Illustration for the Sept. 9, 1903 issue of Puck
Ilargi: As the White House and separate states are divulging budget cuts that would until recently have been unthinkable, even though they're based on completely unrealistic economic scenarios and will therefore turn out to be only a small and lukewarm beginning of the cutting heat that's coming our way, it's good to reflect on the psychology behind it all.
While the public at large is told there is much less money to be spend on everything from teachers to unemployment benefits to roadwork and infrastructure maintenance, the financial markets, and the big banks that control them, are having a field day, once again reaping huge profits, and this time, to add insult to injustice, with the very public money that the people are told is not there to spend on essential services anymore.
So today, here's the second installment of Ashvin Pandurangi's look at the psyche of losers (yeah, that would be you). I know the first part in the series, A Glimpse Into the Stubborn Psychology of Fish, which The Automatic Earth ran last week, was overlooked by many. I'd urge those who have missed it to go read it. We're not going to put a halt to this grand theft auto carnage if we don't even understand why it's happening, and what it is inside our brains that allows for it to do. Ashvin's focus on poker and roulette may well turn out to be key to that understanding.
Ashvin Pandurangi:
A curious thing happened to a middle-aged Frenchman in Monte Carlo last year. He had unexpectedly received a year-end bonus of 10,000 from his employer, and decided to visit Le Grand Casino for a weekend, where he could relax and gamble with his new found wealth. Since his wife and daughters were visiting his stepmother that weekend, he would be able to focus entirely on making some money. His first night was judiciously spent at the Roulette tables, where his sharp instincts and calculated patience presumably allowed him to double his allotted wealth in just five hours. It was an excellent night for the man, who was now 10,000 richer, and he spent the next afternoon lounging in a cabana at the hotel's pool.
That night, the man locked away the initial 10,000 in his room's safe and took the rest back down to the casino floor, where he quickly locked up a seat at his favorite Roulette table from the night before. His playing strategy remained the same as always - place a minimum bet on two out of three columns, switching one column each time he won a bet, and sitting out one roll each time he lost - no deviations from the strategy whatsoever. After a series of wild fluctuations in his bankroll, the man was left with only two more bets, and he decided to place them both on black. The tiny steel ball deftly rolled around the wheel for several revolutions and tensely bounced between a few numbered slots before finally choosing to settle on number 21 - red.
The man quietly finished his glass of red wine, shuffled up to his room and lay awake in bed. He couldn't help feeling extremely frustrated about the events of that evening. Frustrated with the insidious game of roulette, with his own careless betting decisions, with his "bad luck", with the other players who had won, with the man spinning the little steel ball, with the tiny ball itself. He kept replaying the spins in his mind, fantasizing about the money he would still have in his pocket if he had just made a few different decisions. 
What especially haunted him was the would-be expression on his wife's face when he unexpectedly brought home 20,000. The 10,000 bonus would surely lift her into a state of pleasant surprise, but the man speculated that, if he had managed to double that bonus in just two short days at the casino, her pleasant surprise would be magnified ten-fold into a state of blushing pride .On his journey back home the next day, the man began to realize just how strange his lingering feelings from the night before were. After all, he was exactly even from gambling at the end of his trip, and had actually been comped for a night's stay at the hotel and a few meals. He had even expected to lose a bit of money going into the trip, since Roulette laid players some of the worst odds in the Casino. The man reflected on the fact that his brief excitement from winning 10,000 on the first night had paled in comparison to his prolonged dismay from losing that same 10,000 on the second night. It was indeed a curious psychology that continued to puzzle the curious man, so he decided to do some Internet research when he arrived home. Hopefully, he thought, a new and more fundamental understanding of this psychology would finally put his mind at ease.
It didn't take too many Google searches before the man came across the concept of "myopic loss aversion", which explains that people are significantly more likely to experience pain or displeasure from losing a monetary amount than excitement or pleasure from winning that same amount, especially when they frequently evaluate financial outcomes. This disproportional dynamic is obviously powerful when it involves money that one can barely afford to lose, but it also forcefully applies to losses that may be small relative to an individual's bankroll. Even the multi-millionaire corporate executive who drops fifty grand gambling at a Vegas poker table will be beating himself up soon after, despite the fact that he will most likely make multiples of that by the end of the year (or at least he believes that he will).
Many of us may be familiar with the painful/shameful process of losing significant sums of money invested in the "wrong" place at the "wrong" time, but it is much more difficult to imagine the negative reactions produced when an entire economy of millions is serving up losses which, in a few short years, will threaten to wipe out all of the financial gains accumulated over decades. After the most potent "winning streak" in human history, the majority of American society has been blindsided by equally potent losses, which continue to mount and show no signs of abatement:
- It is estimated by Zillow that average home prices in the US have declined ~27% from their peak in June 2007, effectively destroying $9.8 trillion worth of homeowner's equity (in an economy worth ~$14 trillion). [1]
- About 15.7 million homeowners have negative home equity (owe more on home than it is worth), representing a whopping 27% of all mortgaged single-family homes. Joseph Stiglitz infers that these trends will lead to a total of about 9 million people losing their homes through foreclosure between 2008-2011. [2].
- According to officially under-stated statistics, the unemployment rate jumped from 5% in 2008 to ~9.6% in 2011, and the U-6 number puts it at ~16.5%. [3]. The official rate is only that "low" because millions of people have given up looking for jobs over the past few years (magically removing them from the official labor force), and millions of other people with part-time, low-paying jobs are counted as employed (26% of new private-sector hires are temporary [4]).
- Between 2006 and mid-2008, Americans had lost about 22% of total retirement assets or $2.3 trillion, and $2.5 trillion in savings and investment assets. [5]. Although a decent amount of this value has been recovered during 2009-10, it has mostly gone to a significantly smaller percentage of people who have held on to such assets and has only been achieved on the backs of taxpayers, who now owe interest on an additional $4 trillion+ in public debt (plus a few more trillion if we include the GSEs). [6]. When the markets crash again, that public debt will be money completely wasted for a large majority of Americans, if it is not considered to be already.
- Credit card defaults hit a near-record rate of 11.4% in 2010, more than double the rate in 2007, and the average late fee had risen almost 10% from $25.90 in 2008 to $28.19. [7].
- Public employees face at least a $2.5 trillion state pension shortfall mostly accumulated since 2008, and the gap can only be made up through drastic cuts to pension benefits, layoffs and cuts to public services for all other citizens. [8].
- Profits of most small businesses (unincorporated organizations such as partnerships and sole proprietorships) have fallen 5% in the last two years. [9], [10]. These businesses employ over half of all private sector employees and have created 64% of net new jobs over the last 15 years. [11].
There are many other losses that have befallen the American people over the last few years on top of those listed above, and recently they have also seen the costs of necessities increase. The real interest burden of private and public debt continues to weigh heavily on businesses, consumers, patients, students and civil servants. State welfare programs such as unemployment insurance, food stamps, Section 8 and Medicaid provide temporary crutches to dull the searing pain, but it is clear that these programs only continue to exist on recklessly borrowed time and will be selectively restricted to the American people in short order. The federal retirement program of Social Security, on which many retired Americans have come to rely on, is at the brink of insolvency (the difference between outlays and receipts for the SSA in 2010 was $76 billion [12]), and Medicare isn't looking too much better.
American politicians and officials are promising their constituents that this value lost will be recovered, but most of them remember too many broken promises to find any comfort in hollow words. When structural shortages of oil imports become a factor, Americans will have systematically lost not only their financial investments, but their entire way of life and lofty perspectives of reality. Sooner rather than later, we will be forced to fully experience the penetrating anguish and regret associated with unprecedented loss, as the tiny steel ball ceases to bounce around and settles in its pre-determined slot. It is at this time which we will realize that there is only a thinly-veiled political fiction separating us from the furiously desperate protesters in the crowded streets of the Middle East.MERS Lacks Right to Transfer Mortgages, Judge Says
by Thom Weidlich - Bloomberg
Merscorp Inc., operator of the electronic-registration system that contains about half of all U.S. home mortgages, has no right to transfer the mortgages under its membership rules, a judge said.
U.S. Bankruptcy Judge Robert E. Grossman in Central Islip, New York, in a decision he said he knew would have a "significant impact," wrote that the membership rules of the company’s Mortgage Electronic Registration Systems, or MERS, don’t make it an agent of the banks that own the mortgages.
"MERS’s theory that it can act as a ‘common agent’ for undisclosed principals is not supported by the law," Grossman wrote in a Feb. 10 opinion. "MERS did not have authority, as ‘nominee’ or agent, to assign the mortgage absent a showing that it was given specific written directions by its principal."
Merscorp was created in 1995 to improve servicing after county offices couldn’t deal with the flood of mortgage transfers, Karmela Lejarde, a spokeswoman for MERS, said in an interview last year. The company tracks servicing rights and ownership interests in mortgage loans on its electronic registry, allowing banks to buy and sell the loans without having to record the transfer with the county. It played a major role in Wall Street’s ability to quickly bundle mortgages together in securitized trusts.
"‘Don’t come around here no more,’ is basically the message to MERS," said April Charney, a senior attorney with Jacksonville Area Legal Aid in Jacksonville, Florida. "The judge basically deconstructed MERS and said there’s no possible way in any case you can come in and show you have this appropriate proper status to transfer the note."
"MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage-recording process," Grossman wrote. "The court does not accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country, that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law."
Automatic Shield
In the case Grossman ruled on, Credit Suisse Group AG’s Select Portfolio Servicing, a mortgage servicer, sought to bypass the automatic shield against legal claims triggered by Ferrel L. Agard’s filing for personal bankruptcy in September. Select Portfolio wanted permission to foreclose on Agard’s home in Westbury, New York, on behalf of U.S. Bancorp’s U.S. Bank unit, the trustee for the mortgage-backed trust the home loan was in. The house is worth about $350,000 and the mortgage amount was $536,921, according to the decision.
Grossman ruled in favor of Select Portfolio because he couldn’t overrule a November 2008 foreclosure judgment the servicer won in state court, he said. Without that state-court ruling, Select Portfolio wouldn’t have had the right to bring its motion, Grossman said. He then addressed whether a mortgage transfer by MERS is valid, because "MERS’s role in the ownership and transfer of real-property notes and mortgages is at issue in dozens of cases before this court," including those where "there have been no prior dispositive state-court decisions," he wrote.
Select Portfolio argued in part that MERS’s February 2008 assignment of the mortgage to U.S. Bank was valid because Agard agreed that MERS would hold title to it for the original lender, Bank of America Corp.’s First Franklin, and for whichever banks it was further assigned to. First Franklin transferred the promissory note the mortgage secured to Lehman Brothers Holdings Inc.’s Aurora Bank and Aurora to U.S. Bank, according to the decision.
"An adverse ruling regarding MERS’s authority to assign mortgages or act on behalf of its member/lenders could have a significant impact on MERS and upon the lenders which do business with MERS throughout the United States," Grossman wrote. "It is up to the legislative branch, if it chooses, to amend the current statutes to confer upon MERS the requisite authority to assign mortgages under its current business practices."
MERS intervened in the case and argued that Agard’s mortgage, the terms of its membership agreement and New York state law gave it the authority to assign the mortgage. MERS says it holds title to mortgages for its members as both "nominee" and "mortgagee of record."
Grossman said Select Portfolio had to show that U.S. Bank owned both the note and the mortgage, and there was no evidence that it held the note. The judge disagreed with Select Portfolio’s argument that U.S. Bank held the note because the note "follows" the mortgage, which it said U.S. Bank owned. "By MERS’s own account, the note in this case was transferred among its members, while the mortgage remained in MERS’s name," Grossman wrote.
"MERS admits that the very foundation of its business model as described herein requires that the note and mortgage travel on divergent paths." The judge said that the membership agreement wasn’t enough to assign the mortgage and that to do so the lender would have to give power of attorney or similar authority to MERS.
MERS’s membership rules don’t create "an agency or nominee relationship" and don’t clearly grant MERS authority to take any action with respect to mortgages, including transferring them, Grossman wrote. Because the interests at issue concern "real property" -- land and buildings -- under state law, any transfer has to be in writing, which isn’t done under the MERS system, he said.
"Without more, this court finds that MERS’s ‘nominee’ status and the rights bestowed upon MERS within the mortgage itself, are insufficient to empower MERS to effectuate a valid assignment of mortgage," the judge wrote. "MERS’s position that it can be both the mortgagee and an agent of the mortgagee is absurd, at best."
Grossman said parties coming to him to seek to lift the automatic ban on legal claims in cases involving MERS will have to show they own both the mortgage and the note.
Painful cuts in Obama's $3.7 trillion budget
by Jeanne Sahadi - CNNMoney
President Obama on Monday [unveiled] a $3.7 trillion budget request for 2012 that proposes painful cuts in many government programs but fails to address the largest drivers of the country's long-term debt: Medicare, Medicaid and Social Security. The budget takes a big bite out of domestic spending and would slash deficits by $1.1 trillion over the next decade, according to White House estimates.
Two-thirds of those deficit cuts would result from spending reductions, while a third would come from an increase in tax revenue, according to senior administration officials. The cuts include slashing the funding for the low income heating assistance program. "It's a tough decision and we didn't make it lightly," White House budget director Jacob Lew told CNN's "American Morning" on Monday. "The program was never designed to meet all needs."
But even as it trims deficits, the president's budget would add $7.2 trillion to the debt held by the public between 2012 and 2021. Obama's 2012 budget, which will be released in its entirety at 10:30 a.m., is sure to stoke the debate over how to get the government's fiscal house in order.
On the president's right, Republican lawmakers are calling for even deeper cuts and hankering for a fight now over 2011 spending. At the same time, many Democrats and liberal advocates are expected to lash into the administration for the depth of some of his proposed cuts. Sen. Jeff Sessions of Alabama, the ranking member on the Senate Budget Committee, told "American Morning" the budget cuts are nowhere near deep enough to reduce the deficit or the interest payments on the debt. He said the "$1 trillion reduction is insignificant and does not get us off on the right course. We are facing a fiscal crisis."
Strategic investments - and cutbacks: Broadly speaking, the president's request calls for a mix of spending proposals aimed at boosting U.S. competitiveness and belt-tightening intended as a "down payment" on serious deficit reduction. In some cases, the added investment and belt-tightening happen in the same program. For instance, Obama's budget wants to make permanent the recent increase in the level of Pell Grants to $5,500 a year to help 9 million students afford college and graduate school.
But to pay for that proposal, Obama would eliminate the grants for summer school and limit their use to the regular school year. He will also propose that interest on federal loans for graduate students start accruing during school; currently, the interest tab doesn't start running until after graduation. Overall, Obama will call for a five-year freeze on non-security discretionary spending, which the White House estimates will save more than $400 billion over 10 years.
Non-security domestic spending only makes up a little more than 10% of all federal spending, and deficit hawks lament that both the White House and Republicans have focused all of their attention in this area rather than address the country's big debt drivers, which are spending on the entitlement programs and defense. Half of all agencies will see funding reduced from 2010 levels, according to the administration. And altogether, there will be more than 200 terminations, savings and reductions of programs totaling $33 billion in the first year.
Among his proposals for strategic investments, Obama will call for three green energy initiatives:
- 1 million electric cars on the road by 2015;
- a doubling of the share of electricity that comes from clean energy sources by 2035;
- and a 20% reduction in building energy use by 2020.
To help pay for these initiatives, the president will call on Congress to eliminate 12 tax breaks for oil, gas and coal companies. The White House estimates those changes will raise $46 billion over a decade.
Overall, while president's budget doesn't reduce the debt, it does start to stabilize annual deficits around 3% of the economy by the middle of the decade. That's the point where the country's annual spending doesn't add to the debt. But high deficits will still accrue in the years after 2015 because of the interest owed on debt already accrued. For instance in 2017, the administration estimates there will be a $627 billion deficit -- all of which will be interest payments due.
And because the president's budget will not address how to curb the growth in entitlement spending, there is little chance it would stabilize deficits beyond the next 10 years. A senior administration official described the 2012 budget request as a "firm foundation to take the next step." On Social Security, a lightning-rod program that budget experts say faces serious longer-term problems, the president will use the budget to "lay out his principles" on how to strengthen the program in the future.
What could go wrong: Obama's budget request is essentially a blueprint of his fiscal priorities -- the programs he would like to fund or cut, the new investments he would make and how he would pay for it all. But the request is just that -- a request. And it's one that Congress can accept, reject or modify. Indeed, Republicans may well reject Obama's budget out of hand.
And some of his proposals are likely to be a tough sell politically. For instance, he wants to limit the value of itemized deductions for families making more than $250,000 a year. He has made the same proposal before, and it went nowhere. What's new with this budget is the context. He will call for the money raised by limiting deductions to pay for protecting the middle class from the Alternative Minimum Tax for three years. Lawmakers pass so-called AMT patches regularly but rarely pay for them.
Even if Obama's budget is adopted wholesale -- which it won't be -- the estimates for deficit reduction may or may not pan out depending on how close to reality the administration's forecasts for unemployment, interest rates and economic growth prove to be. In any case, Obama's 2012 budget is only the first step in a convoluted process that involves no less than 40 congressional committees, 24 subcommittees, countless hearings and a number of floor votes in the House and Senate.
If all goes well, a formal federal budget for government agencies will be in place by Oct. 1, the start of the 2012 fiscal year. Because Congress never passed a budget for fiscal year 2011, the government has been running on funding from a so-called continuing resolution, which expires on March 4.
White House Expects Deficit to Spike to $1.65 Trillion
by Damian Paletta and Corey Boles - Wall Street Journal
The White House projected Monday that the federal deficit would spike to $1.65 trillion in the current fiscal year, the largest dollar amount ever, adding pressure on Democrats and Republicans to tackle growing levels of debt.
The projected deficit for 2011 is fueled in part by a tax-cut extension that President Barack Obama and Republican lawmakers brokered in December, two senior administration officials said. It would equal 10.9% of gross domestic product, the largest deficit as a share of the economy since World War II. The new estimate is part of Mr. Obama's proposed budget for fiscal year 2012, which becomes public Monday morning. Mr. Obama is proposing $3.73 trillion in government spending in the next fiscal year, part of a plan that includes budget cuts and tax increases that administration officials believe will sharply bring down the federal deficit over 10 years.
The deficit would decline in fiscal year 2012 to $1.1 trillion, or 7% of gross domestic product, under Mr. Obama's plan, as a year-long payroll tax holiday and an extension of federal jobless benefits expired, administration officials said. By 2017, the budget plan says, the deficit would be shaved to $627 billion, or 3% of gross domestic product. Senior administration officials said the new budget would address concerns about the country's long-term fiscal challenges while spending more money on education and research programs that the administration says are needed to boost economic growth.
But Mr. Obama's plan is likely to be rewritten by Republicans who control the House, as proposed spending cuts in his budget fall short of the reductions congressional Republicans are seeking. Even before turning to Mr. Obama's plan for fiscal year 2012, which begins Oct. 1, lawmakers are battling over levels of government spending for the remainder of fiscal year 2011, which House lawmakers will debate this week. "We're very eager to work with Republicans to cut spending and reduce our deficit," a senior administration official said Sunday night.
At $1.65 trillion, the administration's projection for the 2011 deficit is significantly larger than the $1.48 trillion estimated by the non-partisan Congressional Budget Office a few weeks ago. In fiscal year 2010, the deficit was $1.29 trillion. White House officials believe their budget proposal would shave $1.1 trillion off of accumulated federal deficits over 10 years, which they believe would push levels of federal spending into a healthier balance.
That would be less than the $4 trillion in reductions the White House's deficit-reduction commission proposed in December, but it's still a level administration officials believe is achievable and sustainable. The budget wouldn't do much, though, to arrest a future spike in the projected costs of Medicare, Medicaid, and Social Security. Mr. Obama has said he's open to making changes in these programs, but he wants cooperation from Republicans before he will begin.
The savings in the budget come from a combination of spending cuts and increases in revenue. A five-year freeze on non-defense discretionary spending would save more than $400 billion over 10 years, the administration says. The White House, in its plan for 2012, reduces certain programs to save an additional $33 billion. This includes more than $2 billion in cuts to travel, printing, supplies and other overhead costs. The plan also would cut more than $1 billion in grants to large airports and $950 million to revolving funds for state water treatment plants, among other things.
The proposed budget seeks to prevent many middle-class Americans from being subjected to the Alternative Minimum Tax, which would raise their tax bills, for three years starting in fiscal 2012. To cover the cost, the administration would put new limits on the ability of the wealthiest earners to utilize tax deductions to lower their tax burden, among them deductions for charitable contributions and mortgage interest.
The Alternative Minimum Tax was designed to ensure that wealthier earners do not use deductions to avoid most or all taxes. Lawmakers in both parties want to find a long-term solution that limits its growing reach into middle-class households. But Republicans are unlikely to agree to what, in effect, is a tax increase on wealthier Americans to pay the cost of doing so..
The budget will also propose averting scheduled reductions in payments to doctors who treat Medicare patients for the next two fiscal years, at a cost of $62 billion over 10 years. To cover the cost, savings would be found by making improvements in the health care delivery system that weren't detailed by administration officials. The White House will propose cutting 12 tax breaks to oil, gas and coal companies, which it projected will raise $46 billion in revenue over 10 years.
The budget calls for $148 billion in overall spending on research and development, which includes $32 billion in biomedical research at the National Institutes of Health. It would create 20 new Economic Growth Zones, providing tax incentives meant to attract investors and employers in hard-hit economic areas.
The tax deal agreed to by the president and congressional Republicans in December extended all current tax rates for two years, continued an expanded federal jobless benefits program for a year, and exempted most Americans from having to pay payroll taxes for a year. When it was signed into law, it was estimated the compromise would cost more than $850 billion over the next decade.
Budget Forecasts Bigger 2011 Deficit
by Jonathan Weisman and Naftali Bendavid - Wall Street Journal
President Barack Obama's 2012 budget proposal projects this year's deficit will reach $1.6 trillion, the largest on record, as December's tax-cut deal begins to reduce federal revenues, a senior Democrat said Sunday.
The new forecast is larger than the $1.48 trillion deficit projected last month by the Congressional Budget Office, Congress's nonpartisan scorekeeper, and up from last year's $1.3 trillion shortfall. The tax deal extended tax cuts enacted during the Bush administration while adding others, such as a temporary cut to the payroll tax. The prospect of a record deficit is likely to intensify the debate over federal spending and cost controls, which has gripped Washington in recent weeks. Conservative Republicans, many elected with tea-party support, are demanding deep budget cuts for the current fiscal year, which ends Sept. 30.
For now, Mr. Obama and the Republicans are choosing to clash over a narrow slice of federal spending—the 15% devoted to discretionary programs unrelated to security and defense—while the entitlement programs that are driving projected federal deficits remain unaddressed by either party.
Mr. Obama's budget, to be released Monday, calls for spending cuts and tax hikes that would slice about 14% of the approximately $8 trillion in cumulative federal deficits that would occur over the next 10 years without action being taken. It estimates the deficit will fall to $1.1 trillion next year as the economy picks up and the president's proposed spending freeze begins to have effect.
White House officials described the plan as a "down payment" on future deficit reduction. Both political parties are feeling a push from some lawmakers to address spending on Social Security, Medicare and other entitlement programs, which are becoming the largest drivers of the deficit. But both are fearful of proposing changes to popular programs without assurances that the other party will join in the talks.
White House officials believe the time for dealing with entitlements will come soon, when the administration and congressional Republicans come to loggerheads over spending for the current fiscal year or over raising the government's statutory borrowing limit, said Robert Greenstein, executive director of the liberal Center on Budget and Policy Priorities and a White House adviser. To avoid locking the parties into entrenched positions before closed-door negotiations, the White House didn't want to put out proposals that would take fire from both sides.
House Speaker John Boehner (R., Ohio) recently said he "made a mistake'' in backing a higher retirement age for Social Security, because a "conversation'' with Americans was needed first to explain the retirement system's problems. Social Security, Medicare and other entitlement programs will consume 60% of all federal spending, not counting interest on the debt, next year, or $2 trillion, according to the Congressional Budget Office. By 2021, they will eat up 68% and cost $3.3 trillion.
Mr. Boehner said on Sunday that Mr. Obama's budget leaves spending and debt too far out of balance. "The president's asked us to increase the debt limit, and yet he's going to present a budget tomorrow that continues to destroy jobs by spending too much, borrows too much and taxes too much," Mr. Boehner said on NBC's Meet the Press. White House aides said two-thirds of the proposed $1.1 trillion in cumulative savings over the next 10 years would come from spending cuts, while a third would come from tax increases and tax-break closures.
White House officials say the cuts they propose for next year's budget will be significant. Low-income heating assistance would be cut nearly in half, by $2.5 billion, according to an administration official. Aid to state and local governments through Community Development Block Grants would be cut by $300 million. Other programs and agencies to see significant spending cuts would include the Army Corps of Engineers; agricultural subsidies; an Environmental Protection Agency water treatment fund for state and local governments; and the Forestry Service.
Some programs that Mr. Obama says are needed to improve U.S. education and competitiveness would see increases. Overall, the budget includes a five-year freeze on domestic spending. It couldn't be learned what target the White House had set for federal spending as measured against the economy as a whole. A White House deficit-commission last year proposed cutting spending to 21.6% of GDP by 2015, down from 23.8% in 2010.
Mr. Obama's proposed cuts for 2012 reflect a trajectory for federal spending that is far higher than what House Republicans are pressing for. In a plan released Friday evening, House GOP leaders said they wanted to cut $61 billion in federal spending in the remainder of 2011, including from programs long supported by Democrats.
