The one thing the smartest kid ever to come out of Alabama is known for is talking his book. He has his money where his mouth is. Hard to fathom a young upstart from Alabama and the Palindrome working side-by-side but money makes for strange bedfellows. Of course it can also estrange great friendships.
Here is Jimmy Rogers today on ZEROHEDGE.com, the finest financial website on the planet.
Jim Rogers joins Zero Hedge in being highly skeptical about just how credible Saudi's call for a 1MM + boost in its oil supply is: "Saudi Arabia has been lying about the reserves for decades. Saudi Arabia the last two times said they are going to increase production and they couldn't increase production. Don't fall for that. The reason oil is going up is the world is running out of known reserves of oil." Of course, then there is the question of do we trust the Quantum fund creator who retired at 37, or do we go with the sellside lemming brigade of monkeys with typewriters who will groupthink anything and everything to death, just to get paid another completely unwarranted bonus. As to those who are concerned that the commodity "bubble" is about to pop, Rogers says: "It's still years away." And some reinforcement for the gold and silver bulls: "Gold will certainly go over $2,000 by the end of the decade, and silver will pass $50."
Monday, February 28, 2011
Thursday, February 24, 2011
A quote from Mike Krieger.................
"The big news this week from Saudi Arabia is that upon his return to the Kingdom after a three month medical absence, King Abdullah has decided to implement a massive $36 billion payoff to his people to stem off any revolt. Amongst other things: “The measures include a 15 per cent salary rise for public employees to offset inflation, reprieves for imprisoned debtors, and financial aid for students and the unemployed” according to the Financial Times...So the payoffs have begun in earnest and the question is, when will banker puppet Obama will engage in similar tactics. My guess is very soon. More and more people are aware of the sham that is his presidency and as the people realize they have been sold out to make sure the financial oligarchs got their record Christmas bonuses and can fund his 2012 run he will need to give a pay raise to the 15% of Americans on food stamps."
Wednesday, February 23, 2011
I don't know who wrote this but broke is broke.......
When Pretending Fails to Hide Bankruptcy:
- Feb 22, 2011
Our country is bankrupt. It’s not bankrupt in 30 years or five years. It’s bankrupt today.
Want proof? Look at President Barack Obama’s 2010 budget. It showed a massive fiscal gap over the next 75 years, the closure of which requires immediate tax increases, spending cuts, or some combination totaling 8 percent of gross domestic product. To put 8 percent of GDP in perspective, this year’s employee and employer payroll taxes for Social Security and Medicare will amount to just 5 percent of GDP.
Actually, the picture is much worse. Nothing in economics says we should look out just 75 years when considering the present-value difference between future spending and future taxes. Over the full long-term, we need an extra 12 percent, not 8 percent, of GDP annually.
Seventy-five years seems like a long enough time to plan. It’s not. Had the Greenspan Commission, which “fixed” Social Security back in 1983, focused on the true long term we wouldn’t be sitting here now with Social Security 26 percent underfunded. The Social Security trustees, at least, have learned a lesson. The 26 percent figure is based on their infinite horizon fiscal- gap calculation.
But the real reason we can’t look out just 75 years is that the government’s cash flows (the difference between its annual taxes and non-interest spending) over any period of time, including the next 75 years, aren’t well defined. This reflects economics’ labeling problem. If you use different words to describe the receipts taken in and paid out each year by the government, you produce entirely different cash flows and an entirely different fiscal gap measured over any finite horizon.
Matter of Language
It’s only the value of the infinite horizon fiscal gap that is unaffected by the choice of labels of language. Take this year’s payroll tax contributions. Let’s call these transfers from workers to Uncle Sam “borrowing” by the government, rather than “payroll taxes,” since the money will be paid back as future benefits. If the future payback isn’t in full (equal to principal plus interest), we can call the difference a “retirement tax.” Presto! With this change of words, our 2011 deficit of about 10 percent of GDP is boosted another five points to 15 percent.
With one set of words, taxes are higher now and lower later. With the other set of words, the opposite is true. But neither set of labels makes more economic sense than the other or changes what the government takes, on balance, from any person or business in any given year.
This is no surprise. The math of economics rules out an absolute measure of the deficit, just like the math of physics rules out an absolute measure of time.
Bottom Line
The bottom line, then, is that we need to look at the infinite-horizon fiscal gap not just for Social Security, but for the entire federal government. That analysis, based on the Congressional Budget Office’s long-term alternative fiscal scenario, shows an unfathomable fiscal gap of $202 trillion. And covering this gap requires coming up with the aforementioned 12 percent of GDP, forever.
If this gives you the willies, there’s a ready narcotic -- the president’s 2012 budget, which shows that most of our long- term fiscal problem has miraculously disappeared; the fiscal gap isn’t 12 percent of annual GDP. Nor is it 8 percent. It’s now 1.8 percent.
This fantastic improvement in our finances is due, we’re told, primarily to the Independent Payment Advisory Board. This board, to be established in 2014 (after the next election, of course) is charged with recommending cuts to Medicare and Medicaid providers when their costs grow too fast.
Repealing Cuts
We’ve had laws mandating such cuts for years, and they are routinely repealed. Indeed, President Obama signed the latest such repeal last June. But rather than laugh out loud at this cost-control mechanism, the Medicare trustees, three-quarters of whom were appointed by the president, assume in their 2010 report that these cuts will be made -- to the dollar. And the 2012 budget cites the report’s fictional forecast as its authoritative source.
No one takes the 2010 Medicare trustee report’s long-run projections seriously, least of all Richard Foster, Medicare’s chief actuary. Foster added this statement to the end of the report: “The financial projections shown in this report for Medicare do not represent a reasonable expectation…in either the short range…or the long range.”
This isn’t the first administration to conceal our long- term fiscal problem. Back in 1993, Alice Rivlin, then deputy director of the Office of Management and Budget, asked me and economists Alan Auerbach and Jagadeesh Gokhale to prepare a long-term fiscal gap/generational accounting for inclusion in President Bill Clinton’s 1994 budget.
Politics Triumphs
We worked for months on the analysis, but two days before the budget’s release, the study was excised from the budget. We were shocked, but, in retrospect, the politics are clear. The Clinton administration wanted to claim it was fiscally prudent and the study, which showed unofficial debt growing at enormous rates, showed the opposite.
The fiscal gap’s next near appearance in a president’s budget was in 2003. Treasury Secretary Paul O’Neill commissioned Gokhale and Kent Smetters to do the study. It showed a massive $45 trillion fiscal gap -- not a great basis for pushing tax cuts or introducing the prescription-drug benefit for seniors, known as Medicare Part D. O’Neill was ousted on Dec. 6, 2002, and a couple of days later the fiscal-gap study was discarded.
I’m not sure whether censoring the fiscal gap is more dishonorable than fudging it. What I do know is that we can’t assume our problems away and that we should have expected far better of this president who ever voted for him.
- Feb 22, 2011
Our country is bankrupt. It’s not bankrupt in 30 years or five years. It’s bankrupt today.
Want proof? Look at President Barack Obama’s 2010 budget. It showed a massive fiscal gap over the next 75 years, the closure of which requires immediate tax increases, spending cuts, or some combination totaling 8 percent of gross domestic product. To put 8 percent of GDP in perspective, this year’s employee and employer payroll taxes for Social Security and Medicare will amount to just 5 percent of GDP.
Actually, the picture is much worse. Nothing in economics says we should look out just 75 years when considering the present-value difference between future spending and future taxes. Over the full long-term, we need an extra 12 percent, not 8 percent, of GDP annually.
