Why Obama Is Proposing Whopping Corporate Tax Cuts, and Why He’s Wrong

by Robert Reich

Possibly Related Posts:

• Bank Robbery on Wall Street: The Gangsters versus The Banksters
• As Americans Celebrate Labor Day 2010, U.S. Factories Are Closing In Droves
• Bad Monetary Policy Is Redundant
• Global Collapse of the Fiat Money System: Too Big To Fail Global Banks Will Collapse Between Now and First Quarter 2011
• Will Americans Pay to Bailout Yet Another Foreign Bank … in Afghanistan?

Labor Day 2010 comes in the midst of a stunning wave of U.S. factory closings that stretches from coast to coast.  Once upon a time America was the greatest manufacturing machine that the world has ever seen, but now it seems as though the only jobs available for working class Americans involve phrases such as “Welcome to Wal-Mart” and “Would you like fries with that?”  Even though the population of the United States has exploded over the last several decades, the number of Americans employed in the manufacturing sector today is smaller than it was in 1950.  America has become a voracious economic black hole that ”consumes” as much as possible and yet actually produces very little.  The United States is becoming deindustrialized at a blinding pace, and it is becoming increasingly difficult for blue collar American workers to find jobs that will actually enable them to support their families.  The sad truth is that American workers don’t have a whole lot to actually celebrate this Labor Day.  14 million U.S. workers are “officially unemployed” and tens of millions of others have been forced to take part-time or temporary jobs that they are overqualified for just so they can survive.   Unfortunately, this is not just a temporary situation for American workers.  As millions of good jobs continue to get outsourced and offshored, Labor Day celebrations in coming years will be even more depressing.

The following are just some examples of the recent factory closings that have been sweeping the nation….

*Chrysler has announced that its plans to close an engine plant in Kenosha, Wisconisn are official.  The factory will be shut down for good on approximately October 8th and about 575 jobs will be lost.

*The largest milk producer in the United States, Dean Foods, says that it will close a South Carolina dairy plant in October.  That factory closing will eliminate 151 jobs.  This is just the latest in a string of factory closings for Dean Foods.  Over the past several years Dean Foods has closed factories in Michigan, Nebraska, Pennsylvania, Tennessee and Wisconsin.

*Continental Structural Plastics, a major producer of body panels for cars, is shutting down its plant in North Baltimore, Ohio in October and as a result 214 people will lose their jobs.

*Perfect Fit Industries (a prominent manufacturer of bedding accessories, pillows and comforters) has announced that it plans to close a factory in Loogootee, Indiana by the end of the year. As a result, 95 jobs will be lost.

*Ford Motor Company recently announced the closure of a factory that produces the Ford Ranger in St. Paul, Minnesota.  Approximately 750 good paying jobs are going to be lost.  Minnesota Governor Tim Pawlenty was so desperate to keep the plant open that he offered Ford a multi-million dollar incentive package full of tax cuts and job creation incentives to keep it open, but Ford rejected the offer, saying that the St. Paul plant just does not fit with Ford’s new “global” manufacturing strategy.

*The city of Breckenridge, Texas has been shaken by news that Karsten Homes notified nearly 130 employees that their local factory will be closing in two months.

*It has been announced that there will be a new round of layoffs at the Whirlpool factory in Fort Smith, Arkansas, but at this point the company is not saying how many jobs will be lost.  Whirlpool has been laying off workers at the plant steadily over the past few years as much of the work that was once done at the factory has been moved to a facility down in Mexico.

*Midcoast Aviation is closing its Savannah, Georgia factory by the end of the year.  This move will affect approximately 362 jobs.

*Federal-Mogul has been making headlamps for automobiles and for industrial use since 1954 in Boyertown, Pennsylvania, but now that era is coming to an end.  Federal-Mogual has announced that the Boyertown plant will close by the end of the year and 70 jobs will be lost.

*Duro Bag Manufacturing Co. plans to close its factory in Hudson, Wisconsin by October 22nd.  As a result, 63 workers will be without jobs.

Possibly Related Posts:

• Why Obama Is Proposing Whopping Corporate Tax Cuts, and Why He’s Wrong
• Bank Robbery on Wall Street: The Gangsters versus The Banksters
• Bad Monetary Policy Is Redundant
• Global Collapse of the Fiat Money System: Too Big To Fail Global Banks Will Collapse Between Now and First Quarter 2011
• Will Americans Pay to Bailout Yet Another Foreign Bank … in Afghanistan?

Readers of my articles will recall that I have warned as far back as December 2006, that the global banks will collapse when the Financial Tsunami hits the global economy in 2007. And as they say, the rest is history.

Quantitative Easing (QE I) spearheaded by the Chairman of Federal Reserve, Ben Bernanke delayed the inevitable demise of the fiat shadow money banking system slightly over 18 months.

That is why in November of 2009, I was so confident to warn my readers that by the end of the first quarter of 2010 at the earliest or by the second quarter of 2010 at the latest, the global economy will go into a tailspin. The recent alarm that the US economy has slowed down and in the words of Bernanke “the recent pace of growth is less vigorous than we expected” has all but vindicated my analysis. He warned that the outlook is uncertain and the economy “remains vulnerable to unexpected developments”.

Obviously, Bernanke’s words do not reveal the full extent of the fear that has gripped central bankers and the financial elites that assembled at the annual gathering at Jackson Hole, Wyoming. But, you can take it from me that they are very afraid.

Why?

Let me be plain and blunt. The “unexpected developments” Bernanke referred to is the collapse of the global banks. This is FED speak and to those in the loop, this is the dire warning.

So many renowned economists have misdiagnosed the objective and consequences of quantitative easing. Central bankers’ scribes and the global mass media hoodwinked the people by saying that QE will enable the banks to lend monies to cash-starved companies and jump start the economy. The low interest rate regime would encourage all and sundry to borrow, consume and invest.

This was the fairy tale.

Then, there were some economists who were worried that as a result of the FED’s printing press (electronic or otherwise) working overtime, hyper-inflation would set in soon after.

But nothing happened. The multiplier effect of fractional reserve banking did not take off. Bank lending in fact stalled.

Why?

What happened?

Let me explain in simple terms step by step.

1) All the global banks were up to their eye-balls in toxic assets. All the AAA mortgage-backed securities etc. were in fact JUNK. But in the balance sheets of the banks and their special purpose vehicles (SPVs), they were stated to be worth US$ TRILLIONS.

2) The collapse of Lehman Bros and AIG exposed this ugly truth. All the global banks had liabilities in the US$ Trillions. They were all INSOLVENT. The central banks the world over conspired and agreed not to reveal the total liabilities of the global banks as that would cause a run on these banks, as happened in the case of Northern Rock in the U.K.

3) A devious scheme was devised by the FED, led by Bernanke to assist the global banks to unload systematically and in tranches the toxic assets so as to allow the banks to comply with RESERVE REQUIREMENTS under the fractional reserve banking system, and to continue their banking business. This is the essence of the bailout of the global banks by central bankers.

