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A Century Later, Teddy Roosevelt’s Speech on Corporate Power

By Chuck Collins and Sam Pizzigati

Today marks the 100th anniversary of the most ‘radical speech’ an American ex-President has ever delivered.

Ex-Presidents almost always follow a small number of well-worn scripts. Some rush to cash in on their celebrity. Some do charitable good deeds. Some just lay low.

Exactly one century ago, on August 31, 1910, we had an ex-President who took a brash and bold leap that took him far beyond these narrowly circumscribed roles. On that day, in the middle of Middle America, a former President — Theodore Roosevelt — essentially called on his fellow citizens to smash the nation’s rich down to democratic size.

We need, Roosevelt told a massive assembly of 30,000 listeners, to “destroy privilege.” Ruin for our democracy, he warned, will be “inevitable if our national life brings us nothing better than swollen fortunes for the few.”

Those listeners — in Osawatomie, Kansas — roared their approval. Back East, apologists for grand fortune would be aghast. Editorial writers would label Roosevelt “frankly socialistic,” even “anarchistic.” A later historian, George Mowry, would call TR’s talk, soon to be known as his “New Nationalism” address, ”the most radical speech ever given by an ex-President.”

Time hasn’t dimmed that radicalism. Indeed, TR’s speech speaks powerfully to us today, mainly because we confront, a hundred years after he spoke in Osawatomie, the same concentrated wealth and power that TR so feared.

As President, between 1901 and early 1909, Roosevelt had taken on a plutocracy just as entrenched as ours today. He won some battles and ducked many others. But he left the White House feeling the nation, under his successor William Howard Taft, would be headed in the right direction.

But Taft disappointed Roosevelt and outraged the progressive wing of Roosevelt’s Republican Party. TR saw a burning need to spell out a clearer vision for his nation’s future, and he jumped at the invitation from Osawatomie to help dedicate the historic small city’s John Brown Memorial Park.

The event quickly figured to be the biggest in Kansas political history. Roosevelt had just finished a triumphal global tour. He ranked, observers agreed, as the “world’s most popular citizen.”

Kansans would pull out all the stops to set the stage for a memorable speech. By the appointed day, Osawatomie had never looked better. Bands and dignitaries would be everywhere.

“We are ready for plutocrat and peasant,” wrote one local editor, “to honor the ground where John Brown made his decisive stand for freedom.”

Plutocrats never did show. But average Kansans did. They started coming the day before TR’s scheduled appearance, in a driving rain, via “foot, bicycles, motors, buggies, wagons, trains.”

The rain, fortunately, would stop before the mud became too deep. Roosevelt would have open skies when he stepped up onto his podium, a kitchen table, to begin his address. The “surging throng,” says historian Robert La Forte, “continually cheered” for the next hour and a half.

Most Americans today would cheer, too. Are you outraged by the BP oil disaster in the Gulf of Mexico? Our national resources, Roosevelt pronounced, “must be used for the benefit of all our people, and not monopolized for the benefit of the few.”

Think corporations wield too much clout?

“The Constitution guarantees protections to property, and we must make that promise good,” Roosevelt noted. “But it does not give the right of suffrage to any corporation.”

We must “prohibit the use of corporate funds directly or indirectly for political purposes,” TR enunciated, and hold corporate officials “personally responsible when any corporation breaks the law.”

Again and again, Roosevelt urged his listeners to demand state “and, especially, national, restraint upon unfair money-getting.” The absence of that restraint, he noted, “has tended to create a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power.”

But TR didn’t stop there. Restraining fortunes based on “unfair money-getting” had to be only a first step. A fortune “gained without doing damage to the community,” he added, deserves no praise. Americans needed to set a higher standard. We should permit fortunes “to be gained only so long as the gaining represents benefit to the community.”

And even those fortunes, Roosevelt added, needed to be checked, because the “really big fortune, the swollen fortune, by the mere fact of its size acquires qualities” that “differentiate it in kind as well as in degree from what is possessed by men of relatively small means,” qualities that help ensure the “political domination of money.”

To check the growth and limit the power of these fortunes, Roosevelt called for a progressive income tax and an “inheritance tax on big fortunes, properly safeguarded against evasion and increasing rapidly in amount with the sizes of the estate.”

Three years after TR’s Osawatomie speech, we would have an income tax in the United States. Six years later after Osawatomie, we would have an estate tax. By the middle of the 20th century, many of the corporate regulatory reforms that Roosevelt demanded on that August day a century ago would be the law of the land.

By that mid century, the plutocracy that Roosevelt decried had essentially disappeared. The United States had become a middle class nation where average workers, as TR envisioned in 1910, had “a wage more than sufficient to cover the bare cost of living, and hours of labor short enough” to leave them “time and energy” to bear their “share in the management of the community.”

Now that mid 20th century middle class has disappeared. We live amid plutocracy once again. In fact, 2010 marks the first year since 1916 that we don’t even have an estate tax on the books. The heirs of the super rich can this year inherit billions in inheritance totally tax-free.

A hundred years ago, Theodore Roosevelt refused to accept these sorts of concentrations of enormous wealth. At Osawatomie, he helped inspire a generation-long struggle to break up these concentrations. That struggle succeeded.

Our struggle has only just begun. We can succeed, too.


How Hyperinflation Will Happen

Gonzalo Lira

Right now, we are in the middle of deflation. The Global Depression we are experiencing has squeezed both aggregate demand levels and aggregate asset prices as never before. Since the credit crunch of September 2008, the U.S. and world economies have been slowly circling the deflationary drain.

To counter this, the U.S. government has been running massive deficits, as it seeks to prop up aggregate demand levels by way of fiscal “stimulus” spending – the classic Keynesian move, the same old prescription since donkey’s ears.

But the stimulus, apart from being slow and inefficient, has simply not been enough to offset the fall in consumer spending.

For its part, the Federal Reserve has been busy propping up all assets – including Treasuries – by way of “quantitative easing”.

The Fed is terrified of the U.S. economy falling into a deflationary death-spiral: Lack of liquidity, leading to lower prices, leading to unemployment, leading to lower consumption, leading to still lower prices, the entire economy grinding down to a halt. So the Fed has bought up assets of all kinds, in order to inject liquidity into the system, and bouy asset price levels so as to prevent this deflationary deep-freeze – and will continue to do so. After all, when your only tool is a hammer, every problem looks like a nail.

But this Fed policy – call it “money-printing”, call it “liquidity injections”, call it “asset price stabilization” – has been overwhelmed by the credit contraction. Just as the Federal government has been unable to fill in the fall in aggregate demand by way of stimulus, the Fed has expanded its balance sheet from some $900 billion in the Fall of ’08, to about $2.3 trillion today – but that additional $1.4 trillion has been no match for the loss of credit. At best, the Fed has been able to alleviate the worst effects of the deflation – it certainly has not turned the deflationary environment into anything resembling inflation.

