Ted Kaufman's Friday Hearing Explains Everything That Is Broken With The US Financial System:

Submitted by Tyler Durden on 03/07/2011 22:10 -0500 Zero Hedge:

On Friday, free and efficient market champion Ted Kaufman, previously known for his stern crusade to rid the world of the HFT scourge, and all other market irregularities which unfortunately will stay with us until the next major market crash (and until the disbanding of the SEC following the terminal realization of its corrupt and utter worthlessness), held a hearing on the impact of the TARP on financial stability, no longer in his former position as a senator, but as Chairman of the Congressional TARP oversight panel.

Witness included Simon Johnson, Joseph Stiglitz, Allan Meltzer, William Nelson (Deputy Director of Monetary Affairs, Federal Reserve), Damon Silvers (AFL-CIO Associate General Counsel), and others.

In typical Kaufman fashion, this no-nonsense hearing was one of the most informative and expository of all Wall Street evils to ever take place on the Hill. Which of course is why it received almost no coverage in the media.

Below we present a full transcript of the entire hearing, together with select highlights. The insights proffered by the panelists and the witnesses, while nothing new to those who have carefully followed the generational theft that has been occurring for two and a half years in plain view of everyone and shows no signs of stopping, are truly a must read for virtually every citizen of America and the world: this transcript explains in great detail what absolute crime is, and why it will likely forever go unpunished.

Read the full transcript here:

http://www.zerohedge.com/article/ted-kaufmans-friday-hearing-explains-everything-broken-us-financial-system

The Devil's Christmas Letter - by Charles Hughes Smith

http://stockmarketchartanalyst.blogspot.com/2010/12/devils-christmas-letter-by-charles.html

The Devil pens a Christmas letter...

Through means I am unable to disclose, I have obtained a copy of the Devil's Christmas letter. Yes, Satan too sends a Yule letter, and no, I was not on his mailing list. I think Satan's Holiday cheer should give us all pause.

To my fallen angels Beelzebub, Lucifer and Leviathan, princes of Hell's demons, and to my minions, lackeys, toadies and sycophants on Earth:

As you know, this time of year usually finds me quite despondent, as the Prince of Peace's influence waxes most atrociously around his birthday. But this year I am in fine spirits, nay, let me even declare myself absolutely giddy, for the destruction of the United States of America draws ever nearer.

Though my minions have long sown festering seeds of hate and disharmony in that now-benighted land, only recently have my favored weapons of destruction--leverage, debt, half-truths and endless, preening justifications for greed, sloth, lust, pride, envy, anger and gluttony--have been unleashed to worm their way into the stricken heart of that Republic.

My most treasured hopes of destitution and conflict in the U.S.A. are nearing fruition.

First, my minions in the Federal Reserve--such loyal servants!--and the Federal government have unleashed a veritable orgy of leverage and debt upon the land, spreading ruination under the false guise of prosperity. What a delicious irony, that the fools doomed to eternal damnation in my Empire believe themselves prosperous as they absorb the poison of exponentially rising leverage and debt.

They have made a mockery of the rule of law, openly flouting it by letting financial crimes go not just unpunished but rewarded. The blatant injustice that roams the land like a foul, slobbering beast--there are two sets of laws and two sets of books now, one for the financial Elites and their political toadies, and another one for the tax donkeys beneath them--this will eventually ignite the firestorm I seek.

American extravagance has surpassed even my highest expectations, as purveyors of luxury goods reap record profits, and the childish desire for instant gratification has become the unspoken ruler of the land. Convenience is now worshipped as a god, sitting triumphant beside entitlement, greed and willful ignorance.

Convenience is, as you all know, the name of a peculiarly slick slide into Hell.

One of my favorite sins, gluttony, is running amok, with half of the people groaning under their own weight, sickened and weakened. My loyal minions in the fast-food and packaged food industries have followed my plans to perfection, and my lackeys in the marketing and media have fueled the instant gratification and ignorance which insidiously undermine even the greatest empires.

Pride--oh, how the Americans excel at hubris and pride! The Federal Reserve chairman, bless his doomed soul, has declared himself 100% confident about an economy that is nothing but a confidence game. Oh, what joy to hear his lies spoken with such confidence!

The mere thought of the word greed cause me to chuckle delightedly, as the U.S. excels as a haven for greed without bounds, a greed so boundless that the entire universe would be insufficient to satisfy its bankers, hedge fund managers, high-frequency traders, Imperial factotums and politicians. How happy I am to see their greed grease their way into Hell.

I feel like dancing a jig when I hear the unbridled sense of entitlement which has poisoned the American spirit. Yes, let greed and avarice be cloaked with rationalizations--"I was promised," "It's my right," "I deserve it," "it's in our contract"--it is wondrous indeed how my secret invention, "free money," debilitates once-independent souls.

Anger is now overflowing everywhere, building my empire with every thoughtless word. Politicians rage against each other, the people rage against the politicians, and behind the scenes my servants in the political action committees feed the anger with billions of dollars in campaign donations. How amusing to see the politicos lay claim to noble ideals even as they scramble on their knees to collect the millions tossed at their feet to do my bidding.

Oh yes, my bidding, for their greed, pride and anger are my bidding. By all means, politicians, do my work: give tax breaks to the ultra-wealthy, let financial crimes go unpunished, allow the financial Elites' looting to go unhindered, transfer the wealth earned by the citizens' sweat to the financial Elites when their trillion-dollar bets go bad--fuel the anger which will tear you from power, and tear the country apart.

I laughed with glee when One Beholden To Me announced that he was doing "God's work"--how I love twisting together irony and lies! He fooled no one, of course, for even the most deluded souls know he is doing My Work, not the Lord's, but they are too distracted by games and ginned-up contests to care.

Not caring is doing my work, too, of course.

The nation bleeds itself with unwinnable wars, sacrificing its best youth on the altar of endless war--how can I not rejoice at this orgy of death, destruction and sowing of hate? The feeble liars at the nation's helm print endless sums to fund war and to prop up vile tyrants, but offer nothing for libraries or literacy or the curing of malaria. How can I not rejoice at a nation which finds trillions for war and next to nothing to fight the diseases of the poor residents of former colonies, including that Prince of Disease, ignorance.

As for sloth--that millions are being paid to sit around watching television instead of being productive creates the perfect breeding ground for resentment, malice and envy. How perfect to pay people to sit at home and rot away, with only their discontent and despair for company.

As you know all too well, idle hands end up doing my piecework for free.

It was almost beyond my dreams to find the nation's wealth and politics so dominated by a tiny handful of wealthy financial plutocrats--they are doing my bidding without hindrance, though I see by their troubled sleep that they know where their greed and rationalizations are taking them. To channel the nation's wealth to a few hands--what better way to nurture envy and anger?

If ignorance were treasure, the American political class must be declared wealthier than Midas, for its ignorance has reached a pinnacle I can truly admire. Ensnared by their lust for power, blinded by their greed for fame and perquisites, they look no further than the next election cycle, dooming their nation to division, disharmony and the desolation of permanent conflict over the dwindling productive assets of this once-great nation.

The people cry out to be saved by the government, as if it was a Savior instead of a vast combine chewing through the wealth of the nation, "investing" it in corruption, parasitic financial Elites, military misadventures, Homeland "Security"--ha, isn't that a jewel, as the nation withers from within--and the steady, unyielding oppression of the remaining productive members of society.

When the people cheer "We're number One," I cheer with them, for pride goeth before a fall. When they believe the half-truths, the illusions, the mispresentations, the misdirections and yes, the outright lies of the ruling class repeated by their toadies in the media, I can no longer restrain my delight, for lies and half-truths are my favored weapons of destruction. The leaders are themselves leaderless, blank, hollowed-out souls doing the bidding of their parasitic masters, focused only on keeping the corrupt and venal status quo together for a few more months, never looking out ten years.

I delight in that shortsightedness, that abject fear of change and transformation, that clinging to failure and pride, that refusal to face reality.

For the U.S.A. is now an Empire of Debt and Lies, its fraudulent financial system built on misrepresentations of risk and value, and its "economy of confidence" a con game based on illusory wealth, parasitic skimming, government gaming and tax donkeys paying for their Financial Masters' idiotic mistakes.

This adolescent desire to believe the lies, because in believing the lies then nothing need change--this might be my most powerful destructive tool.

A hunger for fantasy and illusion, a fear of adaptation, a childish demand for instant gratification--these are forces I can rely on to lead the once-great country to absolute ruin.

