Article 43

 

Next Recession, Next Depression

Thursday, October 05, 2017

Bad Moon Rising Part 69 - The End Of Empire

image: dying america

“I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. . . . corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed.”
- Abraham Lincoln

“The economic anarchy of CAPITALIST SOCIETY as it exists today is, in my opinion, the real source of the EVIL."
- Albert Einstein - Why Socialism, 1949

“Capitalism is the extraordinary belief that the nastiest of men for the nastiest of motives will somehow work for the benefit of all.”
- John Maynard Keynes

“I wouldn’t call it fascism exactly, but a political system nominally controlled by an irresponsible, dumbed down electorate who are manipulated by dishonest, cynical, controlled mass media that dispense the propaganda of a corrupt political establishment can hardly be described as democracy either.”
- Edward Zehr Columnist, 1936-2001

The Death Spiral Appears Unstoppable

By By Chris Hedges
TruthDig
October 1, 2017

The American empire is coming to an end. The U.S. economy is being drained by wars in the Middle East and vast military expansion around the globe. It is burdened by growing deficits, along with the devastating effects of deindustrialization and global trade agreements. Our democracy has been captured and destroyed by CORPORATIONS that steadily demand more tax cuts, more deregulation and IMPUNITY from prosecution for massive acts of financial fraud, ALL THE WHILE looting trillions from the U.S. treasury in the form of BAILOUTS. The nation has lost the power and respect needed to induce allies in Europe, Latin America, Asia and Africa to do its bidding. Add to this the mounting destruction caused by climate change and you have a recipe for an emerging dystopia. Overseeing this DESCENT at the highest levels of the federal and state governments is a motley collection of imbeciles, con artists, THIEVES, OPPORTUNISTS and WARMONGERING generals. And to be clear, I am speaking about Democrats, too.

The empire will limp along, steadily losing influence until the dollar is dropped as the world’s reserve currency, plunging the United States into a crippling depression and instantly forcing a massive contraction of its military machine.

Short of a sudden and widespread popular REVOLT, which DOES NOT SEEM LIKELY, the death spiral appears unstoppable, meaning the United States as we know it will no longer exist within a decade or, at most, two. The global vacuum we leave behind will be filled by China, already establishing itself as an economic and military juggernaut, or perhaps there will be a multipolar world carved up among Russia, China, India, Brazil, Turkey, South Africa and a few other states. Or maybe the void will be filled, as the historian Alfred W. McCoy writes in his book “In the Shadows of the American Century: The Rise and Decline of US Global Power”, by “a coalition of transnational corporations, multilateral military forces like NATO, and an international financial leadership self-selected at Davos and Bilderberg” that will “forge a supranational nexus to supersede any nation or empire.”

Under every measurement, from financial growth and infrastructure investment to advanced technology, including supercomputers, space weaponry and CYBERWARFARE, we are being rapidly overtaken by the CHINESE. In April 2015 the U.S. Department of Agriculture suggested that the American economy would grow by nearly 50 percent over the next 15 years, while Chinas would triple and come close to surpassing America’s in 2030, McCoy noted. CHINA became the world’s second largest economy in 2010, the same year it became the world’s leading manufacturing nation, pushing aside a United States that had dominated the world’s manufacturing for a century. The Department of Defense issued a sober report titled “At Our Own Peril: DoD Risk Assessment in a Post-Primacy World.” It found that “the U.S. military no longer enjoys an unassailable position versus state competitors,” and it no longer can automatically generate consistent and sustained local military superiority at range. McCoy predicts the collapse will come by 2030.

Empires in decay embrace an almost willful suicide. Blinded by their hubris and unable to face the reality of their diminishing power, they retreat into a fantasy world where hard and unpleasant facts no longer intrude. They replace diplomacy, multilateralism and politics with unilateral threats and the blunt instrument of war.

This collective self-delusion saw the United States make the greatest strategic blunder in its history, one that sounded the death knell of the empire - the invasion of Afghanistan and Iraq. The architects of the war in the George W. Bush White House, and the array of useful idiots in the press and academia who were cheerleaders for it, knew very little about the countries being invaded, were stunningly naive about the effects of industrial warfare and were blindsided by the ferocious blowback. They stated, and probably believed, that Saddam Hussein had weapons of mass destruction, although they had no valid evidence to support this claim. They insisted that democracy would be implanted in Baghdad and spread across the Middle East. They assured the public that U.S. troops would be greeted by grateful Iraqis and Afghans as liberators. They promised that oil revenues would cover the cost of reconstruction. They insisted that the bold and quick military strike “shock and awe” - would restore American hegemony in the region and dominance in the world. It did the opposite. As Zbigniew Brzezinski noted, “this unilateral war of choice against Iraq precipitated a widespread delegitimation of U.S. foreign policy.”

Historians of empire call these military fiascos, a feature of all late empires, examples of “micro-militarism.” The Athenians engaged in micro-militarism when during the Peloponnesian War (431-404 B.C.) they invaded Sicily, suffering the loss of 200 ships and thousands of soldiers and triggering revolts throughout the empire. Britain did so in 1956 when it attacked Egypt in a dispute over the nationalization of the Suez Canal and then quickly had to withdraw in humiliation, empowering a string of Arab nationalist leaders such as Egypts Gamal Abdel Nasser and dooming British rule over the nation’s few remaining colonies. Neither of these empires recovered.

“While rising empires are often judicious, even rational in their application of armed force for conquest and control of overseas dominions, fading empires are inclined to ill-considered displays of power, dreaming of bold military master strokes that would somehow recoup lost prestige and power”, McCoy writes. “Often irrational even from an imperial point of view, these micromilitary operations can yield hemorrhaging expenditures or humiliating defeats that only accelerate the process already under way.”

Empires need more than force to dominate other nations. They need a mystique. This mystiquea mask for imperial plunder, repression and exploitation - seduces some native elites, who become willing to do the bidding of the imperial power or at least remain passive. And it provides a patina of civility and even nobility to justify to those at home the costs in blood and money needed to maintain empire. The parliamentary system of government that Britain replicated in appearance in the colonies, and the introduction of British sports such as polo, cricket and horse racing, along with elaborately uniformed viceroys and the pageantry of royalty, were buttressed by what the colonialists said was the invincibility of their navy and army. England was able to hold its empire together from 1815 to 1914 before being forced into a steady retreat. Americas high-blown rhetoric about democracy, liberty and equality, along with basketball, baseball and Hollywood, as well as our own deification of the military, entranced and cowed much of the globe in the wake of World War II. Behind the scenes, of course, the CIA used its bag of dirty tricks to orchestrate coups, fix elections and carry out assassinations, black propaganda campaigns, bribery, blackmail, intimidation and torture. But none of this works anymore.

The loss of the mystique is crippling. It makes it hard to find pliant surrogates to administer the empire, as we have seen in Iraq and Afghanistan. The photographs of physical abuse and sexual humiliation imposed on Arab prisoners at Abu Ghraib inflamed the Muslim world and fed al-Qaida and later Islamic State with new recruits. The assassination of Osama bin Laden and a host of other jihadist leaders, including the U.S. citizen Anwar al-Awlaki, openly mocked the concept of the rule of law. The hundreds of thousands of dead and millions of refugees fleeing our debacles in the Middle East, along with the near-constant threat from militarized aerial drones, exposed us as state terrorists. We have exercised in the Middle East the U.S. military’s penchant for widespread atrocities, indiscriminate violence, lies and blundering miscalculations, actions that led to our defeat in Vietnam.

The brutality abroad is matched by a growing brutality at home. Militarized police gun down mostly unarmed, poor people of color and fill a system of penitentiaries and jails that hold a staggering 25 percent of the worlds prisoners although Americans represent only 5 percent of global population. Many of our cities are in ruins. Our public transportation system is a shambles. Our educational system is in steep decline and being privatized. Opioid addiction, suicide, mass shootings, depression and morbid obesity plague a population that has fallen into profound despair. The deep disillusionment and anger that led to Donald Trump’s election - a reaction to the corporate coup d’tat and the poverty afflicting at least half of the country - have destroyed the myth of a functioning democracy. Presidential tweets and rhetoric celebrate hate, racism and bigotry and taunt the weak and the vulnerable. The president in an address before the United Nations threatened to obliterate another nation in an act of genocide. We are worldwide objects of ridicule and hatred. The foreboding for the future is expressed in the rash of dystopian films, motion pictures that no longer perpetuate American virtue and exceptionalism or the MYTH OF HUMAN PROGRESS.

The demise of the United States as the preeminent global power could come far more quickly than anyone imagines,” McCoy writes. “Despite the AURA OF OMNIPOTENCE empires often project,” most are surprisingly fragile, lacking the inherent strength of even a modest nation-state. Indeed, a glance at their history should remind us that the greatest of them are susceptible to collapse from diverse causes, with fiscal pressures usually a prime factor. For the better part of two centuries, the security and prosperity of the homeland has been the main objective for most stable states, making foreign or imperial adventures an expendable option, usually allocated no more than 5 percent of the domestic budget. Without the financing that arises almost organically inside a sovereign nation, empires are famously predatory in their relentless hunt for plunder or profitwitness the Atlantic slave trade, Belgiumӗs rubber lust in the Congo, British Indias opium commerce, the Third ReichҒs rape of Europe, or the Soviet exploitation of Eastern Europe.

“When revenues shrink or collapse,” McCoy points out, “empires become brittle.”

ҔSo delicate is their ecology of power that, when things start to go truly wrong, empires regularly unravel with unholy speed: just a year for Portugal, two years for the Soviet Union, eight years for France, eleven years for the Ottomans, seventeen for Great Britain, and, in all likelihood, just twenty-seven years for the United States, counting from the crucial year 2003 [when the U.S. invaded Iraq], he writes.

