Keyser Report, With Jim Rickerts.
Tuesday, September 17, 2013
The Percentage Of Americans That Consider Themselves To Be “Lower Class” Is At An All-Time High
By Michael Snyder
Do you consider yourself to be “lower class”? Most Americans wouldn’t dream of thinking that way. Even at the toughest times of my own life, I always considered myself to be “middle class”. Traditionally, the vast majority of Americans have described themselves as either “middle class” or “working class”, but now we are witnessing a huge shift. According to survey results that were just released, the percentage of Americans that identify themselves as “lower class” is now at an all-time high. It is still only 8.4 percent of the country, but the fact that this number is rapidly growing shows that something is changing on a very fundamental level. In America today, less people than ever believe that they have the opportunity to make a better life for themselves, and according to a brand new Gallup poll that was just released, 20 percent of all Americans did not have enough money to buy food that they or their families needed at some point over the past year. We have 47 million people on food stamps and we have more than 100 million Americans enrolled in at least one welfare program, and that does not even count Social Security or Medicare. We have gone from a “land of opportunity” to a land where tens of millions of people are being crushed by the system.
When I mentioned above that “less people then ever believe that they have the opportunity to make a better life for themselves”, perhaps you doubted that statement.
And I wish that it was not true.
But according to the Los Angeles Times, that is exactly what one new survey shows…
Would you describe yourself as “lower class”?
Not that there is anything wrong with that. It can be very hard to be optimistic about your economic situation when you are trapped in poverty and everyone around you is trapped in poverty.
Even as Barack Obama boldly proclaims that we are in the midst of an “economic recovery”, poverty continues to grow. In New Jersey, poverty hit a 52-year high in 2011, and when the final numbers for 2012 come out it is anticipated that they will be even worse…
In the “bad America”, unemployment is rampant and poverty is everywhere. At this point, low income households have an unemployment rate that is over 21 percent, and there is not much help on the horizon.
In the old days, if the wealthy wanted to get wealthier, they needed the rest of us to run their businesses and work in their factories.
But today, they have figured out that they can make much larger profits by replacing us with computers, robots and machines. They have also figured out that they can ship millions of our jobs to the other side of the planet where it is legal to pay slave labor wages with no benefits.
This is putting a huge squeeze on average American workers. For most Americans, the only thing that they have to offer in the marketplace is their labor. Unfortunately, that labor is not valued as much as it used to be.
Yes, the elite still need us to do service jobs for them. Those are not easily replaced by technology or shipped overseas. So they still need us to cut their hair and flip their burgers.
But without a doubt we have a structural problem with unemployment. As the Brookings Institution recently discovered, it would take 8 million more jobs before we could say that we have “recovered” from the last recession…
Unfortunately, thanks to Obamacare this trend is going to get a lot worse. Millions more Americans are going to be forced into part-time employment. For example, just check out what Trader Joe’s is doing…
In order for there to be a thriving “middle class”, there needs to be lots of middle class jobs.
Sadly, the number of breadwinner jobs that the middle class depends upon is shrinking.
Unless a miracle happens, the percentage of Americans that consider themselves to be “lower class” is probably going to continue to grow.
So how would you solve this problem?
Please feel free to share your ideas by posting a comment below…
Do you consider yourself to be “lower class”? Most Americans wouldn’t dream of thinking that way. Even at the toughest times of my own life, I always considered myself to be “middle class”. Traditionally, the vast majority of Americans have described themselves as either “middle class” or “working class”, but now we are witnessing a huge shift. According to survey results that were just released, the percentage of Americans that identify themselves as “lower class” is now at an all-time high. It is still only 8.4 percent of the country, but the fact that this number is rapidly growing shows that something is changing on a very fundamental level. In America today, less people than ever believe that they have the opportunity to make a better life for themselves, and according to a brand new Gallup poll that was just released, 20 percent of all Americans did not have enough money to buy food that they or their families needed at some point over the past year. We have 47 million people on food stamps and we have more than 100 million Americans enrolled in at least one welfare program, and that does not even count Social Security or Medicare. We have gone from a “land of opportunity” to a land where tens of millions of people are being crushed by the system.
When I mentioned above that “less people then ever believe that they have the opportunity to make a better life for themselves”, perhaps you doubted that statement.
And I wish that it was not true.
But according to the Los Angeles Times, that is exactly what one new survey shows…
Last year, less than 55% of Americans agreed that “people like me and my family have a good chance of improving our standard of living,” the lowest level since the General Social Survey first asked the question in 1987.And even those that are “educated” are becoming more pessimistic…
From 2002 to 2012, the “lower class” among Americans with one to four years of college more than doubled — from 2.6% to 5.8%.So what about you?
Would you describe yourself as “lower class”?
Not that there is anything wrong with that. It can be very hard to be optimistic about your economic situation when you are trapped in poverty and everyone around you is trapped in poverty.
Even as Barack Obama boldly proclaims that we are in the midst of an “economic recovery”, poverty continues to grow. In New Jersey, poverty hit a 52-year high in 2011, and when the final numbers for 2012 come out it is anticipated that they will be even worse…
Poverty in New Jersey continued to grow even as the national recession lifted, reaching a 52-year high in 2011, according to a report released today. The annual survey by Legal Services of New Jersey found 24.7 percent of the state’s population — 2.1 million residents — was considered poor in 2011. That’s a jump of more than 80,000 people — nearly 1 percent higher than the previous year and 3.8 percent more than pre-recession levels. ”This is not just a one-year or five-year or 10-year variation,” said Melville D. Miller Jr., the president of LSNJ, which gives free legal help to low-income residents in civil cases. “This is the worst that it’s been since the 1960 Census.” And it may get worse: The report warned Census figures for 2012 to be released this month may be higher.There are two Americas today. In the “good America”, stock values are soaring and almost everyone has a job. People from that America openly wonder why everyone is so concerned about the economy.
In the “bad America”, unemployment is rampant and poverty is everywhere. At this point, low income households have an unemployment rate that is over 21 percent, and there is not much help on the horizon.
In the old days, if the wealthy wanted to get wealthier, they needed the rest of us to run their businesses and work in their factories.
But today, they have figured out that they can make much larger profits by replacing us with computers, robots and machines. They have also figured out that they can ship millions of our jobs to the other side of the planet where it is legal to pay slave labor wages with no benefits.
This is putting a huge squeeze on average American workers. For most Americans, the only thing that they have to offer in the marketplace is their labor. Unfortunately, that labor is not valued as much as it used to be.
Yes, the elite still need us to do service jobs for them. Those are not easily replaced by technology or shipped overseas. So they still need us to cut their hair and flip their burgers.
But without a doubt we have a structural problem with unemployment. As the Brookings Institution recently discovered, it would take 8 million more jobs before we could say that we have “recovered” from the last recession…
Last month, the unemployment rate fell to 7.3% from 8.1% a year ago. That might signal progress, but the share of workers with jobs was 58.6%; it has remained close to that for several years. The unemployment rate is inherently flawed and isn’t the best measure of economic progress; it counts only those with jobs or actively looking for work.And of course the quality of our jobs continues to decline as well. In America today, only 47 percent of adults have a full-time job, and one out of every ten jobs is now filled by a temp agency.
And in a frustratingly slow economic recovery that has discouraged countless workers, it risks ignoring these missing workers — an estimated 6 million, according to the Brookings Institution’s Hamilton Project.
The Washington-based think tank has come up with what it calls the “jobs gap,” or the number of jobs it would take to offset the effects of the Great Recession. Factoring in the millions of jobs lost during the Great Recession and the number of jobs needed to absorb new workers, the nation needs 8.3 million jobs to fully recover from the recession.
Unfortunately, thanks to Obamacare this trend is going to get a lot worse. Millions more Americans are going to be forced into part-time employment. For example, just check out what Trader Joe’s is doing…
Trader Joe’s, the grocer once lauded for providing health care coverage to its part-time workers, is about to push those employees off its plan.I wish that there was better news to report, but we have to be very honest about where we are at as a nation.
According to a memo obtained by the Huffington Post, the company will stop covering employees who work less than 30 hours per week.
The change is set for the start of 2014. Instead of insurance, workers instead will get a check for $500 in January.
“Depending on income you may earn outside of Trader Joe’s, we believe that with the $500 from Trader Joe’s and the tax credits available under the [Affordable Care Act (ACA)], many of you should be able to obtain health care coverage at very little if any net cost to you,” said Trader Joe CEO Dan Bane in the memo.
In order for there to be a thriving “middle class”, there needs to be lots of middle class jobs.
Sadly, the number of breadwinner jobs that the middle class depends upon is shrinking.
Unless a miracle happens, the percentage of Americans that consider themselves to be “lower class” is probably going to continue to grow.
So how would you solve this problem?
Please feel free to share your ideas by posting a comment below…
Canadian billionaire predicts end of US Dollar as world’s reserve currency – Ned Goodman
Published on Sep 15, 2013
Canadian billionaire businessman Ned Goodman
predicts the end of the U.S. Dollar as the world’s reserve currency. He
predicts the transition out of the U.S. Dollar will become, “…quite
ugly.” He delivered the lecture at Cambridge House’s Toronto Resource
Investment Conference 2013 on Thursday, September 12, 2013.
Legacy of US Empire: Worthless dollars, garbage & Prozac addiction
Watch the full Keiser Report E498 on Tuesday!
In this episode of the Keiser Report, Max Keiser and Stacy Herbert, discuss economic espionage and, perhaps, sabotage by the NSA against the corporations and innovators of competitor nations. In the second half, Max interviews author, journalist and filmmaker, Greg Palast of GregPalast.com, about the Larry Summers’ secret ‘End Game’ memo and the decriminalization of what were once financial crimes.
AP IMPACT: Many US bridges old, risky and rundown
AP IMPACT: Thousands of US bridges that carry millions daily have multiple safety red flags
The Washington Monument stands
behind the Frederick Douglass Memorial Bridge which spans the Anacostia
River in Washington on Wednesday, Sept. 4, 2013. An Associated Press
analysis of federal data found 7,795 bridges around the country,
including this one, in significant disrepair and at risk of collapse
should a single, vital component fail - a combination of red flags that
experts say is particularly problematic. (AP Photo/Alex Brandon)
Joan Lowy and Mike Baker, Associated Press
September 16, 2013 7:35 AM
WASHINGTON (AP) -- Motorists coming off the Frederick Douglass Memorial Bridge into Washington are treated to a postcard-perfect view of the U.S. Capitol. The bridge itself, however, is about as ugly as it gets: The steel underpinnings have thinned since the structure was built in 1950, and the span is pocked with rust and crumbling concrete.
District of Columbia officials were so worried about a catastrophic failure that they shored up the horizontal beams to prevent the bridge from falling into the Anacostia River.
And safety concerns about the Douglass bridge, which is used by more than 70,000 vehicles daily, are far from unique.
An Associated Press analysis of 607,380 bridges in the most recent federal National Bridge Inventory showed that 65,605 were classified as "structurally deficient" and 20,808 as "fracture critical." Of those, 7,795 were both — a combination of red flags that experts say indicate significant disrepair and similar risk of collapse.
A bridge is deemed fracture critical when it doesn't have redundant protections and is at risk of collapse if a single, vital component fails. A bridge is structurally deficient when it is in need of rehabilitation or replacement because at least one major component of the span has advanced deterioration or other problems that lead inspectors to deem its condition poor or worse.
Engineers say the bridges are safe. And despite the ominous sounding classifications, officials say that even bridges that are structurally deficient and fracture critical are not about to collapse.
The AP zeroed in on the Douglass bridge and others that fit both criteria — structurally deficient and fracture critical. Together, they carry more than 29 million drivers a day, and many were built more than 60 years ago. Those bridges are located in all 50 states, plus Puerto Rico and the District of Columbia, and include the Brooklyn Bridge in New York, a bridge on the New Jersey highway that leads to the Lincoln Tunnel, and the Main Avenue Bridge in Cleveland.
The number of bridges nationwide that are both structurally deficient and fracture critical has been fairly constant for a number of years, experts say. But both lists fluctuate frequently, especially at the state level, since repairs can move a bridge out of the deficient categories while spans that grow more dilapidated can be put on the lists. There are occasional data-entry errors. There also is considerable lag time between when state transportation officials report data to the federal government and when updates are made to the National Bridge Inventory.
Many fracture critical bridges were erected in the 1950s to 1970s during construction of the interstate highway system because they were relatively cheap and easy to build. Now they have exceeded their designed life expectancy but are still carrying traffic — often more cars and trucks than they were originally expected to handle. The Interstate 5 bridge in Washington state that collapsed in May was fracture critical.