And here is the beautifully evil part, my minions--no external enemy is required. The Americans are destroying themselves with their reliance on leverage, debt, denial, half-truths and overflowing servings of the Seven Deadly Sins, all of which they have elevated to "assets" in their hopelessly twisted values. To be supremely unproductive, a churner of lies and financial trickery, is now the most rewarded and admired state in America.

The spiritual rot is now so deep and pervasive that the people no longer even recognize the decay --they have been lulled into a false belief that this culture of fraud, embezzlement, manipulations, propaganda and parasitic financial Elites has always held sway. This is precisely how a people act when they have lost their way, spiritually and morally: they elevate sins to virtues, and forget the lessons of their past.

And of course everyone claiming that there is no spiritual vacuum sucking the nation dry, that the status quo is simply "business as usual"--they are doing my work, too, for habituating to all that is corrupt and reprehensible, all that is lacking in integrity and honesty, this is doing my work most admirably.

Americans no longer hate me, they hate sacrifice, with a passion that enlivens my enthusiasm for their self-destruction.

How can I not be pleased this season? At long last, the destruction of the United States by its own citizens is close at hand. Give me two years, minions, no more than four, and I shall insure they will finally begin reaping what they have sown. Ignorance, my poor dear Americans, will not save you, nor will your endless parade of excuses, justifications and rationalizations. Indeed, they are my weapons which you drive deeper into your nation's heart with every lie, every excuse, every frantic justification for your own entitlement.

I await 2011 with high expectations.

Most sincerely yours,

Satan

http://www.oftwominds.com/blogdec10/Devils-Christmas-Letter12-10.html

The Folly Of Investing Today...

http://stockmarketchartanalyst.blogspot.com/

by Karl Denninger - Posted 2010-09-21 20:45

Investing is all about trying to determine a longer-term direction for the market such that risk and reward align in some meaningful way.

Yesterday, on Blogtalk, I stated that I was pulling all of my long-term investments that were market-related, and for an indeterminate time forward I would be only short-term trading this market.

That deserves an explanation, and toward this end, I would like to present the following 10 year weekly chart.



The regular "trace" is the S&P 500 price. The white trace is the 10 year Treasury yield as a comparative.

You need to pay attention to this.

"This time it's different" is often said.

It is almost always wrong, and believing in it will almost always make you broke.

Here's reality folks. Over the previous 10 years the TNX has never declined meaningfully without the S&P 500 following it, and declining to near or below it on a comparative basis.

The TNX almost always leads on declines too, sometimes by as much as six months.

Well, it's been six months.

In 2007, the TNX peaked in late June, after which it began a dive. The market peaked in the middle of October of that year at 1576. The decline essentially reached the comparative bottom.

Now the TNX has peaked the first week of April of this year, and is quite close to the March 2009 lows. Yet the S&P, after it took a swoon, has recovered.

Exactly as it did in 2007.

We all know what came next.

The same thing happened in 2000, when the market peaked and fell apart. Again, the TNX led. It in fact peaked almost exactly at the end of the year in 1999. Three months later "it" began.

Continued at: http://market-ticker.org/akcs-www?post=167162

Stocks Surge To Celebrate Unprecedented 19th Sequential Equity Outflow - $10 Billion In September Redemptions:

http://stockmarketchartanalyst.blogspot.com/

It is beyond a joke now:

ICI's latest data discloses that in the week ended September 8, domestic funds saw outflows of $2.2 billion, following last week's massive $7.7 billion. And yes, ETFs experienced outflows as well.

So far September has experienced nearly $10 billion in outflows, even as the market has ramped by over 6%. Who is buying this $hit? Just ask The New York Fed and Citadel: they may have a few pointers (wink wink).

This is the 19th sequential outflow from US stocks, and amounts to $65 billion in redemptions for the year.

With the market pretty much unchanged YTD, it means that mutual funds can not resort to capital appreciation as a substitute to outflows, and most are on their last breath (Janus: blink twice if you are still alive please).

The kicker: the S&P is at the level it was when the outflows began back during the flash crash.

If that doesn't restore all your confidence that Uncle Sam will be so good at managing the market (just like he has done with everything else), nothing else will. Throw in a little HFT, a little subpennying, a little Flash trading, a little DMA trading, a little quote stuffing, a little hedge fund clubbing, a little specialist front running, a little daily flash crash in big caps like Nucor Steel, and you can see why next week we will most certainly have our first inflow in 20 weeks. Or not.

It doesn't matter. Nobody that is made of carbon, or who doesn't already have direct access to the Fed for zero cost funding, is trading stocks anymore.





(If you are having a hard time seeing these two charts, click on the link below, and then click on the charts in the original article to expand them to full-size...)

http://www.zerohedge.com/article/stocks-surge-celebreate-unprecedented-19th-sequential-equity-outflow-10-billion-september-re

NEWS - From "Alternative" Sources - NOT the Mainstream Propaganda Machine...

http://stockmarketchartanalyst.blogspot.com/

Here are a number of articles I read this morning, from my favorite "alternative" news sources:

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Shadow Government Statistics:
Analysis Behind and Beyond Government Economic Reporting

http://www.shadowstats.com/

If you've watched my last few updates on the market, you'll notice that I'm quite cynical when it comes to any economic report put out by the government (and I'm also very skeptical that earnings reports aren't continually being fudged. Just look at the recent SEC case against Dell as an example). This site gives you the REAL scoop when it comes to the government's reports of economic data...

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Show Me the Recovery:
While second-quarter sales increases are encouraging, weak cash generation is worrisome.

http://www.cfo.com/article.cfm/14522495

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Claims of Recovery But Results Nowhere To Be Found:
A weekly excerpt from the subscription issue of The International Forecaster, taken from Bob Chapman's weekly publication.

http://theinternationalforecaster.com/International_Forecaster_Weekly/Claims_of_Recovery_But_Results_Nowhere_To_Be_Found

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Economists Cut U.S. Growth Forecast - AGAIN!:
Projected U.S. economic growth for the rest of this year and next was revised down for a third month in a row by a panel of about 50 economists.

http://finance.yahoo.com/news/Economists-cut-US-growth-rb-1119878296.html?x=0

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Hell Yes It’s Class Warfare! Part 1:
There is an intentional misconception out there in the market place of talking points and political discussion – it is that liberals are waging class warfare on the wealthy.

http://cons-lie.com/2010/09/07/hell-yes-its-class-warfare-part-1/

Hell Yes It’s Class Warfare! Part 2:

http://cons-lie.com/2010/09/08/hell-yes-its-class-warfare-part-2/

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The Wholly Fallible Ben Bernanke:
Despite three crucial errors at the Federal Reserve, its chairman is still revered as if he is the pope – while we pay the price.

http://www.guardian.co.uk/commentisfree/cifamerica/2010/sep/08/ben-bernanke-federal-reserve

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Rome is Burning:
There is a critical point that I fear the commentariat is just not getting.

http://modeledbehavior.com/2010/09/07/rome-is-burning/

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In The Headlights:
The toils of summer are bygone now. The days grow shorter and America stands in the darkling road of its own prospects like a dumb animal frozen in the blinding light of approaching fury.

http://www.kunstler.com/blog/2010/09/in-the-headlights.html#more

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Death By Globalism:
Have economists made themselves irrelevant? If you have any doubts, have a look at the current issue of themagazine, International Economy, a slick publication endorsed by former Federal Reserve chairmen Paul Volcker and Alan Greenspan, by Jean-Claude Trichet, president of the European Central Bank, by former Secretary of State George Shultz, and by the New York Times and Washington Post, both of which declare the magazine to be “ahead of the curve.”

http://www.counterpunch.org/roberts09012010.html

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And finally, the winner of the "Doom and Gloom Award" goes to this piece, which I found to be a fascinating read...

Doomsdayers Not Cynical Enough:
[Like your editor, Rick’s Picks forum regular Wayne Razzi (aka “Red Will”) is a veteran floor-trader who grew up in South Jersey. When I asked him if he would like to contribute a guest commentary, I was not expecting the provocative tour de force that unfolds, step by step, below. In the essay, Will asserts nothing less that that the impending collapse of our economic system was meticulously engineered by financial and political sociopaths. Let me attest that his is not some whack-o conspiracy theory; rather, it is the closely-reasoned argument of a highly intelligent person who values truth sufficiently to have searched for it, in the form of an answer to a profoundly disturbing question, for many years. Judge for yourself whether his conclusions tally with your own thoughts as to why the American Dream is about to go bust. RA]

http://news.goldseek.com/RickAckerman/1284012060.php

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That's it for today...
I hope you enjoy reading these articles as much as I did!

Happy Trading!...
the zigzagman

A Plea for Freedom:

http://www.infowars.com/a-plea-for-freedom/

THIS IS A MUST READ!!!...IMO

It's one of the best articles I've read all year...