Seventy-five years seems like a long enough time to plan. It’s not. Had the Greenspan Commission, which “fixed” Social Security back in 1983, focused on the true long term we wouldn’t be sitting here now with Social Security 26 percent underfunded. The Social Security trustees, at least, have learned a lesson. The 26 percent figure is based on their infinite horizon fiscal- gap calculation.
But the real reason we can’t look out just 75 years is that the government’s cash flows (the difference between its annual taxes and non-interest spending) over any period of time, including the next 75 years, aren’t well defined. This reflects economics’ labeling problem. If you use different words to describe the receipts taken in and paid out each year by the government, you produce entirely different cash flows and an entirely different fiscal gap measured over any finite horizon.
Matter of Language
It’s only the value of the infinite horizon fiscal gap that is unaffected by the choice of labels of language. Take this year’s payroll tax contributions. Let’s call these transfers from workers to Uncle Sam “borrowing” by the government, rather than “payroll taxes,” since the money will be paid back as future benefits. If the future payback isn’t in full (equal to principal plus interest), we can call the difference a “retirement tax.” Presto! With this change of words, our 2011 deficit of about 10 percent of GDP is boosted another five points to 15 percent.
With one set of words, taxes are higher now and lower later. With the other set of words, the opposite is true. But neither set of labels makes more economic sense than the other or changes what the government takes, on balance, from any person or business in any given year.
This is no surprise. The math of economics rules out an absolute measure of the deficit, just like the math of physics rules out an absolute measure of time.
Bottom Line
The bottom line, then, is that we need to look at the infinite-horizon fiscal gap not just for Social Security, but for the entire federal government. That analysis, based on the Congressional Budget Office’s long-term alternative fiscal scenario, shows an unfathomable fiscal gap of $202 trillion. And covering this gap requires coming up with the aforementioned 12 percent of GDP, forever.
If this gives you the willies, there’s a ready narcotic -- the president’s 2012 budget, which shows that most of our long- term fiscal problem has miraculously disappeared; the fiscal gap isn’t 12 percent of annual GDP. Nor is it 8 percent. It’s now 1.8 percent.
This fantastic improvement in our finances is due, we’re told, primarily to the Independent Payment Advisory Board. This board, to be established in 2014 (after the next election, of course) is charged with recommending cuts to Medicare and Medicaid providers when their costs grow too fast.
Repealing Cuts
We’ve had laws mandating such cuts for years, and they are routinely repealed. Indeed, President Obama signed the latest such repeal last June. But rather than laugh out loud at this cost-control mechanism, the Medicare trustees, three-quarters of whom were appointed by the president, assume in their 2010 report that these cuts will be made -- to the dollar. And the 2012 budget cites the report’s fictional forecast as its authoritative source.
No one takes the 2010 Medicare trustee report’s long-run projections seriously, least of all Richard Foster, Medicare’s chief actuary. Foster added this statement to the end of the report: “The financial projections shown in this report for Medicare do not represent a reasonable expectation…in either the short range…or the long range.”
This isn’t the first administration to conceal our long- term fiscal problem. Back in 1993, Alice Rivlin, then deputy director of the Office of Management and Budget, asked me and economists Alan Auerbach and Jagadeesh Gokhale to prepare a long-term fiscal gap/generational accounting for inclusion in President Bill Clinton’s 1994 budget.
Politics Triumphs
We worked for months on the analysis, but two days before the budget’s release, the study was excised from the budget. We were shocked, but, in retrospect, the politics are clear. The Clinton administration wanted to claim it was fiscally prudent and the study, which showed unofficial debt growing at enormous rates, showed the opposite.
The fiscal gap’s next near appearance in a president’s budget was in 2003. Treasury Secretary Paul O’Neill commissioned Gokhale and Kent Smetters to do the study. It showed a massive $45 trillion fiscal gap -- not a great basis for pushing tax cuts or introducing the prescription-drug benefit for seniors, known as Medicare Part D. O’Neill was ousted on Dec. 6, 2002, and a couple of days later the fiscal-gap study was discarded.
I’m not sure whether censoring the fiscal gap is more dishonorable than fudging it. What I do know is that we can’t assume our problems away and that we should have expected far better of this president who ever voted for him.
Monday, February 21, 2011
What ruler is next??
Abdelaziz Bouteflika (Algeria)
Hamid Karzai (Afghanistan)
Zillur Rahman (Bangladesh)
Joseph Kabila (Congo)
Mahmoud Ahmadinejad (Iran)
Shimon Peres (Israel)
Emir Sabah Al-Ahmad (Kuwait)
Asif Zardari (Pakistan)
Emir Hamad bin Khalifa AlThani (Qatar)
Abdullah bin Abdul Aziz (Saudi Arabia)
Assorted (United Arab Emirates)
Ali Abdullah Saleh (Yemen)
Hamid Karzai (Afghanistan)
Zillur Rahman (Bangladesh)
Joseph Kabila (Congo)
Mahmoud Ahmadinejad (Iran)
Shimon Peres (Israel)
Emir Sabah Al-Ahmad (Kuwait)
Asif Zardari (Pakistan)
Emir Hamad bin Khalifa AlThani (Qatar)
Abdullah bin Abdul Aziz (Saudi Arabia)
Assorted (United Arab Emirates)
Ali Abdullah Saleh (Yemen)
Sunday, February 20, 2011
My best visual from the Super Bowl weekend.........
No, it wasn't Demi Moore parading around in Jerry Jones box like an 8th grader who was poured into her pants, nor was it John Madden holding court with anyone and everyone nor was it the massive board room at COWBOYS Golf Course where Jerry holds court for his business dealings (actually I stumbled into the room by accident and just had to sit in the leather chair at the head of the table for a look-see).
My best visual of the weekend was on the way to the Super Bowl in the white limo that must have held 16 of us and a driver that if truth be told had no business driving that beast because if corner curbs were points he would have won big! We were to park the limo in the 6 Flags Over Texas parking lot and supposedly be shuttled to the front of the stadium. The traffic was moving slowly and we were next to a very pretty blue body of water that after pulling up my Swaro El's showed a large number of Shoveler in full spring plumage and some Coot. My fellow limo riders couldn't figure out what I was looking at so my usual retort of "I'm a bird guy" caused no undue consternation. My eyes panned the spring-like blue color of windy Texas water and there for a brief millisecond I spotted the white. I kept looking, the limo kept moving and I thought what I had spotted was my imagination but there he was, in full spring plumage, in all of his beauty. Swimming fast into the wind, I believe mate-less he was diving into the lake bottom and spending little time in the sunlight on top of the shimmering waves. There is just something special about a bull canvasback in the spring.
Seeing that white was great icing on a Super weekend in Dallas. My fellow limo riders simply missed it.
My best visual of the weekend was on the way to the Super Bowl in the white limo that must have held 16 of us and a driver that if truth be told had no business driving that beast because if corner curbs were points he would have won big! We were to park the limo in the 6 Flags Over Texas parking lot and supposedly be shuttled to the front of the stadium. The traffic was moving slowly and we were next to a very pretty blue body of water that after pulling up my Swaro El's showed a large number of Shoveler in full spring plumage and some Coot. My fellow limo riders couldn't figure out what I was looking at so my usual retort of "I'm a bird guy" caused no undue consternation. My eyes panned the spring-like blue color of windy Texas water and there for a brief millisecond I spotted the white. I kept looking, the limo kept moving and I thought what I had spotted was my imagination but there he was, in full spring plumage, in all of his beauty. Swimming fast into the wind, I believe mate-less he was diving into the lake bottom and spending little time in the sunlight on top of the shimmering waves. There is just something special about a bull canvasback in the spring.
