The Federal Express, Er, Reserve
If you are still fuzzy on just what exactly the Federal Reserve does and who exactly it is, please read this article. It’s ironic this information, which will never be printed in the major US media, has to be explained to us by our former communist adversary. Now this Russian newspaper is schooling us on our own Constitution:
It usually comes as a shock to people – especially diehard Americans who place infinite trust in their sacred Constitution – when they discover that the US dollar is not a product of the American government. That’s right, fellow consumers, that crumpled wad of dollars in your pocket is the product of the U.S. Federal Reserve, and despite the very official title, is about as “federal” as Federal Express. The reality is that the U.S. Federal Reserve is a profit-making venture just like Wal-Mart, General Motors or McDonald’s.
It’s really too bad the American people didn’t recognize that nothing, not health care, not carbon emissions, not tax rates, not race relations, not gay rights — not any of the above — is fundamentally important as having a stable economy. Because without that, everything is chaotic, unfunded, unenforceable, irrelevant. And it’s too bad that almost no voters realized the great cancer in our economy; the tumor from which all other tumors arise, is the Federal Reserve. Had they realized this, they would have voted for the one Presidential candidate who ever bothered to talk about the Federal Reserve: Ron Paul.
But they didn’t. Some voted for a continuation of a military empire. Some voted for the hopeychange. Hopeychange and military empires both rest on the soundness of economy for implementation, and therefore both are doomed.
Fortunately, or unfortunately, depending upon your stance, the fall — at least in this country – may be mercifully sudden. It seems Congress is doing everything possible to throw all the money we don’t even have at all the things that will do nothing to help us. Case in point: billions in foreign aid, billions in loans to the corrupt IMF, and more. Once again the voice of reason is drowned out by the voices of special interest, the voices of goodwill, the voices of the ambitious, the voices of denial. You’ve failed three times in a row, Freddy Mac? Hell, here’s some more billions. To the American citizens: screw you. Get back to work.
Long ago, we’ve traded what works for what “sounds nice.” Imagine if a colony of ants. There are fundamental injustices in the ant colony: the workers (all female) are overburdened. The drones (all male) are parasites who offer almost nothing, but eat great amounts of food. The queen is an unelected dictator. However, if you try to correct all those imbalances by forsaking the daily drive to collect food, come winter, every single ant in that colony will be dead.
Hope and goodwill are not enough. Perhaps this winter will be enough to convince us.
Today’s article of doom: Well, it’s a chart really. When Obama says 10% unemployment, he really means 20%. Why? Because you’re only unemployed if you receive unemployment benefits. If your benefits run out and you still don’t have a job, you’re not unemployed. You’re a “discouraged worker,” a.k.a. deadbeat. If you’re fresh out of school and you can’t find a job, you’re not unemployed, because you were never employed before. If you work only 10 hours a week, you’re also not unemployed. Hell, if you work on commission, and make 10% of what you used to, you’re still not unemployed. Nor are you unemployed if you don’t make money but are in prison, are disabled, etc. Not to mention the figure is adjusted for birth and death rates artificially in the favor of lower unemployment figures.
So again, the real rate of people who can’t support themselves is 20%:
The Average College Degree Costs Roughly $1 Million?!
In the spirit of twisting the knife which is the central theme of this blog, allow me to display exhibit A, which shows how the average person is getting screwed over in new and unrealized ways. Think getting a college degree is a good financial decision? The odds are against you:
This is, of course, not how the system should be. This is a never-ending version of indentured servitude. And let’s not forget that student debt is one of the very few types of debt out there a person cannot discharge through bankruptcy; the others being taxes owed to the IRS and child support. At the long end of one’s life given the average numbers above, the person without the degree has roughly three times the assets as the higher-earning college graduate. But hey, college isn’t about the ability to make money, right? It’s about the life experience. The $1 million life experience. That is, the life experience that costs $1 million in lost wages and accrual. And it’s worth every penny, right? Right?