Cities and states would like to replace the aging and vulnerable bridges, but few have the money; nationally, it is a multibillion-dollar problem. As a result, highway engineers are juggling repairs and retrofits in an effort to stay ahead of the deterioration.
There are thousands of inspectors across the country "in the field every day to determine the safety of the nation's bridges," Victor Mendez, head of the Federal Highway Administration, said in a statement. "If a bridge is found to be unsafe, immediate action is taken."
At the same time, all that is required to cause a fracture critical bridge to collapse is a single unanticipated event that damages a critical portion of the structure.
"It's kind of like trying to predict where an earthquake is going to hit or where a tornado is going to touch down," said Kelley Rehm, bridges program manager for the American Association of State Highway and Transportation Officials.
Signs of age are clear. The Douglass bridge, also known as the South Capitol Street Bridge, was designed to last 50 years. It's now 13 years past that. The district's transportation department has inserted so-called catcher beams underneath the bridge's main horizontal beams to keep the bridge from falling into the river, should a main component fail.
Alesia Tisdall, who drove over the bridge every day for 15 years but now crosses it only occasionally, said she found its "bounce" unnerving.
"You'd look at the person sitting next to you like, 'Did you feel that bounce?' And they'd be looking back at you like they were thinking the same thing," said Tisdall, a computer systems specialist at the Justice Department.
Peter Vanderzee, CEO of Lifespan Technologies of Alpharetta, Ga., which uses special sensors to monitor bridges for stress, said steel fatigue is a problem in the older bridges.
"Bridges aren't built to last forever," he said. He compared steel bridges to a paper clip that's opened and bent back and forth until it breaks.
"In a bridge system, it may take millions of cycles before it breaks. But many of these bridges have seen millions of cycles of loading and unloading."
That fatigue is evident in a steel truss bridge over Interstate 5 in Washington state — south of the similar steel truss that collapsed in May. The span that carries northbound drivers over the east fork of the Lewis River was built in 1936.
Because of age, corrosion and metal fatigue caused by vibration, the state has implemented weight restrictions on the bridge. Washington state Department of Transportation spokeswoman Heidi Sause said the bridge wasn't built for the kind of wear — bigger loads and more traffic — that is now common.
The biggest difference between the bridge over the Lewis River and the one over the Skagit River that collapsed May 23 is that the span still standing has actually been listed in worse condition. State officials hope to replace it in the next 10 to 15 years.
While the Skagit span was not structurally deficient, the I-35W bridge that collapsed in Minneapolis in 2007 had received that designation. The bridge fell during rush hour, killing 13 people and injuring more than 100. The National Transportation Safety Board concluded that the cause of the collapse was an error by the bridge's designers, not the deficiencies found by inspectors. A gusset plate, a fracture critical component of the bridge, was too thin.
There are wide gaps between states in historical bridge construction and their ongoing maintenance. While the numbers at the state level are in flux, Iowa, Nebraska, Missouri and Pennsylvania have all been listed recently in the national inventory as having more than 600 bridges both structurally deficient and fracture critical.
Pennsylvania has whittled down its backlog of structurally deficient bridges but still has many more to go, with an estimated 300 bridges in position to move onto the structurally deficient list every year if no maintenance is done.
Officials say northeastern states face particular challenges because the infrastructure there is older and the weather is more grueling, with dramatic and frequent freeze-thaw cycles that can put stress on roads and bridges.
Many Pennsylvania lawmakers have long sought to boost transportation funding, in part to address crumbling bridges. But this year's proposals, including Gov. Tom Corbett's $1.8 billion plan, stalled amid fights over details.
That's a common issue among infrastructure managers in other states, who say they don't have the money to replace all the bridges that need work. Instead, they continue to do patch fixes and temporary improvements.
Washington's Douglass bridge has been rehabilitated twice. Ronaldo Nicholson, the chief bridge engineer for the area, emphasized that if city officials feel the bridge is unsafe, they'll prohibit trucks from crossing or close the span entirely. Inspections have been stepped up to every six months instead of the usual two-year intervals for most bridges. In the meantime, officials are trying to stretch the bridge's life for another five years — the time they estimate it will take to build a replacement.
Congressional interest in fixing bridges rose after the 2007 collapse in Minneapolis, but efforts to add billions of extra federal dollars specifically for repair and replacement of deficient and obsolete bridges foundered. A sweeping transportation law enacted last year eliminated a dedicated bridge fund that had been around for more than three decades. State transportation officials had complained the fund's requirements were too restrictive. Now, bridge repairs or replacements must compete with other types of highway projects for federal aid.
The new law requires states to beef up bridge inspection standards and qualifications for bridge inspectors. However, federal regulators are still drafting the new standards.
"Do we have the funding to replace 18,000 fracture critical bridges right now?" Rehm asked. "No. Would we like to? Of course."
___
Baker reported from Seattle. Interactive Newsroom Technology Editor Troy Thibodeaux in New Orleans contributed data analysis.
___
The AP National Investigative Team can be reached at investigate@ap.org
Follow Joan Lowy on Twitter at http://www.twitter.com/AP_Joan_Lowy and Baker at https://twitter.com/MikeBakerAP
Obama Admits: The One Percent is Winning, Poor are Losing On His Watch
President Barack Obama
(Photo: Alexander Vilf/Host Photo Agency via Getty Images) Five years
after the financial collapse, President Obama admitted Sunday that his
administration has overseen a deepening gulf between rich and poor, with
95 percent of all income gains going to the top one percent since the
so-called “recovery” began in 2009.
Appearing on the Sunday morning show of ABC’s “This Week with George Stephanopoulos,” Obama was pressed by the host to respond to a recent study by University of California researchers that shows the rich have gotten richer while the poor continue to languish.“95 percent of the gains to the top one percent. That is so striking,” declared Stephanopoulos.
Obama responded, “It is. And the folks at—in the middle and at the bottom haven’t seen wage or income growth, not just over the last three, four years, but over the last 15 years.”
Obama went on to defend his record, claiming that his push for the Affordable Care Act, “fair” taxes, and a “strengthened” banking system will somehow shift the trend. He declared that creating more jobs, stabilizing the economy, and reducing income inequality are his top priorities.
Yet, Stephanopoulos repeatedly brought Obama back to the stark reality of growing class inequality and poverty under his administration.
“Right,” Obama again confirmed, cutting off the host.
_____________________
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 LicenseCopyright: Common Dreams
Sabotage: Special Forces To Target U.S. Economy, Infrastructure, Railways, Power Plants, Waterworks, and Refineries In the Event of Mid East Conflict
If you were under the impression that the brewing conflict with Syria
is over or that it would be a simple one sided affair with the United
States launching “brief and limited” strikes on Syrian military assets,
then consider the following report from a Russian military review.
According to Senior sources within the Syrian military, as well as Russian insiders, an attack on Syria will not come without repercussions here in the United States. The report, published by the widely read European newspaper Pravda and not carried by mainstream U.S. news channels, indicates that Bashar Al-Assad has been pre-positioning Syrian special operations teams inside the United States with the sole intention of disrupting our economy and causing maximum damage to critical U.S. infrastructure elements in high population areas including railways, power plants, water utilities, oil refineries and military targets.
Should President Obama launch an attack on Syria (or perhaps even Iran, Syria’s closest ally), these forces have been given orders to engage key targets on U.S. soil.
Save September 11th, there have been no large-scale foreign born attacks on U.S. soil in recent history. Though German submarines targeted U.S. naval assets off our coasts during World War II, America has been left generally unscathed during military conflicts since the Korean war in the 1950′s.
That will change should the United States attempt military intervention in Syria or Iran.
If this report is to be believed (and it could be nothing more than propaganda), this time around Americans will directly experience the fallout from wars we initiate in other countries, and it will come in similar fashion to what we’ve done in Iraq and Libya, and have planned to do in Syria. The targets will be the civilian population, which will be left without electricity, water and potentially even food due to lack of gasoline supplies should the handful of refineries that make it available in the U.S. be destroyed or damaged.
These critical infrastructure elements are totally exposed to sabotage. Each of them, as well as our nuclear power plants, are usually only protected by private security firms (not the military-grade kind) and local police forces. Thus, a well coordinated military style takeover of utility plants or refineries is not out of the question, and is a completely plausible scenario.
We don’t know the exact number of Syrian special forces commandos supposedly in the United States. However, even a limited strike force, combined with cyber fighters such as the Iranian backed Izz ad-Din al-Qassam, an organization that may have been responsible for last month’s NASDAQ stock exchange outage, could wreak havoc across a totally unsuspecting U.S. public.
What we know is that our life sustaining infrastructure is not secure. The U.S. government knows this and has been planning contingency operations should these areas of our country come under attack.
We also know that any disruptions to the regular flow of commerce would be disastrous, leading very quickly to panic, looting, and a breakdown in civil order.
The Syrians, Iranians and Russians know this as well, thus it only makes sense for a country with limited military resources to take this course of action should we engage them in military conflict.
If we attack Syria or Iran in the future, the American people can fully expect a direct response on U.S. soil. This could well result in our emergency response personnel being overwhelmed and without the ability to provide aid for the millions of people who would be affected within a matter of hours.
The only prudent steps to be taken by the American people are to individually plan and prepare for such events. The government will not be there to provide aid, because despite their efforts to convince us they have everything under control, nothing could be further from the truth. Isolated regional disasters like Hurricane Sandy or Katrina led to complete pandemonium in the streets.
If we can’t handle a Hurricane when we have been given a week of advance warning, what do you think will happen if our infrastructure, economy and commerce systems are hit with a coordinated military attack across the most densely populated areas of the country?
Copyright: SHTF Plan
According to Senior sources within the Syrian military, as well as Russian insiders, an attack on Syria will not come without repercussions here in the United States. The report, published by the widely read European newspaper Pravda and not carried by mainstream U.S. news channels, indicates that Bashar Al-Assad has been pre-positioning Syrian special operations teams inside the United States with the sole intention of disrupting our economy and causing maximum damage to critical U.S. infrastructure elements in high population areas including railways, power plants, water utilities, oil refineries and military targets.
Should President Obama launch an attack on Syria (or perhaps even Iran, Syria’s closest ally), these forces have been given orders to engage key targets on U.S. soil.
Hundreds of Syrian army special forces soldiers are currently located on the territory of the United States, ready to conduct a series of sabotage operations in case of a military aggression against Syria.If true, it’s possible that this and the threat of a Russian military response are responsible for President Obama’s back peddling on military strikes in Syria.
…
The publication lists potential targets that can be damaged, including railways, power stations, power plants, waterworks, oil and gas terminals, and military objects, mostly air and naval bases.
An anonymous source said that the diversion could be implemented in the most densely populated areas and states in order to cause maximum damage to the U.S. economy and infrastructure, simultaneously causing panic among the population.
Attacks against civilians are not planned, the anonymous source at the Ministry of Defense of Syria assured. All fighters grouped in units of three to seven people are employed by the Syrian special forces “al-Qassam” and undergone an extensive training. They are equipped to carry out sabotage operations in the United States.
The source said that the Syrian leadership has chosen this strategy based on the experience of the wars in Yugoslavia, Iraq, and Libya, where the aggression was reflected from a defensive position, which doomed these countries to failure.
Save September 11th, there have been no large-scale foreign born attacks on U.S. soil in recent history. Though German submarines targeted U.S. naval assets off our coasts during World War II, America has been left generally unscathed during military conflicts since the Korean war in the 1950′s.
That will change should the United States attempt military intervention in Syria or Iran.
If this report is to be believed (and it could be nothing more than propaganda), this time around Americans will directly experience the fallout from wars we initiate in other countries, and it will come in similar fashion to what we’ve done in Iraq and Libya, and have planned to do in Syria. The targets will be the civilian population, which will be left without electricity, water and potentially even food due to lack of gasoline supplies should the handful of refineries that make it available in the U.S. be destroyed or damaged.
These critical infrastructure elements are totally exposed to sabotage. Each of them, as well as our nuclear power plants, are usually only protected by private security firms (not the military-grade kind) and local police forces. Thus, a well coordinated military style takeover of utility plants or refineries is not out of the question, and is a completely plausible scenario.
We don’t know the exact number of Syrian special forces commandos supposedly in the United States. However, even a limited strike force, combined with cyber fighters such as the Iranian backed Izz ad-Din al-Qassam, an organization that may have been responsible for last month’s NASDAQ stock exchange outage, could wreak havoc across a totally unsuspecting U.S. public.
What we know is that our life sustaining infrastructure is not secure. The U.S. government knows this and has been planning contingency operations should these areas of our country come under attack.
We also know that any disruptions to the regular flow of commerce would be disastrous, leading very quickly to panic, looting, and a breakdown in civil order.