Seeing that white was great icing on a Super weekend in Dallas. My fellow limo riders simply missed it.
Saturday, February 19, 2011
Only ZeroHedge.com gives us such cutting edge humor............
Dear Ben:
I don’t know if you read ZH. I bet you do. It would be disappointing to learn that you didn’t read some of the leading edge financial blogs. But if not, I bet at least one of your staffers does. If you’re any kind of manager, they won’t be afraid to bring this to your attention. Or perhaps Ron Paul’s staffers can shoot a copy over to your office. It’s a simple petition, really, in the traditional sense. I hope you will consider it.
I understand the conclusion you came to in 2008 and early 2009 after a career spent studying the Great Depression, and I also understand that you feel justified in using whatever channels are available to you as proxy helicopters to drop cash. And it works. You’ve essentially manipulated the US and world markets as though they were remote control funny-cars, bent to whatever short-term route you desire, though we have yet to see what the second and third-order effects are. I mean, beyond food riots, destabilization of the Middle East, gas prices that American citizens won’t ultimately be able to afford, agriculture prices that will play havoc with corporate margins and retail food prices, the US dollar losing its reserve-currency status… things like that.
Having managed money for a while, with all the implicit strategic and tactical decisions, I also understand thesis drift – where you make a decision based on a set of factors, but then continue the policy, or hold the position, based on new reasoning (excuses) that were not part of the original thought process, even after those factors change. An easy example is when a portfolio manager buys a position based on a chart, then, when the chart breaks and he has a small loss, convinces himself that there are other, fundamental factors (it’s cheap now), which support holding the position until it gets back to even. This usually leads to a larger loss. It’s not the sort of lesson you learn in a classroom.
And so it is with you. I understand how it started – the raw panic that you must have felt over some of those weekends in 2008, after belatedly becoming aware that most of the financial system teetered precariously above a fragile foundation of leverage, artifice, obfuscation, and outright fraud - and how emergency conditions justified extreme action in 2008, as distasteful as it must have been for an economist to allocate the capital of honest savers to those that had, in fact, proved to have been the biggest destroyers of capital. I even understand, though I disagree with, the reasoning beyond your latest tactical success / potential strategic disaster – QE-FOREVER.
And now, on the horizon, I see the thesis drift coming: ‘How,’ you ask yourself, ‘will the US possibly roll all these treasuries, to support the ridiculous politicians’ deficit spending, without me in there as an unnatural source of demand? And, if I don’t keep interfering, day by day and auction by auction, MY GOD, what will happen to the value of the enormous, leveraged debt portfolio that the Fed just purchased at a generational top tick, when the auctions struggle and rates begin to take the fast train up? WHAT HAVE I DONE??’ Late at night, when it’s just you, the ceiling, and the ghosts of the Princeton lunchroom, you must worry: ‘At a 5% 10 year, I’ll have one of the largest paper losses in the history of global finance, and, my own obfuscation aside, sooner or later people will clue in, realize they never pulled a lever for my manifesto, and put my head on a stick!’
But here’s the thing, Ben: the deficit spending that you pay lip service to arguing against, which your current policies support, AND THEREFORE FACILITATE, is a real problem. It’s out of control. There is no solution in sight. And, most importantly, there is no URGENCY for a solution to a problem that is, ultimately, existential in terms of capitalism and free markets because the market has stopped giving us any signal other than the delusion you wish to transmit. The barbarian hordes are on the hill above us, looking down and licking their lips, but you’ve put a mirage of QE –colored camouflage serenity in front of them, so that Americans can look past the spiked battle hammers and chain mail of the aggressor, and the rumblings from the beasts, seeing, instead, great payment terms on a new ninety eight inch flat-screen television. YOU are helping to paper over a problem which needs, instead, to be viewed in stark relief.
The danger needs to be FELT, Ben. It needs to have the same urgency as was owed that 353 plane radar cluster off the coast of Hawaii on December 7, 1941. Markets need to be telling us there is a problem, but, because of you, they can’t. Harnessed to your purpose, they’ve stopped serving the ones that they were meant for, allowing one of the most misguided policy trajectories in the history of mankind, to appear benign and without effect. YOU are forestalling a crisis with a thin veneer of paper-mache over an enormous hole in the path to a secure future, and allowing our elected leaders, who have failed in either understanding or effectively communicating the problems, to diddle and prevaricate. And, ultimately, your fix is not sustainable either, so what will you have saved us from, when it’s finally too late, and the engine’s still coughing, and we’re contemplating the trees instead of the runway?
As a highly regarded economist you must understand that recessions have a cyclical purpose. The lows in the business cycle force capital out of poor decisions and into better uses. The lulls are what convince people that risk is real, and that it must, therefore, be accounted for, even when things feel good. The lows are what teach us that 50x leverage is not a good policy - not when you’re an investment bank, not when you’re a hedge fund, not when you’re The Fed. Not EVER! The lows are when failed policies, and failed policy-makers, are seen for what they are. Families adjust, companies adjust, leadership adjusts, and, ultimately, nations adjust. What, do you think, would have been the result of papering over the policies of a Carter or a Nixon? What if we had just shot enough money into the system that they could destroy our economy, or the lawful fabric of our democracy, without being able to see and respond to the critical warnings that free markets give? The result, Ben, would have been no solution. No re-examination of our democratic principles. No Volcker. No Reagan. No fresh image of the city on the hill. Perhaps no post-cold-war boom.
The inevitable history of nations is that they fail, but not always due to the ill-intentioned acts of a despot or conquering army. They can also fail amidst the well-meaning attempts of empathetic illusionists and well meaning technocrats, who have everyone’s best interests at heart, but must bend the rules of logic and law this one time, and then another, due to circumstances that only they can see clearly enough; circumstances that must be dealt with through policy and procedure that no citizenry, given full understanding of its complexities or ultimate effects, would accept.
Things aren’t working, Ben. In your mind, what’s evidently called for is extra-normal production from the machine that you know how to operate. But that’s not really what we need. What we need is for failing policies to fail. We need blathering idiots to be voted out of office. We need America to wake up to the unfolding tragedy in front of them and feel the raw desperation that is a necessary precursor to change - not the shallow, manipulative change of a narcissistic wordsmith, but the deep fundamental change that requires fear as a catalyst, and that sets up generations of capitalist and democratic success. We need Americans to look up on the hill and say, MY GOD, I think that creature with horns on his helmet has a sword, and he’s pointing it at my children. Maybe I should confront him.
But first, Ben, you have to move the mirage. And get out of the line of fire.
And another reader is kind enough to share his comparable comment to the Fed, submitted on August 3, 2010, together with the Fed's response, which in retrospect, and in light of the Fed's recently announced third mandate looks simply hilarious and painfully disingenuous.
Dear Chairman Bernanke and Fed Board:
I am a centrist voter who supported President Obama but who also believes strongly in the need for fiscal responsibility. While I am not a financial expert, I do have an economics degree and understand fiscal and monetary policy issues better than most citizens.
Yesterday, on Monday, Aug 2nd, I watched the stock market go up over 2% despite a month of bad economic news. Today, there was even more bad news -- existing home sales, factory orders, consumer spending and personal incomes -- and yet the market is down only marginally. In any normal world, the market responds to fundamentals.
