sober reality that the material goods purchased with debt steadily depreciate day by day, while the debt stays firmly in place. Who benefitted and who lost during these thirty years of delusion? There is only one beneficiary from the issuance of trillions in debt – Wall Street bankers. The ten biggest banks in the country hold more than 50% of the mortgage debt and 80% of the credit card debt in the U.S. The poor never had much, and they still don’t. Politicians have averted riots and social unrest by pouring trillions into welfare, social security disability, SNAP programs, earned income credits, and hundreds of other transfer payment bribes to the poor. The middle class has borne the brunt of the banker plundering and pillaging.

The Super Rich Storyline

There are three storylines that are pounded home repeatedly by the mainstream media and the Republican Party ideologues.

More than 50% of Americans don’t pay any taxes.
The top 1% pays 38% of all the Federal income taxes.
Increasing the highest tax rate above 35% would destroy jobs and kill small business owners.

The misinformation spewed forth by the super rich, who control the media, politicians, and media message, to disguise their continued looting of the American middle class, is unrelenting. There are 117 million households in the United States with a median household income of $48,000. Data from the Tax Foundation shows that in 2008, the average income for the bottom half of taxpayers was $15,300. The first $9,350 of income is exempt from taxes for singles and $18,700 for married couples. Politicians of both parties also provided credits for children, earned income credits, mortgage tax deductions, property tax deductions, and a myriad of other tax goodie payoffs for votes. When half the households in the country make less than $48,000 per year in income, of course they won’t be paying any Federal income taxes. There are approximately 151 million Americans earning income. Almost 73 million, or 48%, make less than $25,000. As Wall Street enriched billionaires are interviewed by millionaire journalists on CNBC, scorning those who don’t pay their fair share of taxes, they outsource the blue collar jobs of those on the lower income scale to China and India. Without good paying jobs, the middle class uses debt to maintain their American dream, further enriching the billionaire class in a circle of death.

This chart reveals the true nature of who controls our country. It is a battle between a few thousand of the richest people in America versus the other 150 million. The facts are the middle class and poor pay a much higher percentage of their income in taxes than the rich. The Social Security tax cuts off at $106,800. Therefore, the median household pays 6.2% of their income, while the rich household making $5 million per year pays .13% of their income. This applies to sales taxes, property taxes, state taxes, local taxes and the thousand other taxes and fees charged on utility bills, etc. William Domhoff notes that the top 1% who make $1.3 million per year only pay 30.9% of their income in taxes, while those making $141,000 per year pay 31.5% of their income in taxes. I guess their tax lawyers aren’t as well paid. Even those making $34,000 pay 27% of their income in taxes.

Source: Citizens for Tax Justice

The top 1% does pay 38% of the Federal income tax because they have a 23.5% share of the national income. The last time the top 1% reached this level of income was in 1928, just before the Great Stock Market Crash and the Great Depression. During the glory years of the American Empire, between 1946 and 1971, the top 1% of households’ share of the national income ranged between 8% and 13%. With the era of unbridled greed and debt that began in the 1980s, the inequitable distribution of wealth has risen to new heights. This level of pillaging by those in control of the finance sector of the economy, supported by their mouthpieces in Congress, and championed by their controlled media pundits, has reached a level that will eventually lead to revolution.

The biggest lie pushed forth by the powerful super rich in this country is related to the top marginal tax rate, which is currently 35%. The Republican agenda includes a further cut in the top rate to 25%. It is sold to the American public as a good thing for them. It has nothing to do with them. The 35% rate applies to only taxable income over $379,000. Of the 151 million Americans earning a living, this rate would apply to about 200,000 people. The top marginal tax rates during the glory years of the American Empire (1946 – 1971) were between 70% and 90%. These rates only applied to taxable income above $400,000, when the average income was less than $10,000 per year. These were the best years for the American middle class.

The IRS issues an annual report on the 400 highest income tax payers. In 1961, there were 398 taxpayers who made $1 million or more. Today there are over 78,000 taxpayers who make more than $1 million. The loopholes written into the tax code over decades by lobbyists paid for by the super rich, plus much lower tax rates on the largest sources of income of the wealthy (capital gains taxed at 15%), explain why the average federal income tax rate on the 400 richest people in America was 18.11% in 2008, according to the IRS, down from 26.38% when this data were first calculated in 1992. Among the top 400, 7.5% had an average tax rate of less than 10%, 25% paid between 10% and 15%, and 28% paid between 15% and 20%. The average American’s share of their income going to federal taxes increased from 13.1% in 1961 to 22.5% in 2008. William Domhoff explains how the super rich have paid off Congress to rig the system in their favor:

“According to another analysis by Johnston (2010a), the average income of the top 400 tripled during the Clinton Administration and doubled during the first seven years of the Bush Administration. So by 2007, the top 400 averaged $344.8 million per person, up 31% from an average of $263.3 million just one year earlier. How are these huge gains possible for the top 400? It’s due to cuts in the tax rates on capital gains and dividends, which were down to a mere 15% in 2007 thanks to the tax cuts proposed by the Bush Administration and passed by Congress in 2003. Since almost 75% of the income for the top 400 comes from capital gains and dividends, it’s not hard to see why tax cuts on income sources available to only a tiny percent of Americans mattered greatly for the high-earning few. Overall, the effective tax rate on high incomes fell by 7% during the Clinton presidency and 6% in the Bush era, so the top 400 had a tax rate of 20% or less in 2007, far lower than the marginal tax rate of 35% that the highest income earners (over $372,650) supposedly pay.” – Wealth, Income, and Power – William Domhoff

As an added bonus, hedge fund managers like John Paulson, who made $9 billion over two years, paid no income taxes on his windfall. In 2007, Republicans and a key Democrat, Sen. Charles Schumer of New York, fought to keep the tax rate on hedge fund managers at 15%, arguing that the profits from hedge funds should be considered capital gains. Schumer, the ultra-liberal champion of the poor, knows who butters his bread – Wall Street. But it gets better. As long as they leave their money, known as “carried interest,” in the hedge fund, their taxes are deferred. They pay taxes only when they cash out, which could be decades from now. These upstanding citizens access their jackpot winnings by borrowing against the carried interest, often at rates as low as 2%. I’m sure every youngster in America dreams of becoming a hedge fund manager so they can use system risking leverage to make bets on derivatives, reap billions in profits, pay no taxes, and produce no value for the country. The new American Dream.

It is plain to see by anyone without an ideological agenda that a few thousand corrupt individuals have managed to gain control of the American economic system. The introduction of the personal income tax and creation of the Federal Reserve in 1913 have provided the means for the few to dominate the many. Over the last century, a rich super class has created their wealth through issuing debt to the masses, writing the tax code in their favor through their captive politician protectors, using their own private bank to issue trillions in fiat currency and create inflation, and used their control of the mass media to convince the average American that this was beneficial. Chris Whalen in his brilliant economic history of the United States – Inflated – How Money & Debt Built the American Dream sums up what has happened:

“Once the two functions, controlling the amount of currency in circulation, and second the government’s fiscal operations, are housed under the same roof, inflation and a decrease in the value of money are the inevitable result. It is always easier to borrow than to raise taxes. Politicians who have access to the printing press will invariably use it.”

The small cabal of banking elite committed the crime of the century between 2001 and 2008. They used their power over the Federal Reserve and political class to reap hundreds of billions in ill-begotten profits and crashed the worldwide economic system in 2008. They then held the country hostage as they extorted trillions more in bailouts from the taxpayers. As a reward for their chutzpah, they have paid themselves billions in bonuses. While 44 million people try to make ends meet with food stamps, these criminals continue to pillage the countryside attempting to steal the remainder of middle class wealth. As the middle class sinks further into despair, anger is building. The political class has tried to pay off the poor with entitlement payments, but it is the middle class that will revolt when their hope for a better life is destroyed by the moneyed class. With debt in the system expanding at hyper-speed, the American Empire will not decline with a whimper but with a bang. All previous Fourth Turning’s in U.S. history have resulted in tremendous bloodshed. The next ten years will follow this pattern. I’ll address the coming revolution against the criminal banking element in the last part of this five part series – Unforgiven.

ARE YOU SEEING WHAT I’M SEEING?

Is it just me, or are the signs of consumer collapse as clear as a Lowes parking lot on a Saturday afternoon? Sometimes I wonder if I’m just seeing the world through my pessimistic lens, skewing my point of view. My daily commute through West Philadelphia is not very enlightening, as the squalor, filth and lack of legal commerce remain consistent from year to year. This community is sustained by taxpayer subsidized low income housing, taxpayer subsidized food stamps, welfare payments, and illegal drug dealing. The dependency attitude, lifestyles of slothfulness and total lack of commerce has remained constant for decades in West Philly. It is on the weekends, cruising around a once thriving suburbia, where you perceive the persistent deterioration and decay of our debt fixated consumer spending based society.

The last two weekends I’ve needed to travel the highways of Montgomery County, PA going to a family party and purchasing a garbage disposal for my sink at my local Lowes store. Montgomery County is the typical white upper middle class suburb, with tracts of McMansions dotting the landscape. The population of 800,000 is spread over a 500 square mile area. Over 81% of the population is white, with the 9% black population confined to the urban enclaves of Norristown and Pottstown.

The median age is 38 and the median household income is $75,000, 50% above the national average. The employers are well diversified with an even distribution between education, health care, manufacturing, retail, professional services, finance and real estate. The median home price is $300,000, also 50% above the national average. The county leans Democrat, with Obama winning 60% of the vote in 2008. The 300,000 households were occupied by college educated white collar professionals. From a strictly demographic standpoint, Montgomery County appears to be a prosperous flourishing community where the residents are living lives of relative affluence. But, if you look closer and connect the dots, you see fissures in this façade of affluence that spread more expansively by the day. The cheap oil based, automobile dependent, mall centric, suburban sprawl, sanctuary of consumerism lifestyle is showing distinct signs of erosion. The clues are there for all to see and portend a bleak future for those mentally trapped in the delusions of a debt dependent suburban oasis of retail outlets, chain restaurants, office parks and enclaves of cookie cutter McMansions. An unsustainable paradigm can’t be sustained.

The first weekend had me driving along Ridge Pike, from Collegeville to Pottstown. Ridge Pike is a meandering two lane road that extends from Philadelphia, winds through Conshohocken, Plymouth Meeting, Norristown, past Ursinus College in Collegeville, to the farthest reaches of Montgomery County, at least 50 miles in length. It served as a main artery prior to the introduction of the interstates and superhighways that now connect the larger cities in eastern PA. Except for morning and evening rush hours, this road is fairly sedate. Like many primary routes in suburbia, the landscape is engulfed by strip malls, gas stations, automobile dealerships, office buildings, fast food joints, once thriving manufacturing facilities sitting vacant and older homes that preceded the proliferation of cookie cutter communities that now dominate what was once farmland.

Telltale Signs

I should probably be keeping my eyes on the road, but I can’t help but notice the telltale signs of an economic system gone haywire. As you drive along, the number of For Sale signs in front of homes stands out. When you consider how bad the housing market has been, the 40% decline in national home prices since 2007, the 30% of home dwellers underwater on their mortgage, and declining household income, you realize how desperate a home seller must be to try and unload a home in this market. The reality of the number of For Sale signs does not match the rhetoric coming from the NAR, government mouthpieces, CNBC pundits, and other housing recovery shills about record low inventory and home price increases.

The Federal Reserve/Wall Street/U.S. Treasury charade of foreclosure delaying tactics and selling thousands of properties in bulk to their crony capitalist buddies at a discount is designed to misinform the public. My local paper lists foreclosures in the community every Monday morning. In 2009 it would extend for four full pages. Today, it still extends four full pages. The fact that Wall Street bankers have criminally forged mortgage documents, people are living in houses for two years without making mortgage payments, and the Federal Government backing 97% of all mortgages while encouraging 3.5% down financing does not constitute a true housing recovery. Show me the housing recovery in these charts.

Existing home sales are at 1998 levels, with 45 million more people living in the country today.

New single family homes under construction are below levels in 1969, when there were 112 million less people in the country.

Another observation that can be made as you cruise through this suburban mecca of malaise is the overall decay of the infrastructure, appearances and disinterest or inability to maintain properties. The roadways are potholed with fading traffic lines, utility poles leaning and rotting, and signage corroding and antiquated. Houses are missing roof tiles, siding is cracked, gutters astray, porches sagging, windows cracked, a paint brush hasn’t been utilized in decades, and yards are inundated with debris and weeds. Not every house looks this way, but far more than you would think when viewing the overall demographics for Montgomery County. You wonder how many number among the 10 million vacant houses in the country today. The number of dilapidated run down properties paints a picture of the silent, barely perceptible Depression that grips the country today. With such little sense of community in the suburbs, most people don’t even know their neighbors. With the electronic transfer of food stamps, unemployment compensation, and other welfare benefits you would never know that your neighbor is unemployed and hasn’t made the mortgage payment on his house in 30 months. The corporate fascist ruling plutocracy uses their propaganda mouthpieces in the mainstream corporate media and government agency drones to misinform and obscure the truth, but the data and anecdotal observational evidence reveal the true nature of our societal implosion.