Nothing Was Sacred: The Theft of the American Dream...

http://jessescrossroadscafe.blogspot.com/2010/07/phil-it-is-end-of-world-as-we-know-it.html

Posted by Jesse at 1:07 PM - July 17, 2010

America must decide what type of country it wishes to be, and then conform public and foreign policy to those ends, and not the other way around. Politicians have no right to subjugate the constitutional process of government to any foreign organization.

Secrecy, except in very select military matters, is repugnant to the health of a democratic government, and is almost always a means to conceal a fraud. Corporations are not people, and do not have the rights of individuals as such.

Banks are utilities for the rational allocation of capital created by savings, and as utilities deserve special protections. All else is speculation and gambling. In banking, simpler and more stable is better. Low cost rules, as excessive financialisation is a pernicious tax on the real economy.

Financial speculation, as opposed to entrepreneurial investment, creates little value, serving largely to transfer wealth from the many to the few, often by exploiting the weak, and corrupting the law. It does serve to identify and correct market inefficiencies, but this benefit is vastly overrated, because those are quickly eliminated. As such it should be allowed, but tightly regulated and highly taxed as a form of gambling.

When the oligarchy's enablers, hired help is the politer word, and assorted useful idiots ask, "But how then will we do this or that?" ask them back, "How did we do it twenty years ago?" Before the financial revolution and the descent into a bubble economy and a secretive and largely corrupted government with a GDP whose primary product is fraud.

Other nations, such as China, are surely acting for their own interests, and in many cases the interests of their people, much more diligently and effectively than the kleptocrats who are in power in Washington and New York these days. How then could we possibly subvert the Constitution and the welfare of the people to unelected foreign organizations? If this requires a greater reliance on self-sufficiency, then so be it. America is large enough to see to its own, as the others see to theirs.

Economics will not provide any answers in and of itself. Economics without an a priori policy and morality, without a guiding principle like the Constitution, is a heartless monster easily manipulated to say whatever one wishes it to say, if they are willing to pay enough economists to say it. Its reputation as a science is greatly exaggerated.

"Eliminating government" is a trap put forward by the plutocrats for those unable to reason except by prejudice, as they desire to exercise their power unimpeded by the rule of law. Once you knock down the protections and the safeguards in the name of reform, the wolves will turn on the public in an orgy of looting and exploitation. This is an old story, and sadly it often works.

Efficient markets hypothesis is almost as great a hoax as the benefits of globalization and 'free trade' have been to the American people as a whole. These things are promoted by the few, at the expense of the gullible many, for their own personal benefit.

Hatred, mean spiritedness, and resentment of the weak, the old, the different, is a trick played on the masses by oligarchs and would be dictators from time immemorial. They play to the darker side of the crowd. It is a trap, and the means to the demise of freedom. And these tricksters play it well, because deceit is their specialty, their stock in trade.

"First they ignore you, then they ridicule you, then they fight you, then you win." - Mohandas K. Gandhi

So it will not be easy, and it is a mistake to think that it will be. But what greater task can we set ourselves to, other than justice and freedom for ourselves and children?


It’s the End of the World As We Know It:

By Phil of Phil’s Stock World

What are 308,367,109 Americans supposed to do?



First of all, despite clamping down on immigration, our population grew by 2.6M people last year. Unfortunately, not only did we not create jobs for those 2.6M new people but we lost about 4M jobs so what are these new people going to do? Not only that, but nobody is talking about the another major job issue: People aren’t retiring! They can’t afford to because the economy is bad – that means there are even less job openings… The pimply faced kid can’t get a job delivering pizza because his grandpa’s doing it.

There are some brilliant pundits who believe cutting retirement benefits will fix our economy. How will that work exactly? Pay old people less money, don’t cover their medical care and what happens? Then they need money. If they need money, they need to work and if they need to work they increase the supply of labor, which reduces wages and leaves all 308,367,109 of us with less money. Oh sorry, not ALL 308,367,109 – just 308,337,109 – the top 30,000 (0.01%) own the business the other 308,337,109 work at and they will be raking it in because labor is roughly 1/3 of the cost of doing business in America and our great and powerful capitalists have already cut their manufacturing costs by shipping all those jobs overseas, where they pay as little as $1 a day for a human life so now, in order to increase their profits (because profits MUST be increased) they have now turned inward to see what they can shave off in America.



How does one decrease the cost of labor in America?

Well first, you have to bust the unions. Check. Then you have to create a pressing need for people to work – perhaps give them easy access to credit and then get them to go so deeply into debt that they will have to work until they die to pay them off. Check. It also helps if you push up the cost of living by manipulating commodity prices. Check. Then, take away people’s retirement savings. Check. Lower interest rates to make savings futile and interest income inadequate. Check. And finally, threaten to take away the 12% a year that people have been saving for retirement by labeling Social Security an “entitlement” program – as if it wasn’t money Americans worked their whole lives to save and gave to the government in good faith. Check.

As Allen Smith says:

“Ronald Reagan and Alan Greenspan pulled off one of the greatest frauds ever perpetrated against the American people in the history of this great nation, and the underlying scam is still alive and well, more than a quarter century later. It represents the very foundation upon which the economic malpractice that led the nation to the great economic collapse of 2008 was built. Essentially, Reagan switched the federal government from what he critically called, a “tax and spend” policy, to a “borrow and spend” policy, where the government continued its heavy spending, but used borrowed money instead of tax revenue to pay the bills. The results were catastrophic. Although it had taken the United States more than 200 years to accumulate the first $1 trillion of national debt, it took only five years under Reagan to add the second one trillion dollars to the debt. By the end of the 12 years of the Reagan-Bush administrations, the national debt had quadrupled to $4 trillion!“

Both Reagan and Greenspan saw big government as an evil, and they saw big business as a virtue. They both had despised the progressive policies of Roosevelt, Kennedy and Johnson, and they wanted to turn back the pages of time. They came up with the perfect strategy for the redistribution of income and wealth from the working class to the rich. If Reagan had campaigned for the presidency by promising big tax cuts for the rich and pledging to make up for the lost revenue by imposing substantial tax increases on the working class, he would probably not have been elected. But that is exactly what Reagan did, with the help of Alan Greenspan. Consider the following sequence of events:

1) President Reagan appointed Greenspan as chairman of the 1982 National Commission on Social Security Reform (aka The Greenspan Commission)

2) The Greenspan Commission recommended a major payroll tax hike to generate Social Security surpluses for the next 30 years, in order to build up a large reserve in the trust fund that could be drawn down during the years after Social Security began running deficits.

3) The 1983 Social Security amendments enacted hefty increases in the payroll tax in order to generate large future surpluses.

4) As soon as the first surpluses began to role in, in 1985, the money was put into the general revenue fund and spent on other government programs. None of the surplus was saved or invested in anything. The surplus Social Security revenue, that was paid by working Americans, was used to replace the lost revenue from Reagan’s big income tax cuts that went primarily to the rich.

5) In 1987, President Reagan nominated Greenspan as the successor to Paul Volcker as chairman of the Federal Reserve Board. Greenspan continued as Fed Chairman until January 31, 2006. (One can only speculate on whether the coveted Fed Chairmanship represented, at least in part, a payback for Greenspan’s role in initiating the Social Security surplus revenue.)

6) In 1990, Senator Daniel Patrick Moynihan of New York, a member of the Greenspan Commission, and one of the strongest advocates the 1983 legislation, became outraged when he learned that first Reagan, and then President George H.W. Bush used the surplus Social Security revenue to pay for other government programs instead of saving and investing it for the baby boomers. Moynihan locked horns with President Bush and proposed repealing the 1983 payroll tax hike. Moynihan’s view was that if the government could not keep its hands out of the Social Security cookie jar, the cookie jar should be emptied, so there would be no surplus Social Security revenue for the government to loot. President Bush would have no part of repealing the payroll tax hike. The “read-my-lips-no-new-taxes” president was not about to give up his huge slush fund.

The practice of using every dollar of the surplus Social Security revenue for general government spending continues to this day. The 1983 payroll tax hike has generated approximately $2.5 trillion in surplus Social Security revenue which is supposed to be in the trust fund for use in paying for the retirement benefits of the baby boomers. But the trust fund is empty! It contains no real assets. As a result, the government will soon be unable to pay full benefits without a tax increase. Money can be spent or it can be saved. But you can’t do both. Absolutely none of the $2.5 trillion was saved or invested in anything.

That is how the largest theft in the history of the world was carried out.