Many of the estimated 69 empires that have existed throughout history lacked competent leadership in their decline, having ceded power to monstrosities such as the Roman emperors Caligula and Nero. In the United States, the reins of authority may be in the grasp of the first in a line of depraved demagogues.

ӔFor the majority of Americans, the 2020s will likely be remembered as a demoralizing decade of rising prices, stagnant wages, and fading international competitiveness, McCoy writes. The loss of the dollar as the global reserve currency will see the U.S. unable to pay for its huge deficits by selling Treasury bonds, which will be drastically devalued at that point. There will be a massive rise in the cost of imports. Unemployment will explode. Domestic clashes over what McCoy calls Ӕinsubstantial issues will fuel a dangerous hypernationalism that could morph into an American fascism.

A discredited elite, suspicious and even paranoid in an age of decline, will see enemies everywhere. The array of instruments created for global dominance, wholesale surveillance, the evisceration of civil liberties, sophisticated torture techniques, militarized police, the massive prison system, the thousands of militarized drones and satellites - will be employed in the homeland. The empire will collapse and the nation will consume itself within our lifetimes IF WE do not WREST POWER from those who rule the corporate state.

SOURCE

Posted by Elvis on 10/05/17 •
Section Bad Moon Rising • Section Dying America • Section Next Recession, Next Depression
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Tuesday, June 07, 2016

Steady Fall Of Labor Participation

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Why you should never blindly trust the official unemployment rate

By Jeff Spross
The Week
June 6, 2016

Friday’s JOB REPORT was a study in whiplash.

The unemployment rate dropped a remarkable 0.3 percentage points: It was 5 percent in April, and fell to 4.7 percent in May.

Which sounds great!

But only 38,000 jobs were created last month. That’s absolutely abysmal. It’s likely the Verizon strike TEMPORARILY ELIMINATED 35,000 to 40,000 jobs in May, which will return now that the strike is over. But even that would’ve only brought May’s count to just under 80,000 new jobs. By COMPARISON, 2015 averaged 221,000 jobs per month, and 2014 averaged 260,000 per month. On top of that, job creation numbers for both March and April were revised down for a total loss of 59,000.

Which is not good at all.

The way to make sense of these two conflicting indicators is to realize the unemployment rate is not always the best indicator of the economy’s health. In fact, it’s probably a much worse indicator right now than it’s been in a long time.

Friday’s jobs report actually provides an excellent opportunity to explain why.

There’s some silly CONSIPRACY-MONGERING out there about how the unemployment rate isn’t the “real” unemployment rate.

But the thing to realize is that the “official” unemployment rate is designed to measure a specific thing, and you can’t ask that measurement to tell you more about the economy than it’s designed to. The “official” unemployment rate everyone always talks about is actually called the ”U-3” rate, and it’s the total number of unemployed Americans as a percentage of the labor force.

So what does that mean? The labor force is everyone over the age of 16 who is either employed or has looked for a job within the last four weeks. So a 4.7 percent unemployment rate means 4.7 percent of that population doesn’t have a job.

Now let’s look at another measure the government tracks: the EMPLOYMENT-TO-POPULATION ratio. This is the percentage of everyone over the age of 16 who has a job. And it held steady: 59.7 percent in April and 59.7 percent in May.

So the percentage of everyone over age 16 who is unemployed held steady. But the percentage of people over 16 who looked for work in the last four weeks and who are unemployed fell. How did that happen? Because some of them stopped looking for work. They left the labor force, not because they found a job, but because they no longer met the criterion.

You can see it in the data that doesn’t get the headline treatment: The labor force participation rate itself fell from 62.8 percent to 62.6 percent in May. And the number of unemployed people who stopped looking for work ticked up sharply.

Obviously, that’s all bad. But the way the math works, it results in a lower official unemployment rate.

This all gets at a deeper problem. The official unemployment rate is affected by the health of the economy. But the labor force participation rate is affected by it, too. It fell from 67 percent in the late ‘90s to 66 percent after the 2001 recession and never recovered. Then it fell again after the Great Recession, all the way down to between 62 and 63 percent. It has yet to recover.

image: Labor Participation Rate May 2016

It looked like the labor force participation rate might have finally started climbing again, but its fall over the last two months basically wiped out all its gains. The one bit of good news is that its post-Great Recession drop leveled off around the start of 2014, and there’s no sign yet it’s starting a new fall.

Now, some of that collapse is due to normal demographics changes, in particular old and retired people becoming a bigger share of the overall population. But that doesn’t account for all of the collapse. Some of it is people giving up because they just can’t find work. That means, until the labor force participation rate recovers by several percentage points, the official unemployment rate simply won’t be a good measure of the health of the economy.

“A 5 percent unemployment rate today is a distinctly different indication of labor market slack than a 5 percent unemployment rate would have been before the recession, in 2007,” Patrick O’Keefe, director of economic research at the accounting firm CohnReznick, told The New York Times.

So what should we be looking at to judge the health of the economy?

There are actually SIX different measures of unemployment the government tracks: “U-1” through “U-6.” The U-6 RATE in particular is WORTH WATCHING when labor force participation is depressed; it INCLUDES unemployed people who look for work less often and people who want to work full-time but can only find part-time jobs, for instance. There’s also the EMPLOYMENT-TO-POPULATION RATIO FOR AGES 25-54. That is, out of all Americans age 25 to 54, what percentage has jobs? It’s HELPFUL because it filters out a lot of the demographic questions like whether people are retired or students - that bedevils other measures.

But ultimately, the best measure is just THE RATE at which wages are growing. The economy is at full health when the number of jobs available matches the number of people who want to work. When that happens, workers stop competing for jobs, and employers start competing for workers, which causes wages to rise.

Back at the height of the 1990s boom, wages grew at roughly 4 percent. Right now they’re growing at around 2.5 PERCENT.

So we’ve got the metrics to tell us how well the economy is (or isn’t) doing. We just have to be more flexible about which ones we use.

SOURCE

Posted by Elvis on 06/07/16 •
Section Dying America • Section Next Recession, Next Depression
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Sunday, March 23, 2014

The Next Depression Part 53 - You’re Next

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Do Not Make Fun Of Those That Have Fallen Out Of The Middle Class - You Could Be Next

By Michael Snyder
Ecomomic Collapse Blog
March 20, 2014

There are millions of American families that once lived very comfortable middle class lifestyles that have lost it all.  When you are unemployed and you can’t find a decent job, it can crush your soul.  Every day you can see the disappointment or the disapproval in the eyes of your family and friends, and it can be really easy to want to give up completely.  And then there are always those that choose to actively vocalize their disdain for those that are down on their luck.  But telling people “to get a job” or shaming them for being on welfare isn’t going to solve anything in an economy where there simply are not enough jobs for everyone.  Only a small minority of welfare recipients are actually trying to abuse the system.  Most people just want to work hard and take care of their families.  Unfortunately, that is much harder to do than it was before the last financial crisis.

At this point, our economy has stabilized at a much lower level than it was at before.  For example, 32 million Americans were on food stamps when Barack Obama took office, and subsequently that number shot up to about 47 million.  Fortunately, that number has been relatively stable for the last couple of years, but there has been no recovery.  This can be seen in lots of other economic statistics as well.

If we were going to have an “economic recovery”, it should have happened by now.

Unfortunately, it has not materialized, and now the next downturn is coming.

Since I run a website called “The Economic Collapse”, a lot of people seem to assume that I actually want an economic collapse to happen.  But that is not the truth at all.  I love this country, and just like most other people I really enjoy life in modern America.  I wish that the party could go on forever.  But I know that it cannot.

And every day I hear from people that are deeply suffering in this economy.  Anyone that has a heart that hears of such suffering would want things to get better.  Why would anyone want to see even more pain?

But I know that more pain is coming.

In the years ahead, a tremendous amount of love and compassion are going to be needed.  When people lose their jobs, their entire lives can be turned upside down.  Just consider the case of one formerly middle class woman named Abby Henson…

Last winter I ran into a friend pushing his two youngest children in a stroller. When I asked how he was doing, he told me hed recently lost his job. I walked away thinking, ғThank God thats not us.Ҕ Fast-forward seven months and now were the family people walk away from with a sigh of relief.

One day this summer, my husband came home early from work with the news he’d lost his job. Since then, weve gone through all the stages of grief, with a few additions of our own. I’ve gone into what Ive dubbed “Mama Bear” mode, wanting to do everything with my husband and our two small children, maybe because I just don’t want to face anyone alone. How are you doing? is a hard question to answer in the rush of school pickup. So I keep my mate and cubs close, or we hibernate at home, trying to avoid scrutiny.

Sadly, this kind of thing has happened to millions of families.  Those that doubt this just need to look at the survey numbers.

Back in 2008, 53 percent of all Americans considered themselves to be “middle class”.

In 2014, only 44 percent of all Americans still consider themselves to be “middle class”.

This next story that I want to share with you is from a reader named Joe.  Please look past the lack of punctuation, and consider what he is saying.  This is a man that has had his heart broken…

I’m not sure whats worse. never having a career and family or losing them both. I know that when i got the honor of handing 20 years of hard work to the chinese it plunged me in to despair and a horrible spin. 3 years later and a college degree and ive lost my home and my family over it. and all i got was, you could have, you should have. so its all my fault that someone elses greed caused all this. by the way the corporate CEO that did this makes 7 million bucks a year. she caused 2 divorces. a dozen early forced retirements, countless career losses and multiple wrecked families. I’m lucky i still have my RV which is home now. i used to have a nice 4 bedroom house with all the middle class trimmings. now i consider myself lucky to have a job where i barely make the space rent and no hope of recovering my former career or my family. i had it all and lost it so i dont know whats worse having or never having it at all and pining for it. either way it hurts knowing that no one wants you after you fall apart you’re just a hot potato. all i know is that im lost with no hope with a clean 30 year work history thats now moot. in retrospect i wish i had stayed in the saddle and kept riding my motorcycle till i was no more.