Yet, in the United States today it does not. The only reason the stock market (and other asset prices, e.g. housing) are supported at current levels is the perceived near certainty of further Federal Reserve intervention (aka "quantitative easing"). Speculation of further quantitative easing is clearly evident in the financial press (CNBC, WSJ, Bloomberg, etc.), and was exacerbated by Mr. Bullard last week. The Federal Reserve should not -- and ultimately cannot -- prevent markets from reaching equilibrium. This means asset prices must fall to match both declining personal and national incomes, which are the natural consequences of globalization (and misguided US trade policy) on US GDP relative to the rest of the world.
Therefore, the Fed should not manipulate markets in an attempt to make up for: 1) misguided deregulation (i.e. abandonment of Glass-Steagall during the Clinton Admin, made worse under the Bush Admin) 2) irresponsible, bubble-inducing easy money policies by the Fed under Greenspan 3) fiscal irresponsibility by the Congress 4) globalization While quantitative easing may have been necessary in late 2008-early 2009 to stabilize the economy, I am writing to implore you to please stop any discussion of further easing. Please have the courage to follow former Fed Chairman Volcker''s example and let the economy go through a difficult adjustment period so it can have a REAL recovery.
respectfully
--------------------------------------------------------------------------------
And the Fed's reponse:
Dear Mr. [redacted]:
Thank you for your most recent correspondence to Chairman Bernanke and the Board members.
The Chairman and Board members receive a great number of letters daily. As public figures with many daily responsibilities, they are unable to reply to all of those letters personally or to acknowledge receipt of each correspondence. However, they appreciate receiving observations and advice that bear on the Federal Reserve's responsibilities, particularly from people who have concerns about how the economy is functioning.
Also please know that the Federal Reserve's monetary policy actions are not aimed at correcting or influencing any particular market. The goal of monetary policy is to foster conditions conducive to sustaining sound, noninflationary economic growth over time and policymakers must make decisions that provide the greatest benefit overall.
Again, thank you for taking the time to share your views.
Sincerely,
JPD
Board Staff
I don’t know if you read ZH. I bet you do. It would be disappointing to learn that you didn’t read some of the leading edge financial blogs. But if not, I bet at least one of your staffers does. If you’re any kind of manager, they won’t be afraid to bring this to your attention. Or perhaps Ron Paul’s staffers can shoot a copy over to your office. It’s a simple petition, really, in the traditional sense. I hope you will consider it.
I understand the conclusion you came to in 2008 and early 2009 after a career spent studying the Great Depression, and I also understand that you feel justified in using whatever channels are available to you as proxy helicopters to drop cash. And it works. You’ve essentially manipulated the US and world markets as though they were remote control funny-cars, bent to whatever short-term route you desire, though we have yet to see what the second and third-order effects are. I mean, beyond food riots, destabilization of the Middle East, gas prices that American citizens won’t ultimately be able to afford, agriculture prices that will play havoc with corporate margins and retail food prices, the US dollar losing its reserve-currency status… things like that.
Having managed money for a while, with all the implicit strategic and tactical decisions, I also understand thesis drift – where you make a decision based on a set of factors, but then continue the policy, or hold the position, based on new reasoning (excuses) that were not part of the original thought process, even after those factors change. An easy example is when a portfolio manager buys a position based on a chart, then, when the chart breaks and he has a small loss, convinces himself that there are other, fundamental factors (it’s cheap now), which support holding the position until it gets back to even. This usually leads to a larger loss. It’s not the sort of lesson you learn in a classroom.
And so it is with you. I understand how it started – the raw panic that you must have felt over some of those weekends in 2008, after belatedly becoming aware that most of the financial system teetered precariously above a fragile foundation of leverage, artifice, obfuscation, and outright fraud - and how emergency conditions justified extreme action in 2008, as distasteful as it must have been for an economist to allocate the capital of honest savers to those that had, in fact, proved to have been the biggest destroyers of capital. I even understand, though I disagree with, the reasoning beyond your latest tactical success / potential strategic disaster – QE-FOREVER.
And now, on the horizon, I see the thesis drift coming: ‘How,’ you ask yourself, ‘will the US possibly roll all these treasuries, to support the ridiculous politicians’ deficit spending, without me in there as an unnatural source of demand? And, if I don’t keep interfering, day by day and auction by auction, MY GOD, what will happen to the value of the enormous, leveraged debt portfolio that the Fed just purchased at a generational top tick, when the auctions struggle and rates begin to take the fast train up? WHAT HAVE I DONE??’ Late at night, when it’s just you, the ceiling, and the ghosts of the Princeton lunchroom, you must worry: ‘At a 5% 10 year, I’ll have one of the largest paper losses in the history of global finance, and, my own obfuscation aside, sooner or later people will clue in, realize they never pulled a lever for my manifesto, and put my head on a stick!’
But here’s the thing, Ben: the deficit spending that you pay lip service to arguing against, which your current policies support, AND THEREFORE FACILITATE, is a real problem. It’s out of control. There is no solution in sight. And, most importantly, there is no URGENCY for a solution to a problem that is, ultimately, existential in terms of capitalism and free markets because the market has stopped giving us any signal other than the delusion you wish to transmit. The barbarian hordes are on the hill above us, looking down and licking their lips, but you’ve put a mirage of QE –colored camouflage serenity in front of them, so that Americans can look past the spiked battle hammers and chain mail of the aggressor, and the rumblings from the beasts, seeing, instead, great payment terms on a new ninety eight inch flat-screen television. YOU are helping to paper over a problem which needs, instead, to be viewed in stark relief.
The danger needs to be FELT, Ben. It needs to have the same urgency as was owed that 353 plane radar cluster off the coast of Hawaii on December 7, 1941. Markets need to be telling us there is a problem, but, because of you, they can’t. Harnessed to your purpose, they’ve stopped serving the ones that they were meant for, allowing one of the most misguided policy trajectories in the history of mankind, to appear benign and without effect. YOU are forestalling a crisis with a thin veneer of paper-mache over an enormous hole in the path to a secure future, and allowing our elected leaders, who have failed in either understanding or effectively communicating the problems, to diddle and prevaricate. And, ultimately, your fix is not sustainable either, so what will you have saved us from, when it’s finally too late, and the engine’s still coughing, and we’re contemplating the trees instead of the runway?
As a highly regarded economist you must understand that recessions have a cyclical purpose. The lows in the business cycle force capital out of poor decisions and into better uses. The lulls are what convince people that risk is real, and that it must, therefore, be accounted for, even when things feel good. The lows are what teach us that 50x leverage is not a good policy - not when you’re an investment bank, not when you’re a hedge fund, not when you’re The Fed. Not EVER! The lows are when failed policies, and failed policy-makers, are seen for what they are. Families adjust, companies adjust, leadership adjusts, and, ultimately, nations adjust. What, do you think, would have been the result of papering over the policies of a Carter or a Nixon? What if we had just shot enough money into the system that they could destroy our economy, or the lawful fabric of our democracy, without being able to see and respond to the critical warnings that free markets give? The result, Ben, would have been no solution. No re-examination of our democratic principles. No Volcker. No Reagan. No fresh image of the city on the hill. Perhaps no post-cold-war boom.
The inevitable history of nations is that they fail, but not always due to the ill-intentioned acts of a despot or conquering army. They can also fail amidst the well-meaning attempts of empathetic illusionists and well meaning technocrats, who have everyone’s best interests at heart, but must bend the rules of logic and law this one time, and then another, due to circumstances that only they can see clearly enough; circumstances that must be dealt with through policy and procedure that no citizenry, given full understanding of its complexities or ultimate effects, would accept.