The Syrians, Iranians and Russians know this as well, thus it only makes sense for a country with limited military resources to take this course of action should we engage them in military conflict.
If we attack Syria or Iran in the future, the American people can fully expect a direct response on U.S. soil. This could well result in our emergency response personnel being overwhelmed and without the ability to provide aid for the millions of people who would be affected within a matter of hours.
The only prudent steps to be taken by the American people are to individually plan and prepare for such events. The government will not be there to provide aid, because despite their efforts to convince us they have everything under control, nothing could be further from the truth. Isolated regional disasters like Hurricane Sandy or Katrina led to complete pandemonium in the streets.
If we can’t handle a Hurricane when we have been given a week of advance warning, what do you think will happen if our infrastructure, economy and commerce systems are hit with a coordinated military attack across the most densely populated areas of the country?
Copyright: SHTF Plan
Inequality for All: Robert Reich Warns Record Income Gap Is Undermining Our Democracy
Five years ago this weekend, the Wall Street giant Lehman Brothers
collapsed triggering the worst financial crisis since the Great
Depression. Today, the divide between the 1 percent and the 99 percent
is as great as ever. According to one recent study, the top 1 percent
has captured about 95 percent of the income gains since the recession
ended. “Since the recovery, almost all of the gains have gone to the
very, very top. People who are in the top 1 percent are doing even
better than they did before the Great Recession, better than they have
done since 1928,” says former Labor Secretary Robert Reich. “Most
Americans are on a downward escalator. Median wage in the United States,
adjusted for inflation, keeps on dropping.” Reich is the focus of the
new film, “Inequality for All.” In this interview, he also talks about
Syria, the second anniversary of Occupy Wall Street on September 17,
Obama’s healthcare plan and Milton Friedman’s connection to the Pinochet
dictatorship in Chile.
TRANSCRIPT
This is a rush transcript. Copy may not be in its final form.
Amy Goodman: Five years ago this weekend, the Wall Street giant Lehman Brothers collapsed, triggering the worst financial crisis since the Great Depression. At the time, Lehman was the fourth-largest bank on Wall Street. It collapsed under the weight of subprime, mortgage back securities tied to the crumbling U.S. housing market. Five years after the financial crisis began, millions are still suffering, but Wall Street is not. While next week marks the second anniversary of occupy Wall Street, the divide between the 1% and the 99% is as great as ever. According to one recent study, the top 1% has captured about 95% of the income gains since the recession ended. Meanwhile, the top 10% of earners last year to more than half the countries total income, the highest level recorded since the government began collecting relevant data a century ago. Today we’re joined by former Secretary of labor and renowned economist Robert Reich. He is the focus of a new film called, “Inequality for All.”
Robert Reich: The thing you ought to know about this Mini-Cooper, it is small. Me and my car. We are in proportion. My name is Robert Reich. I was secretary of labor under Bill Clinton, before that, the Carter Administration, before that, I was a special assistant to Abraham Lincoln. Of all developed nations, The United States has the most unequal distribution of income. We’re surging toward even greater inequality. 1928 and 2007 become the peak years for income concentration. It looks like a suspension bridge.
Interviewee: Last year we made $36,000.
Interviewee: I probably make $50,000 a year working 70 hours a week.
Robert Reich: The middle class is struggling. The people occasionally say to me, what nation does it better? The answer is, the United States. After World War II, the economy boomed. You had very low inequality.
Bill O’Reilly: You know Robert Reich?
Fox News Guest: I do indeed.
Bill O’Reilly: He is a communist.
Robert Reich: When I was a kid the bigger boys would pick on me. I think it changed my life. I had to protect people from the people who would beat them up economically. Who is actually looking out for the American worker? The answer is nobody. Workers don’t have a power if they don’t have a voice. Their wages and benefits start eroding. We are losing equal opportunity in America. Anyone of you who feels cynical, just consider where we have been.
Amy Goodman: The trailer for the new film “Inequality for All” featuring Robert Reich. It opens in theaters September 27th. Robert Reich joins us here in New York. He served as labor secretary under President Lincoln — under President Clinton and now is a professor at the University of California, Berkeley. Time Magazine named him one of the most ten most effective cabinet secretaries of the last century. He has written twelve books including “Aftershock: The Next Economy & America’s Future” and “Beyond Outrage.” Expanded edition, what has gone wrong with our economy and our democracy and how to fix it. Welcome back to _Democracy Now! _
Robert Reich: Hi Amy. You know, I am getting so old that my students really do believe I was a special assistant to Abraham Lincoln. Those were tough years, I tell them, and they have stopped getting the joke.
Amy Goodman: They have heard of Abraham Lincoln.
Robert Reich: They have heard of Abraham Lincoln. That’s right.
Amy Goodman: So, you’re a good teacher, then.
Robert Reich: But look, they don’t have — my students, who are very idealistic, and they do want to change the world, they, in their lives don’t have very much of a memory of government or even of a society that we are a part of expanding equal opportunity, changing the structure of power. They don’t remember as I do the 1960s.
Amy Goodman: Let’s talk about this fifth anniversary of the collapse of Lehman Brothers, the beginning of the recession and who has profited in this last five years. It has certainly not been bad for everyone.
Robert Reich: Oh, no. In fact, Emmanuel Saez, my colleague at Berkeley who has really done the pioneering work on determining who has got what and looked at income tax records, he’s just came out with a new study showing that since the recovery, almost all the gains have gone to the very, very top. People who are in the top 1% are doing better than they did even before the great recession, better than they have done since 1928. Remember what happened after 1928, we had a great crash. Remember after 2007, which was the last peak in terms of inequality, we had another crash. We can get back to why there is a relationship there, but most Americans are on a downward escalator. The median wage in the United States adjusted for inflation keeps on dropping.
Amy Goodman: You use the image of a suspension bridge to talk about inequality in the film.
Robert Reich: Because, up until this new study, shows that to 2012 actually is the new peak. The old peaks were 1928 and 2007. Which is interesting because in 1929 and 2008 we had crashes. And I think it is not coincidental. Because when so much of the income and wealth go to the top, the rest simply don’t have the purchasing power to keep the economy going at full employment.
Amy Goodman: Talk about what’s happened to everyone else.
Robert Reich: What’s happening to everybody else is not only wages eroding and a very large number of discouraged workers, who basically, are never going to be able to find jobs, but economic insecurity. Most Americans today, even if they have jobs, even if the jobs pay fairly well, are much more insecure than Americans have ever been at work before, at least in living memory. Because we have a huge number of contingent workers, huge number of part-time workers, huge number of workers who can’t know what their paychecks are going to be because they’re paid on a contingency fee, bonuses, working hours, billable hours. That means they cannot plan and have to live, to some extent, from paycheck to paycheck. That insecurity, coupled with declining wages, coupled with more and more concentration of income and wealth at the top, has led to an economy that is very vulnerable and a democracy that is also very vulnerable, because all of that money at the top is being transformed into political power every day.
Amy Goodman: Political power. I want to refer to Syria right now. It is something you also have written about, Syria and the reality at home in America. Aside from the moral and strategic arguments against the war or a strike on Syria by the United States, can easily talk about what the cost of war mean?
Robert Reich: Every time the United States has got into this tinderbox in the Middle East, for reasons that we can debate, whether it is good or not, there have been ancillary, let’s call them, ancillary consequences. Civilians are killed. You can’t prevent civilians from being killed. There is a rise in anti-American sentiment. There is a rise in terrorism. We deflect attention from what is going on here in the United States in terms of widening inequality, what needs to be done here in America. We use resources that could otherwise be used on our poor on infrastructure, on education. I am old enough to remember Lyndon Johnson’s and the great society ending on the shoals of Vietnam, another Civil War, in effect, where we were told exactly what, ironically, what John Kerry is saying about Syria. American resolve is at stake, our credibility is at stake. If we don’t do this, our enemies are going to be emboldened. He is using the same words, ironically, that were used by McNamara in the 1960s when John Kerry was —
Amy Goodman: The former secretary of defense under Lyndon Johnson.
Robert Reich: The former Secretary of Defense, when John Kerry was protesting the Vietnam War. I hope this irony is not lost on Kerry or anybody else.
Amy Goodman: Chuck Hagel, who opposed the Iraq war, our current Defense Secretary, when asked what will be the cost of these strikes, because very few people are talking about the actual economic costs. He said something like tens of millions of dollars.
Robert Reich: Look, these things tend to escalate out of control. We know that. We have been there before. I mean in living memory of most of us. What Assad has apparently done, and I’m assuming Assad was responsible for the chemical — the use of chemical weapons, is abhorrent, absolutely abhorrent. There has to be some world response. But, to assume that the United States is the only world’s policeman and that missiles are going to actually be the best response as opposed to economic sanctions or freezing assets or doing any number of things, the most powerful economic force in the world can do, that is the United States, I think is the height of folly at this particular point in time.
Amy Goodman: We are talking to former Labor Secretary Robert Reich. Now, when you were the Secretary of Labor under President Clinton, interestingly, especially in light of the NSA scandal today and how the Obama administration is reeling from all of the leaks around U.S. government spying on Americans, you proposed cutting the CIA budget in half and giving the money to inner-city schools.
Robert Reich: I did, and I was making a kind of play on the notion of U.S. intelligence because I just sat through a briefing where the CIA and the intelligence committee said they needed more money, and I said — and I was slightly tongue-in-cheek, but I was quite serious, Amy. I said, if we’re really concerned about U.S. intelligence, the most important intelligence we have are the brains and capacities of our kids as they face their adulthood and their futures, and we need better schools, particularly in poor communities, and we need to spend a lot of money and we’re spending far more on the wrong kind of intelligence. I didn’t get a very positive response, let’s put it that way.
Amy Goodman: Were talking to Robert Reich. He is the subject of a new film. It’s called “Inequality for All.” He teaches, now, economics at the University of California Berkeley. Was the Labor Secretary under President Clinton. We will be back with him in a minute.
Amy Goodman: Former Labor Secretary Robert Reich is our guest today. I want to turn to another clip from the new film, “Inequality for All” which will be released around the country September 27th. Here Bob Reich explains how he got interested in issues of economic justice.
Robert Reich: When I was a kid, the bigger boys would pick on me. That is what you did. That’s what is done. So I got an idea that I would make alliances with older boys. Just one or two who would be my protectors. The summer when I was about ten, one of the older boys who I depended on to kind of be a protector whose name was Michael Schwerner, in the summer of 1964, I learned that Mickey had been in Mississippi registering voters and he and two other people who had been with him registering voters were tortured and murdered. And when I heard that my protector had been murdered by the real bullies, I think it changed my life. I had to protect people from the bullies, the people who would beat them up economically or the people who would subject them and their families to real harm. Because if you don’t have a voice, if you don’t have power, if you’re vulnerable economically in society, you don’t have anybody to protect you.
Amy Goodman: That’s Robert Reich featured in “Inequality for All” talking about what inspires you. This is the 50th anniversary, of course, of the 1963 March on Washington as well. Talk more about your experience.
Robert Reich: Well, like many people who are my age, the 1960s were the formative era.
We were involved in the Civil Rights Movement, even peripherally, the anti-Vietnam War movement. I spent a lot of time organizing young people for Eugene McCarthy; went clean for Gene in 1968. But, out of all of that came a sense of efficacy, a sense that we really could change the world. There had been a civil rights act, a voting rights act, we ended the Vietnam War and there was also an assumption that I shared with many people that, of course, you would spend much of your life working to improve society. Even if that was not going to be your official vocation or your job. Still, that was part of your work, part of your life’s work. It wasn’t just me. There were really millions of us. I think that assumption may be different now. One of the great victories of the right, particularly the radical right, has been to spread such cynicism about the capacity of the country to change and generate social justice that many people just have given up. They basically I don’t want anything to do with politics, it is all corrupt, I don’t want anything to do with that kind of focus on social movements at that scale. They will go nowhere. But that, you see, that kind of cynicism about our politics and our government cedes everything, cedes control to the money interests. And that is exactly what they want.
Amy Goodman: Can you talk about what has just happened in California? Governor Brown says he will sign this legislation around increasing the minimum wage. It will be the highest in the country, and yet the backlash that we have seen?
Robert Reich: Well, look, 85% of Americans support a minimum wage increase. If you just kept the minimum wage we had a 1968 steady, adjusted for inflation, it would be $10.40 right now. If you adjusted the minimum wage or the productivity improvements we have had since the late 1960s, the minimum wage would be over $15 an hour. Martin Luther King in 1963, that was a march for jobs and justice, and one of the planks was moving the minimum wage to two dollars an hour, which, today’s dollars, would be well over $14, in fact, by some measure about $15 and hour. So, this is not out of our tradition. This is not a radical notion. This is what it would be, all other things being equal, and if you put more money people’s pockets, they can turn around and buy stuff, which means more jobs, not fewer jobs.