For instance, the White House's $300 million cut to community development grants for all of next fiscal year is more than matched by the House GOP's proposed $3 billion cut to community development in the current year. Head Start, a health and education program for low-income children, would be cut 15.3% in the GOP plan. Democrats say that would cause 218,000 children to be dropped from the program. Nutritional aid for women, infants and children would be cut by 10.3%.
The Food and Drug Administration would be cut by 8.7% under the House GOP plan, and the Environmental Protection Agency, which is emerging as a focal point of the ideological battle between the two parties, would be cut 30%. The differences between the two visions for federal spending suggest that clashes will soon come on spending for this year and next. The first showdown will come in early March, when a stop-gap spending law that has been funding the government expires. Both parties, however, are playing down the potential for a stalemate that would shut down the government.
A second showdown could come in May, when the federal government hits the statutory limit on borrowing. Before Congress raises the debt limit, Republicans say they will demand stringent cuts in spending. This summer, House and Senate subcommittees will begin drafting spending bills for fiscal 2012. The Senate, led by Democrats, will likely use the White House plan as a blueprint, but the Republican-dominated House will go its own way, setting off still more clashes in the fall, when those plans must be passed by Congress to keep the government functioning.
Mr. Obama's plan to reduce the deficit by $1.1 trillion over 10 years is short of the $4 trillion in reductions the White House's bipartisan deficit-reduction commission proposed in December. It would bring the country's deficit to around 3% of the country's GDP by 2017, an administration official said. That is higher than the 2.3% threshold the deficit-reduction commission proposed. The White House would fail to meet a promise made a year ago to balance the budget outside of interest payments on the federal debt by 2015, which would mean a deficit of 3% of GDP.
Even at the levels forecast, the administration is counting savings that it doesn't detail. For instance, the White House budget would stop a long-deferred drop in Medicare reimbursements to doctors for the next two years, and pay for it with $62 billion in cuts to Medicare, Medicaid and other health programs over the next 10 years. Of that, $18 billion would come from ending mechanisms that state governments use to boost Medicaid reimbursements from the federal government. But beyond fiscal 2013, the budget does not lay out offsetting budget cuts for what is likely to be a continuing need to address doctor reimbursement costs.
The White House will propose preventing the alternative minimum tax from expanding to hit more middle-income households, and paying for the change for three years by limiting tax deductions, two administration officials said. The mortgage-interest deduction would be limited for higher-income families. Deductions for charitable giving would be capped, an idea floated last year that went nowhere.
The budget proposal will recommend ending tax cuts for the highest earners, enacted under former President George W. Bush, when they are set to expire at the end of 2012. However, the White House isn't counting the projected $1.1 trillion in higher taxes it would collect in budget forecasts.
White House Budget director Jacob Lew said the budget would enable nine million college students to take advantage of Pell grants, but to pay for that, the budget would eliminate Pell grants during the summer, limiting them to the academic year. Similarly, the budget will help pay for 100,000 new teachers, especially in the math and sciences. But it would also begin applying interest to graduate students' loans while those students are still in school.
GOP to Block Renewal of Build America Bonds Program
by Andrew Ackerman - Wall Street Journal
Key Republicans signaled they would block renewal of the Build America Bonds program as the Obama administration prepared to reinstate the bonds in the 2012 budget plan due Monday.
Build America Bonds were originally introduced as part of the $787 stimulus program in 2009 but expired at the end of last year. They allowed states and localities to sell taxable bonds and receive a federal subsidy payment from the Internal Revenue Service equal to 35% of the interest costs on their bonds. But Sen. Orrin Hatch (R., Utah), the ranking Republican on the Senate Finance Committee, said late Friday that BABs were "simply a disguised state bailout." "These bonds rightly expired at the end of 2010 and it is my hope the Obama administration does not try to resurrect such a nonsensical provision in their upcoming budget," he said.
The Obama administration will propose reintroducing BABs, according to three people outside the administration who were briefed on the matter. They expected the administration to propose a two-year extension at a 28% subsidy rate for the bonds. Even a 28% subsidy rate wouldn't garner GOP support, according to a Republican Senate aide. The aide said the rate wasn't revenue neutral, meaning it would cost the federal government more in subsidy payments than the government loses in revenue from traditional tax-exempt municipal bonds.
Democrats see these bonds as an effective tool for job creation and funding infrastructure projects. Some were already trying to reinstate them ahead of the budget proposal last week. On Thursday Rep. Gerald Connolly (D., Va.) introduced a bill that would extend the bonds at subsidy rates of 32% in 2011 and 31% in 2012. That bill has been referred to the House Ways and Means Committee, which handles tax legislation, but it is unlikely to advance. Ways and Means Chairman Dave Camp (R., Mich.) said last year Build America Bonds were "a highly subsidized spending program."
The Obama administration proposed making the bond program permanent in its budget proposal last year at a 28% subsidy rate. Though bills to extend the program for two years twice passed the then-Democrat controlled House, they failed to get a vote in the full Senate because of Republican opposition. State and local governments sold a total of $182.5 billion of the bonds before the program expired, according to Thomson Reuters data.
Housing Crash Is Hitting Cities Once Thought to Be Stable
by David Streitfeld - New York Times
Seattle — Few believed the housing market here would ever collapse. Now they wonder if it will ever stop slumping. The rolling real estate crash that ravaged Florida and the Southwest is delivering a new wave of distress to communities once thought to be immune — economically diversified cities where the boom was relatively restrained.
In the last year, home prices in Seattle had a bigger decline than in Las Vegas. Minneapolis dropped more than Miami, and Atlanta fared worse than Phoenix. The bubble markets, where builders, buyers and banks ran wild, began falling first, economists say, so they are close to the end of the cycle and in some cases on their way back up. Nearly everyone else still has another season of pain.
"When I go out and talk to people around town, they say, ‘Wow, I thought we were going to have a 12 percent correction and call it a day,’ " said Stan Humphries, chief economist for the housing site Zillow, which is based in Seattle. "But this thing just keeps on going."
Seattle is down about 31 percent from its mid-2007 peak and, according to Zillow’s calculations, still has as much as 10 percent to fall. Mr. Humphries estimates the rest of the country will drop a further 5 and 7 percent as last year’s tax credits for home buyers continue to wear off. "We went into 2010 feeling gangbusters, thanks to Uncle Sam," Mr. Humphries said. "We ended it feeling penniless, with home values tanking."
The fact that even a fairly prosperous area like Seattle was ensnared in the downturn shows just how much of a national phenomenon the crash has been. The slump began when the low-quality loans that drove the latter stage of the boom began to go bad, but the resulting recession greatly enlarged the crisis. Many people could not get a mortgage, and others simply gave up the hunt. Now, though the overall economy seems to be mending, housing remains stubbornly weak. That presents a vexing problem for the Obama administration, which has introduced several initiatives intended to help homeowners, with mixed success.
CoreLogic, a data firm, said last week that American home prices fell 5.5 percent in 2010, back to the recession low of March 2009. New home sales are scraping along the bottom. Mortgage applications are near a 15-year low, boding ill for the rest of the winter.
It has been a long, painful slide. At the peak, a downturn in real estate in Seattle was nearly unthinkable. In September 2006, after prices started falling in many parts of the country but were still increasing here, The Seattle Times noted that the last time prices in the city dropped on a quarterly basis was during the severe recession of 1982.
Two local economists were quoted all but guaranteeing that Seattle was immune "if history is any indication." A risk index from PMI Mortgage Insurance gave the odds of Seattle prices dropping at a negligible 11 percent. These days, the mood here is chastened when not downright fatalistic. If a recovery depends on a belief in better times, that seems a long way off.
Those who must sell close their eyes and hope for the best. Those who hope to buy see lower prices but often have lighter wallets, removing any sense of urgency.
Arne Klubberud and Melissa Lee-Klubberud paid $358,000 for a new, 960-square-foot townhouse on trendy Capitol Hill a few weeks after that Seattle Times article was published. Now, with one child and with hopes for more, they need more space. They just put the townhouse on the market for $300,000. "Obviously, this is not the ideal situation," said Ms. Lee-Klubberud, a 32-year-old lawyer. They are hoping to take advantage of the sour market to buy at a good price, but first, they must sell for an amount that is acceptable. "Everyone has their limits," she said. "We have ours."
On a dark, dank Sunday, a handful of people came to look at the three-level unit. One of them was Katherine Davis, who had just sold her house in the far eastern suburbs. It took 14 months, during which she had to drop the price several times. The equity she had accumulated over the decades disappeared quickly. "At first, I thought it would be nice to come out of this with $200,000, but I adjusted my expectations," Ms. Davis said. She ended up with less than half of that. Her goal is to buy a small place in the city, but not yet. "Selfishly, I’m hoping the market continues to drop," she said.
Increasing numbers of sellers are simply surrendering. Megan and Ryan Dortch tried to sell their one-bedroom Eastlake condo for $325,000 two years ago. They rejected an offer of $295,000 as inadequate. A year later, they relisted it for $289,000, then $279,000, which was less than they paid. Without a sale at that price, they could not afford to buy a place big enough for them and their new baby.
They have given up on real estate. They are renting out their old apartment at a small loss every month, and living in a rented house. "I don’t expect the market to get better," said Ms. Dortch, 31, a customer service consultant. Neither does Gene Burrus, another frustrated seller who became a landlord. "Rent is so cheap it doesn’t make sense to buy now," he said. He might reconsider if 10 or 15 percent more comes out of the market.
Redfin, a real estate brokerage firm based in Seattle, says foot traffic began picking up in the last several weeks. Mortgage rates are rising, which could nudge those who need to buy to make a deal now for fear rates will rise even more.
But whenever the market finally does pick up, all those accidental landlords will want to unload, putting another burden on the market. "So many sellers are waiting in the shadows," said Redfin’s chief executive, Glenn Kelman. "The inventory is going to expand and expand and expand. I don’t see any basis for significant price increases."
While almost every economist is expecting another round of price declines for the next few months, many see a leveling off in the second half of the year. Fiserv, the company that produces the monthly Case-Shiller Home Price Indexes, analyzed prices in 375 communities. About three-quarters of them will be stable by December, Fiserv calculates.
"We’re at a period near the bottom but with more volatility than we normally see at this point," said David Stiff, Fiserv’s chief economist. "This sort of double dip is unprecedented for housing." Maybe that is why belief in a bottom is as elusive now as fears of a top were in 2006. "We would love to have a house," said Dan Cunningham, a 41-year-old renter. "I have more than enough for a down payment. I’m preapproved for a loan. But I have to have confidence it’s not going to lose another 20 percent." He plans to wait until he sees prices rising before making any offers.
Property taxes = Perpetual Liabilities - An endless note on your house you can never pay off
by Mish - Global Economic Analysis
Imagine the perpetual loan, a loan that no matter what you do, you can never pay off. To help conceptualize the idea, think of it as a perpetual interest-only loan in which you are forbidden to completely pay off principal.
As preposterous as that deal may sound, it is highly likely you are in one.
If you own a house, you are in exactly that deal, except it conveniently not called interest. Instead it's called a property tax.
This is a post I have been meaning to write for years. However, I was finally inspired by a reader "Russell" who writes ...Hello Mish
Here's a heads up from Portland Oregon. The city is proposing a property tax hike of 15 percent for the May ballot. Currently, most of the current city property taxes go towards police and firefighter pensions.
This proposed hike is "for the kids", threatening teacher layoffs. I assume this is the first of many hike attempts that we will be seeing in the near future.
Do we really own our property? I say we don't. We basically have a note that we can never pay off from the government. I will now have to pay around 550 a month for the right to own my house.
Isn't that like a 100,000 dollar note that can never be payed off? Why own property in these cities? Why live here? That is what my wife and I are starting to face. We like our neighborhood and the city in general, but if may be time to leave.
Thanks again for all that you do (that you can put this kind of content out daily blows me away),
Russell
Portland Seeks Two Tax Hikes
Oregon Live reports Portland school board unanimous: A second school tax hike on the May ballotThe Portland school board voted 6-0 tonight to put a second tax hike before voters in May, saying a higher operating tax is needed to save 200 teaching jobs in Portland Public Schools.
If voters say yes, the local-option property tax set aside to bolster Portland schools would rise to $1.99 per $1,000 of assessed property value, a 60 percent increase from the current $1.25 per $1,000 voters approved in 2006.
It is the second tax increase the school board has referred to the May ballot. The first was a record-setting $548 million school construction bond that, if approved, will cost property owners $2 for every $1,000 of assessed property values for the next six years.
School board members said that financial hard times for families make this a tough time to ask property owners to pay more.
But they said cutting more than 400 teachers, rather than about 150 as would be necessary if the levy passes, would be too harmful to students and to the local economy.
"We are talking about protecting family-wage jobs in Portland," board member Bobbie Regan said.
Tell Bobbie Regan to Stuff It
What Portland needs is a competing measure on the ballot to lower taxes.
If you live in Portland, it is your patriotic duty to get Bobbie Regan's phone number, call her up and tell her where to go. The arrogance and gall of these people is amazing.
Not a single teacher need lose their job, not a one. All the union has to do is accept lower wages or benefits. Instead they want to tax you to death, not one but twice so the teachers' union can get wages and benefits that no one else does.
Compute Your "Endless Note" Interest
To compute your perpetual interest, take your property tax and divide by the estimated fair market value on your house.
Property taxes in Illinois are insane. I pay about $14,000 a year ($1167 a month!) on a house worth about $650,000. Thus my property taxes are roughly 2.2% a year. Is this really "owning" a house?
Why Own a House?
As noted above, you can never really own one. Property taxes are a perpetual liability.
However, I made an agreement with my wife, decades ago, that we would get a house as soon as she finished school. She wanted one, I didn't. However, now that I have one, I am happy with it. There are tradeoffs.
My advice to people has not changed. If you want a house and can afford a house, then as long as you really know what you are getting into, and as long as you are quite sure your job is stable then buy a house. (That's quite a lot of IFs)
In 2004-2006 I was more vehemently opposed to buying a house than now.
Twenty years ago you could get nice appreciation, but that is no longer true. Moreover, I suspect that once home prices bottom, prices will stagnate for a decade.
Thus, there is no compelling financial treason to own a house. Indeed, from a financial perspective, there are good reasons to not own a house.
However, there are more important things than money. If having a house makes you or a loved one happy, then as long as you can afford a house, and as long as it does not make you a debt slave, it is reasonable to buy one.
The biggest key right now is making sure your job is stable. If it's not, then buying a house might bankrupt you if you lose your job. Unfortunately, many people vastly overestimate the stability of their job.
U.S. investors fear muni defaults, job losses
by Pedro Nicolaci da Costa - Reuters
Some of the United States' weakest local governments face a real risk of default in 2011 as well as waves of layoffs that could put upward pressure on the country's jobless rate, according to a Reuters poll. The findings from the poll published on Sunday found a majority of Wall Street professionals including municipal bond traders and investors believe -- 14 out of 25 -- up to four multibillion-dollar municipal bond defaults will take place this year.
The tremors come at a time when financial markets are still fragile as the economy recovers from its deepest slump since the Great Depression, and the turbulent finances of states and municipalities have been cited by top Federal Reserve officials as a key downside risk to the expansion. Among the investors polled, 19 of 23 thought job cuts aimed at bringing budgets into line would put noticeable upward pressure on the national unemployment rate, which over the past two months has fallen sharply to 9.0 percent from 9.8 percent.
Ten of those surveyed saw the jobless rate increasing more than 0.5 percentage point and three believed the impact would be over a full percentage point -- a rise that could potentially be associated with hundreds of thousands of job losses. "If the states fire the employees necessary to cut their budgets, unemployment will get worse," said Marilyn Cohen, president of Envision Capital Management in Los Angeles.
While few municipal market analysts think any state will default on its debt -- in part because states cannot legally file for bankruptcy -- there are intense concerns about the shaky finances at some big U.S. cities. Last March, for example, Detroit laid out bankruptcy risks in a debt offering statement. The city, which is rated in the junk category by Standard & Poor's and Moody's Investors Service -- and has not sold general obligation debt since -- said in the bond document it did not envision a bankruptcy filing.
"A credit like Detroit with limited liquidity and sizable debt could file bankruptcy in 2011, but only if politics goes against it and the state allows the filing to take place," said Richard Ciccarone, head of municipal bond research at McDonnell Investment Management in Oakbrook, Illinois.
In The Clear?
But the state governments are not completely out of the woods. Among the debt-ridden states topping the list of concerns, Illinois and California were seen by far as the weakest links, followed by Nevada, at the epicenter of the subprime mortgage crisis. Thirteen out of 27 respondents to the Reuters poll ranked Illinois as the most troubled U.S. state.
"While the recent Illinois state income tax hike proves Illinois' legislature has the will to take fiscally-conservative action, the state is facing debatable long-term economic prospects, a high debt load and an even higher unfunded pension problem," said Guy LeBas, chief fixed-income strategist at Philadelphia-based Janney Montgomery Scott, an investment fund with $52 billion under management.
Illinois' unfunded pension liability is the biggest among the states at $75.5 billion as of the end of fiscal 2010, while its funded ratio was just 45.4 percent. The cash-strapped state is turning to a debt sale for the second year in a row to raise money just to make its pension payment.
California -- the biggest issuer of bonds in the $2.8 trillion U.S. municipal debt market -- is also facing tough times. Its economy was hit hard by the combined effects of the recession, housing market downturn and financial market turmoil, leaving it with an unemployment rate above 12 percent and slashing at the state government's revenue. The most populous U.S. state's government faces a budget gap of more than $25 billion through mid-2012, which newly elected Governor Jerry Brown has proposed tackling with deep spending cuts and revenue from extensions of temporary tax increases that will create a drag on growth.
Despite the likely absence of any financial failures at the state level, many investors foresee small blow-ups that, taken together, could hamper an already fragile U.S. recovery marked by very slow growth in employment. "No states should default, and most if not all of the local government defaults will occur amongst smaller, less liquid entities," said Peter Cardillo of Avalon Partners.
Investors in the Reuters poll were also asked to rank the various risks facing the usually tame muni bond market. They cited the rising costs of healthcare and borrowing costs as well as "headline risk" as the biggest looming threats. Medicaid costs can take up to a third of a state's budget, a proportion that swells during economic downturns.
Headline risk likely refers to Wall Street banking analyst Meredith Whitney's recent forecast of an impending wave of credit defaults by struggling local governments. Her prediction has stirred up anxiety among retail investors, playing a role in the nearly $25 billion pulled from municipal bond funds in the past three months.
Wisconsin Governor Says National Guard Could Respond to Unrest, as State Employees Learn of his Budget Proposal
by Ann-Elise Henzl - WUWM
Gov. Scott Walker says he is confident state workers will continue to show up for work and do their jobs, despite their potential disappointment in his emergency budget proposal. However, if there is worker unrest, Walker says the Wisconsin National Guard is prepared to respond.
The governor revealed Friday that he wants the state Legislature to go into Special Session next week to take up his plan to close a budget deficit. His plan calls for workers to lose nearly all their collective bargaining rights. State employees also would be required to pay more for pension and health care benefits.
Walker first shared his plan with fellow Republican lawmakers in a closed-door meeting Thursday. He’s talking more about his proposal Friday. The governor says he’s briefed the National Guard and other state agencies, to prepare them for any problems with workers, as they learn of Walker’s emergency budget plan.
Illinois Governor Quinn wants to borrow $8.75 billion to pay down bills
by Monique Garcia - Chicago Tribune
State's income tax increase hasn't solved money woes. Gov. Pat Quinn says money isn't coming in fast enough to repay billions owed to schools, other providers.
Taxpayers might have expected that state government was back on solid financial footing after lawmakers approved a major income tax increase that's already being docked from their paychecks. But Gov. Pat Quinn says Illinois' books were so neglected for so long that the money isn't coming in fast enough to repay billions owed to schools, doctors, mental health centers and other providers. So during his budget speech Wednesday, Quinn is expected to push a plan to borrow $8.75 billion to help alleviate the pressure.
The idea is to use the cash infusion to whittle down the bill backlog from a mountain to a molehill and rush payments to the 36,000 vendors owed an estimated $7 billion. The loan would be paid back over 14 years using money generated by a portion of the income tax hike. "We have to do this," Quinn said. "The state should pay what it owes small businesses and schools and many other employers across Illinois. It will keep men and women working and add to the employment ranks."
Some providers have been waiting as long as six months to be repaid by the state, continuing a cycle that has led some to lay off workers, cut services and stretch their credit to stay open. Quinn has tried to channel their frustrations into a lobbying campaign, asking those owed money to contact lawmakers to support the borrowing plan. Quinn's budget office has acknowledged that the borrowing still isn't enough to cover everything the state owes. "We actually wanted it to be a bigger number because our needs and our pressures are greater," Malcolm Weems, chief of staff in Quinn's budget office, told a Senate committee last week.
It's a cash-flow problem. Weems said the state doesn't just owe money to those who have contracts to provide services, but must also pay for state employee health insurance costs, send tax returns to corporations and give municipalities across the state a cut of tax revenues. A Quinn budget spokeswoman said those costs could top $4 billion. Quinn first pushed for the borrowing plan along with an income tax increase after the election, but the idea failed to gain traction with legislators weary of signing off on such a large loan after voting for a tax hike.
Prospects aren't much better now that a new crop of lawmakers have been sworn in. State law requires that three-fifths of lawmakers vote in favor of borrowing proposals, which means that some Republican support is a must. Republican leaders, however, say the state must first implement more spending reforms before saddling itself with high interest payments.
"The proposals that have been brought forth have to make fiscal sense for the taxpayers, and the proposal we have learned of so far doesn't meet that test," said Patty Schuh, spokeswoman for Senate Republican leader Christine Radogno of Lemont. Schuh said the borrowing deal will cost roughly $5 billion in interest over 14 years.
Other lawmakers say the state shouldn't borrow to pay off bills, but use revenue coming from the tax increase to pay down debt over time. Quinn argues that borrowing now will save Illinois money in the long run because interest rates will be lower than what the state must legally pay providers for falling so far behind.
Last year, Illinois paid $62 million in late payment penalties, according to a spokesman for Illinois Comptroller Judy Baar Topinka. House budget expert Rep. Frank Mautino, D-Spring Valley, said borrowing would allow the state to effectively wipe out its bill backlog within months. Without borrowing, Mautino said, the backlog would take nearly a decade to pay off, and schools and service providers would continue to suffer.
"There's not one senator or representative who doesn't have a school in his or her district that isn't owed hundreds of thousands of dollars, and the money we didn't pay them has a direct correlation to the teachers that they've laid off," Mautino said. "Because of our failure to do anything, many bad things have happened."
Detroit Schools Manager Sees Crisis Deepen
by Matthew Dolan - Wall Street Journal
Two years after his appointment as emergency financial manager for the Detroit Public Schools, Robert Bobb has outsourced many services, unearthed corruption and closed a number of schools. Yet the district's mammoth deficit has continued to grow during amid the state's downturn and growing pension and debt obligations, and the city's schools are still grappling with longstanding problems, including political battles involving the state, school board and teachers' unions and a long-term exodus by students.
With weeks left in his term, Mr. Bobb has put forth some radical ideas to overhaul the system. One would split the district into two entities to help retire its debt, along the lines of the government-engineered bankruptcy of General Motors. Another would use money from a national tobacco settlement to inject $400 million into the Detroit schools and some 40 other deficit-ridden Michigan districts. A third is modeled on post-Katrina New Orleans, where a shrunken district was remade with mostly charter schools.
All would need approval by the state legislature and governor, and none appears to have much traction now. Only one has even been circulated in writing. The tobacco-settlement idea has been debated in public, but state lawmakers didn't take it up last fall, and no bill has emerged in the new legislative session. But Mr. Bobb warns that without action, the current deficit could force Detroit Public Schools to close 100 more schools —the district now has 134—and cram an average of 62 students into each high-school classroom. In an interview, he said some in the state may hold a bias against their financially troubled biggest city."I've heard on more than one occasion, that when something this important is Detroit-specific, it's very difficult to get people for good, sufficient reason focused on Detroit," he said. Mr. Bobb arrived in Detroit just two years ago, appointed by former Gov. Jennifer Granholm to take over an urban district that the U.S. secretary of Education had called one of the nation's worst, after his predecessor was fired and the state declared a financial emergency in the system. He had previously served as president of the board of education in Washington, D.C.
Detroit had seen its test scores plummet, along with its population, trends that continue. The district today enrolls 84,875 students, down more than half from a decade ago. A national reading test last May showed that Detroit was the worst-performing larger, inner-city district in the country. Mr. Bobb claimed a mandate to overhaul both finances and academics. He launched campaigns to stabilize enrollment—which determines state funding—in hopes of slowing the exodus to suburbs and charter schools. He also conducted hundreds of audits, laid off teachers, privatized services such as busing and custodial work and closed 59 schools.
In his interview with the Journal, he said that without his budget cuts, the district's annual deficit—now at $327 million, up from $218 million in 2009—would have grown to more than $500 million. The schools have a $1.025 billion annual budget. He also said the district has made new strides, including a new teacher contract that allows 40% of a teacher's evaluation based on student performance, an extended school day and a new requirement for 120 minutes in daily reading and math instruction which double for high schools students. Mr. Bobb also has expanded advanced placement class offerings and expanded college entrance test prep courses, while pitching a message of focusing on students and classrooms.