Yields are low, unemployment up, CPI numbers are down (and under some metrics, negative) – in short, everything screams “deflation”.

Therefore, the notion of talking about hyperinflation now, in this current macro-economic environment, would seem … well … crazy. Right?


I would argue that the next step down in this world-historical Global Depression which we are experiencing will be hyperinflation.

Most people dismiss the very notion of hyperinflation occurring in the United States as something only tin-foil hatters, gold-bugs, and Right-wing survivalists drool about. In fact, most sensible people don’t even bother arguing the issue at all – everyone knows that only fools bother arguing with a bigger fool.

A minority, though – and God bless ’em – actually do go ahead and go through the motions of talking to the crazies ranting about hyperinflation. These amiable souls diligently point out that in a deflationary environment – where commodity prices are more or less stable, there are downward pressures on wages, asset prices are falling, and credit markets are shrinking – inflation is impossible. Therefore, hyperinflation is even more impossible.

This outlook seems sensible – if we fall for the trap of thinking that hyperinflation is an extention of inflation. If we think that hyperinflation is simply inflation on steroids – inflation-plus – inflation with balls – then it would seem to be the case that, in our current deflationary economic environment, hyperinflation is not simply a long way off, but flat-out ridiculous.

But hyperinflation is not an extension or amplification of inflation. Inflation and hyperinflation are two very distinct animals. They look the same – because in both cases, the currency loses its purchasing power – but they are not the same.

Inflation is when the economy overheats: It’s when an economy’s consumables (labor and commodities) are so in-demand because of economic growth, coupled with an expansionist credit environment, that the consumables rise in price. This forces all goods and services to rise in price as well, so that producers can keep up with costs. It is essentially a demand-driven phenomena.

Hyperinflation is the loss of faith in the currency. Prices rise in a hyperinflationary environment just like in an inflationary environment, but they rise not because people want more money for their labor or for commodities, but because people are trying to get out of the currency. It’s not that they want more money – they want less of the currency: So they will pay anything for a good which is not the currency.

Right now, the U.S. government is indebted to about 100% of GDP, with a yearly fiscal deficit of about 10% of GDP, and no end in sight. For its part, the Federal Reserve is purchasing Treasuries, in order to finance the fiscal shortfall, both directly (the recently unveiled QE-lite) and indirectly (through the Too Big To Fail banks). The Fed is satisfying two objectives: One, supporting the government in its efforts to maintain aggregate demand levels, and two, supporting asset prices, and thereby prevent further deflationary erosion. The Fed is calculating that either path – increase in aggregate demand levels or increase in aggregate asset values – leads to the same thing: A recovery in the economy.

This recovery is not going to happen – that’s the news we’ve been getting as of late. Amid all this hopeful talk about “avoiding a double-dip”, it turns out that we didn’t avoid a double-dip – we never really managed to claw our way out of the first dip. No matter all the stimulus, no matter all the alphabet-soup liquidity windows over the past 2 years, the inescapable fact is that the economy has been – and is headed – down.

But both the Federal government and the Federal Reserve are hell-bent on using the same old tired tools to “fix the economy” – stimulus on the one hand, liquidity injections on the other. (See my discussion of The Deficit here.)

It’s those very fixes that are pulling us closer to the edge. Why? Because the economy is in no better shape than it was in September 2008 – and both the Federal Reserve and the Federal government have shot their wad. They got nothin’ left, after trillions in stimulus and trillions more in balance sheet expansion…

But they have accomplished one thing:

They have undermined Treasuries. These policies have turned Treasuries into the spit-and-baling wire of the U.S. financial system – they are literally the only things holding the whole economy together.

In other words, Treasuries are now the New and Improved Toxic Asset. Everyone knows that they are overvalued, everyone knows their yields are absurd – yet everyone tiptoes around that truth as delicately as if it were a bomb. Which is actually what it is.

So this is how hyperinflation will happen:

One day – when nothing much is going on in the markets, but general nervousness is running like a low-grade fever (as has been the case for a while now) – there will be a commodities burp: A slight but sudden rise in the price of a necessary commodity, such as oil.

This will jiggle Treasury yields, as asset managers will reduce their Treasury allocations, and go into the pressured commodity, in order to catch a profit. (Actually it won’t even be the asset managers – it will be their programmed trades.) These asset managers will sell Treasuries because, effectively, it’s become the principal asset they have to sell.

It won’t be the volume of the sell-off that will pique Bernanke and the drones at the Fed – it will be the timing. It’ll happen right before a largish Treasury auction. So Bernanke and the Fed will buy Treasuries, in an effort to counteract the sell-off and maintain low yields – they want to maintain low yields in order to discourage deflation. But they’ll also want to keep the Treasury cheaply funded. QE-lite has already set the stage for direct Fed buys of Treasuries. The world didn’t end. So the Fed will feel confident as it moves forward and nips this Treasury yield jiggle in the bud.

The Fed’s buying of Treasuries will occur in such a way that it will encourage asset managers to dump even more Treasuries into the Fed’s waiting arms. This dumping of Treasuries won’t be out of fear, at least not initially. Most likely, in the first 15 minutes or so of this event, the sell-off in Treasuries will be orderly, and carried out with the idea (at the time) of picking up those selfsame Treasuries a bit cheaper down the line.

However, the Fed will interpret this sell-off as a run on Treasuries. The Fed is already attuned to the bond markets’ fear that there’s a “Treasury bubble”. So the Fed will open its liquidity windows, and buy up every Treasury in sight, precisely so as to maintain “asset price stability” and “calm the markets”.

The Too Big To Fail banks will play a crucial part in this game. See, the problem with the American Zombies is, they weren’t nationalized. They got the best bits of nationalization – total liquidity, suspension of accounting and regulatory rules – but they still get to act under their own volition, and in their own best interest. Hence their obscene bonuses, paid out in the teeth of their practical bankruptcy. Hence their lack of lending into the weakened economy. Hence their hoarding of bailout monies, and predatory business practices. They’ve understood that, to get that sweet bail-out money (and those yummy bonuses), they have had to play the Fed’s game and buy up Treasuries, and thereby help disguise the monetization of the fiscal debt that has been going on since the Fed began purchasing the toxic assets from their balance sheets in 2008.

But they don’t have to do what the Fed tells them, much less what the Treasury tells them. Since they weren’t really nationalized, they’re not under anyone’s thumb. They can do as they please – and they have boatloads of Treasuries on their balance sheets.

So the TBTF banks, on seeing this run on Treasuries, will add to the panic by acting in their own best interests: They will be among the first to step off Treasuries. They will be the bleeding edge of the wave.