A report by the Census Bureau this past week inadvertently reveals data that confirms my observations on the roadways of my suburban existence. Annual household income fell in 2011 for the fourth straight year, to an inflation-adjusted $50,054. The median income — meaning half earned more, half less — now stands 8.9% lower than the all-time peak of $54,932 in 1999. It is far worse than even that dreadful result. Real median household income is lower than it was in 1989. When you understand that real household income hasn’t risen in 23 years, you can connect the dots with the decay and deterioration of properties in suburbia. A vast swath of Americans cannot afford to maintain their residences. If the choice is feeding your kids and keeping the heat on versus repairing the porch, replacing the windows or getting a new roof, the only option is survival.

All races have seen their income fall, with educational achievement reflected in the much higher incomes of Whites and Asians. It is interesting to note that after a 45 year War on Poverty the median household income for black families is only up 19% since 1968.

Now for the really bad news. Any critical thinking person should realize the Federal Government has been systematically under-reporting inflation since the early 1980’s in an effort to obscure the fact they are debasing the currency and methodically destroying the lives of middle class Americans. If inflation was calculated exactly as it was in 1980, the GDP figures would be substantially lower and inflation would be reported 5% higher than it is today. Faking the numbers does not change reality, only the perception of reality. Calculating real median household income with the true level of inflation exposes the true picture for middle class America. Real median household income is lower than it was in 1970, just prior to Nixon closing the gold window and unleashing the full fury of a Federal Reserve able to print fiat currency and politicians to promise the earth, moon and the sun to voters. With incomes not rising over the last four decades is it any wonder many of our 115 million households slowly rot and decay from within like an old diseased oak tree. The slightest gust of wind can lead to disaster.

Eliminating the last remnants of fiscal discipline on bankers and politicians in 1971 accomplished the desired result of enriching the top 0.1% while leaving the bottom 90% in debt and desolation. The Wall Street debt peddlers, Military Industrial arms dealers, and job destroying corporate goliaths have reaped the benefits of financialization (money printing) while shoveling the costs, their gambling losses, trillions of consumer debt, and relentless inflation upon the working tax paying middle class. The creation of the Federal Reserve and implementation of the individual income tax in 1913, along with leaving the gold standard has rewarded the cabal of private banking interests who have captured our economic and political systems with obscene levels of wealth, while senior citizens are left with no interest earnings ($400 billion per year has been absconded from savers and doled out to bankers since 2008 by Ben Bernanke) and the middle class has gone decades seeing their earnings stagnate and their purchasing power fall precipitously.

The facts exposed in the chart above didn’t happen by accident. The system has been rigged by those in power to enrich them, while impoverishing the masses. When you gain control over the issuance of currency, issuance of debt, tax system, political system and legal apparatus, you’ve essentially hijacked the country and can funnel all the benefits to yourself and costs to the math challenged, government educated, brainwashed dupes, known as the masses. But there is a problem for the 0.1%. Their sociopathic personalities never allow them to stop plundering and preying upon the sheep. They have left nothing but carcasses of the once proud hard working middle class across the country side. There are only so many Lear jets, estates in the Hamptons, Jaguars, and Rolexes the 0.1% can buy. There are only 152,000 of them. Their sociopathic looting and pillaging of the national wealth has destroyed the host. When 90% of the population can barely subsist, collapse and revolution beckon.

Extend, Pretend & Depend

As I drove further along Ridge Pike we passed the endless monuments to our spiral into the depths of materialism, consumerism, and the illusion that goods purchased on credit represented true wealth. Mile after mile of strip malls, restaurants, gas stations, and office buildings rolled by my window. Anyone who lives in the suburbs knows what I’m talking about. You can’t travel three miles in any direction without passing a Dunkin Donuts, KFC, McDonalds, Subway, 7-11, Dairy Queen, Supercuts, Jiffy Lube or Exxon Station. The proliferation of office parks to accommodate the millions of paper pushers that make our service economy hum has been unprecedented in human history. Never have so many done so little in so many places. Everyone knows what a standard American strip mall consists of – a pizza place, a Chinese takeout, beer store, a tanning, salon, a weight loss center, a nail salon, a Curves, karate studio, Gamestop, Radioshack, Dollar Store, H&R Block, and a debt counseling service. They are a reflection of who we’ve become – an obese drunken species with excessive narcissistic tendencies that prefers to play video games while texting on our iGadgets as our debt financed lifestyles ultimately require professional financial assistance.

What you can’t ignore today is the number of vacant storefronts in these strip malls and the overwhelming number of SPACE AVAILABLE, FOR LEASE, and FOR RENT signs that proliferate in front of these dying testaments to an unsustainable economic system based upon debt fueled consumer spending and infinite growth assumptions. The booming sign manufacturer is surely based in China. The officially reported national vacancy rates of 11% are already at record highs, but anyone with two eyes knows these self-reported numbers are a fraud. Vacancy rates based on my observations are closer to 30%. This is part of the extend and pretend strategy that has been implemented by Ben Bernanke, Tim Geithner, the FASB, and the Wall Street banking cabal. The fraud and false storyline of a commercial real estate recovery is evident to anyone willing to think critically. The incriminating data is provided by the Federal Reserve in their Quarterly Delinquency Report.

The last commercial real estate crisis occurred in 1991. Mall vacancy rates were at levels consistent with today.

The current reported office vacancy rates of 17.5% are only slightly below the 19% levels of 1991.

As reported by the Federal Reserve, delinquency rates on commercial real estate loans in 1991 were 12%, leading to major losses among the banks that made those imprudent loans. Amazingly, after the greatest financial collapse in history, delinquency rates on commercial loans supposedly peaked at 8.8% in the 2^nd quarter of 2010 and have now miraculously plummeted to pre-collapse levels of 4.9%. This is while residential loan delinquencies have resumed their upward trajectory, the number of employed Americans has fallen by 414,000 in the last two months, 9 million Americans have left the labor force since 2008, and vacancy rates are at or near all-time highs. This doesn’t pass the smell test. The Federal Reserve, owned and controlled by the Wall Street, instructed these banks to extend all commercial real estate loans, pretend they will be paid, and value them on their books at 100% of the original loan amount. Real estate developers pretend they are collecting rent from non-existent tenants, Wall Street banks pretend they are being paid by the developers, and their highly compensated public accounting firm pretends the loans aren’t really delinquent. Again, the purpose of this scam is to shield the Wall Street bankers from accepting the losses from their reckless behavior. Ben rewards them with risk free income on their deposits, propped up by mark to fantasy accounting, while they reward themselves with billions in bonuses for a job well done. The master plan requires an eventual real recovery that isn’t going to happen. Press releases and fake data do not change the reality on the ground.

I have two strip malls within three miles of my house that opened in 1990. When I moved to the area in 1995, they were 100% occupied and a vital part of the community. The closest center has since lost its Genuardi grocery store, Sears Hardware, Blockbuster, Donatos, Sears Optical, Hollywood Tans, hair salon, pizza pub and a local book store. It is essentially a ghost mall, with two banks, a couple chain restaurants and empty parking spaces. The other strip mall lost its grocery store anchor and sporting goods store. This has happened in an outwardly prosperous community. The reality is the apparent prosperity is a sham. The entire tottering edifice of housing, autos, and retail has been sustained by ever increasing levels of debt for the last thirty years and the American consumer has hit the wall. From 1950 through the early 1980s, when the working middle class saw their standard of living rise, personal consumption expenditures accounted for between 60% and 65% of GDP. Over the last thirty years consumption has relentlessly grown as a percentage of GDP to its current level of 71%, higher than before the 2008 collapse.

If the consumption had been driven by wage increases, then this trend would not have been a problem. But, we already know real median household income is lower than it was in 1970. The thirty years of delusion were financed with debt – peddled, hawked, marketed, and pushed by the drug dealers on Wall Street. The American people got hooked on debt and still have not kicked the habit. The decline in household debt since 2008 is solely due to the Wall Street banks writing off $800 billion of mortgage, credit card, and auto loan debt and transferring the cost to the already drowning American taxpayer.

The powers that be are desperately attempting to keep this unsustainable, dysfunctional debt choked scheme from disintegrating by doling out more subprime auto debt, subprime student loan debt, low down payment mortgages, and good old credit card debt. It won’t work. The consumer is tapped out. Last week’s horrific retail sales report for August confirmed this fact. Declining household income and rising costs for energy, food, clothing, tuition, taxes, health insurance, and the other things needed to survive in the real world, have broken the spirit of Middle America. The protracted implosion of our consumer society has only just begun. There are thousands of retail outlets to be closed, hundreds of thousands of jobs to be eliminated, thousands of malls to be demolished, and billions of loan losses to be incurred by the criminal Wall Street banks.

The Faces of Failure & Futility

My fourteen years working in key positions for big box retailer IKEA has made me particularly observant of the hubris and foolishness of the big chain stores that dominate the retail landscape. There are 1.1 million retail establishments in the United States, but the top 25 mega-store national chains account for 25% of all the retail sales in the country. The top 100 retailers operate 243,000 stores and account for approximately $1.6 trillion in sales, or 36% of all the retail sales in the country. Their misconceived strategic plans assumed 5% same store growth for eternity, economic growth of 3% per year for eternity, a rising market share, and ignorance of the possible plans of their competitors. They believed they could saturate a market without over cannibalizing their existing stores. Wal-Mart, Target, Best Buy, Home Depot and Lowes have all hit the limits of profitable expansion. Each incremental store in a market results in lower profits.

My trip to my local Lowes last weekend gave me a glimpse into a future of failure and futility. Until 2009, I had four choices of Lowes within 15 miles of my house. There was a store 8 miles east, 12 miles west, 15 miles north, and 15 miles south of my house. In an act of supreme hubris, Lowes opened a store smack in the middle of these four stores, four miles from my house. The Hatfield store opened in early 2009 and I wrote an article detailing how Lowes was about to ruin their profitability in Montgomery County. It just so happens that I meet a couple of my old real estate buddies from IKEA at a local pub every few months. In 2009 one of them had a real estate position with Lowes and we had a spirited discussion about the prospects for the Lowes Hatfield store. He assured me it would be a huge success. I insisted it would be a dud and would crush the profitability of the market by cannibalizing the other four stores. We met at that same pub a few months ago. Lowes had laid him off and he admitted to me the Hatfield store was a disaster.

I pulled into the Lowes parking lot at 11:30 am on a Saturday. Big Box retailers do 50% of their business on the weekend. The busiest time frame is from 11:00 am to 2:00 pm on Saturday. Big box retailers build enough parking spots to handle this peak period. The 120,000 square feet Hatfield Lowes has approximately 1,000 parking spaces. I pulled into the spot closest to the entrance during their supposed peak period. There were about 70 cars in the parking lot, with most probably owned by Lowes workers. It is a pleasure to shop in this store, with wide open aisles, and an employee to customer ratio of four to one. The store has 14 checkout lanes and at peak period on a Saturday, there was ONE checkout lane open, with no lines. This is a corporate profit disaster in the making, but the human tragedy far overrides the declining profits of this mega-retailer.

As you walk around this museum of tools and toilets you notice the looks on the faces of the workers. These aren’t the tattooed, face pierced freaks you find in many retail establishments these days. They are my neighbors. They are the beaten down middle class. They are the middle aged professionals who got cast aside by the mega-corporations in the name of efficiency, outsourcing, right sizing, stock buybacks, and executive stock options. The irony of this situation is lost on those who have gutted the American middle class. When you look into the eyes of these people, you see sadness, confusion and embarrassment. They know they can do more. They want to do more. They know they’ve been screwed, but they aren’t sure who to blame. They were once the very customers propelling Lowes’ growth, buying new kitchens, appliances, and power tools. Now they can’t afford a can of paint on their $10 per hour, no benefit retail careers. As depressing as this portrait appears, it is about to get worse.

This Lowes will be shut down and boarded up within the next two years. The parking lot will become a weed infested eyesore occupied by 14 year old skateboarders. One hundred and fifty already down on their luck neighbors will lose their jobs, the township will have a gaping hole in their tax revenue, and the CEO of Lowes will receive a $50 million bonus for his foresight in announcing the closing of 100 stores that he had opened five years before. This exact scenario will play out across suburbia, as our unsustainable system comes undone. Our future path will parallel the course of the labor participation rate. Just as the 9 million Americans who have “left” the labor force since 2008 did not willfully make that choice, the debt burdened American consumer will be dragged kicking and screaming into the new reality of a dramatically reduced standard of living.