Amy Goodman: Let’s go back to another clip of “Inequality for All.” The focus here is problems of American workers today.
Robert Reich: Contrary to popular mythology, mobilization and technology haven’t really reduced the number of jobs available to Americans. These transformations reduced their pay. It is not just that wages are stagnating, but, when you take into consideration rising cost, the rising costs of rents or homes dramatically increasing costs of health care. The rising costs of childcare and also the rising costs of higher education, rising much faster than inflation. Take all of these into consideration and you find it is much worse than just stagnating wages, it is basically middle-class families, often with two wage earners, working harder and harder and harder and getting nowhere.
Amy Goodman: An excerpt of “Inequality for All,” which is being released in two weeks. Bob Reich, what about health care? What about the costs of health care? What about the costs of Obamacare, the cost of what Medicare for all would be, the cost of the system we have today?
Robert Reich: Well, look, it is the most inefficient and costly system that any advanced country has, yet we have the highest infant mortality, the lowest level of — even in terms of lifespans we don’t do as well as many other countries. We ought to have a single payer plan. We will eventually have a single payer. It is the only rational direction to go in. Everybody admits this. Even doctors and medical professionals and heads of medical institutions I sit with and talk with, privately they say, yes, we’re going to have to go to single-payer. They just don’t say it publicly. The fact we didn’t even have a public option in the Affordable Care Act is absurd. On the other hand, though, Amy, the Affordable Care Act is a beginning. Let’s be clear. This is something that Bill Clinton couldn’t get, Franklin D. Roosevelt couldn’t get, Harry Truman couldn’t get, John F. Kennedy couldn’t get. I mean, it is at least a major step in the right direction. And the Republicans are apoplectic about it. They’re threatening to not even to raise the debt ceiling unless we roll back or unless they get rid of and repeal the Affordable Care Act. I think most Americans, once they see the act working and once they enjoy the benefits, will be incredibly supportive, which is exactly what the opponents are worried about.
Amy Goodman: Why do you think the media has not been — I mean the media is supposed to be separate from the Government, from the insurance industry has not been able to convey what these costs are and to actually show exactly where the U.S. stands in the world so people could make a rational decision.
Robert Reich: Well, you say the media is supposed to be separate from the private sector and separate from the insurance industries and everything else. I wish I could say with a straight face that America’s news media and news outlets were not influenced at all by advertisers or by insurance companies and drug companies. Drug companies advertise like mad. I’m not sure that is the case. I think that Americans have not really had and been given a clear idea of the absurdities and unnecessary costs of our health care system. I mean prevention is and should be the rule of game. But, it is all a matter of fee-for-service and everyone is inside living off that fee-for-service likes that way, but we’ve got to move to a system that awards healthy outcomes.
Amy Goodman: I want to turn to another anniversary. Next Tuesday marks the second anniversary of Occupy Wall Street. I’m playing a clip now of Robert Reich addressing and occupy demonstration in California at the University of Berkeley in 2011.
Robert Reich: Because of Occupy L.A. and the Occupy Movement around America, this country is beginning to discuss an issue and a set of issues it has avoided discussing for years. And that is the increasing concentration of income and wealth and political power at the very top of this country, and what that has sent to the economy and what it has done to our democracy.
Amy Goodman: That was Bob Reich speaking in California two years ago. What about the significance of the Occupy Movement, the coining of the term 99%, and where are we today?
Robert Reich: Well, on the positive side, the Occupy Movement has had a huge effect, putting this issue front and center; page one. A lot of discussion, reframing the debate so that people understand that it is not the middle class against the poor, it is basically a small group of Americans at the very top, the 400 richest Americans — 400 of them have more wealth than the bottom 150 million of us put together. The heirs of Walmart, just the Walmart heirs who own a huge chunk of Walmart’s stock, they have more wealth than the bottom 40% of Americans put together. This is mind-boggling, and the Occupy Movement showed America what was happening. Unfortunately, on the negative side, Occupy did not organize itself and discipline itself and develop politically strategic ways of effectuating many of the objections it had. And so that once the mayors and universities began clearing out these encampments, there was not the kind of organization that’s needed for a sustained, long-term social movement. And one thing we have learned over the years, Amy, whether it is the Labor Movement or the Women’s Movement or the Civil Rights Movement or any other movement, it takes a long time, it takes a great discipline, it takes strategy, it takes politics, and it takes patience.
Amy Goodman: I wanted to read a critique of your theories put forward by Paul Roderick Gregory of the Hoover Institution who recently wrote an article for Forbes called “Robert Reich’s F Minus in Economics: False Facts, False Theories.” In it, Gregory writes, “Reich, a former Labor Secretary displays a glaring ignorance of how markets work, even labor markets. In his world, big corporations convene behind closed doors to decide how much they deign to give to their workers after they have taken their often obscene profits. He does not understand that wages are generally set in markets, not in smoke filled corporate board rooms. He displays and even greater lack of appreciation of profits as signals to guide resource allocation as sources of investment finance. To Reich, profits seem always to be too high, wages too low. I would like to ask him how many workers would be employed if businesses earned no profit and labor got everything?” Well, respond, Robert Reich.
Robert Reich: Well, that’s the typical right-wing argument. The Hoover Institute, where this fellow is, and Forbes Magazine, that calls itself a capitalist tool, I mean, they’re putting out this stuff and have put it out for years. This is not new. The fact of the matter is, is that one of the major ways in which an American corporations have shown huge profits over the last two years is by keeping payroll down, by squeezing wages. This is well documented. I don’t have — this is not my own personal view, Amy. This is — we know it. There is abundant evidence and abundant proof of this. And this is why, in part, the top 1% has done so well because they are the ones who get a lot of their income out of the stock market, where as everybody else, the only assets that most other people have, if they have any assets at all, is the value of their homes. And home values are the things that really took a huge hit after 2008. They are slowly beginning to come back. But, many people are still underwater. So, if you don’t look at this reality, if you don’t look at the asset base of the wealthy versus the asset base of most other people, you can begin to be convinced by these propaganda — this propaganda.
Amy Goodman: I was just watching Steve Ratner this morning, right, who is the American financier who led the presidential task force on the auto industry for the Obama administration, when talking about the California increase in the minimum wage bill, talked about how, for example, at fast food restaurants, yeah, he said maybe minimum wage should be increased, but you are talking living wage, when these people want $15 an hour, that is not with these fast food restaurants are about. What is your response to that?
Robert Reich: Well, first of all, we’re not talking about individual mom and pop operations so much as we are talking about the Walmarts, the very large chains, retail, restaurant, hotel, hospital. Walmart is the largest employer in the United States right now. McDonald’s and others, if they raise their minimum-wage to $15 an hour, that would have several positive effects. It would, as I noted a moment ago, give people more money with which they could then turn around and buy stuff, which is going to keep other people employed. It would, secondly, enable these people to live without the dependence on food stamps and other safety nets that we are all paying for. We are all subsidizing Walmart and McDonald’s and others. These are not any longer — their employees are not any longer teenagers. I mean, these are mostly adults. The typical Walmart worker the typical even fast food worker at one of these big chains, is earning at least half of family income. And if they are not going to pay their workers enough, the rest of us are going to have to subsidize their workers, even the earned income tax credit is a subsidy to these companies so their workers are not impoverished. And that’s just — that’s not fair. That is not economical. That gives these companies a competitive advantage that is simply unwarranted.
Amy Goodman: Janet Sparks, a Walmart employee was recently speaking at a protest and comparing the wages of Walmart workers to the CEO of Walmart, which was something like $20.7 million.
Robert Reich: The gap between CEO pay and the pay of the typical workers — you don’t even have to go to the low-wage workers — is now at a record 350 times. So, anybody who says somehow these companies can’t afford it, is not looking at their profit loss statements, is not looking at their extraordinary corporate profits overall, the share values which has been risen — has risen dramatically since the great recession, relative to what is happened to wages. If you look at the economy as a whole, the share of the economy going to wages is at the lowest level we have seen in about five decades. The share going to profits is at the highest level we have seen in decades. This is not rocket science. This is not abstruse economics. This is just — these are data available to everybody and have been well reported.
Amy Goodman: So, what can the Obama Administration do? What can President Obama do to address this greatest gap in wealth in this country that we have ever seen?
Robert Reich: Well, number one, introduced a bill to raise the minimum wage. He says that he is going to do it; still has not done it. His minimum wage bill was very modest. I think it ought to be a minimum wage that is higher than nine dollars and whatever I can’t remember what it is, $9.20 or $9.50. But, secondly, I think that the president and other members of administration out to be out there campaigning for better wages because even as people start to get new jobs back, those new jobs are paying less than the jobs that were lost during the great recession. Which means that the median wage — I’m not talking about average wage. Shaquille O’Neal, the basket ball player, and I have an average height of 6’1″. Do you get my point? I’m pretty short. I mean, every time you say average, watch your wallet, because the people at the top are bringing up the average. But if you look at the median, which is really half way there, that gives you a pretty good snapshot of where the middle class, and certainly the poor, are. That median wage keeps on dropping, adjusted for inflation. Which means that more and more families are being squeezed to a greater and greater and greater extent. This economy is not working for everyone. And one of the points we make in the film, which I have been writing about, but the wonderful thing about the film is that you can dramatize something, is that the economy is not something out there, it is not kind of a state of nature, the economy is a set of rules. It is based upon, basically, rules that are decided upon by our democracy. And if our rules are generating outcomes that are unfair, that don’t work very well, that don’t spread enough of the gains of economic growth to enough people, we change the rules.
Amy Goodman: Can you talk, finally, about the significance of who will head the Federal Reserve? What that means in this country? Now we have got the battle between Janet Yellen and Larry Summers. You have a long history with Larry Summers. President Obama is rumored to be supporting Larry Summers. Talk about the significance of what that means considering this five years, the Lehman Brothers anniversary, is all tied up with Larry Summers and his ideology.
Robert Reich: The Fed does two things. The most of our attention is on the bond buying program, that is, is it keeping interest rates down and who benefits from those low interest rates. The other thing, though, that the Fed is charged with is a great deal of regulatory oversight of Wall Street. More now than before, although, Dodd Frank is still not fully effectuated. I mean, the big banks have pushed back very hard. The so-called Volcker rule, remember that?
Amy Goodman: Explain.
Robert Reich: It is supposed to be the watered-down version of Glass-Steagall, separating commercial from investment banking. Still not there. The banks have been so powerful in their lobbying and political contributions that they have not even allow the Volcker Rule to be applied. But, the next Fed chair is going to have a very important responsibility with regard to oversight of Wall Street.
Amy Goodman: And what does it mean that Larry Summers is reportedly President Obama’s top candidate?
Robert Reich: Well, I am in an awkward position here because I know Janet Yellen well. She is very close friend and Larry Summers and I are friends. I’ve been working with him for thirty years, and so if you’re asking me, who do —
Amy Goodman: Well, aside from the friend part, you know Larry Summers, Robert Rubin, what they represent in what we’re talking about, this huge income gap in the country that continues to grow.
Robert Reich: Let me just be clear. In the late 1990s,1999, Bob Rubin, Larry Summers, others in the administration, did agree to support Republican bills to get rid of the Glass-Steagall act, which as I said, had separated investment from commercial banking. They also opposed the move a by the Commodity Futures Trading Corporation to regulate derivatives. That is what got us into trouble, the lack of oversight from derivative trading. These are bets on bets. Wall Street was making a fortune on them, certainly by 2007. And those bets were out of control. So, let’s just put it this way. Bob Rubin is also a friend, but I spent a lot of time in the administration battling Bob Rubin because, Bob, again I like him, his view of the economy is through the eyes of Wall Street. Those eyes — the Wall Street’s view of America, is not where most people live. It is just not — it doesn’t take account of the problems, the challenges, the realities faced by most people. It views the economy as sort of a bunch of assets to be moved around wherever they can get the highest use and best use. And people are not simply assets.
Amy Goodman: We’re going to take break and then when we come back, I want to play for you a clip of another colleague, though he was at University of California Berkeley years ago, the Chilean economist Manfred Max-Neef and I would like to get your response. He is calling for a global economic war crimes tribunal. This is Democracy Now! We will be back with Robert Reich in a minute.