Here the panic phase of the event begins: Asset managers – on seeing this massive Fed buy of Treasuries, and the American Zombies selling Treasuries, all of this happening within days of a largish Treasury auction – will dump their own Treasuries en masse. They will be aware how precarious the U.S. economy is, how over-indebted the government is, how U.S. Treasuries look a lot like Greek debt. They’re not stupid: Everyone is aware of the idea of a “Treasury bubble” making the rounds. A lot of people – myself included – think that the Fed, the Treasury and the American Zombies are colluding in a triangular trade in Treasury bonds, carrying out a de facto Stealth Monetization: The Treasury issues the debt to finance fiscal spending, the TBTF banks buy them, with money provided to them by the Fed.

Whether it’s true or not is actually beside the point – there is the widespread perception that that is what’s going on. In a panic, widespread perception is your trading strategy.

So when the Fed begins buying Treasuries full-blast to prop up their prices, these asset managers will all decide, “Time to get out of Dodge – now.”

Note how it will not be China or Japan who all of a sudden decide to get out of Treasuries – those two countries will actually be left holding the bag. Rather, it will be American and (depending on the time of day when the event happens) European asset managers who get out of Treasuries first. It will be a flash panic – much like the flash-crash of last May. The events I describe above will happen in a very short span of time – less than an hour, probably. But unlike the event in May, there will be no rebound.

Notice, too, that Treasuries will maintain their yields in the face of this sell-off, at least initially. Why? Because the Fed, so determined to maintain “price stability”, will at first prevent yields from widening – which is precisely why so many will decide to sell into the panic: The Bernanke Backstop won’t soothe the markets – rather, it will make it too tempting not to sell.

The first of the asset managers or TBTF banks who are out of Treasuries will look for a place to park their cash – obviously. Where will all this ready cash go?


By the end of that terrible day, commodites of all stripes – precious and industrial metals, oil, foodstuffs – will shoot the moon. But it will not be because ordinary citizens have lost faith in the dollar (that will happen in the days and weeks ahead) – it will happen because once Treasuries are not the sure store of value, where are all those money managers supposed to stick all these dollars? In a big old vault? Under the mattress? In euros?

Commodities: At the time of the panic, commodities will be perceived as the only sure store of value, if Treasuries are suddenly anathema to the market – just as Treasuries were perceived as the only sure store of value, once so many of the MBS’s and CMBS’s went sour in 2007 and 2008.

It won’t be commodity ETF’s, or derivatives – those will be dismissed (rightfully) as being even less safe than Treasuries. Unlike before the Fall of ’08, this go-around, people will pay attention to counterparty risk. So the run on commodities will be for actual, feel-it-’cause-it’s-there commodities. By the end of the day of this panic, commodities will have risen between 50% and 100%. By week’s end, we’re talking 150% to 250%. (My private guess is gold will be finessed, but silver will shoot up the most – to $100 an ounce within the week.)

Of course, once commodities start to balloon, that’s when ordinary citizens will get their first taste of hyperinflation. They’ll see it at the gas pumps.

If oil spikes from $74 to $150 in a day, and then to $300 in a matter of a week – perfectly possible, in the midst of a panic – the gallon of gasoline will go to, what: $10? $15? $20?

So what happens then? People – regular Main Street people – will be crazy to buy up commodities (heating oil, food, gasoline, whatever) and buy them now while they are still more-or-less affordable, rather than later, when that $15 gallon of gas shoots to $30 per gallon.

If everyone decides at roughly the same time to exchange one good – currency – for another good – commodities – what happens to the relative price of one and the relative value of the other? Easy: One soars, the other collapses.

When people freak out and begin panic-buying basic commodities, their ordinary financial assets – equities, bonds, etc. – will collapse: Everyone will be rushing to get cash, so as to turn around and buy commodities.

So immediately after the Treasury markets tank, equities will fall catastrophically, probably within the next few days following the Treasury panic. This collapse in equity prices will bring an equivalent burst in commodity prices – the second leg up, if you will.

This sell-off of assets in pursuit of commodities will be self-reinforcing: There won’t be anything to stop it. As it spills over into the everyday economy, regular people will panic and start unloading hard assets – durable goods, cars and trucks, houses – in order to get commodities, principally heating oil, gas and foodstuffs. In other words, real-world assets will not appreciate or even hold their value, when the hyperinflation comes.

This is something hyperinflationist-skeptics never quite seem to grasp: In hyperinflation, asset prices don’t skyrocket – they collapse, both nominally and in relation to consumable commodities. A $300,000 house falls to $60,000 or less, or better yet, 50 ounces of silver – because in a hyperinflationist episode, a house is worthless, whereas 50 bits of silver can actually buy you stuff you might need.

Right now, I’m guessing that sensible people who’ve read this far are dismissing me as being full of shit – or at least victim of my own imagination. These sensible people, if they deign to engage in the scenario I’ve outlined above, will argue that the government – be it the Fed or the Treasury or a combination thereof – will find a way to stem the panic in Treasuries (if there ever is one), and put a stop to hyperinflation (if such a foolish and outlandish notion ever came to pass in America).

Uh-huh: So the Government will save us, is that it? Okay, so then my question is, How?

Let’s take the Fed: How could they stop a run on Treasuries? Answer: They can’t. See, the Fed has already been shoring up Treasuries – that was their strategy in 2008 – ’09: Buy up toxic assets from the TBTF banks, and have them turn around and buy Treasuries instead, all the while carefully monitoring Treasuries for signs of weakness. If Treasuries now turn toxic, what’s the Fed supposed to do? Bernanke long ago ran out of ammo: He’s just waving an empty gun around. If there’s a run on Treasuries, and he starts buying them to prop them up, it’ll only give incentive to other Treasury holders to get out now while the getting’s still good. If everyone decides to get out of Treasuries, then Bernanke and the Fed can do absolutely nothing effective. They’re at the mercy of events – in fact, they have been for quite a while already. They just haven’t realized it.

Well if the Fed can’t stop this, how about the Federal government – surely they can stop this, right?

In a word, no. They certainly lack the means to prevent a run on Treasuries. And as to hyperinflation, what exactly would the Federal government do to stop it? Implement price controls? That will only give rise to a rampant black market. Put soldiers out on the street? America is too big. Squirt out more “stimulus”? Sure, pump even more currency into a rapidly hyperinflating everyday economy – right

(BTW, I actually think that this last option is something the Federal government might be foolish enough to try. Some moron like Palin or Biden might well advocate this idea of helter-skelter money-printing so as to “help all hard-working Americans”. And if they carried it out, this would bring us American-made images of people using bundles of dollars to feed their chimneys. I actually don’t think that politicians are so stupid as to actually start printing money to “fight rising prices” – but hey, when it comes to stupidity, you never know how far they can go.)

In fact, the only way the Federal government might be able to ameliorate the situation is if it decided to seize control of major supermarkets and gas stations, and hand out cupon cards of some sort, for basic staples – in other words, food rationing. This might prevent riots and protect the poor, the infirm and the old – it certainly won’t change the underlying problem, which will be hyperinflation.