Things aren’t working, Ben. In your mind, what’s evidently called for is extra-normal production from the machine that you know how to operate. But that’s not really what we need. What we need is for failing policies to fail. We need blathering idiots to be voted out of office. We need America to wake up to the unfolding tragedy in front of them and feel the raw desperation that is a necessary precursor to change - not the shallow, manipulative change of a narcissistic wordsmith, but the deep fundamental change that requires fear as a catalyst, and that sets up generations of capitalist and democratic success. We need Americans to look up on the hill and say, MY GOD, I think that creature with horns on his helmet has a sword, and he’s pointing it at my children. Maybe I should confront him.
But first, Ben, you have to move the mirage. And get out of the line of fire.
And another reader is kind enough to share his comparable comment to the Fed, submitted on August 3, 2010, together with the Fed's response, which in retrospect, and in light of the Fed's recently announced third mandate looks simply hilarious and painfully disingenuous.
Dear Chairman Bernanke and Fed Board:
I am a centrist voter who supported President Obama but who also believes strongly in the need for fiscal responsibility. While I am not a financial expert, I do have an economics degree and understand fiscal and monetary policy issues better than most citizens.
Yesterday, on Monday, Aug 2nd, I watched the stock market go up over 2% despite a month of bad economic news. Today, there was even more bad news -- existing home sales, factory orders, consumer spending and personal incomes -- and yet the market is down only marginally. In any normal world, the market responds to fundamentals.
Yet, in the United States today it does not. The only reason the stock market (and other asset prices, e.g. housing) are supported at current levels is the perceived near certainty of further Federal Reserve intervention (aka "quantitative easing"). Speculation of further quantitative easing is clearly evident in the financial press (CNBC, WSJ, Bloomberg, etc.), and was exacerbated by Mr. Bullard last week. The Federal Reserve should not -- and ultimately cannot -- prevent markets from reaching equilibrium. This means asset prices must fall to match both declining personal and national incomes, which are the natural consequences of globalization (and misguided US trade policy) on US GDP relative to the rest of the world.
Therefore, the Fed should not manipulate markets in an attempt to make up for: 1) misguided deregulation (i.e. abandonment of Glass-Steagall during the Clinton Admin, made worse under the Bush Admin) 2) irresponsible, bubble-inducing easy money policies by the Fed under Greenspan 3) fiscal irresponsibility by the Congress 4) globalization While quantitative easing may have been necessary in late 2008-early 2009 to stabilize the economy, I am writing to implore you to please stop any discussion of further easing. Please have the courage to follow former Fed Chairman Volcker''s example and let the economy go through a difficult adjustment period so it can have a REAL recovery.
respectfully
--------------------------------------------------------------------------------
And the Fed's reponse:
Dear Mr. [redacted]:
Thank you for your most recent correspondence to Chairman Bernanke and the Board members.
The Chairman and Board members receive a great number of letters daily. As public figures with many daily responsibilities, they are unable to reply to all of those letters personally or to acknowledge receipt of each correspondence. However, they appreciate receiving observations and advice that bear on the Federal Reserve's responsibilities, particularly from people who have concerns about how the economy is functioning.
Also please know that the Federal Reserve's monetary policy actions are not aimed at correcting or influencing any particular market. The goal of monetary policy is to foster conditions conducive to sustaining sound, noninflationary economic growth over time and policymakers must make decisions that provide the greatest benefit overall.
Again, thank you for taking the time to share your views.
Sincerely,
JPD
Board Staff
Friday, February 18, 2011
This is good.....dam good........enjoy your weekend!
Submitted by Jim Quinn of The Burning Platform
Pump It Up
Down in the pleasure centre,
hell bent or heaven sent,
listen to the propaganda,
listen to the latest slander.
There’s nothing underhand
that she wouldn’t understand.
Pump it up until you can feel it.
Pump it up when you don’t really need it.
Elvis Costello - Pump It Up
I had been planning an article based on the Green Day song – Static Age - about the propaganda, lies and misinformation that are endlessly directed at the American people by the government, the mainstream corporate media, and the wealthy elite that control the levers of our society. Then Barack Obama presented his 2012 Budget proposal, including his 10 year projection for our country. I know you’ve heard the term Peak Oil, but the term that came to my mind when I saw Obama’s budget was Peak Bullshit. I thought that would be a great article name, but some sites wouldn’t like the foul language. I was in a quandary until the Elvis Costello song Pump It Up came on the radio while I was driving to work. Down in the pleasure center of Washington DC, the propaganda, slander and most blatant lies are spoken without a hint of guilt or even the faintest whiff of shame. The politicians in Washington DC on both sides of the aisle believe the American people are stupid, gullible, apathetic and easily manipulated. They may be right, but there are a few people out there who can cut through their bullshit and find the truth.
Obama, Wall Street, and the corporate mouthpieces in the mainstream media have been pumping up the American people for months with false data, unwarranted optimism, bank profits created out of thin air by accounting fraud, and attempting to create an economic recovery built on a foundation of sand, supported only by lies. The Obama budget is worse than a joke. It is a tragic joke. It amazes me that he can stand in front of the American people and present such a lie. The liberal media then unquestioningly presents the budget as a frugal cost cutting proposal that will reduce deficits and inflict painful cuts upon the poor American people. It would be laughable, if it wasn’t so sad. One look at Obama’s deficit projections for FY11 and FY12, presented one year ago, should be enough to convince you that no one in Washington DC has a clue what they are doing.
Federal (Deficit)
Year Spending Surplus
2011 $3,834 -$1,267
2012 $3,755 -$828
Obama projected a two year deficit of $2.1 trillion. His current projection, just one year later, is $2.75 trillion. He missed it by this much.
The rocket scientists running our country underestimated the deficit by 31% in the space of one year. I suppose that is considered highly accurate for a government drone. Now let’s get some perspective on Obama’s projected FY11 deficit of $1.65 trillion. This is the projected DEFICIT. Do you remember back to the Clinton administration? Did you feel like your Federal government wasn’t spending enough? In 1998 the TOTAL SPENDING of the Federal government was $1.65 trillion. We now run deficits that equal the entire budget of the United States in 1998, without blinking an eye or questioning how we got here. The politicians have scared the populace into thinking that the country will collapse without the Federal Government spending $3.8 trillion of your money, every year.
Static Age
Can you hear the sound of the static noise?
Blasting out in stereo
Cater to the class and the paranoid
Music to my nervous system
Advertising love and religion
Murder on the airwaves
Slogans on the brink of corruption
Vision of blasphemy, war and peace
Screaming at you
I can’t see a thing in the video
I can’t hear a sound on the radio
In stereo in the static age – Green Day – Static Age
The politicians prefer their actions be bathed in shades of grey. The corporate payoffs, backroom deals, union arm twisting and selling of votes to the highest bidder are how business is done in Washington DC. They believe that if there is enough static noise being generated by the mainstream media, then the American public will be distracted and not notice they have destroyed the country. When analyzing Obama’s budget we need some perspective. Below is a chart showing actual Federal spending and deficits from 1999 through 2010 and projections from 2011 through 2021. My assessment is that the Great American Empire peaked in 1999-2000. The unemployment rate was 4% and 64.4% of the working age population, or 137 million Americans, were employed. Corporate profits were surging, along with the stock market. The Federal government was spending $1.8 trillion and generating budget surpluses of $236 billion. The National Debt of $5.7 trillion was only 57% of GDP.