Does this little chart seem preposterous? Well, check out the details. Dare I say the current educational model is unsustainable? The last time we had something so ridiculously expensive with such easy financing for something so basic to a functioning society was… the housing bubble. Hm.
Today’s article of doom: State governments all over the country on the edge of the abyss.
Promote the Greatest Failures (Or Is It Criminals?)
A post from the very informative Zero Hedge blog summed up some of the more noteworthy comments from the Federal Reserve and the Treasury during this economic debacle:
April 20th, 2007 – Paulson: “I don’t see (subprime mortgage market troubles) imposing a serious problem. I think it’s going to be largely contained. All the signs I look at show the housing market is at or near the bottom.”
June 20th, 2007 – Bernanke: “(the subprime fallout) will not affect the economy overall.”
October 15th, 2007 – Bernanke: “It is not the responsibility of the Federal Reserve — nor would it be appropriate — to protect lenders and investors from the consequences of their financial decisions.”
May 16th, 2008 – Paulson: “In my judgment, we are closer to the end of the market turmoil than the beginning.”
June 9th, 2008 – Bernanke: “Despite a recent spike in the nation’s unemployment rate, the danger that the economy has fallen into a substantial downturn appears to have waned.”
July 20th, 2008 – Paulson: “It’s a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation.”
August 10th, 2008 – Paulson: “We have no plans to insert money into either of those two institutions.” (Fannie Mae and Freddie Mac)
February 29th, 2008 – Bernanke: “I expect there will be some failures. I don’t anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system.”
September 19th, 2008 – Paulson: “We’re talking hundreds of billions of dollars – this needs to be big enough to make a real difference and get at the heart of the problem,” he said. “This is the way we stabilize the system.”
September 19th, 2008 – Bernanke: “most severe financial crisis” in the post-World War II era. Investment banks are seeing “tremendous runs on their cash,” Bernanke said. “Without action, they will fail soon.”
And now, the Obama team’s brilliant idea is to give the Federal Reserve sweeping new powers, in tandem with the Treasury, to regulate the banking system. The very ones who were purportedly clueless about what was unfolding, as well as being the ones who caused it (by artificially lowering interest rates to encourage mortgage lending, thereby bypassing the effects of the dot com bubble bursting), are now going to be in charge. After, of course, they engineered the transfer of wealth of the entire future generation to the bottom line of the richest banks. Bravo.
It’s like taking the executives from General Motors and then creating a regulatory agency for all motor vehicles and putting them at the helm. In short, it’s absolutely ridiculous. Let’s not forget also, that the Federal Reserve, the organization that controls our money supply, and will soon control the entire regulatory system, is a private corporation. Like “Federal” Express. If you aren’t aware of these factors, I suggest checking out this week’s episode of Freedom Watch, which is one of the very view shows on mainstream TV that talk about these issues.
Or, read this book:
But, since we all know the Federal Reserve has more cumulative power than the US president and his staff, dating back several decades from the point in which the US was arguably effectively bankrupt (though this fact was disguised) and real wealth – gold – was outlawed from public ownership and transferred to pay off international debts and the income tax was established to pay interest on our remaining debts… well, we all know this legislation will pass and the central banks won’t have to rule from the shadows any more. No one wants to be seen as undermining our magical new President’s will, therefore, it will pass.
In the words of Kurt Vonnegut: so it goes.
Today’s article of doom: political correctness is way out of hand when people are arrested to make up a “fair” quota of racial balance completely at odds with established crime statistics.
California: DOA
Soaring deficits, reduced income, over-burdened infrastructure, over-burdened health-care system, mountains of unfunded pension liabilities, a politically-correct atmosphere of entitlement (even among non-citizens), and a populace that wants no new taxes. All of these things define both the Federal Government of the United States and the State of California. There is one crucial difference, however, which assigns the image of green shoots to the former and tumbleweeds to the other. California doesn’t print its own money. Therefore, the state can only spend money it either has or borrows, and no one is stupid enough to lend them anything anymore. Absent this crucial difference, California is a microcosm of the USA. Unfortunately, this difference is unimportant in the long run for the Federal Government, because inflating the currency is not a solution; it’s a delay tactic.