“This is all bloody ridiculous,” I can practically hear the hyperinflation skeptics fume. “We’re just going through what the Japanese experienced: Just like the U.S., they went into massive government stimulus – hell, they invented quantitative easing – and look what’s happened to them: Stagnation, yes – hyperinflation, no.”

That’s right: The parallels with Japan are remarkably similar – except for one key difference. Japanese sovereign debt is infinitely more stable than America’s, because in Japan, the people are savers – they own the Japanese debt. In America, the people are broke, and the Nervous Nelly banks own the debt. That’s why Japanese sovereign debt is solid, whereas American Treasuries are soap-bubble-fragile.

That’s why I think there’ll be hyperinflation in America – that bubble’s soon to pop. I’m guessing if it doesn’t happen this fall, it’ll happen next fall, without question before the end of 2011.

The question for us now – ad portas to this hyperinflationary event – is, what to do?

Neanderthal survivalists spend all their time thinking about post-Apocalypse America. The real trick, however, is to prepare for after the end of the Apocalypse.

The first thing to realize, of course, is that hyperinflation might well happen – but it will end. It won’t be a never-ending situation – America won’t end up like in some post-Apocalyptic, Mad Max: Beyond Thuderdome industrial wasteland/playground. Admittedly, that would be cool, but it’s not gonna happen – that’s just survivalist daydreams.

Instead, after a spell of hyperinflation, America will end up pretty much like it is today – only with a bad hangover. Actually, a hyperinflationist spell might be a good thing: It would finally clean out all the bad debts in the economy, the crap that the Fed and the Federal government refused to clean out when they had the chance in 2007–’09. It would break down and reset asset prices to more realistic levels – no more $12 million one-bedroom co-ops on the UES. And all in all, a hyperinflationist catastrophe might in the long run be better for the health of the U.S. economy and the morale of the American people, as opposed to a long drawn-out stagnation. Ask the Japanese if they would have preferred a couple-three really bad years, instead of Two Lost Decades, and the answer won’t be surprising. But I digress.

Like Rothschild said, “Buy when there’s blood on the streets.” The thing to do to prepare for hyperinflation would be to invest in a diversified hard-metal basket before the event – no equities, no ETF’s, no derivatives. If and when hyperinflation happens, and things get bad (and I mean really bad), take that hard-metal basket and – right in the teeth of the crisis – buy residential property, as well as equities in long-lasting industries; mining, pharma and chemicals especially, but no value-added companies, like tech, aerospace or industrials. The reason is, at the peak of hyperinflation, the most valuable assets will be dirt-cheap – especially equities – especially real estate.

I have no idea what will happen after we reach the point where $100 is no longer enough to buy a cup of coffee – but I do know that, after such a hyperinflationist period, there’ll be a “new dollar” or some such, with a few zeroes knocked off the old dollar, and things will slowly get back to a new normal. I have no idea the shape of that new normal. I wouldn’t be surprised if that new normal has a quasi or de facto dictatorship, and certainly some form of wage-and-price controls – I’d say it’s likely, but for now that’s not relevant.

What is relevant is, the current situation cannot long continue. The Global Depression we are in is being exacerbated by the very measures being used to fix it – stimulus is putting pressure on Treasuries, which are being shored up by the Fed. This obviously cannot have a happy ending. Therefore, the smart money prepares for what it believes is going to happen next.

I think we’re going to have hyperinflation. I hope I have managed to explain why.

There is No Economic Recovery… Only Transition

Barry Ferguson

It is important to know the difference!

The definition of ‘recovery’: to get back; regain

The definition of ‘transition’: to change; passage from one form, state, style, or place to another

Is the economy in ‘recovery’ or ‘transition’? Our government, of course, has no alternative than to preach about ‘economic recovery’. That would imply a return to the past. That would imply that we will soon be back to a 5% unemployment rate, a frothy housing sector, and stock indices reaching for the moon. Happy days are here again. Everyone has a job, a new house, and a shiny new car. Heck, everyone even got a new wide-screen television just for applying for loans to buy all that stuff. World peace is even at hand! Bill Clinton is dictating a memo to Monica Lewinsky in a White House closet and Alan Greenspan is again a ‘maestro’. That’s ‘recovery’. Of course, if you believe any of that, then you would also be inclined to cheat off Nancy Pelosi’s test in a physics class. No, I would argue that we are not going to ‘recover’ or regain with regard to our economy. Rather, we are experiencing a ‘transformation’- a profound change – and the finished product will be ugly.

First, government is a bigger part of our lives and economy. Consider this. According to the BEA (Bureau of Economic Analysis), 2009 GDP for the US was $14.2 trillion. Manufacturing contributed $1.5 trillion and government spending (federal and state) contributed $1.9 trillion. In year 2000, the numbers were $1.4 trillion for manufacturing and $1.2 trillion for government spending. We can see very clearly that our government is becoming a bigger contributor to the nation’s GDP. Now, who keeps screaming about cutting back government spending? That’s our GDP you’re talking about! Our government now holds the single largest primary category contribution to GDP according to BEA. Back to 2009, real estate, financing, and insurance combined contributed another $3 trillion to GDP. Thus we are known as the ‘FIRE’ economy – Finance, Insurance, Real Estate. Maybe we should be known as the ‘FED’ economy (Fornicating with Economic Destruction). But here’s the problem. Manufacturing is a net positive to society. It supplies jobs that are paid for by the profits from the manufacturing company. Government is a net negative to society because it supplies jobs that are paid for only from the productive wages generated from the manufacturing part of the economy. Manufacturing grows assets. Government eats assets. Now the trend is clear and we cannot reverse course. We no longer have the guts to do so. What we are left with is an economy that is not based on asset production so much as transfer of payment siphoning.

Even more disturbing is according to the BLS (Bureau of Labor Statistics), the latest statistics available in 2008 showed the average federal employee enjoyed a salary 20% higher than that of a comparable private employ. It gets worse. That figure is just the salary. It seems that the federal employee also enjoyed a benefits package (health insurance, pension, etc…) valued at $40,785 compared to the private employee’s package valued at $9,882. If this weren’t pathetic enough, the fellow that sleeps in the White House is currently engaged in a comedy tour bashing the other political party with a line about driving a car in a ditch and wanting the keys back. He mockingly says, “They can’t have the keys back – they don’t know how to drive”. As the driver of government, let’s review his car. We have the post office, Amtrak, Fannie and Freddie, the student loan program, welfare, Medicare, Medicaid, and social security. Did I name even one that turns a profit? Did I name even one that is solvent? For all these insolvent, poorly run government programs, we taxpayers pay twice the payroll for federal workers than the private sector would pay. And, the government has been hiring. Their payrolls are up! Private payrolls are down. Whatever happened to government work being ‘public service’? Now it is ‘public enrichment’! Before my head explodes, my point is this. The government will continue to produce nothing and cost the country’s taxpayers more money for doing so. The result will be a less efficient country that doesn’t produce much because government doesn’t produce anything. Well, unless you count encyclopaedic volumes of bureaucratic heath care tax legislation. Forget the ‘republic. We are now an autocracy. Recovery would imply a return to capitalism. The transition is to a government controlled and subsidized economy characterized by the arbitrary imposition of corporate law and regulation for the sole purpose of central bank enrichment. The government no longer works for us. It only works to control us. War has been declared and we, the citizens, are enemy combatants. Government regulators stand ready to use their own form of waterboarding on any of us that step out of line. (As a point of clarity, the government regulators uses the term ‘audit’. I prefer the more accurate, ‘waterboarding’.)