And it is not just older Americans that are suffering in this economy.

Many young people that worked incredibly hard through school and that did everything “right” now find the door to the middle class completely shut.  The following is testimony from a recent college graduate that is incredibly sad.

I’m a college graduate. I live at home. I am on food stamps. I graduated about two years ago and the only work I’ve been able to get is sign waving. Temp agencies are all so flooded with applicants they are almost useless. I’ve sent out hundreds of resumes, filled out dozens of applications, and nothing ever happens. Everyone acts like it’s YOUR fault. That used to be hurtful, but now I’m past caring, because I realize what life holds for me: nothing. I will never have a family or career. I will never own a home or even live on my own again. I will never be able to have a social life again. I will never be financially independent, like I was for a brief period of time at an age younger than most because I worked so hard for it. And all of it was for this nothing. A lifetime of hard work, completely wasted. I wish I had just partied and screwed around my whole life - the outcome probably would have been better.

The despair that our young adults are feeling right now shows up very clearly in the survey numbers.

Back in 2008, 25 percent of all Americans in the 18 to 29-year-old age bracket considered themselves to be “lower class”.

In 2014, 49 percent of them do.

That is an astounding shift in just six years.

Anyone that believes that the U.S. economy is “just fine” is crazy.

When you lose everything, it can plunge you into a spiral of depression and desperation that can be incredibly difficult to break free from.

Some people get tempted to give up completely, but that is never a good answer.

I hope that some people will take hope from a comment that a reader named Paul left on one of my recent articles…

Due to a lack of job security and all the bad economic news I have lapsed into a clinical depression. I have been susceptible to anxiety and depression in the past. However, I did not have to deal with a bout of depression for about 5 years. I am writing this as a wakeup call to other people who may be feeling what I am feeling right now. I am extremely angry about the rampant corruption, laziness, hubris, and ignorance that is permeating through society today. I have shifted between anger, apathy, and sadness. However, I have family that I must protect. One of my purposes in life is to give people hope. Also, below is a list of actions I took to combat my depression.

Take up a new hobby. Dancing helped me.

Take stock of how your life impacts others.

Prepare for harder times ahead. This is extremely empowering.

Engage in acts of kindness. I found a twenty dollar bill on the floor at a store. Instead of keeping it I gave it to lost and found at customer service. I also removed a sharp piece of wood from the middle of a residential street.
I remember the saying “Suicide is a permanent solution to a temporary problem.” Feelings of sadness, anger, hopelessness are transitory. If you have thoughts about taking your life please get help.

Typing this has made me feel better.

I will continue to fight my depression. I am in a dark place right now. However, I am searching for the light.

Please pray for Paul and others just like him as they struggle with their pain.

The truth is that there is always hope.

If you are reading this and you are hurting, I want you to know that almost everyone hits a very deep low at some point.  But if you keep fighting, there is always a way for things to be turned around.

Personally, God took the broken pieces of my life and turned them into a beautiful thing, and He can do the same for you.

So never, ever, ever give up.

Yes, very challenging economic times are coming.

But our lives should not be defined by our material possessions anyway.

Personally, I am very glad to be alive during this time of human history.  When times are the darkest, that is when light is needed the most.  And times of great crisis also often bring great opportunity as well.

The years ahead are going to present an awesome opportunity to make a difference in this world.

Posted by Elvis on 03/23/14 •
Section Revelations • Section Dying America • Section Next Recession, Next Depression
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Monday, December 31, 2012

Austerity American Style Part 5 - Selling Out The Public

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“With the Bush administration, the underlying evil that informs systems of government that are based on “power over” instead of “liberty for” is coming out from hiding in the shadows”
- War On Consciousness, Paul Levy, June 2007

The game isn’t over in the US, but the smart money is that the first revolution in the US isn’t going to be a revolution of the left, its going to be a nutbar revolution from the right, and it is going to be extraordinarily ugly. In the meantime, if you have to stay, make sure you’re on good terms with your neighbors, your spouse, your friends and your family.  Figure out how to grow food wherever you are and how to reduce your dependence on anything but people you trust.  (Don’t trust any corporation.) And, if you can, organize.  Organize locally, organize at the State level, organize nationally.  Understand the age of compromise is over. It is now too late to save the old system.  It’s over.  We tried, and we failed.  It is beyond reform, it is GOING TO FLAME OUT, the only question is how many people it will burn to death as it does so.
- An American Future, Newshoggers, December 2010

The idea that raising taxes on the rich in these dismal economic times in any way represents some injustice is such baloney that one should wonder how any American can possibly eat this Republican garbage. Similarly, the nonsense about job creators somehow not creating new jobs because of higher taxes flies in the face of reality, because very low taxes have not caused them to create significant new jobs. Nor did higher taxes for some decades for decades after World War II stop high rates of new job creation.
- Are you A Victim Of Political Propoganda, August 30, 2012

The problem from the standpoint of conventional economics with the fiscal cliff is that it amounts to a double-barrel dose of austerity delivered to a faltering and recessionary economy.  Ever since John Maynard Keynes, most economists have understood that austerity is not the answer to recession or depression.

...the entire economic policy of the United States is dedicated to saving four banks that are too large to fail. The banks are too large to fail only because deregulation permitted financial concentration, as if the Anti-Trust Act did not exist.
- The “Fiscal Cliff” Is A Diversion, Paul Craig Roberts, December 17, 2012

“The simple truth is that Social Security has not contributed a nickel to the national debt so it makes no sense for it to be part of deficit negotiations,
- Senator Bernie Sanders, November 27, 2012

“Every time I hear a political speech or I read those of our leaders, I am horrified at having, for years, heard nothing which sounded human. It is always the same words telling the same lies. And the fact that men accept this, that the peoples anger has not destroyed these hollow clowns, strikes me as proof that men attribute no importance to the way they are governed; that they gamble - yes, gamble - with a whole part of their life and so called ‘vital interests.’”
- Albert Camus, 1937

We must remember that every right, we enjoy has been wrestled from the hands of power, at great personal cost by ordinary people like you and I.  We have been entrusted with the honor of remembering their struggle and defending these rights by helping to educate others and holding to the belief that compassion and understanding arise from an awareness that we are all just reflections of each other.
- Tom Feely, Information Clearinghouse

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Obama Hits Social Security In Fiscal Cliff Offer Friendlier To The Wealthy
President Barack Obama, with his latest fiscal cliff offer, proposes extending the Bush tax cuts for everyone earning less than $400,000 a year, and paying for it by increasing taxes on the middle class and cutting Social Security and Medicare.

By Ryan Grim
Huffington Post
December 18, 2012

Obama’s offer would allow the payroll tax holiday to expire, meaning middle class workers will see smaller paychecks in 2013. Economists have warned that the recovery is too fragile to risk a broad tax hike on workers. IT WOULD also gradually reduce Social Security, pension and Medicare benefits seniors are due to receive, taking a small bite up front, but building up to much larger cuts over time.

Obama’s concession to Republicans is opposed by a majority of Americans, according to a HuffPost/YouGov poll. Fifty-two percent of survey respondents said the payroll tax cut should be extended to avoid raising taxes on the middle class, while 22 percent said that it should be allowed to expire to help pay down the debt. Extending the payroll tax cut received bipartisan support: 64 percent of Democrats and 57 percent of Republicans in the survey said they supported the extension. 

MOVE ON, the largest online progressive organization in Washington, reacted angrily Monday night to reports that Obama was softening. The group’s quick reaction to a possible deal that has yet to be announced publicly shows there will be fierce opposition to cuts that hit Social Security, Medicare or Medicaid beneficiaries.

One top GOP aide predicted a deal, within the next day, that House Republicans would have no choice but to accept. A second said that many details still needed to be filled in, and that the president was dug in at $1.2 trillion in revenue, more than Republicans wanted.

Obama, according to Senate Majority Leader Harry Reid (D-Nev.), had previously told fiscal cliff negotiators that “Social Security is not going to be part of this.” That TURNED OUT TO BE A FALSE ASSERTION, given Monday’s offer to target the elderly. The proposed Social Security reform is known as “chained CPI” and is an alternate measure of inflation that accounts for the way consumers react to higher prices by switching to similar products that are less costly. Or, as the Bureau of Labor Statistics put it, “If the price of pork increases while the price of beef does not, consumers might shift away from pork to beef.”

The CHAINED CPI proposal is unpopular across the political spectrum. Fifty-six percent of Republicans, along with 67 percent of Democrats and 46 percent of independents, said they thought the proposal was a bad idea. Older Americans were most likely to oppose the measure, with 77 percent of those age 65 and older saying that the proposal was a bad idea. Adults under 30 were the least likely to have an opinion: 50 percent said they weren’t sure whether the proposal was a good or bad idea, while 21 percent said it was a good idea and 29 percent said it was a bad idea.

Justin Ruben, head of MoveOn, said in a statement that the group’s members agree. “MoveOn members overwhelmingly oppose cuts to Social Security, Medicare, and Medicaid benefits, and they’ve made clear that they would see any fiscal agreement that cuts such benefits as a betrayal that sells out working and middle class families—whether the cuts come via a chained CPI, increased Medicare eligibility age, or in some other form,” Ruben said.

Ruben said that his organization would encourage Democrats to block such a bargain. “If such a deal were proposed by the president and speaker, MoveOn members would expect every Senate and House Democrat to do everything in their power to block it,” Ruben said. “Senate Majority Leader Reid would play a crucial role, as MoveOn members would count on him and other senators to remain true to their repeated promises to keep Social Security benefits off the table.”

Reid has indeed been adamant. “I have made it very clear, I have told anyone that will listen—including everyone in the White House, including the president—that I am not going to be part of having Social Security as part of these talks relating to this deficit,” Reid told reporters earlier.