So, what can be done for California? Well, cuts need to happen, taxes need to be raised, money needs to be borrowed (courtesy of the Federal Government guaranteeing the debt, like a parent co-signing on their delinquent teenager’s car loan), or the State needs a Federal bailout. In my opinion, each of the four options is equally likely, and probably a combination of all four will be the solution.
The cuts needed are mind-boggling, such as eliminating welfare, college funding, and state-funded medical insurance entirely. And closing state parks. And letting people out of prison early. And even eliminating textbooks. Some people are very, very upset. But hey, the populace just shot down an emergency increase in taxes, so what’s the state to do?
Obviously, politically pander and beg for handouts from the Federal Government, of course. With all the chains and conditions such funding will inevitably come with. In the meantime, as an angry citizen as you most surely are, you can play with the budget yourself and see how you’d plug the gap with this interactive tool. It’s educational at the very least. Who’d have thought money didn’t just fall out of the sky over Sacramento?
Almost certainly, some amount of money will get passed down from the Obama administration. But keep in mind this fact: the Federal Government is in far worse shape than California. In fact, if California’s debt to GDP ratio was the same as the Federal Government’s, its debt would be 230 billion instead of 25 billion!
Today’s article of doom: Idiotic mainstream media tries to link Nazi shooter with people who oppose the Federal Reserve, fiat money (rather than the Gold Standard), and unconstitutional Income Taxes by claiming the United States never existed without them.
Will Germany Be Allowed To Be So Boldly Responsible?
If you are getting mocked by a majority of economists, journalists, and politicians, you must be doing something right. Cases in point: Ron Paul, Peter Schiff. Lately, Germany has been the butt-end of jokes due to their complete lack of support of “quantitative easing,” better known as “devaluing the money supply” as well as their disinclination to keep up with “stimulus packages,” or “throwing money down the drain” as it’s more commonly referred to.
In fact, it’s so strange to see one of the modern heads of state, who are presumably all puppets for corporate interest, to say anything against the holy relic of Keynesian economics, that it’s worth noting, especially when that person is head of the largest economy in Europe. With common sense like that, will Germany pull the Euro out of its slump, or leave the rest of Europe to its fate and return to the Deutschmark? Either way, it will likely pull away from the half-hearty, half-poisonous relationship it has with the sinking ship known as the USA, and draw closer to its half-hearty and half-poisonous relationship with Russia.
Not only has Germany decided to opt out of the West’s Zimbabwe solution, but it has also decided to reign in spending, and will likely make it something akin to a crime to run with deficits in the future. This makes way, way too much sense. How dare Germany be willing to undergo some severe immediate pain to improve its long-term economic outlook? How anti-consumerist; how anathema to the concept of instant gratification. Is the USA going to let this independent and responsible thinking go unpunished? If so, it would signal the fact the USA is no longer able to convince partners around the world to ruin their economies in a sort of lowest common denominator game of musical chairs. And that would be noteworthy indeed. As many countries, from Greece to Brazil will tell you, it’s not a good bet to take with the USA.
Today’s article of doom: There is something satisfying about watching a man rave about the economy while beating things with a stick.
Pipeline-istan
I highly recommend this article entitled “Pipeline-Istan: Everything You Need to Know About Oil, Gas, Russia, China, Iran, Afghanistan and Obama.” Nothing in it is particularly shocking or new to anyone who was skeptic of the war on terror and its purposes, but the common threads of several chapters of Eurasia over the last few years have been woven together well. A nice supplemental editorial is here.
The subject must have been in the collective unconscious recently because another great article was floating around with the funny title of: “Kremlin says battle over energy resources may lead to wars.” It should have been called “Kremlin says two plus two equals four” or, more accurately, “Kremlin says that two plus two has equaled four several times in the recent past and predicts it will equal four in the future.”