A second major way the nation’s economy is transforming is the now constant manipulation from the Federal Reserve. True ‘markets’ depend upon the judgment of participants to set prices for assets traded. The sad truth is that ‘markets’ died with capitalism. While everyone bemoans the greedy Wall Streeters and rails about their outlandish executive bonuses so earned from cheating and stealing money from investors, let’s look at reality. There is neither question nor argument that banks, lenders, and Wall Streeters ran amuck with derivative and credit default swap leverage over the past 20 years. The economy slumped into a depression when banker earnings collapsed with the credit bubble default. All attention since has been directed at regulation. Supposedly there wasn’t enough of it. Now we need to impose more. But step back a moment. Capitalism is the great regulator. Wasn’t capitalism driving the stock price of GM to zero? Wasn’t capitalism driving the stock price of Bank of America to zero? WaMu? AIG? Bear Sterns? Lehman? Citi? Countrywide? Fannie? Freddie? I could go on but why were all these companies having their stock prices pummelled to zero. BECAUSE THEY WERE BROKE! THEIR BUSINESS MODELS NO LONGER WORKED! THAT’S WHAT CAPITALISM DOES!! All of these companies were being driven to bankruptcy court because they were being punished for poor corporate performance. Capitalism 101 – an efficient producer will always drive an inefficient producer out of business. That’s what keeps capitalism, well…, efficient! Why was capitalism circumvented? Why was it not allowed to do what it does best – purge the system of garbage? The reason is all these bankrupt companies are part of the con that the Federal Reserve runs to control the planet. They were all the shills. They all had to be saved or merged with other companies who were given substantial cash to play along. Well, except for Lehman. Apparently, they didn’t have enough derivatives to imperil the world to warrant a lifeline. Too big to fail my arse! Joshua brought down Jericho. David slew Goliath. Buford Pusser cleaned up McNairy County, Tennessee. But now, the government thinks it has all the answers. And ‘capitalism’ is not on the answer key.

Look at the Federal Reserve. Manipulation is their ‘MO’. When do they pump trillions into the market? Answer – whenever it is falling to painful levels. If investors buy or sell securities, they do so out of a motivation to produce a profit. But in August of 2010, the Fed began a ‘quantitative easing’ policy by buying intermediate maturity Treasuries. Why? Do they think Treasuries are underpriced and happen to be a ‘good buy’? No. They are doing so to simply manipulate the bond market and hopefully manipulate the stock market as well. The Fed also runs the Plunge Protection Team (PPT) for manipulation purposes. You know the drill. Whenever the Dow Jones Industrial Average is crumbling and new lows are at hand, the PPT steps in at 3PM to jolt the indexes higher with high dollar buy programs. Check out the following chart.

This is a 5-day, 30-minute bar, intraday look at the week ending May 21, 2010. For perspective, the Dow Jones Industrial Average had fallen over 600 points for the week as Friday’s trade opened. It dropped to about 9950 and you could almost hear the air raid sirens going off. The PPT normally likes to wait until 3PM for dramatic purposes but they couldn’t take the chance on this Friday. Pow! They let loose with both barrels. 6 million shares of the ETF, DIA (that mirrors the Dow), were traded in the first 30 minutes immediately snatching the index from its opening gap lower. That got buyers interested as we all like to trade with the PPT blowing hot air into our sails. But in the afternoon, the indices faded and the DIA turned negative again. All that hard work for nothing. Then, POW!! In the final 30 minutes of trading, there was another enormous surge of buying boosting the DIA and all other indices on the planet higher. Even the Antarctica Index went higher! And, all indices all over the world burst higher at precisely 3:30 PM. Well, actually there is no Antarctica Index. But if there was, it too would have been jolted higher by this incredible buy program. Did I mention this was the final half hour of Friday afternoon? Did I mention that average trading volume for the DIA was around 10 million shares per day? Did I mention that the first half hour of buying plus the final half hour of buying accounted for about 10 million shares of trading that made up the staggering total of 30 million total shares of DIA traded on this Friday? Yes, more than 10% of the total shares were traded in the final half hour of trading. Why? At the time, concerns were focused on the Greece debt problem and the viability of the Euro. The ‘flash crash’ of May 6 was still in everyone’s psyche and US economic data were trending lower. And, the Dow breeched the Fed’s ‘line in the sand’ when it fell below 10,000.

Presto! There’s the rally. There’s the manipulation. The Dow rallied some 250 points off its low of the day. And, most of that was again, in the final half hour of trading. This is just one example of the many intervention days of the PPT. It is clear that we are now in an era of covert and overt manipulation of all asset markets orchestrated by the central banks. After all, who else could have the power, money, and coordination to simultaneously goose all the asset classes of all the indices around the world at exactly the same time? Now when there is a selloff during the day, doesn’t every single trader on the planet anticipate a PPT savior rally in the last hour of trading? You can see it like the ‘January effect’. Now traders anticipate the PPT arrival by beginning their buying before 3PM. It’s like Christmas Eve and you know Santa is coming so you get the milk and cookies ready. The result is we no longer have real ‘markets’. What we have is casinos operated by the Fed and their shill banks that are manipulated for psychological purposes every day. Asset prices are no longer true. ‘Recovery’ would imply that market prices would be left up to market participants and those prices would balloon back to the stratosphere. The ‘transition’ is to a system in which the government (owned by the Federal Reserve) manipulates asset prices as they act the part of a bear market trampoline. The ‘markets’ will likely never recover. Charts don’t lie!

DIA – 5-day intraday chart, 30-minute bars, week ending 5/21/2010

Chart courtesy StockCharts.com

A third major way we can see transformation in the economy is through US government data. In case you don’t know, it’s all a lie now. All data is contrived and sculpted to make the stock indices seem plausible and an economic ‘recovery’ seem inevitable. Personally, I can hardly read anything that the Commerce Department puts out because I double over in laughter when I see the department name. I think of the Commerce Department as the Government Department of Pathological Lying. In fairness, I love their disclaimer attached to housing numbers that says in essence that due to statistically inaccuracies, they are not sure whether or not housing was actually up or down. In other words, it’s just a number. The unemployment number is reported by the Labor Department and it is supposed to be about 9.7% as I write. However, there isn’t a single, solitary soul on planet Earth that believes that number. I mean there is no one that God ever created that is stupid enough to believe unemployment in the US is less than 15% – much less 10%. Well, there is the Pelosi. But why does the government feel compelled to lie about everything? It seems to me that the only reason we lie is to tell our listener a story that makes them feel better than if they heard the truth. If the government only tells lies, the truth must be horrible. The result is we have a government that cannot be trusted. We must invest money based on what we feel or on what truth we can extract on our own. Recovery would imply a growing respect for citizenry. Transformation will be disdain and contempt for citizenry driven by wilful intent to deceive and control by any means necessary.