4) This devious scheme was effected by the FED’s quantitative easing (QE) – the purchase of toxic assets from the banks. The FED created “money out of thin air” and used that “money” to buy the toxic assets at face or book value from the banks, notwithstanding they were all junks and at the most, worth maybe ten cents to the dollar. Now, the FED is “loaded” with toxic assets once owned by the global banks. But these banks cannot declare and or admit to this state of affairs. Hence, this financial charade.

5) If we are to follow simple logic, the exercise would result in the global banks flushed with cash to enable them to lend to desperate consumers and cash-starved businesses. But the money did not go out as loans. Where did the money go?

6) It went back to the FED as reserves, and since the FED bought US$ trillions worth of toxic wastes, the “money” (it was merely book entries in the Fed’s books) that these global banks had were treated as “Excess Reserves”. This is a misnomer because it gave the ILLUSION that the banks are cash-rich and under the fractional reserve system would be able to lend out trillions worth of loans. But they did not. Why?

7) Because the global banks still have US$ trillions worth of toxic wastes in their balance sheets. They are still insolvent under the fractional reserve banking laws. The public must not be aware of this as otherwise, it would trigger a massive run on all the global banks!

8) Bernanke, the US Treasury and the global central bankers were all praying and hoping that given time (their estimation was 12 to 18 months) the housing market would recover and asset prices would resume to the levels before the crisis. .

Let me explain: A House was sold for say US$500,000. Borrower has a mortgage of US$450,000 or more. The house is now worth US$200,000 or less. Multiply this by the millions of houses sold between 2000 and 2008 and you will appreciate the extent of the financial black-hole. There is no way that any of the global banks can get out of this gigantic mess. And there is also no way that the FED and the global central bankers through QE can continue to buy such toxic wastes without showing their hands and exposing the lie that these banks are solvent.

It is my estimation that they have to QE up to US$20 trillion at the minimum. The FED and no central banker would dare “create such an amount of money out of thin air” without arousing the suspicions and or panic of sovereign creditors, investors and depositors. It is as good as declaring officially that all the banks are BANKRUPT.

9) But there is no other solution in the short and middle term except another bout of quantitative easing, QE II. Given the above caveat, QE II cannot exceed the amount of the previous QE without opening the proverbial Pandora Box.

10) But it is also a given that the FED will embark on QE II, as under the fractional reserve banking system, if the FED does not purchase additional toxic wastes, the global banks (faced with mounting foreclosures, etc.) will fall short of their reserve requirements.

11) You will also recall that the FED at the height of the crisis announced that interest will be paid on the so-called “excess reserves” of the global banks, thus enabling these banks to “earn” interest. So what we have is a merry-go-round of monies moving from the right pocket to the left pocket at the click of the computer mouse. The FED creates money, uses it to buy toxic assets, and the same money is then returned to the FED by the global banks to earn interest. By this fiction of QE, banks are flushed with cash which enable them to earn interest. Is it any wonder that these banks have declared record profits?

12) The global banks get rid of some of their toxic wastes at full value and at no costs, and get paid for unloading the toxic wastes via interest payments. Additionally, some of the “monies” are used by these banks to purchase US Treasuries (which also pay interests) which in turn allows the US Treasury to continue its deficit spending. THIS IS THE BAILOUT RIP OFF of the century.

Now that you fully understand this SCAM, it is left to be seen how the FED will get away with the next round of quantitative easing – QE II.

Obviously, the FED and the other central banks are hoping that in time, asset prices will recover and resume their previous values before the crisis. This is a fantasy. QE II will fail just as QE I failed to save the banks.

The patient is in intensive care and is for all intent and purposes brain dead, although the heart is still pumping albeit faintly. The Too Big To Fail Banks cannot be rescued and must be allowed to be liquidated. It will be painful, but it is necessary before there is recovery. This is a given.

Warning:

When the ball hits the ceiling fan, sometime early 2011 at the earliest, there will be massive bank runs.

I expect that the FED and other central banks will pre-empt such a run and will do the following:

1) Disallow cash withdrawals from banks beyond a certain amount, say US$1,000 per day; 2) Disallow cash transactions up to a certain amount, say US$10,000 for certain transactions; 3) Transactions (investments) for metals (gold and silver) will be restricted; 4) Worst-case scenario – the confiscation of gold AS HAPPENED IN WORLD WAR II. 5) Imposition of capital controls etc.; 6) Legislations that will compel most daily commercial transactions to be conducted through Debit and or Credit Cards; 7) Legislations to make it a criminal offence for any contraventions of the above.

Solution:

Maintain a bank balance sufficient to enable you to comply with the above potential impositions.

Start diversifying your assets away from dollar assets. Have foreign currencies in sufficient quantities in those jurisdictions where the above anticipated impositions are least likely to be implemented.

CONCLUSION

There will be a financial tsunami (round two) the likes of which the world has never seen.

Global banks will collapse!

Be ready.

Possibly Related Posts:

• Why Obama Is Proposing Whopping Corporate Tax Cuts, and Why He’s Wrong
• Bank Robbery on Wall Street: The Gangsters versus The Banksters
• As Americans Celebrate Labor Day 2010, U.S. Factories Are Closing In Droves
• Bad Monetary Policy Is Redundant
• Will Americans Pay to Bailout Yet Another Foreign Bank … in Afghanistan?

As I have repeatedly pointed out, American taxpayers have been bailing out foreign banks for years.

For example, I noted in May:

As the Wall Street Journal points out, the Federal Reserve might open up its “swap lines” again to bail out the Europeans:

The Fed is considering whether to reopen a lending program put in place during the financial crisis in which it shipped dollars overseas through foreign central banks like the European Central Bank, Swiss National Bank and Bank of England.

***

At a crescendo in the crisis in December 2008, the Fed had shipped $583 billion overseas in the form of these swaps.

As the BBC’s Robert Peston writes:

There is talk of the ECB providing some kind of one year repo facility (where government bonds are swapped for 12-month loans) in collaboration with the US Federal Reserve.

See this for more information on swap lines.

Indeed, the Federal Reserve has been helping to bail out foreign central banks and private banks for years.

For example, $40 billion in bailout money given to AIG went to foreign banks. Indeed, even AIG’s former chief said that the government used AIG “to funnel money to other Institutions, including foreign banks”.

As the Telegraph wrote in September 2008:

The Fed has also just offered another $125bn of liquidity to banks outside the US that are desperate for dollars and can’t access America’s frozen credit markets.

Congressman Grayson said that the Fed secretly “stuffed” half a trillion dollars in foreign pockets.

(Of course, the Fed won’t tell Congress or the TARP overseer – let alone the American people – who got the cash).

And as I pointed out the same month:

A Fact Sheet from the U.S. Treasury says:

Participating financial institutions must have significant operations in the U.S., unless the Secretary makes a determination, in consultation with the Chairman of the Federal Reserve, that broader eligibility is necessary to effectively stabilize financial markets.

An article from today in Politico explains

“In a change from the original proposal sent to Capitol Hill, foreign-based banks with big U.S. operations could qualify for the Treasury Department’s mortgage bailout, according to the fine print of an administration statement Saturday night.”

Of course, even much of the bailout money which went to American banks ended up being shuttled abroad. As I wrote in March 2009:

Moreover, bailout money that went to Citigroup was loaned to Dubai, bailout money that went to Bank of America China was invested in China, and bailout money given to JP Morgan was invested in India.