"We have to ask ourselves, what is our core mission?" Mr. Bobb said late last month, flanked by contractors slated to take over the district's custodial work and save the district an estimated $75 million over five years. "We need clean and well-kept facilities. However, our core mission is educating students." But Mr. Bobb has encountered strong opposition from some entrenched corners. He is in a testy court battle with the system's board of education—whose financial powers he was given in 2009—over who will run the district next. "The complete victory is getting rid of Mr. Bobb and getting the money from Lansing" to run the Detroit schools, the board's attorney, George Washington, said during a January public meeting.
The board earlier sued to challenge his authority over the curriculum and won. A lawyer from the state representing Mr. Bobb said in a statement Saturday he planned to appeal, saying the decision inappropriately prevents Mr. Bobb from hiring staff and selecting teachers. He has also drawn fire from teachers' unions with his push to outsource more functions and seek more teacher accountability, taking heckling for everything from his accounting to his salary. In their 2009 contract, teachers gave concessions on pay and benefits worth tens of millions of dollar. But Mr. Bobb said extended contract talks reduced the potential savings.
Additionally, Mr. Bobb reversed himself on some cuts after complaints, bringing back some staff he had sought to cut—counselors, bus attendants and pianists for music lessons. Parents sued to get the bus attendants back. And a miscalculated enrollment forecast cost the district $20 million. Mr. Bobb said he has learned from the experiences. A self-described "bean counter" with no teaching background, he said that when "you're making those hard decisions, you have to listen to the other voices that tell you about what impact those decisions are having on children."
The immediate question is whether the financial ship can be turned. The most pressing concern is a need for the state to guarantee the district won't fall into bankruptcy, Mr. Bobb told a state legislative committee panel last week. If the state can't do that, he said, the district's insurer will double the district's short-term borrowing costs to almost $40 million a year to meet payroll expenses by April 1.
So far, the state, facing a $1.8 billion deficit of its own, is standing on the sidelines. Gov. Rick Snyder, elected last fall, has asked Mr. Bobb, whose contract expires Feb. 28, to stay on until June, and while Mr. Bobb separately has said he would like to stay, a formal agreement hasn't yet been struck. The governor also hasn't said how, or whether, he would seek more state money for the Detroit district.
Long-term, Mr, Bobb said, the future of the Detroit schools depends on an academic overhaul. He urges that any infusion of new money be used to usher in changes that would eliminate seniority rights for teachers and tie compensation to classroom performance. "We should know how all of us are performing, and those things should be made public," Mr. Bobb said.
Pennsylvania Governor Corbett Promises Drastic Budget Cuts
by Scott Bomboy - MyFoxPhilly.com
Pennsylvania Gov. Tom Corbett has vowed again to cut the commonwealth's huge budget gap and not raise taxes. Here is a look at where some of the sharpest cuts will come - and how it may cost you money. Corbett told Republican State Committee activists this weekend balancing the budget without a tax increase will require "drastic" measures and breaking that promise would sweep the GOP out of office.
Corbett will announce the budget cuts and other measures on March 8 in an address to the state legislature. The state faces a budget gap that ranges between $4 billion and $5.5. billion, by some estimates. Here is a look at where the cuts may come from:
How The Budget Gap Happened
In September 2009, state Auditor General Jack Wagner said revised figures showed that there was a potential $5 billion budget gap in Pennsylvania. Wagner said the gap was created by a $2.5 billion loss in federal stimulus funds, $3 billion in unemployment payments now owed to the federal government, and an increase of at least $800 million for rising pension costs. He also pointed that state spending increased 33 percent, or about twice the inflation rate, during Gov. Ed Rendell's time in office
In his February 2010 budget statement, Rendell said he cut the cost of state government by $1.7 billion over eight years, but that 80 percent of budget costs are dictated by legally mandated spending. Rendell also said, one year ago, the potential budget deficit into two years' time was $5.6 billion, because of the impact of a 2001 pension increase legislation. He expected a $2.6 billion gap in the upcoming budget year. In June 2010, Budget Secretary Mary Soderberg told state legislative leaders the budget deficit had grown to $3 billlion, not $2.6 billion.
Privatizing Public Services
A widely publicized plan to sell Pennsylvania's liquor stores may not be part of Corbett's initial plan. Some estimates say Pennsylvania could get $2 billion for the state stores at auction. Others downplay that number. Corbett is committed to the concept, but has said he wants more information, and some of the studies are a decade old. One system Corbett said he will never privatize in the Pennsylvania prison system.
Also off the table is a tax or fee on proceeds from the Marcellus Shale natural gas extraction, which could be a big economic boom for the state. Another measure that has been debated for years is privatizing the Pennsylvania Turnpike. Former Gov. Ed Rendell failed in his efforts to lease the turnpike out. Other state-owned properties such as state parks and museums could also see some level of privatization.
Education Funding Cuts
The state will spend less on local school districts. This would have a direct effect on local taxpayers, who will need to fund the difference if school districts keep current staffing and pension levels. Since Harrisburg actually runs Philadelphia's school district, officials in Philadelphia are bracing for the worst, and getting ready to cut services to students and parents. The local education battle will get nasty, since an estimated 75 percent of budget costs for all local school districts in Pennsylvania come from staff salary and benefits.
The state spends $5.2 billion a year on local education and about $10 billion on all education programs, including colleges. The state will lose $1 billion in 2012 for local education as federal stimulus money goes away. And that is before the state starts cutting other program funding. So local schools districts will need to make up for at least a 20 percent cut in their state funding, increasing the likelihood of big, local school-tax hikes.
One measure under way in Harrisburg has already started a fight, as GOP lawmakers want to allow school districts to furlough teachers in an effort to save money. Currently, school districts can only furlough teachers if there is a substantial decline in student enrollment and they must do so by eliminating a school program.
Social Programs
The state will also likely cut back its funding of unemployment compensation and health-insurance programs. Two options available to Corbett will be to increase payroll deductions for unemployment and reduce the number of payments to collectors. Pennsylvania's current state-subsidized adultBasic health insurance plan ends in March and a new plan will probably cost more to participants. Another program that will end is a system of state grants known as WAMs (or Walking Around Money) that was used by Rendell and others. Cutting WAMs will save taxpayers around $100 million.
Battle shaping up over Florida pension proposal
by David Smiley, Kathleen McGrory, Carli Teproff and Julie Brown - Miami Herald
Gov. Rick Scott has picked a fight with more than a half million employees with his proposal to make them fund their own pensions.
Hal Krantz says it has been years since he brought home a pay raise. After 16 years of teaching, the married Coral Springs Middle School instructor with a daughter in college is struggling to stretch his salary while meeting the soaring costs of healthcare, food and other necessities. Gov. Rick Scott's plan to compel public employees like Krantz to kick in as much as 5 percent of their paychecks into their pensions is causing quite a bit of angst.
This is particularly true of teachers, who traditionally earn modest salaries offset by a broad benefits package, but also state workers, many of whom have not received pay raises in years. The proposal is included in the budget that Scott will unveil Monday at a rally of tea party supporters in the Lake County community of Eustis. Employees say the pension measure is the equivalent of a pay cut. "We give up so much because we love this profession,'' said Krantz. `Now they are cutting even deeper into our pocket.''
Around the nation, governments are reeling from the poor economy and falling tax revenues. Supporters of Scott's plan, which would affect not just state workers but school employees and many municipal workers in the state retirement system, say it's imperative to change gears to keep the state and the pension fund solvent. They note that for many in the private sector, salaries have fallen, jobs have grown scarce and traditional pensions have long since been replaced by 401(k) accounts that require workers to sock away money for their own retirement.
They point out that other states have already taken the step Scott is proposing. New York, for instance, requires employees to kick in 3 percent of their salary toward funding their pension for a period of 10 years. Scott estimates it will save the state, which is facing a multibillion-dollar shortfall heading into the legislative session, $2.8 billion over two years. "It's only fair that if you're going to have a pension plan, you're going to do just like the private sector does,'' Scott said.
Florida's pension system is currently funded by state and local governments contributing the equivalent of between 9 and 10 percent of an employee's income toward retirement. In the case of high-risk workers like police and firefighters, the percentage is higher. Scott has talked of a 5 percent buy-in by employees -- basically splitting the difference with the state.
How generous is a state pension? For most employees, after 30 years on the job, the annual stipend is equal to 48 percent of the average of that employee's highest five years of pay, according to the pension fund web site. The average recipient retires around age 60, at which point he or she can begin to collect. There are currently 655,000 active members of the Florida Retirement System and another 304,000 retired workers receiving benefits. Up until now, those enrolled have not had to contribute any money to their plan.
"It's a pretty radical thing when you start talking about taxing state workers 5 percent of their salary in one year, when the majority of state workers haven't seen raises in five years,'' said Daniel Reynolds, national president of the National Federation of Public and Private Employees. "While we are all reading and hearing about pension reform proposals with great interest, we don't know what is going to happen,'' BSO spokesman Jim Leljedal wrote in an e-mail. BSO employees are in the state system, as are Miami-Dade police.
"Everybody is on edge right now,'' said John Rivera, president of the Miami-Dade Police Benevolent Association. Rivera predicted Scott's plan, as well as the possibility that new hires could be forced to buy into a system resembling a 401(k), would make staffing the Miami-Dade Police Department problematic. "They're going to make an already impossible job that much more unattractive,'' he said.
Some civil servants feel as though Scott's proposal vilifies them. "This whole issue gets to be a cruel myth blaming state employees for the budget deficit,'' said Paul Hunt, a former Coral Gables social worker who retired in November after 17 years. "These are people who have worked honestly in the community, giving good service, and often taking lower wages now so they could retire with a sense of security.''
Broward Superintendent Jim Notter said the cuts would not only affect the district's 15,500 teachers but cause more hardship for its lowest-paid employees, like bus drivers. "I believe in a time of economic crisis, it borders on insanity to further take money out of good employees' pockets,'' he said.
In Miami-Dade County, a first-year teacher earns $38,500; a 22-year veteran earns $68,225. For that starting teacher, the 5 percent contribution would be about $163 a month. Unions have already vowed to fight the proposal, said United Teachers of Dade President Karen Aronowitz. "What Rick Scott is really saying is let them eat cat food.''
New York's Ever-Malleable Budget
by Jacob Gershman - Wall Street Journal
Amid all of the wrestling over painful spending cuts, at times trimming millions of dollars out of the state budget is as easy as a phone call. Take, for instance, Gov. Andrew Cuomo's idea for a new Department of Financial Regulation, the largest piece of his high-profile effort to consolidate government.
In his State of the State speech, Mr. Cuomo spoke of his plan to merge the Insurance Department, Banking Department and Consumer Protection Board into a single, better-managed and less-costly regulatory agency. "We can have a win win," Mr. Cuomo said. "We can consolidate them into a Department of Financial Regulation that better protects the consumer and the consolidation will save the taxpayer money by reducing the cost of three separate organizations."
So it struck Albany observers as a little puzzling that under Mr. Cuomo's actual spending plan, the Department of Financial Regulation didn't appear to be cheaper—at least not in the first year. In fact, it's several million dollars higher than last year's operating budgets for insurance, banking and consumer protection. In other words, D was more than A+B+C. Budget officials explained that the increase had to do with the short-term, up-front costs of merging the agencies. Still, that didn't square with the governor's win-win-strategy, which includes giving taxpayers a break.
On Thursday, a Wall Street Journal reporter called up the Cuomo administration about the budget numbers for the new agency. After a few conversations, the answer wasn't immediately clear. Cuomo officials then on Friday told the Journal they were "rescoring" the numbers and would reduce the appropriation for the financial regulation department by $8 million in their 21-day amendments to the executive budget. The agency would now cost about $2 million less than its individual parts. This time around, D is less than A+B+C, as Mr. Cuomo promised.
It's not clear how the budget office mustered the savings on a second try. A spokesman for Mr. Cuomo said the administration's adjustment had already been in the works. But Mr. Cuomo's fiscal fine-tuning points to an enduring feature about state finances: Budget numbers are malleable. Funds are swept, sub-allocated, transferred, re-estimated and reclassified. State and federal dollars are tangled into knots. All of this makes it hard to sort out spending patterns and the fiscal effects of policy decisions until they've vanished from the rear-view mirror.
The governor proposed a total spending reduction of 2.7%. But the cut is really 1.3% when you adjust for a delayed school-aid payment last year. (The budget office didn't factor that adjustment as it had repeatedly done before.) And when you leave out federal aid, including stimulus dollars, spending would actually grow by more than 4%. Medicaid is another example. Then-Gov. David Paterson last year submitted a budget that called for $51.5 billion in total Medicaid spending, a 1.8% increase, including federal dollars. The budget approved last summer projected Medicaid spending to be $52.6 billion.
Flash forward to this year, and we see from Mr. Cuomo's executive budget that Medicaid spending is now estimated at $53.8 billion, or $2.3 billion more than what Mr. Paterson had originally proposed. For the next fiscal year, Mr. Cuomo is proposing a Medicaid budget of $52.8 billion. To hit that target, he aims to slow growth by finding about $3 billion in new savings. But we won't really know whether Mr. Cuomo met that goal until a year or more from now, when the numbers settle into place.
For those keeping score of this administration, you'll have to sit back and be patient.
Planning a Better Way Than Fannie and Freddie
by Gretchen Morgenson - New York Times
Kudos to Treasury and the Department of Housing and Urban Development for some straight talk about the nation’s broken mortgage system.
A report to Congress from those departments, published on Friday, provided some long-awaited analysis by the Obama administration about what went wrong in housing finance — and how to fix it.
The report, entitled "Reforming America’s Housing Finance Market," zeros in on the perverse incentives created by the nation’s mortgage complex during the years leading up to the panic of 2008. The Treasury’s recommendation that we wind down Fannie Mae and Freddie Mac and let the private mortgage market step in is spot on.
Still, it is not clear that such moves, sensible though they are, will be enough to prevent taxpayers from having to bail out institutions that back mortgages in the future. That is because the debate over how to put the Treasury’s ideas into effect will soon become a brawl. Powerful participants are already working overtime to keep taxpayers on the hook. The financial services industry, after all, has grown accustomed to having taxpayers ride to the rescue when it gets into trouble. Why would the big banks want to change that wonderful (for them) dynamic?
Some mighty and diverse groups are lining up against significant reductions in the government’s role as backstop to the mortgage industry. These include the Mortgage Bankers Association, the Financial Services Roundtable and the Center for American Progress. All three have put out recommendations revolving around the notion of creating Fannie- and Freddie-like entities to guarantee mortgages. Never mind that we have seen this movie before, and that it ended badly.
The Mortgage Bankers Association, for example, recommends the creation of "mortgage-credit guarantor entities" with federal charters and overseen by a federal regulator. These private entities would guarantee loans pooled into mortgage-backed securities, just as Fannie and Freddie did. At least one of these institutions could be owned by mortgage originators in a cooperative set-up, the mortgage bankers say.
In a report issued last month, the Center for American Progress echoes this plan, calling for the creation of mortgage institutions with federal regulators and charters to guarantee mortgage-backed securities. But because, under both plans, mortgage lenders could own some of these institutions, the entities could become new, too-big-to-fail constructs. What would stop the banks from assigning high-risk mortgages that they originated to these guarantors, once again leaving taxpayers to pay the freight if the loans go bad?
Sure, these entities would be overseen by a "strong regulator," as the Mortgage Bankers Association asserts. But if the credit crisis demonstrated anything, it was how easily regulators can be co-opted by the enterprises they are supposed to oversee. And if the mission of these "new" guarantors includes affordable-housing goals, you can be sure that regulators will again be persuaded to let them take more risks in the name of meeting homeownership benchmarks.
Happily, the Treasury report helps identify these possibilities when it describes how the taxpayers came to own Fannie and Freddie, at a current cost of about $150 billion. For example, the report states that the "profit-maximizing structure" at Fannie Mae and Freddie Mac undermined the companies’ public mission, while their perceived government backing conferred unfair advantages. It is hard to see why the new entities recommended by the financial industry, especially when they are owned by banks, would not have these dangerous characteristics as well.
Lest we forget, Fannie Mae and Freddie Mac were simply supposed to support liquidity in the mortgage market, according to their charters. They did not require the companies to actually add cash to a world already awash in home-loan money. But because executives at both companies wanted the lush profitability that such financings provided, Fannie and Freddie wound up pouring more liquidity into a system that did not need it.
That is the lesson of the financial crisis, at least where Freddie and Fannie are involved. Taxpayers surely do not want to create new government-sponsored enterprises that may later fail. So why not work toward a system where the government is solely the home lender of last resort? That way, the private market could operate in good times; the government would step in only if the market froze up.
Friday’s report seems to be leading in this direction. But it supplies no road map to a government system that provides a catastrophic insurance program only for those times when the private market is not working.
Such a program could insure privately underwritten mortgage securities at a cost based on in-depth analyses of loans in these pools. Using actual loan files, program administrators could estimate both current and historical losses of mortgages in the pools and base the cost of the insurance on the securities’ true risks. Insurance fees should not, repeat not, be based on credit ratings.
To be sure, any honest discussion of a new deal in mortgage finance will probably conclude that home loans would become more expensive. But if people put down more money when they bought homes, the risks associated with their mortgages would, in theory, be lower. As a result, their mortgage costs would decline, reflecting those lower risks.
And while we are talking honestly about mortgage finance, we should recognize the dire consequences of our nation’s tax policy, which encourages consumers to amass huge levels of debt when buying a home. Why not reward borrowers who have more equity in their homes instead? One way to do this would be to provide tax credits to borrowers based on the amount of their down payments. Such a system could be graduated so lower- and middle-income borrowers benefited most, while upper-income borrowers received far less or nothing at all.
There is much to hash out if we are to build an effective housing finance system in America. Being truthful about what went wrong in the past, the report paves the way for a meaningful discussion. But we must also be sure that the solutions do not bring us back to where we began. That is where the real fight will be fought.
3 Fannie & Freddie Restructuring Options, None of them Right; Cheering the Demise of 30-Year Mortgages
by Mish - Global Economic Analysis
Obama wants to reform Fannie and Freddie. There are a few options on the table, but Little Red Riding Hood does not think the porridge in any of the bowls is quite right.
Please consider White House wants less government in mortgage systemThe Obama administration wants to shrink the government's role in the mortgage system -- a proposal that would remake decades of federal policy aimed at getting Americans to buy homes and would probably make home loans more expensive across the board.
The Treasury Department rolled out a plan Friday to slowly dissolve Fannie Mae and Freddie Mac, the government-sponsored programs that bought up mortgages to encourage more lending and required bailouts during the 2008 financial crisis.
The first option proposed by the administration would give the government no role beyond helping poorer and middle-class borrowers through agencies like the Federal Housing Administration, which provides insurance on mortgage loans.
The second and third options would give the government a role as an insurer of mortgages, and each would prompt mortgage companies to pass along fees to borrowers.
Under one, the government would step in to guarantee private mortgages during a severe economic downturn, such as another housing slump, but would provide limited support during normal times.
The third option would be more complex. The government would insure a targeted range of mortgage investments that already are guaranteed by private insurers -- serving as a "reinsurance" broker to those financing companies. In the event the private insurers couldn't pay the owners of the mortgage investments, the government insurance would pay.
The third option would leave the government with the largest role and probably have the smallest impact on mortgage rates. While lenders would have to pay fees, which would ordinarily drive rates higher, the government guarantees would also make mortgages a safer investment. That would attract more private money and hold rates down.
The correct option is to get rid of Fannie, Freddie, the FHA and HUD. The government should not provide any backstop or any guarantees at any time. Unfortunately that option was not on the table.
Some are concerned that private lending may dry up. If it did, so what? The government has no business promoting housing or taking on risks best suited for private markets.
Here's the deal: If lenders knew there was no government guarantees, they would not make as many stupid loans. If they don't make stupid loans, there is far less risk that lending freezes up in the first place.
Moreover, if somehow the lenders do go broke as a consequence of making poor loans, bondholders and shareholders will pay the price, not taxpayers. Pray tell, what is wrong with that?
Cheering the Demise of 30-Year Mortgages
In a free market, we may very well not see many 30-year loans issued. Why would any lending institute want to lend for 30 years at an interest rate of 5% anyway?
We might even see new products like 8-year, 10-year, or 12-year loans. Such loans would help ensure equity paybacks quickly, reducing risk for everyone on both sides of the transaction. If that forces people to buy a smaller house, so be it.
A home should be an affordable place to live, not a debt-trap or method of leveraged financial speculation for 30 years.
Borrowing short and lending long for 30-years (while attempting to hedge in between) is a recipe for disaster. Fannie and Freddie have already gotten into serious trouble over it. If that practice stops, we will all be the better for it. Thus, we should all cheer the demise of 30-year loans.
If we would just get government totally out of the way, housing will recover a lot quicker, with home prices far more stable, than with government guarantees or half-assed measures. It's time we remove the government crutch completely.
Chinese Express Wary Faith in Fannie, Freddie Debt
by Aaron Back - Wall Street Journal
China's government, one of the biggest holders of debt from Fannie Mae and Freddie Mac, voiced confidence that Washington would continue to stand behind the obligations of the U.S. mortgage giants after the Obama administration outlined options for phasing them out.
The statement by the State Administration of Foreign Exchange, or SAFE, the arm of China's central bank that manages foreign-exchange reserves, reflects Beijing's continued concern about perceptions within China of the safety of its U.S. investments. Most of China's $2.85 trillion in reserves is invested in dollar assets, and while China doesn't disclose the size of its holdings of Fannie and Freddie securities, past records show it owning hundreds of billions of dollars of debt from them and other U.S. government-linked agencies.
Chinese officials have raised concerns about the possible impact of U.S. policy on the future value of China's dollar holdings, saying loose monetary policy could hurt the value of U.S. assets. But the government has also rejected rumors that it has lost money on its existing holdings of Fannie and Freddie debt.
The Obama administration on Friday issued a white paper on plans to reduce U.S. government involvement in the mortgage market, including an eventual phaseout of Fannie and Freddie, which the government took over in 2008. But the White House's report emphasized that it "will not waver from its commitment" to ensuring that the two "have sufficient capital to honor any guarantees issued now or in the future and meet any of their debt obligations."
SAFE's statement, posted on its website Saturday, said the White House plan "has aroused widespread public interest and concern that our foreign-exchange reserve investments could be damaged." The statement said China has not had losses on its Fannie and Freddie holdings, and added that SAFE "took particular notice that the U.S. government's commitment to support [Fannie and Freddie] hasn't changed."
China. U.S Treasury data show that as of June 2009 China held $454 billion of long-term U.S. agency debt, the bulk believed to be Fannie and Freddie debt. More recent figures on its holdings haven't been published. But separate Treasury data show China has been steadily selling its holdings of agency securities since mid-2008, including net reductions of $24.67 billion in 2009 and $27.35 billion in the first 11 months of 2010. Those figures don't include transactions through intermediaries in other countries, however.
Public concern in China about possible losses on its U.S. investments has flared up repeatedly in China since the start of the global financial crisis. Many Chinese seem to believe that during the crisis the country lost vast sums on its U.S. holdings.
Last week, Lu Zhengwei, a senior economist at Industrial Bank Co., a small Chinese lender, said in a report that the commitment by the Obama administration to pay back holders of Fannie and Freddie securities amounts to an "empty check" without the support of the U.S. Congress. "Looking at the current political situation in the U.S., for the U.S. Congress to give a clear guarantee on this issue is almost impossible," Mr. Lu said.
The same day, a separate report in the Chinese newspaper International Finance News cited unnamed analysts as saying that losses on China's Fannie and Freddie holdings could reach $450 billion. The report provided few details on its calculations. SAFE responded with a statement on Friday denouncing such estimates as "groundless," and strongly denying that it faces any losses. The denial was given prominent treatment by state media Friday evening, including during the widely watched evening news broadcast on state television.
Last year, outlandish rumors spread that the central-bank governor, Zhou Xiaochuan, had defected to the U.S. because of hundreds of billions of dollars in purported losses on U.S. debt—even though U.S. Treasurys were in fact one of the best-performing assets at the time. In late 2008, a lengthy Chinese-language essay circulated online excoriating Mr. Zhou and other top officials for being too close to the U.S., accusing them of having "colluded" with then Treasury Secretary Henry Paulson to buy U.S. bonds.
Richard Russell: Hyperinflation? What Hyperinflation?
by Cullen Roche - Pragmatic Capitalism
Few investors have been more vocal about the potential collapse of the US Dollar than Richard Russell. But as the recovery builds strength Russell has dramatically toned down his commentary about any potential hyperinflation and collapse of the USD. In his Friday commentary he said the market action simply isn’t even remotely displaying a hyperinflationary environment or even an eventual hyperinflationary environment. And he’s dead right (via Dow Theory Letters):Comment — I read a lot about “the coming hyper-inflation.” If hyper-inflation is in our future, I don’t see it in the market action.The precious metals are hesitating, the CRB Commodity Index is in a bullish trend but is now hesitating, XLE, the widely-followed energy exchange traded fund has been in a bullish trend but is now moving sideways, oil has been declining, and March oil is now selling below 86.
And what’s most important (nobody seems to be noticing this) is that Chinese stocks are most definitely in a down-trend. China has been the monster buyer of commodities, and if China is slowing down, that will put a big question market in the hyper-inflation scenario.
One other item — if we’re heading for hyper-inflation Treasury bonds should be falling out of bed. Not so, below is a daily chart of the 30-year US Treasury bond, and it’s hardly falling out of bed. If there’s inflation coming and certainly hyper-inflation, the bond market will smell it. From the looks of this chart, I’d have to bet deflation over inflation.