Speaking of wars and oil, isn’t it funny how half of the American population thought that Pepsi Obama would stop the war in Iraq, stop torturing, stop spying on Americans, and stop indefinite detention — in short, start following the Constitution? That is funny, since if he was interested in following the Constitution, he’d be a Libertarian or a Constitutionalist and not a Pepsi Democrat. When, oh when, will the voters reject the two-party system, which is really a one-party system? Old Coke McCain thinks Pepsi Obama is doing a pretty good job. Is this really Obama doing this and this or is it Bush? I’m getting deja-vu.
Well, enough of that subject. Politics is similar to Professional Wrestling in its authenticity. Too bad its effects aren’t similarly ephemeral. Instead, we get the terrorist-hunting boy and girl scouts. Progress!
In other news (and if this is news to you, well… good luck, pal) Medicare is projected by the government’s overly-rosy expectations to run out by 2017. I don’t particularly feel great about all the Medicare money that’s been taken from my paycheck over the years but I’m certain there is some kind of pill that will numb that gnawing sense of anger (hopefully my insurance will cover it once 2017 rolls around).
Today’s article of doom: The worst is yet to come.
Audacity of Numbers
Let’s say you are the puppet, er, leader of the world’s most powerful nation. And let’s say that nation will pull in, if everything goes well, close to $2 trillion over the next year. And let’s say, for whatever reason, you decide to spend $3.4 trillion over that same time period. Then, on top of that, just because you’re a nice guy, you decide to spend another $63 billion over the next few years on people that aren’t even part of your nation.
Then, for the sake of argument, you somehow absurdly claim with a straight face that you are making the hard choices and saving $17 billion in the midst of this. Do the supposed independent newspapers, who are now in need of a government bailout (which, by the way, is supported by politicians who are concerned about the loss of “independent reporting”) call you on your ridiculous hypocrisy and mock you endlessly like truly independent media should?
No. Instead, they give you a platform to say:
“We can no longer afford to spend as if deficits don’t matter and waste is not our problem. We can no longer afford to leave the hard choices for the next budget, the next administration — or the next generation.” Obama 5/7/09
I guess all that talk about audacity wasn’t mere imagery. The truly independent oversight, commentary, and investigation nowadays comes from blogs, not the mainstream media. Of course, media moguls like Rupert Murdoch don’t like that much, and are hinting that the days of uncontrolled, unfiltered, free internet are numbered. And they might be right.
Today’s article of doom: thanks a lot, Congress, for supporting the fascist Bush-era Patriot Act. It helped imprison this 16 year old boy with no due process whose IP number was likely spoofed. Way to make the country safer.
AIPAC Gets Another Pass
The spy case against two members of AIPAC has been dropped, to no one’s surprise. The reason why is summed up nicely here:
“The defence intended to call the former US secretary of state, Condoleezza Rice, and other officials to establish that the government regularly uses Aipac to discreetly send information to Israel.”
That wouldn’t be very flattering to our government, because of course the next question would be why we channel sensitive information to a foreign government through a group that claims to be working in America’s best interest (and doing it as a 501(c)3 tax-exempt organization).
“The case has been further complicated by a scandal revealed last month by a political publication, Congressional Quarterly, around a member of Congress, Jane Harman, who was secretly taped telling an Israeli agent that she would pressure the justice department to reduce spying charges against the two former Aipac officials.
In return, the Israeli agent offered to get a wealthy donor who helps funds election campaigns for Nancy Pelosi, the then-minority leader in the House of Representatives, to pressure Pelosi to appoint Harman to a senior position on the congressional intelligence committee.”
Shocker. A U.S. Congresswoman who pushes Israel’s agenda in return for Israeli-sponsored political favors? Best not dwell on that. It might be embarrassing for both the U.S. and Israel.
At least the mainstream UK paper, written in a country that is also usually nauseatingly intolerant of criticism of Israeli policy, got the conclusion right:
“AIPAC has long wielded considerable influence over US policy in the Middle East though a mix of appeals to American sympathy for Israel and a hard-ball approach against members of congress who question the unyielding policies of Israeli governments.”