And the government is in the process of providing billions more – along with trillions more in guarantees of worthless assets – to sovereign wealth funds and hedge funds.

So not only are Americans bailing out our own too big to fail banks, but we’re bailing out foreign mega-banks as well.

Even though bailing out Europe might make sense if America was flush with cash, things are different now. As Congressmen Kucinich and Filner wrote last June:

Our country and this body cannot afford to spend American tax payer dollars to bail out private European banks.

In addition, the U.S. is – of course – also contributing tens of billions of dollars towards the Greek bailout through its contributions to the International Monetary Fund. Some allege that the U.S. will secretly help bailout of all of Europe. See this and this.

As Tyler Durden pointed out last week, the IMF has now abandoned any cap on the bailouts it gives, and the U.S. is the largest funder of the IMF.

Now, the New York Times says that the U.S. is going to bail out Afghanistan’s biggest bank:

Details of the deal, including how much each government would contribute, were still being worked out on Saturday between the Central Bank of Afghanistan and the United States Treasury Department, officials said…Top officials at Kabul Bank and a senior leader at the Central Bank declined to comment publicly on the proposed bailout, which was still being negotiated. However a manager at the Central Bank and a senior American official confirmed what the American official called an “intervention.”

Not surprisingly, there have been numerous allegations of corruption at the Kabul Bank.

Update: The New York Times has updated their story with comments from U.S. Treasury officials insisting that no American money will be used to recapitalize the Kabul Bank:

“No American taxpayer funds will be used to support Kabul Bank,” said Jenni LeCompte, a Treasury Department spokeswoman.

Of course, the IMF, World Bank or a foreign country could funnel the bailout moneys and then the U.S. could print more money to “repay” them later. Accounting shenanigans and under-the-table deals can work wonders to hide the truth from angry American serfs taxpayers.

Possibly Related Posts:

• Why Obama Is Proposing Whopping Corporate Tax Cuts, and Why He’s Wrong
• Bank Robbery on Wall Street: The Gangsters versus The Banksters
• As Americans Celebrate Labor Day 2010, U.S. Factories Are Closing In Droves
• Bad Monetary Policy Is Redundant
• Global Collapse of the Fiat Money System: Too Big To Fail Global Banks Will Collapse Between Now and First Quarter 2011

30 Statistics That Prove The Elite Are Getting Richer, The Poor Are Getting Poorer And The Middle Class Is Being Destroyed

Published on 09-02-2010

By Michael Snyder – BLN Contributing Writer

Not everyone has been doing badly during the economic turmoil of the last few years.  In fact, there are some Americans that are doing really, really well.  While the vast majority of us struggle, there is one small segment of society that is seemingly doing better than ever.  This was reflected in a recent article on CNBC in which it was noted that companies that cater to average Americans are doing rather poorly right now while companies that market luxury goods and services are generally performing exceptionally well.  So why aren’t all American consumers jumping on the spending bandwagon?  Well, it seems that there are a large number of Americans who either can’t spend a lot of money right now or who are very hesitant to.  A stunningly high number of Americans are still unemployed, and for many other Americans, there is a very real fear that hard economic times will return soon.  On the other hand, there is a significant percentage of Americans who are blowing money on luxury goods and services as if the economy has fully turned around and it is time to let the good times roll.  So exactly what in the world is going on here?

Well, in 2010 life is very, very different depending on whether you are a “have” or a “have not”.  The recent article on CNBC referenced above described it this way….

Consumer spending in the U.S. has turned into a tale of two cities in 2010, with an entire segment of consumers splurging confidently on the finer things in life, while another segment, concerned about unemployment and with little or no discretionary income, spends only on bare necessities.

So why is this happening?

It is happening because the rich are getting richer and they have plenty of money to buy stuff and the poor are getting poorer and have less money to spend than ever.

In case you haven’t been paying attention over the past couple of decades, what we have in America today is a system that is designed to funnel as much wealth into the hands of the elite as possible.

This isn’t capitalism that we have in America in 2010.  Instead, what we have created is a system where the laws are set up so that the power elite and their big, dominant corporations always win.

Why do you think so many of America’s largest corporations pay so little in taxes?

Why do you think so many of them are showered with government subsidies, tax breaks and bailouts?

It’s not about competition anymore.

It’s about rigging the game in your favor.

The power elite and the giant corporations they control spend millions and millions on lobbying and campaign contributions and they expect a big return on that investment.

Let’s take a look at one example.  Many people think that Barack Obama and the Democrats are supposed to be anti-business, right?

Well then why are some of Barack Obama’s biggest donors the very same corporations that are receiving giant bailouts, making record profits and paying their employees billions in bonuses?

Goldman Sachs was Barack Obama’s second biggest donor.  Microsoft was number four.  Citigroup was number six.  JPMorgan Chase was number seven.  Time Warner was number eight.

Are you starting to get the picture?

Every single year, the U.S. Congress passes law after law after law that makes it easier for big corporations to dominate and makes it easier for the rich to get even richer.

America’s economy is not about competition anymore.

It is about eliminating competition.

And unfortunately for middle class Americans, the giant predator corporations that now dominate our economy are realizing that they don’t really need nearly as many American workers anymore.

Instead, they are slowly but surely shipping our jobs off to the other side of the world where workers are willing to work for about a tenth as much.

And yet we still run out to the “big box” stores and fill up our carts with a bunch of plastic crap made on the other side of the world by these giant corporations.

Meanwhile, those giant corporations are taking the profits they make out of our communities and they are taking our jobs and are shipping them overseas.

So in the final analysis, is it any wonder why the income inequality gap is growing?

Without small businesses having a legitimate chance to compete and without good jobs for American workers, the middle class in America is going to continue to get chewed up and spit out.

The following are 30 statistics that prove that the elite are getting richer, the poor are getting poorer and the middle class is being destroyed in 2010….

The Rich Are Getting Richer

1 - As of 2007, the top 1 percent of all Americans was taking home 24 percent of the national income.  This was a level that had not been seen since the days of the Great Depression.

2 – Incomes have been growing in the United States, but those at the very top of the pyramid have been gobbling up almost all of the income growth.  According to Harvard Magazine, 66% of the income growth between 2001 and 2007 went to the top 1% of all Americans.

3 – Even official government figures bear out the fact that the rich are getting richer.  An analysis of income-tax data by the Congressional Budget Office a few years ago found that the top 1% of all American households own nearly twice as much of the corporate wealth as they did just 15 years ago.

4- Most Americans have suffered during the last few years, but not the boys and girls down on Wall Street.  New York state Comptroller Thomas DiNapoli says that Wall Street bonuses for 2009 were up 17 percent when compared with 2008.

5 – Even as the number of Americans living in poverty skyrockets, the number of millionaires just keeps growing.  In fact, the number of millionaires in the United States rose a whopping 16 percent to 7.8 million during 2009.