When ever I hear a consensus view of what lies ahead, I always check with the market. If the market doesn’t agree, I remain sceptical. As for the current hyper-inflation forecast, I’ll remain sceptical as long as the market is sceptical.
Source: Dow Theory Letters
This Is Now One Of The Most Expensive Markets Of All Time
by John Hussman - Hussman Funds
Last week, the S&P 500 Index ascended to a Shiller P/E in excess of 24 (this "cyclically-adjusted P/E" or CAPE represents the ratio of the S&P 500 to 10-year average earnings, adjusted for inflation). Prior to the mid-1990's market bubble, a multiple in excess of 24 for the CAPE was briefly seen only once, between August and early-October 1929. Of course, we observe richer multiples at the heights of the late-1990's bubble, when investors got ahead of themselves in response to the introduction of transformative technologies such as the internet. After a market slide of more than 50%, investors again pushed the Shiller multiple beyond 24 during the housing bubble and cash-out financing free-for-all that ended in the recent mortgage collapse.
And here we are again. This is not to say that we can rule out yet higher valuations, but with no transformative technologies driving the economy, little expansion in capital investment, and ongoing retrenchment in consumer balance sheets, I can't help but think that the "virtuous cycle" rhetoric of Ben Bernanke is an awfully thin gruel by comparison. We should not deserve to be called "investors" if we fail to recognize that valuations are richer today than at any point in history, save for the few months before the 1929 crash, and a bubble period that has been rewarded by zero total return for the S&P 500 since 2000. Indeed, the stock market has lagged the return on low-yielding Treasury bills since August 1998. I am not sure that even members of my own profession have learned anything from this.
TARP Inspector Neil Barofsky to Resign
by Liz Rappaport - Wall Street Journal
Neil M. Barofsky, the special inspector general for the Troubled Asset Relief Program since December 2008, announced his resignation Monday and plans to step down from the job on March 30. The 40-year-old Mr. Barofsky notified staff members of his decision on Monday morning and submitted a resignation letter to President Barack Obama. The former federal prosecutor plans to spend time with his family and pursue new opportunities.
"I was so blessed to serve my country at such a dark financial time," Mr. Barofksy said in an interview. Now is a good time to leave the job, known as Sigtarp, because the Troubled Asset Relief Program and financial crisis are winding down, he added. Mr. Barofsky said he achieved his goals of minimizing expenses, waste and fraud in TARP. Created as the financial system was teetering in 2008, TARP made huge infusions into U.S. banks and securities firms, the auto industry and mortgage market. As of mid-January, a total of $410 billion had been spent through the bailout program, with an additional $59.7 billion still to be doled out.
Mr. Barofsky worked 16-hour days to oversee TARP, seeing himself as responsible for tracking every dollar. He has published 13 audits of TARP, produced nine quarterly reports for Congress, and testified frequently to lawmakers about the program. TARP was largely successful in helping Wall Street and other battered industries, he said. "The fact that we're in a place talking about exits is just tremendously good news," Mr. Barofsky said in the interview. Nearly 150 TARP recipients have repaid the U.S. government, as of his latest report to Congress, and the program's overall price tag is declining as the government profits on its exit strategy for investments such as General Motors Co.
Nevertheless, TARP has failed to meet its stated goal of "preserving homeownership" through the Home Affordable Modification Program, Mr. Barofsky said, partly because the Treasury Department has mostly ignored his suggestions. The mortgage-modification program also has been plagued with inefficiencies and paperwork mishaps. Mr. Barofsky successfully limited the size of two TARP programs that allowed hedge funds and other private investors to participate with taxpayer money.
In the interview, Mr. Barofsky said he worries that the "most significant legacy of TARP" may be the concept of "too big to fail," he said. Most large financial institutions still can take big risks, he said, since TARP showed that such firms are essentially government-backed, subsidized by access to cheap funding and won't be allowed to collapse.
Starting out in a dark basement office in the Treasury building at 1500 Pennsylvania Ave. in Washington, Mr. Barofsky built Sigtarp into a law-enforcement operation of about 140 people, including investigators from the Federal Bureau of Investigation, Internal Revenue Service, U.S. Attorney's offices, private law firms and the U.S. Postal Service.
So far, Mr. Barofsky has charged 45 individuals with civil or criminal fraud. About a third of those defendants have been convicted. Sigtarp is leading the accounting-fraud case against Lee Farkas, the former chairman of mortgage company Taylor, Bean & Whitaker Mortgage Corp. Mr. Barofsky said his office has prevented people and institutions from fraudulently obtaining more than $550 million in TARP funds.
In his letter to President Obama, Mr. Barofsky said the special inspector general's office included the "finest collection of white-collar criminal investigators ever assembled." While overseeing Sigtarp, Mr. Barofsky got married and became a father. "Who knew you could get BlackBerry service from a national park in South Africa on safari?" he said in a reference to his honeymoon, which was delayed by the crushing workload shortly after Mr. Barofsky took the job.
"I didn't move down to play it safe," said Mr. Barofsky, a former prosecutor for the U.S. Attorney's office in the Southern District of Manhattan, "but to do the right thing." The office of Sigtarp will continue, with Mr. Barofsky's deputy, Christy Romero, as acting head when he steps down in March. It will be up to the Obama administration to nominate Ms. Romero or someone new to lead the office.
UK taxpayers 'subsidising banks by £30 billion a year', on top of bail-outs
by Philip Aldrick - Telegraph
British taxpayers are subsidising the banks by more than £30bn a year on top of the vast state bail-out package extended during the financial crisis to prevent their collapse, according to a new report.
The New Economics Foundation (NEF) has calculated the value of the implicit Government guarantee, the fees charged on the emergency measures taken to stabilise the economy, and the excess profits taken on loans since competition in the market collapsed.
It says the figure is "at least" £32.5bn using "conservative" estimates. Publication of the report comes the day before Barclays kicks off the banking reporting season on Tuesday, when the high street lender will inflame public anger by unveiling around £2bn in investment banker bonuses. Although the bonus pool will be lower than it was last year, the total compensation may be as much as £1bn higher at £5.5bn – analysts estimate – as salaries were doubled in many cases last year to offset bonus restrictions.
In a goodwill gesture intended to allay fury over excessive pay awards, Barclays is believed to be introducing a new performance yardstick for bonuses. For 1,000 of its top investment bankers, the deferred element of their package – around 60pc – will only come into effect if Barclays' core capital ratio remains above the new regulatory minimum of 7pc. The bank is expected to unveil pre-tax profits of around £5.7bn for 2010, a rise of about 24pc. However, investment banking revenue is forecast to be £4.9bn lower at £13bn due to a slowdown in activity.
NEF's calculations showed that the bulk of the state's subsidy to banking came from its implicit guarantee to banks deemed too-big-to-fail. By handing banks "insurance against going bust", the Government gives them "a huge commercial advantage", the NEF said. "It means banks are able to borrow money much more cheaply than if they were not ultimately underwritten by the public."
Using Bank of England analysis, NEF calculated that the subsidy is worth £30bn annually to UK banks. Banks are also making another £2.5bn "at least" from the higher charges on bank loans, such as mortgages, and fees on state-backed capital raisings and the Bank's £200bn money-printing programme.
"The taxpayer is subsidising the banks twice over: one in public support to the banks, and secondly through paying much higher interest," NEF said. NEF's estimate of the subsidy is additional to the £512bn of risk that the National Audit Office has calculated the taxpayer still bears from the emergency bail-out measures in 2008.
When Democracy Weakens
by Bob Herbert - New York Times
As the throngs celebrated in Cairo, I couldn’t help wondering about what is happening to democracy here in the United States. I think it’s on the ropes. We’re in serious danger of becoming a democracy in name only.
While millions of ordinary Americans are struggling with unemployment and declining standards of living, the levers of real power have been all but completely commandeered by the financial and corporate elite. It doesn’t really matter what ordinary people want. The wealthy call the tune, and the politicians dance.
So what we get in this democracy of ours are astounding and increasingly obscene tax breaks and other windfall benefits for the wealthiest, while the bought-and-paid-for politicians hack away at essential public services and the social safety net, saying we can’t afford them. One state after another is reporting that it cannot pay its bills. Public employees across the country are walking the plank by the tens of thousands. Camden, N.J., a stricken city with a serious crime problem, laid off nearly half of its police force. Medicaid, the program that provides health benefits to the poor, is under savage assault from nearly all quarters.
The poor, who are suffering from an all-out depression, are never heard from. In terms of their clout, they might as well not exist. The Obama forces reportedly want to raise a billion dollars or more for the president’s re-election bid. Politicians in search of that kind of cash won’t be talking much about the wants and needs of the poor. They’ll be genuflecting before the very rich.
In an Op-Ed article in The Times at the end of January, Senator John Kerry said that the Egyptian people "have made clear they will settle for nothing less than greater democracy and more economic opportunities." Americans are being asked to swallow exactly the opposite. In the mad rush to privatization over the past few decades, democracy itself was put up for sale, and the rich were the only ones who could afford it.
The corporate and financial elites threw astounding sums of money into campaign contributions and high-priced lobbyists and think tanks and media buys and anything else they could think of. They wined and dined powerful leaders of both parties. They flew them on private jets and wooed them with golf outings and lavish vacations and gave them high-paying jobs as lobbyists the moment they left the government. All that money was well spent. The investments paid off big time.
As Jacob Hacker and Paul Pierson wrote in their book, "Winner-Take-All Politics": "Step by step and debate by debate, America’s public officials have rewritten the rules of American politics and the American economy in ways that have benefited the few at the expense of the many."
As if the corporate stranglehold on American democracy were not tight enough, the Supreme Court strengthened it immeasurably with its Citizens United decision, which greatly enhanced the already overwhelming power of corporate money in politics. Ordinary Americans have no real access to the corridors of power, but you can bet your last Lotto ticket that your elected officials are listening when the corporate money speaks.
When the game is rigged in your favor, you win. So despite the worst economic downturn since the Depression, the big corporations are sitting on mountains of cash, the stock markets are up and all is well among the plutocrats. The endlessly egregious Koch brothers, David and Charles, are worth an estimated $35 billion. Yet they seem to feel as though society has treated them unfairly.
As Jane Mayer pointed out in her celebrated New Yorker article, "The Kochs are longtime libertarians who believe in drastically lower personal and corporate taxes, minimal social services for the needy, and much less oversight of industry — especially environmental regulation." (A good hard look at their air-pollution record would make you sick.)
It’s a perversion of democracy, indeed, when individuals like the Kochs have so much clout while the many millions of ordinary Americans have so little. What the Kochs want is coming to pass. Extend the tax cuts for the rich? No problem. Cut services to the poor, the sick, the young and the disabled? Check. Can we get you anything else, gentlemen?
The Egyptians want to establish a viable democracy, and that’s a long, hard road. Americans are in the mind-bogglingly self-destructive process of letting a real democracy slip away. I had lunch with the historian Howard Zinn just a few weeks before he died in January 2010. He was chagrined about the state of affairs in the U.S. but not at all daunted. "If there is going to be change," he said, "real change, it will have to work its way from the bottom up, from the people themselves."
I thought of that as I watched the coverage of the ecstatic celebrations in the streets of Cairo.
China's drought could have 'devastating' consequences
by Peter Foster - Telegraph
Lowest rainfall for 60 years in the North China Plain threatens wheat harvest, food prices and the global economy.
No Chinese family can celebrate the recently passed lunar New Year festival without a prodigious mound of jiaozi, or dumplings – juicy parcels of dough-swaddled pork and leek that explode, scalding and garlicky, in the mouth. For many Chinese, however, this New Year’s dumplings have left a bitter after-taste thanks to spiralling food prices caused in part by a drought on the North China Plain that the UN food agency warned last week could have "devastating"consequences for China’s annual wheat harvest.
In the village of Qingdepu in Shanxi province – one of eight provinces including Shandong, Jiangsu, Henan, Hebei that account for three-quarters of China’s wheat production and have experienced the lowest rainfall levels for at least 60 years – they are already feeling the pinch. "Flour (used to make the dough for the dumpling-wrappers) is up by more than 40 per cent from last year," grumbles 42-year-old Hou Guifa, "and the price of pork (used in the fillings) by more than 25 per cent."
Mr Hou’s house, like all the others we visit, is coated in a layer of yellow dust that blows in off the parched corn fields that lie beyond his window. "It rained in March," he recalls gloomily, "but hardly at all since then. The land yielded only half what it does in a good year." "If you don’t have a family member with another job (outside farming) you feel the impact. This year the children’s hongbao [the traditional red envelope containing a gift of money] only had five yuan (50p). Last year it was 10."A Chinese farmer shows the dried vegetable seeds at his drought-striken fields in Zhouping, in Shandong province Photo: AFP/GETTY IMAGES
China’s drought is not the kind of biblical event that spawns charity telethons and rock concerts, but its impacts are being felt far beyond the tightened-belts of China’s farmers and the children who bought a few less sweets this New Year. Wheat prices in Chicago, a global benchmark, have hit their highest levels since 2008 amid fears that China’s drought, if it worsens, could further drive up global prices that have already been elevated by the impact of the recent fires and floods in Australia.
Last week the UN’s Food and Agriculture Agency issued a "special alert" – the first for anywhere in the world this year – warning that if rains don’t come in China this spring the situation could reach "critical" levels in the worst-affected areas. Although the mood of rural China is nothing like that of restive Egypt – where food prices have been partly blamed for fuelling recent political upheavals – the government in Beijing has moved swiftly to assist the nearly 3m people suffering direct consequences of the drought.
Both China’s president, Hu Jintao, and prime minister Wen Jiabao have been on well-publicised morale-boosting tours of the region, promising more than £600m to dig emergency wells, speed up irrigation projects and subsidise next year’s planting. China’s weather manipulation or "rain-making" machines have also gone into overdrive, with artillery batteries firing hundreds of silver iodide-filled shells into the sky to induce precipitation, which did succeed in triggering a light sprinkling of snow across the North last week.
"But it’s still not enough," says another farmer in the next village along, scratching at the soil to reveal the dust-dry earth barely a centimeter below the surface, "when the snow melts it will have made almost no difference at all."
And in a global economy in which China plays an ever-more important role, the inflated price of a pork dumpling is no longer just a worry for China’s peasant-farmers or their politically nervous leaders’ in Beijing, but increasingly has knock-on effects for global investors too. Sharply rising food prices – exacerbated by the drought – are a symptom of China’s broader battle against inflation which a Bloomberg consensus poll expects to hit 5.4pc for January, far above the central’s government’s target and a sharp uptick from December’s 4.6pc.
China’s central bank moved pre-emptively to increase interest rates over the New Year holiday – to 6.06pc, the third hike since October – prompting analysts to warn that the cost of fighting inflation will be slower Chinese growth this year. "The interest rate rise is a pretty sure indication that the government has looked at the data (for January) and doesn’t like what it sees," says Tom Miller, managing editor of the GK Dragonomics consultancy in Beijing.
"Inflation is definitely a problem now. We could see three more interest-rate rises this year and further raising of bank reserve ratios, which will have an impact on the property market and cut headline GDP growth perhaps to 8.5 per cent from last year’s 10 per cent." he adds. Shanghai’s stock-market has already shed 5pc this year on fears of shrinking liquidity, while in India the Bombay Sensex has dropped 10pc as emerging market investors retreat on fears that India’s own fight against rising food prices and wider inflation will stifle growth there too.
But back in the corn fields of Shanxi the fears for growth are of a rather more pressing and prosaic kind, and not solely for next year’s rains and harvest, but for the decades to come as China’s population grow and its land and water resources come under greater and greater stress. Those with long memories, like 85-year-old Wang Tianhai, the keeper of the Qingdepu village’s Daoist temple, say they wonder what the future holds.
"We haven’t seen it this dry since the Mao Tse-tung era," he recalls, "But when I was a boy, men dug the wells in this village with picks and shovels; the water was just a few metres below the ground. "Now they bring a machine and drill for more than 200 metres down. It will take more than spring rains to change that."
Grapes of Wrath - 2011
by Jim Quinn - Burning Platform
“And the great owners, who must lose their land in an upheaval, the great owners with access to history, with eyes to read history and to know the great fact: when property accumulates in too few hands it is taken away. And that companion fact: when a majority of the people are hungry and cold they will take by force what they need. And the little screaming fact that sounds through all history: repression works only to strengthen and knit the repressed.” – John Steinbeck – Grapes of Wrath
John Steinbeck wrote his masterpiece The Grapes of Wrath at the age of 37 in 1939, at the tail end of the Great Depression. Steinbeck won the Nobel Prize and Pulitzer Prize for literature. John Ford then made a classic film adaption in 1941, starring Henry Fonda. It is considered one of the top 25 films in American history. The book was also one of the most banned in US history. Steinbeck was ridiculed as a communist and anti-capitalist by showing support for the working poor. Some things never change, as the moneyed interests that control the media message have attempted to deflect the blame for our current Depression away from their fraudulent deeds. The novel stands as a chronicle of the Great Depression and as a commentary on the economic and social system that gave rise to it. Steinbeck’s opus to the working poor reverberates across the decades. He wrote the novel in the midst of the last Fourth Turning Crisis. His themes of man’s inhumanity to man, the dignity and rage of the working class, and the selfishness and greed of the moneyed class ring true today.
Steinbeck became the champion of the working class. When he decided to write a novel about the plight of migrant farm workers, he took his task very seriously. To prepare, he lived with an Oklahoma farm family and made the journey with them to California. Seventy years later the plight of the working class is the same. If Steinbeck were alive today he would live with a Michigan auto manufacturing family making a journey to fantasyland of green energy, where automobiles ran on corn and sunshine. The working class bore the brunt of the Great Depression in the 1930s and they are bearing the burden during our current Greater Depression. Steinbeck knew who the culprits were seventy years ago. We know who the culprits are today. They are one in the same. The moneyed banking interests caused the Great Depression and they created the disastrous collapse that has thus far destroyed 7 million middle class jobs. Steinbeck understood that the poor working class of this country had more dignity and compassion for their fellow man than any Wall Street banker out for enrichment at the expense of the working class.
Okies and the Land of Milk & Honey“How can you frighten a man whose hunger is not only in his own cramped stomach but in the wretched bellies of his children? You can’t scare him–he has known a fear beyond every other.” - John Steinbeck –
Grapes of WrathThe America of 1930 was different in many aspects from the America of 2011. The population of the U.S. was 123 million, living in 26 million households, or 4.7 people per household. Today the population of the U.S. is 310 million, living in 118 million households, or 2.6 people per household. The living and working structure of the country was dramatically different in 1930. The percentage of the population that lived in rural areas exceeded 40%, down from 60% in 1900, as the country rapidly industrialized. One quarter of the population still worked on farms. Today, less than 20% of Americans live in rural areas, while less than 2% live on farms. In 1935, there were 6.8 million farms in the U.S. Today there are 2.1 million farms. The family farm has been slowly but surely displaced by corporate mega-farms since the 1920s, with 46,000 farms now accounting for 50% of all farm production today.
The sad plight of the American working farmer did not begin with the Stock Market Crash of 1929. The seeds of destruction were planted prior to and during World War I. Automation through technology allowed for more cultivation of land. Agricultural prices rose due to strong worldwide demand, leading farmers to dramatically increase cultivation. With food commodity prices soaring, farmers fell into the classic trap that McMansion buyers fell into from 2000 through 2006. Farmers took on huge amounts of debt to acquire more land and farming equipment as local banks were willing to feed their illusions with loans. It was a can’t miss proposition. Jim Grant in his book Money of the Mind: Borrowing and Lending from the Civil War to Michael Milken described the end result:
Like bull markets in stocks, the bull market in farmland engendered the belief that prices would rise forever. "Speculators who had no interest whatever in farming bought land for the 6 percent or 8 percent annual rise that seemed a certainty throughout the early years of the century…" The rise in farm prices had only begun. The price of wheat was 62 cents a bushel in 1900. It was 99 cents in 1909, $1.43 in 1916, and $2.19 at the peak in 1919. To put $2.19 in perspective, it was not a price seen again until 1947.
The collapse of prices in the early 1920s would have been devastating enough, but the damage was compounded by debt. By the summer of 1921, crop prices were down by no less than 85 percent from the postwar peak. Nebraskans, finding that corn had become cheaper than coal, burned it. As it does in every market, the fall in prices revealed the weaknesses in the structure of credit that had financed the rise.
Between 1919 and 1921, the number of banks that failed totaled 724, with only one of the largest, National City Bank, being bailed out by Washington DC. The heartland, where more than 40% of the population lived, did not participate in the Roaring Twenties. Wall Street and the urbanized Northeast experienced the rapid wealth accumulation during the 1920s. The working poor of the farm belt struggled to subsist. Land under cultivation continued to rise even after the bust of the early 1920s, tripling between 1925 and 1930. The land was over farmed and not properly cared for, depriving the soil of organic nutrients and increasing exposure to erosion. Then Mother Nature took her pound of flesh, much like she is doing today across the globe.
The Dust Bowl was a period of severe dust storms causing major ecological and agricultural damage to Midwest prairie lands from 1930 to 1936. The phenomenon was caused by severe drought coupled with decades of extensive farming without crop rotation, fallow fields, cover crops or other techniques to prevent erosion. Deep plowing of the virgin topsoil of the Great Plains had displaced the natural deep-rooted grasses that normally kept the soil in place and trapped moisture even during periods of drought and high winds. These immense dust storms—given names such as “Black Blizzards” and “Black Rollers”—often reduced visibility to a few feet. The Dust Bowl affected 100,000,000 acres, centered on the panhandles of Texas and Oklahoma.
Small farmers were hit especially hard. Even before the dust storms hit, the invention of the tractor drastically cut the need for manpower on farms. These small farmers were usually already in debt, borrowing money for seed and paying it back when their crops came in. When the dust storms damaged the crops, not only could the small farmer not feed himself and his family, he could not pay back his debt. Banks would then foreclose on the small farms and the farmer’s family would be both homeless and unemployed. Between 1930 and 1935, nearly 750,000 farms were lost through bankruptcy or sheriff sales.
Millions of acres of farmland became useless, and hundreds of thousands of people were forced to leave their lifelong homes. They set out on Route 66 toward the land of milk and honey – California. Hundreds of thousands of families traveled this lonely road during the 1930s.
Many of these families, often known as “Okies”, since so many came from Oklahoma migrated to California and other states, where they found economic conditions little better during the Great Depression than those they had left. Owning no land, many became migrant workers who traveled from farm to farm to pick fruit and other crops at starvation wages. While the Great Depression affected all Americans, about 40% of the population was relatively unscathed. Not so for the “Okies”.
Californians tried to stop migrants from moving into their state by creating checkpoints on main highways called "bum blockades." California even initiated an "anti-Okie" law which punished anyone bringing in "indigents" with jail time. While Steinbeck highlights the plight of migrant farm families in The Grapes of Wrath, in reality, less than half (43%) of the migrants were farmers. Most migrants came from east of the Dust Bowl and did not work on farms. By 1940, 2.5 million people had moved out of the Plains states; of those, 200,000 moved to California.
Man’s Inhumanity to Man“It has always seemed strange to me… the things we admire in men, kindness and generosity, openness, honesty, understanding and feeling, are the concomitants of failure in our system. And those traits we detest, sharpness, greed, acquisitiveness, meanness, egotism and self-interest, are the traits of success. And while men admire the quality of the first they love the produce of the second.” – John Steinbeck
Steinbeck’s novel was a national phenomenon. The book won Steinbeck the admiration of the working class, due to the book’s sympathy to the common man and its accessible prose style. It also got him branded a communist by the large California land barons and the non-stop harassment by J. Edgar Hoover and the IRS for most of his life. The book was lauded, debated, banned and burned. A book can only generate that amount of heat by getting too close to a truth that those in power do not want revealed. The Grapes of Wrath did just that. Steinbeck meant to pin the blame where it belonged:
“I want to put a tag of shame on the greedy bastards who are responsible for this [the Great Depression and its effects].”
The bankers who took their farms and cast them aside like a piece of trash, the Wall Street speculators who got rich by peddling debt to the working class, and the wealthy land barons who treated the migrant farm workers like criminals, were to blame for the suffering of millions. The pyramid of wealth was as unequal in 1929 as it is today.
The 1% of the population at the very top of the pyramid had incomes 650% greater than those 11% of Americans at the bottom of the pyramid. The tremendous concentration of wealth in the hands of a few meant that continued economic prosperity was dependent on the high investment and luxury spending of the wealthy.
By 1929, the richest 1% owned 40% of the nation’s wealth. The top 5% earned 33% of the income in the country. The bottom 93% experienced a 4% drop in real disposable income between 1923 and 1929. The middle class comprised only 20% of all Americans. Society was skewed heavily towards the haves. By 1929, more than half of all Americans were living below a minimum subsistence level. Those with means were taking advantage of low interest rates by using margin to invest in stocks. The margin requirement was only 10%, so you could buy $10,000 worth of stock for $1,000 and borrow the rest. With artificially low interest rates and a booming economy, companies extrapolated the good times and invested in huge expansions. During the 1920s there were 1,200 mergers that swallowed up more than 6,000 companies. By 1929, only 200 mega-corporations controlled over half of all American industry. The few were enriched, while the many wallowed in poverty and despair.