Connecting the dots between my anecdotal observations of suburbia and a critical review of the true non-manipulated data bestows me with a not optimistic outlook for the coming decade. Is what I’m seeing just the view of a pessimist, or are you seeing the same thing?

A few powerful men have hijacked our economic, financial and political structure. They aren’t socialists or capitalists. They’re criminals. They created the culture of materialism, greed and debt, sustained by prodigious levels of media propaganda. Our culture has been led to believe that debt financed consumption over morality and justice is the path to success. In reality, we’ve condemned ourselves to a slow painful death spiral of debasement and despair.

“A culture that does not grasp the vital interplay between morality and power, which mistakes management techniques for wisdom, and fails to understand that the measure of a civilization is its compassion, not its speed or ability to consume, condemns itself to death.” – Chris Hedges

IT’S A MATTER OF TRUST – PART ONE

“All the world is made of faith, and trust, and pixie dust.” ― J.M. Barrie – Peter Pan

“The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.” – Lord Acton

Who do you trust? Do you trust the President? Do you trust Congress? Do you trust the Treasury Secretary? Do you trust the Federal Reserve? Do you trust the Supreme Court? Do you trust the Military Industrial Complex? Do you trust Wall Street bankers? Do you trust the SEC? Do you trust any government agency or regulator? Do you trust the corporate mainstream media? Do you trust Washington think tanks? Do you trust Madison Avenue PR maggots? Do you trust PACs? Do you trust lobbyists? Do you trust government unions? Do you trust the National Association of Realtors? Do you trust mega-corporation CEOs? Do you trust economists? Do you trust billionaires? Do you trust some anonymous blogger? You can’t even trust your parish priest or college football coach anymore. A civilized society cannot function without trust. The downward spiral of trust enveloping the world is destroying our global economy and will lead to collapse, chaos and bloodshed. The major blame for this crisis sits squarely on the shoulders of crony capitalists that rule our country, but the willful ignorance and lack of civic accountability from the general population has contributed to this impending calamity. Those in control won’t reveal the truth and the populace don’t want to know the truth – a match made in heaven – or hell.

“Most ignorance is vincible ignorance. We don’t know because we don’t want to know.” – Aldous Huxley

The fact that 86% of American adults have never heard of Jamie Dimon should suffice as proof regarding the all-encompassing level of ignorance in this country. As the world staggers under the unbearable weight of debt built up over decades, to fund a fantasyland dream of McMansions, luxury automobiles, iGadgets, 3D HDTVs, exotic vacations, bling, government provided pensions, free healthcare that makes us sicker, welfare for the needy and the greedy, free education that makes us dumber, and endless wars of choice, the realization that this debt financed Ponzi scheme was nothing but a handful of pixie dust sprinkled by corrupt politicians and criminal bankers across the globe is beginning to set in. A law abiding society that is supposed to be based on principles of free market capitalism must function in a lawful manner, with the participants being able to trust the parties they do business with. When trust in politicians, regulators, corporate leaders and bankers dissipates, anarchy, lawlessness, unscrupulous greed, looting, pillaging and eventually crisis and panic engulf the system.

Our myopic egocentric view of the world keeps most from seeing the truth. Our entire financial system has been corrupted and captured by a small cabal of rich, powerful, and prominent men. It is as it always has been. History is filled with previous episodes of debt fueled manias, initiated by bankers and politicians that led to booms, fraud, panic, and ultimately crashes. The vast swath of Americans has no interest in history, financial matters or anything that requires critical thinking skills. They are focused on the latest tweet from Kim Kardashian about her impending nuptials to Kanye West, the latest rumors about the next American Idol judge or the Twilight cheating scandal.

Bubble, Bubble, Toil & Trouble

Economist and historian Charles P. Kindleberger in his brilliant treatise Manias, Panics, and Crashes details the sordid history of unwitting delusional peasants being swindled by bankers and politicians throughout the ages. Human beings have proven time after time they do not act rationally, obliterating the economic teachings of our most prestigious business schools about rational expectations theory and efficient markets. The only thing efficient about our markets is the speed at which the sheep are butchered by the Wall Street slaughterhouse. If humanity was rational there would be no booms, no busts and no opportunity for the Corzines, Madoffs, and Dimons of the world to swindle the trusting multitudes. The collapse of a boom always reveals the frauds and swindlers. As the tide subsides, you find out who was swimming naked.

“The propensity to swindle grows parallel with the propensity to speculate during a boom… the implosion of an asset price bubble always leads to the discovery of frauds and swindles”— Charles P. Kindleberger, economic historian

The historically challenged hubristic people of America always think their present-day circumstances are novel and unique to their realm, when history is wrought with similar manias, panics, crashes and criminality. Kindleberger details 38 previous financial crises since 1618 in his book, including:

The Dutch tulip bulb mania
The South Sea bubble
John Law Mississippi Company bubble
Banking crisis of 1837
Panic of 1857
Panic of 1873
Panic of 1907 – used as excuse for creation of Federal Reserve
Great Crash of 1929
Oil Shock of 1974-75
Asian Crisis of 1998

Kindleberger wrote his book in 1978 and had to update it three more times to capture the latest and greatest booms and busts. His last edition was published in 2000. He died in 2003. Sadly, he missed being able to document two of the biggest manias in history – the Internet bubble that burst in 2001 and the housing/debt bubble that continues to plague the world today. Every generation egotistically considered their crisis to be the worst of all-time as seen from quotes at the time:

1837: “One of the most disastrous panics this nation ever experienced.”
1857: “Crisis of 1857 the most severe that England or any other nations has ever encountered.”
1873: “In 56 years, no such protracted crisis.”
1929: “The greatest of speculative boom and collapse in modern times – since, in fact, the South Sea Bubble.”

Human beings have not changed over the centuries. We are a flawed species, prone to emotional outbursts, irrational behavior, alternately driven by greed and fear, with a dose of delusional thinking and always hoping for the best. These flaws will always reveal themselves because even though times change, human nature doesn’t. The cyclical nature of history is a reflection of our human foibles and flaws. The love of money, power, and status has been the driving force behind every boom and bust in history, as noted by historian Niall Ferguson.

“If the financial system has a defect, it is that it reflects and magnifies what we human beings are like. Money amplifies our tendency to overreact, to swing from exuberance when things are going well to deep depression when they go wrong. Booms and busts are products, at root, of our emotional volatility.” – Niall Ferguson

Not only are our recent booms and busts not unique, but they have a common theme with all previous busts – greedy bankers, excessive debt, non-enforcement of regulations, corrupt public officials, rampant fraud, and unwitting dupes seeking easy riches. Those in the know use their connections and influence to capture the early profits during a boom, while working the masses into frenzy and providing the excessive leverage that ultimately leads to the inevitable collapse. As the bubble grows, rationality is thrown out the window and all manner of excuses and storylines are peddled to the gullible suckers to keep them buying. Nothing so emasculates your financial acumen as the sight of your next door neighbor or moronic brother-in-law getting rich. As long as all the participants believe the big lie, the bubble can inflate. As soon as doubt and mistrust enter the picture, someone calls a loan or refuses to be the greater fool, and panic ensues. This is when the curtain is pulled back on the malfeasance, frauds, deceptions and scams committed by those who engineered the boom to their advantage. As Kindleberger notes, every boom ends in the same way.

“What matters to us is the revelation of the swindle, fraud, or defalcation. This makes known to the world that things have not been as they should have been, that it is time to stop and see how they truly are. The making known of malfeasance, whether by the arrest or surrender of the miscreant, or by one of those other forms of confession, flight or suicide, is important as a signal that the euphoria has been overdone. The stage of overtrading may well come to an end. The curtain rises on revulsion, and perhaps discredit.” – Charles P. Kindleberger – Manias, Panics, and Crashes

When mainstream economists examine bubbles, manias and crashes they generally concentrate on short-term bubbles that last a few years. But some bubbles go on for decades and some busts have lasted for a century. The largest bubble in world history continues to inflate at a rate of $3.8 billion per day and has now expanded to epic bubble proportions of $15.92 trillion, up from $9.65 trillion in September 2008 when this current Wall Street manufactured crisis struck. A 65% increase in the National Debt in less than four years can certainly be classified as a bubble. We are currently in the mania blow off phase of this bubble, but it began to inflate forty years ago when Nixon closed the gold window. This unleashed the two headed monster of politicians buying votes with promises of unlimited entitlements for the many, tax breaks for the connected few and pork projects funneled to cronies, all funded through the issuance of an unlimited supply of fiat currency by a secretive cabal of central bankers running a private bank for the benefit of other bankers and their politician puppets. Crony capitalism began to hit its stride after 1971.

The apologists for the status quo, which include the corporate mainstream media, intellectually dishonest economist clowns like Krugman, Kudlow, Leisman, and Yun, ideologically dishonest think tanks funded by billionaires, and corrupt politicians of both stripes, peddle the storyline that a national debt of 102% of GDP, up from 57% in 2000, is not a threat to our future prosperity, unborn generations or the very continuance of our economic system. They use the current historically low interest rates as proof this Himalayan Mountain of debt is not a problem. Of course it is a matter of trust and faith in the ability of a few ultra-wealthy, sociopathic, Ivy League educated egomaniacs that their brilliance and deep understanding of economics that will see us through this little rough patch. The wisdom and brilliance of Ben Bernanke is unquestioned. Just because he missed a three standard deviation bubble in housing and didn’t even foresee a recession during 2008, doesn’t mean his zero interest rate/screw grandma policy won’t work this time. It’s done wonders for Wall Street bonus payouts.

The growth of this debt bubble is unsustainable, as it is on track to breach $20 trillion in 2015. The only thing keeping interest rates low is coordinated manipulation by Ben and his fellow sociopathic central bankers, the insolvent too big to fail banks using derivative weapons of mass destruction, and politicians desperately attempting to keep the worldwide debt Ponzi scheme from imploding on their watch. Their “solution” is to kick the can down the road. But there is a slight problem. The road eventually ends.

At some point a grain of sand will descend upon a finger of instability in the sand pile and cause a collapse. No one knows which grain of sand will trigger the crisis of confidence and loss of trust. But with a system run by thieves, miscreants, and scoundrels, one of these villains will do something dastardly and the collapse will ensue. Ponzi schemes can only be sustained as long as there are enough new victims to keep it going. As soon as uncertainty, suspicion, fear and rational thinking enter the equation, the gig is up. Kindleberger lays out the standard scenario, as it has happened numerous times throughout history.

“Causa remota of the crisis is speculation and extended credit; causa proxima is some incident that snaps the confidence of the system, makes people think of the dangers of failure, and leads them to move from commodities, stocks, real estate, bills of exchange, promissory notes, foreign exchange – whatever it may be – back into cash. In itself, causa proxima may be trivial: a bankruptcy, suicide, a flight, a revelation, a refusal of credit to some borrower, some change of view that leads a significant actor to unload. Prices fall. Expectations are reversed. The movement picks up speed. To the extent that speculators are leveraged with borrowed money, the decline in prices leads to further calls on them for margin or cash and to further liquidation. As prices fall further, bank loans turn sour, and one or more mercantile houses, banks, discount houses, or brokerages fail. The credit system itself appears shaky, and the race for liquidity is on.” – Charles P. Kindleberger – Manias, Panics, and Crashes

Despite centuries of proof that human nature will never change, there are always people (usually highly educated) who think they are smart enough to fix the markets when they breakdown and create institutions, regulations and mechanisms that will prevent manias, panics and crashes. These people inevitably end up in government, central banks and regulatory agencies. Their huge egos and desire to be seen as saviors lead to ideas that exacerbate the booms, create the panic and prolong the crashes. They refuse to believe the world is too complex, interconnected and unpredictable for their imagined ideas of controlling the levers of economic markets to have a chance of success. The reality is that an accident may precipitate a crisis, but so may action designed to prevent a crisis or action by these masters of the universe taken in pursuit of other objectives. Examining the historical record of booms and busts yields some basic truths. The boom and bust business cycle is the inevitable consequence of excessive growth in bank credit, exacerbated by inherently damaging and ineffective central bank policies, which cause interest rates to remain too low for too long, resulting in excessive credit creation, speculative economic bubbles and lowered savings.