Alex Lawson, executive director of Social Security Works, which opposes cuts to the program, said the chained CPI is painful policy. “Almost every elected official just spent an entire election season saying they wouldn’t cut the benefits of those 55 and older. The truth is the chained CPI hits everyone’s benefits on day one,” he said. “It hits the oldest of the old and disabled veterans the hardest. If it wasn’t being bandied about as being ‘on the table,’ I would guess that it was created as an office joke to see who could create the most noxious and offensive policy possible.”

Boehner included the chained CPI in his counteroffer to Obama earlier, which also called for broader reform of social insurance programs. In 2011, Boehner and Obama reportedly agreed to a “Grand Bargain” that included the chained CPI, but the deal fell apart.

SOURCE

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Proposed Social Security Bargain Makes No Sense for the Elderly

By Dean Baker
Center For Economic Policy And Research
December 18, 2012

According to reliable sources, the Obama administration is seriously contemplating a deal under which the annual cost of living adjustment for Social Security benefits would be indexed to the chained consumer price index rather than the CPI for wage and clerical workers (CPI-W) to which it is now indexed. This will lead to a reduction in benefits of approximately 0.3 percentage points annually. This loss would be cumulative through time so that after 10 years the cut would be roughly 3 percent, after 20 years 6 percent, and after 30 years 9 percent. If a typical senior collects benefits for twenty years, then the average reduction in benefits will be roughly 3 percent. 

There are a few quick points worth addressing:

The claim that the chained CPI provides a more accurate measure of the cost of living;

Whether Social Security benefits are now and will in the future be sufficient to allow for a decent standard of living for retirees; and

Whether this is a reasonable way to be dealing with concerns over the budget.

This are taken in turn below.

Is the Chained CPI More Accurate?

While many policy types and pundits have claimed that the chained CPI would provide a more accurate measure of the cost of living for seniors, they have no basis for this claim. The chained CPI is ostensibly more accurate for the population as whole because it picks up the effect of consumer substitution as people change from consuming goods that increase rapidly in price to goods with less rapid price increases.

While this is a reasonable way to construct a price index, it may not be reasonable to apply the consumption patterns and the substitution patterns among the population as a whole to the elderly. The Bureau of Labor Statistics (BLS) has CONSTRUCTED AN EXPERIMENTAL ELDERLY INDEX (CPI-E) which reflects the consumption patterns of people over age 62. This index has shown a rate of inflation that averages 0.2-0.3 percentage points higher than the CPI-W.

The main reason for the higher rate of inflation is that the elderly devote a larger share of their income to health care, which has generally risen more rapidly in price than other items. It is also likely that the elderly are less able to substitute between goods, both due to the nature of the items they consume and their limited mobility, so the substitutions assumed in the chained CPI might be especially inappropriate for the elderly population.

While the CPI-E is just an experimental index, if the concern is really accuracy, then the logical route to go would be for the BLS to construct a full elderly CPI. While this would involve some expense, we will be indexing more than $10 trillion in Social Security benefits over the next decade. It makes sense to try to get the indexation formula right.

Are Social Security Benefits Adequate?

While some people have tried to foster a myth of the elderly as a high living population, the facts dont fit this story. The median income of people over age 65 is LESS THAN $20,000 A YEAR. Nearly 70 percent of the elderly rely on Social Security benefits for more than half of their income and NEARLY 40 PERCENT RELY ON SOCIAL SECURITY FOR MORE THAN 90 PERCENT OF THEIR INCOME. These benefits average less than $15,000 a year.

The reason that seniors are so dependent on Social Security is that the other pillars of the retirement stool, employer pensions and individual savings, have largely collapsed. Defined benefit pensions are rapidly disappearing. Defined contribution plans, like 401(k)s have also proved grossly inadequate. Only around half of the work force even has a defined contribution plan available to them at their workplace. In a period of stagnant wages and limited employer contributions, workers have generally been unable to accumulate much wealth in these plans. According to the Retirement Research Center at Boston College, the median value of 401(K) and other defined contribution plans for those near retirement who have a plan is $120,000, ENOUGH TO GET AN ANNUITY PAYING $575 PER MONTH.

For most workers the vast majority of their wealth was in their homes. The collapse of the housing bubble destroyed much of this equity. Counting all forms of wealth, including equity in a home, the median household approaching retirement HAD JUST $170,000 IN WEALTH IN 2011.

The proposed cut in the annual cost of living adjustment will be a substantial hit to a population that for the most part is ill-prepared to see a cut in its income. The effect of this cut on the income of the typical beneficiary will be larger, measured as a share of income, than the return to Clinton era tax rates on the richest 2 percent will be to the people affected. It is also worth noting that this cut to benefits will affect current retirees, not just people who will be collecting benefits 10 or 15 years in the future, who might have some opportunity to adjust to a cut.

Is the Chained CPI a Reasonable Way to Deal with the Budget

It is important to remember that under the law Social Security is supposed to be treated as a separate program that is financed by its own stream of designated revenue. This means that it cannot contribute to the budget deficit under the law, because it is only allowed to spend money from the Social Security trust fund.

This is not just a rhetorical point. There is no commitment to finance Social Security out of general revenue. The projections from the Social Security trustees show the program first facing a shortfall in 2033 after which point it will only be able to pay a bit more than 75 percent of scheduled benefits. While this date is still fairly far in the future, at some point it will likely be necessary to address a shortfall.

It is reasonable to expect that the changes needed to keep the program fully funded will involve some mix of revenue increases and benefit cuts. However if the chained CPI is adopted as part of a budget deal unconnected to any larger plan for Social Security then it effectively means that there will have been a substantial cut to Social Security benefits without any quid pro quo in terms of increased revenue. This hardly seems like a good negotiating move from the standpoint of those looking to preserve and strengthen the program.

There is also the question of whether the Social Security trustees will even score this cut accurately. In the 1990s there were changes to the CPI that had the effect of reducing the measured rate of inflation by at least 0.5 percentage points annually (Economic REPORT TO THE PRESIDENT 1998 Box 2-6). This would have implied a reduction in the annual cost of living adjustment by this amount and a corresponding improvement in the Social Security trust fund’s prospects. However, there is no evidence of this improvement in the programs finances during this period. In fact the projected rate of real wage growth (the difference between the nominal rate of wage growth and the measured CPI) was 1.0 PERCENT IN 1995, before the changes to the CPI. The projected long-run rate of real wage growth had actually been lowered to 0.9 percent in the 1998 TRUSTEE REPORT (Table II.D.1) which was issued after all the reductions in the CPI had been put in place.

It is important to remember that the trustees projections come from the trustees, not the professional staff of the Social Security Administration. Four of the six trustees are political appointees of the president. It is certainly possible that the cuts associated with the adoption of the CPI will not be factored into the trustees projections just as the even larger cuts associated with the changes in the CPI in the 1990s were not factored into the trustees projections.

Finally, it is worth commenting on the idea of tampering with statistical measures to achieve budgetary goals. The United States has been fortunate in having independent statistical agencies that have fiercely resisted efforts to manipulate data for political ends. In fact, in the 1990s there was considerable pressure placed on the Bureau of Labor Statistics to make adjustments to the CPI which would reduce Social Security and other indexed benefits. Katherine Abraham, the then head of the agency was steadfast in refusing to make any changes to the index that were not justified by BLS research.

The current effort has the spirit of using statistics for political ends, for example by refusing to have BLS produce a full elderly CPI so we would actually know the inflation rate experienced by the elderly. There also has been some discussion of leaving some programs, such as Supplemental Security Income, tied to the current CPI so as not to hurt a seriously disadvantaged population.

Congress can decide the benefit formula for these programs as it chooses. The honest way to cut benefits is for Congress to explicitly vote to cut benefits, not to try to hide a cut behind a statistical manipulation. This is the sort of behavior that encourages public contempt for politicians and the political process. 

SOURCE

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I May Lose My Unemployment Benefits

By Jennifer Liberto
CNN Money
December 20, 2012

This could be Karen Duckett’s worst New Year, ever.

Duckett, 51, of Laurel, Md., is among 2.1 million jobless Americans whose unemployment benefits will end on Dec. 29, if Congress doesn’t act.

After a 30-year career, managing housekeeping staff at a retirement community, Duckett was laid off last year. Despite looking for a job every day, she hasn’t been able to find work. Duckett says if her unemployment benefits run out, she and her 14-year-old grandson, who lives with her, won’t have enough money to eat.

“It’s been a very difficult year,” Duckett said. “The check keeps a roof over our head. ... I can’t even imagine what we’re going to do without that check.”

She is among 2.1 million Americans who will no longer be able to apply for unemployment benefits in the New Year. Another 1 million people who don’t have jobs will also exhaust their state benefits in early 2013 and lose their benefits, according to the National Employment Law Project, an advocacy group.

During the recession, as unemployment rates rose over 10%, the government put in place an emergency program to extend federal benefits to the jobless, whose state unemployment insurance had run out. Currently, federal unemployment benefits are available for up to 47 weeks, depending on the state.

The cost to extend the benefits by another year is $30 billion, according to the Congressional Budget Office. It’s a little piece of the $7 trillion in tax increases and spending cuts that will take effect as part of the fiscal cliff. It’s also a relatively small cost compared to other expenses, such as the payroll tax cut, which will cost $115 billion.

Majority of Americans have received government aid

Democrats have championed an extension of the benefits. President Obama said Wednesday during a press conference that he wasn’t willing to give tax breaks to millionaires while “not providing unemployment insurance for 2 million people who are still out there looking for work.”

Republicans have been cool to the extension. They say they’re open to the idea only if it doesn’t add to federal deficits. Finding $30 billion to “pay for” rising deficits could be tricky enough to scuttle a deal.

Several economists have said the economic recovery needs it.