In other words, if you criticize the policies of the nation of Israel in any possible way, you are an anti-semite (even if you are Jewish), as discovered by Seymour Reich, Edgar Bronfman Sr., John Mearsheimer, Stephen Walt, Ernest Hollings, Howard Dean, Philip Zelikow, Richard Cohen, Zbigniew Brzezinski, Chas Freeman, Tony Judt, Adrienne Rich, Samantha Power, Tony Kushner, Tom, Dick, Harry, and pretty much anyone who has ever suggested anyone in Israel might be something other than holy, righteous, correct, moral, and God-like at all times.
In other news, the U.S. economy shrank by 6.1% in the first quarter, after shrinking 6.3% in the previous quarter. But don’t worry, our glorious leader sees “green shoots.” That kind of ridiculous optimism (like Bush’s “rough patch”) would be so much more effective if the politician in question had pom-poms and a short skirt. Without the visual aids, it just rings hollow. I wonder if the forecast is still for 0.5% growth for 2009 — that would be quite a trick to pull off.
What else has been going on? Swine Flu, increased fighting in Iraq and Pakistan, Chrysler declares bankruptcy (taking $8 billion more in bailout money because they can’t even go bankrupt without a bailout) and some more blah blah blah and deja vu. Oh, and GM gets $2 billion more in bailout money, ostensibly to help them with the bankruptcy paperwork in advance.
One advantage to living in a declining economy is the degree to which it’s easy to become reaccustomed to the local library. Next time you’re there, I recommend Dmitry Orlov’s Reinventing Collapse. Having lived through the implosion of the Soviet Union, he paints a very convincing picture of live here in the U.S. in a few years.
Today’s article of doom: more riots in Europe.
Where Is The Reckoning?
We live in Limbo Land. Everything in the news is the same, day after day, so we wonder: have we hit the bottom? Are things really that bad? Things are still the same in Pakistan. And Iraq. And Gaza. Europe still fears summer riots. The US government is still giving money to GM. Unemployment continues to climb. And mortgage defaults keep increasing:
But the world hasn’t ended yet. The four horsemen haven’t shown up to the party. In fact, no one has heard hide nor hair of them for as long as most people remember. Rumor has it they never existed. Malls are still open with their flat, tinkling music. Restaurants are still steaming. Gridlock is ever-present. What’s the deal? If a person didn’t read the news, they could easily not know anything has changed in the last year. Does this mean we’re able to absorb so much more instability than we ever expected? Was Cheney right when he said “deficits don’t matter?”
No, I think people like John Michael Greer have it right when they talk about “The Long Descent.” It’s not going to be abrupt, and civilization won’t disappear overnight. But things will decline steadily, and things won’t return to the way they were before. We’re so used to instant gratification, we don’t even like to wait for our apocalypses. It’s been six months and I haven’t had a single blackout — Armageddon is boring!
I’ll admit, I would like things to happen sooner rather than later, mostly so we don’t end up pushing off our problems to our children’s generation. I would rather face the consequences head-on. Pushing them off in order to compound them later is what we’ve been doing for decades. But there is plenty of time for disaster. In the meantime, there are still a lot of things even the most paranoid person hasn’t done yet to prepare. This summer should be a particularly nice season for gardening. Time to kill the useless lawn? This cycle will last a long while, so we might as well enjoy the beginning of it as well as the end.
Today’s article of doom: if you live in Contra Costa County, sleep soundly knowing due to budget cuts, burglaries, assaults, and thefts will no longer be prosecuted.