Amy Goodman: Our guest for the hour is Robert Reich, the former Labor Secretary, now Professor of E at University of California, Berkeley, and the subject of a new film called, Inequality for All. We are going to talk more about that in a minute. But first, I want to turn to another economist, Chilean economist Manfred Max-Neef, who has advocated for the idea of an economics crimes tribunal. I interviewed him over Independence Day weekend when he was attending a meeting of Right Livelihood Award Laureates in Bogotá, Colombia. He won their Right Livelihood Award after his publication of his book, “Outside Looking In: Experiences in Barefoot Economics.” I asked him what he was talking about with this economic crimes tribunal, why he felt one was needed.
Manfred Max Neef: Well, we know that everything that has happened now in these last years, and we know that many, or practically all, of the big problems: environment, assassinations of leaders, in the Amazon and other places, and unemployment, and desperation, and all of the suicides that are increasing dramatically in Spain and other places of the world—we know all these, in the end, until now, are the origin of what I call an evil—an absolutely evil—economic model that is dominating the world.
This economy cannot go on no longer because it has become absolutely criminal. I was last year in the Zermatt meeting in Switzerland, with about 400 people participating, all high-level people from different countries of the world, and I gave the opening speech. In the speech I said, well, I’m going to start with a very brutal statement. The statement is that this economic model is killing more people in the world than all the armies put together. And this is people who die of hunger or of other diseases that would not be happening now if there was a more just, and I would even say decent, economic model.
What we are working on now is really a humane process. I am now one of the members appointed by the King of Bhutan, the General Assembly, one of the 60 national experts, who are designing a new economic paradigm and developing a paradigm for the world, which is based on well-being and happiness and ecological sustainability and adequate distribution of wealth and intelligent use of natural resources. But the main component is well-being and human happiness.
Along the lines of what was said by your wonderful, magnificent, and forgotten father of your country, Thomas Jefferson, the only one who wrote a political document in which happiness, the pursuit of happiness, is an inalienable right.
Amy Goodman: That was Manfred Max-Neef. He also was a professor at University of California, Berkeley, an economics professor, now in South Chile. Particularly poignant to hear his words today, on this week, that’s the Fortieth Anniversary of the coup in Chile on September 11th, the other September 11, 1973. Salvador Allende died in the Palace as the Pinochet forces rose to power—Pinochet ruling for seventeen years, killing thousands of Chileans. But that idea that Manfred Max-Neef puts forward, Robert Reich, of economics crimes tribunal. What do you think?
Robert Reich: It is very interesting to examine who the great economic criminals are. It is interesting you mentioned the Pinochet coup because two years after that, Milton Friedman came down to Chile to meet with Pinochet to urge economic reforms that were basically quite brutal and brutalized a great number of people. Milton Friedman was not necessarily a supporter of Pinochet, but certainly hated Allende, was very supportive of what Kissinger and Nixon had both done and that is helped Pinochet take over eventually
Amy Goodman: Interestingly, this week, Kerry met with Kissinger to get advice on Syria, on September 11th.
Robert Reich: On September 11th. There are these unfortunate parallels. So in defining an economic criminal, I think it would be interesting to see the interactions between economics and politics. The criminal actions to me, around the world, particularly in the United States, are the underminings of democracy. That is, if we cannot have a democracy that controls, that limits the excesses of capitalism, the brutality of capitalism, then we don’t have any hope of a just economy. And the people who are making it difficult for our democracy or any democracy to function—again, very poignantly reflected in this Fortieth anniversary of the coup in Chile—are those people who could very well be defined as economic criminals.
Amy Goodman: Robert Reich, finally, the film is coming out, the film about you, Inequality for All, in two weeks, and it will air around the country, it will play in theaters around the country. You famously say in this film, as you even said on the show, we make the rules of the economy and we have the power to change these rules. What do you hope to accomplish with this film?
Robert Reich: First of all, it is not about me. It is about the economy, it is about inequality, it is about our democracy. I am a vehicle. I helped prepare the film and it is based on some of my work and writings. But we hope that the film is going to open a lot of people’s eyes who don’t understand what is going on. There’s a lot of confusion about inequality. People know that inequality is surging. Many people have a feeling the game is rigged. But they don’t really understand why, how it’s happened and why it is dangerous. Or what they can do about it.
This film also provides a kind of guide to people. There’s a social action movement that is connected to the film. We hope that the film really spurs not just a different discussion in this country, but also a movement to take back our economy and democracy,
Amy Goodman: Where do you think we start?
Robert Reich: We start — it has to start with people, citizens, organizing, and mobilizing and energizing. Nothing starts in Washington. It starts at the grassroots. We know this. Those of us who have been involved in social movements before know this. But in order to start it, you have to have the right understanding. You have to have the right framework. That is what this movie is about.
Amy Goodman: I want to thank you, Rob Reich, for joining us: Rob Reich, former Labor Secretary under President Clinton. He’s featured in the new film, “Inequality for All.” It’s being released on September 27th. He has written twelve books including, “Aftershock, and Beyond Outrage.”
Copyright: Truth Out
TRANSCRIPT
This is a rush transcript. Copy may not be in its final form.
Amy Goodman: Five years ago this weekend, the Wall Street giant Lehman Brothers collapsed, triggering the worst financial crisis since the Great Depression. At the time, Lehman was the fourth-largest bank on Wall Street. It collapsed under the weight of subprime, mortgage back securities tied to the crumbling U.S. housing market. Five years after the financial crisis began, millions are still suffering, but Wall Street is not. While next week marks the second anniversary of occupy Wall Street, the divide between the 1% and the 99% is as great as ever. According to one recent study, the top 1% has captured about 95% of the income gains since the recession ended. Meanwhile, the top 10% of earners last year to more than half the countries total income, the highest level recorded since the government began collecting relevant data a century ago. Today we’re joined by former Secretary of labor and renowned economist Robert Reich. He is the focus of a new film called, “Inequality for All.”
Robert Reich: The thing you ought to know about this Mini-Cooper, it is small. Me and my car. We are in proportion. My name is Robert Reich. I was secretary of labor under Bill Clinton, before that, the Carter Administration, before that, I was a special assistant to Abraham Lincoln. Of all developed nations, The United States has the most unequal distribution of income. We’re surging toward even greater inequality. 1928 and 2007 become the peak years for income concentration. It looks like a suspension bridge.
Interviewee: I probably make $50,000 a year working 70 hours a week.
Robert Reich: The middle class is struggling. The people occasionally say to me, what nation does it better? The answer is, the United States. After World War II, the economy boomed. You had very low inequality.
Bill O’Reilly: You know Robert Reich?
Fox News Guest: I do indeed.
Bill O’Reilly: He is a communist.
Robert Reich: When I was a kid the bigger boys would pick on me. I think it changed my life. I had to protect people from the people who would beat them up economically. Who is actually looking out for the American worker? The answer is nobody. Workers don’t have a power if they don’t have a voice. Their wages and benefits start eroding. We are losing equal opportunity in America. Anyone of you who feels cynical, just consider where we have been.
Amy Goodman: The trailer for the new film “Inequality for All” featuring Robert Reich. It opens in theaters September 27th. Robert Reich joins us here in New York. He served as labor secretary under President Lincoln — under President Clinton and now is a professor at the University of California, Berkeley. Time Magazine named him one of the most ten most effective cabinet secretaries of the last century. He has written twelve books including “Aftershock: The Next Economy & America’s Future” and “Beyond Outrage.” Expanded edition, what has gone wrong with our economy and our democracy and how to fix it. Welcome back to _Democracy Now! _
Robert Reich: Hi Amy. You know, I am getting so old that my students really do believe I was a special assistant to Abraham Lincoln. Those were tough years, I tell them, and they have stopped getting the joke.
Amy Goodman: They have heard of Abraham Lincoln.
Robert Reich: They have heard of Abraham Lincoln. That’s right.
Amy Goodman: So, you’re a good teacher, then.
Robert Reich: But look, they don’t have — my students, who are very idealistic, and they do want to change the world, they, in their lives don’t have very much of a memory of government or even of a society that we are a part of expanding equal opportunity, changing the structure of power. They don’t remember as I do the 1960s.
Amy Goodman: Let’s talk about this fifth anniversary of the collapse of Lehman Brothers, the beginning of the recession and who has profited in this last five years. It has certainly not been bad for everyone.
Robert Reich: Oh, no. In fact, Emmanuel Saez, my colleague at Berkeley who has really done the pioneering work on determining who has got what and looked at income tax records, he’s just came out with a new study showing that since the recovery, almost all the gains have gone to the very, very top. People who are in the top 1% are doing better than they did even before the great recession, better than they have done since 1928. Remember what happened after 1928, we had a great crash. Remember after 2007, which was the last peak in terms of inequality, we had another crash. We can get back to why there is a relationship there, but most Americans are on a downward escalator. The median wage in the United States adjusted for inflation keeps on dropping.
Amy Goodman: You use the image of a suspension bridge to talk about inequality in the film.
Robert Reich: Because, up until this new study, shows that to 2012 actually is the new peak. The old peaks were 1928 and 2007. Which is interesting because in 1929 and 2008 we had crashes. And I think it is not coincidental. Because when so much of the income and wealth go to the top, the rest simply don’t have the purchasing power to keep the economy going at full employment.
Amy Goodman: Talk about what’s happened to everyone else.
Robert Reich: What’s happening to everybody else is not only wages eroding and a very large number of discouraged workers, who basically, are never going to be able to find jobs, but economic insecurity. Most Americans today, even if they have jobs, even if the jobs pay fairly well, are much more insecure than Americans have ever been at work before, at least in living memory. Because we have a huge number of contingent workers, huge number of part-time workers, huge number of workers who can’t know what their paychecks are going to be because they’re paid on a contingency fee, bonuses, working hours, billable hours. That means they cannot plan and have to live, to some extent, from paycheck to paycheck. That insecurity, coupled with declining wages, coupled with more and more concentration of income and wealth at the top, has led to an economy that is very vulnerable and a democracy that is also very vulnerable, because all of that money at the top is being transformed into political power every day.
Amy Goodman: Political power. I want to refer to Syria right now. It is something you also have written about, Syria and the reality at home in America. Aside from the moral and strategic arguments against the war or a strike on Syria by the United States, can easily talk about what the cost of war mean?
Robert Reich: Every time the United States has got into this tinderbox in the Middle East, for reasons that we can debate, whether it is good or not, there have been ancillary, let’s call them, ancillary consequences. Civilians are killed. You can’t prevent civilians from being killed. There is a rise in anti-American sentiment. There is a rise in terrorism. We deflect attention from what is going on here in the United States in terms of widening inequality, what needs to be done here in America. We use resources that could otherwise be used on our poor on infrastructure, on education. I am old enough to remember Lyndon Johnson’s and the great society ending on the shoals of Vietnam, another Civil War, in effect, where we were told exactly what, ironically, what John Kerry is saying about Syria. American resolve is at stake, our credibility is at stake. If we don’t do this, our enemies are going to be emboldened. He is using the same words, ironically, that were used by McNamara in the 1960s when John Kerry was —
Amy Goodman: The former secretary of defense under Lyndon Johnson.
Robert Reich: The former Secretary of Defense, when John Kerry was protesting the Vietnam War. I hope this irony is not lost on Kerry or anybody else.
Amy Goodman: Chuck Hagel, who opposed the Iraq war, our current Defense Secretary, when asked what will be the cost of these strikes, because very few people are talking about the actual economic costs. He said something like tens of millions of dollars.
Robert Reich: Look, these things tend to escalate out of control. We know that. We have been there before. I mean in living memory of most of us. What Assad has apparently done, and I’m assuming Assad was responsible for the chemical — the use of chemical weapons, is abhorrent, absolutely abhorrent. There has to be some world response. But, to assume that the United States is the only world’s policeman and that missiles are going to actually be the best response as opposed to economic sanctions or freezing assets or doing any number of things, the most powerful economic force in the world can do, that is the United States, I think is the height of folly at this particular point in time.
Amy Goodman: We are talking to former Labor Secretary Robert Reich. Now, when you were the Secretary of Labor under President Clinton, interestingly, especially in light of the NSA scandal today and how the Obama administration is reeling from all of the leaks around U.S. government spying on Americans, you proposed cutting the CIA budget in half and giving the money to inner-city schools.
Robert Reich: I did, and I was making a kind of play on the notion of U.S. intelligence because I just sat through a briefing where the CIA and the intelligence committee said they needed more money, and I said — and I was slightly tongue-in-cheek, but I was quite serious, Amy. I said, if we’re really concerned about U.S. intelligence, the most important intelligence we have are the brains and capacities of our kids as they face their adulthood and their futures, and we need better schools, particularly in poor communities, and we need to spend a lot of money and we’re spending far more on the wrong kind of intelligence. I didn’t get a very positive response, let’s put it that way.