“It is important to continue on with the emergency unemployment insurance program. It is providing a boost to economic growth,” said Mark Zandi, chief economist of Moody’s Analytics.

If Congress does extend unemployment benefits, it would be the 10th extension since the Great Recession began in December 2007. Congress first enacted an extension to the federal benefits package in June 2008.

Some 40% of the roughly 12 million people currently unemployed have been jobless for more than six months, according to NELP.

Duckett is one of the long term unemployed. That’s why she hit Capitol Hill on Tuesday, along with 50 other unemployed workers—organized by the Philadelphia Unemployment Project. The advocacy group hoped their stories would push lawmakers to work toward a deal to extend federal benefits until the economy improves.

“I opened my mailbox a week ago and got the notice warning me that I would not be receiving any more checks,” said Duckett, a breast cancer survivor, with tears streaming down her cheeks. “That gives me two weeks to see what we’re going to do.”

SOURCE

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Obama’s Grand Charade: Say No to the Staged Dismantling of Medicare and Social Security

By Margaret Flowers
Global Research
December 7, 2012

Here we go again. President Obama is in round three of his ongoing efforts to cut our important social insurances, such as Social Security and Medicare. Whether he succeeds or not is up to us. We can create a stronger economy and healthier population by strengthening and expanding our social insurances and switching to a green energy economy.

Round 1: In April, 2010, shortly after President Obama signed into law a health bill that further privatizes our health care system and while all attention was on this “historic achievement,” Obama created the NATIONAL COMMISSION FOR FISCAL RESPONSIBILITY AND REFORM. He appointed Alan Simpson and Erskine Bowles as chairs of what was commonly known as the Deficit Commission and loaded the panel with 14 deficit hawks out of the total of 18 appointees. The commission was given the power to create a deficit plan that would go to Congress for an up or down vote.

If there was still any question about the intent of the commission, those should have been answered by the fact that the PETER G. PETERSON FOUNDATION was working closely with them, providing support staff and hosting the America Speaks gatherings in the summer of 2010. Billionaire Pete Peterson has SPENT DECADES arguing for cuts to social insurances.

I attended an America Speaks event in Detroit in June, 2010 and it felt very similar to the Health Care House Parties that the Obama campaign promoted in December, 2008. The event materials were designed to manufacture consensus on how much to cut our social insurances. But, the people weren’t fooled and when the question of how much to cut Medicare was raised, many people demanded Medicare for all as a choice.

I also testified before the Deficit Commission in late June, 2010, arguing that Medicare for all would solve both our health and financial crises. But the Commission wasnt concerned with effective solutions, instead it was laying the groundwork for the Grand Charade that would lead Americans to believe we have a deficit crisis and accept austerity measures.

The commissionwas unable to get enough votes among its members by its December deadline for issuing a report, so there was no vote in Congress on their recommendations, but many of their ideas appeared in Paul Ryan’s “Path to Prosperity” in early 2011. Simpson and Bowles also issued their own report which is often mistakenly labeled the report of the commission.

Round 2: In August, 2011, another committee was created and given the same power as the Deficit Committee. This group of 12 members of Congress, 6 from each body and 6 from each party, was known as the Super Committee.  This small committee with extraordinary power was unprecedented and represented a serioususurpation of the democratic process.

The Super Committee held hearings during the fall and was required to issue recommendations by Thanksgiving. From the start, the committee stated that everything was on the table, including social insurances. While they went through the motions of public hearings, the agreements were already being made in secret negotiations and they included cuts to vital programs.

In fact, by this time it was clear that President Obama was not only willing to accept cuts to Social Security and Medicare, two programs that are the pride of the Democratic Party, but was DRIVING THE PROCESS. Documents leaked show that Obama offered Boehner a “Grand Bargain” that included cuts to a broad array of social programs that would have hurt every American.

Like the Deficit Committee, the Super Committee failed to reach a consensus by the deadline. No doubt mobilized resistance to cuts to social programs made their task more difficult. The Occupy movement was in full swing, occupiers protested the Super Committee and some even walked to DC from NY, Philadelphia and Baltimore to protest. In Washington, DC, the occupation at Freedom Plaza held our own Super Committee Hearing.Our report, The 99%s Deficit Proposal: How to create jobs, reduce the wealth divide and control spending, showed that there were real solutions to our crises that were better for the people and were supported by supermajorities of the population.

Round 3: The so-called Fiscal Cliff is the current attempt to convince people that we will have to accept cuts to important programs. If enough people can be convinced that the sky is falling, then President Obama can make the cuts he has sought to make for years. No doubt giving Wall Street what it has wanted for a long time will be rewarded with high-paid speeches to big business when his presidency ends.

And this time, the President has the help of more than 80 CEOs, led by Simpson and Bowles, to get the job done. The new “Fix the Debt” campaign is starting with a budget of $60 million for public ads and lobbying Congress. Why is big business getting involved? Cuts to social insurances will allow further cuts in corporate taxes.

This is reminiscent of a similar campaign called “Health Care for America Now” that helped the President pass a Wall Street health care bill. Like Health Care for America Now, the public will be convinced through a strategic propaganda campaign to make demands from Congress that go against their own interests. But, we shouldn’t expect anything less from a president who WON marketing campaign of the year in 2008.

So, the president has upped the ante in this ongoing Grand Charade. And unless we take action, cuts to our important programs will cause real suffering and more preventable deaths. There are solutions to all of the crises that we face. We must demand that human needs and protection of the planet be a higher priority than corporate profits.

For example, if we improved Medicare and expanded it to every person in the US, we could effectively control our health care costs which are growing faster than GDP. Former president CLINTON ACKNOWLEDGED that the U. S. could save $1 trillion each year by adopting a single payer system like almost every other developed nation. We would also improve health outcomes and end bankruptcy due to medical illness and costs.

Just like with health care, if we put in place the right policy for retirement we solve the problem and help the economy. The CENSUS BUREAU REPORTS that in the last decade there has been a 78% increase in Americans over 60 facing the threat of hunger and one in six seniors live in poverty.  DOUBLING SOCIAL SECURITY would bring seniors out of poverty and be a giant stimulus to the economy. It would also be a great relief to every family.

Another popular solution is the GREEN NEW DEAL promoted by the Jill Stein campaign. The Green New Deal would create high quality jobs and transition the US to a renewable energy economy.

It’s time to end this Grand Charade. We mustn’t be fooled by this Wall Street agenda. AS WE’VE SEEN IN EUROPE, austerity measures are harmful to people and the economy. For ideas on organizing resistance to these measures, see SOLIDARITY AGAINST AUSTERITY and VIA 22.

Margaret Flowers is co-director of IT’S OUR ECONOMY, co-host of Clearing the FOG Radio and an organizer of the occupation of Freedom Plaza in Washington, DC. She is also with the Health Care is a Human Right campaign in Maryland.

SOURCE

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Americas Deceptive 2012 Fiscal Cliff, Part II - The Financial War Against the Economy at Large

By Michael Hudson
Naked Capitalism
December 31, 2012

Today’s economic warfare is not the kind waged a century ago between labor and its industrial employers. Finance has moved to capture the economy at large, industry and mining, public infrastructure - via PRIVATIZATION - and now even the EDUCATIONAL SYSTEM. (At over $1 trillion, U.S. student loan debt came to exceed credit-card debt in 2012.) The weapon in this financial warfare is no larger military force. The tactic is to load economies (governments, companies and families) with debt, siphon off their income as debt service and then foreclose when debtors lack the means to pay. Indebting government gives creditors a lever to pry away land, public infrastructure and other property in the public domain. Indebting companies enables creditors to seize employee pension savings. And indebting labor means that it no longer is necessary to hire strikebreakers to attack union organizers and strikers.

Workers have become so deeply indebted on their home mortgages, credit cards and other bank debt that they FEAR TO STRIKE or even to complain about working conditions. LOSING WORK means missing payments on their monthly bills, enabling banks to jack up interest rates to levels that used to be deemed usurious. So debt peonage and unemployment loom on top of the wage slavery that was the main focus of class warfare a century ago. And to cap matters, credit-card bank lobbyists have rewritten the BANKRUPTCY LAWS to curtail debtor rights, and the referees appointed to adjudicate disputes brought by debtors and consumers are subject to veto from the banks and businesses that are mainly responsible for inflicting injury.

The aim of financial warfare is not merely to acquire land, natural resources and key infrastructure rents as in military warfare; it is to centralize creditor control over society. In contrast to the promise of democratic reform nurturing a middle class a century ago, we are witnessing a regression to a world of special privilege in which one must inherit wealth in order to avoid debt and job dependency.

The emerging financial oligarchy seeks to shift taxes off banks and their major customers (real estate, natural resources and monopolies) onto labor. Given the need to win voter acquiescence, this aim is best achieved by rolling back everyones taxes. The easiest way to do this is to shrink government spending, headed by Social Security, Medicare and Medicaid. Yet these are the programs that enjoy the strongest voter support. This fact has inspired what may be called the Big Lie of our epoch: the pretense that governments can only create money to pay the financial sector, and that the beneficiaries of social programs should be entirely responsible for paying for Social Security, Medicare and Medicaid, not the wealthy. This Big Lie is used to reverse the concept of progressive taxation, turning the tax system into a ploy of the financial sector to levy tribute on the economy at large.

Financial lobbyists quickly discovered that the easiest ploy to shift the cost of social programs onto labor is to conceal new taxes as user fees, using the proceeds to cut taxes for the elite 1%. This fiscal sleight-of-hand was the aim of the 1983 Greenspan Commission. It confused people into thinking that government budgets are like family budgets, concealing the fact that governments can finance their spending by creating their own money. They do not have to borrow, or even to tax (at least, not tax mainly the 99%).