Beyond the ‘big three’ economic transitions, there are many other instances of economic metamorphosis. In the interest of brevity, I will list a few that come to mind.

A) Higher taxes are inevitable to support bigger government.

B) High unemployment rates are the new norm. Manufacturing is vital as it supplies jobs of generalized skills. An economy with limited manufacturing activity is one of specialization that requires specialized education, experience and limited manpower requirements.

C) Inflation has pushed the price of education beyond the means of average Americans. Democracies and Republics require an educated populace. Autocracies don’t. A poorly educated society will be poorly employed.

D) Australia just held elections (August, 2010). Voting is required of Australian citizens. Those who don’t cast a vote are fined. Freedom mandates responsibility and education. America is now the land of the ‘entitled’. We want government to give us food, water, and cable TV. Can anyone imagine a fine imposed on US citizens that don’t participate in the voting process? Entitled people care not who rules them as long as they enjoy the fruits of their non-productivity.

E) War is inevitable and perpetual – big governments depend on public fear. As Thomas Jefferson told us: ‘When the government fears the people, you have liberty. When the people fear the government, you have tyranny.’ Big governments justify their size by requiring a big military. That gives the government a reason to spend a lot of money and grow government. Wars are fought with borrowed money. That is a profit center for the big banks.

F) Banks control government with debt. How do they grow debt? See the previous statement. According to usgovernmentspending.com, US GDP is projected to rise to $15.2 trillion in 2011 and $16.2 trillion in 2012. Total federal debt in 2012 is estimated to be $16.3 trillion. America will then be spelled G-R-E-E-C-E. Debt is the ultimate enslaver. Of course, if we add the debts of our GSEs (Fannie and Freddie) and ‘off balance sheet’ entitlement programs like Social Security, the debt is triple digit trillions. That doesn’t even spell G-R-E-EC-E. It just spells B-R-O-K-E!

G) In 2007 – the housing sector contributed 15% to economy. I don’t know the current figures, but I can look around and guess that housing’s contribution is half of what it once was. Recovery implies we return to mania. Transition implies something else has to fill the void of that which no longer exists. In the land of entitlement and regulation, there is nothing to fill the void.

H) Interest rates will soon be zero forever. Why? The Federal Reserve likes it that way. They are in complete charge now. Their only threat is Andrew Jackson and he is not walking amongst us. His Father is buried in the same cemetery as most of my relatives. His spirit burns in veins of some of us. The Fed will choke the country breathless unless they are first choked out of existence by the spirit of Jackson. Stop and salute if you ever pass by Old Waxhaw Presbyterian Church in South Carolina. It is hallowed ground.

In closing, let’s look at currency’s role in economic transition. Why is every nation on the planet trying to devalue their currency? Think about it. As I write, the US has allowed the Federal Reserve to dissolve its currency and now cannot tolerate currency strength as that action mutes exports (needed to lend credence to GDP) and cripples the stock casino. A stronger currency also means that we repay $13.5 trillion in debt with more expensive dollars than were borrowed. The central bank of Japan is struggling to keep the value of their currency from advancing. Despite calls to the contrary, China has resisted allowing their currency to ‘freely float’ in value fearing its value could rise. China is easy. They need to export their way to prosperity. A strong currency would be a hindrance. Japan and the US are the two biggest debtor nations. Now, how do you sell the debt? Foreign nations that extend you credit can hold either your currency or your Treasury debt or both. If I were the Fed, and in charge of a hopelessly and perpetually indebted country, I’d try to make sure that the currency stayed weak and the Treasury price stayed strong.

Aren’t strong currencies a sign of economic strength? Ah, there is the admission. It seems we have transitioned to a weak economy. The transition to a debtor nation is just that. It is not economic recovery – just transition.

US homeowners flock to Florida event in desperate bid to save properties

More than 20,000 American borrowers to hit Palm Beach as Naca’s five-day mortgage modification marathon gets under way

In the pre-dawn darkness of a steamy night of sub-tropical rain, a queue of anxious, soggy people snakes around the palm trees outside a cavernous Florida convention centre. Some have erected camp beds or makeshift tents. All clutch sheaves of mortgage documents.

Welcome to America’s biggest jamboree of delinquent borrowers. For five days, the Neighbourhood Assistance Corporation of America (Naca), a not-for-profit organisation, is working round the clock to help homeowners hang on to their houses. More than 12,000 people have signed up in advance and more than 20,000 are expected to turn up, travelling from as far afield as California, Georgia and Maryland.

“It’s either feed your kids or pay your mortgage,” says Omayra Delgado, a 33-year-old special education teacher whose Miami house has slumped in value from $160,000 (£103,000) to $60,000. “My home is in foreclosure. I’m trying to keep it.”

Politicians’ talk of an economic recovery is laughable to many of those here. This is a last, desperate bid to cling on to home ownership – the event is shrewdly named “save the dream”.

Inside, hundreds of loan advisers sit behind trestle tables. They are colour-coded: Bank of America workers wear red, Citigroup are in blue and Wells Fargo are in black. Even the moribund government-supported refinancing giants Fannie Mae and Freddie Mac are here, but their budgets don’t run to natty coloured clothing.

Borrowers go through orientation and financial counselling sessions. Then, for the luckier applicants who can show a steady income, the loan advisers have the power to reduce interest rates or even write off a proportion of loans.

Bruce Marks, Naca’s chief executive, says this is the only way to dig the nation out of the housing morass: “What you hear from the Obama administration is ‘we’re helpless, our programmes aren’t working’. What you hear from Congress is ‘we don’t know what to do so we’re going to do nothing’.”

Every little adjustment is crucial, because for all the White House’s hopes of a swift bounce back from recession, the US property market is showing signs of renewed distress. Some 10% of US households with mortgages are behind on their payments, according to figures last week from the Mortgage Bankers Association. The percentage of people beginning to have trouble with their loans has begun to rise again, after falling earlier this year – loans that are one month in arrears have gone up from 3.31% to 3.51%. And home sales in July were down 12.4% on June, dropping to 276,000 – the lowest since records began in 1963.


Radar Logic, a property data firm, says the usual summer uptick in property prices has barely happened this year. Thousands of repossessed homes have been put on sale by banks at knockdown prices, inhibiting any vitality in the market. “The inventory of distressed property for sale in this country is just staggering,” says Radar Logic’s chief executive, Michael Feder, who predicts an imminent “double dip” in housing. “There’s just no momentum in pricing, no momentum in inventory.”