300M people worked and saved their whole lives to set aside $2.5Tn into a retirement system that, if it were paying a fair compounding rate of 5% interest over 40 years of labor (assuming an even $62Bn a year was contributed), would be worth $8.4Tn today – enough money to give 100M workers $84,000 each in cash!

The looting of FICA hid the massive deficits of the last 30 years in the Unified Budget. Presidents and Congresses were able to reduce taxes on the wealthiest Americans without complaint from the deficit hawks, because they benefited. The money went directly from the pockets of average Americans into the pockets of the rich.



Now that it is time to repay those special bonds in the Trust Fund, we are inundated in opinion pieces in the leading newspapers and magazines complaining about Social Security and its horrible impact on the budget. Government finances have been trashed by foolish tax cuts, unpaid wars, tax loopholes for corporations and the very wealthy, the failures of economists, the greedy search for greater returns in financial markets and the collapse of moral values in giant businesses, but Social Security is supposed to be the problem that needs fixing…

Social Security is not “broken“–the money is in the Trust Fund. But the people who manage the finances of the United States don’t want to repay the bonds held by the Trust Fund. They want to default selectively against average people, their fellow citizens, who paid their taxes expecting to be protected in their retirement. Refusing to repay the $2.54 trillion dollars in bonds held by the Social Security Trust makes the US look like Greece, just another nation unable to govern itself coherently. The people who manage US finances come from the financial elites, the best that Wall Street and enormous corporations have to offer. Selective default exposes them as charlatans. The claims of the economics profession to expertise are puffery. Their theories about the benefits of tax cuts are proven false. Their mathematical proofs about free markets collapse in the real world.



So, what is this all about? It’s about forcing 5M people a year who reach the age 65 to remain in the work-force. The top 0.01% have already taken your money, they have already put you in debt, they have already bankrupted the government as well so it has no choice but to do their bidding. Now the top 0.01% want to make even MORE profits by paying American workers even LESS money. If they raise the retirement age to 70 to “balance” Social Security – that will guarantee that another 25M people remain in the workforce (less the ones that drop dead on the job – saving the bother of paying them severance).

What’s next? Is it fair to say that children can’t work in a struggling family business? Isn’t it to everybody’s benefit that kids should be allowed to help out at the family store? That will be the next step towards turning America into a 3rd World country. The seemingly innocent concept of “letting” kids work will deprive another 5M people of paying jobs – throwing them out into the labor force as well and driving labor costs down even further.

There’s an expression that goes “give them an inch and they’ll take a yard.” The top 0.01% of this country have taken their inches and they are foreclosing on the yards and they will come for the rest of your stuff next. If you think you are “safe” from the looting of America, it is only because they haven’t gotten around to you yet. As I explained in “America is 234 Years Old Today – Is It Finished?” – the game is rigged very much like a poker tournament. The people at the top table don’t care how well you do wiping out your fellow players at the lower tables, they know they will get you eventually and your efforts to scoop up a pile of cash for yourself simply makes their job easier when they are ready to take it from you.



The average American is $634,000 in debt thanks to the efforts that Reagan and Greenspan put in motion 30 years ago and the richer you are, the more of that money is going to come out of your hide eventually and the more you lobby to make sure that the “rich” are not taxed unfairly, the less fair it will be to you because, no matter how rich you THINK you are, unless your income is measured in MILLIONS PER MONTH, you aren’t even close to the top 30,000.

No progressive tax? That means that people and corporations who make $1M PER DAY should pay no more tax than a person making $1M per year, right? Well that means that the $2.5M debt that your family of four owes will be paid by you over 2.5 years of labor while the $2.5M owed by your Billionaire competitor will be paid over a long weekend, after which he can turn his attention back to crushing your business by creating cheaper goods – maintaining profit margins by driving down local labor costs and outsourcing the rest.

It’s a new world, America, and you’d better get used to it – we were sold down the river on a slow boat to China long ago and we’re only just beginning to feel the first effects of waves that wash back to our own shores. The people who own the media don’t want CHANGE. That’s why you never hear this stuff in the MSM – things are going exactly according to plan and the old money crowd is playing a long, patient game and they already have most of the chips – the last thing they want is people questioning the system…

http://www.philstockworld.com/2010/07/17/its-the-end-of-the-world-as-we-know-it/

Fed Strikes More Cautious Tone On Recovery, Noting Risks Overseas; Holds Rates At Record Lows:

http://finance.yahoo.com/news/Fed-strikes-more-cautious-apf-2953770810.html?x=0&sec=topStories&pos=4&asset=&ccode=

Jeannine Aversa, AP Economics Writer, On Wednesday June 23, 2010, 5:35 pm EDT

WASHINGTON (AP) -- The Federal Reserve struck a more cautious tone about the strength of the U.S. economic recovery, indicating Europe's debt crisis poses a risk to it.

Wrapping up a two-day meeting Wednesday, the Fed in a 9-1 decision retained its pledge to hold rates at record-low levels for an "extended period." Doing so is intended to energize the rebound.

The Fed expressed confidence that the recovery will stay intact despite threats from abroad and at home. But Chairman Ben Bernanke and his colleagues offered a slightly more reserved outlook than the last time they convened.

The Fed said the economic recovery is "proceeding." That was a bit less upbeat than the view at the April meeting when the Fed said economic activity continued to "strengthen." The Fed also said the labor market is "improving gradually."

While not mentioning Europe by name, the Fed said "financial conditions have become less supportive of economic growth ... largely reflecting developments abroad."

The fragile economic picture increases pressure on President Barack Obama and lawmakers in Washington. Near-double-digit unemployment is certain to factor into the way Americans vote in congressional midterm elections this fall. If it fails to come down after that, the jobless rate could play a significant role in the 2012 presidential election.

At the same time, the president has limited options. Congress has run into opposition on extending unemployment benefits and providing more aid to cash-strapped states. While some liberal Democrats maintain that government spending is the best way to stimulate the economy, a growing number of moderate and conservative Democrats share Republican concerns that the government's exploding budget deficits pose a greater risk.

The subtle shift in the Fed's outlook drew little reaction from stock investors. The Dow Jones industrial average was essentially flat after announcement.

The decision to keep rates at record lows boosted demand for safe-haven assets like Treasurys, sending interest rates lower. The yield on the 10-year Treasury note, a widely used benchmark for mortgages and other consumer loans, fell to 3.13 percent from 3.25 percent late Tuesday. The 10-year note hasn't closed at that level in more than a year. Rates had already fallen earlier in the day after the government said new-home sales dropped 33 percent last month.

Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, for the fourth straight meeting was the sole member to dissent from the Fed's decision to retain the "extended period" pledge.

Hoenig fears keeping rates too low for too long could lead to excessive risk-taking by investors and feed new speculative bubbles in the prices of stocks, bonds and commodities.

He's also expressed concern that low rates could eventually unleash inflation. And Hoenig said he worries that keeping the "extended period" pledge will limit the Fed's stated "flexibility" to start modestly bumping up rates.

Given the risks to the recovery, the Fed left a key bank lending rate at between zero and 0.25 percent. The rate has remained at that level since December 2008.

That means rates on certain credit cards, home equity loans, some adjustable-rate mortgages and other consumer loans will remain low. Commercial banks' prime lending rate would stay at about 3.25 percent, the lowest point in decades.

Low rates serve borrowers who qualify for loans and are willing to take on more debt. But they hurt savers. Low rates are especially hard on people living on fixed incomes who are earning scant returns on their savings.

Still, if the rates spur Americans to spend more, they would help invigorate the economy. That's why the Fed maintained its pledge, in place for more than a year, to keep rates at record lows for an "extended period."

Because the fragile recovery is more vulnerable to shocks, from home and overseas, economists increasingly say the Fed probably won't start boosting rates until next year -- or possibly into 2012. That's a change from a few months ago, when economists thought the Fed would begin raising rates at the end of this year.

"Increased market volatility and uncertainty on the economic outlook may cause the Fed to delay raising rates until well into next year," said Kurt Karl, chief U.S. economist at Swiss Re.

The Fed has leeway to hold rates at record lows because inflation is essentially nonexistent. In fact, the Fed noted that the price of energy and other commodities have dropped in recent months, and that underlying inflation has "trended lower." That seems to suggest that Fed policymakers are a bit more concerned about the remote prospect of deflation, versus inflation.

T.J. Marta, a market strategist at Marta on the Markets, called the Fed's policy statement "more dovish" and reinforces the belief that the central bank won't need to start boosting rates any time soon to fend off inflationary pressures.

After suffering the worst recession since the 1930s, the economy has been growing again for nearly a year. Manufacturing activity is picking up. Businesses are spending more. And Bernanke has expressed confidence that the nation won't fall back into a "double dip" recession.