6 – The amount of money some of these Wall Street hotshots are making is incredible.  Back in 2005, the top 25 hedge fund managers earned a total of 9 billion dollars.  That would be bad enough, but even in these hard economic times the rich just keep getting richer.  One year after the recent financial collapse the top 25 hedge fund managers earned a total of approximately $25 billion.  That breaks down to an average of $1 billion each.  The truth is that the United States has been experiencing uneven prosperity for quite some time and things just seem to get worse with each passing year.

The Poor Are Getting Poorer

7 – Government anti-poverty programs are exploding in size in response to the recent economic difficulties.  USA Today is reporting that a record one in six Americans are now being served by at least one government anti-poverty program.

8 – Over 50 million Americans are on now Medicaid.  That figure is up more than 17 percent since the beginning of the recession.

9 – The number of Americans in the food stamp program rose to a new all-time record of 40.8 million in May.  That number is up almost 50 percent since the beginning of the recession.

10 – The number of Americans who cannot afford even the basic necessities is absolutely staggering.  A whopping 50 million Americans could not afford to buy enough food in order to stay healthy at some point over the last year.

11 – Compared to other industrialized nations, the United States is doing very poorly.  The U.S. poverty rate is now the third worst among the developed nations tracked by the Organization for Economic Cooperation and Development.

12 – The saddest part of this is what we are doing to our children.  According to one recent study, approximately 21 percent of all children in the United States are living below the poverty line in 2010.

13 – But the American people cannot provide for their families if they don’t have jobs.  Today there are not nearly enough jobs for everyone.  In 2010, it takes the average unemployed American worker over 8 months to find a job.

14 – Approximately 10 million Americans are currently receiving unemployment insurance, which is a number that is nearly four times higher than what it was at back in 2007.

15 – The truth is that we are creating a permanent underclass of Americans that cannot get jobs.  The number of Americans receiving long-term unemployment benefits has increased over 60 percent in just the past year.

16 – Increasingly, the wealth of the United States is being held in fewer and fewer hands.  One study found that as of 2007, the bottom 80 percent of American households held about 7% of the liquid financial assets.

17 – It is not a good time to be living in “the bottom half” in America.  The size of “the pie” being divided up among those at the low end of the wage scale is becoming really, really small.  In fact, the bottom 40 percent of all income earners in the United States now collectively own less than 1 percent of the nation’s wealth.

The Middle Class Is Being Destroyed

18 – Even those Americans that still do have decent jobs are seeing their wealth fade rapidly.  For example, U.S. families have $6 trillion less in housing wealth than they did just three years ago.

19 – Home ownership used to be a sign that one had arrived in the middle class, but in 2010 an increasing number of Americans are finding out that they simply can’t afford their homes anymore.  One out of every seven mortgages were either delinquent or in foreclosure during the first quarter of 2010.

20 – The reality is that incomes have just not kept up with housing costs.  This has put an incredible amount of pressure on the middle class.  Just how much pressure?  Well, only the top 5 percent of all U.S. households have earned enough additional income to match the rise in housing costs since 1975.

21 – The debt binge middle class Americans have been on over the past couple of decades has drained many of them completely dry, and now more Americans than ever have bad credit scores.  Over 25 percent of Americans now have a credit score below 599, which means that they are a very bad credit risk.

22 – A rapidly rising number of Americans are actually choosing bankruptcy as a way out of their financial problems.  Nationwide, bankruptcy filings rose 20 percent in the 12 month period ending this past June 30th.

23 – The middle class manufacturing jobs that once defined so many American cities are rapidly disappearing.  Despite the fact that the U.S. population has dramatically increased, less Americans are employed in manufacturing today than in 1950.

24 – These days it seems like almost everyone is looking for a good job, but very few people are finding them.  According to one recent survey, 28% of all U.S. households have at least one member that is looking for a full-time job.

25 – Even many of those Americans that still have decent jobs have been hit hard by this economic downturn.  A recent Pew Research survey found that 55 percent of the U.S. labor force has experienced either unemployment, a pay decrease, a reduction in hours or an involuntary move to part-time work since the recession began.

26 – The number of jobs that are evaporating is absolutely stunning.  According to one analysis, the United States has lost a total of 10.5 million jobs since 2007.

27 – So where are the jobs going?  It doesn’t take a genius to figure it out.  China’s trade surplus (much of it with the United States) climbed 140 percent in June compared to a year earlier.

28 – The truth is that “globalism” and “free trade” have put middle class American workers in direct competition with the cheapest labor in the world.  This is what middle class American workers must now compete against: in China a garment worker makes approximately 86 cents an hour and in Cambodia a garment worker makes approximately 22 cents an hour.

29 – Due to these difficult economic conditions, the middle class is being squeezed as never before.  According to a poll taken in 2009, 61 percent of Americans ”always or usually” live paycheck to paycheck.  That was up significantly from 49 percent in 2008 and 43 percent in 2007.

30 – So what kind of future do our young people have in front of them?  Unfortunately, things don’t look pretty.  Many fresh college graduates can’t even get a job that will allow them to be independent.  One recent survey of last year’s college graduates discovered that 80 percent moved right back home with their parents after graduation.  That was up significantly from 63 percent in 2006.

Possibly Related Posts:

• Why Obama Is Proposing Whopping Corporate Tax Cuts, and Why He’s Wrong
• Bank Robbery on Wall Street: The Gangsters versus The Banksters
• As Americans Celebrate Labor Day 2010, U.S. Factories Are Closing In Droves
• Bad Monetary Policy Is Redundant
• Global Collapse of the Fiat Money System: Too Big To Fail Global Banks Will Collapse Between Now and First Quarter 2011

The Fed’s Liquidity Trap: The American and world economies are in a deliberate state of slow collapse

Published on 09-01-2010

By Bob Chapman – The International Forecaster

Almost two years ago the US Treasury was selling large amounts of short-term Treasury bills to fund bailouts and stimulus. That caused a major increase in debt. Most of that paper was 2-year bills and it is coming due for rollover shortly. While that transpires, October will report the annual fiscal deficit of 9/30/10 of about $1.5 trillion, a figure thought impossible just 1-1/2 to 2 years ago.

This time around the Treasury will have to depend on the Fed and US banks and institutions to fund this mountain of paper. China has reduced its holdings of Treasury debt by about 6%, or by about $6 billion over ten months, or by about 10% or almost $100 billion over the past year or so. We know these figures are estimates because the Chinese government has the same trouble the US government has, it cannot discern truth from fiction.

Now that the effect of the first quantitative easing is behind us the economy is facing a hangover even with zero interest rates and a 2.42% ten-year T-note. It was just months ago that those rates were close to 4%. The sale of Treasuries for the past six months was easy with a strong US dollar caused by a manufactured crisis in Greece and in the euro. As we look back we can see almost the whole picture. We saw major NYC banks going very long the dollar and short the euro beginning in late October of last year. At the time we couldn’t figure out what they were up too, but it became apparent this past March. The contrived attack on Greece and the euro was to allow the Treasury to fund its debt and to make the banks, which own the Fed, a fortune. 100 to 1 leverage is a lock when you have inside information and are creating the crisis. Except for Greece, Euro Zone members numbers welcomed the 17% fall in the euro vs. the dollar, because their exports were cheaper and more price competitive. What is there not to like about that? As a result the bond vigilantes went into hiding, because they were afraid to go head to head with the Treasury and the Fed. This wasn’t the old days when these entities did not rig the markets. This was today, when they rig every market 24/7, under the Executive Order that created “The President’s Working Group on Financial Markets.” This is a page out of the national Socialist handbook of Germany in the 1930s. Government and markets by regulation known as corporatist fascism aided by collectivist Keynesian economics. The result has been 17 months of net financial inflows, part of which was aided by the Fed in their secret offshore operations. It is no wonder they do not want to be audited and investigated. Now we are back to square one again. We announced two months ago that QE2 was on the way, but as usual few were listening. Monetization is the name of the game.