When self proclaimed experts on the Great Depression, like Ben Bernanke, proclaim that the Federal Reserve contributed to the Depression by not expanding the monetary supply fast enough, they practice the art of the Big Lie. The Great Depression was mainly caused by the expansion of the money supply by the Federal Reserve in the 1920’s that led to an unsustainable credit driven boom. Both Friedrich Hayek and Ludwig von Mises predicted an economic collapse in early 1929. In the Austrian view it was this inflation of the money supply that led to an unsustainable boom in both asset prices (stocks and bonds) and capital goods. Ben Strong, the head of the Federal Reserve, attempted to help Britain by keeping interest rates low and the USD weak versus the Pound. The artificially low interest rates led to over investment in textiles, farming and autos. In 1927 he lowered rates yet again leading to a speculative frenzy leading up to the Great Crash. The ruling elite of society were the Wall Street speculators. Only 1.5 million people out of an entire population of 127 million invested in the stock market. Margin loans increased from $3.5 billion in 1927 to $8.5 billion in 1929. Stock prices rose 40% between May 1928 and September 1929, while daily trading rose from 2 million shares to 5 million shares per day. By the time the Federal Reserve belatedly tightened in 1928, it was far too late to avoid a stock market crash and depression.
The Federal Reserve was created by bankers to benefit bankers. The Federal Reserve purchased $1.1 billion of government securities from February to July 1932, which raised its total holding to $1.8 billion. Total bank reserves only rose by $212 million, but this was because the American populace lost faith in the banking system and began hoarding more cash, a factor very much beyond the control of the Central Bank. The potential for a run on the banks caused local bankers to be more conservative in lending out their reserves, and was the cause of the Federal Reserve’s inability to inflate. From its backroom middle of the night creation in 1913, the bank owned Federal Reserve has sought to benefit its owners, the large Wall Street banking interests and its politician protectors in Congress. The working class has always been nothing more than hosts used by the parasites to tax and peddle debt to.
Income and wealth inequality reached a new peak in 2007, the highest level of inequality since 1929. William Domhoff details this inequality in the following terms:
In the United States, wealth is highly concentrated in a relatively few hands. As of 2007, the top 1% of households (the upper class) owned 34.6% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.5%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth (total net worth minus the value of one’s home), the top 1% of households had an even greater share: 42.7%.
Source: Domhoff
Real median household income in the U.S. is $49,777 today. It was $52,388 in 1999 before George Bush took office. This is a 5% decline over ten years. Even more disturbing is the fact that the top 20% of households showed real increases in income. The bottom 50% lost income during the last ten years, with the bottom 20% losing 8% of income over this time frame. No wonder there is so much anger among the working middle class in the country regarding the bailout for the top 1%. Sixty million households make less today than they made 10 years ago. The policies of the Federal Reserve over the last ten years have benefitted speculators and punished seniors, savers and the working middle class. Every policy, program and regulation rolled out by the Federal Reserve in the last three years has been to prop up, enrich, and support their Too Big To Fail Wall Street owners. The middle class American working family is Too Small To Matter.
Steinbeck presciently realized that the suffering of the working class was not due to bad weather, bad luck, or the actions of the working class. It was caused by the rich ruling elite wielding their power and influence across the land in their effort to enrich themselves by any means necessary. Historical, social, and economic circumstances separate people into rich and poor, landowner and tenant, and the people in the dominant roles struggle viciously to preserve their positions. During the Great Depression it was the brokers, bankers and businessmen who maintained a dominant role, while farmers, workers, and the common man were treated like dogs. Steinbeck used this symbolism by having the Joad’s family dog be run over by a rich person driving a fancy roadster early in the novel. Steinbeck saw the large California landowners as the epitome of the evil Haves. The landowners created a system in which the migrants were treated like animals, shuffled from one filthy roadside camp to the next, denied livable wages, and forced to turn against their brethren simply to survive.
Steinbeck’s world was black and white, good and evil, rich and poor. Today, the corporate mainstream media would brand him a anti-capitalist, socialist crackpot. Those in control want to keep the masses lost in shades of grey. In the 1930s it was clearer regarding who was to blame. The social safety net of New Deal programs from FDR had just begun. At the time, I’m sure they seemed like a good idea to ease the suffering of the poor. In reality, they did little to help, as the unemployment rate was still 18% in 1939, ten years after the Depression began. These programs, along with hundreds implemented since the 1930s, have created a dependent underclassand have left America with unfunded liabilities in excess of $100 trillion. The rich use the 70,000 page IRS tax code to avoid taxes. They use their wealth to buy influence in Washington DC, rigging the game in their favor. The bottom 50% of the population pays no income taxes. The working middle class, with declining real incomes, foot the bill. They are bamboozled into believing they can live like the rich by a financial industry willing to lie, obfuscate and defraud them. Corporate superstar CEOs, fawned over by the corporate media, outsourced their good paying middle class jobs to foreign lands, boosting EPS, their stock price and their mega-million bonuses. This may not look like the 1930s, but it is worse for millions of American working middle class families.
The Dignity of Wrath“…and in the eyes of the people there is the failure; and in the eyes of the hungry there is a growing wrath. In the souls of the people the grapes of wrath are filling and growing heavy, growing heavy for the vintage.” - John Steinbeck - Grapes of Wrath
Steinbeck’s feelings about the people he was writing about can be summed up in this passage:
“If you’re in trouble, or hurt or need – go to the poor people. They’re the only ones that’ll help – the only ones.”
The Joads refuse to be broken by their circumstances. They maintain their dignity, honor and self respect, despite the trials and tribulations that befall them. Hunger, tragic death, and maltreatment by the authorities do not break their spirit. Their dignity in the face of tragedy stands in contrast to the vileness of the rich landowners and the cops that treated the migrant workers like criminals.
No matter how much misfortune and degradation are heaped upon the Joads, their sense of justice, family, and honor never waver. Steinbeck believed that as long as people maintained a sense of injustice—a sense of anger against those who sought to undercut their pride in themselves—they would never lose their dignity. Tom Joad is the symbol of all the mistreated working poor who refuse to be beaten down. The landowners and the police are the oppressors. Tom kills a policeman in a struggle for the dignity of the workers. Tom’s farewell to his Ma, captures the essence of the struggle:
“Wherever they’s a fight so hungry people can eat, I’ll be there. Wherever they’s a cop beatin’ up a guy, I’ll be there. If Casy knowed, why, I’ll be in the way guys yell when they’re mad an’—I’ll be in the way kids laugh when they’re hungry n’ they know supper’s ready. An’ when our folks eat the stuff they raise an’ live in the houses they build—why, I’ll be there.” – Tom Joad – Grapes of Wrath
Steinbeck’s wrath was directed towards the bankers who stole the farms, the California landowners that treated the workers like vermin, and the police who sided with the wealthy and carried out the brutality on the workers. Tom Joad’s anger and wrath toward those who meant to make them cower is portrayed powerfully in this passage:
“I know, Ma. I’m a-tryin’. But them deputies- Did you ever see a deputy that didn’t have a fat ass? An’ they waggle their ass an’ flop their gun aroun’. Ma”, he said, “if it was the law they was workin’ with, why we could take it. But it ain’t the law. They’re a-working away at our spirits. They’re a-tryin’ to make us cringe an’ crawl like a whipped bitch. They’re tryin’ to break us. Why, Jesus Christ, Ma, they comes a time when the on’y way a fella can keep his decency is by takin’ a sock at a cop. They’re working on our decency”.”
Today, Steinbeck’s wrath would be focused upon Wall Street Mega-Banks, Mega-Corporations and the politicians that allow them to pillage the wealth of the nation. Droughts, foreclosures and technology drove millions of farmers into the cities during the 1930s and it accelerated with the onset of World War II. America became manufacturer to the world, with manufacturing accounting for over 28% of GDP in the mid-1950s. The business of banking, insurance and real estate accounted for less than 11% of GDP.
Since the adoption of the credit card on a large scale in the late 1960′s, the role of bankers and debt in our society has grown relentlessly and recklessly. The point of no return occurred in the mid-1980′s when the financial sector passed the manufacturing sector in relative importance for our economy. Today, banker generated profits from peddling debt to the middle class, creating derivatives to defraud widows and pension funds, and running their institutions like leveraged casinos on steroids account for 21.5% of GDP. Manufacturing profits now account for a pitiful 11.2% of GDP, as the CEO titans of industry at General Electric, Hewlett Packard, Intel, and Apple shipped the manufacturing jobs to Asia in a noble effort to boost earnings per share and reward themselves with $30 million pay packages.
Source: www.mybudget360.com
Total U.S. debt as a percentage of GDP was remarkably stable at approximately 130% for three decades, while financial profits as a percentage of GDP consistently ranged just below 1%. The ascension of Alan Greenspan to the throne of the Federal Reserve unleashed a dust storm of debt and banking profits over the last 25 years. Total credit and financial industry profits each grew by more than 250%. Real wages of middle class workers are lower today than they were in 1971. Since the higher paying manufacturing jobs were shipped overseas, Wall Street stepped into the breach by providing trillions of debt to the average American so they could buy stuff being produced in China by people who took their jobs. Wall Street and the corporate media convinced middle class Americans that their standard of living was increasing upon the waves of debt. The godfather, Greenspan, watched over and protected the big banks. When they screwed up in their efforts to pillage and plunder on a grand scale, the godfather would reduce interest rates and flood the system with liquidity. Heads they win, tails America loses.
Source: Barry Ritholtz
The powerful Wall Street banks were un-refrained, unregulated and unscrupulous in their unquenchable looting and ransacking of the wealth of the American public. The Federal Reserve provided the fuel and Congress lit the fuse with the repeal of Glass-Steagall, ultimately leading to the biggest financial explosion in world financial history in 2008. The financial crisis was created by the biggest Wall Street banks and the policies of the Federal Reserve. It is a tribute to their monetary power, complete capture of the mainstream media, and total ensnarement of the corrupt politicians in Washington DC, that somehow the Too Big To Fail banks are bigger than they were before the crisis. The working middle class has footed the bill for the trillions that have been shoveled into the coffers of these criminal enterprises. As a reward, the savers receive .25% on their savings. These men have put 8.5 million people out of work in the last three years. Steinbeck understood that bankers who foreclosed on the homes of poor farmers and fed the speculation that led to the Great Crash were nothing more than extensions of an evil monster:
“No, you’re wrong there—quite wrong there. The bank is something else than men. It happens that every man in a bank hates what the bank does, and yet the bank does it. The bank is something more than men, I tell you. It’s the monster. Men made it, but they can’t control it.”
The bankers that control our economy today deserve the same scorn and wrath that Steinbeck heaped on bankers and California landowners in the 1930′s. Jesse, from Jesse’s Café Americain captures the wrath in this assessment of our current state of affairs:
“The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained recovery. All else is looting and folly, with apathy and complacent self-interest as their accomplices.”
Selfishness & AltruismI ain’t never gonna be scared no more. I was, though. For a while it looked as though we was beat. Good and beat. Looked like we didn’t have nobody in the whole wide world but enemies. Like nobody was friendly no more. Made me feel kinda bad and scared too, like we was lost and nobody cared…. Rich fellas come up and they die, and their kids ain’t no good and they die out, but we keep on coming. We’re the people that live. They can’t wipe us out, they can’t lick us. We’ll go on forever, Pa, cos we’re the people. – Ma Joad - Grapes of Wrath
The power elite that believe they can control the masses as puppet master commands a puppet should beware. The wrath of the masses can be fierce and sudden. Ask Hosni Mubarak. As Steinbeck realized many decades ago, selfishness run amok, supported and encouraged by the authorities lead to poverty, despair and sometimes revolution. The false mantra of an economy based on self-interest and free markets is a smokescreen blown by the few with wealth and power to obscure the truth that they have used their wealth and power to rig the game in their favor. The have-nots can dream about becoming a have, but the chances of achieving that dream today are miniscule. Steinbeck pointedly distinguishes between the selfishness of the moneyed class and the altruism of the working poor. In contrast to and in conflict with this policy of selfishness stands the migrants’ behavior toward one another. Aware that their livelihood and survival depend upon their devotion to the collective good, the migrants unite—sharing their dreams as well as their burdens—in order to survive.
Those in control need to keep the masses divided. They need Americans to be distracted by phantom terrorist threats, inconsequential political differences, American Idol, Charlie Sheen, Lindsey Lohan and Lady Gaga. They need Americans to be focused on “I”. Their greatest fear is that the American people realize that “We” can change the direction of this country and bring the perpetrators of crimes against the people of this country to justice. John Steinbeck saw the potential power of the common man if they became “We”:
One man, one family driven from the land; this rusty car creaking along the highway to the west. I lost my land, a single tractor took my land. I am alone and bewildered. And in the night one family camps in a ditch and another family pulls in and the tents come out. The two men squat on their hams and the women and children listen. Here is the node, you who hate change and fear revolution. Keep these two squatting men apart; make them hate, fear, suspect each other. Here is the anlarge of the thing you fear. This is the zygote. For here “I lost my land” is changed; a cell is split and from its splitting grows the thing you hate–”We lost our land.” The danger is here, for two men are not as lonely and perplexed as one. And from this first “we” there grows a still more dangerous thing: “I have a little food” plus “I have none.” If from this problem the sum is “We have a little food,” the thing is on its way, the movement has direction. Only a little multiplication now, and this land, this tractor are ours. The two men squatting in a ditch, the little fire, the side-meat stewing in a single pot, the silent, stone-eyed women; behind, the children listening with their souls to words their minds do not understand. The night draws down. The baby has a cold. Here, take this blanket. It’s wool. It was my mother’s blanket–take it for the baby. This is the thing to bomb. This is the beginning–from “I” to “we.” - John Steinbeck - Grapes of Wrath
The American people have a choice. They can continue on a course of apathy, selfishness and worship of mammon, or they can rally together with selflessness and concern for the welfare of their fellow man and future unborn generations. The current path, forged by a minority of privileged wealthy elite, will lead to the destruction of this country and misery on an unprecedented scale. It is up to each of us to show the courage of John Steinbeck, who without a thought for himself, stood up against the stones of condemnation, and spoke for those who were given no real voice in the halls of justice, or the halls of government. By doing so he became an enemy of the political status quo. Are you prepared to incur the wrath of the vested interests and meet their lies and propaganda with the fury of your own wrath in search for the truth? These men are sure you don’t have the courage, fortitude and wrath to defeat them.
Mine eyes have seen the glory of the coming of the Lord:
He is trampling out the vintage where the grapes of wrath are stored;
He hath loosed the fateful lightning of His terrible swift sword:
His truth is marching on.- Battle Hymn of the Republic
149 comments:
@ I AM Nobody...
From previous post. Optomism in the face of contrary evidence is nothing short of denial. I too welcome "real" positive news but have yet been confronted with an Relevant or Significant news of the kind.
It is always great to outline scenarios in advance to plan strategically.
Cheers
The Grapes of Wrath bit is very eloquent. He kind of skipped over the part where all that wrath, in the long run, accomplished very little. Here we are again; and insufficiently wrathful.
Still. Good stuff; though no one on the cruise ship is going to read it.
Meanwhile, back at the Harvard School of Sociopathy;
http://tinyurl.com/4r6uvk2
This is great stuff to read for anyone interested in autopsying "Economics". He's a Harvard endowed chair; and his analysis is systematically unsystematic. He cherry picks all his data, so they prove exactly what he wants to sell; and from his Harvard pulpit, his information is unassailable.
RE: property tax and picometry
The article about property tax increases caught my attention as I have been noticing an increasing mention of a technology called "picometry". I don't know if this is mostly an urban issue.
A preview of the "squeezing the little guy" that is to come. There is a massive generational lump determined to live out its retirement and self-fulfillment fantasies, so younguns beware!
I'd be interested to hear if any have real experience with the capabilities of picometric data collection.
http://www.bizjournals.com/philadelphia/stories/2007/02/12/focus3.html
http://www.newswire.ca/en/releases/archive/October2010/18/c2959.html
The interesting twist on the Wisconsin Governor story is that he specifically exempted the Police and Firefighter unions from the prohibition on collective bargaining. I guess if you're going to divide and conquer, it makes sense to keep the guys with guns on your side.
I am a little behind on the comments so someone may have given a heads up on this, but for all you spiritually enlightened people check out Mad Max at:
http://www.youtube.com/watch?v=tiaG6T8OWgk&feature=player_embedded#at=13
Referring to Katherine Ann Fitts 99 to one vote.
Hombre
I had not Idea you where such a geezer. You, IMN, and I should start a geezer caucus here.
el gallinazo,
Good to see you here again. What pray tell would be the purpose of our geezer caucus?
For another story of how we lose I recommend this one, posted today, by CHS.
Dislocations Ahead: The Ratchet Effect, Stick-Slip and QE3
@allgreatthingsemergefromchaos - Note: Right, but Tecumseh is dead!
-Physically Superior,
-Mentally superior,
-Highly Adaptable,
-Spiritually Grounded, -Compassionate with community yet decisive in battle against those who who seek harm.
-Well prepared in advance (this goes along with other points)
-Minimally Vulnerable and Mobile (Ex: No young children to feed, defend, or carry and Not pregnant!!!)
-Instinctive (Hesitating will get you killed)
-Good Karma
-Good Luck
A hombre, a nobody, a buzzard
all aches and pains and groans
but
they do know cheryl is not a crow
and sherlock is not a holmes
I'll have to chime in on this one. When I was gambling in the forex market (I was fascinated with patterns at the time), I really got into the psychology of it. There's a really good book called "Trading in the Zone" that brings some extra insight into this post. Simply put, losing is twice as hard as winning. Flip a coin with a friend for a dime each time. No sweat if you lose ten in a row. Now do that betting the house payment each time- different outcome. Somehow we think that because heads has come up 10 times in a row, we are "due" for a win. Not so, the odds remain at 50/50. Successful traders, like poker players, are able to do well with only a slight advantage because they emotionally distance themselves from the effects of the outcome. I once saw on the Andy Griffith show Andy say "Winnings the easy part. Everybody knows how to win".
So what happens when a nation loses? I'd say first we deny it. Then as its effects become apparent, we blame ourselves. Hopefully, when people get around to the blame part, they'll pick the root causes instead of the scapegoats. I'll say it again- Concentrated wealth destroys democracies.
Who says gambling cannot be fun?
As a student, in late 60's and early 70's, I was a member of London's Playboy Casino. One could go to the "eat as much as you like" self-service buffet for £1 - yes, one pound. The drinks were extra but you did get served by a lovely young lady who was dressed like a bunny. If you were gambling, the drinks were free.
A guy one year older than me at boarding school - a 17-year-old - ended up owning this casino. Essentially, the British decided to keep the Americans out of London's casinos - they used words like "Mafia" to describe them. This boy's Dad was Hugh Hefner's partner. His name was Victor Lownes and the boy was Victor Lownes II. Anyway, they got a British nationality for the boy and passed ownership of the casino to him and stayed open for business. :)
The profits of the London operation (i.e. gambling) is what kept the rest of the business going as it was the only one with a gambling license.
This boy used to take his best mates to London for weekends and the other boys were most envious. Eventually, he went to the school doctor with an itch and the diagnosis lead to him being asked to leave school. I mean, doing it with a girl was a really one step too far.
I can't count the number of times my lady friend and I didn't have enough money to pay the taxi and had to walk home. She usually won for the first hour and then would not let me take her away until she had lost it all.
Blogger Stoneleigh said...
" Logout,
The debate will be available on DVD this week. I expect a lot more people will see it that way than listened to it live."
Good to hear. I think I am pretty familiar with both combatants views so what I look forward to is the is some sprited roaring of the crowd. I wouldn't have minded making comment in the live version, but I doubt that the view of 'stagflation' (now and for a little while) would have been appreciated. I could be wrong though, you each together might have enjoyed a rare sort of glee taking turns beating up on me. LOL
I watched Dmitri Orlov's recent video. Although I do not quite see climate the way he does, it is a very good video with much to commend it.
I was looking for something I think he said but was unable to find it in the transcript. Maybe I am using the wrong search terms, or he did not put it in the transcript or I remembered something from another video. Anyway, somewhere, I remember him saying that the drug cartels are best placed to exploit the coming anarchy since they are best organised and have the resources as well as the necessary ruthlessness.
How does an ordinary person set about joining one of these outfits? Here, in Australia, it seems to be necessary to buy an American motorbike and to join one of the two main motorcycling clubs - or to have had the good fortune to have been born in a number of remote Lebanese villages with names like Mishmish (i.e. apricots).
How does an American join the winning team? :)
The sum of all the numbers on a roulette wheel is "666", the sign of the beast. Nuf said about that!
A single '0' wheel odds for the house are 2.7% and a double '00' wheel odds for the house are 5.26%. There are some "European Rules" that decrease the house odds a little but in the US these are found only on high stakes games. So the space for the game is paid for even with lower odds.
Slot machines are typically much worse for the player. House odds are typically in the 15% range.
The only game that can be beatten is Blackjack AKA 21 by card counting. It takes lots of practice to count a deck in 25 seconds or less but with enough work it can be done. If the dealer thinks you are card counting by your betting routine, they will reshuffle the deck often and spoil your chance of any advantage. Even at best with card counting, the odds are some small fraction of a percent in your favor. Of course the drinks are free and that will spoil your odds too.
There is another function that is little thought about called "The weight of the money". If you have a $1000, even in a perfect 50/50 even game, and the casino has $100,000,000. You will tap out eventually. When I was dealing at a large casino here in Reno and I had a bad run, a runner would bring out another rack of chips. None of the players had anywhere near that sort of bankroll.
lynford1933,
What you call "weight of money" is very important - the more money you have, the more likely it should be to win but only if you are not greedy as well.
I did all sorts of things to try and make money out of "faulty" roulette wheels and suchlike - all the time drinking the free cocktails. Things like the Chi-square test seemed to be helpful in the search for faulty tables. Much later on, I learnt how a good croupier could make the ball avoid a certain part of the table. It didn't always work but it was certainly statistically significant. This meant that the maths were a waste of time. Of course, my professor of operations research did not believe me.
The tables in London are much more reasonable than those in the USA as they have only one zero. The destination is usually the same though. It can be thought of as a stock-control problem. I would love to own a tiny share of a casino (not shares in a casino). Free cocktails or even drinking at the tables got banned in the UK many years ago, hélas.
Nassim: "Much later on, I learnt how a good croupier could make the ball avoid a certain part of the table."
I knew a girl that could hit a quadrant half the time and when she missed it was typically the adjacent quads. This is what you were saying about avoiding a quadrant. When there was no one playing, she would practice that. The casino liked to see the wheel dealer spinning the wheel because it tempted people to play. BTW: I lost a twenty to her because I didn't think she could do that three times in a row. I have to admit it was a slow spin and the ball only went around a couple times but to the average player she could have cleaned their clock in no time or given them a nice gift.
“I hate these bloody shops. They’re like junk yards,” says one elderly flat-capped man to another as they shuffled past the Blackpool branch of Price Busters ...
Shop volunteers say they have noticed the changing circumstances of their customers. “More people are coming in here for the first time and realising how good it is,” says one. “Why pay £30 for a jumper in Marks when you can get a good one here for £3.50?”
Bargain hunters hit Blackpool’s pound shops
I detest the banks and banksters. However, I don't have a problem with Scott Walker. The state of WI is out of money. That's just a fact.
I knew a girl that could hit a quadrant half the time and when she missed it was typically the adjacent quads. This is what you were saying about avoiding a quadrant.
Lynford1933,
Yes, just what I meant. I had the rare pleasure of watching two croupiers take each other on - to see who was best at fixing the outcome. Obviously, if the croupier does something like that with an accomplice that would be the end of lots of things including their career. That was not in London.
Whenever a punter starts to win serious money, they change the croupier - they want to make sure that it is not the croupier. If the punter continues winning, they change that croupier as well.
The bit I said about the advantages of being rich and not greedy work as follows. Imagine a table with one zero - i.e. 37 slots. Normally, they pay 36 times the bet and your chip is still yours. Imagine that in this fictional casino, they paid out 40 times - instead of 37. Most people would think that the punter is almost certain to win. This is not true. If he wants to win, he has to bet a small fraction of his chips or there still is a good chance he would be wiped out. Somewhat counter-intuitive but true.
Forget cookie inflation
How about everything inflation.
The price of everything except some US real estate is rising, and somehow that's not inflation.
No make sense.
California home prices are rising by the way.
Added article: "MERS Lacks Right to Transfer Mortgages, Judge Says"
.
Cheryl,
You have clearly not understood the importance of defining inflation as we do here, rather than merely as rising prices. It is not nominal prices that matter, whether rising or falling. Affordability - real price, or price relative to purchasing power - is what counts. The real price is the nominal price adjusted for changes in the money supply (inflation or deflation).
It is very common for people to think only in nominal terms, but also very superficial. Here we like to look deeper at what is going on and why.
M3 plus total credit market debt peaked and began to contract (for the first time since the Great Depression) in 2008. That is deflation. Price increases are a lagging indicator of the inflation which was in force until that point, compounded by speculative momentum chasing in commodity markets. The pain of those rising prices is amplified by the contraction of purchasing power due to a falling money supply, meaning that real prices are rising more quickly than nominal prices.
As we move further into deflation, prices will fall instead, but it is vital to note that this will not result in anything being more affordable for most people. On the contrary, as monetary contraction picks up momentum to the downside, purchasing power will fall faster than price, meaning that real prices will rise.