The US treasury’s efforts to help borrowers aren’t bearing fruit. The government’s “making home affordable” programme was supposed to protect 3 million homeowners from foreclosure. But the treasury admitted this month that only 422,000 loans have been permanently adjusted so far. The rate is slipping by the month and 616,000 trial modifications have ended in failure.

This outlook is alarming. In the same way the mortgage crisis pushed America into the worst financial storm since the 1930s, a fresh collapse in housing could scupper a fragile recovery that is barely taking root in the world’s largest economy. Goldman Sachs puts the chance of a double-dip recession in the US at 25%. Mark Zandi, the chief executive of rating agency Moody’s, has raised his view of the likelihood from 20% to 33.3%. Nouriel Roubini, the economic guru dubbed “Doctor Doom” for his early prediction of the credit crunch, reckons the probability is more than 40%.

Experts at Capital Economics predict that by the end of the crisis, as many as 4 million Americans may lose their homes: “Aside from the considerable social costs, this does not bode well for consumer spending, bank profits or the housing market itself.”

Florida is an ideal spot for the latest in Naca’s mortgage-altering marathons, which have also taken place in Washington, Atlanta, Phoenix and Las Vegas. The Sunshine State, beloved of British holidaymakers, is in property hell. About 45% of homes here are in negative equity, according to CoreLogic, a research firm, which calculates that Florida’s stock of property is worth $859bn but has $771bn of mortgage debt outstanding.

Irresponsible borrowers are partly at fault. As Tea Party activists never tire of pointing out, property purchasers should not have taken on mortgages they were not able to afford. A CNBC presenter, Rick Santelli, articulated this view with an on-air rant that went viral on the internet last year, calling for a referendum “to see if we really want to subsidise the losers’ mortgages”, claiming government aid for strugglers “will make Thomas Jefferson and Benjamin Franklin roll over in their graves”.

But irrespective of blame, many of those who have travelled to Palm Beach are simply desperate. Darnette Anderson, a receptionist whose husband, Kenneth, spent the night queuing, says her house, which she bought for $115,000 in 2004, was recently valued at $42,000. With her husband out of work, she cannot afford mortgage payments of $1,400 a month: “I just hope and pray that we can get this settled and move on to a comfortable repayment schedule.”

Yrena Cruz, a Wal-Mart worker from Miami, says she and her boyfriend were sucked into an unrealistic mortgage by a low “teaser” rate which subsequently changed to an impossible amount – and the housing crash made it unfeasible to refinance. She said: “I’m worried sick. I can’t wait to get this finished with. My house was worth $400,000. Now, it’s probably half that.”

Some come from surprising backgrounds. A Californian dentist, Dennis Jacobs, 65, flew 2,600 miles from San Diego to try to renegotiate a mortgage on his apartment. He sold his dentistry practice to pay off debts and is now working part-time. He is pessimistic: “I don’t see any uptick in the economy at all. I think the unemployment figures are understated – there are large numbers of people underemployed.”

The jobless rate in the US is 9.6% and has stayed stubbornly close to double figures in spite of Barack Obama’s $787bn economic stimulus package. One reason, say economists, is that older people in states such as Florida are delaying their retirement to cope with straitened finances.

Naca’s chief executive worries the US property crisis may have swung to the opposite extreme, with risk-averse banks reluctant to write even the most sensible of mortgages. Marks says banks “just refuse to lend” because they see no prospect of the “abusive” profits they once made. He is pessimistic about a short-term return to stability: “If somebody is used to getting intoxicated, to taking an extreme amount of drugs or alcohol, then they’re never going to be satisfied with just a beer.”

• This article was amended on 31 August 2010. A subheading in the original referred to the homeowners as “mortgagees”. This has been corrected.

The Age of Mammon

Jim Quinn

Financiers – like bank robbers – do not create wealth. They merely distribute it. While the mob may idolize holdup men in good times, in the bad times it lynches them. What they will do to the new money men when their blood is up, we wait eagerly to find out.”Mobs, Messiahs and Markets

As our economy hurtles towards its meeting with destiny, the political class seeks to assign blame on their enemies for this Greater Depression. The Republicans would like you to believe that Bill Clinton, Robert Rubin, Chris Dodd, and Barney Frank and their Community Reinvest Act caused the collapse of our financial system. Democrats want you to believe that George Bush and his band of unregulated free market capitalists created a financial disaster of epic proportions. The truth is that America has been captured by a financial class that makes no distinction between parties. These barbarians have sucked the life out of a once productive nation by raping and pillaging with impunity while enriching only them. They live in 20,000 square foot $10 million mansions in Greenwich, CT and in $3 million dollar penthouses on Central Park West.

These are the robber barons that represent the Age of Mammon. The greed, avarice, gluttony and acute materialism of these American traitors has not been seen in this country since the 1920′s. The hedge fund managers and Wall Street bank executives that occupy the mansions and penthouses evidently don’t find much time to read the bible in their downtime from raping and pillaging the wealth of the middle class. There are cocktail parties and $5,000 a plate political “fundraisers” to attend. You can’t be cheap when buying off your protection in Washington DC.

Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal: But lay up for yourselves treasures in heaven, where neither moth nor rust doth corrupt, and where thieves do not break through nor steal: For where your treasure is, there will your heart be also. No one can serve two masters, for either he will hate the one and love the other; or else he will be devoted to one and despise the other. You cannot serve both God and Mammon.Matthew 6:19-21,24

It seems that Lloyd Blankfein, the CEO of Goldman Sachs, may have been overstating the case in saying his firm is doing God’s work. With his $67.9 million compensation in 2007 and payment of $20.2 billion to his co-conspirators, Blankfein appears to be a proverbial camel trying to pass through the eye of a needle. This compensation was paid in the year before the financial collapse brought on by the criminal actions of Lloyd and his fellow henchmen. After having his firm bailed out by the American middle class taxpayer at the behest of fellow Goldman alumni Hank Paulson, Lloyd practiced his version of austerity by cutting compensation for his flock to only $16.2 billion ($500,000 per employee) in 2009. I’m all for people making as much money as they can for doing a good job. But, I ask you – What benefits have Goldman Sachs, the other Wall Street banks, and hedge funds provided for America?

Never have so few, done so little, and made so much, while screwing so many.

In 2005, the top 25 hedge fund managers “earned” $9 billion, or an average of $360 million. One year after a financial collapse caused by the financial innovations peddled by Wall Street, the top 25 hedge fund managers paid themselves $25 billion, or an average of $1 billion a piece. For some perspective, there were 7 million unemployed Americans in 2006. Today there are 14.6 million unemployed Americans. While the country plunges deeper into Depression, the barbarians pick up the pace of their plundering and looting of the remaining wealth of the nation. Bill Bonner and Lila Rajiva pointed out a basic truth in 2007, before the financial collapse.