Quantitative easing will put the American public at ease, at least temporarily. They do not realize it but the American and world economies are in a deliberate state of slow collapse. Yes, the Fed has created a terrible mess. They have been totally unprofessional and reckless. The result has been, even after five quarters, averaging 3-1/4% growth, sales of new and used homes are dismal with no hope in sight for improvement, unemployment just under its highs, record debt, slight wage increases, lost purchasing power due to inflation and few prospects for improvement. Inventory is all in place, so that can no longer be a plus.

What the Fed has been approaching since June is a “liquidity trap.” That is when loans are offered to business and they refuse to borrow. They stop using credit because they question the future of the economy, their government and the specter of new taxes in the future. Money and credit is available, but few want to assume the risks to borrow.

Between stimulus and federal government hiring there has been nothing sustainable about the economy. It’s on federal life support with assistance from the Fed.

This market is the exact opposite of the gold and silver markets, which are in an 11-year bull market. The metals separated from the dollar 15 months ago and they have already won the battle of the world’s only real currency. Gold has gained 15% a year for those last 7 years. This is a secular bull market and cannot be denied. Further, gold has appreciated annually against every currency.

One of the things we find extremely interesting is that many well-meaning, bright professionals do not really understand what this is all about. They do not know the ulterior motives of those in power behind the scenes. They do not know who really pulls the strings politically, in government, at the Fed, and even on Wall Street and in banking and insurance. They do not understand the hidden agendas of enrichment and power. They do not know the real goals of legislation for Cap & Trade and Carbon Taxes when it has been proven, without a doubt, that global warming is a fraud. If they knew of the Council on Foreign Relations, the Trilateral Commission, or the Bilderberg Group, and these men and women express their ideas and nothing more at their meetings and in their committees, but that is not the way it works. These people and groups set policy for government and the shape the future of our country and the world. We have been reading their publications for more than 50 years, so we feel qualified to express our opinion. Just look at one of their recent failures, the North American Union. This was an attempt to merge Canada, the US and Mexico into one country. It’s a matter of record, their records, that the planning for this project began in the early 1990s in conjunction with the sister organization, the Royal Institute of London. They laid all the plans out to set up the NAU to eventually merge it into a world government. They admit this, but the brightest on Wall Street, in banking, etc., don’t get it.

They don’t understand, or want to understand the control these people have and how they shape the world’s future. What difference does it make if they really do not understand the problem. Who really pulls the strings and how the game works. Is Obama better than Bush, or Bloomberg, etc.? No, because they all take their order from different factions of the same group of people. We understand what these people are up too and that is how we are able to back into what they are trying to accomplish. That is why we are right so often. We understand who they are and what their game is. We know why intelligent people and newsletter writers are wrong so often. They do not understand who is really in charge and who pulls the strings and what their final goals are.

As an example, we witnessed an annual meeting put on by these people at Jackson Hole, Wyo. It is a showcase to present a path, which is to be followed for the next two years. They didn’t tell you that. They presented it as a showcase of ideas. The meeting was far from that. All the players had their marching orders. The results were preordained. We wrote about what would happen and why before it ever happened, just as we forecast two month ago that those behind the scenes had decided that quantitative easing was the only option they had for the future to keep the financial and economic system from collapsing even though that process is only temporary. All we can say is we will never understand how bright people miss the obvious. There is no logic here, only agenda.

The 3-card Monte game continues. The Fed desires to free up its balance sheet in order to have money and credit available; the Fed will sell mortgage backed securities they paid banks $0.70 to $0.80 on the dollar for, back to them for $0.20 on the dollar. This allows the banks to carry this paper on their good books at market value and allows the taxpayer to pay the difference, and the Fed cleans up their books. They do not have to do this, but they are going to do so. The losses will be about $1.2 trillion. That is why, among other things, the Fed does not want to be audited. That is why they paid billions to Congress to kill the legislation. That is why the incumbents have to be removed in November. Incidentally, the banks won’t mark their newly acquired paper to market. They will mark it to model, and gain even more profits, which, of course, are just an illusion. This gives the Fed a year of QE, while the sheep sleep.

The bond market is a bubble and it could last another two years or more, so do not short it. Those seeking safety and stability are being deceived by an investment that every day loses purchasing power to gold and silver. In fact, the investors are so misled that market sentiment is 73% bullish on bonds. They will fall as interest rates rise, but no one knows when. The bond market has continued to attract funds. Recently almost $8 billion flowed in one week into bonds, as equity funds lost almost $3 billion. This means the dollar carry trade will flourish and the stock market will remain under pressure. Why not, earnings will be weaker next year among the higher rated companies and even with QE, GDP growth probably will be even to 1% better. At the same time inflation will rage. The worst of all investment worlds, except for those in gold and silver related assets. Just as an example, during the period from 1929 to 1936, gold doubled and gold and silver shares rose over 500% in a deflationary period. Between 1978 and 1981, during an inflationary recession the average gold and silver share appreciated 40 times the price of gold bullion. We ask you, who would want to be in bonds while we witness the greatest gold and silver bull market in history? This certainly is a once in a lifetime opportunity that has been proven for the past 11 years.

What we are seeing in bonds we saw in late 2008, as the first QE began. Ten-year note yields fell to close to 2% and a short covering market rally began at Dow 8,500 causing massive short covering. The reality of the following time frame was that GDP only grew an average of 3 to 3-1/4%, or 1% in inventory is extracted. The result has been little sustainability. Now here comes QE2, but this time the growth will be less with inflation higher and higher gold and silver prices. The credit contraction continues, feeding deflation and a liquidity trap, which will be held at bay by a $2.5 trillion injection annually. We still presently have core inflation above 2% and real inflation over 7%. We show official inflation at 9.5%, versus 7.4% in 2008, while real unemployment is 21-1/2%. The economy cannot extricate itself from that dilemma. On top of this we’ll have a further falling dollar. All we can say is this is terrible and it is going to get worse.

As far as the Fed is concerned what does it do in a liquidity trap. That is when interest rates are very low and both people won’t buy homes for fear of lower prices and businesses won’t borrow for fear of falling growth and higher unemployment. It is simple the Fed just creates more money and credit out of thin air. But, for rising government employment and war spending the economy would be like a wet noodle.

What is equally tragic about all this is that 1/3rd of experts, economists, analysts and newsletter writers have not been correct. How do they get so incompetent?