Nominal prices have a role to play in deflationary psychology in that when they fall, potential buyers (ie people who still have purchasing power) put off purchasing decisions in order to wait for nominal prices to fall further. Because these people retain purchasing power, for them things really will be cheaper in a deflation, but they will be in a tiny minority. Everyone else is likely to be seeing their access to credit dry up, their wages and benefits plummet, their job security disappear, their debt servicing burden rise, their taxes rise etc etc. For them there will be no bargains, even at drastically lower nominal prices.
Judge on MERS - "The court does not accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country, that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law."
Good for him! all the big financials have top notch lawyers I'm sure, but like that ole Wyoming sheriff said, "the law is the law."
Isn't it interesting watching the principles of Tainter (and Thoreau?) at work in the world, trying to sort out the complex legalities of something as simple as shelter! Of course when millions think a reasonable shelter for themselves is a mansion with 14 gables and 3000 sq/ft I have little sympathy for their loss.
Yes, even our modest home (by today's standards) is far more than I need--we all are a part of this giant ponzi.
An update on Joe Bageant is found at: http://www.joebageant.com/joe/
Cheers,
Robert
Thanks for the Jim Quinn piece. Many truths included here. It's been said that history is lost on the young and today's news and happenings indicate that might be true. Thanks to all for the very interesting comments!!!
Update on Joe Bageant...
http://www.joebageant.com/joe/
Fed dictator Bernanke needs to be toppled Period.
Regards,
Paul
Does anyone else think the anti-government demonstrators in Tehran are somehow on the U.S. State Department payroll? Pretty tricky aren't they?
@Donovan
"..The state of WI is out of money. That's just a fact."
Funny you should bring that up. I was just working on writing an article about North Dakota and the Bank of North Dakota.
Seems 'the government' (horror of horrors), yes The Government, of North Dakota, by owning their own state bank have succeeded where Wall St and crony rigged market Capitalism have miserably failed.
What's missing with the Bank of North Dakota is a debt free issued (no interest attached to the actual creation of) local currency like the Austrians experimented with in the early 1930's as a localized solution to the lack of capital during the Depression.
Someone here posted this older link on the subject.
What the local currency idea lacked was the state bank idea from North Dakota to complete the local financing of civil projects, without the sadistic parasitic Vampire Squid of Wall St and the Compound Exponential Ponzi interest inherent in 'sovereign' currency being created from nothing (with debt/interest attached) by a private banking cartel/mafia, which is the current corrupt monopoly regime's modus operandi.
Banking should just be a utility like electricity or water or better yet sewage.
It is simply a local service that keeps track of the accounts, keeps them physically secure and loans money out to the local community, like the Bank of North Dakota.
Other states should wakethefuckup and adapt the North Dakota model to their circumstances;
Before it's too late
to affect any locally based initiatives due to chaos and depression (physical, mental, spiritual) and a general clusterfuckyness that will inevitably set in.
The fascists stopped the successful Austrian experiment. The Wall St Mobster Maggots would try to stop here.
They should be treated to the 'Hilly Billy' guillotine à la Fargo ;>)
_
Thought this might be of interest to some TAErs.
Video - 11 min. RT interviews John Perkins.
"RT News: Economic Hitman reveals shocking truths about the American Government"
http://www.youtube.com/watch?v=u17YHjeWBpE
“… the federal government lacks sovereignty. It lacks financial sovereignty - it is financially dependent on the banks that control its depository and slush funds, create the currency through the Federal Reserve and manage the accumulated capital of the same syndicates outside the government. It lacks information sovereignty as its data, information, and payments systems are controlled and operated by private corporations, primarily defense contractors. If we could dig out the true ownership of both banks and defense contractors, my guess is that it would look identical. Finally, the members of the Administration have no way of guaranteeing their safety and the safety of their families if they defy orders of those who have the weaponry and power to enforce their will by any means necessary.
This means that essentially there is no government as many of us think of it. It also means that the governmental mechanism is quite fractured, with many competing interests that lack an organizing mission. They simply share an organizing imperative to control and concentrate credit and cash flow and to enforce the liquidity of currency and credit that makes the system go.”
“Financial reform legislation has generated lots of make-work and expenses for thousands of companies and financial institutions without providing any meaningful reform.
So what does this all mean? The “strong dollar policy” – including the housing and debt bubble, trillions in financial fraud, and the suppression of the gold price – was part of a intentional plan to move trillions out of North America, both overtly and covertly. I refer to this as a “financial coup d’état.”
Wall Street and Washington issued trillions in fraudulent securities, used it to gain control over trillions in assets, and then were able to engineer the taxpayers refinancing out the fraudulent paper. Think of this as a leveraged buyout of a planet.
To the victors go the spoils. That is why we are seeing the people who engineered the coup so richly rewarded.”
Straight Talk with Catherine Austin Fitts: We Are Victims of A Financial Coup D'Etat
@IMN
el gallinazo,
"Good to see you here again. What pray tell would be the purpose of our geezer caucus?"
Well, when the end zone comes into sight, one might revise ones strategy. I would have a different approach to the coming collapse if I were 25.
Sorry JF
You can try as you might, but the very mention of the name Steorn gives me a rash. Simply can't stand looking at it.
.
A comment by someone just now on how e missed the great market advances yada yada yada has apparently gone missing. Sorry for that, please post it again. Never meant to delete it, and am pretty sure I didn't. I did delete a few long ones by JF on Steorn and other free energy sources. Hot air and rashes and all that.
.
"Stoneleigh said...M3 plus total credit market debt peaked and began to contract (for the first time since the Great Depression) in 2008. That is deflation. Price increases are a lagging indicator of the inflation which was in force until that point,"
That is a little disingenuous isnt it?
http://inflationdata.com/inflation/Inflation_Rate/HistoricalInflation.aspx?dsInflation_currentPage=0
As you can see, about 6 months after the Fall 2008 stock market crash, this series from the BLS reported negative inflation numbers (i.e. deflation). This is/was exceedingly rare - first time this series had EVER showed even a single a negative number in 50+ years. Thus, there is a lag, but that lag manifested itself by March 2009.
Sadly for the deflationistas, the negative numbers disappeared in Nov 2009, and we have seen 13 sucessive months of inflation (albeit very low) since.
"Stoneleigh said...Nominal prices have a role to play in deflationary psychology in that when they fall, potential buyers (ie people who still have purchasing power) put off purchasing decisions in order to wait for nominal prices to fall further"
Ahh yes, the deflationary spiral as it were. You are right, once deflation gets started, it is exceedingly hard to stop. Yet, as that chart (which many deflationistas I follow used to point to with glee when the data was going their way) shows, deflation was stopped dead in its tracks.
Anon.
Linking to something called inflation.data means zilch. No-one wants to understand what inflation is, and no, rising prices do not equal inflation. All you need to know is here, John Williams' SGS M3. It's still falling. That's all there is to it.
Do prices rise for some items? Obviously.
Is that inflation? Not necessarily.
And WIlliams' graph conclusively says that no, it's not inflation, since the money/credit supply is shrinking.
Time for everyone to try and figure out what it is that causes price rises, seeing as it's not inflation.
Disingenuous? I think perhaps knowing how we define inflation and then still coming back with a comment like this fits that term much better than Stoneleigh's statement you quote.
.
@Bigelow
Controlling the dialog, primarily with psychological means using MSM and cultural dumb=down has always been the name of the game for pure power and control.
Finding just the right term or meme that resonates with your propaganda is the Bernaysian Valhalla.
Catherine Austin Fitts piece I believe has a good counterpoint to Oligarchy with the phrase,"the federal government lacks sovereignty"
The U.S.
"..it lacks financial sovereignty.."
"..it lacks information sovereignty.."
Hell, it lacks political sovereignty, multinational corporate bank syndicates run it's political kabuki freakshow.
The term, 'the federal government lacks sovereignty' has a nice ring to it.
Too bad the majority of the U.S. population probably don't know or understand what the word sovereignty means, but to those who do, it sums up the situation in a quick little phrase.
The Federal Reserve is the ground zero for the concept of 'lack of sovereignty.'
It was granted a monopoly right to issue sovereign U.S. currency back in 1913.
The U.S. public Sheeple have sleep walked through almost a century where their own government hasn't issued it's own currency.
Amazing feat of propaganda.
Forget politics, the public is incapable of seeing the nose on it's collective face.
If "the federal government lacks sovereignty" message isn't understood and assimilated by the Public, forget the complicated financial yada-yada.
It's like scolding the dog, they just hear, "Blah, Blah, Blah, Ginger, Blah, Blah, Blah, ..." and wonder if there is a dog biscuit in it for them.
_
Hi
I just read today's post by Charles Hughes Smith at oftwominds.com titled "A 5-Year Scenario: 2011-2016 "
http://www.oftwominds.com/blogfeb11/2011-2016-2-11.html
It seems to me very consistent with what Stoneleigh suggests, but it has some guesses at a time line. What do you all think?
"Linking to something called inflation.data means zilch."
Curious, Deflationists used to love this site when the number went negative - its only now that they question its merits. I choose it because it is a major sympathist of Bob Prechter, one of Stoneleigh's favorites.
"Ilargi said...And WIlliams' graph conclusively says that no, it's not inflation, since the money/credit supply is shrinking."
So Williams graphs are OK? Great. Take a look at this one:
http://www.shadowstats.com/alternate_data/inflation-charts
According to your source, deflation appeared briefly in 2009 (just as it did on my deflationists site) and disappeared later that year. So again, if what we are seeing today is the last vestiges of commodity prices in late 2008, what exactly was that dip into deflation that your buddy Williams shows us?
Incidentally, my prediction is that you will refuse to provide a substanitive answer, saying I just dont know how TAE defines deflation. Thats fine. If so, your objection is so noted.
That said, the data you link to shows what they (and the bls and inflation data et al) call "deflation" existed briefly in early 2009 - the first such time in 50+ years. Thus, assuming the rising prices of today are lagging vestiges of the commodity prices in early 2008, what was the source of that once in a 50+ years dip we saw in 2009?
Does anyone else think the anti-government demonstrators in Tehran are somehow on the U.S. State Department payroll?
ogardner,
It is really quite comic to watch Khamenei pretend to support the Egyptian demonstrators and Clinton pretend to support the Iranian demonstrators.
IMHO. the people of Egypt and the people of Iran both want their regimes to fall but that most certainly does not mean that they want what Iran and the USA would like. They want foreigners to stop meddling and they want to get on with building their countries - after all these lost decades.
The guys running Iran are just as corrupt as the American Shah they replaced and that is why the people want change - it does not mean that they want the son of the Shah back again (which is what Clinton, Israel and the military industrial complex would like).
@Ahimsa and Bigelow
Acouple of good interesting links! Thanks.
"Next" by Kunstler, as usual humorous and interesting, even as he slaps around those of us who were genuinely moved by the Egyptian youth, as the kicked out of office, nonviolently, their strongman leader.
LG - "I would have a different approach to the coming collapse if I were 25."
Yes indeed! I would have a much different approach if I were 45!
:-)
http://tinyurl.com/kunstlerrant
So Anon,,
No comment (or even, as you call it. "substanitive answer" (whatever that may be) on the graph I linked to, and instead you prefer a CPI graph because that suits you better? Bit cheap, isn't it?
Unfortunately for you, CPI has nothing to do with what inflation actually is. It's just a bunch of hedonistically determined data devoid of any meaning, which someone glued the term inflation onto.
I don't mind having a conversation about this, but can we leave amateur hour behind, please?
.
"Ilargi said...No comment (or even, as you call it. "substanitive answer" (whatever that may be) on the graph I linked to, and instead you prefer a CPI graph because that suits you better? Bit cheap, isn't it?"
OK then, point to you. I did notice that the 2nd derivative of the M3 graph has gone positive, and (if the trend continues) will be back above zero some time this year. Still, as of this moment, M3 (as Williams calculated it) is down - no doubt about it.
"Ilargi said...I don't mind having a conversation about this, but can we leave amateur hour behind, please?"
Excellent. As I noted before, according to williams site, we had what he (and most people outside of I&S) refer to as "deflation" in early 2009. It was a monumental thing as this data series rarely goes negative. In fact it went negative for the first time in over 50 years.
As such, assuming as Stoneleigh suggests, the rising prices of today are lagging vestiges of the commodity prices in early 2008, what was the source of that once in 50+ years dip we saw in 2009?
Maybe one of our web-savvy compatriots could produce a simple checklist and explanatory animation about deflation. Something like--do you think rising prices means inflation? Yes or No, with educational excerpts to follow. A choose-your-own-adventure sort of thing.
It gets tiresome listening to the repetition. It took me quite a while to wrap my head around what deflation meant to I & S, so I read the primers and read the intros and read some of the recommended links. I invested in knowledge and understanding.
Now obviously the AnonCheryl has no interest in learning. But at least they could be pointed to a simple resource that would educate them if they desired and then they could be ignored.
@A Walk In The Woods
"If "the federal government lacks sovereignty" message isn't understood and assimilated by the Public, forget the complicated financial yada-yada."
Along those lines, forget Politics altogether. The expression "pushing on a rope" perfectly describes our citizen input where the federal process is concerned. How many understand there is no chance?
An email list urged that I contact my U.S. Representative yesterday to prevent the 'Patriot Act' from being renewed; a pointless gesture. Of course it was renewed and the headline characterized it as the anti-terror law.
We are not superior to our neighbors who think politics will work. We are just a tiny bit more awake than they are.
el g, hombre, IMN:
Out of curiosity, what WOULD you likely do if you held the mixed blessing and curse of youth?
I'm a 'whippersnapper' who has been prepping for two years, accruing knowledge, materials, experiences and practicum that I deem helpful. A wonderful change from working a desk job :)
But still I wonder if it's any dang use. The real question on my mind is how the non-prepared folks will react at losing... well... their closely held identities, followed by their waistlines! Hungry mouths and shattered dreams. The horror.
Do you believe that remaining in the US is desirable at this point?
I keep returning to the idea of heading to Central or South America... am I right in thinking that you're already in Argentina, el g?
But then I feel guilty at the thought of running away rather than trying to help!
Leaving family and friends who prefer to put faith in the giant lying mouthpieces instead of someone who loves them and who, most importantly, has created the time and space needed to pause and smell the burning smells coming from the kitchen.
Le sigh.
They all think I'm crazy. Or that I'm half-right and it could NEVER get that bad! Hmmmmm.
What say you? Any advice blessed with the wisdom of experience would be appreciated highly.
Oh - and let me take this opportunity to say a HUGE thank you to Stoneleigh, Ilargi, and the TAE community at large, for creating such a trove of barely-publicized information, punctuated by compelling and provoking discourse. Indeed, a beacon for the ragged lost.
@ el gallinazo...
I am curious, what would you be doing if you were 25? (Reason I ask is cause I am in the low 20's?
I have been preparing on all levels for several years. :) Still looking for the right community. My past friends and family are oblivious.
I make my investments based on no electricity, no gas, and no more commerce. Rule of thumb is to purchase things in multiples, while they are available and relatively cheap. During/after deflation many products will be unavailable!!!
My strategy is built on having land and water only. Problem is finding a community where I can get productive land with water. Once the die-off occurs I assume there will be much land to be settled.
@ Board...
On another note it is advisable for people to buy UV rated greenhouse poly plastic in advance. Its expensive stuff but there won't be any more once things unravel. 100x20 feet rolls (4 year warranty) for $230 Canadian. Still way cheaper that polycarbonate and more mobile.
Regular poly (even the 12-16m) stuff falls apart after several months in the sun. This said, regular poly plastic is great for double sealing windows, humanure compost underlay (prevent groud water contamination from surface recharge to be extra safe) and lots other stuff.
@ Deacon...
I parallel your situation. What should the youngings do? Buying land without a mortgage is the only obstacle for me?
I have thought of leaving my city is British Columbia because of the dominance of hells angels. Being prepared is one thing, but I too question the reaction of the people who will be unprepared, needy, and aggressive.
Cheers
The Anonymous,
As such, assuming as Stoneleigh suggests, the rising prices of today are lagging vestiges of the commodity prices in early 2008, what was the source of that once in 50+ years dip we saw in 2009?
Sigh, you misinterpret what I said. I never said anything was a vestige of changes in commodity prices. We had a rising social mood until late 2007, with monetary expansion persisting until 2008, and rising prices persisting for a while beyond that.
We then saw a combination of pessimistic social mood, a fall in the markets, a contraction of the overall money supply and falling prices as a lagging indicator. That period was followed by a rally in which the mood turned and confidence returned. Since we have seen a return to an expansionist mentality (the psychology of growth and of speculative price driving), prices have been rising again.
I expect them to continue to do so for perhaps a few months after the rally is over, and then I expect them to fall again in alignment with a pessimistic mood and monetary contraction.
Is that clear?
Hey board, even doomers need to laugh
Ahmadinejad Promises Democratic Reforms in Egypt
Andy Borowitz, you gotta love his stuff.
Ah, the ever present impatience of youth. The geezer caucus hasn't even officially agreed to convene yet and already we are being badgered for our votes. :)
I don't know what I would do if I were young today and accepted collapse as inevitable. The closest I can come to having been there was about age 30 when the US had just passed peak oil (though we were not told about it) and OPEC raised its embargo. We fairly easily adapted and collapse did not happen.
This time the world has peaked and collapse is in the wind. What I think we geezers might help you with is perhaps to understand what happened after our own peak. I learned a new word today h/t to Mad Max and Barry Ritholtz. That word is agnotology, coined to label the study of culturally induced ignorance. Creating said ignorance is the work of people dubbed affective laborers. Prior to US peak oil, they were making their chops denying that smoking had anything to do with cancer. After the peak, they were being paid to spread confusion and misleading information about practically everything. We see them here on TAE, yes I'm talking about you Anon, Cheryl, et al. Tossing in inappropriate figures from corrupt sources like the Bureau of Lying Statistics.
The result is that humanity approaches its most challenging event since Toba, holding more wrong ideas about the world and its people than seems humanly possible. I love it here at TAE because there are so many denizens that apparently had gotten over their thirst for kool-aid and retained the ability to see some reality. Maybe what we geezers can do is try to retell some of the old, not quite so corrupted, mythology.
@agtefc
You live in a place dominated by angels from hell and you want to leave. Are you crazy? Has Orlov taught you nothing? Where do you think this world is headed? Do you think there is some place where the heavenly variety will ride to your rescue? Sorry, geezers can get carried away with question marks sometimes. Seriously though, I would give some thought to slipping into one of the biker bars to see if I could develop a little rapport with them. Of course, I wouldn't use words like rapport in there. If nothing else, it would be good practice for what's coming.
Anonymous archaeological sources have being quoted saying that the lost civilization named "idiot doomers" in the year 2130, had charts that showed they were in deep doo-doo, but not as per their second derivatives. The diggings continue.
News at 11.
Regards,
Paul
what should youth do?
My boy who is now 20 seems to have found his own approach.
1- He lives in Norway
2- He is crazy about weightlifting - he lifts 100+kg
3- He is physically huge 195cm and 110kg
4- He eats no refined carbohydrates but does eat raw eggs by the dozen
5- He gave military service a miss after 5 days - they were feeding him the wrong things
6- Right now, he is studying physiotherapy
7- Never watches TV and has stopped video-gaming and internet usage almost completely.
Ruben said...
“Maybe one of our web-savvy compatriots could produce a simple checklist and explanatory animation about deflation.”
Well, I’m not terribly ‘web-savvy’ but here’s a 10 question common sense non-technical guide to deflation/inflation for dummies.
1. Is it easy to get your hands on some money?
2. Is it easy to get a job these days? (corollary: would you turn down a crap job offer to hold out for something better?)
3. If you are lucky enough to have a job, do you dare ask for a raise?
4. Is your bank offering you a calculator or coffee maker for opening a savings account?
5. Are you getting 3 credit card offers a day with free transfer of balances at 0% for 12 months?
6. If you’re not a demented geezer, do you think a 5 year 6% CD sounds reasonable?
7. Are home sellers getting 3 simultaneous offers the first week their house is on the market?
8. Are the odds of winning at Lotto getting better?
9. Seen any new shopping malls open up lately?
10. Does it seem like there are a lot of more weddings and births among people you know?
As not an old Geezer, but a medium one, I would past on something from my own youth to the young of today who 'have a clue'.
All my senior male relatives in the extended family fought in WWII. Almost all in frontline combat units, Pacific and Europe. At family gatherings, I would overhear them talking among themselves. To a man, all agreed there was no rhyme or reason for why they survived. It didn't matter if you were smart or dumb, many, many very intelligent men died around them. It didn't matter if you kind or cruel, many genuinely nice guys died, many SOB's lived. It didn't matter if you were handsome or homely, tone deaf or a talented musician. It didn't matter if you believed in 'God' or not, it didn't matter if you loved humanity or hated it, if you were in the wrong place at the wrong time, you died. And knowing what was the 'right place' was anyone's guess Most of the time, often a matter of split seconds and fractions of an inch. All were haunted to a greater or lesser degree by survivors guilt because none thought they were any better of a man than the next to have survived. Most never spoke about what they experienced until the end of their lives. It was a truly humbling thing to have gone through.
As to what the young can rationally do now, what comes to mind is the old expression, "Chance favors a prepared mind".
It is still ultimately a matter of chance and 'luck' in dire straits. If you believe in Fate and Karma, that too puts it out of your conscious decision making process.
Maybe it is Karmageddon, maybe it's the Craps table.
My own lame strategy if I were young again would be to practice being as 'mindful' as possible, to simply pay attention to each moment. It is what I always did when playing my best in sports. Being 'in the zone' applies to all aspects of daily routine.
Especially when working with power saws. :>)
_
@ Nassim...
110 kilos eh. Sounds like a healthy kid. Well situated in Norway :) Size and lifting strength are significantly overrated though. Full day stamina is where it is at. Most guys at the gym would pass out after 2 hours of turning soil with a spade. Not saying your son is most guys, but that stereotype still holds. What is coming is the mother of all grunt work. 16 hour days everyday will be the norm. The more you prepare now the more leisure you will have (if any)
Procuring firewood for the winter alone (by hand) Chop, buck, transport, split, stack is where the real work out is :)
Cheers
@ I AM Nobody...
Seen the Orlov video; good points. (Hence the initial concern)
I do wonder whether the severity of the food shortage likely to occur will leave gangs intact. While gangs dominated in the soviet collapse (Orlov) the boundary conditions are quite different this time around.
Cheers
@ A Walk in the woods...
You raised a good point about safety though. Risk aversion always in a world with little healthcare. I am sticking with manual tools because cannot rely on fuel or electricity and also for safety.
I remember the sacrifices of WWII frequently. Too bad we may be ushering in a WWIII. We have the most militarized state of the world in human history. For years Churchill raised the prospect of war and no body listened. I think we are at that same point. I am no Churchill, but WWIII is coming...soon.
Cheers
@agtefc
As Dmitry tirelessly points out, things are different here and not, in his opinion, in a good way. As most everything in the USSR belonged to the state, nobody much cared what individuals appropriated from state property. In our best of all possible worlds, where nearly everything is privately owned, we will kill anyone bent on appropriation. Which inspires a choice, try to do it alone or bring a gang.
One need look no further than Mexico to see that an impoverished corrupt kleptocracy is a fine place to organize and sustain gangs. I do not agree that we are about to see WW-III. Usanistan seems to be the only country on the planet presently disposed to make war and we seem to have our hands full already. What I think is quite possible is MOAGWAR, the Mother Of All Gang Wars. Perhaps to be fought all over the world. Just about an hour ago, I saw a report on AlJazeera about BIFF, a Muslim gang of about 200 on Mindanao, claiming to be a separatist movement. Their uniforms didn't match and their weapons were eclectic, but they appeared well fed.
A Walk in the Woods said...
The fascists stopped the successful Austrian experiment. The Wall St Mobster Maggots would try to stop here.
Same thing.
We have real fascism now . . . corporate-controlled governing of the world.
@ I AM Nobody...
I concur with you on the gang wars.
RAPID (within 15 years) depopulation to under One billion people is both "Necessary & Sufficient" for posterity on ecological and environmental grounds alone. How we go from 7 billion to 1 billion we will only be able to say in retrospect, but no doubt war is in the cards.
Demand destruction at the per capital level (destruction of individual wealth and purchasing power), overshadowed by demand destruction at the global level (destruction of the global economy and trade) will only reduce population by a few billion. Throw in a war to get the world elites down to their population quota.
The funny thing is that some people think the "new world order" is coming within this lifetime, but they fail to realize that the time horizons of the people planning the new world are on a century level time scale.
Deflation kills two birds with one stone. 1) It further concentrates/centralizes power to the wealthy elite and 2) Causes demand destruction that is necessary (but not sufficient by itself) to save the earth from environmental catastrophe.
Any restart at above one billion still runs the risk of environmental catastrophe given the critical state of the environment.
Cheers
If I were a twenty something I would prepare for a life of forced mobility.
Joining the army has been a popular option for centuries. (For the moment, migrant labour is another option)
I wouldn't fantasize about a fast die-off leaving plenty of open space to create a new world.
Unless I had deep roots in an a region, I would want to live near navigable water.
I would try to avoid accumulating too many "survival" toys that may be difficult to haul around, unless I were already well-situated and secure.
I believe the lifeboat primers here emphasize preserving cash in the near term. You will need money for the forseeable future.
Many of my ancestors spent decades wandering the oceans. Many died young, but some survived and eventually found a safe haven in old age.
Stoneleigh posted an intro about how the future belongs to the adaptable. If you are fortunate to have a good knowledge of your family history, you would likely find many illustrations of this.