“On the Forbes list of rich people, you will find hedge fund managers in droves, but no one who made his money as a hedge fund client.”Mobs, Messiahs and Markets

Ask the clients of Bernie Madoff how they are doing.

1920′s Redux

The parallels between the period leading up to the Great Depression and our current situation leading to a Greater Depression are revealing. When you examine the facts without looking through the prism of party politics it becomes clear that when the wealth and power of the country are overly concentrated in the clutches of the top 1% wealthiest Americans, financial collapse and depression follow. This concentration of income and wealth did not cause the Stock Market Crash of 1929 or the financial system implosion in 2008, but they were a symptom of a sick system of warped incentives. The top 1% of income earners were raking in 24% of all the income in America in 1928. After World War II until 1980, the top 1% of income earners consistently took home between 9% and 11% of all income in the country. During the 1950′s and 1960′s when average Americans made tremendous strides in their standard of living, the top 1% were earning 10% of all income. A hard working high school graduate could rise into the middle class, owning a home and a car.

From 1980 onward, the top 1% wealthiest Americans have progressively taken home a greater and greater percentage of all income. It peaked at 22% in 1999 at the height of the internet scam. Wall Street peddled IPOs of worthless companies to delusional investors and siphoned off billions in fees and profits. The rich cut back on their embezzling of our national wealth for a year and then resumed despoiling our economic system by taking advantage of the Federal Reserve created housing boom. By 2007, the top 1% again was taking home 24% of the national income, just as they did in 1928. When the wealth of the country is captured by a small group of ruling elite through fraudulent means, collapse and crisis becomes imminent. We have experienced the collapse, while the crisis deepens.

It’s Good To Be the King

The Wall Street oligarchs were able to accumulate an ever increasing portion of corporate profits by inventing securitization, interest-rate swaps, and credit-default swaps which swelled the volume of transactions that bankers could make money on. These products were originally introduced as a means for corporations to hedge their risks. Wall Street shysters chose to use their “creative” financial products to build the biggest gambling casino in the history of the world. They functioned as the house, siphoning off billions in profits, but then got caught up in the hysteria and placed billions of bets themselves. This resulted in the financial industry generating 41% of all business profits in 2007. From World War II through 1980, financial industry profits ranged between 10% and 15%. Simon Johnson explains the despicable hijacking that has taken place since then.

From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.

The original robber barons amassed huge personal fortunes, typically through the use of anti-competitive business practices. These well known titans of industry included Henry Ford, Andrew Carnage, John D. Rockefeller, and JP Morgan. They may have practiced questionable business ethics, but they did create wealth while benefitting the country as a whole. They introduced the automobile, provided the nation with steel, produced the oil that powered our economy, and brought order to industrial chaos of the day. It seems their fortunes were built by creating rather than destroying.

The disgustingly rich Wall Street wheeler dealers who live in Greenwich CT and NYC and summer in the Hamptons have created nothing. Their immense wealth has been created through draining the economic system of its lifeblood. Their financial innovations have created no lasting benefit for our society. Wall Street knowingly created no documentation (liar loans) mortgage loans, Option ARM loans, and subprime loans. You do not create products that beg for fraud unless you want fraud. The packaging of these fraudulent mortgages into CDOs and CDSs by Wall Street’s crime machine benefitted Wall Street only. Those who got the loans defaulted, lost the homes, and had their credit ruined. Wall Street financiers have lured the American public into debt with easy credit and a marketing machine geared to convince the average Joe that he could live just like the rich. Simon Johnson explained the phenomena in a recent article.

“Excessive consumer debt is an outcome of prolonged inequality – in trying to remain middle class, too many people borrowed too much, while unscrupulous lenders were only too willing to take advantage of such people.”

You Call This Capitalism?

Capitalism is supposed to be an economic system in which the means of production and distribution are privately owned and operated for profit; decisions regarding supply, demand, price, distribution, and investments are not made by the government; Profit is distributed to owners who invest in businesses, and wages are paid to workers employed by businesses. The American economy is in no way a free market capitalistic system. It has become a oligarchic consumer capitalist society that is manipulated, in a deliberate and coordinated way, on a very large scale, through mass-marketing techniques, to the advantage of Wall Street and mega-corporations.

When you hear the Wall Street class on CNBC argue against tax increases for the rich, they hark to the fact that small businesses would be hurt most by the expiration of the Bush tax cuts. There are 6 million small businesses in the US, with 90% of them employing less than 20 employees. These are not the rich. The vast majority of these businesses earn less than $1 million per year. There are only about 134,000 people in America who make on average $2.5 million per year. There are another 600,000 people who make on average $760,000 per year. Out of a workforce of 150 million, less than 1 million rake in over $750,000 per year. These are not small businesses. They are the Wall Street elite, corporate CEOs and the privileged classes that control the power in NYC and Washington DC.

The following charts clearly show that perverse incentives in the US financial system that have allowed corporate executives to reap ungodly pay packages, while the middle class workers who do the day after day heavy lifting in corporations have been treated like dogs. Considering the S&P 500, which measures the stock returns of the 500 largest companies in the U.S., has returned 0% for the last 12 years, the CEOs of these companies should be slightly embarrassed paying themselves 300 times as much as their average workers. Not in the age of mammon. Big time CEOs are rock stars. Outrageous pay packages are a medal of honor in a world where humility and true honor don’t exist.

The Depression that currently is engulfing the nation was 30 years in the making. The criminal Wall Street financiers are the modern day John Dilingers. They have mastered the art of stealing from the masses while convincing these same people that they should admire them because they are rich. This is the oddity about Americans as pointed out by Bill Bonner and Lila Rajiva.

“The poor genuinely believe the rich are better than they are. They are smarter and better educated. The poor even support low tax rates for the rich, as long as they have a lurking chance of joining them.” – Mobs, Messiahs and Markets

The truth is that the poor have no chance of joining the the rich. The game is rigged. The poor have admired the rich for decades. But, hard times have arrived. And they are about to get harder. The rich have armed guards to keep the poor at bay. They will need an army of guards before this crisis subsides.

Leonard Cohen sums it up perfectly in his song Everybody Knows:

Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows that the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
That’s how it goes
Everybody knows
Everybody knows that the boat is leaking
Everybody knows that the captain lied
Everybody got this broken feeling
Like their father or their dog just died

Homelessness Up 50% In New York City


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

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

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

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

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

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

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

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

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

Economic Collapse Blog
Tuesday, August 31, 2010

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

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

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

So why is this happening?

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

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

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

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

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

It’s not about competition anymore.

It’s about rigging the game in your favor.

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

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

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

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

Are you starting to get the picture?

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

America’s economy is not about competition anymore.

It is about eliminating competition.

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

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

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

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

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

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

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

The Rich Are Getting Richer

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

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

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

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

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

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

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

The Poor Are Getting Poorer

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

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

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

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

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

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

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

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

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

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

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

The Middle Class Is Being Destroyed

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

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

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

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

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

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

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

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

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

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

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

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

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