Low interest rates tend to stimulate borrowing from the banking system. This expansion of credit causes an expansion of the supply of money through the money creation process in our fractional reserve banking system. This leads to an unsustainable credit-sourced boom during which the artificially stimulated borrowing seeks out diminishing investment opportunities. The easy credit issued to non-credit worthy borrowers results in widespread mal-investments and fraud. A credit crunch leading to a bust occurs when exponential credit creation cannot be sustained. Then the money supply suddenly and sharply contracts as fear and loathing of debt replace greed and worship of debt. In theory, markets should clear through liquidation of bad debts, bankruptcy of over-indebted companies and the failure of banks that made bad loans. Sanity is restored to the marketplace through failure, allowing resources to be reallocated back towards more efficient uses. The housing boom and bust from 2000 through today perfectly illustrates this process. Of course, Bernanke declared housing to be on solid footing in 2007.

The housing market has not been allowed to clear, as Bernanke has artificially kept interest rates low, government programs have created false demand, and bankers have shifted their bad loans onto the backs of the American taxpayer while using fraudulent accounting to pretend they are solvent. Our owners are frantically attempting to re-inflate the bubble, just as they did in 2003. Our deepest thinkers, like Greenspan, Krugman, Bush, Dodd, and Frank knew we needed a new bubble after the Internet bubble blew up in their faces and did everything in their considerable power to create the first housing bubble. If at first you don’t succeed, try, try again.

Human nature hasn’t changed in centuries. We have faith that humanity has progressed, but the facts prove otherwise. We are a species susceptible to the passions of power, greed, delusion, and an inflated sense of our own intellectual superiority. And we still like to kill each other in the name of country and honor. There is nothing progressive about crashing the worldwide economic system and invading countries for “our” oil.

History has taught that there will forever be manias, bubbles and the subsequent busts, but how those in power deal with these episodes has been and will be the determining factor in the future of our economic system and country.

Humanity is deeply flawed; the average human life is around 80 years; men of stature, wealth, over-confidence in their superior intellect, and egotistical desire to leave their mark on history, always rise to power in government and the business world; this is why history follows a cyclical path and the myth of human progress is just a fallacy.

“That men do not learn very much from the lessons of history is the most important of all the lessons that History has to teach” – Aldous Huxley

In Part 2 of this three part series I will examine the one hundred year experiment of trusting a small cabal of non-elected bankers to manage and guide our economic system for the benefit of the American people.

ECONOMIC REPORT CARD – FAIL

We are now three and one half years into Barack Obama’s presidency. I thought a few pertinent charts would help us assess the success of his economic policies. Upon his election he demanded an $800 billion stimulus package in order to keep the unemployment rate from surpassing 8%. The $800 billion was to be spent over two years we were told and then government spending would be scaled back to pre-stimulus levels. There were 145 million Americans employed when Obama was elected. There are 9 million more working age Americans today than there were in 2008. There are now 142.4 million employed Americans. So, we’ve added 9 million potential workers and still have 2.6 less Americans employed. We have the same number of Americans employed as we did in early 2006, when there were 17 million less working age Americans.

The Obama stimulus plan was passed with everything he wanted. Democrats controlled the House and Senate and gave him exactly what he proposed. By October 2009, the unemployment rate was 10%. Obama’s stimulus package and economic policies have been so successful that he has been able to get the unemployment rate all the way down to 8.2% after three and one half years, even though he said his stimulus package would keep the unemployment rate under 8%. And all it took to get the unemployment rate down to 8.2% was for 8 MILLION Americans to leave the labor force. A critical thinking person who doesn’t swallow the crap peddled by the BLS and the rest of the government propaganda machine might question WHY 8 million Americans would leave the workforce when people desperately need income. If the labor participation rate had stayed constant, the current unemployment rate is 10.9%.

The long-term chart below tells the true story. The BLS classifying millions as not in the labor force is a crock. The Obama apologists and sycophants peddle a false storyline about Baby Boomers retiring as the cause for this labor force decline. The fact is people over the age of 55 have the highest participation rate in history and it continues to rise. Of the 142.4 million employed Americans, only 114 million works more than 35 hours per week, with 28.4 million working part-time. That means that 20% of those employed are part time workers with no benefits. In 2008, prior to the ascendency of Obama, there were 125 million full-time workers and 20 million part-time workers. Obama has been able to increase the percentage of part-time workers from 14% to 20% in just over 3 years. Remember this fact when Obama touts the 3 million new jobs he’s created since 2010.

If you were wondering what the 8.5 million Americans who have left the labor force since 2008 were doing, look no further than the millions of bedrooms now functioning as classrooms for the University of Phoenix and the other on-line, for profit diploma mills that have proliferated with the doling out of hundreds of billions in cheap government student loans. These for profit diploma mills know how to game the system and get their money even if the students drop out after a few months. They educate 12% of students, receive 25% of federal student aid and account for nearly 50% of loan defaults. Sounds like a great business model.

Low interest Federal government loans have skyrocketed from $100 billion when Obama took office to $450 billion today. Total student loan debt has surpassed $1 trillion, with the average student graduating with $25,000 of debt and many more burdened with $100,000 or more of debt. Those part-time jobs making lattes at Starbucks aren’t cutting it. Default rates are already at a ten year high and are poised to skyrocket as more people graduate into a jobless job market. Not only is the American taxpayer on the hook for the $450 billion of direct Federal student loans, but the Federal government is guaranteeing another $450 billion. When the student loan bubble pops, the taxpayer financed bailout will be epic. And this is all being engineered by the Obama administration in order to artificially reduce the unemployment rate. Does this graph remind you of another bubble that resulted in a few problems for the American taxpayer?

After three and a half years, Obama’s policies have led to 11 million less full-time workers and 8 million more part-time workers – just like he drew it up on the board when he committed $800 billion of your tax dollars to saving our economy through classic Keynesianism. Obama declared the stimulus would be a two year jolt to get our economy back on track. Federal government spending was $2.7 trillion in 2006, $2.7 trillion in 2007 and $3.0 trillion in 2008, the last three years of Bush’s administration. If spending stayed on a standard trajectory, it would have been $3.1 trillion in 2009, $3.2 trillion in 2010, $3.3 trillion in 2011 and $3.4 trillion in 2012. With the end of the Iraq occupation in 2010, it should have dropped by $200 billion, resulting in total spending of $3.1 trillion in 2011 and $3.2 trillion in 2012.

Obama declared the stimulus would be short-term. Federal government spending should have risen to $3.5 trillion in 2009, $3.6 trillion in 2010 ($300 billion stimulus – $200 billion Iraq withdrawal), and then revert back to $3.3 trillion in 2011 and $3.4 trillion in 2012. Let’s see whether Obama was honest in his promises:

Federal Government Spending

2009 – $3.5 trillion

2010 – $3.5 trillion

2011 – $3.6 trillion

2012 – $3.8 trillion

After three and one half years of stimulus spending, Cash for Clunkers, Home Buyer Tax Credits, mortgage modification programs, Fannie, Freddie & FHA accumulating billions in bank losses, zero interest rates, QE1, QE2, Operation Twist, unlimited student loans, wars of choice in the Middle East, mark to fantasy accounting standards for Wall Street, and hundreds of billions in bonuses for criminal bankers, we are left with a $5.3 trillion (50% increase) higher national debt and a $300 billion (2.3% increase) higher real GDP. That’s not exactly a big bang for your Keynesian buck. The response you will get from the Obama apologists is, “Imagine how bad it would have been if we didn’t spend the money”. This is a classic liberal response when their solutions are a total failure. Krugman will declare that if we had only spent another $2 trillion all would be well.

As you can see, Obama and all the politicians in Washington DC are really good at spending your money on pork projects, paying off campaign contributors and compensating their corporate cronies. Do you see any reversion back to normalized spending? How can current spending be $300 billion higher than the two stimulus years if Obama was telling the truth in 2009? The Obamanistas declare we are still in an emergency and must borrow and spend to save the economy. The emergency never ends for politicians of both parties. This is how they have bastardized John Maynard Keynes’ theory. They love to implement spending when the economy is in the dumper, but they forget his admonition to pay down debt during the good times. It never happens. There will always be another emergency. Even 2nd grade level Sesame Street fans can see the Federal government spending and debt accumulation never reverses. It couldn’t be any more obvious, unless you are an intellectually dishonest Keynesian ideologue hack (aka Krugman).

This brings us to the crowning economic achievement of the Obama administration. His most successful program is unequivocally the SNAP food stamp program. When Obama assumed power in January 2009 there were 32 million Americans on food stamps and the annual cost of the program was $44 billion. Today there are 46 million Americans on food stamps and the annual cost is pacing at $75 billion. He has been able to get fully 15% of the U.S. population enrolled in this fantastic program and the Department of Agriculture is even running advertisements to convince more people to join.

And don’t worry about any restrictions. You can buy as much soda, ice cream, cheetos, and fudge brownies with your SNAP card as you choose. Of course, you are still free to purchase higher end fare.

A cynical less trusting soul than me might even conclude that Obama’s goal is to provide government entitlements to as many people as possible in order to win votes in the upcoming election. One might ask how he can tout an economic recovery and the millions of “new” jobs he has created since 2010, when 6 million people have been added to the food stamp rolls since his economic recovery officially began in 2010. I’m confused by the Obama distinction between success and utter failure.

Not far behind the food stamp program, the SSDI program has been another resounding Obama success. He has been able to enroll twice as many participants in this program as jobs created since the end of the recession. There are already 10 million people on SSDI costing the American taxpayer in excess of $150 billion per year. There are 250,000 people per month applying for benefits and the program will be broke by 2015. In a shocking development, when people began to roll off the 99 week unemployment gravy train, the number of new SSDI applications soared. I guess they were depressed at not being able to collect unemployment for two more years.

Bob Adelman recently summed up the SSDI scam:

“The program, funded federally but administered by the states, is being milked by many who have run out of unemployment benefits and other resources and haven’t been able to find work. At present one out of every eight working-age, non-retired individuals receive disability payments, some for “mental disorders” and “back pain.” Claims for mental disorders, for instance, have more than tripled from 10 percent of cases in 1982 to 32.8 percent in 2012, with half of those based on “mood disorders” such as depression or anxiety. Back or neck “problems” have increased by 31 percent and were the top cause of disability for 50- to 64-year olds. Depression and anxiety and other emotional problems increased by 20 percent, and now constitute one-third of all disability claims. Once on the rolls, beneficiaries have little incentive to return to work because their disability entitles them to additional benefits such as food stamps, Medicaid, Section 8 housing, and student-loan forgiveness. As a result less than one half of one percent of those on disability ever go back to work.”

I’m depressed by the results of Obama’s economic policies. Maybe I should apply for SSDI.

It appears that former college professor Obama never paid attention in his macroeconomics undergraduate course. The “guns versus butter model” doesn’t enter the equation for a profound thinker like Barack. Why do hard choices need to be made when Ben Bernanke is manning the printing press? In the real world, a nation has to choose between two options when spending its finite resources. It can buy either guns (invest in defense/military) or butter (invest in production of goods), or a combination of both. This can be seen as an analogy for choices between defense and civilian spending in more complex economies. Politicians and bankers have been ignoring this rational model since 1971 when Nixon closed the gold window. Why make difficult choices when you can borrow and print your way to prosperity? As a country we’ve chosen guns, butter, BMWs, McMansions, free unfunded healthcare, unfunded pensions, unfunded sickcare, and DHS implemented security for all. In order to prove himself tougher than George W., Obama, the socialist, has actually increased war spending by 23% to an all-time high. Fiat currency is an amazing invention. Guns, butter and healthcare for all.

Mainstream media liberals like Ezra Klein dutifully trot out charts and storylines trying to convince the ignorant masses that Obama is not to blame for the soaring national debt. They declare it was the Bush tax cuts and his wars. This blame Bush storyline is growing old as Obama has already extended the Bush tax cuts once, ramped up wars in the Middle East and cut payroll taxes for the last two years. The Office of Management and Budget has calculated the total increase in the national debt will be $7.8 trillion after eight years of Obama, 269% more than was accumulated during the Bush reign of error. I believe the $7.8 trillion is ridiculously optimistic. The national debt has increased by $5.3 trillion since Obama took office. It will go up another $200 billion by the end of this fiscal year. It will surely exceed $1 trillion per year during a 2nd Obama term as he would extend most of the Bush tax cuts, extend the payroll tax cuts, continue to increase war spending, and the hidden delayed Obamacare costs would arrive. His eight year report card will show a $9.5 trillion increase in the national debt, reaching the magic grand total of $20 trillion. The national debt to GDP ratio will be close to 120%.