The Greenspan tax shift played on the fact that most people see the need to save for their own retirement. The carefully crafted and well-subsidized deception at work is that Social Security requires a similar pre-funding - by raising wage withholding. The trick is to convince wage earners it is fair to tax them more to pay for government social spending, yet not also to ask the banking sector to pay similar a user fee to pre-save for the next time it itself will need bailouts to cover its losses. Also asymmetrical is the fact that nobody suggests that the government set up a fund to pay for future wars, so that future adventures such as Iraq or Afghanistan will not run a deficit to burden the budget. So the first deception is to treat only Social Security and medical care as user fees. The second is to aggravate matters by insisting that such fees be paid long in advance, by pre-saving.

There is no inherent need to single out any particular area of public spending as causing a budget deficit if it is not pre-funded. It is a travesty of progressive tax policy to only oblige workers whose wages are less than (at present) $105,000 to pay this FICA wage withholding, exempting higher earnings, capital gains, rental income and profits. The raison de’tre for taxing the 99% for Social Security and Medicare is simply to avoid taxing wealth, by falling on low wage income at a much higher rate than that of the wealthy. This is not how the original U.S. income tax was created at its inception in 1913. During its early years only the wealthiest 1% of the population had to file a return. There were few loopholes, and capital gains were taxed at the same rate as earned income.

The governments seashore insurance program, for instance, recently incurred a $1 trillion liability to rebuild the private beaches and homes that Hurricane Sandy washed out. Why should this insurance subsidy at below-commercial rates for the wealthy minority who live in this scenic high-risk property be treated as normal spending, but not Social Security? Why save in advance by a special wage tax to pay for these programs that benefit the general population, but not levy a similar user fee tax to pay for flood insurance for beachfront homes or war? And while we are at it, why not save another $13 trillion in advance to pay for the next bailout of Wall Street when debt deflation causes another crisis to drain the budget?

But on whom should we levy these taxes? To impose user fees for the beachfront reconstruction would require a tax falling mainly on the wealthy owners of such properties. Their dominant role in funding the election campaigns of the Congressmen and Senators who draw up the tax code suggests why they are able to avoid prepaying for the cost of rebuilding their seashore property. Such taxation is only for wage earners on their retirement income, not the 1% on their own vacation and retirement homes.

By not raising taxes on the wealthy or using the central bank to monetize spending on anything except bailing out the banks and subsidizing the financial sector, the government follows a pro-creditor policy. Tax favoritism for the wealthy deepens the budget deficit, forcing governments to borrow more. Paying interest on this debt diverts revenue from being spent on goods and services. This fiscal austerity shrinks markets, reducing tax revenue to the brink of default. This enables bondholders to treat the government in the same way that banks treat a bankrupt family, forcing the debtor to sell off assets - in this case the public domain as if it were the family silver, as Britain’s Prime Minister Harold MacMillan characterized Margaret Thatcher’s privatization sell-offs.

In an Orwellian doublethink twist this privatization is done in the name of free markets, despite being imposed by global financial institutions whose administrators are not democratically elected. The International Monetary Fund (IMF), European Central Bank (ECB) and EU bureaucracy treat governments like banks treat homeowners unable to pay their mortgage: by foreclosing. Greece, for example, has been told to start selling off prime tourist sites, ports, islands, offshore gas rights, water and sewer systems, roads and other property.

Sovereign governments are, in principle, free of such pressure. That is what makes them sovereign. They are not obliged to settle public debts and budget deficits by asset selloffs. They do not need to borrow more domestic currency; they can create it. This self-financing keeps the national patrimony in public hands rather than turning assets over to private buyers, or having to borrow from banks and bondholders.

SOURCE

AMERICA’S DECEPTIVE 2012 FISCAL CLIFF PART ONE

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The Biggest Bubble In History: Fraud

By Washington’s Blog
January 24, 2013

Forget the Housing, Bond or Derivatives Bubbles Fraud Is the Biggest Bubble of All Time

The housing bubble which burst in 2007 or so was the BIGGEST BUBBLE OF ALL TIME.

Many argue that the bubble in U.S. bonds has surpassed the housing bubble as the largest ever.

Of course, given that the derivatives market is more than A THOUSAND TRILLION DOLLARS, and that is is backed by THOUSANDS OF TIMES LESS collateral, a good case can be made for arguing that derivatives are the biggest bubble.

But if you really think about it, the largest bubble in history is fraud, because it includes all of the above and more.

Specifically, the housing crisis was CAUSED BY FRAUD.  The government ENCOURAGED FRAUD, AND HELPED COVER IT UP.

Huge swaths of the derivatives market are manipulated by fraud.  See THIS, THIS, THIS and THIS. But instead of cracking down on the fraud, the government is BACKING IT.

And the bubble in bonds was caused by super-low interest rates.  See THIS, THIS, and THIS.

Low interest rates - in turn - are caused by the government’s zero interest rate policy and QUANTITATIVE EASING.

And how did the government sell these programs? By saying that they were necessary to help the economy and create more jobs.

But in reality, zero interest rate policy is just ANOTHER STEALTH BAILOUT FOR THE BIG BANKS.  And quantitative easing ONLY HELPS THE SUPER-ELITE...and hurt the economy and the little guy (Bernanke KNEW BACK IN 1988 that QE doesn’t work for its advertised purposes.)

In other words, the governments low interest rate policies were based upon a FUNDAMENTAL MISREPRESENTATION as to their purpose and probable effect.

Indeed, experts say that ALL BUBBLES are enabled by fraud.

But there are signs that the fraud bubble is collapsing.

Trust is falling to all-time lows as to many government and private institutions.  Why?  Because institutional corruption is so rampant that it is becoming obvious to everyone from JOE SIXPACK to amateur and SOPHISTICATED PROFESSIONAL INVESTORS.

While liberals tend to distrust big corporations and conservatives tend to distrust the federal government, we all agree that the MALIGNANT, SYMBIOTIC RELATIONSHIP between the two is the root problem.  Indeed, when GOVERNMENT SND CORPORATISM MERGE, it is hard for anyone to trust what is going on.

When government officials are AS CORRUPT as the CRIMINAL ENTERPRISES they are suppose to regulate, even the mainstream media CAN’T IGNORE IT ANY LONGER.

And the people lose all trust in the system.

No matter HOW HARD the boys WORK to COVER UP THEIR ONGOING MISDEEDS, the fraud bubble may finally be popping

See examples of a popping fraud bubble HERE, HERE, and HERE.

SOURCE

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Treasury approved excessive pay for executives at bailed-out AIG, GM and Ally

Associated Press
January 28, 2013

A government report Monday criticized the U.S. Treasury Department for approving “excessive” salaries and raises at firms that received taxpayer-funded bailouts during the financial crisis.

The Special Inspector General for the Troubled Asset Relief Program said Treasury approved all 18 requests it received last year to raise pay for executives at American International Group Inc., General Motors Corp. and Ally Financial Inc. Of those requests, 14 were for $100,000 or more; the largest raise was $1 million.

Treasury also allowed pay packages totaling $5 million or more for nearly a quarter of the executives at those firms, the report says.

Also noted: A $200,000 raise was approved for an executive of Allys mortgage-lending subsidiary Residential Capital LLC just weeks before ResCap filed for bankruptcy protection. Ally was GMҒs financial arm until it was taken over by the government in the bailout.

“We ... expect Treasury to look out for taxpayers who funded the bailout of these companies by holding the line on excessive pay,” said Christy Romero, the special inspector general for TARP. Treasury cannot look out for taxpayers’ interests if it continues to rely to a great extent on the pay proposed by companies that have historically pushed back on pay limits.

The report says Treasury bypassed rules under the 2008 bailout that limited pay. Treasury approved raises that exceeded pay limits and in some cases failed to link compensation to performance, it notes.

Romero said the guidelines say compensation should not exceed the 50th percentile of pay for executives in similar positions at other financially distressed companies.

But pay surpassed that level for 63 percent of the executives whose pay was approved, according to the report.

The report also said Treasury officials had been warned a year ago that the department needed to reform its procedures to ensure that the pay guidelines are followed.

Patricia Geoghegan, the Treasury official who approved the raises, disputed the findings of the report.

In a letter to Romero, Geoghegan said it’s unfair to call the pay excessive. She said Treasury must strike a balance between limiting compensation and approving pay packages that are consistent with executives in similar jobs.

Geoghegan called the 50th percentile “a benchmark” She noted that some pay packages at the three companies exceeded that level in 2012. But she said more than half at AIG were at or below that level, while nearly half at GM and Ally were below it.

A Treasury Department spokesman had no additional comment Monday and referred to Geoghegans letter.

The three companies received a total $248.7 billion in the financial bailout in 2008. AIG has repaid the $182 billion it received; GM still owes $21.5 billion on the $49.5 billion it received and Ally owes $11.4 billion on $17.2 billion in aid.

In a statement, AIG said it has overhauled its compensation practices to align pay with the company’s goal of balancing profit and risk. The company also is reviewing pay policies to ensure that compensation is tied to performance, AIG said.

GM and Ally said they are complying with all pay restrictions under the bailout rules.

SOURCE

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Obama Pushes Austerity in the Guise of Defending the Middle Class

By Patrick Martin
World Socialist Web Site
February 12, 2013

In the days leading up to Tuesday nights State of the Union address, the Obama administration has combined calls for austerity measures to slash social spending with demagogic attacks on congressional Republicans for advocating even larger cuts in domestic social programs.

Obama’s speech comes as back-room discussions continue between the White House and congressional leaders of both parties, driven by two imminent deadlines: the March 1 sequester, when $85 billion in across-the-board spending cuts take effect, and the March 27 expiration of authorization for spending by all federal government departments.

The sequester is a consequence of the 2011 Budget Control Act, a bipartisan deal between Obama and congressional Republicans, while the March 27 cutoff comes as a result of the expiration of another bipartisan agreement, the six-month continuing resolution passed last October to avoid a shutdown of the federal government during the 2012 election campaign.