Amy Goodman: Were talking to Robert Reich. He is the subject of a new film. It’s called “Inequality for All.” He teaches, now, economics at the University of California Berkeley. Was the Labor Secretary under President Clinton. We will be back with him in a minute.
Amy Goodman: Former Labor Secretary Robert Reich is our guest today. I want to turn to another clip from the new film, “Inequality for All” which will be released around the country September 27th. Here Bob Reich explains how he got interested in issues of economic justice.
Robert Reich: When I was a kid, the bigger boys would pick on me. That is what you did. That’s what is done. So I got an idea that I would make alliances with older boys. Just one or two who would be my protectors. The summer when I was about ten, one of the older boys who I depended on to kind of be a protector whose name was Michael Schwerner, in the summer of 1964, I learned that Mickey had been in Mississippi registering voters and he and two other people who had been with him registering voters were tortured and murdered. And when I heard that my protector had been murdered by the real bullies, I think it changed my life. I had to protect people from the bullies, the people who would beat them up economically or the people who would subject them and their families to real harm. Because if you don’t have a voice, if you don’t have power, if you’re vulnerable economically in society, you don’t have anybody to protect you.
Amy Goodman: That’s Robert Reich featured in “Inequality for All” talking about what inspires you. This is the 50th anniversary, of course, of the 1963 March on Washington as well. Talk more about your experience.
Robert Reich: Well, like many people who are my age, the 1960s were the formative era.
We were involved in the Civil Rights Movement, even peripherally, the anti-Vietnam War movement. I spent a lot of time organizing young people for Eugene McCarthy; went clean for Gene in 1968. But, out of all of that came a sense of efficacy, a sense that we really could change the world. There had been a civil rights act, a voting rights act, we ended the Vietnam War and there was also an assumption that I shared with many people that, of course, you would spend much of your life working to improve society. Even if that was not going to be your official vocation or your job. Still, that was part of your work, part of your life’s work. It wasn’t just me. There were really millions of us. I think that assumption may be different now. One of the great victories of the right, particularly the radical right, has been to spread such cynicism about the capacity of the country to change and generate social justice that many people just have given up. They basically I don’t want anything to do with politics, it is all corrupt, I don’t want anything to do with that kind of focus on social movements at that scale. They will go nowhere. But that, you see, that kind of cynicism about our politics and our government cedes everything, cedes control to the money interests. And that is exactly what they want.
Amy Goodman: Can you talk about what has just happened in California? Governor Brown says he will sign this legislation around increasing the minimum wage. It will be the highest in the country, and yet the backlash that we have seen?
Robert Reich: Well, look, 85% of Americans support a minimum wage increase. If you just kept the minimum wage we had a 1968 steady, adjusted for inflation, it would be $10.40 right now. If you adjusted the minimum wage or the productivity improvements we have had since the late 1960s, the minimum wage would be over $15 an hour. Martin Luther King in 1963, that was a march for jobs and justice, and one of the planks was moving the minimum wage to two dollars an hour, which, today’s dollars, would be well over $14, in fact, by some measure about $15 and hour. So, this is not out of our tradition. This is not a radical notion. This is what it would be, all other things being equal, and if you put more money people’s pockets, they can turn around and buy stuff, which means more jobs, not fewer jobs.
Amy Goodman: Let’s go back to another clip of “Inequality for All.” The focus here is problems of American workers today.
Robert Reich: Contrary to popular mythology, mobilization and technology haven’t really reduced the number of jobs available to Americans. These transformations reduced their pay. It is not just that wages are stagnating, but, when you take into consideration rising cost, the rising costs of rents or homes dramatically increasing costs of health care. The rising costs of childcare and also the rising costs of higher education, rising much faster than inflation. Take all of these into consideration and you find it is much worse than just stagnating wages, it is basically middle-class families, often with two wage earners, working harder and harder and harder and getting nowhere.
Amy Goodman: An excerpt of “Inequality for All,” which is being released in two weeks. Bob Reich, what about health care? What about the costs of health care? What about the costs of Obamacare, the cost of what Medicare for all would be, the cost of the system we have today?
Robert Reich: Well, look, it is the most inefficient and costly system that any advanced country has, yet we have the highest infant mortality, the lowest level of — even in terms of lifespans we don’t do as well as many other countries. We ought to have a single payer plan. We will eventually have a single payer. It is the only rational direction to go in. Everybody admits this. Even doctors and medical professionals and heads of medical institutions I sit with and talk with, privately they say, yes, we’re going to have to go to single-payer. They just don’t say it publicly. The fact we didn’t even have a public option in the Affordable Care Act is absurd. On the other hand, though, Amy, the Affordable Care Act is a beginning. Let’s be clear. This is something that Bill Clinton couldn’t get, Franklin D. Roosevelt couldn’t get, Harry Truman couldn’t get, John F. Kennedy couldn’t get. I mean, it is at least a major step in the right direction. And the Republicans are apoplectic about it. They’re threatening to not even to raise the debt ceiling unless we roll back or unless they get rid of and repeal the Affordable Care Act. I think most Americans, once they see the act working and once they enjoy the benefits, will be incredibly supportive, which is exactly what the opponents are worried about.
Amy Goodman: Why do you think the media has not been — I mean the media is supposed to be separate from the Government, from the insurance industry has not been able to convey what these costs are and to actually show exactly where the U.S. stands in the world so people could make a rational decision.
Robert Reich: Well, you say the media is supposed to be separate from the private sector and separate from the insurance industries and everything else. I wish I could say with a straight face that America’s news media and news outlets were not influenced at all by advertisers or by insurance companies and drug companies. Drug companies advertise like mad. I’m not sure that is the case. I think that Americans have not really had and been given a clear idea of the absurdities and unnecessary costs of our health care system. I mean prevention is and should be the rule of game. But, it is all a matter of fee-for-service and everyone is inside living off that fee-for-service likes that way, but we’ve got to move to a system that awards healthy outcomes.
Amy Goodman: I want to turn to another anniversary. Next Tuesday marks the second anniversary of Occupy Wall Street. I’m playing a clip now of Robert Reich addressing and occupy demonstration in California at the University of Berkeley in 2011.
Robert Reich: Because of Occupy L.A. and the Occupy Movement around America, this country is beginning to discuss an issue and a set of issues it has avoided discussing for years. And that is the increasing concentration of income and wealth and political power at the very top of this country, and what that has sent to the economy and what it has done to our democracy.
Amy Goodman: That was Bob Reich speaking in California two years ago. What about the significance of the Occupy Movement, the coining of the term 99%, and where are we today?
Robert Reich: Well, on the positive side, the Occupy Movement has had a huge effect, putting this issue front and center; page one. A lot of discussion, reframing the debate so that people understand that it is not the middle class against the poor, it is basically a small group of Americans at the very top, the 400 richest Americans — 400 of them have more wealth than the bottom 150 million of us put together. The heirs of Walmart, just the Walmart heirs who own a huge chunk of Walmart’s stock, they have more wealth than the bottom 40% of Americans put together. This is mind-boggling, and the Occupy Movement showed America what was happening. Unfortunately, on the negative side, Occupy did not organize itself and discipline itself and develop politically strategic ways of effectuating many of the objections it had. And so that once the mayors and universities began clearing out these encampments, there was not the kind of organization that’s needed for a sustained, long-term social movement. And one thing we have learned over the years, Amy, whether it is the Labor Movement or the Women’s Movement or the Civil Rights Movement or any other movement, it takes a long time, it takes a great discipline, it takes strategy, it takes politics, and it takes patience.
Amy Goodman: I wanted to read a critique of your theories put forward by Paul Roderick Gregory of the Hoover Institution who recently wrote an article for Forbes called “Robert Reich’s F Minus in Economics: False Facts, False Theories.” In it, Gregory writes, “Reich, a former Labor Secretary displays a glaring ignorance of how markets work, even labor markets. In his world, big corporations convene behind closed doors to decide how much they deign to give to their workers after they have taken their often obscene profits. He does not understand that wages are generally set in markets, not in smoke filled corporate board rooms. He displays and even greater lack of appreciation of profits as signals to guide resource allocation as sources of investment finance. To Reich, profits seem always to be too high, wages too low. I would like to ask him how many workers would be employed if businesses earned no profit and labor got everything?” Well, respond, Robert Reich.
Robert Reich: Well, that’s the typical right-wing argument. The Hoover Institute, where this fellow is, and Forbes Magazine, that calls itself a capitalist tool, I mean, they’re putting out this stuff and have put it out for years. This is not new. The fact of the matter is, is that one of the major ways in which an American corporations have shown huge profits over the last two years is by keeping payroll down, by squeezing wages. This is well documented. I don’t have — this is not my own personal view, Amy. This is — we know it. There is abundant evidence and abundant proof of this. And this is why, in part, the top 1% has done so well because they are the ones who get a lot of their income out of the stock market, where as everybody else, the only assets that most other people have, if they have any assets at all, is the value of their homes. And home values are the things that really took a huge hit after 2008. They are slowly beginning to come back. But, many people are still underwater. So, if you don’t look at this reality, if you don’t look at the asset base of the wealthy versus the asset base of most other people, you can begin to be convinced by these propaganda — this propaganda.
Amy Goodman: I was just watching Steve Ratner this morning, right, who is the American financier who led the presidential task force on the auto industry for the Obama administration, when talking about the California increase in the minimum wage bill, talked about how, for example, at fast food restaurants, yeah, he said maybe minimum wage should be increased, but you are talking living wage, when these people want $15 an hour, that is not with these fast food restaurants are about. What is your response to that?
Robert Reich: Well, first of all, we’re not talking about individual mom and pop operations so much as we are talking about the Walmarts, the very large chains, retail, restaurant, hotel, hospital. Walmart is the largest employer in the United States right now. McDonald’s and others, if they raise their minimum-wage to $15 an hour, that would have several positive effects. It would, as I noted a moment ago, give people more money with which they could then turn around and buy stuff, which is going to keep other people employed. It would, secondly, enable these people to live without the dependence on food stamps and other safety nets that we are all paying for. We are all subsidizing Walmart and McDonald’s and others. These are not any longer — their employees are not any longer teenagers. I mean, these are mostly adults. The typical Walmart worker the typical even fast food worker at one of these big chains, is earning at least half of family income. And if they are not going to pay their workers enough, the rest of us are going to have to subsidize their workers, even the earned income tax credit is a subsidy to these companies so their workers are not impoverished. And that’s just — that’s not fair. That is not economical. That gives these companies a competitive advantage that is simply unwarranted.
Amy Goodman: Janet Sparks, a Walmart employee was recently speaking at a protest and comparing the wages of Walmart workers to the CEO of Walmart, which was something like $20.7 million.
Robert Reich: The gap between CEO pay and the pay of the typical workers — you don’t even have to go to the low-wage workers — is now at a record 350 times. So, anybody who says somehow these companies can’t afford it, is not looking at their profit loss statements, is not looking at their extraordinary corporate profits overall, the share values which has been risen — has risen dramatically since the great recession, relative to what is happened to wages. If you look at the economy as a whole, the share of the economy going to wages is at the lowest level we have seen in about five decades. The share going to profits is at the highest level we have seen in decades. This is not rocket science. This is not abstruse economics. This is just — these are data available to everybody and have been well reported.
Amy Goodman: So, what can the Obama Administration do? What can President Obama do to address this greatest gap in wealth in this country that we have ever seen?
Robert Reich: Well, number one, introduced a bill to raise the minimum wage. He says that he is going to do it; still has not done it. His minimum wage bill was very modest. I think it ought to be a minimum wage that is higher than nine dollars and whatever I can’t remember what it is, $9.20 or $9.50. But, secondly, I think that the president and other members of administration out to be out there campaigning for better wages because even as people start to get new jobs back, those new jobs are paying less than the jobs that were lost during the great recession. Which means that the median wage — I’m not talking about average wage. Shaquille O’Neal, the basket ball player, and I have an average height of 6’1″. Do you get my point? I’m pretty short. I mean, every time you say average, watch your wallet, because the people at the top are bringing up the average. But if you look at the median, which is really half way there, that gives you a pretty good snapshot of where the middle class, and certainly the poor, are. That median wage keeps on dropping, adjusted for inflation. Which means that more and more families are being squeezed to a greater and greater and greater extent. This economy is not working for everyone. And one of the points we make in the film, which I have been writing about, but the wonderful thing about the film is that you can dramatize something, is that the economy is not something out there, it is not kind of a state of nature, the economy is a set of rules. It is based upon, basically, rules that are decided upon by our democracy. And if our rules are generating outcomes that are unfair, that don’t work very well, that don’t spread enough of the gains of economic growth to enough people, we change the rules.