The decline of the American Empire can be seen in the chart of woe. The unemployment rate today is 9%. Only 58.4% of the working age population is employed. Eleven years after peak empire, the working age population has grown by 26 million people and the number of employed Americans has grown by 2.4 million. At least 64.4% of the population would like to be working. This means that there are 14.4 million people who would work if the jobs were available. The Federal government is spending $3.8 trillion and generating deficits of $1.6 trillion. The National Debt is $14.2 trillion, or 94% of GDP. Except for Wall Street banks and mega-corporations, small business profits are weak and the stock market is at the same levels reached in 1999. These are the truths you won’t hear from politicians or the mainstream media.
Federal (Deficit)
Year Spending % Change Surplus
1999 $1,702 $125
2000 $1,789 5.1% $236
2001 $1,863 4.1% $128
2002 $2,011 7.9% -$158
2003 $2,160 7.4% -$378
2004 $2,293 6.2% -$413
2005 $2,472 7.8% -$319
2006 $2,655 7.4% -$249
2007 $2,729 2.8% -$161
2008 $2,983 9.3% -$459
2009 $3,518 17.9% -$1,413
2010 $3,456 -1.8% -$1,293
2011F $3,819 10.5% -$1,645
2012B $3,729 -2.4% -$1,101
2013B $3,771 1.1% -$768
2014B $3,977 5.5% -$645
2015B $4,190 5.4% -$607
2016B $4,468 6.6% -$649
2017B $4,669 4.5% -$627
2018B $4,876 4.4% -$619
2019B $5,154 5.7% -$681
2020B $5,422 5.2% -$735
2021B $5,697 5.1% -$774
So now let’s assess the reality of Obama’s ten year budget. If you were to believe the reports in the media, you would think that Obama is cutting deficits and making hard choices. Amazingly, deficits plummet all the way down to “only” $600 billion to $800 billion after 2012. In the chart above, I ignore the revenue side of the equation, because Obama’s assumptions are beyond ridiculous. His assumption of the GDP growing from $15 trillion in 2011 to $24.6 trillion in 2021, a 64% increase, is a fantasy. During the last 10 years, GDP grew by only 51%. So, despite mind numbing debt levels, structurally high unemployment, peak oil, and a rapidly aging population, GDP is going to surge over the next ten years? I certainly believe that. Under the Obama budget, tax revenues will grow from 14.4% of GDP in 2011 to 20% of GDP in 2021. By comparison, the historical average is only 18% of GDP. Some of Obama’s tax revenue assumptions are as follows:
Raising the top marginal income tax rate from 35% to 39.6%. This is a $709 billion/10 year tax hike
Raising the capital gains and dividends rate from 15% to 20%
Raising the estate tax rate from 35% to 45% and lowering the estate tax exemption amount from $5 million ($10 million for couples) to $3.5 million. This is a $98 billion/ten year tax hike
Capping the value of itemized deductions at the 28% bracket rate. This will effectively cut tax deductions for mortgage interest, charitable contributions, property taxes, state and local income or sales taxes, out-of-pocket medical expenses, and unreimbursed employee business expenses. A new means-tested phase-out of itemized deductions limits them even more. This is a $321 billion/ten year tax hike
Massive new taxes on energy, including LIFO repeal, Superfund, domestic energy manufacturing, and many others totaling $120 billion over ten years
Increasing unemployment payroll taxes by $15 billion over ten years
Increasing tax penalties, information reporting, and IRS information sharing. This is a ten-year tax hike of $20 billion.
It is an absolute certainty that the Democrats will lose control of the Senate in 2012. Obama will never get any of his tax increases through a Republican controlled Congress. They are DOA. Therefore, his revenue assumptions are overstated by hundreds of billions every year. Even using his optimistic assumptions, the National Debt would reach $18 trillion in 2015. Using real world numbers, the National Debt will exceed $20 trillion in 2015. In what must be a gag, Obama says that interest on the debt will “only” be $500 billion in 2015. Hysterically, this would mean our debt holders will only require a crumbling empire to pay 2.5% on our debt. How about 5% as a minimum and 10% as a more likely rate? This would put interest on the debt between $1 trillion and $2 trillion per year. The collapse of America is a certainty if Obama’s budgeted spending and deficits play out. Somehow, the majority of Americans are overwhelmed with indifference.
Overwhelmed By Indifference
Some of my friends sit around every evening
and they worry about the times ahead
But everybody else is overwhelmed by indifference
and the promise of an early bed
You either shut up or get cut up;
they don’t wanna hear about it. - Elvis Costello - Radio, Radio
Do you remember when the politicians of both parties were making dire predictions of Great Depressions, economic collapse and 10% unemployment if we didn’t pass their ”save an investment banker” rescue package and the $800 billion “jobs creation” stimulus package? They assured the American people that these expenditures were temporary and were only being made to save the country. Before the crisis, Federal spending was $2.7 trillion. The talking heads at the Fed and in the White House assure us they saved the world. GDP is growing and Obama told me we’ve added over 1 million jobs in the last year. Sounds like the emergency is over. The $400 billion per year of emergency spending should now be rolled back, since it was temporary. Therefore, Obama’s budget surely must going from $3.8 trillion back down to a pre-emergency level of $3.0 trillion in 2012. Not quite. You see, government spending never goes down. His proposal shows $3.7 trillion of spending in FY12. Emergencies never end for a politician in Washington DC. Spending equals power and control over our lives. There will always be another emergency that requires more spending.
You are now hearing the spin from the ideologues on both sides of the aisle about their cost consciousness and desire to restrain spending. It’s all a load of bull. Bush and the Republicans added $4.3 trillion to the National Debt during their reign of error. Obama has matched Bush in the space of 2 1/2 years by adding another $4.3 trillion. There is no effort to cut spending. Obama’s budget shows spending rising from $3.7 trillion in FY12 to $5.7 trillion in FY21. The propaganda and misinformation being spewed from these corrupt politicians is mind numbing.
Again, some perspective is needed to realize how out of control our Federal Government has become. According to the BLS, inflation has risen by 33% since 1999. Real GDP has grown by 23%. The population of the U.S. has grown by 10%. The number of employed Americans has risen by 1.8%. The average pay for a Federal drone (aka worker) has risen by 58%, while the average pay for real workers has risen by only 30%. Therefore, the average non-government employee has seen a decrease in their standard of living as inflation has risen faster than wages. As you can calculate yourself, Federal government spending surged by 124% between 1999 and today. Have you noticed a doubling in service level, competence, educational scores, new energy solutions, or safety and security? What did we get for an extra $2.1 trillion of spending?
What we got was exhausting wars of choice, less freedom, less liberties, less safety, more rules, more regulations, more bureaucrats, more corruption, a financial collapse, and a government that has put us on a path to fiscal ruin. We’ve almost tripled spending on Defense. Are we safer? We’ve more than doubled spending on healthcare. Are we healthier? We’ve more than doubled spending on welfare. Are the poor less impoverished? We’ve more than doubled spending on education. Are our children smarter? The Federal government is out of control. When you hear a politician or pundit detailing the horrors of “spending cuts”, please keep in mind they are lying. There will be no cuts until they are forced upon the government by the looming collapse of our economic system.