Deacon,
I realize that I didn't address your questions. As I mentioned in reply to agtefc, gangs and militias seem likely to make life treacherous just about everywhere on the planet. AlJazeera reported this evening that a US Federal Agent was executed at a roadblock in Mexico. It seems that just about everyplace on Earth includes at least one group with a longstanding beef. Already they are being joined by new groups with new beefs.
Leaving Usanistan might work out for you, but it does bring to this geezerly mind an old saying. "You can run, but you can't hide." Trouble can find you anywhere. Now if only those techno-topians had what it takes to build the Starship Enterprise, maybe you could book a ride to the Klingon Empire. Oh wait, they're kind of a warlike gang culture too aren't they.
The question of family is a very touchy one. Some families will pull together to try and survive. Some will practice betrayal perhaps out of spite or to gain some small advantage. Some will, without malice, drag their well-prepared members right over the cliff with them. Luck and Karma are going to count for a lot more than most people think.
I don't believe M3 is a good indicator of either Inflation or Deflation-
Williams rebuilt M3 using the same components as the Fed used-when they printed M3-
http://research.stlouisfed.org/fred2/categories/28
You can see M3 contains MMMF's+Time deposits+Euro dollars etc.
These are classed as MZM and MZM has no effect on money/credit supply-
I think the reason M3 has turned back up-is because MZM has been hot-
http://bit.ly/hTb6Kq
http://bit.ly/gqubSa
Here's where your Deflation is happening-
Credit is contracting faster than money is being printed and the money that's being printed is being borrowed by Investment Banks
GS etc. at zero and they are speculating in the stock and futures market and driving prices-
Actually-they are front running their clients (again) and when the time is right-they'll be net short-
The Credit market is 20 times the size of the cash market-
http://research.stlouisfed.org/fred2/series/SBASENS
http://research.stlouisfed.org/fred2/series/TCMDO
http://bit.ly/gfiFo8
This isn't counting the shadow banking and that toxic paper supply which last i heard was around 7 or so hundred trillion and no one will take it to the market to see how much value there is-
If it ever was marked to market Deflation would literally scream-
So far-Bernanke has slowed Deflation and even caused a hiccup of Inflation-but that will be short lived-imo
Money Supply, Inflation defined by John Williams
http://www.shadowstats.com/
article/money-supply.pdf
Money Supply Special Report
Aug 3 2008 by John Williams, Shadow Government Statistics
"Inflationary Economic Contractions-Current Environment-
As the severity of the current downturn has gained broader recognition, some in the deflationist camp have started to argue that the underlying fundamentals driving the economy into the ground also will lead to lower prices, actually triggering a deflation. Quite to the contrary, despite deteriorating economic and financial conditions, my outlook remains for rising inflation well into 2009 and for a situation that eventually will evolve into a hyperinflationary great depression, as outlined in the Hyperinflation Special Report of April 8, 2008."
Price Inflation vs Monetary Inflation
With John Williams' projected Price Inflation running close to 10%, I think the terms Inflationary Economic Contraction and Hyperinflationary Great Depression are right on.
Baroto
We know John Williams can't seem to properly interpret his own graphs. We mentioned that long ago. I've yet to see anyone forecast hyperinflation who actually understands the term.
The bottom line remains where we have always put it: as long as the US borrows at international bond markets, hyperinflation is not possible. Once it leaves those markets, it is, but that's years into the future.
.
Used
About dead on, I'd say, though I do think M3 is not entirely useless as a deflation indicator. What I think you could add to your overview is the notion of what I have named "zombie money", and/or zombie credit: this is not just about the fleeting emptiness of credit as such, much of it concerns wagers that have already been lost, and were "financed" with credit to begin with. Even if "assets" are not marked to market, it's all still only running to stand still. Lastly, I think a good argument can be made that credit is many times more than 20 times the cash market. Just look at the $700 trillion (or is it still over $1 quadrillion?) derivatives monster in the closet.
.
The undo function. Does "control+Z" work in meatspace? Yes, if you "control+X" the law.
Surreal world we live in.
Regards,
Paul
Ilargi
"as long as the US borrows at international bond markets, hyperinflation is not possible"
See I think that has changed, per our friends at the Fed. They are the biggest buyer/holder of us treasuries now, and estimated to hold as much as China, Japan and UK combined by the end of the year. We had our deflationary collapse in late 2008, early 2009, but then the Fed stepped in. It would have been a different story if they didn't, but they did and have since. So what we have is the Gov issuing debt,Treasuries (1.5trl deficit) and the Fed buying most of it (QE). The day the gov stops running a deficit and the Fed declares the end of QE in any form, that's when the market goes down, the economy crashes(even further), deflation sets in, $ goes up, but until then.......
US House committee hearing takes aim at public sector pensions
On another note I'm very pleased the 20 somethings on this board have decided to take matters into their own hands and are trying to do something about it. Godspeed y'all.
@ all
interesting:
http://www.globalresearch.ca/index.php?context=viewArticle&code=NAZ20110205&articleId=23096
http://www.globalresearch.ca/index.php?context=viewArticle&code=NAZ20110202&articleId=23050
RE: Collapse...
I think about collapse these days as it relates to the convergence of political, social and monetary forces...all under an umbrella of resource allocation and access.
How, I wonder, will the USA maintain a relatively stable social system if and when the system reaches a critical mass viz resource allocation? AND...will the USA "ever" reach that point? There are many lands to exploit. Perhaps the "rape" of the developing world has only just begun.
"Stoneleigh said...Is that clear?"
Yes, perfectly. I would have understood it in the first instance if you admitted to Cheryl that the downward prices of 2009 were halted by "expansionist mentality (the psychology of growth and of speculative price driving)", but that in the future you "expect them to fall again in alignment with a pessimistic mood and monetary contraction."
Thank you for the substanitive response. This is much more constructive than some your apologists here on TAE which prefer the veiled insult approach (although I must admit, I do find it amusing seeing that they felt absolutely compelled to respond).
That aside, given what I now understand you are saying I have one followup.
As was noted, that downward pricing action of 2009 was very very unique - a once in 50 year occurrence - and clearly set up a possible deflationary spiral as prices fell and less money (combined with less credit) circulated throughout the economy.
Once these things get going, they are exceedingly hard to stop. Yet as you admit, the mood turned and, prices have been rising again.
Thus, my question - if this deflationary cycle which is so difficult to stop has ineed been stopped, what makes you think that when it returns, it cannot be stopped again?
ilargi:
"Just look at the $700 trillion (or is it still over $1 quadrillion?) derivatives monster in the closet.
"
If I go cover your bet and Joe covers mine and then in your turn you cover his, we got a lot of covering going on, with just the original bet having any traction.
How much of those 700 T to 1 Q in derivatives have traction?
Ilargi - when you say Used was "dead on" do you also happen to agree with his statement:
"So far-Bernanke has slowed Deflation and even caused a hiccup of Inflation-but that will be short lived-imo"
If so, this alleviates much of the dispute I have with you in that you acknowledge that here, now, in this particular moment in time we have a "hiccup of Inflation".
If so then fair enough. And if you too think it will be "short lived" then fair enough. Just understand, the reason I took issue with you (and Stoneleigh) is that much of your writing suggests we are now, currently, in a period of deflation.
I was talking to a local business person who's relative is a local accountant and was surprised to hear how many small and medium local enterprises use short term (credit) loans for day to day operations and to cover weekly payrolls.
The majority do this now in this area.
If that is the case, the 20 to 1 (credit to 'money') ratio is even worse than I thought because what many think is 'money' for their paycheck is actually credit.
When they take their paycheck at the end of the week and spend it, they are spending credit, someone else's credit, but it's not money or savings.
It's not money from their employer's bank account but credit from their employer's credit line.
Multiply this over the small/medium bizs for the whole country and that 20 to 1 thing could be 200 to 1 for all we know.
As credit collapses, the small biz credit lines that go down are paying A LOT of the salaries (that pay the mortgages) that people think are actually money but in fact are very short term (weekly) credit.
I think there is a tremendous multiplier effect to this 'short-term loans to meet payrolls thing' which is not being reflected in the stats, from the governments or in Shadow Stats.
_
@I.M.Nobody
You saw the report on AlJazeera about BIFF.
Now the burning question is: were is the MILF?
Sorry, could not resist such easy bait ;)
On a more serious note, I won't post the link to Tool's "Right in Two" again, you can google it :(
Regards,
Paul
Ilargi-
I'd say, though I do think M3 is not entirely useless as a deflation indicator.
**********
Yes M3 can be used in part for looking at and gauging recessionary events-
I'm with you on the seldom spoken about shadow banking derivative monster-
Williams seems to interpret every chart that points north as proof of hyper-inflation-
Hyper-inflationists need to explain what exactly in a total fiat system-the USD is supposed to hyper-inflate against-
There has to be a peg somewhere and with the whole planet in printing mode-currencies just float against each other-
Another question hyper-inflationists don't care to answer-If they believe their own story that is-
Why are they not borrowing all they can and leveraging into real-estate?
That would be a no brainer-
@ A Walk in the woods...
Excellent Point!!!
When you look and see how far the rabbit hole goes (with credit),it keeps going deeper and deeper. 20:1 ratio is the conservative bounds, and an order of magnitude higher (1:200) is a serious likelihood to contemplate.
The reoccurring trends in Science, Economics, and Sociology is that estimates and predictions are more conservative than reality because reductionist determinism (not getting the big picture) fails to incorperate positive feedback cycles and integrate cross disciplinary variables. We have to introspect on our pessimistic outlooks and biases, but being overly optimistic, especially given the trend of being too conservative is worse.
Perhaps even more alarming is how dependent the food production, distribution, and commerce industries are on credit. (Choir Preaching) Grocery store owners do not own the goods in the store with base money, but with letters of credit. Same thing for global shipping industry. Same thing for manufacturing (forward demand of supplies)
Cheers
@ Dan...
Good links. :)
Global research is one of my many research stops.
Cheers
@ Q...
On your advise for a youngin to prepare to stay mobile:
Mobility will be critical.
This means no children and not pregnant for the period where things will be nasty.
If you are older and don't plan to have kids, get "snipped" to be sure.
If your a youngin, getting snipped is likely not an option, but I would store condoms for the first bit and do some heavy research (and practice :)on family planning.
For the highly available young gentlemen out there, who are preparing/prepared, be forewarned that you have a "make baby and family security" target on your forehead. Sex can be a liability in many situations that most cannot afford. When things get tough the liability will be enhanced.
Cheers
I want to thank I&S and the TAE Board community for all your posts, comments, perspectives, links, and helpful advise. Can never be too appreciative. :)
Cheers
Gotta love Obama!!!
"Obama to Propose More than $1 Trillion in Deficit Reduction"
http://www.globalresearch.ca/index.php?context=va&aid=23214
The budget for the Environmental Protection Agency would be slashed by a staggering 30 percent. Other cuts include:
· The Women, Infants and Children program, providing milk and other food for low-income pregnant women, mothers and young children, cut $758 million, about 10 percent
· Head Start preschool education, cut $1.1 billion, about 14 percent
· Community health centers, cut $1 billion
· The District of Columbia budget, cut $240 million, mainly from the Metro system.
There are moves in both the House and Senate to pass the 2011 Defense Appropriations Bill intact, which would effectively exempt the military budget from any cuts in the revised continuing resolution.
Dan wrote "How, I wonder, will the USA maintain a relatively stable social system if and when the system reaches a critical mass viz resource allocation?"
I have a few booklets of ration coupons saved from WW2. (Not from the USA though)
There is no way the illusion of individual freedom will survive. There will probably be central planning of one sort or another. How this plays out around the world will vary.
The boomer generation who made a cult of "individualism" and self realization have been very quick to sell their children into slavery. The obscene giveaways of the past 2 or 3 years clearly illustrates they are ready to acquiesce to central planning.
The Century of the Self series linked here in the past was truly nauseating, especially the account of how the supposed individualism of the 60s generation morphed into self-centredness through the 70s, to political control in the 80s and beyond. I watched all this happening in real time. I recall clearly how the mass media in the 1980s began to seriously glamourize the money-for-nothing ethic of speculators and corporate raiders.
As to how long the Empire will persist, it is a bit ironic how many Irish and Scottish soldiers helped spread freedom and democracy for the British Empire. There will be no shortage of recruits for the current empire in the near term.
"The Anonymous said...
Ilargi - when you say Used was "dead on" do you also happen to agree with his statement:
"So far-Bernanke has slowed Deflation and even caused a hiccup of Inflation-but that will be short lived-imo""
It should be obvious that the way we define inflation/deflation, i.e. money/credit supply x velocity, is about broad term movements that leave no room for hiccups.
"If so, this alleviates much of the dispute I have with you in that you acknowledge that here, now, in this particular moment in time we have a "hiccup of Inflation"."
That would be a no. See Shadowstats M3.
"If so then fair enough. And if you too think it will be "short lived" then fair enough. Just understand, the reason I took issue with you (and Stoneleigh) is that much of your writing suggests we are now, currently, in a period of deflation."
We are in deflation. See Used's:
"Credit is contracting faster than money is being printed and the money that's being printed is being borrowed by Investment Banks"
Rising prices, once again, and again and again, do not equal inflation.
.
" baroto said...
Ilargi
"as long as the US borrows at international bond markets, hyperinflation is not possible"
See I think that has changed, per our friends at the Fed. They are the biggest buyer/holder of us treasuries now, and estimated to hold as much as China, Japan and UK combined by the end of the year."
Sounds kind of cute, but foreign holdings of Treasuries are still close to 50%, and the absolute dollar amount on them is rising fast (mouch more issuance).
If these holders, plus the large stateside ones, (Pimco et al), demand 8% interest, do you think the Fed will be satisfied with 1%?
.
A fine example of free markets!
New SEC Short Sale Rule and its effects on the US stock casino
Scheduled to take effect Feb. 28, 2011 the SEC recently introduced Rule 201 to prevent short sales. 201 halts short sales on any stock at or below the bid once the security falls 10% in a day. The freeze is in effect the day it trips and all the next trading day. Does not apply to penny stocks but all the rest.
Big bank trading will surely have some way to prevent this rule applying to them.
So far-Bernanke has slowed Deflation and even caused a hiccup of Inflation-but that will be short lived-imo
**********
I should clarify that statement-
If you look at total credit-you can see the recent uptick and that was what i was referring to-
http://bit.ly/gfiFo8
It is clearly inflation (rise in credit borrowing) but as John Hussman explains-
It is actually just more debt because Corporations have been maxing out credit lines in case of another credit freeze-
So it shows on balance sheets as cash-but is really just another debt liability and they are not deploying any of that cash into the economy (expanding)so although it is Inflation-it is not Inflationary (velocity)
http://www.hussmanfunds.com/wmc/wmc100809.htm
The *flationist argument rages on, all sound and fury signifying nothing but a successful distraction from the one critically important monetary development. I have previously posted comments trying to explain it, but lack the writing talent and greater knowledge of the topic possessed by Charles Hugh Smith. His latest essay hits it very well IMHO. You Want Inflation? Here's How To Get It
The *flation situation is really quite simple. Roughly the top decile are enjoying them some nice credit-based monetary inflation. The rest of us, not so much. We get to hum along to them good oldtime deflationary blues. Sung to the accompaniment of ever rising prices for the things we can hardly live without.
We can wait in vain for Helicopter Ben. Oh, the helicopters will be coming someday. But not to drop cash in our front yards. They will, however, be loaded with precious metals and prepared to rain them down upon those deemed to be insufficiently docile in their misery.
I highly recommend this essay to help illuminate the reason why the situation is so little understood and seemingly arguable. We Can't Think Anymore; We Can Only Count Plenty of people are busy totaling up the money supply. Few seem to pay any attention to the obvious fact, requiring no act of counting, that it is very poorly distributed and getting worse every day. That's the fact that matters. That and the also obvious irremediality of the situation.
Ilargi
"If these holders, plus the large stateside ones, (Pimco et al), demand 8% interest, do you think the Fed will be satisfied with 1%?"
I think the Fed and the Treasury/Gov are working together, and no the US/Treasury can not aford higher interest rates on the debt, but the fed is purchasing at the curent low rates at a rate of about 1trln per year.
Lets say that continues for another 2-3 years, foreign and domestic hoders continue to sell and the Fed ends up holding 70-80% or more of US treasuries. Can the Gov default then? Or even end the Fed?
Ahimsa,
It is not possible to understand the budgetary priorities of the Kleptocratic Imperial Republic of Usanistan until you recognize the intended function of its various departments. Not that complicated though, as there is only one that really matters.
It is understandably assumed that the Principality of Pentagonia houses the successor in interest to what was called the US War Department. This is demonstrably false based on one simple observation. The War Department won clear victories in all of its military adventures, except 1812 which was kind of a draw. Pentagonia hasn't even fought a single war, as declared by Congress, nor even successfully concluded combat against anyone able to field more than a few dozen poorly trained riflemen against them.
Since the late 1940's, Pentagonia has served as the primary federal welfare agency for the top decile of Usanistanis and their collaborative partners in the Theocratic Rabbinate of Zionia. As such, it is completely understandable that Pentagonia has and will continue to enjoy monetary inflation. Those other agencies tend to share some of their money with the riffraff and there is only so much to go around. So, it's deflation for their budgets.
It's natural to blame the occupant of the Oval Office. Per Harry Truman, the buck stops there. It is well to keep in mind though that the occupant only has it on loan, they don't own it. They work diligently for their masters, like any insecure laborer.
Why Isn't Wall Street in Jail? Matt Taibbi, RollingStone
I. M. Nobody said...
****
Thnx for CHS link-
I can't agree with what he says on how bailing out homeowners would cause Inflation (spending)
The big problem is unemployment and sentiment relative to that and current economic conditions-
I think that even the bailed out homeowners would not start spending more (or at least much more)
Also with printing that amount of money and throwing it at us peasants-Bond yields would likely spike up big as foreign Bond buyers shy away from a fast devaluing $ and that would actually have a big Deflationary effect as people would start saving more-
Sentiment is the killer for Bernanke-
One more thing-
At some point rising commodity prices will find a ceiling-because sooner or later-they all must be consumed by us lowlife's and affordability is steadily dropping out from under prices-
Eventually the real market will call BS-then look out-
Used said...It is clearly inflation (rise in credit borrowing) but as John Hussman explains-
It is actually just more debt because Corporations have been maxing out credit lines in case of another credit freeze-
So it shows on balance sheets as cash-but is really just another debt liability and they are not deploying any of that cash into the economy (expanding)so although it is Inflation-it is not Inflationary (velocity)"
Sounds reasonable to me. I am assming then, given that it is on balance sheets, but not actually deployed (i.e. in circulation), its effects on price are based more on the "expectation of inflation" than from actual inflation itself?
http://www.sciencedirect.com/science/article/B6VBW-4MBJY7D-2/2/f484a0c41ea88d8133abf4098483703e
"Ilargi said...It should be obvious that the way we define inflation/deflation, i.e. money/credit supply x velocity, is about broad term movements that leave no room for hiccups."
Meaning what precisely? That the "inflationary hiccup" does not matter or does not exist?
Im not trying to be snarky, im just trying to understand. For the record, I am not a hyperinflationist. Far from it, the only way I see that is even possible is if Ben prints 500-1,000 trillion dollars to offset the entire debt universe and there is no sign this is going to happen. In my mind, there will either be severe deflation, mild deflation, or mild inflation. Hyerinflation is a pipe dream.
Braindead arogant dude debates Shilling.
Fail
Regards,
Paul
@used
I am personally certain that CHS wrote his essay to be expository as to how and why we find ourselves living in a bifurcated economic system. I don't think he was actually writing Benny a prescription.
No argument that commodities will find ceilings. What I have some doubts about is whether or not gravity is a recursive algorithm in this particular economic universe. The protestations of our esteemed colleague here not withstanding. The decline of demand just might be met with a decline in supply causing those balloons to bounce along the ceiling instead of popping and falling to the floor.
As hideous an outcome as I seem able to imagine. Nevertheless, the limitations in nature's bounty and the mercilessness of the Kleptocrats make it seem quite feasible to me.
@P01
Schilling vs Tamny was a prime example of agnotological affective labor in action. They did nothing but muddy the water, which is what such "debates" are intended to do. The host slipped in the only salient observation, which is that labor is stuck in wage mud.
Of course, noone offers to speculate on what that might mean. Nor did anyone mention the large pool of wannabe laborers who are drowning in that muddy water. No, we're just supposed to keep watching those silly money supply charts and market indexes while we wonder why so little of it ever rains down on us.
This is (just the begining of) a bank run. Expect more to follow, complete with: "Oops..our treasury caught fire, sorry about that..."
Regards,
Paul
"Property taxes = Perpetual Liabilities - An endless note on your house you can never pay off
by Mish - Global Economic Analysis"
I don't get it. This article was a total roadblock for me, and I couldn't even read the whole thing. Why does it sound like a bad thing that I can never pay off my property taxes? What my property taxes go to, are for services I USE, and will continue to use until the day I die. So why should I expect property taxes to go away?
I pulled my own house off of the county parcel viewer, and there is a pie chart that shows where my taxes go to. Here is the breakdown:
School 36.69%
Consolidated 30.35%
Fire 12.93%
City 12.29%
Library 4.47%
EMS 2.37%
Flood 0.87%
Ferry 0.03%
I am publicly educated, and I have a teenage daughter that is in public education. I use that daily. Some day I may be paying for the right for my grand children to go to school. So what! Fire, city, libary, EMS, Flood, Ferry. Don't want them going away, either. I use them.
Now that big chunk I didn't touch, Consolidated. I can download a long list of 2011 consolidated levies, but will post just a few. Veterans aid. Mental health. Parks. Zoo/open space/trails. Transportation........
So can someone please explain to me why paying property taxes is a detested "perpetual liability?" I may not agree with 100% of where my taxes go, but the majority I do. And don't tell me renters don't pay property taxes. Their landlords do, and the cost is passed on to the renter.
I am free to exit my house, and enjoy driving on roads, through cities, to shopping malls, hike in the mountains, swim in lakes, play in the ocean, listen to birds chirp, check out books from the library, and can call 911 for police, EMS, or firemen in an emergency. ALL FOR FREE.
So why are property taxes a bad thing???
I don't get the complaint. I will happily pay my property taxes. Until I die.
Sorry for the rant.
ab
Blogger I. M. Nobody said...
@used
I am personally certain that CHS wrote his essay to be expository as to how and why we find ourselves living in a bifurcated economic system. I don't think he was actually writing Benny a prescription
********
Don't get me wrong i like CHS-
No question that he was only giving out an example-but my point was-i doubt even that would cause inflationary conditions although it would eliminate some personal debt-which at this point is the biggest problem-but would also load up the deficit which again falls back into out laps-
**********
The decline of demand just might be met with a decline in supply causing those balloons to bounce along the ceiling instead of popping and falling to the floor.
*******
I think you're right-a supply crunch will eventually happen and prices will be effected by it-unless the Governments finally get a clue and let the market sort this out-
Bodies need to float and after that an equilibrium will be found by the market "if" its allowed to work-but i don't hold much hope of that happening anytime soon-
*********
The Anonymous said...
Sounds reasonable to me. I am assming then, given that it is on balance sheets, but not actually deployed (i.e. in circulation), its effects on price are based more on the "expectation of inflation" than from actual inflation itself?
*******
There is definitely some merit in what you see-
The way MSM/Fed et al has been touting all this so called "sideline cash" and uptick in borrowing-has no doubt gunned investor sentiment because they don't see what Hussman describes-
not being a regular poster here-i apologize for cluttering up the board today-
I like this site and i do donate-
Keep up the good work I&S-
@ab, re: property taxes
I think your rant is at home here. My interpretation of what Stoneleigh has said on this topic would be--
Your town will try to hang on to its cash flow long after they have exceeded your ability to pay. In the short term fewer building permits means reduced cash flow for the city. This can be easily compensated for with a small increase in property tax.
But a collapse of revenue as properties are devalued and new construction withers means there is no other revenue source for income except property taxes. Add on a few exciting features like poor municipal bond decisions or the privatization of the sewer system, and you could be on the hook for considerable cash.
If, at the same time, you have lost your job, are paying a mortgage on an underwater property, have health issues etc. this could be a real problem.
AlphaBeta Soup - I have some of the same feelings about property taxes. If I'm lucky enough to own, I'll pay my fair share.
With MISH I think it's his extraordinary anti-union bias. You see to him, firemen, police, and teachers are extortionists! Check his back posts. Anyone in any union, anywhere is the enemy!
As to the post in question, notice that Oregon has no sales tax, so the funds for the programs you listed have to come from somewhere!
Here in Indiana we pay 7% sales tax on about everything in addition to property taxes of 2%+
Do I like it, no! But I want/need the services... when they stop, I'll stop paying.
I called my county to see if I could pay ahead 2 years in property taxes, such that I would have a roof over my head and not worry abut my house being taken from me, and the family would have a place to stay. I was told 'no', that I can pay only 1 year in advance.
To the chicos (younguns) who queried me:
First, just let me say that I use to be a regular commenter, but since I moved to my new place about 5 months ago, I cannot get internet in the house and have to use cafes in town. This slows down my feedback, and I often tab the comment page and read it at home. This often puts me a day or two behind the loop which takes some of the fun out of commenting. Also, the display went bad on my MacBook and it took almost two months to get it repaired here. I have a 3rd gen iTouch, which totally saved my ass, and I followed TAE and the comments on it, but writing extensively was tedious, particularly because I have very large hands and lack dexterity. And yes, I have been living since the start of last June in Argentina, on the outskirts of a large town about 100 km by road NNW from Cordoba, AR’s second largest city.