Still, the strength of the recovery could be affected by the European debt crisis, an edgy Wall Street, cautious consumers, a fragile housing market and high unemployment.

If the U.S. recovery were to flash signs of a relapse, the Fed would likely take other steps to get it back on course. The Fed has left the door open to resuming purchases of mortgage securities, a move that would drive down mortgage rates and bolster the housing market. It ended a $1.25 trillion mortgage-buying program in March.

Volcker: Reconsidering Basic Tenets of Financial Theory:

http://stockmarketchartanalyst.blogspot.com/2010/06/volcker-reconsidering-basic-tenets-of.html

Today’s must read media piece comes from former Fed Chair Paul Volcker, in the NY Review of Books:

“Some five years ago, at a conference of the Stanford Institute for Economic Policy Research, I lamented that “the growing imbalances, disequilibria, risks” were giving rise to “circumstances as dangerous and intractable” as any I could recall—intractable not just because of the combination of complicated issues, but because there seemed to be “so little willingness or capacity to do much about it.”

That is merely the intro. It takes a few paragraphs for Paul to work up a good head of steam — the man who broke the back of inflation isn’t holding back:

“Has the contribution of the modern world of finance to economic growth become so critical as to support remuneration to its participants beyond any earlier experience and expectations? Does the past profitability of and the value added by the financial industry really now justify profits amounting to as much as 35 to 40 percent of all profits by all US corporations? Can the truly enormous rise in the use of derivatives, complicated options, and highly structured financial instruments really have made a parallel contribution to economic efficiency? If so, does analysis of economic growth and productivity over the past decade or so indicate visible acceleration of growth or benefits flowing down to the average American worker who even before the crisis had enjoyed no increase in real income?

There was one great growth industry. Private debt relative to GDP nearly tripled in thirty years. Credit default swaps, invented little more than a decade ago, soared at their peak to a $60 trillion market, exceeding by a large multiple the amount of the underlying credits potentially hedged against default. Add to those specifics the opacity that accompanied the enormous complexity of such transactions.

The nature and depth of the financial crisis is forcing us to reconsider some of the basic tenets of financial theory. To my way of thinking, that is both necessary and promising in pointing toward useful reform.”

Nice to see Paul is not giving up his fight to get the financial sector back on a leash...



http://www.ritholtz.com/blog/2010/06/volcker-2/

Source:

‘The Time We Have Is Growing Short' by Paul Volcker
NY Review of Books, June 24, 2010
http://www.nybooks.com/articles/archives/2010/jun/24/time-we-have-growing-short/

Why U.S. Debt Matters to You:

http://money.cnn.com/2010/06/03/news/economy/U.S._debt_impact/index.htm

By Jeanne Sahadi, Senior Writer June 3, 2010: 11:38 AM ET

NEW YORK (CNNMoney.com) -- Letting U.S. debt grow unabated is often framed as an unforgivable burden to heap on one's grandchildren.

But there are plenty of reasons today's parents might be concerned for themselves and their kids.

If Congress doesn't craft a plan to address long-term fiscal shortfalls after the economy recovers, potential problems could arise sooner rather than later, debt experts say.

Slower economic growth: After examining data from dozens of countries over the past two centuries, economists Carmen Reinhart and Kenneth Rogoff found a connection between high debt and reduced economic growth. Specifically, they found that when a nation's gross debt reaches 90% of its economy, it often loses about one percentage point of growth a year.

U.S. gross debt -- currently $13 trillion -- will hit the 90% threshold this year. Gross debt includes money owed to those who hold U.S. bonds and money owed to government trust funds such as Social Security.

Reinhart has said the relationship between high debt and low growth is "self-feeding." Low growth ravishes government revenue and increases the need to borrow. More borrowing builds debt. Higher debt increases pressure to tighten fiscal policies in order to reduce the risk that investors lose confidence in the country. But tighter policies can slow economic growth.

One percentage point lower growth may not seem huge. But it's equal to roughly a third of the average annual GDP forecast over the next decade.

And slower growth can reduce the number of jobs created, which in turn can hold down household incomes.

High interest payments: Interest rates are still very low and may continue to be as the debt crisis in Europe makes the United States a more attractive safe haven for investors.

That means the government can borrow on the cheap right now. But rates will rise as the world economy recovers. By 2020, annual interest owed on U.S. debt will approach $1 trillion, or roughly 21% of projected federal revenue for that year, according to Congressional Budget Office estimates.

Interest rates may rise further than expected if credit rating agencies or investors start to doubt U.S. resolve to rein in the growth in debt. And that would jack up the cost of borrowing for businesses and consumers.

Ironically, some debt experts would almost prefer that rates rise so there will be more urgency to deal with the debt situation. It might hurt, but not as much as if rates stay very low for a long time -- planting the seeds for the next credit bubble and bust when U.S. debt levels are that much higher.

Less government support: The more debt the government accrues, the more it will pay in interest and the less it will have to spend on the basic services Americans expect from their government.

Spending for everything from education to infrastructure and defense could be compromised. And, many argue, not being able to make strategic investments in these areas can weaken the country competitively.

Also, the government will be hamstrung in responding to emergencies such as natural or man-made disasters, terrorist attacks or future economic downturns.

Inflation: There don't appear to be any official signs of inflation brewing today. But throughout U.S. history, high levels of debt have usually brought high rates of inflation, Reinhart and Rogoff found.

Some economists -- including Kansas City Federal Reserve Bank President Thomas Hoenig -- have said they are concerned about what could happen if the United States faces a debt crisis. In such a case, the Federal Reserve may cave to political pressure to let inflation rise, which reduces the real value of the country's debt but also devalues people's savings and income.

Harsh choices: No one can say when or even if a debt crisis will occur. But lawmakers will tempt fate if they wait too long to address the imbalances on the U.S. balance sheet, fiscal experts say.

Fiscal experts believe it's entirely possible that, absent action, the United States would experience a debt crisis within the next 10 to 20 years.

"Most believe it would happen much sooner than 20 years," said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget. Many believe it could happen within the next five to 10 years, she said.

And waiting too long would force lawmakers to make much more draconian and abrupt changes than they would otherwise.

Experts are increasingly convinced that Congress won't act until a true crisis is on the U.S. doorstep -- for two reasons. The first is the sharp partisan divide. The second is that no politician likes to run on promises to implement difficult and unpopular measures.

So until there's sufficient public support for debt reduction, don't expect to see much political will for it.

"Like the proverbial frog that fails to jump out of the soup pot as the temperature slowly rises, Americans seem terrifyingly unwilling to act until the pain of debt can no longer be ignored," Syracuse University professor Len Burman wrote in a recent essay. "As the frog learns in its final moments, by then, it's too late."

Slouching Toward Despotism:

http://jessescrossroadscafe.blogspot.com/2010/05/guest-post-slouching-towards-despotism.html

by Keith Hazelton May 27, 2010

Benjamin Franklin, when asked at the conclusion of the Constitutional Convention in 1787 what that assembly had created, purportedly responded, “A republic, if you can keep it,” which seems likely given his remarks to Convention members on that September day immediately prior to their vote on the proposed Constitution in its original form.

Often, but on far more occasions in the last three years, we are reminded of a portion of those remarks. Dr. Franklin, given his age (81) and health, asked to have his commentary read to delegates preceding what he hoped would be a unanimous vote in favor of a nonetheless flawed agreement.

“In these sentiments, Sir, I agree to this Constitution with all its faults, if they are such; because I think a general Government necessary for us, and there is no form of Government but what may be a blessing to the people if well administered, and believe farther that this is likely to be well administered for a course of years, (but) can only end in Despotism, as other forms have done before it, when the people shall become so corrupted as to need despotic Government, being incapable of any other.”

And the question we keep pondering is, “Are we there yet?” Are we merely slouching toward despotism, or have we arrived? Are we already so corrupt so as to need despotic government, what with Vampire Squids and corporate/union-bought elections and Congressional bystanders and regulatory capture and Systemically Important Too Big To Fail and Gulf of Mexico oil well disasters?

(Despotism, by the way, describes a form of government by which a single entity rules with absolute and unlimited power, and may be expressed by an individual as an autocracy or through a group as an oligarchy according to Wikipedia, the world's leading source of made-up information, which is good enough for us.)

In previous posts we have observed the growing and discernible disconnect between several types of government-reported economic data such as Retail Sales and actual state sales tax collections, and the Employment Situation and withholding tax collections. Others also have made solid cases for these disconnects between statistical theory and economic reality and it occurs to me that, far from being isolated or random events, they are evidence of much more disconcerting forces at work.