Year Defense Pensions Health Care Welfare Education
1999 $333 $431 $332 $165 $56
2000 $359 $454 $352 $171 $60
2001 $366 $481 $390 $183 $64
2002 $422 $503 $427 $224 $78
2003 $483 $518 $469 $242 $91
2004 $543 $537 $509 $238 $96
2005 $600 $565 $549 $246 $106
2006 $621 $591 $583 $250 $128
2007 $653 $636 $642 $254 $102
2008 $730 $669 $671 $313 $102
2009 $794 $739 $764 $407 $91
2010 $847 $756 $821 $496 $140
2011F $965 $801 $882 $488 $130
2012B $925 $813 $866 $424 $121
% Increase 177.8% 88.6% 160.8% 157.0% 116.1%
Now the question is what do we do about it? I know my first inclination would be to do what that Iraqi reporter did a few years ago during a Bush press conference in Iraq. I’d love to throw my shoes at Obama and every lying corrupt politician in America, but the momentary feeling of pleasure would be snuffed out in seconds by a hail of bullets from the Department of Homeland Security thugs guarding these traitors to the American republic.
Below is my CHART OF DOOM. Using real world assumptions, the National Debt will reach $25 trillion by 2019. That level of debt would be 130% of a realistic GDP figure. The interest on this level of debt would likely exceed $2 trillion per year, more than the entire Federal spending budget in 2002. This chart will not come to pass. Our economic system will collapse well before we reach a $25 trillion debt level. This is already baked in the cake. There are not enough politicians willing to tell the truth and not enough citizens that want to hear the truth. The result will be default, insolvency, currency collapse, vaporization of wealth, chaos, and pain.
The only way to avert the coming financial catastrophe is to go Egyptian on their asses. Maybe mobs of Americans surrounding the White House, Federal Reserve building and Wall Street bank headquarters would get their attention. It wouldn’t take a majority, but a minority of angry Americans willing to fight for the future of the country. The anger is building. More people are becoming aware. The internet is working its magic, just as it is doing in the Middle East. Those in control can keep pumping out their lies and propaganda, but the truth is plain to see, if you open your eyes.
“It does not take the majority to prevail, but rather an irate, tireless minority, keen on setting brush fire freedom in the minds of men.” - Samuel Adams
Pump It Up
Down in the pleasure centre,
hell bent or heaven sent,
listen to the propaganda,
listen to the latest slander.
There’s nothing underhand
that she wouldn’t understand.
Pump it up until you can feel it.
Pump it up when you don’t really need it.
Elvis Costello - Pump It Up
I had been planning an article based on the Green Day song – Static Age - about the propaganda, lies and misinformation that are endlessly directed at the American people by the government, the mainstream corporate media, and the wealthy elite that control the levers of our society. Then Barack Obama presented his 2012 Budget proposal, including his 10 year projection for our country. I know you’ve heard the term Peak Oil, but the term that came to my mind when I saw Obama’s budget was Peak Bullshit. I thought that would be a great article name, but some sites wouldn’t like the foul language. I was in a quandary until the Elvis Costello song Pump It Up came on the radio while I was driving to work. Down in the pleasure center of Washington DC, the propaganda, slander and most blatant lies are spoken without a hint of guilt or even the faintest whiff of shame. The politicians in Washington DC on both sides of the aisle believe the American people are stupid, gullible, apathetic and easily manipulated. They may be right, but there are a few people out there who can cut through their bullshit and find the truth.
Obama, Wall Street, and the corporate mouthpieces in the mainstream media have been pumping up the American people for months with false data, unwarranted optimism, bank profits created out of thin air by accounting fraud, and attempting to create an economic recovery built on a foundation of sand, supported only by lies. The Obama budget is worse than a joke. It is a tragic joke. It amazes me that he can stand in front of the American people and present such a lie. The liberal media then unquestioningly presents the budget as a frugal cost cutting proposal that will reduce deficits and inflict painful cuts upon the poor American people. It would be laughable, if it wasn’t so sad. One look at Obama’s deficit projections for FY11 and FY12, presented one year ago, should be enough to convince you that no one in Washington DC has a clue what they are doing.
Federal (Deficit)
Year Spending Surplus
2011 $3,834 -$1,267
2012 $3,755 -$828
Obama projected a two year deficit of $2.1 trillion. His current projection, just one year later, is $2.75 trillion. He missed it by this much.
The rocket scientists running our country underestimated the deficit by 31% in the space of one year. I suppose that is considered highly accurate for a government drone. Now let’s get some perspective on Obama’s projected FY11 deficit of $1.65 trillion. This is the projected DEFICIT. Do you remember back to the Clinton administration? Did you feel like your Federal government wasn’t spending enough? In 1998 the TOTAL SPENDING of the Federal government was $1.65 trillion. We now run deficits that equal the entire budget of the United States in 1998, without blinking an eye or questioning how we got here. The politicians have scared the populace into thinking that the country will collapse without the Federal Government spending $3.8 trillion of your money, every year.
Static Age
Can you hear the sound of the static noise?
Blasting out in stereo
Cater to the class and the paranoid
Music to my nervous system
Advertising love and religion
Murder on the airwaves
Slogans on the brink of corruption
Vision of blasphemy, war and peace
Screaming at you
I can’t see a thing in the video
I can’t hear a sound on the radio
In stereo in the static age – Green Day – Static Age
The politicians prefer their actions be bathed in shades of grey. The corporate payoffs, backroom deals, union arm twisting and selling of votes to the highest bidder are how business is done in Washington DC. They believe that if there is enough static noise being generated by the mainstream media, then the American public will be distracted and not notice they have destroyed the country. When analyzing Obama’s budget we need some perspective. Below is a chart showing actual Federal spending and deficits from 1999 through 2010 and projections from 2011 through 2021. My assessment is that the Great American Empire peaked in 1999-2000. The unemployment rate was 4% and 64.4% of the working age population, or 137 million Americans, were employed. Corporate profits were surging, along with the stock market. The Federal government was spending $1.8 trillion and generating budget surpluses of $236 billion. The National Debt of $5.7 trillion was only 57% of GDP.
The decline of the American Empire can be seen in the chart of woe. The unemployment rate today is 9%. Only 58.4% of the working age population is employed. Eleven years after peak empire, the working age population has grown by 26 million people and the number of employed Americans has grown by 2.4 million. At least 64.4% of the population would like to be working. This means that there are 14.4 million people who would work if the jobs were available. The Federal government is spending $3.8 trillion and generating deficits of $1.6 trillion. The National Debt is $14.2 trillion, or 94% of GDP. Except for Wall Street banks and mega-corporations, small business profits are weak and the stock market is at the same levels reached in 1999. These are the truths you won’t hear from politicians or the mainstream media.