This scathing assessment of Obama’s economic policies is by no means an endorsement of Mitt Romney or his economic plan, since he has never provided a detailed economic plan. After four years of a Romney presidency, the national debt will also be $20 trillion as his war with Iran and handouts to his Wall Street brethren replace Obama’s food stamps and entitlement pork. There was only one presidential candidate whose proposals would have placed this country back on a sustainable path. The plutocracy controlled corporate mainstream media did their part in ignoring and then scorning Ron Paul during his truth telling campaign. The plutocracy wants to retain their wealth and power, while the willfully ignorant masses don’t want to think. The words of Ron Paul sum up what will occur over the coming years as the interchangeable pieces of this corporate fascist farce drive the country to ruin:

“Deficits mean future tax increases, pure and simple. Deficit spending should be viewed as a tax on future generations, and politicians who create deficits should be exposed as tax hikers.”

“Believe me, the next step is a currency crisis because there will be a rejection of the dollar, the rejection of the dollar is a big, big event, and then your personal liberties are going to be severely threatened.”

The politicians, bankers and corporate titans running this country are too corrupt and cowardly to reverse the course on our path to destruction. The debt will continue to accumulate until our Minsky Moment. At that point the U.S. dollar will be rejected and chaos will reign. The Great American Empire will be no more. At that time sides will need to be chosen and blood will begin to spill. Decades of bad decisions, corruption, cowardice, ignorance, greed and sloth will come to a head. The verdict of history will not be kind to the once great American Empire.

WHO DESTROYED THE MIDDLE CLASS – PART 3

This is the 3^rd and final chapter of my series about the destruction of the middle class. In Part 1 of this series I addressed where and how the net worth of the middle class was stolen. In Part 2, I focused on the culprits in this grand theft and in Part 3, I will try to figure out why they stole your net worth and what would be required to restore sanity to this world.

Dude, Why Did They Steal My Net Worth?

“I have no problem with people becoming billionaires—if they got there by winning a fair race, if their accomplishments merit it, if they pay their fair share of taxes, and if they don’t corrupt their society. Most of them became wealthy by being well connected and crooked. And they are creating a society in which they can commit hugely damaging economic crimes with impunity, and in which only children of the wealthy have the opportunity to become successful. That’s what I have a problem with. And I think most people agree with me.” – Charles Ferguson – Predator Nation

It is clear to me that a small cabal of politically connected ultra-wealthy psychopaths has purposefully and arrogantly stripped the middle class of their wealth and openly flaunted their complete disregard for the laws and financial regulations meant to enforce a fair playing field. Why did they gut the middle class in their rapacious appetite for riches? Why did the scorpion sting the frog while crossing the river, dooming them both? It was his nature. The same is true for the hubristic modern robber barons latched on the backs of the middle class. Their appetite for ever greater riches will never be mollified. They will always want more. They promise not to destroy the middle class, as that will surely extinguish the last hope for a true economic recovery built upon savings, investment and jobs, but it is their nature to destroy. A card carrying member of the plutocracy and renowned dog lover, Mitt Romney, revealed a truth not normally discussed by those running the show:

“I’m not concerned about the very poor. We have a safety net there. I’m not concerned about the very rich, they’re doing just fine.”

The data from the Fed report confirms Romney’s assertion. The poorest 20% were the only household segment that saw an increase in their real median income between 2007 and 2010, while the richest 10% saw only a modest 5% decrease in their $200,000 plus, annual incomes. Meanwhile the middle class households experienced a brutal 8% to 9% decline in real income. Table 2 in Part 2 of this article reveals why the poorest 20% were able to increase their income. Transfer payments (unemployment, welfare, food stamps, SSDI) increased from 8.6% of their income in 2007 to 11.1% in 2010. Government transfer payments rose from $1.7 trillion in 2007 to $2.3 trillion today, a 35% increase in five years. I’m sure the bottom 20% are living high on the hog raking in that $13,400 per year. Think about these facts for just a moment. There are 23 million households in this country with a median annual household income of $13,400. That means half make less than that. There are 58 million households that have a median household income of $45,800, with half making less than that.

The reason Mitt Romney isn’t concerned about the very poor is because his only interaction with them is when they cut the lawn at one of his six homes. The truth is the bottom 20% are mostly penned up in our urban ghettos located in Detroit, Chicago, Philadelphia, NYC, LA, Atlanta, Miami, and the hundreds of other decaying metropolitan meccas. They generally kill each other and only get the attention of the top 10% if they dare venture into a white upper class neighborhood. They are the revenue generators for our corporate prison industrial complex – one of our few growth industries. They provide much of the cannon fodder for our military industrial complex. They are kept ignorant and incapable of critical thought by our Department of Education controlled public school system. The welfare state is built upon the foundation of this 20%. It is certainly true that the bottom 30 million households in this country, from an income standpoint, do receive hundreds of billions in entitlement transfers, but Table 2 clearly shows that 80% of their income comes from working. The annual $72 billion cost for the 46 million people on food stamps pales in comparison to the hundreds of billions being dispensed to the Wall Street banks by Ben Bernanke and Tim Geithner, and the $1 trillion per year funneled to the corporate arm dealers in the military industrial complex. The Wall Street maggots (i.e. J.P. Morgan) crawl around the decaying welfare corpse, extracting hundreds of millions in fees from the EBT system and the SNAP program as they encourage higher levels of spending.

This is all part of the diversion. Forty five years after the War on Poverty began, there are 49 million Americans living in poverty. That’s a solid good return on the $16 trillion spent so far. It’s on par with the 16 year zero percent real return in the stock market. We have produced a vast underclass of ignorant, uneducated, illiterate, dependent people who have become a huge voting block for the Democratic Party. Politicians, on the left, promise more entitlements to these people in order to get elected. Politicians on the right will not cut the entitlements for fear of being branded as uncaring. The Republicans agree to keep the welfare state growing and the Democrats agree to keep the warfare state growing -bipartisanship in all its glory. And the middle class has been caught in a pincer movement between the free shit entitlement army and the free shit corporate army. The oligarchs have been incredibly effective at using their control of the media, academia and ideological think tanks to keep the middle class ire focused upon the lower classes. While the middle class is fixated on people making $13,400 per year, the ultra-wealthy are bribing politicians to pass laws and create tax loopholes, netting them billions of ill-gotten loot. These specialists at Edward Bernays propaganda techniques were actually able to gain overwhelming support from the middle class for the repeal of estate taxes by rebranding them “death taxes”, even though the estate tax only impacts 15,000 households out of 117 million households in the U.S. The .01% won again.

It is easy to understand how the hard working middle class is so easily manipulated by the corporate fascists into believing their decades of descent to a lower and lower standard of living is the result of the lazy good for nothings at the bottom of the food chain sucking on the teat of state with their welfare entitlements. I drive through the neighborhoods of West Philadelphia every day, inhabited by the households with a net worth of $8,500 and annual income of $13,400. They inhabit crumbling hovels worth less than $25,000, along pothole dotted streets strewn with waste, debris and rubbish. More than half the people in this war zone are high school dropouts, over 30% are unemployed, and drug dealing is the primary industry. When a drug dealer becomes too successful and begins to cut into the profits of the “legitimate” oligarch sanctioned drug industry, he is thrown into one of our thriving prisons. Marriage is an unknown concept. The life expectancy of males is far less than 79 years old. But something doesn’t quite make sense. Every hovel has a Direct TV satellite dish. The people shuffling around the streets all have expensive cell phones. There are newer model cars parked on the streets, including a fair number of BMWs, Mercedes, Cadillac Escalades and Volvos. How can this be when their annual income is $13,400 and they have $8,500 to their names?

This is where our friendly neighborhood Wall Street oligarchs enter the picture. These downtrodden people are not bright. They are easily manipulated and scammed. They believe driving an expensive car and appearing successful is the same as being successful. Therefore, they are easily susceptible to being lured into debt. Millions of these people represented the “subprime” mortgage borrowers during the housing bubble. The tremendous auto “sales” being reported by the mainstream media in an effort to boost consumer confidence about an economic recovery, are being driven by subprime auto loans from Ally Financial (85% owned by the U.S. Treasury/you the taxpayer) and the other government back stopped Wall Street banks. This is the beauty of credit. The mega-lenders reap tremendous profits up front, the illusion of economic progress is created, poor people feel rich for a while, and when it all blows up at a future date the middle class taxpayer foots the bill. Real wages for the 99% have been falling for three decades. You make poor people feel wealthy by providing them easy access to vast quantities of cheap debt. I’m a big fan of personal responsibility, but who is the real malignant organism in this relationship? The parasite banker class, like a tick on an old sleepy hound dog, has been blood sucking the poor and middle class for decades. They have peddled the debt, kept the poor enslaved, and have used their useful idiots in the media to convince millions of victims to blame each other through their skillful use of propaganda. They maintain their control by purposely creating crisis, promoting hysteria, and engineering “solutions” that leave them with more power and wealth, while stripping the average citizen of their rights, liberty, freedom and net worth (i.e. Housing Bubble to replace Internet Bubble, Glass-Steagall repeal, Patriot Act, TARP, NDAA, SOPA). Jesse cuts to the heart of the matter, revealing the darker side of our human nature:

“Sometimes when faced with problems that are confusing and troubling it is easier to think what someone tells you to think, particularly something that touches a deep and dark nerve in your nature, rather than carry the burden and ambiguity of struggling with the facts and thinking for yourself. Repeating a party line is a shorthand way of avoiding real thought. And the predators are always there to take advantage of it. They welcome trouble and often foment crisis in order to advance their agendas.”

“Anyone can be misled by a clever person, and no one likes to readily admit that they have been had. It is a sign of character and maturity to realize this, and admit you were deceived, and to demand change and reform. But some people cannot do this, even when the facts of the deception are revealed. It seems as though the more incorrect that the truth shows them to be, the louder and more strident they become in shouting down and denying the reality of the situation. And anyone who denies their perspective becomes ‘the other,’ someone to be feared and hated, shunned and eliminated, one way or the other.”

Until Debt Do Us Part

I sense signs of desperation amongst the plutocracy. Their propaganda machine is sputtering. Their storylines are growing tired. They have fended off the fury of the Tea Party movement by successfully high jacking it and neutralizing their impact under the thumb of the Republican establishment. The oligarchs called out their armed thugs to crush the OWS rage, while using their media mouthpieces to misrepresent the true purpose of the movement – Wall Street greed and criminality with Washington DC collusion. The Savings & Loan Crisis of the late 1980s resulted in 800 bankers being thrown into prison. After the greatest banker heist in history, not one banker has been thrown in jail. Obama and Holder have been neutered by their masters. The power elite openly brandish their glee at avoiding accountability for their crimes. They are desperately attempting to re-inflate the debt bubble, as debt is the lifeblood of these vampire squids. The key piece of their current propaganda campaign is to convince the people they have effectively deleveraged and their continuing austerity efforts are actually detrimental to economic recovery. It’s nothing but a confidence game to keep the Ponzi going. The Ponzi operators want to extract every last dime from the masses before the engineered collapse. The data does not confirm the deleveraging narrative. Total credit market debt in the United States is now at an all-time high and stands at 345% of GDP. In 1977 it stood at 155% of GDP and at 250% in 2000.

Total credit market debt is now $4 trillion higher than it was in 2007, prior to the financial collapse. It has gone up by $1 trillion in the last 12 months. Does this sound like deleveraging? The chart below details the truth the moneyed interests don’t want you to understand. The bastions of capitalism on Wall Street have dumped $3.4 trillion of their toxic debt and $1 trillion of mortgage and credit card debt onto the backs of middle class taxpayers and future unborn generations. They did this under the auspices of saving the economic system. Their sole purpose has been to save themselves from becoming part of the middle class. The transfer of wealth from the quarry (middle class) to the predators (moneyed interests) continues unabated.

The faux journalists in the mainstream media have been pounding the consumer deleveraging mantra. They babble on about the austere masses methodically paying down their debts. It’s a specious lie. The chart below shows that banks have written off $218 billion of credit card debt since 2008. It also shows outstanding revolving debt falling from $1.01 trillion to $819 billion, a $191 billion decrease. For the math challenged, like any Wall Street shill paraded on CNBC, this means consumers have added $27 billion of credit card debt since 2008. Does that sound like deleveraging? Households have also taken on $300 billion of additional student loan debt since 2008, buying into the government sponsored scam to keep the unemployment rate lower by offering the false hope of jobs with useless on-line degrees from the University of Phoenix. Does that sound like deleveraging?