Fudging on unemployment numbers or "rounding up" retail sales reports may seem like minor infractions, and many of these government data reports have been manipulated for years, maybe half a century, but they represent a pattern of conscious, calculated design of "don't worry, be happy, the government's in charge, nothing to see here, so move along."

The Bureau of Labor Statistics (BLS), for example, estimates who is working and who is not, but conveniently excludes millions of people from its composition of the unemployment rate who are not working but neither deeming them “unemployed” because they are “marginally attached” to the workforce or are “discouraged” by a lack of job prospects and no longer are looking for employment (2.3 million as of March 2010 plus another 3.4 million “persons who currently want a job,” who also aren’t counted as unemployed).

Side note: You are well aware, of course, the Social Security Administration probably could tell us monthly almost exactly how many people really are working, not working, working part time, self-employed, and so on based on its receipts of tax withholdings from employers. It is beyond the pale to imagine SSA could not furnish a version of the monthly Employment Situation that would be far more reliable by orders of magnitude than the guesses of the BLS.

As to why government statistical agencies may be reporting "happy" numbers, well, you know the answer to that...government statistics are lying's fifth circle of hell, just a shade better than Campaign Promises.

How about the major changes to the Producer Price Index and the Consumer Price Index which were made in the 1980s and 1990s to greatly reduce reported inflation numbers as a means of containing the cost of living adjustments (COLAs) for Social Security recipients, as John Williams at ShadowStats extensively has reported for years?

Or the March 2010 Monthly Treasury Statement, which understated the true government deficit last month by including a $117 billion collection described as “proprietary receipts from the public” by the Treasury, likely TARP repayments but not defined as such. Or the December 2009 Monthly Treasury Statement in which $45 billion extracted from the nation’s banks as a 13-quarter advance FDIC premium also was shown as a “negative outlay” which creates a significant understatement of the true FY2010 deficit picture (so far, $162 billion this fiscal year, which will understate our true deficit by about 10 percent).

Or the “New” General Motors wasting millions of (tax) dollars for print and television ads to promote a fictitious narrative that it has “repaid” government loans of $8.1 billion (to the U.S and Canada) “plus interest” five years early when in fact SIGTARP, the Special Inspector General of the Troubled Asset Relief Plan Neil Barofsky, told Congress and Fox News that GM did no such thing, that the loan “repayment” did not come the old fashioned way from sales and earnings but from a "cash advance" on another TARP facility which both governments will count as additions to their already significant equity positions. Nothing in those ads mentions the many tens of billions of taxpayer dollars borrowed from China which flowed into General Motors and Chrysler pre-bankruptcy which never will be repaid.

And now the New GM wants to create another automobile financing company, or buy back its former GMAC/Ally unit which itself has received nearly $20 billion of government Too Big To Fail largesse, so it may become even more profitable by returning to sub-prime auto and everything-else lending and have a happy IPO later this year, because as everyone knows, including the New GM's management, there's precious little profit in building cars no one wants and few can afford. "As a dog returns to its vomit, so a fool repeats his folly," (Proverbs 26:11) as Jesse's Cafe Americain recently observed.

How about the seeming inability to legislate any significant financial reform in the wake of the worst economic crisis in 80 years, a crisis which, mind you, needed fewer than eight years to erupt once the last shred of restraint – Glass-Steagall – was forcibly removed at the end of 1999 by those who, coincidentally (paging Messrs. Rubin and Summers), have profited so handsomely from its demise.

The Banking Act of 1933 – Glass-Steagall – was a wonder of simplicity in a simpler era. It set forth in a mere 37 pages of text the safeguards necessary to separate commercial banking from everything else and to ably prevent for 66 years – two full generations – any meaningful implosion of the nation’s financial system. Any search for cause and effect of The Great Recession must begin here. The useless financial reform act – the Dodd act – weighs in at a lobbyist-induced 1,500+ pages, and will do nothing to prevent another financial crisis, nothing to dismantle Too Big Too Fail, nothing to contain derivatives, nothing to audit the Federal Reserve and nothing to curtail abuses in consumer financial practices.

Yet where are the criminal investigations? Where is the FBI? Where are the Congressional inquiries and panels and special prosecutors? Where are the indictments? Where are the perp walks and the jail sentences? Where is the justice, Mr. Holder and your 50 friends among the states? Aside from two former Bears Stearns hedge fund managers in 2007, and a pretend hedge fund manager - Mr. Madoff - in 2009, a weak SEC civil show-case against Goldman Sachs in 2010 and the mostly voluntary, golden-parachute-enabled "retirements" of a handful of TBTF C-level executives, a number of which, John-Thain-like, merely have revolved around the door a couple of times and landed at another lucrative looting opportunity, nothing has happened. Nothing, nada, zero, zip, dick. Nothing. It's breathtaking in its design and execution.

We now are reliably told the TARP program will cost less than $100 billion when all is said and done. Huh? What about the $2 trillion-plus of added government debt which itself adds tens of billions to the annual interest servicing burden, or the $1.5 trillion-plus willed into existence by the Federal Reserve? Who are they kidding?

Or a Health Care Act which, in 2,500 pages manages to spend about another trillion dollars or so and leaves no health insurance company behind, effectively criminalizing, albeit with monetary penalties far less than the cost of individually paid health insurance plans, anyone not otherwise exempted who fails to purchase health care coverage.

It seems to us, after thinking about this topic for some time now, that we have arrived. We have arrived at that point in our civilization in which our government deems it acceptable to obfuscate about things both small and large on the basis that, Jack-Nicholson/Colonel-Jessup-like, we (the rest of us who aren’t lodged in the political/oligarchical castes) “can’t handle the truth.”

And most of the time it would appear they are right, that we – the rest of us – can’t be bothered with such discrepancies and inconsistencies, falsehoods and half-truths. We're too busy trying to keep the house, make the mortgage and auto loan and credit card and student loan payments. We're too focused on our own financial survival to be concerned with what goes on at a national leadership and direction level. And doesn't it just seem a little too convenient for those who wish to plunder the wealth of the nation to keep the other 90 percent of us so strapped with indebtedness and an outdated personal moral conviction that debts should be repaid regardless of their potential to physically and mentally harm one's well being or, heaven forbid, harm one's all-important credit score, when walking away from debt has been an accepted business practice for centuries?

It only seems to matter on those rare occasions when things blow up, and the average, non-voting, non-taxpaying citizen awakens from his or her media-induced stupor to ponder that when the curtain is drawn away, it reveals only humans and not wizards, or that the outgoing tide reveals who has been swimming naked or when the emperor is shown to be undressed. But interest in such matters wanes quickly, and the thirst for change recedes silently into renewed acceptance of the status quo, as we now discover.

Soon, no doubt, when markets resume their upward trajectory and the Dow returns to and surpasses 14,250 (probably by this summer) and oh-don't-worry-about-those-6.5-million-log-term-unemployed-because-they're-just-lazy, much of this unpleasantness of the last three years will be forgotten by those more interested in only good news and Dancing With the Stars and American Idol, and the continued warnings of the Cassandras will be deemed evidence that these are, once again, merely the musings of disaffected social misfits or bad-news-opportunists who deep down must hate America (right up until the point at which the next crisis erupts, and erupt it will).

In fact, our short attention spans are relied upon by the political class of both parties and by the oligarchical class which controls it, as magnificent wealth transfer schemes blossom anew (talk about green shoots...) and the all-so-brief period which has elapsed between the “days away from financial Armageddon” of September 2008 and the "all clear, business as usual" of May 2010 insures, like the watered-down, useless "financial reform" legislation written by financial industry lobbyists which certainly will pass soon, that the laudable goal of making safe our financial system and returning it to the status of handmaiden to legitimate capital-producing and jobs-creating enterprise, will be discarded in exchange for the pretense of life as we knew it, circa 2006.

Only this time, effectively having destroyed the middle class of Boomers, Gen X-ers, Gen Y-ers, Millennials and Echo Boomers, and having bought the complicit silence of the of a near-majority (47% of Americans paid no income tax whatsoever in 2008) in exchange for bread and circuses, and having largely destroyed the previous primary mechanism by which wealth has been stolen and transferred (credit creation and personal indebtedness), the masters of the universe will have to find a new scam, which, at this writing, appears to be sovereign government debt, currencies and commodities, because turning back the calendar to 2006 alone will never recreate the consumer spending/debt orgy of 1982-2006.