Federal (Deficit)
Year Spending % Change Surplus
1999 $1,702 $125
2000 $1,789 5.1% $236
2001 $1,863 4.1% $128
2002 $2,011 7.9% -$158
2003 $2,160 7.4% -$378
2004 $2,293 6.2% -$413
2005 $2,472 7.8% -$319
2006 $2,655 7.4% -$249
2007 $2,729 2.8% -$161
2008 $2,983 9.3% -$459
2009 $3,518 17.9% -$1,413
2010 $3,456 -1.8% -$1,293
2011F $3,819 10.5% -$1,645
2012B $3,729 -2.4% -$1,101
2013B $3,771 1.1% -$768
2014B $3,977 5.5% -$645
2015B $4,190 5.4% -$607
2016B $4,468 6.6% -$649
2017B $4,669 4.5% -$627
2018B $4,876 4.4% -$619
2019B $5,154 5.7% -$681
2020B $5,422 5.2% -$735
2021B $5,697 5.1% -$774
So now let’s assess the reality of Obama’s ten year budget. If you were to believe the reports in the media, you would think that Obama is cutting deficits and making hard choices. Amazingly, deficits plummet all the way down to “only” $600 billion to $800 billion after 2012. In the chart above, I ignore the revenue side of the equation, because Obama’s assumptions are beyond ridiculous. His assumption of the GDP growing from $15 trillion in 2011 to $24.6 trillion in 2021, a 64% increase, is a fantasy. During the last 10 years, GDP grew by only 51%. So, despite mind numbing debt levels, structurally high unemployment, peak oil, and a rapidly aging population, GDP is going to surge over the next ten years? I certainly believe that. Under the Obama budget, tax revenues will grow from 14.4% of GDP in 2011 to 20% of GDP in 2021. By comparison, the historical average is only 18% of GDP. Some of Obama’s tax revenue assumptions are as follows:
Raising the top marginal income tax rate from 35% to 39.6%. This is a $709 billion/10 year tax hike
Raising the capital gains and dividends rate from 15% to 20%
Raising the estate tax rate from 35% to 45% and lowering the estate tax exemption amount from $5 million ($10 million for couples) to $3.5 million. This is a $98 billion/ten year tax hike
Capping the value of itemized deductions at the 28% bracket rate. This will effectively cut tax deductions for mortgage interest, charitable contributions, property taxes, state and local income or sales taxes, out-of-pocket medical expenses, and unreimbursed employee business expenses. A new means-tested phase-out of itemized deductions limits them even more. This is a $321 billion/ten year tax hike
Massive new taxes on energy, including LIFO repeal, Superfund, domestic energy manufacturing, and many others totaling $120 billion over ten years
Increasing unemployment payroll taxes by $15 billion over ten years
Increasing tax penalties, information reporting, and IRS information sharing. This is a ten-year tax hike of $20 billion.
It is an absolute certainty that the Democrats will lose control of the Senate in 2012. Obama will never get any of his tax increases through a Republican controlled Congress. They are DOA. Therefore, his revenue assumptions are overstated by hundreds of billions every year. Even using his optimistic assumptions, the National Debt would reach $18 trillion in 2015. Using real world numbers, the National Debt will exceed $20 trillion in 2015. In what must be a gag, Obama says that interest on the debt will “only” be $500 billion in 2015. Hysterically, this would mean our debt holders will only require a crumbling empire to pay 2.5% on our debt. How about 5% as a minimum and 10% as a more likely rate? This would put interest on the debt between $1 trillion and $2 trillion per year. The collapse of America is a certainty if Obama’s budgeted spending and deficits play out. Somehow, the majority of Americans are overwhelmed with indifference.
Overwhelmed By Indifference
Some of my friends sit around every evening
and they worry about the times ahead
But everybody else is overwhelmed by indifference
and the promise of an early bed
You either shut up or get cut up;
they don’t wanna hear about it. - Elvis Costello - Radio, Radio
Do you remember when the politicians of both parties were making dire predictions of Great Depressions, economic collapse and 10% unemployment if we didn’t pass their ”save an investment banker” rescue package and the $800 billion “jobs creation” stimulus package? They assured the American people that these expenditures were temporary and were only being made to save the country. Before the crisis, Federal spending was $2.7 trillion. The talking heads at the Fed and in the White House assure us they saved the world. GDP is growing and Obama told me we’ve added over 1 million jobs in the last year. Sounds like the emergency is over. The $400 billion per year of emergency spending should now be rolled back, since it was temporary. Therefore, Obama’s budget surely must going from $3.8 trillion back down to a pre-emergency level of $3.0 trillion in 2012. Not quite. You see, government spending never goes down. His proposal shows $3.7 trillion of spending in FY12. Emergencies never end for a politician in Washington DC. Spending equals power and control over our lives. There will always be another emergency that requires more spending.
You are now hearing the spin from the ideologues on both sides of the aisle about their cost consciousness and desire to restrain spending. It’s all a load of bull. Bush and the Republicans added $4.3 trillion to the National Debt during their reign of error. Obama has matched Bush in the space of 2 1/2 years by adding another $4.3 trillion. There is no effort to cut spending. Obama’s budget shows spending rising from $3.7 trillion in FY12 to $5.7 trillion in FY21. The propaganda and misinformation being spewed from these corrupt politicians is mind numbing.
Again, some perspective is needed to realize how out of control our Federal Government has become. According to the BLS, inflation has risen by 33% since 1999. Real GDP has grown by 23%. The population of the U.S. has grown by 10%. The number of employed Americans has risen by 1.8%. The average pay for a Federal drone (aka worker) has risen by 58%, while the average pay for real workers has risen by only 30%. Therefore, the average non-government employee has seen a decrease in their standard of living as inflation has risen faster than wages. As you can calculate yourself, Federal government spending surged by 124% between 1999 and today. Have you noticed a doubling in service level, competence, educational scores, new energy solutions, or safety and security? What did we get for an extra $2.1 trillion of spending?
What we got was exhausting wars of choice, less freedom, less liberties, less safety, more rules, more regulations, more bureaucrats, more corruption, a financial collapse, and a government that has put us on a path to fiscal ruin. We’ve almost tripled spending on Defense. Are we safer? We’ve more than doubled spending on healthcare. Are we healthier? We’ve more than doubled spending on welfare. Are the poor less impoverished? We’ve more than doubled spending on education. Are our children smarter? The Federal government is out of control. When you hear a politician or pundit detailing the horrors of “spending cuts”, please keep in mind they are lying. There will be no cuts until they are forced upon the government by the looming collapse of our economic system.
Year Defense Pensions Health Care Welfare Education
1999 $333 $431 $332 $165 $56
2000 $359 $454 $352 $171 $60
2001 $366 $481 $390 $183 $64
2002 $422 $503 $427 $224 $78
2003 $483 $518 $469 $242 $91
2004 $543 $537 $509 $238 $96
2005 $600 $565 $549 $246 $106
2006 $621 $591 $583 $250 $128
2007 $653 $636 $642 $254 $102
2008 $730 $669 $671 $313 $102
2009 $794 $739 $764 $407 $91
2010 $847 $756 $821 $496 $140
2011F $965 $801 $882 $488 $130
2012B $925 $813 $866 $424 $121
% Increase 177.8% 88.6% 160.8% 157.0% 116.1%
Now the question is what do we do about it? I know my first inclination would be to do what that Iraqi reporter did a few years ago during a Bush press conference in Iraq. I’d love to throw my shoes at Obama and every lying corrupt politician in America, but the momentary feeling of pleasure would be snuffed out in seconds by a hail of bullets from the Department of Homeland Security thugs guarding these traitors to the American republic.
Below is my CHART OF DOOM. Using real world assumptions, the National Debt will reach $25 trillion by 2019. That level of debt would be 130% of a realistic GDP figure. The interest on this level of debt would likely exceed $2 trillion per year, more than the entire Federal spending budget in 2002. This chart will not come to pass. Our economic system will collapse well before we reach a $25 trillion debt level. This is already baked in the cake. There are not enough politicians willing to tell the truth and not enough citizens that want to hear the truth. The result will be default, insolvency, currency collapse, vaporization of wealth, chaos, and pain.
The only way to avert the coming financial catastrophe is to go Egyptian on their asses. Maybe mobs of Americans surrounding the White House, Federal Reserve building and Wall Street bank headquarters would get their attention. It wouldn’t take a majority, but a minority of angry Americans willing to fight for the future of the country. The anger is building. More people are becoming aware. The internet is working its magic, just as it is doing in the Middle East. Those in control can keep pumping out their lies and propaganda, but the truth is plain to see, if you open your eyes.
“It does not take the majority to prevail, but rather an irate, tireless minority, keen on setting brush fire freedom in the minds of men.” - Samuel Adams
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