Amy Goodman: Can you talk, finally, about the significance of who will head the Federal Reserve? What that means in this country? Now we have got the battle between Janet Yellen and Larry Summers. You have a long history with Larry Summers. President Obama is rumored to be supporting Larry Summers. Talk about the significance of what that means considering this five years, the Lehman Brothers anniversary, is all tied up with Larry Summers and his ideology.
Robert Reich: The Fed does two things. The most of our attention is on the bond buying program, that is, is it keeping interest rates down and who benefits from those low interest rates. The other thing, though, that the Fed is charged with is a great deal of regulatory oversight of Wall Street. More now than before, although, Dodd Frank is still not fully effectuated. I mean, the big banks have pushed back very hard. The so-called Volcker rule, remember that?
Amy Goodman: Explain.
Robert Reich: It is supposed to be the watered-down version of Glass-Steagall, separating commercial from investment banking. Still not there. The banks have been so powerful in their lobbying and political contributions that they have not even allow the Volcker Rule to be applied. But, the next Fed chair is going to have a very important responsibility with regard to oversight of Wall Street.
Amy Goodman: And what does it mean that Larry Summers is reportedly President Obama’s top candidate?
Robert Reich: Well, I am in an awkward position here because I know Janet Yellen well. She is very close friend and Larry Summers and I are friends. I’ve been working with him for thirty years, and so if you’re asking me, who do —
Amy Goodman: Well, aside from the friend part, you know Larry Summers, Robert Rubin, what they represent in what we’re talking about, this huge income gap in the country that continues to grow.
Robert Reich: Let me just be clear. In the late 1990s,1999, Bob Rubin, Larry Summers, others in the administration, did agree to support Republican bills to get rid of the Glass-Steagall act, which as I said, had separated investment from commercial banking. They also opposed the move a by the Commodity Futures Trading Corporation to regulate derivatives. That is what got us into trouble, the lack of oversight from derivative trading. These are bets on bets. Wall Street was making a fortune on them, certainly by 2007. And those bets were out of control. So, let’s just put it this way. Bob Rubin is also a friend, but I spent a lot of time in the administration battling Bob Rubin because, Bob, again I like him, his view of the economy is through the eyes of Wall Street. Those eyes — the Wall Street’s view of America, is not where most people live. It is just not — it doesn’t take account of the problems, the challenges, the realities faced by most people. It views the economy as sort of a bunch of assets to be moved around wherever they can get the highest use and best use. And people are not simply assets.
Amy Goodman: We’re going to take break and then when we come back, I want to play for you a clip of another colleague, though he was at University of California Berkeley years ago, the Chilean economist Manfred Max-Neef and I would like to get your response. He is calling for a global economic war crimes tribunal. This is Democracy Now! We will be back with Robert Reich in a minute.
Amy Goodman: Our guest for the hour is Robert Reich, the former Labor Secretary, now Professor of E at University of California, Berkeley, and the subject of a new film called, Inequality for All. We are going to talk more about that in a minute. But first, I want to turn to another economist, Chilean economist Manfred Max-Neef, who has advocated for the idea of an economics crimes tribunal. I interviewed him over Independence Day weekend when he was attending a meeting of Right Livelihood Award Laureates in Bogotá, Colombia. He won their Right Livelihood Award after his publication of his book, “Outside Looking In: Experiences in Barefoot Economics.” I asked him what he was talking about with this economic crimes tribunal, why he felt one was needed.
Manfred Max Neef: Well, we know that everything that has happened now in these last years, and we know that many, or practically all, of the big problems: environment, assassinations of leaders, in the Amazon and other places, and unemployment, and desperation, and all of the suicides that are increasing dramatically in Spain and other places of the world—we know all these, in the end, until now, are the origin of what I call an evil—an absolutely evil—economic model that is dominating the world.
This economy cannot go on no longer because it has become absolutely criminal. I was last year in the Zermatt meeting in Switzerland, with about 400 people participating, all high-level people from different countries of the world, and I gave the opening speech. In the speech I said, well, I’m going to start with a very brutal statement. The statement is that this economic model is killing more people in the world than all the armies put together. And this is people who die of hunger or of other diseases that would not be happening now if there was a more just, and I would even say decent, economic model.
What we are working on now is really a humane process. I am now one of the members appointed by the King of Bhutan, the General Assembly, one of the 60 national experts, who are designing a new economic paradigm and developing a paradigm for the world, which is based on well-being and happiness and ecological sustainability and adequate distribution of wealth and intelligent use of natural resources. But the main component is well-being and human happiness.
Along the lines of what was said by your wonderful, magnificent, and forgotten father of your country, Thomas Jefferson, the only one who wrote a political document in which happiness, the pursuit of happiness, is an inalienable right.
Amy Goodman: That was Manfred Max-Neef. He also was a professor at University of California, Berkeley, an economics professor, now in South Chile. Particularly poignant to hear his words today, on this week, that’s the Fortieth Anniversary of the coup in Chile on September 11th, the other September 11, 1973. Salvador Allende died in the Palace as the Pinochet forces rose to power—Pinochet ruling for seventeen years, killing thousands of Chileans. But that idea that Manfred Max-Neef puts forward, Robert Reich, of economics crimes tribunal. What do you think?
Robert Reich: It is very interesting to examine who the great economic criminals are. It is interesting you mentioned the Pinochet coup because two years after that, Milton Friedman came down to Chile to meet with Pinochet to urge economic reforms that were basically quite brutal and brutalized a great number of people. Milton Friedman was not necessarily a supporter of Pinochet, but certainly hated Allende, was very supportive of what Kissinger and Nixon had both done and that is helped Pinochet take over eventually
Amy Goodman: Interestingly, this week, Kerry met with Kissinger to get advice on Syria, on September 11th.
Robert Reich: On September 11th. There are these unfortunate parallels. So in defining an economic criminal, I think it would be interesting to see the interactions between economics and politics. The criminal actions to me, around the world, particularly in the United States, are the underminings of democracy. That is, if we cannot have a democracy that controls, that limits the excesses of capitalism, the brutality of capitalism, then we don’t have any hope of a just economy. And the people who are making it difficult for our democracy or any democracy to function—again, very poignantly reflected in this Fortieth anniversary of the coup in Chile—are those people who could very well be defined as economic criminals.
Amy Goodman: Robert Reich, finally, the film is coming out, the film about you, Inequality for All, in two weeks, and it will air around the country, it will play in theaters around the country. You famously say in this film, as you even said on the show, we make the rules of the economy and we have the power to change these rules. What do you hope to accomplish with this film?
Robert Reich: First of all, it is not about me. It is about the economy, it is about inequality, it is about our democracy. I am a vehicle. I helped prepare the film and it is based on some of my work and writings. But we hope that the film is going to open a lot of people’s eyes who don’t understand what is going on. There’s a lot of confusion about inequality. People know that inequality is surging. Many people have a feeling the game is rigged. But they don’t really understand why, how it’s happened and why it is dangerous. Or what they can do about it.
This film also provides a kind of guide to people. There’s a social action movement that is connected to the film. We hope that the film really spurs not just a different discussion in this country, but also a movement to take back our economy and democracy,
Amy Goodman: Where do you think we start?
Robert Reich: We start — it has to start with people, citizens, organizing, and mobilizing and energizing. Nothing starts in Washington. It starts at the grassroots. We know this. Those of us who have been involved in social movements before know this. But in order to start it, you have to have the right understanding. You have to have the right framework. That is what this movie is about.
Amy Goodman: I want to thank you, Rob Reich, for joining us: Rob Reich, former Labor Secretary under President Clinton. He’s featured in the new film, “Inequality for All.” It’s being released on September 27th. He has written twelve books including, “Aftershock, and Beyond Outrage.”
Copyright: Truth Out
Global Credit Excess Is WORSE than Before the 2008 Crash
The BIS said in its
quarterly review that the issuance of subordinated debt — which leaves
lenders exposed to bigger losses if things go wrong — has jumped more than threefold over the last year to $52bn in Europe, and jumped tenfold to $22bn in the US.
The share of “leveraged loans” used by the weakest borrowers in the syndicated loan market has jumped to an all-time high of 45pc, ten percentage points higher than the pre-crisis peak in 2007-2008.
The BIS said interbank credit to emerging markets has reached the “highest level on record” while the value of bonds issued in off-shore centres by private companies from China, Brazil and other developing nations exceeds total issuance by firms from rich economies for the first time, underscoring the sheer size of the debt build-up in Asia, Latin Africa, and the Mid-East.
Claudio Borio, the BIS research chief, said the ructions in emerging markets since the Fed turned hawkish in May is a warning to investors that they must tread with care. “Global financial markets have reacted very strongly. If there were any doubts about the strength of international policy spillovers, they have now been put to rest,” he said.
Mr Borio said nobody knows how far global borrowing costs will rise as the Fed tightens or “how disorderly the process might be”.
“The challenge is to be prepared. This means being prudent, limiting leverage, and avoiding the temptation of believing that the market will remain liquid under stress, the illusion of liquidity,” he said.
***
Mr White said the five years since Lehman have largely been wasted, leaving a global system that is even more unbalanced, and may be running out of lifelines. “The ultimate driver for the whole world is the US interest rate and as this goes up there will be fall-out for everybody. The trigger could be Fed tapering but there are a lot of things that can go wrong. I very am worried that Abenomics could go awry in Japan, and Europe remains exceedingly vulnerable to outside shocks.”
Mr White said the world has become addicted to easy money, with rates falling ever lower with each cycle and each crisis. There is little ammunition left if the system buckles again. “I don’t know what they will do: Abenomics for the world I suppose, but this is the last refuge of the scoundrel,” he said.
The BIS quietly scolded Bank of England Governor Mark Carney and his eurozone counterpart Mario Draghi, saying the attempt to use “forward guidance” to hold down long-term rates by rhetoric alone had essentially failed. “There are limits as to how far good communications can steer markets. Those limits have become all too apparent,” said Mr Borio.
Copyright: Global Research
Share of high risk leveraged loans now greater than 2007
The BIS said investors are snapping up “covenant-lite” loans that offer little protection to creditors, as well as a form of hybrid capital for banks known as CoCos (contingent convertible capital instruments) that switch debt into equity if bank capital ratios fall too low. While CoCos help shield taxpayers from losses in a banking crisis by leaving private creditors with more of the risk, the recent appetite for such an instrument is also a warning sign.The BIS said interbank credit to emerging markets has reached the “highest level on record” while the value of bonds issued in off-shore centres by private companies from China, Brazil and other developing nations exceeds total issuance by firms from rich economies for the first time, underscoring the sheer size of the debt build-up in Asia, Latin Africa, and the Mid-East.
Claudio Borio, the BIS research chief, said the ructions in emerging markets since the Fed turned hawkish in May is a warning to investors that they must tread with care. “Global financial markets have reacted very strongly. If there were any doubts about the strength of international policy spillovers, they have now been put to rest,” he said.
How Bernanke signal has pushed up long term rates
“The challenge is to be prepared. This means being prudent, limiting leverage, and avoiding the temptation of believing that the market will remain liquid under stress, the illusion of liquidity,” he said.
***
Mr White said the five years since Lehman have largely been wasted, leaving a global system that is even more unbalanced, and may be running out of lifelines. “The ultimate driver for the whole world is the US interest rate and as this goes up there will be fall-out for everybody. The trigger could be Fed tapering but there are a lot of things that can go wrong. I very am worried that Abenomics could go awry in Japan, and Europe remains exceedingly vulnerable to outside shocks.”
Mr White said the world has become addicted to easy money, with rates falling ever lower with each cycle and each crisis. There is little ammunition left if the system buckles again. “I don’t know what they will do: Abenomics for the world I suppose, but this is the last refuge of the scoundrel,” he said.
The BIS quietly scolded Bank of England Governor Mark Carney and his eurozone counterpart Mario Draghi, saying the attempt to use “forward guidance” to hold down long-term rates by rhetoric alone had essentially failed. “There are limits as to how far good communications can steer markets. Those limits have become all too apparent,” said Mr Borio.
Banksters Jack Up Your Gas Prices…
Banking used to be a boring business in America.
It’s an infrastructure business necessary to facilitate commerce. For example, without the infrastructure of a highway, you can’t transport goods from Chicago to New York; similarly without the infrastructure of a bank, the company in New York can’t pay for the goods that were shipped from Chicago.
Because banking is essential infrastructure, the banking system was set up to be profitable but not too profitable.
For the last 80 years, banking was a nice boring business that allowed business to operate in America.
But then everything began to change.
When Reagan came to Washington, he ushered in an unprecedented age of financial deregulation and banking consolidation.