Consumer Credit Card Debt and Charge-off Data (in Billions):

	Outstanding Revolving Consumer Debt	Outstanding Credit Card Debt	Qrtly Credit Card Charge-Off Rate	Qrtly Credit Card Charge-Off in Dollars
Q1 2012	$819.4	$803.0	4.37%	$8.8
2011	$864.9	$847.6
Q4 2011	$864.9	$847.6	4.53%	$9.6
Q3 2011	$826.2	$809.7	5.63%	$11.4
Q2 2011	$819.2	$802.8	5.58%	$11.2
Q1 2011	$810.7	$794.4	6.96%	$13.8
2010	$857.4	$840.2		$77.9
Q4 2010	$857.4	$840.2	7.70%	$16.2
Q3 2010	$836.0	$819.2	8.55%	$17.5
Q2 2010	$847.5	$830.5	10.97%	$22.8
Q1 2010	$860.3	$843.1	10.16%	$21.4
2009	$921.9	$903.4		$85.6
Q4 2009	$921.9	$903.4	10.12%	$22.8
Q3 2009	$922.2	$903.7	10.1%	$22.8
Q2 2009	$933.1	$914.4	9.77%	$22.3
Q1 2009	$946.1	$927.2	7.62%	$17.7
Q4 2008	$1,010.3	$990.1

(Source: CardHub.com, Federal Reserve)

They only people with the courage to tell it like it is are skeptics and outcasts from polite society inhabited by the power elite – people like Ron Paul, Michael Burry, and deceased critical thinkers like Frank Zappa and George Carlin. In one of his final appearances, Carlin brutally lashed out with a torrent of truth, only spoken by courageous people not worried about the consequences of their blunt honesty:

They want obedient workers, obedient workers. People who are just smart enough to run the machines and do the paperwork and just dumb enough to passively accept all these increasingly shittier jobs with the lower pay, the longer hours, the reduced benefits, the end of overtime and the vanishing pension that disappears the minute you go to collect it. The table is tilted folks, the game is rigged. Nobody seems to notice, nobody seems to care. Good honest hard working people, white collar, blue collar, it doesn’t matter what color shirt you have on. Because the owners of this country know the truth, it’s called the American Dream, because you have to be asleep to believe it.”

Grotesque Casino of Corporate Fascism

“The illusion of freedom will continue as long as it’s profitable to continue the illusion. At the point where the illusion becomes too expensive to maintain, they will just take down the scenery, they will pull back the curtains, they will move the tables and chairs out of the way and you will see the brick wall at the back of the theater.” – Frank Zappa

“Specifically, over the past 15 years, the global financial system – encouraged by misguided policy and short-sighted monetary interventions – has lost its function of directing scarce capital toward projects that enhance the world’s standard of living. Instead, the financial system has been transformed into a self-serving, grotesque casino that misallocates scarce savings, begs for and encourages speculative bubbles, refuses to restructure bad debt, and demands that the most reckless stewards of capital should be rewarded through bailouts that transfer bad debt from private balance sheets to the public balance sheet. What is central here is that the government policy environment has encouraged this result. This environment includes financial sector deregulation that was coupled with a government backstop, repeated monetary distortions, refusal to restructure bad debt, and a preference for policy cowardice that included bailouts and opaque accounting. Deregulation and lower taxes will not fix this problem, nor will larger stimulus packages.” – John Hussman

None of the solutions put forth by Obama or Romney will fix the problems facing the country today. They are two handpicked figureheads representing the same owners. Both political parties are responsible for the grotesque casino that passes for our financial system. These political hacks have been in alternating control of our government system for the last 150 years. They don’t want to come up with real solutions to the problems they created. The owners want obedient slaves, distracted by technology and shallow entertainment, subjugated by debt used to buy things they want but don’t need, believing waging wars in distant lands keeps us safe, and favoring the imprisonment of petty thieves and drug users while the grand thieves run the country and control our currency. Keeping the willfully ignorant masses in the dark and confused is a vital part of the plan. Debt is the ingredient that enriches the issuers and keeps the dupes in check. Wall Street bankers, Federal Reserve governors, captured financial “experts”, journalists paid by corporations, economists with an ideological agenda and bought off politicians all repeating the same theme with the same unquestioning, strident conviction is a sure sign that we are being played. The never ending series of titanic bailouts of Wall Street did not avert a catastrophic economic collapse. They protected the corporate fascists from experiencing the consequences of their monstrous predatory actions over the last few decades. And it was all done for money. Simple human greed and an insane desire by a few psychotic men to control and manipulate others for their own selfish pleasure is what has turned this country into a corporate fascist state bereft of its soul and original founding principles, as stated by Ron Paul:

“We’re not moving toward Hitler-type fascism, but we’re moving toward a softer fascism: Loss of civil liberties, corporations running the show, big government in bed with big business. So you have the military-industrial complex, you have the medical-industrial complex, you have the financial industry, you have the communications industry. They go to Washington and spend hundreds of millions of dollars. That’s where the control is. I call that a soft form of fascism — something that’s very dangerous.”

The soft form of fascism easily transforms into the hard form as those in control exhibit their supremacy with displays of military potency in our cities (Boston, St. Louis, Pittsburgh, Chicago), passage of liberty stripping legislation like the Patriot Act and NDAA, along with announcements about thousands of drones patrolling our skies over the next five years. When propaganda begins to lose its effectiveness, brute force is the next step. Whenever I write about the slow methodical disintegration of our once great republic into a dysfunctional banana republic controlled by bankers, mega-corporations and arms dealers; the apologists for the empire scoff and cynically ask for my solutions. I, along with many other rational thinking realists, have proposed solutions, but they don’t have a snowballs chance in Syria of ever even being debated by the existing ruling class. The unholy alliance between bankers, corporate interests and politicians must be broken. These proposals would go a long way towards breaking that alliance:

Political System

Since politicians cannot be trusted to exhibit courage or intelligence when it comes to public policy, a balanced budget amendment to the Constitution needs to be passed, with a five to ten year implementation period to ameliorate the pain.
Term limits of 6 years for Congressmen and Senators. Serving in Congress should not be a career. It is a duty to the country. The purpose of Congress is to represent the existing generations of citizens and ensure that future generations have a country that offers opportunity to live a better life than their parents.
The entire election process would be scraped. It would be transformed into a 3 month publicly financed election. No money from corporations, unions, or individuals would be allowed. Multiple candidates would have an opportunity to debate on public TV. The two party domination of our political process must be broken.
Corporations are not people. Extreme wealth does not give someone the right to buy elections. Rich oligarchs operating in the shadows and spending billions on negative advertising is not how a republic should elect their representatives. Lobbyists, special interests and PACs and would be eliminated from the political process.
The President could no longer issue Executive Orders, undercutting the legislative process.
Every bill before Congress would immediately be put online. The constituents of every Congressmen and Senator would be allowed to voice their opinion by voting yes or no online.
Every bill that is proposed by a Congressman must have a funding mechanism. If the proposal increases costs to the American taxpayer, something else must be cut to pay for the new proposal. This would be unnecessary if a balance budget amendment was passed.
No American troops could be committed to war in a foreign country without a full vote of Congress as required by the U.S. Constitution.
A cost benefit analysis would be conducted regarding every department and agency in the Federal Government by the GAO. Those failing to meet minimum requirements would be drastically reduced or eliminated.
The education of children would be delegated to localities, without Federal mandates. Every child in America would receive vouchers for grade school, high school and college. They could choose any school to attend – public or private. If the private school cost more than the voucher, the family would pay the difference. Excellent schools would flourish, poor schools would be forced to improve or they would close. Teacher tenure would be eliminated. Teaching excellence would be rewarded.

Economic Policy

The first thing to be done is to abolish the Federal Reserve. It is owned by and operated for the benefit of the biggest banks in the world. Its sole purpose has been to enrich the few at the expense of the many through its insidious use of inflation and debt issuance. It has been around for less than 100 years and has debased the USD by 96%. The U.S. Treasury has the authority to issue the currency of the country. It did so from 1789 until 1913.
The 2^nd thing to do would be to reinstitute the Glass-Steagall Act because Wall Street cannot be trusted to manage their risk properly. This would separate true banking activities from the high risk gambling that brought the economic system to its knees. Privatizing the profits and socializing the losses is unacceptable.
The FASB would be directed to make all banks and financial corporations value their assets at their true market value. This would reveal the mega Wall Street banks and corporations like GE to be insolvent. An orderly bankruptcy of all insolvent financial firms involving the sell-off of their legitimate assets to well-run risk adverse banks that didn’t screw up would ensue. Bondholders and stockholders would realize their losses for awful investment decisions. The economic system would be purged of its bad debt.
The currency of the US would be backed by hard assets. A basket of gold, silver, platinum, uranium, and some other limited hard commodities would back the USD. If politicians attempted to spend too much, the price of this basket would reflect their inflationary schemes immediately.
The 16th Amendment would be repealed and the income tax would be scrapped. It would be replaced with a national consumption tax. The more you consume, the more taxes you pay. Wages, savings and investment would be untaxed. The tax code is the source for much of politicians’ power. Its demise would further reduce Washington DC control over our lives.
A downsizing of the US Military from $1 trillion to $500 billion annually would be initiated through the withdrawal of troops from Afghanistan, Iraq, Germany, Japan and hundreds of other bases throughout the world. Policing the world is bankrupting the empire.
All corporate, farm, education, and social engineering subsidies would be eliminated. All Federal employees would have their pay slashed by 10% and the workforce would be reduced by 20% over 5 years. Federal health benefits and pension benefits would be set at average private industry levels.
The Social Security System would be completely overhauled. Anyone 50 or older would get exactly what they were promised. The age for collecting SS would be gradually raised to 72 over the next 15 years. Those between 25 and 50 would be given the option to opt out of SS. They would be given their contributions to invest as they see fit if they opt out. Anyone entering the workforce today would not pay in or receive any benefits. The wage limit for SS would be eliminated and the tax rate would be reduced from 6.2% to 3%.
The Medicare system is unsustainable. It would be converted from a government program to private market based program. The Federal mandates, rules and regulations would be eliminated. Senior citizens would be given healthcare vouchers which they would be free to use with any insurance company or doctor based on price and quality. Insurance companies would compete for business on a national basis. Doctors would compete for business. The GAO would have their budget doubled and they would audit Medicare fraud & Medicaid fraud and prosecute the criminals without impunity.
The healthcare bill would be repealed. Insurance companies would be allowed to compete with each other on a national basis. Tort reform would be implemented so that doctors could do their jobs without fear of being destroyed by slimy personal injury lawyers. Doctors would need to post their costs for various procedures. Price and quality would drive the healthcare market.
The entitlement state would be dismantled. The criteria for collecting welfare, SSDI, food stamps and unemployment benefits would be made much stricter. Unemployed people collecting government payments would be required to clean up parks, volunteer at community charity organizations, pick up trash along highways, fix and paint houses in their neighborhoods and generally keep busy in a productive manner for society.
A free market method for stabilizing the housing market would be for banks to voluntarily reduce the mortgage balances of underwater homeowners in exchange for a PAR (Property Appreciation Right). The homeowner would agree to pay off the PAR to the Treasury (and administered through the IRS) out of future price appreciation on the existing home or subsequent property. The homeowner would be excluded from taking on any home equity loans or executing any “cash out” refinancing until the PAR was satisfied. The maximum PAR obligation accepted by the Treasury would be based on the value of the home and the income of the homeowner.

I’m sure there are many more solutions which non-captured, intelligent, reasonable citizens could put forth to save this country. None of these ideas would be acceptable to the country’s owners. They would reduce their wealth and power. What these oligarchs do not realize is that we are in the midst of a Fourth Turning. Those who experienced the last one have died off. The existing social order will be swept away. It is likely to be violent and bloody. Good people and bad people will die. When the Crisis reaches its climax we will have the opportunity to implement good solutions. There is also the distinct possibility that our increasingly ignorant populace will turn to a messianic psychopath that promises them renewed glory. Decades of delusional decisions will lead to a future that will not be orderly or controllable.

“The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained growth and recovery. If the suffering becomes great enough, change will inevitably come, but it may not be orderly or as controllable as the moneyed interests often like to think.” – Jesse

Parts 1 & 2 can be accessed here:

PART 1

PART 2

WHO DESTROYED THE MIDDLE CLASS – PART 2

In Part 1 of this three part series I addressed where and how the net worth of the middle class was stolen. In Part 2, I will tackle who stole your net worth and in Part 3, why they stole your net worth. Now let’s zero in on the culprits of this crime.

Dude, Who Stole My Net Worth?