If the sequester takes effect, budget cuts will hit both defense spending and a wide range of domestic social programs. The military cuts would have only a marginal effect in the vast Pentagon budget, which dwarfs the combined military spending of the next 15 countries in the world. The domestic cuts largely spare the major entitlement programs, Social Security, Medicare and Medicaid, but will devastate smaller programs like Head Start education for pre-kindergarten children.

On Friday, the White House published a list of the most egregious consequences of the domestic spending cuts looming under sequestration, as part of an effort to blame the Republicans for cuts for which both corporate-controlled parties are responsible. The list details the cumulative effect of the cuts, which total nearly $500 billion in domestic spending over the next ten years. Among the cutbacks:

An estimated 600,000 women and children would lose food stamps.

100,000 formerly homeless people would lose their government-financed housing.

Head Start cuts would eliminate early education slots for as many as 70,000 poor children.

Federal support would be eliminated for 7,200 school employees who serve special-needs children.

Job safety and food safety inspectors would face unpaid furloughs.

Federal loans to small businesses would be reduced by $500 million.

President Obama devoted his Saturday radio and Internet address to the sequester, warning of thousands of federal layoffs or furloughs and a huge blow to middle class families and our “economy as a whole” if the cuts took effect.

He argued, At a time when economists and business leaders from across the spectrum have said that our economy is poised for progress, we shouldn’t allow self-inflicted wounds to put that progress in jeopardy. This is a transparent effort to put the blame on congressional Republicans for a deepening economic crisis that implicates the entire capitalist system and all its political representatives, as reports in the US and globally suggest that world capitalism is already sinking back into renewed slump, more than four years after the Wall Street crash.

At the same time, Obama has renewed his appeal to the Republicans to join him in reaching a grand bargain that will include unprecedented cuts in Social Security, the government retirement benefits program, and Medicare, the federal health care program for the elderly.

Obama’s alternative to the sequester is simply a different set of deficit-reduction measures. In his Saturday address, he called for a balanced mix of “spending cuts” and the closure of “tax loopholes.” There’s certainly no reason that middle class families and small businesses should suffer just because Washington couldn’t come together and eliminate a few special-interest tax loopholes, or government programs that just don’t work, he concluded.

One policy choice by Obama speaks volumes about the real class basis of his administration. He proposed a pay raise for federal civilian workers of only one percent, after several years in which their pay has been frozen. According to the National Treasury Employees Union, federal workers have already accounted for $103 billion in deficit-reduction from the pay freeze and increased pension contributions. Since statutory pay guidelines call for at least a 1.8 percent pay raise, matching the level in equivalent non-government jobs, Obama’s 1.0 percent raise would take another $18 billion out of the pockets of federal workers.

The White House is seeking to conceal its anti-working-class program with another deluge of demagogy about Republicans defending the super-rich. White House senior adviser Dan Pfeiffer, in a blog post on the White House web site, decried the refusal of the Republicans to close loopholes for millionaires and billionaires.

The cynicism of this rhetoric is demonstrated by reports that Obama will name his longtime financial backer Penny Pritzker, heiress to the billion-dollar Hyatt Hotel fortune, as his next secretary of commerce, and choose the CEO of REI sportswear, Sally Jewell, a former Mobil oil executive, for the post of secretary of the interior.

In the presidents radio speech, and in statements by other spokesmen, the Obama administration has laid special emphasis on the need to avoid cuts in military spending. Obama cited the Navy’s decision to delay dispatch of a second aircraft carrier to the Persian Gulf, due to the uncertainty of funding.

Outgoing Secretary of Defense Leon Panetta issued several warnings about the supposedly catastrophic impact of the minor trim in Pentagon spending, and the uniformed chiefs of the various armed services are to appear before congressional committees Tuesday and Wednesday to reinforce the message.

An Army memorandum to Congress complained of a rapid atrophy of unit combat skills with a failure to meet demands of the National Military Strategy by the end of this year, while the Air Force warned that shortfall and sequestration will have drastic/long lasting impacts on the US nuclear arsenal.

While sections of the congressional Republicans associated with the ultra-right Tea Party have called for the sequester to go ahead, as a down payment on the gutting of federal domestic spending, those Republicans with the closest ties to the military-intelligence apparatus have joined forces with Panetta and Obama to oppose the sequester.

The Foreign Policy Initiative sent a letter to congressional leaders opposing the sequestration cuts in military spending, signed by the bulk of the neo-conservative Republicans who spearheaded the war in Iraq, including William Kristol, Robert Kagan, Paul Bremer and Elliott Abrams, as well as Robert Gates, defense secretary in both the Bush and Obama administrations, and former senators Joseph Lieberman, Jim Talent (a top Romney adviser) and Norm Coleman.

Senate Democrats have drafted a measure to largely eliminate the cuts in the Pentagon budget, reducing it by only $3 billion a year instead of the planned reduction of more than 15 times that amount. The military cuts would be offset by equivalent deficit reduction through cuts in farm subsidies and implementation of the so-called Buffett Rule imposing a minimum tax rate on multi-millionaires.

SOURCE

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Austerity cant solve crises of capitalism

By Gene Clancy
International Action Center
February 8, 2013

Millions of workers across the United States received a rude and unpleasant jolt this January when they discovered that their take-home pay had just shrunk by 2 percent. The Social Security payroll tax cut of 2009 was restored, costing workers an average amount of $850 a year, a significant wage decrease for workers on the edge of financial ruin.

This de facto pay cut is part of a march towards government austerity going on in the U.S. and around the world. What austerity really means is cutting government spending for social benefits and/or raising taxes to guarantee loan payments to banks. Austerity is an article of faith not only for the right wing, but for centrist politicians like the Obama administration and most European governments.

There was little to no discussion of the increase in the payroll tax, which will have a far greater negative economic impact than the small increases in taxes on the very rich that were ballyhooed in December.

More dangerous even than restoring the payroll tax are the proposed cuts in federal spending, including cuts to Social Security benefits. A preposterous lie, generated by the ruling class and its lackey media, is that Social Security and other benefits based on earlier contributions are somehow responsible for the large deficit, and that ғreforms must be made in order to ԓsave them.

In reality, Social Security has $2.6 trillion in its trust fund, enough to adequately fund it for at least the next 25 years, according to Jack Lew, President Barack ObamaԒs former budget director and new nominee for secretary of the Treasury. (Forbes.com, July 13, 2011)

Social Security should not even be included as part of the federal budget, and certainly not seen as a way to reduce the deficit.Ӕ Its trust fund has been accumulated from the lifetime contributions of millions of workers through its own payroll taxes and should be used for that purpose only. To reduce the benefits of older workers in order to reduce the deficit is outright robbery of the working class.

Deficits, austerity and economic growth

There are many reasons why most capitalist governments worldwide have inadequate revenue to cover costs. For the U.S., they include outrageous military spending (over a trillion dollars on the Iraq and Afghanistan wars alone), tax cuts for big business and the very wealthy, and gigantic bailouts for the banks.

Most important though is the worldwide economic crisis, which has impoverished the working class by permanently removing tens of millions of jobs, thus reducing the tax base. There has been no capitalist upturn following the 2008 crash. Every attempt to start new production involves bringing in new technology that destroys more jobs than it creates. Thus, capitalism has reached a dead end.

The ruling classes, desperate to have governments guarantee loan and interest payments to banks, have ignored the advice of many of their own economists and agencies, and embarked on a policy of governmental austerity that only exacerbates the overall capitalist crisis.

For example, an International Monetary Fund study of 17 countries that implemented austerity plans in the last 30 years showed that alleged debt-reduction plans, aimed at reducing debt and leading to prosperity, on the whole failed to do so. (Allvoices.com, Jan 29)

Moreover, says the IMF, Income and employment donӒt fully recover even five years after the austerity program is enacted. (Washington Post, May 7)

Since the IMFԒs own study shows that its austerity policies reduce economic growth, why does it continue to dictate such measures to governments all around the globe, especially in Africa, Asia and Latin America, and lately in southern Europe?

Policies please the banks, corporations

The answer is that these policies please the big capitalists and imperialists, especially the banks. They also please multinational corporations since they weaken unions and lower labor costs. The IMFs real goal is not to grow any economy but to increase the power of capital over labor and the power of the imperialist countries and their allies over oppressed nations.

For example, five years of austerity in Greece has resulted in deep economic depression and increasing misery for Greek workers. The Greek gross domestic product, which is a measure of the value of the total goods and services produced in a country, stands at only 70 percent of what it was before the European Union and IMF imposed austerity measures on Greece.

The 17 eurozone governments, which have embarked on a policy of severe austerity, have not only produced a “double dip” recession throughout Europe. They have not even been able to significantly decrease their debt. (See “Eurozone Debt Burden Stuck Amid Low Growth,” AP, Jan 23)

The latest official estimate of U.S. economic growth, released Jan. 30 by the Department of Commerce, has provided further proof that budgetary austerity depresses the economy. According to this report, “the just-completed fiscal cliff deal is expected to trim anywhere from 1 to 1.7 percent from economic growth this year.” With economic growth averaging 1.8 to 2.4 percent over the past three years, the impact of the just passed budget packageŅ may bring economic growth to a standstill. (Beforeitsnews.com, Feb 1, 2013)

Capitalism is, in fact, AT A DEAD END. Unable to solve the economic crisis which it caused, the ruling classes seek to squeeze a solution out of the world’s working and poor people through a combination of higher taxes and draconian cuts in needed health and social services. Progressives around the world must see to it that the rulers lies are exposed and that workers are not made to pay the price for the crises caused by capitalism.