How do lending institutions sell off a 3-1/2 year inventory of homes when four months is normal? Yes, we know official figures are far less than that, but they are usually wrong. Look at their horrible track records. The high-end market in homes is virtually non-existent. No sales for the past two months. Only 1,000 units priced over $500,000 were sold. Even in new homes 80% that were sold were priced under $300,000. If it were not for the activities of Fannie Mae, Freddie Mac, Ginnie Mae and FHA making a great many subprime loans, there would be very little buying activity at all.

There you have it, and it is quite a mess. Unfortunately it is going to get worse.

Defense companies and other major industries are hoping to block disclosure of their own fraudulent or substandard performance in federal contracts, despite a mandate this year by Congress that such potentially embarrassing information be released to the public.

Sensitive to concerns raised by the companies, the White House has delayed enacting the little-known disclosure provision while it studies the issue, officials said.

The controversy highlights the extent to which efforts to make the government more transparent often garner bipartisan support but then stall in the face of powerful interests seeking to limit public disclosure.

An Albemarle County Circuit Court judge has set aside a subpoena issued by Virginia Attorney General Ken Cuccinelli to the University of Virginia seeking documents related to the work of climate scientist and former university professor Michael Mann.

Judge Paul M. Peatross Jr. ruled that Cuccinelli can investigate whether fraud has occurred in university grants, as the attorney general had contended, but ruled that Cuccinelli’s subpoena failed to state a “reason to believe” that Mann had committed fraud.

The ruling is a major blow for Cuccinelli, a global warming skeptic who had maintained that he was investigating whether Mann committed fraud in seeking government money for research that showed that the earth has experienced a rapid, recent warming. Mann, now at Penn State University, worked at U-Va. until 2005.

According to Peatross, the Virginia Fraud Against Taxpayers Act, under which the civil investigative demand was issued, requires that the attorney general include an “objective basis” to believe that fraud has been committed. Peatross indicates that the attorney general must state the reason so that it can be reviewed by a court, which Cuccinelli failed to do.

Peatross set the subpoena aside without prejudice, meaning Cuccinelli could give the subpoena another try by rewriting the civil demand to better explain the conduct he wishes to investigate. But the judge seemed skeptical of Cuccinelli’s underlying claim about Mann, noting that Cuccinelli’s deputy maintained in a court hearing that the nature of Mann’s fraud was described in subsequent court papers in the case.

“The Court has read with care those pages and understands the controversy regarding Dr. Mann’s work on the issue of global warming. However, it is not clear what he did was misleading, false or fraudulent in obtaining funds from the Commonwealth of Virginia,” Peatross wrote.

Additionally, the judge said Cuccinelli could only ask about one of five grants issued to Mann that the attorney general has been seeking to investigate. That’s because the other four involved the use of federal, not state, funds.

In a statement, Cuccinelli said he will take the judge’s ruling into account and rewrite the civil investigative demand. Spokesman Brian Gottstein said Cuccinelli is also examining the ruling to decide whether to appeal.

“While this was not an outright ruling in our favor, I am pleased that the judge has agreed with my office on several key legal points and has given us a framework for issuing a new civil investigative demand to get the information necessary to continue our investigation into whether or not fraud has been committed against the commonwealth,” he said.

Mann, meanwhile, said he was pleased with the judge’s ruling.

“I’m very pleased that the judge has ruled in our favor,” he said in a statement. “It is a victory not just for me and the university, but for all scientists who live in fear that they may be subject to a politically-motivated witch hunt when their research findings prove inconvenient to powerful vested interests.

“I’m looking forward now to trying to get back full time to the things I really care about: doing research and extending the forefront of our scientific understanding of the science of climate and climate change, teaching and advising students and postdoctoral scholars, and doing the best I can to communicate to the public important scientific findings,” he said.

A spokeswoman for the University of Virginia said a statement from the university would be forthcoming.

If you think you’ve been seeing more people sleep on city streets, statistics back up the perception. The homeless population living on New York City streets has gone up 50 percent in the past year, according to city statistics reported by the HellsKitchenLife.com blog.

The New York City Department of Homeless Services conducts a yearly survey of the streets of the city to count the number of homeless who are not in shelters. The HOPE survey was conducted in January 2010.

The number of homeless in the borough of Manhattan was up 47 percent in the past year, according to the count. The 2010 count had 1,145 people living in the streets. That is up 368 from 2009.

Brooklyn had the biggest increase of any borough. It saw a homeless increase of more than 100 percent in 2010.

More than 1,000 people now live in New York City’s subway system — up 11 percent in the past year.

While the numbers are alarming, they are still at historically low levels and the ratio of homeless to the general population remains low compared to other major cities, according to the city. The HOPE survey showed a 29 percent drop in homelessness from 2005.

DHS works to prevent homelessness and also provides short-term emergency shelter. The agency seeks to help homeless individuals move from shelters back to permanent housing.

For example, the DHS says it provided temporary, emergency shelter to 8,230 families with children equating to 25,204 adults and children in July. But the agency says shelters have seen fewer families. From October 2009 through June 2010, shelters had 11 percent fewer children, who are now back in homes of their own.

U.S. auto sales in August probably were the slowest for the month in 28 years as model-year closeout deals failed to entice consumers concerned the economy is worsening and they may lose their jobs.

Industrywide deliveries, to be released tomorrow, may have reached an annualized rate of 11.6 million vehicles this month, the average of eight analysts’ estimates compiled by Bloomberg. That would be the slowest August since 1982, according to researcher Ward’s AutoInfoBank. The rate would be 18 percent below last year’s 14.2 million pace, when the U.S. government’s “cash for clunkers” incentive program boosted sales.

Bernanke Faces Skepticism on Policy Tools “There’s now a cost-benefit analysis for future actions which I’d contrast with the ‘whatever it takes’ philosophy of the crisis,” Stanford University Professor

John Taylor, creator of an interest-rate formula used by central banks, said in an interview. “The benefits of additional quantitative easing are quite small.”

“I really don’t think that there’s a lot that the Fed can do,” said Martin Feldstein, a professor at Harvard University… and member of the committee that dates the beginning and end of recessions. While additional asset purchases are probably the best option, “even if they did quite a lot of it, say $1 trillion worth, I don’t think it will have a substantial impact,” he said in an interview.

Possibly Related Posts:

• Why Obama Is Proposing Whopping Corporate Tax Cuts, and Why He’s Wrong
• Bank Robbery on Wall Street: The Gangsters versus The Banksters
• As Americans Celebrate Labor Day 2010, U.S. Factories Are Closing In Droves
• Bad Monetary Policy Is Redundant
• Global Collapse of the Fiat Money System: Too Big To Fail Global Banks Will Collapse Between Now and First Quarter 2011

By Robert Chapman

The International Forecaster

Possibly Related Posts:

• Why Obama Is Proposing Whopping Corporate Tax Cuts, and Why He’s Wrong
• Bank Robbery on Wall Street: The Gangsters versus The Banksters
• As Americans Celebrate Labor Day 2010, U.S. Factories Are Closing In Droves
• Bad Monetary Policy Is Redundant
• Global Collapse of the Fiat Money System: Too Big To Fail Global Banks Will Collapse Between Now and First Quarter 2011

If you can still put a roof over your head and food on the table for your family, you should consider yourself to be very fortunate.  There are millions of Americans out there right now that are really, really suffering.  The cold, hard reality of it is that there aren’t even close to enough jobs out there for everyone right now.  It is almost as if we are all caught in a really bizarre game of musical chairs where the losers get stripped of their tickets to the middle class.  What this horrible economy is doing to the dignity of millions of middle class Americans is incredibly saddening.  There are a lot of very highly educated and very hard working Americans who cannot seem to get jobs no matter what they do and now find themselves doing whatever they can just to survive.  It can be really hard to keep your dignity when you played by all the rules and you worked as hard as you could all your life and now you find yourself a half step away from being homeless.  Those of us who are still doing okay should never look down on those who are struggling in this economy, because the truth is that any of us could be next.