“Thus far, both political parties have been remarkably clever and effective in concealing this new reality. In fact, the two parties have formed an innovative kind of cartel—an arrangement I have termed America’s political duopoly. Both parties lie about the fact that they have each sold out to the financial sector and the wealthy. So far both have largely gotten away with the lie, helped in part by the enormous amount of money now spent on deceptive, manipulative political advertising.” – Charles Ferguson – Predator Nation

When you dig into the charts and data supplied by the Federal Reserve generated report, the data which goes back to 2001 tells a story not addressed by the deceptive, manipulative, political propaganda that passes for investigative reporting by the captured mainstream media. The chart below compares the median versus mean income growth from the last three Fed consumer surveys. Overall, it reveals a lost decade of negative income growth for the average middle class family. In the early part of the decade the average middle class family made some progress as jobs were relatively plentiful and the internet crash mostly impacted the rich, who own most of the stocks in the country. This is why the median income rose while the average income fell. The wealthy have a large impact on the average because they own the vast majority of assets in this country. The stock market debacle was unacceptable to the oligarchs and their money printing puppet Greenspan.

Both the liberal and conservative wings of the ruling oligarchy were in complete agreement. A new bubble needed to be blown in order to refill the coffers of the ruling class. Paul Krugman spoke for the liberal wing:

“To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”

Greenspan and his handpicked successor Bernanke represented the conservative wing by reducing interest rates to ridiculously low levels, failing to carry out their regulatory obligations, encouraging recklessness, and purposefully failing to acknowledge and deflate the greatest housing bubble in world history:

“American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage.” – Alan Greenspan – February 2004

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

“With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.” – Ben Bernanke – November 2005

The master plan worked like a charm from 2004 through 2007 as you can see by the tremendous surge in average income. The stock market rocketed by 75% between 2003 and 2007 and national home prices shot up by 50%. Wall Street creatively invented no doc, negative amortization, interest only, subprime mortgages and generated a frenzy of demand from anyone that could scratch an X on a loan document, just as Greenspan had demanded. Being “sophisticated” financial institutions, they were able to assemble thousands of shit loans that were certain to default into one big derivative package of shit and their captured lackeys at the “sophisticated” rating agencies stamped a AAA rating on the smelly pile of feces. Always looking out for the best interests of their clients (aka muppets), the upstanding Wall Street firms sold the derivative piles of shit to them as can’t miss investments. Wall Street profits went off the charts. Billions in bonuses flowed to the rich and powerful Wall Street titans. Mega-corporations generated record profits as consumers utilized the Fed induced tsunami of easy debt to buy BMWs, 72 inch HDTVs, home theaters, stainless steel appliances, granite counter-tops, Caribbean cruises, Jimmy Choo shoes, and Rolex watches in a mad frenzy of consumer delusion.

What you might also notice in the chart above is that median household income somehow declined during this decadent orgy of corporate fascist pleasure. How could this be? Table 2 from the Fed report makes it clear. The vast majority of households in this country generate 75% to 81% of their income from wages. Virtually none of the income generated in 85 million households (the bottom 75%) comes from interest, dividends or capital gains. You need money to make money. The top 10% only generated 46% of their income from wages. The report does not provide details on the top 1%, but wages most certainly account for less than 20% of their income. Interest, dividends and capital gains represented 22.2% of the income for the top 10%, while it represented less than 1% of income for the bottom 75%. This data is the smoking gun that proves that Federal Reserve policy and control fraud on a grand scale by the titans of Wall Street was designed and executed to benefit only the wealthy elite billionaire class and their co-conspirators. All the income gains during this time accrued to the psychopathic amoral financial oligarchy. The average family saw their real wages decline and anyone lured into the housing market during this time frame by the “sophisticated” financial experts at Citicorp, Bank of America, Wells Fargo, Merrill Lynch, Countrywide, Washington Mutual, Wachovia, Bear Stearns, Goldman Sachs, Lehman Brothers, and the other members of the Too Big To Fail criminal syndicate was set up for epic loses.

As expected, the psychopathic banker class could not be satisfied with the results of their looting. Their gluttonous voracious greed culminated in a historic collapse of the worldwide financial system resulting in a housing implosion, stock market crash and 8 million middle class Americans losing their jobs. The Fed report does show that average household income declined more than median household income after this historic financial oligarchy created collapse. One look at Table 6 from the Fed report will explain why. Only 15% of families own stocks and only 50% have retirement accounts. Approximately 50 million households in the country have virtually no stocks and less than 30% have retirement accounts. The top 10% wealthiest households, with a median household net worth of $1.2 million, proportionately own 3 times as much stock as the average family and 90% have retirement accounts. Therefore, the 57% crash in stocks impacted the top 10% to a greater extent, while the average family was most impacted by the 28% drop in home prices.

Despite the fact that the median net worth of the top 10% actual rose from $1.17 million in 2007 to $1.19 million in 2010 (while the bottom 80% saw their net worth decline by 36%) the losses in the stock market were intolerable to the banker predators and their captured government parasite politicians. All the “solutions” to the Wall Street induced financial debacle have been designed to benefit those who committed the crime and should have done the time. The singular design of those pulling the strings was to replenish the treasure chests on Wall Street, engineer a stock market rally to pump up the net worth and capital gain income for the 1%, and protect the vested interests of the financial elite. All the obscene criminally generated profits created during the boom were privatized into the grubby hands of the financial predators, while the subsequent gargantuan losses were socialized onto the backs of the American middle class taxpayers and future unborn generations.

TARP was rammed through the captured Congress by the oligarchs despite a 300 to 1 opposition from the public in order to protect obscenely wealthy bankers, stockholders and bondholders. The $800 billion of debt financed political pork, disguised as stimulus, was doled out to corporate contributors, union thugs, and a myriad of other special interests. Zero interest rates are specifically geared to generate billions of risk free profits for Wall Street and to force retirees to gamble their dwindling retirement funds in the rigged stock market. Bernanke and Paulson threatened the limp wristed pocket protector CPAs at the FASB into allowing Wall Street banks to make up the value of their loan portfolios in order to mislead the public regarding their insolvency. The tripling of the Federal Reserve balance sheet from $950 billion in September 2008 to $2.9 trillion today was done to remove the toxic assets from the balance sheets of the Too Big To Fail Wall Street cabal at 100 cents on the dollar. QE1, QE2, and Operation Twist have had the sole purpose of providing the “sophisticated” financial elite with the funds to pump into the stock market using their high frequency trading super computers.

The subsequent Federal Reserve contrived 100% increase in the S&P 500 has repaired the damaged balance sheets of the moneyed interests, while the average middle class family has sunk further into debt and despair. The powerful entrenched sociopathic marauder class cares not for the average middle class American. They can barely conceal their contempt and disgust for the masses as they blatantly flaunt their hegemony and supremacy over our decrepit decaying corrupted economic system. M. Ramsey King described the disgusting display last week:

“Jamie Dimon’s appearance before the Senate Banking Committee was a sickening display that clearly demonstrated that Congress has been thoroughly corrupted by Wall Street. Instead of grilling Dimon, Senators acted like overly affectionate puppies fighting each other for an opening to smooch their master.”

The destruction of the middle class has been methodical and systematic. The top 10% of earners had a median net worth of $1.19 million, or 192 times as much as the median wealth of $6,200 of those in the bottom 20% in 2010. In 2007, the top 10% had 138 times as much wealth as the bottom 20%. In 2001, it was 106 times as much. With the continued rise in the stock market, declining real wages for the middle class, and further home price declines, the gap between the top 10% and the bottom 20% has continued to widen. The level of pain being experienced by the middle class has reached an unprecedented extreme. A few data points from David Rosenberg make that clear:

Forty-six million Americans (one in seven) are on food stamps.
One in seven is unemployed or underemployed.
The percentage of those out of work defined as long-term unemployed is the highest (42%) since the Great Depression.
54% of college graduates younger than 25 are unemployed or underemployed.
47% of Americans receive some form of government assistance.
Employment-to-population ratio for 25- to 54-year-olds is now 75.7%, lower than when the recession “ended” in June 2009.
There are 7.7 million fewer full-time workers now than before the recession, and 3.3 million more part-time workers.
Eight million people have left the labor force since the recession “ended” — adding those back in would put the unemployment rate at 12% instead of 8.2%.
The number of unemployed looking for work for at least 27 weeks jumped 310,000 in May, the sharpest increase in a year.

I would add a few more data points to David’s list of woe:

Over 7.5 million homes have been foreclosed upon by the Wall Street bankers since 2008.
The National Debt has increased by $5.7 trillion (57% increase) since September 2008, while real GDP has risen by $305 billion (2.3% increase) since the 3^rd quarter of 2008.
Interest income paid to senior citizens and savers has declined by $400 billion (29% decline) since September of 2008 due to Ben Bernanke’s ZIRP.
Government transfer payments have risen by $500 billion (32% increase) since September 2008, while private industry wages have risen by $200 billion (4.7% increase).
The price of a gallon of gas has risen from $1.70 in December 2008 to $3.53 today.
Food prices have risen by 7% to 10% since late 2008, even using the falsified BLS data. A true assessment by anyone who actually goes to a grocery store (not Bernanke – his maid does the shopping) would be a 10% to 20% increase.

The middle class has a gut feeling they are being screwed by somebody, they just can’t figure out who to blame. The ultra-wealthy elite keep up an endless cacophony of propaganda and misinformation designed to confuse an increasingly uneducated and willfully ignorant public while blurring the facts for those educated few capable of understanding the truth. They have been able to keep the masses dumbed down through government run education; distracted by sports, reality TV, Facebook, internet porn, and igadgets; lured by mass media messages of materialism; and shackled with the chains of debt used to acquire the goods sold by mega-corporations. We’ve become a society oppressed by a small faction of ultra-wealthy masters served by millions of impoverished, uneducated, sedated slaves. But the slaves are getting restless and angry. The illegally generated wealth disparity chasm is growing so large that even the ideologue talking head representatives of the elite are having difficulty spinning it. Even uneducated rubes understand when they are getting pissed on.

“Senator, don’t piss down my back and tell me it’s raining” – Fletcher – Outlaw Josey Wales

The situation is growing increasingly unstable and has left the country susceptible to an extreme outcome when this teetering tower of debt topples.

The moneyed interests have brilliantly pitted the middle class against the lower classes through their control of the media, academia, and the political system. They have cleverly blamed the victims for their own plight. They have convinced the general public that millions have lost their homes to foreclosure because they were careless, greedy and stupid. They blame the Community Reinvestment Act. They blame others for taking on too much debt when they were the issuers of the debt. The Wall Street moneyed interests created the fraud inducing mortgage products, employed the thousands of sleazy mortgage brokers, bullied appraisers into fraudulent appraisals, paid off rating agencies, bribed the regulators, bet against the derivatives they had sold to their clients, threatened to burn down the financial system unless Congress handed them $700 billion, and paid themselves billions in bonuses for a job well done. But, according to these greedy immoral bastards, the real problem in this country is the lazy good for nothing parasites on food stamps and collecting unemployment, who need to stop complaining and pick themselves up by their bootstraps and get a damn job. It’s a storyline used against Occupy Wall Street and anyone who questions their right to plunder what is left on the carcass of America. The vilest fraud in the history of man was perpetrated by these evil men and not one executive of these firms has been prosecuted. Obama, the champion of the little people, has proven to be nothing but a figurehead for the powers that be. Proof that the Wall Street syndicate is winning the war couldn’t be any clearer than the fact that the top six criminal banks now have 40% more of the nation’s assets in their vaults than they did before they burned down the economy.

The demonization of the victims continues, while the perpetrators prosper. The sociopaths appear to be winning; just as they seemed to be winning in the later stages of the Roman Empire.

“And we often fall into this bias on the prompting of con men and sociopaths of the predator class who use it to justify their own criminal actions and personal injustice. They are not burdened with empathy for their victims, and even delight in their misfortune. But they must find ways to make their actions more acceptable to society as a whole that normally does have such concerns for equity and justice.” – Jesse

“Are we like late Rome, infatuated with past glories, ruled by a complacent, greedy elite, and hopelessly powerless to respond to changing conditions?” – Camille Paglia

I think you know the answer to this question.

If you missed the first part of this series, CLICK HERE to read it.

DEFICIT ONLY GOING UP BY $2.6 MILLION PER MINUTE

The deficit only went up by $125 billion in May. No wonder the stock market is soaring. Everyone knows, the bigger the deficit, the better the economy gets. Borrowing always leads to prosperity and growth. Just ask the 3 million people who’ve been kicked out of their houses in the last few years. The deficit through 8 months according to the CBO is $845 billion. We’re right on track for another $1.3 trillion deficit. That Obama is sure serious about deficits. Of course, if you go to the Treasury Dept site and see how much the National debt has risen over the first 8 months it shows a $902 billion deficit. That’s only a $57 billion discrepancy. Close enough for government work.

http://www.treasurydirect.gov/NP/NPGateway

I know math is hard for 98% of willfully ignorant Americans, but I’ll try to put this $902 billion deficit in perspective so that even a CNBC Bimbo might understand:

We are spending $3.8 billion more per day than we are bringing in.
We are spending $157 million more per hour than we are bringing in.
We are spending $2.6 million more per minute than we are bringing in.
We are spending $43,500 more per second than we are bringing in.