In fact we think the oligarchs realize this, and they are redoubling their efforts to pillage as much as possible before the real collapse occurs, even as its seeds already have been sown in this crisis which now appears, by design and deception, to be ending. That collapse draws nigh, and Roubini and Taleb and Ritholtz and Panzer and Jesse and Tyler and Mish and Yves and Charles Hugh Smith and Joe Bageant and many, many others already see it, yet all are being dismissed - again - as those nattering nabobs of negativism who, broken-clock-being-right-twice-a-day-like, were merely “lucky” in guessing about the immediate past crisis as former Fed Chairman Alan Greenspan suggested in a recent television interview.

Tell us Greece is not the "sub-prime" of early 2007; that the US$150 billion "cure" to be soon applied by the EU and IMF is only can-kicking but will allow one and all to congratulate themselves on "containing" an isolated problem and to quickly return to the never-ending cocktail party, that is until the next Greece Fire which spreads to one after another country, including, ultimately, the possibility of the conflagration reaching bond markets in the U.S.

Or that a mere US$1 trillion of bailout/rescue/currency support recently proposed by the Eurozone and the IMF to "shock and awe" financial markets dominated by the recently rescued TBTFs who busily apace bet against the very governments which saved them (except now in Germany), is not merely another stealth rescue of these giant financial institutions which, having been caught with a bit too much Club Med sovereign debt on their books while their own prop traders work hard to destroy its value, now cry out - again - that the risk of their insolvency - again - threatens the global financial and economic systems.

Or that the battling machines of high-frequency trading, which briefly wiped out and then restored a trillion dollars worth of fictitious (paper) wealth in fewer than 15 minutes mid-afternoon May 6th in a dry-run rehearsal of things to come, won't now become even more emboldened and empowered to manipulate financial markets in any manner necessary to insure continued quarters of perfectly profitable trading days.

(May 6th should have been a non-event. We were expressly warned by the Manhattan Assistant US Attorney in a July 2009 court filing, in which it was alleged that a former Goldman Sachs quant trading programmer stole Goldman's "secret proprietary trading code," that "there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways." Well, duh. Doesn't it just seem like someone took this code, or a similar one, out for a test drive earlier this month?)

Soon, perhaps if not already, the wealth transfer will be complete, and a newly impoverished, former middle class will wake up from their recliners to find not only is Dancing With the Stars over, but also is their former debt-fueled way of life as the economy staggers, unemployment escalates, more good jobs are exported and living standards rapidly erode. (Irony alert: Their former U.S. employers, who effectively have downsized and off-shored their way to record profits, will find they have destroyed their own customer base - the former middle class - who no longer can afford their products.)

When 40 million people are receiving food stamps at one end of the economic spectrum (and probably another 20 million eligible according to the Department of Agriculture), and the bulk of financial and real assets have been concentrated into the top 10 percent of the other end of the economic spectrum, nothing good can come of it. So the well-off cohort will remain well-off and will conspire to direct through their agents in government only enough resources to buy the complicity and silence of the bottom 40 percent, like tax breaks, food stamps, health care subsidies and so on, and the soon-to-be-former middle class will be ground into yet lower levels of the economic ladder, such, that when the looting has concluded, we will see a top 10 percent and a bottom 90 percent, much as feudalistic Europe in the centuries of the Dark Ages.

(We strongly recommend two books on the subject, both of which in far more detail and eloquence lay out the symptoms, causes and effects of our slouch toward despotism: Survival +, by Charles Hugh Smith at Of Two Minds, and Deer Hunting With Jesus: Dispatches From America's Class War, by Joe Bageant at Joe Bageant (and whose recent post about the American Hologram Lost on the Fearless Plain also is required reading).

“All lies and jest… Still a man hears what he wants to hear and disregards the rest,” so said Paul Simon, which rings so true more than four decades later. We hear what we want to hear, and, apparently, what we want to hear is that all is back to normal, that all is good, that the wizards have everything under control, and that nothing bad can ever happen again.

So, are we there yet? Have we not already abdicated our responsibilities as citizens and tacitly embraced the despotism of which Franklin predicted 222 years ago, having become so corrupted (contaminated) as to require the despotic government of an oligarchy dedicated to insuring the truth never gets in the way of a good narrative, an enormous disparate accumulation of wealth and a firm grip on the levers of power to ensure the preservation of that wealth?

A few Tea Party primary victories and incumbent "mandatory retirements" aside, nothing will change in Washington as long as the strings of campaign cash and lobbyist perks are being pulled elsewhere. The "outs" who soon will replace some of the "ins" promptly will forget about their mandates from the voters the day they move into their new D.C. offices and townhomes and realize from moment one their only responsibility is to their own rational self-interest of being re-elected in 2012 and 2014 and 2016. Et tu, Barack?

And if Benjamin Franklin is not prescient enough for you, how about the Teacher, in Ecclesiastes, Chapter 1, v.13-18, from about 2,300 years ago:

What a heavy burden God has laid on men! I have seen all the things that are done under the sun; all of them are meaningless, a chasing after the wind. What is twisted cannot be straightened; what is lacking cannot be counted. I thought to myself, "Look, I have grown and increased in wisdom more than anyone who has ruled over Jerusalem before me; I have experienced much of wisdom and knowledge." Then I applied myself to the understanding of wisdom, and also of madness and folly, but I learned that this, too, is a chasing after the wind. For with much wisdom comes much sorrow; the more knowledge, the more grief.

Indeed, with wisdom comes sorrow, and from more knowledge, more grief. Would, sometimes, that we could empty so much of it from the mush of our remaining gray matter and then we wouldn't have to pretend it's all good, when, in fact, it’s anything but good, as soon, perhaps in a matter of a few short years, we shall see.

We first wrote the following paragraphs in June 2006, long before sub-prime lending, a bursted housing bubble, Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers, Merrill Lynch, CitiGroup, Bank of America, JPMorgan Chase, Goldman Sachs, GM, Chrysler, the Federal Reserve, the Treasury Department and The Great Recession began to dominate our lives, when Franklin’s predictions and our inexorable slouch toward despotism first appeared on our radar screen:
The transition from unitary executive to dictator – conservative, benevolent or otherwise – will not happen in the waning months of the current administration, so uniquely manifested by America's First Triumvirate of George Bush, Dick Cheney and, until recently, Karl Rove, but succeeding chief executives may choose overtly to expand further the envelope-pushing and Constitution-trampling of the 43rd President and his neo-conservative command-and-control cabal as the American oligarchy, and the nation, slouches slowly toward despotism.

As such, we will one day awake from our debt-financed, pleasure-induced stupors to find one person or group firmly in charge, answering to no one, especially not Congress, and in complete grasp of the military, the intelligence agencies, the treasury, the Federal Reserve and the financial and judicial systems. It will happen – it is happening – an inch at a time, until the day comes when not only will we, the fun-loving, celebrity-worshipping, civic-duty-abhoring citizens of America, so embrace the notion of despotism, we will think it entirely our own idea.

Are we there yet?...

(Keith Hazelton is an Adjunct Professor of Finance at Oklahoma City University's Meinders School of Business and an Economic Adviser to the Oklahoma Bankers Association. His opinions are his own.)

America's Ten Most Corrupt Capitalists:

Wall Street's captains of industry and top policymakers in Washington are often the same people. A lot of them get rich by playing for both teams.

http://www.alternet.org/news/146819?page=entire

Here Is Why the Fed Cannot Simply Continue to Inflate Its Way Out of Every Financial Crisis That It Creates:

The return on each new dollar of US debt is plummeting to new lows according to figures from the Federal Reserve.

http://jessescrossroadscafe.blogspot.com/2010/05/here-is-why-fed-cannot-simply-inflate.html

The chart below is from the essay, Not Just Another Greek Tragedy by Cornerstone.



I have been watching this chart for the past ten years, as part of the dynamic of the sustainability of the bond and the dollar as the limiting factor on the Fed's ability to expand the money supply.

The ability to expand debt is contingent on the ability to service debt. If the cost of the debt rises over the net income of the country's capital investment, or even gets close to it, the currency issuing entity is trapped in a debt spiral to default without a radical reform.

In other words, if each new dollar of debt costs ten percent in interest, largely paid to external entities, and it generates less than ten cents in domestic product, it is a difficult task to grow your way out of that debt without a default or dramatic restructuring.

So we are not quite there yet. But we are getting rather close on an historic basis. Without the implicit subsidy of the dollar as the world's reserve currency it would be much closer.

As it is now, this chart indicates that stagflation at least, rather than a hyperinflation, is in the cards for the US. But the trend is not promising, and the lack of meaningful reform is devastating.

A 'soft default' through inflation is the choice of those countries that have the latitude to inflate their currencies. Greece, being part of the European Monetary Union, did not. The US is not so constrained, especially since it owns the world's reserve currency.