If you really want to read some horror stories about what long-term unemployment is doing to some people in America, you should go spend an hour or two over at Unemployed-Friends some time.  It is a great forum with a lot of great resources for the unemployed, but it also contains dozens and dozens and dozens of heartbreaking stories from middle class Americans who have had their lives shattered by this economic downturn.

The following is a typical story on Unemployed-Friends.  It is from a 48 year old Air Force veteran who has lost everything and is now sleeping in his vehicle.  It turns out that Scott48′s job was shipped off to India and now he has been out of work for over two years….

“I am a 48 year old USAF Vet. I got my house in 1996 with the help of the VA. In 2009 the company I worked for went out of buisness(gone to India) I then became a 99er. I notified Wells Fargo that I lost my job and they said they would work with me, the next mortgage statement I got they conveniently increased my mortgage! With what I got from UE was enough for the house but I had to cut out the luxury of food, gas, utillities, insurance, entertainment and alcohol. That was it for me, so the forecloser ball was in motion. I had to give my dog to my cousin so he would get fed, I took everything I owened to the auction( execpt tools, clothes, pictures, tech manuals and my Saxophone) and sold it. I went to a half-way house the VA recomended for a week and it was joke, so my cousin said I could stay with her. After 4 months she diecided that I wasnt looking hard enough and kicked me out, and Ive applied for everything except selling myself. This summer I was staying in an abandoned house due to forecloser and the real estate company has now put it on the market, and I am now on the street sleeping in my vehicle or a friend here and there. Keeping clean is going to be a challenge cuz the Flying J truck stops charge $10 for a shower, rip-off. What a country!”

The truth is that this economy is driving many Americans to the brink of desperation.  Even recent college graduates are becoming desperate enough to actually consider suicide.  The following story is from an Unemployed-Friends user known as 08pacollegegrad….

“I could just take any job like working at fast food places, but I hear people who try can’t even get hired there. I went to Wendy’s for lunch the other day and I thought of picking up an application…but the slot where they keep the applications was completely empty. That should say it all. Plus, I feel like if I take just any job…I will be set back further and never be able to gain experience in my chosen fields.

I follow up on job applications, but employers ignore me for the most part when I try to contact them. I sent five follow up e-mails last week and got no responses. I contacted an employer expressing my interest in working for them, but all they gave me is the link to their online application system that I have never gotten a job from.

I am thinking of applying for more internships (I have already done two), but I don’t want employers to think why I am applying for an internship when I should have had a full fledged job by now.

I have almost killed myself over my situaion and am taking anti-depressants right now. I see a psychiatrist every 4-6 weeks, but I still have days where I feel so empty. I am sick of sitting at home searching for jobs and praying for a response that never comes.”

Many Americans spend day after day after day looking for a job that never comes.  The sense of hopelessness that can build after doing this for a few years is almost indescribable.  The following is another incredibly sad story from an Unemployed-Friends user known as feuxdejoie….

“I lost my job in June 2008, my husband was working but sentenced to prison for 4 years, for DUI, no accidents or injuries. I had been using my unemployment to pay bills but my last check came June 12, 2010. I’m alone and scared. The city that I live in has the highest unemployment in the State, Illinois. Our children are grown and I sit alone all day searching for jobs. My husband can only call once a month because of the outrageous rates for telephone calls. I’m at the end of my rope and don’t know where to turn if they don’t pass a tier V for unemployment or open up some jobs.
I turned 50 in April and had worked all of my life, starting at age 14 with a work permit! My employer stated to me that they needed someone bilingual and terminated me even after I told them that I would take classes to learn.  I signed up for college and began classes in January then unemployment told me that I wasn’t elgible for unemployment while attending school.”

There are millions of Americans who believe that their lives are over because they can’t get decent jobs.  When you lose your job, your home, your car, your health insurance and then finally your unemployment insurance runs out, it is easy to lose all hope as an Unemployed-Friends user named Ember has done….

“so i feel pretty much hopeless. been unemployed since July 2008. in over two years i haven’t even been called for an interview. tired of looking and applying for jobs outside of my field that require experience i don’t have. it’s all for naught. i have two bachelor of science degrees. my BS degrees, cuz that’s what they’re worth. since losing my job i’ve gotten divorced. lost my house. lost my health insurance. totalled my car and sustained chronic back pain. and moved in with my mom. and did i mention, when all this started i was a new mom, just back from maternity leave? so (now) i’m raising a toddler on my own, with no income. my unemployment insurance ran out a few weeks ago. i don’t even know what to do now. i just want to disappear. i’m tired of trying. i’m tired of being a burden on everyone. if i didn’t have the responsibility to take care of my child i wouldn’t be around anymore.”

This final example is from an Unemployed-Friends user identified as Faith1028.  Be warned that this one will shake you to your core if you have any sensitivity at all.  As you read this, keep in mind that this kind of thing is literally happening to millions of Americans these days….

“HI, y’all! This is my story. I’m from Chicago.

I lost my job 11.06.09 – I did my best to remain positive & confident that I would get a job by the end of November.

December 2009 – Still no job. I’m getting food stamps (LINK card) & Unemployment Benefits. Not much money at all, but I’m surviving. Thanks to all this stress, my stomach has been burning and/or been painful daily for all December. I puked my guts out on the 26th.

January 2010 – My stomach is still hurting every day. I had to close out my savings account. I haven’t told my slumlord or my fellow tenants that I lost my job; I go on pretending I’m still going to work everyday. Unfortunately on the 26th, I got my eviction notice. I called the office to ask why. The response was “I don’t know.” I became hysterical. I’ve no job, no money, no family/friends to help. (I have many *relatives*, but no *family*.) I truly believed my only alternative was suicide. I wanted to say good-bye to my brother (my only sibling), but we haven’t spoken to each other for over 4 years; I no longer have his address/phone number. I found him on Facebook. I didn’t bring up my situation because I felt he wouldn’t care. We exchanged a few messages and that was it. I haven’t heard from him since. Good riddance.

February 2010 – Someone found a family that I can stay with for only $250/month! My own room! They turned out to be aquaintances of mine. Vegetarian, too! At least I have a place to stay. I’d rather live alone, but, hey, I’m desperate! — And I’m not too crazy about the bedbugs. OW!