$12.8 Trillion
Just to put things in perspective, let’s look at the latest figures of money spent “fighting the credit crisis.” Bloomberg puts the figure at $12.8 trillion. Oddly enough, it seems the most concentrated rage of the public has been over AIG bonuses; something Congress even passed a bill on in order to confiscate. Now, while I am just as outraged as anyone that these employees of failed banks are getting millions in bonuses straight from the taxpayer, let’s remember these are only millions. As in one thousandth of a billion, which is itself one thousandth of a trillion. Here is the total money spent on the bailout. Since it’s so massive, each unit represents one billion. In other words, $1.00 on here means one billion (or one thousand million for the numerically illiterate). All the AIG bonuses everyone screamed over was about $170 million, so here it would be represented as $0.17:
==================================================
— Amounts (Billions)—
Limit Current
==================================================
Total $12,798.14 $4,169.71
——————————————————————————————
Federal Reserve Total $7,765.64 $1,678.71
Primary Credit Discount $110.74 $61.31
Secondary Credit $0.19 $1.00
Primary dealer and others $147.00 $20.18
ABCP Liquidity $152.11 $6.85
AIG Credit $60.00 $43.19
Net Portfolio CP Funding $1,800.00 $241.31
Maiden Lane (Bear Stearns) $29.50 $28.82
Maiden Lane II (AIG) $22.50 $18.54
Maiden Lane III (AIG) $30.00 $24.04
Term Securities Lending $250.00 $88.55
Term Auction Facility $900.00 $468.59
Securities lending overnight $10.00 $4.41
Term Asset-Backed Loan Facility $900.00 $4.71
Currency Swaps/Other Assets $606.00 $377.87
MMIFF $540.00 $0.00
GSE Debt Purchases $600.00 $50.39
GSE Mortgage-Backed Securities $1,000.00 $236.16
Citigroup Bailout Fed Portion $220.40 $0.00
Bank of America Bailout $87.20 $0.00
Commitment to Buy Treasuries $300.00 $7.50
——————————————————————————————
FDIC Total $2,038.50 $357.50
Public-Private Investment* $500.00 0.00
FDIC Liquidity Guarantees $1,400.00 $316.50
GE $126.00 $41.00
Citigroup Bailout FDIC $10.00 $0.00
Bank of America Bailout FDIC $2.50 $0.00
——————————————————————————————
Treasury Total $2,694.00 $1,833.50
TARP $700.00 $599.50
Tax Break for Banks $29.00 $29.00
Stimulus Package (Bush) $168.00 $168.00
Stimulus II (Obama) $787.00 $787.00
Treasury Exchange Stabilization $50.00 $50.00
Student Loan Purchases $60.00 $0.00
Support for Fannie/Freddie $400.00 $200.00
Line of Credit for FDIC* $500.00 $0.00
——————————————————————————————
HUD Total $300.00 $300.00
Hope for Homeowners FHA $300.00 $300.00
——————————————————————————————
So, about one dollar out of every seventy-five thousand dollars or so went to AIG bonuses. And yet that lone dollar is the only one that’s generated sufficient rage. What about the rest?
The truth is we are such a competitive (and some might say spiteful) group of people, that we’re fighting over the pennies while truckloads of cash are being stolen. It’s the same reason people are upset about bailing out GM. Again, I’m not a fan of bailing out anyone; least of all a company who arrogantly refused to develop fuel-efficient vehicles until the last moment, but the total money given to GM so far is about 18 billion, and another 6 billion for GMAC. So, 24 billion. That’s less than 0.1% of the total bailout money. And mortgage owners who took on too much debt — similar situation. We have 300 billion set aside for that, or 2.3% of the total money spent. Huh? If this whole problem is based upon bad mortgages, why have we only spent 2.3% of the bailout money on the problem?
These three issues are the hot button issues for the public. People hate seeing their neighbor down the street (i.e. peers) getting a good deal on taxpayer money. But when bankers, CEOs, and Wall Street get a good deal multiplied by a factor of a million or so, well, no harm no foul. Those people are invisible to us so it’s not real money, right? I mean… you know… “we gotta do something.” And, “our economy depends on these banks.” And, uh, “credit is the lifeblood of our economy”… right? But my neighbor’s job or house or car or food is subsidized. What a jerk. We’re so easy to bamboozle.
Speaking of subsization and bamboozling, did you know that every time you use the USPS to mail something, you’re subsidizing companies that send you junk mail?
Today’s article of doom: banks will sell their” toxic” (read worthless) assets at the price they determine in a “partnership” deal where the government assumes 93% of the risk.