The economy is out of balance, heavily weighted to a service sector, especially the financial sector which creates no new wealth, but merely transforms and transfers it. With stagnation in the median wage, and an historic imbalance in income distribution skewed to the top few percent, with the banks levying de facto taxation and inefficiency on the economy as a function of that income transfer, there should be little wonder that the growth of real GDP is sluggish in relation to new debt.

Or as Joe Klein so colorfully phrased it, the elite have been strip-mining the middle class in America for the past thirty years.

Along with the 'efficient market hypothesis,' trickle-down economics is also a fallacy. This is why the stimulus program being conducted by the Federal Reserve, in an egregious expansion of its authority to conduct monetary policy, in subsidies and transfer payments to Wall Street is not working to stimulate the real economy. It merely inflates the bonuses of the few, and extends the unsustainable.

So obviously one might say, "The Banks must be restrained, and the financial system reform, and the economy brought back into balance, before there can be any sustained recovery.

Fed Keeps Rates At Record Lows; Upbeat On Economy:

http://finance.yahoo.com/news/Fed-keep-rates-at-record-lows-apf-1923832918.html?x=0&sec=topStories&pos=main&asset=&ccode=

Jeannine Aversa, AP Economics Writer, On Wednesday April 28, 2010, 2:17 pm

WASHINGTON (AP) -- The Federal Reserve is sounding a more confident note that the economy is strengthening and pledges to hold rates at record lows to make sure it gains even more traction.

Wrapping up a two-day meeting Wednesday, the Fed in a 9-1 decision retained its pledge to hold rates at historic lows for an "extended period." Doing so will help energize the recovery.

The Fed offers a more upbeat view of the economy, even as it notes that risks remain.

The Fed says the job market is "beginning to improve" and notes that consumer spending has "picked up." Both observations were brighter than when the Fed last met in mid-March.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

WASHINGTON (AP) -- Federal Reserve policymakers are likely to deliver a fresh vote of confidence in the staying power of the recovery as signs multiply the economy is strengthening.

Fed Chairman Ben Bernanke and his colleagues resumed their two-day meeting Wednesday morning and are all but certain to keep holding rates at record lows to help the economy grow. However, they'll also expected to discuss when and how they'll reverse course and start boosting rates once the recovery is firmly rooted.

The Fed meets as the economy flashes growing signs of improvement.

Employers are creating jobs. Americans' confidence is rising and they are spending more. Manufacturers are boosting production. And an increasing number of companies -- such as Ford, Caterpillar and UPS -- are seeing their profits grow. By those measures, the economy is in better shape now than when the Fed last met in mid-March.

Still, there are continuing strains: high unemployment at 9.7 percent, loans are hard for people and businesses to obtain, and the housing and commercial real-estate markets are fragile. Greece's debt crisis also is roiling Wall Street. U.S. stocks lost 2 percent on Tuesday.

"The Fed's confidence in the recovery has clearly improved, and they'll communicate that," said Bill Cheney, chief economist at John Hancock. "But they are still going to be cautious because certainly nothing about the economy is cast in stone. I don't think the Fed wants to create any image that it's ready to boost rates," he added.

For now, the Fed is poised yet again to leave its key bank lending rate between zero and 0.25 percent, where it's remained since December 2008.

Assuming the Fed leaves rates alone, commercial banks' prime lending rate, used to peg rates on certain credit cards and consumer loans, will stay about 3.25 percent. That's its lowest point in decades.

Rock-bottom rates serve borrowers who qualify for loans and are willing to take on more debt. But they hurt savers. Low rates are especially hard on people living on fixed incomes who are earning scant returns on their savings.

Still, if super-low rates spur Americans to spend more, they will help invigorate the economy. That's why the Fed also is expected to repeat its pledge -- in place for more than a year -- to keep rates at record lows for an "extended period."

Some concern has emerged inside the Fed that that pledge could limit its ability to quickly raise rates when necessary. Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, for two straight meetings has opposed the Fed's decision to retain the "extended period" pledge.

Hoenig said he fears keeping rates too low for too long could lead to excessive risk-taking by investors, feeding new speculative bubbles. He's also expressed concern that low rates could eventually unleash inflation.

Yet Bernanke and other Fed officials in recent weeks have made clear that the Fed's pledge to keep rates at record lows for an "extended period" is linked to the economy's performance -- not to a specific period. The Fed will raise rates whenever it decides it's necessary, Bernanke has said.

Higher rates for millions of American borrowers are still months away at best, many economists predict.

The timing and execution of a Fed policy shift is a high-stakes game.

The Fed needs to hold rates at record lows long enough to make sure the recovery is lasting, especially once the bracing effects of the government's massive fiscal stimulus fades later this year.

On the other hand, the Fed must be nimble to start tightening credit to prevent inflation from becoming a problem or sowing the seeds of new speculative excesses such as in the prices of stocks, bonds or commodities.

One tricky question is when the Fed should start selling some of its vast portfolio of mortgage securities. The Fed bought $1.25 trillion of these securities to drive down mortgage rates and aid the housing market. Its challenge is to sell those assets in a way that doesn't weaken home prices and push up mortgage rates.

"My expectation is that sales would be slow, gradual, announced in advance, and would not create undue market impacts," Fed Chairman Ben Bernanke told Congress recently.

The Fed's balance sheet has exploded, reflecting the central bank's action to fight the financial crisis. It stood at $2.3 trillion for the recent week, more than double the level before the crisis struck.

"I think we would like to bring the balance sheet back to something consistent with where it was before the crisis," Bernanke told lawmakers. "And that would suggest something under a trillion dollars, I think, would be appropriate."

Besides selling securities outright, the Fed has a number of other tools to shrink its balance sheet when it moves to tighten credit. Those include selling securities from its portfolio with an agreement to buy them back later. Those operations are called reverse repurchase agreements. The Fed also is moving forward on a plan to let banks set up the equivalent of certificates of deposit at the central bank. That would give banks an incentive to park money at the Fed, rather than lending it out.

Where is $421.8 Billion That Went Out of the Federal Reserve?

http://www.commodityonline.com/news/Where-is-$4218-bn-that-went-out-of-Fed-Reserve-27410-3-1.html



By Dr Jeffrey Lewis
April 15, 2010

The St. Louis Federal Reserve Bank, which documents the inner workings and balance sheets at the nation's central bank, just released new research and data suggesting that the Federal Reserve lent $421.8 billion – with no one knowing exactly where it went.

Where’s the Money?

Each week, the St. Louis Fed releases data regarding the Federal Reserve's activity and public balance sheets. In ordinary times, this data is usually largely ignored, as the mainstream media has little interest in probing into the “small” $5-10 billion changes in the Total Loans and Leases of Commercial Banks. The week of March 24-31 was different, however, as the Federal Reserve made $421.8 billion in new loans, more than it made in the week following the Fed's big moves to combat the financial crisis in 2008!

Is the Fed Bailing out Greece?

Economists are all but left in the dark on the actual operations behind the scenes, and they have minimal data to investigate other than what the Federal Reserve is willing to release to the public. However, the timeliness of this most recent surge in lending activity suggests that the Federal Reserve may be taking a hand in bailing out foreign nations, or Greece in particular, by shoveling funds through commercial banks.

This wouldn't be the first time a bank was used to bail out foreign debtors. AIG, the leading recipient of TARP funds, was used as a gateway to transfer US taxpayer funds to foreign banks owed money. Of course, the ailing insurance company virtually collapsed nonetheless, but long after the funds were delivered from the US Treasury to foreign institutions.

Pull the Alarms!

Rarely are large monetary policy decisions made without an explanation from the Federal Reserve, and even more rarely are they conducted in just one week. To put the recent lending in perspective, $421.8 billion is more than the total increases in lending throughout 2005. There has never in the history of the Federal Reserve been such a massive increase in total lending. And never should anyone expect that lending of this magnitude would be done without any explanation. To put it simply, there is big money moving, and no one knows where it's going, for better or for worse.

Timing is Everything

The huge jump in lending comes just days after the Federal Reserve ends its operations to buy agency and other US debt, and just a few weeks after the looming European debt crisis emerges. Clearly, the timing couldn't be any more interesting, as the Federal Reserve is either indirectly financing international bailouts or continuing to expand the money supply without any prior knowledge.

Gold and Silver Set to Soar

Either explanation for the gross increase in the money supply is a boon for precious metals, which have experienced an even more impressive month as manipulation comes to light. If the Federal Reserve is acting to bail out foreign nations, or to buy up Treasuries or other Agency debt, it should be clear that inflation is sure to run rampant. Head for the hills – unprecedented monetary policy is taking place without any authorization, explanation, or (from what we can tell) causation.