SOURCE

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GOP sequester strategy: Hurt the poor, harm national security, and destroy jobs to screw old folks

By Jed Lewison
Daily Kops
February 25, 2013

Let’s be clear about one thing: the harsh automatic budget cuts of the sequester that will kick in on March 1 have nothing to do with responsible fiscal policy. They are a political gimmick run amok and despite their bipartisan origins, the political party that is now most intent on wielding them as a weapon is the GOP. Their goal: enact deep cuts to Social Security, Medicare, and Medicaid benefits while preserving benefits from tax loopholes and deductions for the wealthiest Americans.

Congressional Republicans are standing their ground, a position they say is strategic. The federal governments growing debt cannot be controlled through the spending at the annual discretion of Congress, and after the cuts take effect, that part of the federal budget will drop to levels not seen in five decades as measured against the size of the economy. Long term, the problem is entitlements, especially Medicare and Social Security.

The pain of further cuts to discretionary programs could bring Mr. Obama to the negotiating table on them by the spring, if not by midsummer, when Congress must once again raise the government’s borrowing limit.

“Because the Democratic-controlled Senate and the president refuse to negotiate, the only way to potentially bring them to the table to negotiate is to go forward with the spending reductions as they are,” [Georgia Republican Rep. Tom] Price said.

They aren’t satisfied with the chained CPI Social Security benefit cut President Barack Obama has said he would be willing to accept in exchange for closing loopholes and deductions. They look at the fact that the budget deficit has dropped by roughly half since President Obama’s first year and scoff. They hear that projected Medicare spending has already dropped by more than Simpson-Bowles originally sought and think to themselves that this is a good idea:

Nearly two million people who have been out of work for more than six months could see unemployment payments drop by 11 percent in checks that arrive in late March or the first days of April, according to the White House budget office, an average of $132 a month. [...]

The National Institutes of Health, for instance, would need to cut about 5 percent of its annual budget in just seven months, meaning hundreds fewer research grants, said Kathleen Sebelius, the health secretary. Money for food safety inspection and air traffic controllers would also be cut.

Roughly 600,000 low-income women and children would stop receiving food aid.

There’s no question that President Obama and congressional Democrats shoulder some of the responsibility for getting us to this point. But for the most part, the thing they’ve done wrong is failing to fight against insane Republican ideas - and to assume that today’s GOP is capable of operating in good faith. But what Republicans are doing here is going after one group of vulnerable Americans to screw over another group of vulnerable Americans, and this pattern of destructive crisis after destructive crisis isn’t going to stop until they stop.

SOURCE

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Posted by Elvis on 12/31/12 •
Section Dying America • Section Austerity American Style • Section Next Recession, Next Depression
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Thursday, December 27, 2012

The Next Depression Part 52 - New Crash Warning

warning.jpg

New Crash Warning Comes From Proven Source
A warning over the global economy comes from the Bank for International Settlements - which voiced concerns before the last crash.

By Ed Conway
Sky News
December 10, 2012

The BANK FOR INTERNATIONAL SETTLEMENTS (BIS) is an odd organisation. Originally set up in the 1930s to facilitate the payment of First World War reparations by Germany to France, Britain and others, it has since transformed into a club of central bankers.

What is less well-known is that it came within a whisker of being shut down after the Second World War. It had been tainted by the failure of the reparations policy and by the presence of prominent Nazis on its board. At the Bretton Woods conference in 1944, the Norwegians lobbied for it to be shut down - after all, aside from anything else, what purpose did it have any longer? The British argued against this, but were overruled by the Americans* and the conference agreed that the BIS would be shut down.

But in the event, the undertaking was forgotten and the BIS survived. And, many economists would argue, a good thing too. For today, the BIS is renowned for being one of the only international institutions to have warned us of the risks and imbalances which eventually led to the great financial crisis of 2008.

Which is why we should take note, today, that it has issued yet another warning.

According to the BIS’ latest QUARTERLY REVIEW [.pdf] financial markets are starting to behave in some of the ways they behaved before the crash. In particular, investors seem to be chasing riskier and riskier assets, despite the fact that the economic prospects are hardly all that great.

Here is the key passage from the BIS report:

“Some asset prices started to appear highly valued in historical terms relative to indicators of their riskiness. For example, global high-yield corporate bond spreads fell to levels comparable to those of late 2007, but with the default rate on these bonds running at around 3%, whereas it was closer to 1% in late 2007.

“The same was true of investment grade corporate bond spreads, but with respective default rates of a little over 1% and around 0.5%. Indeed, numerous bond investors said that they felt less well compensated for risk than in the past, but that they had little alternative with rates on many bank deposits close to zero and the supply of other low-risk investments in decline.”

Bond yields usually move in line with the wider economy’s growth prospects, but clearly these two lines have started to diverge in recent months. There is something going on.

At least part of the likely explanation - and this is my interpretation rather than the BIS’ - is that the flood of money being set loose by central banks, including the Bank of England and the Federal Reserve, through quantitative easing is pumping asset prices higher.

But either way, it is alarming that the very institution which first warned about the prospects of a crash is issuing a warning again about the same kind of behaviour happening in asset markets.

SOURCE

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Celente: This Will Usher In A Massive Financial Collapse in 2013

King World News
December 23, 2012

Eric King:  Gerald, I wanted to take a look at this upcoming issue you have coming out.  (In here it says,) “Bonds Away!” The bond bomb is ready to explode ... threatening to make the real estate and dot-com bubbles, and even the Great Recession, look like market corrections.  “Can you talk about that?”

Celente: Yes.  This piece is being penned by Dr. Paul Craig Roberts, the former Assistant Treasury Secretary under Ronald Reagan.  And he is convinced that the bond bubble is about to burst.  This cannot continue to go on the way it is.  Everyone knows that the whole game is rigged, and so is this....

“The whole game is rigged.  It’s ready to go down, and Dr. Paul Craig Roberts believes it’s Bonds Away in 2013 as the bond bubble explodes and brings about a financial disaster even worse than the Great Depression.

Eric King:  “Hes saying here it’s a road to financial collapse that we are going to head down when this thing bursts.”

Celente:  “It is.  Because the whole world is being propped up by these phony bonds and its going to collapse.  It has to happen.  Interest rates are going to start going up, and when they do the bond bubble explodes.  You cannot keep interest rates at zero for this amount of time and expect anything other than disaster to follow.”

Eric King:  “Gerald, I have a couple of other things I want to talk to you about from your upcoming Trends Journal, but the gold and silver action, obvious manipulation and intervention there.  Can you talk about the gold and silver smash that we’ve seen recently?”

Celente:  “Yes.  How could gold and silver prices be going down?  We just heard the Federal Reserve Chairman give us another name for QE4, but they did it.  We listened to the head of the European Central Bank, Mario Draghi, Unlimited financial transactions.  All of the money you want.”

“He (Draghi) promised to do whatever it takes to keep the markets going.  And we just got a new Prime Minister of Japan (Shinzo Abe).  What did he say?  Hes now telling the Bank of Japan he wants quantitative easing, printing more cheap money and debasing the currency.”

“When you look at the amount of gold and silver traded on the commodities exchanges, it’s very easy to manipulate it.  And they are manipulating (the metals) mostly at night in the Asian markets.”

“Gold has been around for civilizations.  Its not going anywhere and neither is silver.  I don’t give financial advice, but I do have a retirement account.  Its the end of the year and I had to put money into it.  Guess what I bought?  Gold and silver.”

SOURCE

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CFTC Caves To Wall Street, Will Continue To Allow Cartel To Control Derivatives Market

By DSWright
FDL NEWS
May 17, 2013

Behold the power of finance capital. Despite shitting the bed and making us all clean it up, Wall Street will remain essentially the same as the Commodities Futures Trading Commission (CFTC) caved to the banksters and will CONTINUE TO ALLOW A CARTEL TO CONTROL THE DERIVATIVES MARKET.

Under pressure from Wall Street lobbyists, federal regulators have agreed to soften a rule intended to rein in the banking industrys domination of a risky market.

The changes to the rule, which will be announced on Thursday, could effectively empower a few big banks to continue controlling the derivatives market, a main culprit in the financial crisis.

Laugh or cry? Your choice. And if you donҒt care now you will shortly as this practically guarantees another crash.

Forget democracy or even the basic functions of a republic as most of the citizenry oppose a deregulated Wall Street how about basic logic? We just ran this experiment and it crashed and burned in 2008, so why run it again?

The push for competition follows concerns that a handful of select banks ֗ JPMorgan Chase, Citigroup, Bank of America, Morgan Stanley and Goldman Sachs control the market for derivatives contracts.

That grip, regulators and advocacy groups say, empowers those banks to overcharge some asset managers and companies that buy derivatives. It also raises concerns about the safety of the banks, some of which nearly toppled in 2008.

Do those companies sound familiar? They should.

For those who donגt know, the reason Wall Street wants secrecy and opacity is so they can juice up the fees. Example: you are an airline that wants to buy a derivatives contract to lock in fuel prices which are typically volatile. If you had a transparent market you could see competitive bids to get the best deal, but under the current system, now continuing thanks to the CFTC, you will have to deal with the Wall Street Cartel who will stand between you the airline and the fuel provider hiding information from both. And since you dont know all the information you canҒt really dispute the fees the Wall Street Cartel wants to charge you, can you?

Cha-ching!

The problem of course is that since all that information is opaque and hidden even the banksters themselves lose track of the details, an example being, I dont know, mortgage derivatives. Smart people outsmart each other, then themselves.

Almost everyone told the Obama Administration and Congress that punting the rule-making process of Dodd-Frank to regulators like the CFTC was a guarantee that Wall Street would get its way, putting the economy in danger. Obama and Congress pretended to hear the complaint, took Wall StreetҒs money, and punted to the rule-making process to the regulators anyway. And viola, we have what we have today, a system that fundamentally mirrors the pre-crisis regulatory environment.

So enjoy reliving the 2008 crisis it֒s deja vu all over again.

SOURCE

Posted by Elvis on 12/27/12 •
Section Dying America • Section Next Recession, Next Depression
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