To make it understandable to my readers in West Philly, this means that the government is buying a Cadillac Escalade on credit, every second of every day, forever.

But don’t worry. The national debt as a percentage of GDP is only 102%. Rogoff & Reinhart said we only have to start worrying when it reaches 90%. See. Nothing to worry about. The stock market is up 100 points and Bernanke has promised to save the world. Back to America’s Got Talent.

U.S. posts deficit of $125 billion in May

By Jeffry Bartash

WASHINGTON (Market Watch) – The U.S. posted a deficit of $125 billion in May to bring the total federal shortfall to $845 billion through the first eight months of fiscal 2012, according to preliminary data from the Congressional Budget Office. That’s about $80 billion less than the deficit reported at the same time a year earlier. Spending rose 1% to $306 billion last month, adjusted for changes in the timing of certain payments and the effects of the TARP emergency-relief program in 2011, the CBO said. The government’s tax intake rose 3% to $180 billion in May. The federal fiscal year runs from October to September.

H.L. MENCKEN WAS RIGHT

“I believe that it is better to tell the truth than a lie. I believe it is better to be free than to be a slave. And I believe it is better to know than to be ignorant.” – H.L. Mencken

H.L. Mencken was a renowned newspaper columnist for the Baltimore Sun from 1906 until 1948. His biting sarcasm seems to fit perfectly in today’s world. His acerbic satirical writings on government, democracy, politicians and the ignorant masses are as true today as they were then. I believe the reason his words hit home is because he was writing during the last Unraveling and Crisis periods in America. The similarities cannot be denied. There are no journalists of his stature working in the mainstream media today. His acerbic wit is nowhere to be found among the lightweight shills that parrot their corporate masters’ propaganda on a daily basis and unquestioningly report the fabrications spewed by our government. Mencken’s skepticism of all institutions is an unknown quality in the vapid world of present day journalism.

The Roaring Twenties of decadence, financial crisis caused by loose Fed monetary policies, stock market crash, Depression, colossal government redistribution of wealth, and ultimately a World War, all occurred during his prime writing years. I know people want to believe that the world only progresses, but they are wrong. The cycles of history reveal that people do not change, just the circumstances change. How Americans react to the undulations of history depends upon their age and generational position. We are currently in a Crisis period when practical, truth telling realists like Mencken are most useful and necessary.

Mencken captured the essence of American politics and a disconnected populace 80 years ago. Even though many people today feel the average American is less intelligent, more materialistic, and less informed than ever before, it was just as true in 1930 based on Mencken’s assessment:

“The Presidency tends, year by year, to go to such men. As democracy is perfected, the office represents, more and more closely, the inner soul of the people. We move toward a lofty ideal. On some great and glorious day the plain folks of the land will reach their heart’s desire at last, and the White House will be adorned by a downright moron.”

You can make your own judgment on the accuracy of his statement considering the last two gentlemen to occupy the White House. His appraisal of U.S. Senators and citizens in our so-called Democracy captures the spirit of the travesty that passes for leadership and civic responsibility in this country today.

“Democracy gives the beatification of mediocrity a certain appearance of objective and demonstrable truth. The mob man, functioning as citizen, gets a feeling that he is really important to the world—that he is genuinely running things. Out of his maudlin herding after rogues and mountebacks there comes to him a sense of vast and mysterious power—which is what makes archbishops, police sergeants, the grand goblins of the Ku Klux and other such magnificoes happy. And out of it there comes, too, a conviction that he is somehow wise, that his views are taken seriously by his betters — which is what makes United States Senators, fortune tellers and Young Intellectuals happy. Finally, there comes out of it a glowing consciousness of a high duty triumphantly done which is what makes hangmen and husbands happy.”

People still read newspapers in the 1930s to acquire credible information about the economy, politics and economy. Today’s corporate owned rags aren’t fit to line a bird cage. The mainstream media is a platform for the lies of their corporate sponsors. Each TV network or newspaper spouts propaganda that supports the financial interests and ideology they are beholden to. Does anyone think they are obtaining the truth from Paul Krugman, Chris Matthews, Sean Hannity or Rush Limbaugh? Evidently the answer is yes. The upcoming presidential campaign will be a nightmare of endless negative advertisements created by Madison Avenue maggots and paid for by rich powerful men attempting to herd the mindless sheeple towards their ultimate slaughter. Whichever corporate controlled party can more successfully scare the masses into pulling their lever in the voting booth on November 6th will get the opportunity push the country closer to its ultimate collapse. This collapse was destined from the time of Mencken when the Federal Reserve was created by a small group of powerful bankers and their cronies in Congress. Fear has worked for 100 years in controlling the masses, as Mencken noted during his time:

“The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.”

In the 1930s you needed to count on newspapers for the truth. The purpose of those who wield power is to keep the masses dumbed down and paranoid regarding terrorist threats and artificial enemies. By convincing the dense public that acquiring material goods on credit was a smart thing to do, they have trapped them in a web of debt. By making life an inexhaustible bureaucratic nightmare or rules, regulations, forms, ID cards, registrations, and red tape, those in power maintain control and accumulate power. H.L. Mencken would be proud:

“Democracy is a pathetic belief in the collective wisdom of individual ignorance. No one in this world has ever lost money by underestimating the intelligence of the great masses of the plain people. Nor has anyone ever lost public office thereby.”

Let’s See How Far We’ve Come

“The worst government is often the most moral. One composed of cynics is often very tolerant and humane. But when fanatics are on top there is no limit to oppression.” – H.L. Mencken

The corporate / government / banking oligarchy started the fire. The world is burning to the ground and politicians have thrown gasoline onto the fire with passage of debt financed stimulus programs, Obamacare, bank bailouts, the Patriot Act, NDAA, and a myriad of other government “solutions”. To anyone willing to think for just a few minutes, the picture is unambiguous. This requires the ability to think critically – a missing gene among the majority of Americans.

Critical thinking is the careful, deliberate determination of whether one should accept, reject, or suspend judgment about a claim and the degree of confidence with which one accepts or rejects it. Critical thinking employs not only logic but broad intellectual criteria such as clarity, credibility, accuracy, precision, relevance, depth, breadth, significance and fairness. Critical thinking requires extensive experience in identifying the extent of one’s own ignorance in a wide variety of subjects (“I thought I knew, but I merely believed.”)

One becomes less biased and more broad-minded when one becomes more intellectually empathetic and intellectually humble. I have observed little or no critical thinking skills in the pompous asses that write daily columns in today’s newspapers and zero critical thinking skills among the vacuous pundits and big breasted brainless fashion models that yap all day long on CNBC, MSNBC, CNN, Fox and the Big 3 dying networks.

Any thinking would be a shocking change of pace from the corrupt corporate owned politicians in Washington DC. Other than Ron Paul and a few other truth tellers, critical thinking from a politician or a government bureaucrat is about as likely as Obama not using a teleprompter. Everything being spewed at the public from the MSM, Wall Street, and Washington DC is intellectually dishonest, manipulated and packaged by pollsters and PR firms. I’ve come to the conclusion that those in power desire that public school systems of the United States churn out ignorant, non-questioning morons. A populace that is incapable or uninterested in critically thinking about the important issues of the day is a politician’s best friend. Half the population doesn’t vote and the other half unquestioningly obeys what they are told by their parties.

Ignorance is the state of being uninformed about issues and unaware about the implications of those issues. It is not about intelligence. A huge swath of America is ignorant due to lack of education and a low class upbringing. But, I know many college educated people who haven’t read a book in 20 years or could care less about economic issues. They made a choice to be ignorant. They prefer being distracted by their latest technological toy to dealing with reality.

Most Americans are incapable of looking beyond a 2 to 3 year time horizon. That is why the median 401k balance in the US is $13,000. That is why the average credit card debt per household is $16,000. That is why 25% of all homeowners are underwater on their mortgage. Politicians, banks, and marketers take advantage of this witlessness to enslave the average American. We’ve come to love our slavery. Appearing successful because you drive the right car, wear the right clothes or live in the right house is more important than actually doing the hard work to actually become successful, like spending less than you make and saving the difference.

An informed, interested, questioning public would be a danger to the government as described by H.L. Mencken:

“The most dangerous man to any government is the man who is able to think things out … without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane, intolerable.”

There were already two fiscal hurricanes of unfunded liabilities and current deficits churning towards our shores before Obama and his non-critical thinking Democratic minions launched a third storm called Obamacare. No matter how many intellectually deceitful mouthpieces like Paul Krugman and Rush Limbaugh misrepresent the facts, the fiscal foundation of the country is crumbling under the weight of unfunded entitlement promises, out of control government spending and far flung military misadventures. Only someone who is intellectually bankrupt, like Krugman, would declare the National Debt at $8 trillion as a looming disaster when George Bush was President, but declare that a $15.6 trillion National Debt headed towards $20 trillion by 2015 isn’t a danger now that Barack Obama is President. The intellectual and moral credentials required to write for a major newspaper have fallen markedly since the days of Mencken.

The combination of educationally uninformed, ignorant by choice, and intellectually dishonest will be fatal for the country. Total US credit market debt as a percentage of GDP is just below an all-time high, exceeding 350% of GDP. It is 25% higher than it was at the depths of the Great Depression. Consumer debt fell in 2010 – 2011 because banks wrote off about a trillion dollars of bad debt, while government debt has skyrocketed to unprecedented levels. Now consumers are back racking up more debt, with government encouragement and subsidies responsible for the surge in student loan and auto debt. With GDP stalling out, government debt accumulating at $1.4 trillion per year and consumers back to their delusional selves again, this ratio will pass 400% by 2014.

The financial crisis was caused by excessive utilization of debt. In order to correct these imbalances, the country needed to undergo a deleveraging and reversion back to a country of savers. Savings equals investment. Instead, our “leaders” have reduced interest rates to 0% and have gone on an unprecedented government borrowing and spending spree. Savers and senior citizens are punished, while gamblers and speculators are rewarded. Anyone who thinks about this strategy for a few minutes will realize it is asinine and hopeless. It enriches the few and impoverishes the many.

Based upon a realistic assessment of our current spending trajectory, The National Debt of the U.S. will exceed $25 trillion by 2019. That is more than double the figure when Bush left office. George Bush almost doubled the National Debt from $5.6 trillion to $11 trillion during his reign of error. It seems one thing Republicans and Democrats can agree on is that spending money they don’t have will have no negative consequences (“deficits don’t matter” – Cheney). When you have a Federal Reserve willing to print to infinity there is no limit to how much you can spend. Only a fool would believe there won’t be consequences. That fool writes an opinion column for the NYT and has a Nobel Prize on his bookshelf.

We add $3.8 billion of debt to this figure each and every day. We add $158 million to this figure each and every hour. The interest on the National Debt reached an all-time high of $454 billion in 2011 with an effective interest rate of about 3%. Much of this interest is paid to foreign governments like China, Japan and OPEC nations. This is $1.2 billion per day of interest paid mostly to foreigners. With just the slightest bit of critical thinking one could easily perceive that with a National Debt of $25 trillion and a likely increase in interest rates to at least 6%, our annual interest costs would increase to $1.5 trillion per year. The United States needed to implement a long-term plan ten years ago to address the impossible to fulfill promises made by its corrupt, mentally bankrupt politicians. Americans’ inability to deal with reality and fondness for not thinking beyond tomorrow has shown them to be an inferior species, as Mencken noted:

“The one permanent emotion of the inferior man is fear – fear of the unknown, the complex, the inexplicable. What he wants above everything else is safety.”

The entire revenue of the US government totaled $2.3 trillion in 2011, with $800 billion of those funds earmarked for Social Security outlays in the future. Does this appear sustainable? President Obama submits budgets of never ending trillion dollar deficits and then gives stump speeches declaring that we must get our deficits under control. He appears on the MSM declaring his dedication to fiscal responsibility and what passes for a journalist these days nods their head like a lapdog and lobs the next softball to the President. You have to be delusional to believe this claptrap. Luckily for the politicians, most Americans are delusional and apathetic. They just got another text message from their BFF. They are consumed by who will get booted this week from American Idol or Dancing With the Stars. The NFL draft is tonight and did your hear that Kim Kardashian is doing Kanye West?

H.L. Mencken understood the false promises of democracy 80 years ago:

“Democracy is also a form of worship. It is the worship of Jackals by Jackasses. It is the theory that the common people know what they want, and deserve to get it good and hard.”

We deserve to get it good and hard, and we will.