As to what I would be doing if I were 25 instead officially entering old age by Usakistani standards next August. I would hopefully be doing what you are doing and what Stoneleigh recommends everyone else do in her primers, properly prepping for the collapse - although I have always tended to be physically lazy. But when your years are numbered and the joints start to creak, and you hitch your belt around your chest rather than your waist, one tends to pine more for the rocking chair as opposed to field work.
Also, after 40 years of intense investigation, I have come to the conclusion beyond a reasonable doubt that western science has it totally ass backwards and that the physical world is a virtual simulation produced by ones individuated consciousness, the latter being a lot closer to fundamental reality than the physical universe. This is only my opinion and not necessarily that of the other contributing geezers on this blog, though VK (who is even younger than you two) and I correspond a lot about it. If one is reasonably certain of this, in old age one tends to cling less tenaciously to ones body. So I am taking a more relaxed attitude toward TEOTWAWKI than some. But, once again, I like to think that if I were 25 I would be the diligent ant prepping for winter rather than an antediluvian grasshopper fucking off-
As to leaving Usakistan, it’s a tough call and everyone’s mileage will vary. I headed off toward Latin America upon retirement for two reasons:
1) I have accrued some savings, but they would not last me long in the USA, and I had been living for the last 13 years in the US Virgin Islands, a boutique tourist place and very expensive. So I headed off seeking a less expensive existence.
part 2
2) I have a graduate degree in the physical sciences and among my varied professions, I have taught chemistry and physics in the public school systems. An open minded investigation into the NYC part of 9/11 led me to the inescapable conclusion that the three WTC towers were dropped by radio controlled implosions of planted nanothermite on the girders and beams, and that the airplane collisions were just a diversion for the scientifically unsophisticated. This is an area which Ilargi has forbidden to be debated on this blog, which is OK because there are many other blogs devoted to it. However, when I realized that 9/11 and the murder of about 3000 American citizens was an inside job orchestrated by Cheny and Rumsfeld, I realized that it might be a good idea to get the fuck out of Dodge at my earliest convenience. These neo-cons custom manufactured their “ new Pearl Harbor” and I wanted to avoid as many of the ramifications as possible, include the Patriot Acts v. 1 &2 and the Iraqi invasion and the Afghan invasion, all of which would have been politically impossible without the 9/11 false flag operations.
However expatriation also has a lot of problems. I was not planning on residing in AR. It was rather a romantic “entanglement” which brought me here. I have certain types of brain dysfunction now which is making it really hard for me to gain even minor fluency in Spanish. Additionally, AR has a rather bastard dialect, sort of the Australian of the Spanish speaking world which makes it even more difficult. So getting things done here is not a bed of roses.
I have been writing travel blogs since I left STJ, and have a mailing list of TAEers who want to receive them. Have not written one since I came to AR, but I feel one in my bones coming on if my laptop doesn’t self-destruct again, so if you wish a copy, let me know at hpaulfuchs at gmail commercial and I will add you to the list.
@ Board...
Concerning allocation and perpetual liability of property taxes. (Mish post)
It is one thing if taxes go to actual realtime firefighting and police work etc. (essential services)
It is another thing if the property taxes go toward excessive retirement benefits and retirement pensions at the social detriment of the community they were meant to protect. What good is paying taxes for firefighters if no one is living in the homes because they were evicted as a result of not being able to pay property taxes (even if they don't have a mortgage).
This allocation of public good (taxes) only works when the good is bestowed on the community at large, not the minority interests of public workers & retirees.
Education is NOT an essential service. Most of the USA was publicly educated, and most are illiterate. Need I say more about the social contribution of public education. All public education teaches you is to raise your hand and ask permission to take a %^&*. Public education is where the control state begins.
Cheers
I forget who said that stamina is req'd, being able to work 16 hr days.
I thought of our " snuffy " who has been maintaining a heavy work load for a couple of years at least.And I think he is older than 25. Reading between the lines Mrs. Snuffy is no slouch either:)
Re taxes, Cdns pay much more than Americans. I am not a homeowner so don't know the current rate in my town. I do know that an increase of 5.6 percent is being proposed.
Municipal gov'ts don't yet get it. Quebec City is planning to spend $400M on a hockey rink. My town just built a new city hall for the bureaucrats to work in. It is gorgeous. And then there are the interest payments on loans,malinvestments.... Just to-day I attended a demonstration of food preparation for seniors funded by tax dollars. The entire menu was processed food from the industrial food complex! Cool Whip and Jello instant pudding for dessert! Did note the pile of packaging to dispose of as all the ingredients were pre-measured, pre-cooked....some hard working bloke is paying taxes for that presentation to-day. So disheartening.
@ I AM Nobody...
Good day,
Check out brief youtube clip concerning WWIII titled "Total Collapse The Build Up to World War III"
The stakes have never been higher and the game started a long time ago. Soon enough the victor will be decided.
USA, Russia, Iran, China, Israel, and others have been on a military extravaganza over the last years. When the global economy collapses there will be no exchange economy. With no exchange and when resources are privately owned, Nations will appropriate resources by force, and its better to do the appropriation with a gang. Gang warfare...Yes; Gangs of Nations.
Don't think for a moment that the world powers don't know the eventuality of their kick the can down the road policy. They are buying time, but time for what? Time for Final war preparations including the necessary propaganda required to place the entire sphere of public anger and fear behind the war.
The START treaty was just inflated rhetoric on toilet paper when it allowed each of the USA and Russia to keep 1500 warheads a piece and place no restrictions on future nuclear weapons R&D.
The NATO missile defense shield is almost closed and both China and Russia know they are about to get nutured. Time is running out.
Stoneleigh called Energy the Master resource, but in reality energy is only a master resource in its relation to to work. (Work equals Energy divided by Time)
TIME is the master resource!!! over which energy is utilized.
The extend and pretend policies implemented by the policy puppets, have a purpose beyond their own self interest...The interests of their masters. (World elite: Illuminati, Free Masons, Rothschild, Rockefellers, the "Money Masters," etc. )
Cheers
The undo function
p01,
What a bunch of mugs. In the 1960's, the glorious president of Egypt, Gamal Abdel Nasser, declared that the companies on the stock exchange were nationalised (i.e. the ownership stolen) on the radio and TV.
Well, it is the same regime and the same military running the country so what is to stop them from doing it again when it suits them?
If you want to read a truly nauseating and sycophantic interview, see what Robert Fisk makes of the "doyen of Egypt's journalists" - Mohamed Heikal: 'I was sure my country would explode. But the young are wiser than us'
When I was a kid, well before Fisk's learned to read the newspapers it would seem, Haikal was the Goebbels of Egypt. Every destructive idea of Nasser was put into print by Haikal. The press then, as today, was totally controlled and no journalist could possibly be allowed to have a different point-of-view from Haikal's.
People who did not conform were tortured and murdered in huge numbers. That is what their Homeland Security is for.
Haikal was the one who explained why all the companies on the stock exchange should be confiscated and what a great thing it would be for ordinary people.
Here is a link by Ellen Brown called Restoring Economic Sovereignty: The Push for State-Owned Banks.
Picks up on the theme that the Feds in Washington are 'beyond the pail' and that if you don't take action, soon, on the state level, the door will close and all that's left will be wide spread debt slavery and cotton pickin' down on the corporate plantation, y'all.
Local currency combined with state banks might be the only card left to play in an utterly crooked deck.
_
State banks might also be the only avenue of finance for towns once the muni bond market self-immolates itself.
Local scrip at the town level integrated with loans from the state bank to support the towns. The Austrian town of Wörgl briefly made a go of it, why not a re-adaptation of the idea for present circumstances?
_
@ Board....
Speaking of WWIII prospects an wise Nuclear Fall Out preparation is to have Iodine tablets or tincture of iodine/betadine. Radio-Isotopes of Iodine selectively replace Iodine ions used to manufacture T3 & T4 hormones in the thyroid gland causing severe disruption of the bodies key metabolic endocrine organ. Hyper and Hypo levels in the body of T3 & T4 (Thyroxine & Triiodothyronine) cause people to go crazy. Prior to synthetic production of thyroid hormones, a majority of people in insane asylums were severely hypo or hyper T3&T4.
The Iodine tablets are digestible. Iodine tablets come either as Potassium Iodide (KI) or Potassium Iodate (KIO3).
If you do not have tablets you can use "tincture of iodine" or "Betadine" (liquids with iodine) mixed to the proper concentration and rubbed onto a swatch of skin in proximity to the thyroid,(just inferior to the adams apple.
NEVER ingest these solutions!!!
For adults paint 8ml of 2% (of Iodine by volume with water) daily
For Children and young adults under 150 pounds use only 4ml daily.
For children under 3 but older than a month use 2ml daily
For Newborns under a month old use 1ml daily.
Ideally you want to start treatment prior to exposure.
Do not use Iodized table Salt!!! for this treatment.
It is important in you Iodine Concentration calculations that you use 2% "Iodine" and not 2% of the solution.
Cheers
NB: When the USA did nuclear testing on the pacific islands people on downwind islands had severe thyroid issues.
@scandia
That Quebec City arena really got me steaming! Good grief! This is gonna blow-up so sky high it'll land on the moon!
Back to calming down...
Regards,
Paul
One of the secrets of the Austrian town of Wörgl was keeping their currency in local circulation, not having a Citi Bank come in and suck it all out of the local community and 'invest' it elsewhere (on bonuses, MBSs, CDOs, food commodities, cocaine and crack whores).
The Wörgl experiment also worked because it goosed the velocity of the local scrip currency inside the community.
We just need a few glimmers of a semi working model of this to strike a match instead of curse the the Darkness.
What da ya got to loose?
_
allgreatthingsemergefromchaos said...
I concur with you on the gang wars.
RAPID (within 15 years) depopulation to under One billion people is both "Necessary & Sufficient" for posterity on ecological and environmental grounds alone. How we go from 7 billion to 1 billion we will only be able to say in retrospect, but no doubt war is in the cards.
Just a quick note (not sure if others have mentioned this), but war does not reduce population – even during World Wars when many civilians are hard pressed and resources limited, and millions die in combat, population growth goes on unabated – at least that is historically true of recent centuries.
Things will need to be far worse than any world war of the 20th century for depopulation to occur.
@agtefc
Geezerhood does bring more than just aches, pains and incurable diseases. We also gain some perspectives not readily available to the young. For one thing these boogeymen you refer to as our Masters are mostly geezers too. Geezers know the Reaper is hanging around and they're not anxious to meet him. It's the agile young who like to imagine they can dodge his scythe. Which is why they get to do most of the war fighting.
But pay attention to this little factoid. Modern non-nuclear warfare has been yielding about 90% civilian casualties. That's a sobering number. Elevate it to a nuke war and the odds lean heavily toward an extinction event.
Your faith in missile shields is much like our faith in our air defenses back in the 60's. Highly overestimated. I was attached to a radar squadron in North Florida during the Cuban Missile Crisis. Aside from being called out one evening to guard our compound with live ammo, the only excitement we had was being overflown by an unidentified aircraft that had remained so all the way down the coast from DC. Our interceptors never got close to it. A better equipped squadron based at Patrick AFB finally closed on it near Cape Canaveral. It was one of ours giving us a little test.
I got more such stories, but the take away is that shooting things down is easier said than done. But, for the sake of argument, let us suppose that someone does work it all out and create a near 100% sure kill missile interceptor. Long ago Leo Szilard worked out the idea for a doomsday weapon that wouldn't even have to be delivered to enemy territory. Wikipedia claims none were ever built. But can we really be sure and even if they haven't that doesn't mean they won't be?
Most of those geezers would be dead of natural causes before it would be safe to come out of the bomb shelters. I first heard of the Cobalt bomb in the 50's. It's special appeal is that it kills by high energy radioactive fallout. You can detonate it just about anywhere and let the atmospheric winds spread it around. WW-III could get ugly beyond all recognition. I'm relying on those Masterly geezers not to let it happen.
Hey everyone, we can relax and go back to BAU this guy says solar is going to save us! Thank heavens, I can't afford a doomstead. ;)
http://motherjones.com/blue-marble/2011/02/ray-kurzweil-solar-panels-climate-change
Bernanke making sense; a Mish podcast.
"We can have a situation were there's literally no hiding spots at all. NONE."
Well, there are two but I will not post spoilers.
Regards,
Paul
@ I AM Nobody...
I have no faith in the NATO missile defense shield either. But its near completion still plays an important strategic role. Nations will react out of fear and retaliation. Fear alone is sufficient.
Cheers
@ Board... (& IAN)
To prepare for economic collapse and peak oil, but not prepare for WWIII is surprisingly un-pragmatic given history and our current trajectory or massive millitary armament, carrying capacity overshoot, peak oil, and racial segregation by nation.
Our current infrastructure and urban/suburban design is all wrong anyways. Wouldn't it be nice to start cities from scratch with 500 million people? Runaway Climate change could likely be avoided and given the massive drop off in demand, there would be enough oil and other resources left to permit the rebuilding of a global sustainable resource/ecological based economy.
What do you think the Norwegian seed bank is for?
Cheers
@agtefc
Peter Sellers was a great actor who rendered a masterful Dr. Strangelove. You're no Peter Sellers. I might be prepared to compare you to Sterling Hayden as Gen. Jack D. Ripper.
I'll finish my end of this mistaken conversation with the observation that exploding enough nukes to kill 6.5 billion people on every continent will absolutely affect the climate in ways you don't want to see. Though I doubt very much that you would live to see it. I guess the geezer caucus might as well declare a permanent recess.
@ I AM Nobody...
I don't expect to survive. Ultimately we all won't survive. Death is life's only certainty. What we do in life prepares us for death and echos for eternity.
Night
Here is some feedback from the debate I had with Gonzalo Lira. I have made several comments myself, but they are currently awaiting moderation.
Tomorrow's episode of Financial Survival Radio will be a debate review.
@IMN...As a senior female the descriptive " geezer " doesn't quite fit.
How's about " geezers " and " crones " :)
"Quebec City is planning to spend $400M on a hockey rink."
And my little town of Brockville, Ontario has just poured footings for an "anchor tourism attraction" costing our our three levels of government $20M CAD ... including the obligatory parking garage.
@scandia
The word crone has acquired in modern usage some pretty negative connotations. I guess it would be OK to apply it to a redoubtable lady such as yourself, if we specify it as carrying its ancient meaning from the days of Goddess worship.
Welcome to the caucus your Croneship.
IMer- tsk! you're out of date regarding crones. It's like gay folk re-embracing "queer"; many womenfolk are using crone in the more cheerful fun way, these days.
It is, however, a practice I just watch with interest from the sidelines. :-)
As The Empires Crumble Dept:
http://www.startribune.com/local/116370259.html
Gosh, if you cut taxes, and quit fixing the roads, they go bad, then they break cars and cause accidents. It's the damnedest thing.
.. I remember him saying that the drug cartels are best placed to exploit the coming anarchy since they are best organised and have the resources as well as the necessary ruthlessness.
How does an ordinary person set about joining one of these outfits? ..How does an American join the winning team? :)..
Paul Craig Roberts wrote an essay a while back called "The Year America Dissolved" which speculated that as things fall apart local police will become warlords, eventually expanding their organization to include friends and family and becoming clans.
So you can reach out and touch the future now, and get training, health insurance and two weeks paid vacation every year in the bargain.
The police have the power to do civil seizure of property and assets that they suspect of being involved in commission of a crime. The owner is then charged with proving the property's "innocence," to obtain it's return. Couple this with the legal authority to carry and use weapons, and I think we're looking at the business model of the future.
"Chips revolution" in Belgium. As long as they fry them in tallow or lard there sould be no casualties from this riot.
Regards,
Paul
"speculated that as things fall apart local police will become warlords, eventually expanding their organization to include friends and family and becoming clans. "
Any of the oldtimers here recall my advice on this point, around a year ago?
Why yes Greenpa, I believe I do remember that and I quite agree that our fascist police will indeed be the first gang out of the gate. It has already happened a few times. I see via AlJazeera that a police gang just got busted in Brazil. It will be the same all over.
Since not everyone can join the police, the rest will have to seek out the narcos, bikers, etc.
@ Greenpa, I remember as well. In the days of the British Empire one allocated offspring to the church,banking or the military.
Excess of offspring were sent to the colonies.
@IMN, of course I was thinking of the ancient meaning for crone as in wise woman.
We geezers and crones may be old, but I guess we're not yet senile. :)
Newsflash: The word from Bahraini military spokesghoul. It is officially OK to kill people in the interest of preventing traffic jams.
Good to know.
OHIO CSNY ( got audio back) - Kent State Massacre Montage
Hi IMN
Ahh, I was reviewing the craptastic Darwin Award 'winners' for inspiration and reassurance about H Sapien sapien's prospects for survival in the coming ClusterFack.
One guy thought he deserved a drink of liquor from a store window so he picks up a cinderblock and throws it over his head at the 'glass'. It bounces off (cause it's plexiglass) and hits him on the head, knocking him out cold on the sidewalk where the cops found him. It was captured on the security camera. Sweet.
This is what Pensioners worldwide will look like when they try to collect their retirement funds from the Banks.
Another guy, while robbing a fast food restaurant pulls a gun and demands money, the girl at the register, a clever lass, tells him she can't open the register unless he orders something. He orders onion rings and she says they are out.. so he leaves.
This is cheated investors will look like bringing lawsuits against the Banks.
And last, there was a chap in a motorized wheelchair who was annoyed that an elevator closed and departed without him. After a pause to 'reflect' he decides to ram his wheelchair into the now closed elevator doors not once, not twice, but three times...
...only to plunge down the now-empty elevator shaft to his death.
There is even a video of it on Youtube from the security camera.
I guess you'd call it a YouSnuffTube
This is what waging justice against financial wrong doers like GS and JPM will look like when the Sheeple wake up, many, many days and many, many dollars short. A long fall down and even longer Shaft.
These are all modern metaphors for the Age of Peak Everything.
Keep doing the same horseshit kids, maybe it will get better.....
_
Math by Timmah. No comment because I cannot think of one, I'm completely speechless. WHO ARE THESE PEOPLE?!
Regards,
Paul
Re: Orlov and drug cartels/gangs:
Here are some excerpts from slides from presentations he gave last year:
First, from slide 26 from his Bristol Community College presenation:
<<<<<<<<<<<<<<<<
Security
-One happy family: former military, former prisoners, former
police, former government spooks, plus some drug lords
-An "online community" is a hacker's playground
-Easy pickings: loaners (armed or not), people who can be
tracked using their GPS cell phones and other gizmos
-Hard nuts to crack: cohesive communities that deal face to
face and are electronically "dark"
-Having a lot of witnesses about makes crime more difficult
-A 24/7 watch/patrol is an excellent idea
Obvious ideas:
-Surround yourself with people you know
-Mistrust electronic communications
-Cultivate friendships in places high and low
>>>>>>>>>>>>>>>>>>
Next, from slide 25 ("Action items"), from his Community Action Partnerships presentation:
<<<<<<<<<<<<<<<<<<<
Security: Get returning vets involved in organizing community-based security
>>>>>>>>>>>>>>>>>>
" Foreign hackers attack Canadian government"
computer systems at 3 key departments penetrated
http://www.cbc.ca/politics/story/2011/02/16 pol-weston-hacking.html
@A Walk in the Woods
Did not check the DA site in quite a while, but I see great contenders everyday.
I'll browse it to chatch-up on the finalists just to feel a bit better about our own prospects :)
Regards,
Paul
@Scandia, your Croneship!
I know the feeling about the $400m arena! Don't we UsaCans love our sports!
To wit: Indy is hosting the superbowl next year, so, guess how many millions of investment that will total up to. (I don't know, but a bunch).
Last year our local bankrupt city of 50k residents paid over $500,000per bus for 10 buses! Yes, that's correct,$5m for the lot, and I kid you not they run with only 2 to 4 people most of the time. (sadly)
I often wonder if my doomsday mentality is just my age or is it truly all too obvious just by witnessing these everyday events around me.
@po1 - p. Paul Ryan (R-Wis.) asks Treasury Secretary Tim Geithner how the President can claim his budget is not adding to the debt when their own statistics show that it will.
"I'm just making a point on math and economics," Geithner retorted.
Aw shucks Paul, Timmy was just trying to put a little salve on the festering wound! :-) Like trying to sell snowballs to inuits!
Earth dodges geomagnetic storm: scientist
http://tinyurl.com/4jjwvon
Walk in the boonies: "ClusterFack"
May I suggest "clusterfuffle".
:-)
@Hombre, re the Quebec City arena, I have concluded this is the NHL expanding their brand at taxpayers expense. Smart,eh?
Toronto is debating a 30B- yes that's billion- subway system to the far distant suburbs to the north. The city is broke so there is talk of a partnership with gov't and private investors. Guess who'll take the hit?
Probably silly of me to suggest a bike path?
The first cause of any war of mass destruction/extermination is the existence of VIP fallout shelters.
Without VIP fallout shelters for the instigators or general power elites [of all sovereigns capable of mass destructions] to hide in, weapons of mass destruction/extermination would never be considered usable in global war scenario's [by any sovereign], since the syndicate subtypes of power-monger/dominant sociopath most likely to directly facilitate the use of such weapons are always most reluctant to die themselves, there are no causes they're personally willing to die for in war.
Thus, a suitable proposal for preventing WWIII might be the coordinated global destruction of all VIP fallout shelters simultaneously everywhere, so principally preventing nukes or bioweapons from being unleashed. Such an act need not cost [m]any lives or destroy productive capital, if done with typical bunkerbusting shock and awe proficiency on largely empty facilities.
This method would necessitate a simultaneous destruction of the [larger/deeper] fallout shelters of all major powers, perventing any preemptive strikes on crippled opponents where power elites cannot hide, by those powers where the elites can still hide. Said method would also require a verified absense of [non-sociopathic] suicidal nihilism on the part of the ones likely to instigate the eventual use of mass destructions, on all sides, so as to discount any parties alternatively instigating mass destructions on an ideological or fanatical basis by wielding an imperative to die for, for which no survivability need be facilitated by use of such shelters. Lastly it must be known that these operative parties are meant to personally appropriate the shelters to be destroyed. With no place to hide from their own wrath, destruction/contamination of the planet's surface by their direction would be limited, lest the power elites' survival itself be threatened.
If the ones most directly responsible for the ultimate decisions to commence wars of mass destruction are also the ones meant to descend first into the mile-deep bunker complexes, arranged specifically for their survival, then, if this avenue of apocalypse escape can be blocked indefinitely, and they're otherwise unwilling to die, the wars need not begin.
The Queen has invited Obama for a visit. You Brits ready for the lock down?
The " special relationship " doesn't include you.
@ Gravity, good non violent plan. How do we locate these secret rabbit holes for the war mongers?
Do they kill off the construction workers when the project is completed? Somebody must know?
Strangelove types, then, would never consider using a doomsday device or enacting a doomsday scenario without immediate availability of and accessibility to those mine shafts. [richly endowed with womenfolk]
The Gen. Ripper types might be more reckless, willing to nuke themselves and others for some ideology or fanaticism, safeguarding the integrity of precious bodily fluids. Absense of shelters wouldn't properly dissuade them.
However, assuming military leadership likely doesn't make the ultimate decision to launch any nukes in various escalatory stand-off scenario's, and such decisions then originate outside the military chain of command, maybe the strangelove-types actually provide the reasoning, or lack of it, that is followed in the political realm towards such ends. They might then be dissuaded from pursuing mass destructions with retaliatory or contaminable variables without a suitably hardened shelter facility to hide in.
@Scandia,
the military tacticians of major powers, having designed bunkerbusters to use on each other's facilities, must know the location and architecture of prime targets. To prevent war they would be willing to use this information to destroy the opponents bunkers preemtively in a coordinated fashion, but its unlikely they'd consider their own facilities a similar obstacle to peace. That would be the other side's duty.
Still, such a strike on opponents' bunkers would be indistinguishable from an actual act of war, it may be seen as an opening move to take out any base of operations from which chain of command may continue, this may trigger retalliation.
All powers would have to destroy their own rabbit holes then, beneath their own territory, in an act of insurrective disbunkerment.
New post up.
Inflation For The Innocent, Hyperinflation For The Clueless
.
@ The Anon
i think you need to consider context.
the economy is struggling along and M3 is about even.
at what cost?
is said cost sustainable?
those are the questions not included in your analysis.
right now the government is looking at creating about $27k per debt per tax payer per year to keep M3 about even.
oh chit! that's REAL MONEY. did i say money? i meant debt. the money goes to insiders while the debt is left for us po' folk on the outside of the crime syndicate.
that's not sustainable - $27k in annual debt issuance, is it?
what happens when it stops?
all unsustainable processes stop, no?
guess what? $27k is low ball. the fed is topping it off with an addition $11k per tax donkey per year.
that's $37k per year per tax payer in new debt.
$111k in new debt per citizen over 3 years.
that's in addition to the crunching debt they already have now.
oh, and it is growing exponentially or it blows... so $111k is a LOW BALL figure.
any old drunk can debate the quality of their buzz.
i want to know what they feel like when the booze is removed and the hangover sets in.
the deflationary hangover...
WE NEED TO END DEBT MONEY OR BE LIQUIDATED.
debt based money - societal asset stripping mechanism. it is working like a charm.
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