June/July 2010 – Thanks to daily/nightly use of citrine crystals since 30 May, I have no more stomach problems!
Thanks to weekly use of a natural (green!) pesticide from PlusNaturalEnzymes.com, I no longer have a problem with bedbugs! However…
Mid-June, my Unemployment Benefits ran out. Of course, I’m still looking for a job! What am I supposed to do – put a gun to someone’s head and force them to hire me? As of this date, I have $12 left to my name; $0 in my chequeing account. I recently reapplied for and am now receiving food stamps. Before I got my food stamps back, I’ve eaten whatever (Vegetarian!) food I can get, even stuff I’m allergic to. As a result, I’ve become sick: cold-like symptoms, pain in lower intestines…and a rash over my arms, legs, & neck. Oh, does it itch! At least my food allergies are not life-threatening.
Needless to say, my depression has gotten worse.

I am really trying hard to remain positive — and alive.
But why? Is it really all worth it?

I haven’t paid July’s rent, and the people I’m staying with are getting very *impatient*; I fear I’ll be evicted again! The money is coming! It’s not my bloody fault!

Someone on Twitter sent me a link to this site. I know I’m not the only one suffering; some folks have already committed suicide. I don’t want to die, but I don’t want to be homeless, either. I am so bloody scared.
Just give me money that my tax dollars paid for!
–Or better yet: GIVE ME A BLASTED JOB!!”

The really sad thing is that there are countless other stories just like these being posted all over the Internet all the time.

People are hurting.

People are losing hope.

So how did we get here?

Well, it turns out that the “haves” have figured out that they really don’t need the “have nots” after all.  Incredible advances in technology have increasingly enabled employers to replace humans with machines and computers.  In addition, as we have detailed previously, millions upon millions of middle class American jobs are being shipped off to China and to dozens of third world nations where workers are more than happy to work for less than a tenth of what an American worker would make.

All of those jobs that have been lost to technology and that have been sent overseas are not going to come back.  The hordes of long-term unemployed that we are seeing now is just the beginning.  It is going to get a lot worse.

So the next time you hear a hard luck story from an unemployed American, don’t look down on that person.

You might be next.

Possibly Related Posts:

• Why Obama Is Proposing Whopping Corporate Tax Cuts, and Why He’s Wrong
• Bank Robbery on Wall Street: The Gangsters versus The Banksters
• As Americans Celebrate Labor Day 2010, U.S. Factories Are Closing In Droves
• Bad Monetary Policy Is Redundant
• Global Collapse of the Fiat Money System: Too Big To Fail Global Banks Will Collapse Between Now and First Quarter 2011

Morgan Stanley Says Government Defaults Inevitable

Published on 08-25-2010

Source: Bloomberg

Investors will face defaults on government bonds given the burden of aging populations and the difficulty of securing more tax revenue, according to Morgan Stanley.

“Governments will impose a loss on some of their stakeholders,” Arnaud Mares, an executive director at Morgan Stanley in London, wrote in a research report today. “The question is not whether they will renege on their promises, but rather upon which of their promises they will renege, and what form this default will take.” The sovereign-debt crisis is global “and it is not over,” the report said.

Borrowing costs for so-called peripheral euro-region nations such as Greece and Ireland surged today, resuming their ascent on concern that governments won’t be able to narrow their budget deficits. Standard & Poor’s downgraded Ireland’s credit rating yesterday on concern about the rising costs to support nationalized banks. The yield on Greek debt rose to more than 900 basis points above that of Germany today, the most since the European Union and International Monetary Fund created a 750 billion euro ($948 billion) bailout package in May.

Mares said debt as a percentage of gross domestic product is a false indicator of an economy’s health given it doesn’t reflect governments’ available revenue and is “backward- looking.” While the U.S. government’s debt as a percentage of GDP is 53 percent, one of the lowest ratios among developed nations, its debt as a percentage of revenue is 358 percent, one of the highest levels, the report said.

Double Dip

“Outright sovereign default in large advanced economies remains an extremely unlikely outcome, in our view,” the report said. “But current yields and break-even inflation rates provide very little protection against the credible threat of financial oppression in any form it might take.”

Mares didn’t identify which nations may default. He once worked at the U.K.’s Debt Management Office and is a former senior vice-president at credit-rating company Moody’s Investors Service.

“Note that a double-dip recession would not invalidate this conclusion,” Mares’ report said. “It would cause yet further damage to the governments’ power to tax, pushing them further in negative equity and therefore increasing the risks that debt holders suffer a larger loss eventually.”

Yields on German and U.S. benchmark securities sank today as investors sought the safest assets. Greece’s so-called yield spread over German debt was at 932 basis points as of 2:18 p.m. in London, short of the 973 basis point record set on May 7.

“The conflict that opposes bondholders to other government stakeholders is more intense than ever, and their interests are no longer sufficiently well-aligned with those of influential political constituencies,” such as elderly voters and their claims on pensions and health insurance, Mares wrote.

Possibly Related Posts:

• Why Obama Is Proposing Whopping Corporate Tax Cuts, and Why He’s Wrong
• Bank Robbery on Wall Street: The Gangsters versus The Banksters
• As Americans Celebrate Labor Day 2010, U.S. Factories Are Closing In Droves
• Bad Monetary Policy Is Redundant
• Global Collapse of the Fiat Money System: Too Big To Fail Global Banks Will Collapse Between Now and First Quarter 2011

Little-known fact: Obama’s failed stimulus program cost more than the Iraq war

By: Mark Tapscott
Editorial Page Editor
08/23/10 11:32 AM EDT

Expect to hear a lot about how much the Iraq war cost in the days ahead from Democrats worried about voter wrath against their unprecedented spending excesses.

The meme is simple: The economy is in a shambles because of Bush’s economic policies and his war in Iraq. As American Thinker’s Randall Hoven points out, that’s the message being peddled by lefties as diverse as former Clinton political strategist James Carville, economist Joseph Stiglitz, and The Nation’s Washington editor, Christopher Hayes.

The key point in the mantra is an alleged $3 trillion cost for the war. Well, it was expensive to be sure, in both blood and treasure, but, as Hoven notes, the CBO puts the total cost at $709 billion. To put that figure in the proper context of overall spending since the war began in 2003, Hoven provides this handy CBO chart showing the portion of the annual deficit attributable to the conflict:

But there is much more to be said of this data and Hoven does an admirable job of summarizing the highlights of such an analysis:

* Obama’s stimulus, passed in his first month in office, will cost more than the entire Iraq War — more than $100 billion (15%) more.

* Just the first two years of Obama’s stimulus cost more than the entire cost of the Iraq War under President Bush, or six years of that war.

* Iraq War spending accounted for just 3.2% of all federal spending while it lasted.

* Iraq War spending was not even one quarter of what we spent on Medicare in the same time frame.

* Iraq War spending was not even 15% of the total deficit spending in that time frame. The cumulative deficit, 2003-2010, would have been four-point-something trillion dollars with or without the Iraq War.

* The Iraq War accounts for less than 8% of the federal debt held by the public at the end of 2010 ($9.031 trillion).

* During Bush’s Iraq years, 2003-2008, the federal government spent more on education that it did on the Iraq War. (State and local governments spent about ten times more.)

Just some handy facts to recall during coming weeks as Obama and his congressional Democratic buddies get more desperate to put the blame for their spending policies on Bush and the war in Iraq. For more from Hoven, go here.

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