In 1988, there were around 12,500 banks in America with less than $300 million in deposits, and about 900 with more than $300 million in deposits.
By 2012, there were only 4,200 banks with less than $300 million in deposits in America, and over 1,800 banks with more than $300 million.
During the Clinton administration, particularly during the administration’s last two years, there was a huge push to deregulate banks, and take away the rules and policies that had made banking a nice boring part of America’s business infrastructure.
Then came a push to move them away from an infrastructure role of facilitating commerce, to a role of being actual participants in American commerce.
In the waning months of the Clinton presidency, Phil Gramm’s Commodities Futures Modernization Act became law. That act allowed banks for the first time to participate in commodities markets, and to even create for themselves completely unregulated commodities markets that had never before existed.
In November of 1999, just months before the Commodities Futures Modernization Act became law, the Gramm-Leach-Bliley Act became the law of the land.
Gramm-Leach-Bliley essentially gutted the Glass-Steagall Act of 1933, by removing barriers in the banking business that had previously prevented a traditional checking and savings commercial bank from acting as a stock-brokering investments bank and vice versa.
Commercial banks were allowed to merge with investment banks to form the massive “too big to fail” banks that dominate Wall Street today and that have dealt blow after blow to our national economy today.
Banks also began to leverage depositor’s money, using it to play the stocks and commodities markets.
The result of all of this was the crash of 2008.
In an attempt to undo some of the disastrous effects of Gramm-Leach-Bliley and the Commodities Futures Modernization Act, Congress passed and President Obama signed into law the Dodd–Frank Wall Street Reform and Consumer Protection Act in 2010.
But while Dodd-Frank was passed to help reform Wall Street and to reign in the power of financial institutions, Congress was taken over by Republicans in 2010 and has since refused to fund many of the parts of Dodd-Frank.
As a result, banksters are still getting away with gambling with your money, and are making themselves mind-boggling rich.
That’s where ethanol comes in.
Back in 2005, the Bush administration, along with Democrats in Congress, passed an energy reform bill that mandated new renewable fuel standards.
Two years later, that law was expanded to include requirements for the amount of biofuel, including ethanol, to be added into gasoline every year through 2022.
The law also created ethanol credits.
Each time an energy company mixes ethanol into gasoline, or imports fuel that already has ethanol mixed into it, that company gets a credit from the U.S. government, which can be sold to other companies that don’t blend ethanol to help them meet the federal requirements.
If an energy company fails to meet its required targets of mixing ethanol with gasoline, they can face fines of up to $32,500 per day, so having access to those ethanol credits is pretty important for oil companies.
When the ethanol credits market was first established, the government didn’t realize that Wall Street would turn it into a profit-making money machine like it had with other commodities markets. The government was wrong.
This year, because the banksters cornered the market, the price of ethanol credits increased 20-fold over a period of just six months.
When asked how JPMorgan had acquired so many of the credits, the bank reportedly said that it had stockpiled the credits.
Obviously, JPMorgan and other banks have denied hoarding ethanol credits, and maintain that they’re doing nothing wrong.
And while that legally may be the case, Wall Street’s new found affection for ethanol is hurting Americans at the pump.
The costs of ethanol credits get added onto the price of a gallon of gas, so as the price of a credit increases, so does what you pay at the pump.
Back in January of this year, an ethanol credit cost just 7 cents. By July, after the banksters got into the act, it cost $1.43 and today costs around 60 cents.
And energy refining companies are being pretty blunt about the added costs to consumers.
The Valero Energy Corporation, which owns gas stations all across America, says that the increased costs of ethanol credits could cost the company nearly $800 million, all of which will be passed right along to the consumer.
It’s pretty clear that Wall Street is exploiting the ethanol credits market just like it did with other commodities markets, from mortgage-backed derivatives to precious metals and even coffee.
As a result, we are all paying massively higher gas prices, with much of what we pay going right back into the already bulging wallets of Wall Street executives.
The solution to stopping this non-sense and to stopping Wall Street from further manipulating the ethanol credits market is clear.
Congress needs to fully fund and implement Dodd-Frank and go a step further, by bringing back the sensible regulations of the Glass-Steagall Act.
It’s time to break up America’s “too big to fail” banks, and to make banking a nice boring mildly-profitable part of the American business infrastructure once again.
Copyright: Truth Out
It’s an infrastructure business necessary to facilitate commerce. For example, without the infrastructure of a highway, you can’t transport goods from Chicago to New York; similarly without the infrastructure of a bank, the company in New York can’t pay for the goods that were shipped from Chicago.
Because banking is essential infrastructure, the banking system was set up to be profitable but not too profitable.
For the last 80 years, banking was a nice boring business that allowed business to operate in America.
But then everything began to change.
In 1988, there were around 12,500 banks in America with less than $300 million in deposits, and about 900 with more than $300 million in deposits.
By 2012, there were only 4,200 banks with less than $300 million in deposits in America, and over 1,800 banks with more than $300 million.
During the Clinton administration, particularly during the administration’s last two years, there was a huge push to deregulate banks, and take away the rules and policies that had made banking a nice boring part of America’s business infrastructure.
Then came a push to move them away from an infrastructure role of facilitating commerce, to a role of being actual participants in American commerce.
In the waning months of the Clinton presidency, Phil Gramm’s Commodities Futures Modernization Act became law. That act allowed banks for the first time to participate in commodities markets, and to even create for themselves completely unregulated commodities markets that had never before existed.
In November of 1999, just months before the Commodities Futures Modernization Act became law, the Gramm-Leach-Bliley Act became the law of the land.
Gramm-Leach-Bliley essentially gutted the Glass-Steagall Act of 1933, by removing barriers in the banking business that had previously prevented a traditional checking and savings commercial bank from acting as a stock-brokering investments bank and vice versa.
Commercial banks were allowed to merge with investment banks to form the massive “too big to fail” banks that dominate Wall Street today and that have dealt blow after blow to our national economy today.
Banks also began to leverage depositor’s money, using it to play the stocks and commodities markets.
The result of all of this was the crash of 2008.
In an attempt to undo some of the disastrous effects of Gramm-Leach-Bliley and the Commodities Futures Modernization Act, Congress passed and President Obama signed into law the Dodd–Frank Wall Street Reform and Consumer Protection Act in 2010.
But while Dodd-Frank was passed to help reform Wall Street and to reign in the power of financial institutions, Congress was taken over by Republicans in 2010 and has since refused to fund many of the parts of Dodd-Frank.
As a result, banksters are still getting away with gambling with your money, and are making themselves mind-boggling rich.
That’s where ethanol comes in.
Back in 2005, the Bush administration, along with Democrats in Congress, passed an energy reform bill that mandated new renewable fuel standards.
Two years later, that law was expanded to include requirements for the amount of biofuel, including ethanol, to be added into gasoline every year through 2022.
The law also created ethanol credits.
Each time an energy company mixes ethanol into gasoline, or imports fuel that already has ethanol mixed into it, that company gets a credit from the U.S. government, which can be sold to other companies that don’t blend ethanol to help them meet the federal requirements.
If an energy company fails to meet its required targets of mixing ethanol with gasoline, they can face fines of up to $32,500 per day, so having access to those ethanol credits is pretty important for oil companies.
When the ethanol credits market was first established, the government didn’t realize that Wall Street would turn it into a profit-making money machine like it had with other commodities markets. The government was wrong.
This year, because the banksters cornered the market, the price of ethanol credits increased 20-fold over a period of just six months.
As The New York Times
brilliantly details, according to analysis of regulatory documents and
interviews with more than 40 people involved in the ethanol credits
market, Wall Street banksters hoarded millions of the credits just as
refiners needed to buy more of them to meet energy and biofuel
regulations.
Those familiar with Wall Street’s booming ethanol credits market told
The New York Times that big bank JPMorgan Chase for example recently
offered to sell industry executives hundreds of millions of the credits
over the summer.When asked how JPMorgan had acquired so many of the credits, the bank reportedly said that it had stockpiled the credits.
Obviously, JPMorgan and other banks have denied hoarding ethanol credits, and maintain that they’re doing nothing wrong.
And while that legally may be the case, Wall Street’s new found affection for ethanol is hurting Americans at the pump.
The costs of ethanol credits get added onto the price of a gallon of gas, so as the price of a credit increases, so does what you pay at the pump.
Back in January of this year, an ethanol credit cost just 7 cents. By July, after the banksters got into the act, it cost $1.43 and today costs around 60 cents.
And energy refining companies are being pretty blunt about the added costs to consumers.
The Valero Energy Corporation, which owns gas stations all across America, says that the increased costs of ethanol credits could cost the company nearly $800 million, all of which will be passed right along to the consumer.
It’s pretty clear that Wall Street is exploiting the ethanol credits market just like it did with other commodities markets, from mortgage-backed derivatives to precious metals and even coffee.
As a result, we are all paying massively higher gas prices, with much of what we pay going right back into the already bulging wallets of Wall Street executives.
The solution to stopping this non-sense and to stopping Wall Street from further manipulating the ethanol credits market is clear.
Congress needs to fully fund and implement Dodd-Frank and go a step further, by bringing back the sensible regulations of the Glass-Steagall Act.
It’s time to break up America’s “too big to fail” banks, and to make banking a nice boring mildly-profitable part of the American business infrastructure once again.
Copyright: Truth Out
Obama admits 95% of income gains gone to top 1%
President
Obama said his priority as president -- after stabilizing the economy
and creating jobs -- has been to chip away at the growing trend of
income inequality.
NEW YORK (CNNMoney)
President Obama has been loud and clear about his fight against income inequality, but he admitted that the rich have fared far better than the poor during his time in the White House.
In an interview that aired Sunday on ABC's "This Week with George Stephanopoulos," the show host cited a recent study from the University of California, Berkeley, that found 95% of income gains from 2009 to 2012 went to the top 1% of the earning population.The president agreed with Stephanopoulos.
"The folks in the middle and at the bottom haven't seen wage or income growth, not just over the last three, four years, but over the last 15 years," the president said.
In fact, other data also show that America's median household income has dropped by more than $4,000 since 2000, after adjusting for inflation.
Related: Why America's middle class is losing ground
During the interview, Obama said his priority as president has been to stabilize the economy and create jobs. He said the country has made progress with 42 straight months of economic growth and 7.5 million new jobs in the private sector.
His other focus he said has been to chip away at the growing trend of income inequality.
The president cited his efforts to tax the rich more, make health care more affordable, and usher in financial reforms to avoid future bailouts funded by taxpayers.
However, Stephanopoulos pressed the president, highlighting again that the economic recovery since the financial crisis has overwhelmingly favored the richest Americans.
"Do you look at that, four and a half years in, and say, 'Maybe a president just can't stop this accelerating inequality?'" he asked.
Related: California poised to raise minimum wage to $10
Obama admitted that some of it stemmed from events that are beyond Washington's control. He pointed out that globalization and technology has robotized "entire occupations" like bank tellers and travel agents.
As president, he said his administration has pursued policies to push back against these trends, such as prepare kids for higher skilled jobs, and invest in research, new ports and a smarter electricity grid. However, he voiced his frustration at the lack of support for his agenda from Republicans.
"There's no serious economist out there that would suggest that, if you took the Republican agenda of slashing education further, slashing Medicare further, slashing research and development further, slashing investments in infrastructure further, that that would reverse some of these trends of inequality," Obama said.
During his State of the Union address in February, Obama unveiled a plan to boost the federal minimum wage to $9 an hour in 2015, up from the current $7.25, and index it to inflation.
"This single step would raise the incomes of millions of working families," the president said during his speech that night. "For businesses across the country, it would mean customers with more money in their pockets."
And in July, Obama pledged that he will spend the remainder of his presidency trying to reverse growing income inequality.
"This growing inequality isn't just morally wrong; it's bad economics," he said. "Because when middle-class families have less to spend, guess what, businesses have fewer consumers. When wealth concentrates at the very top, it can inflate unstable bubbles that threaten the economy. "
The Mother Of All Delusions: US Stocks Blind To Crashing Earnings Estimates (For Now)
Wolf Richter www.testosteronepit.com www.amazon.com/author/wolfrichter
The Fed’s Greatest Accomplishment
Corporate revenues have been crummy all year, with many companies seeing actual declines. It has infected a wide range of sectors, though a few, such as the auto industry – both manufacturing and retail – are still booming. Even the tech sector has been singing the revenue blues. But revenues are brushed off by the markets these days as irrelevant. When a revenue debacle is reported, it might take down the company’s stock for a few days, but then it crawls back up. Because, forget revenues. What matters is earnings growth.
But, um… forecasts of earnings for the third quarter have come crashing down, according to Thompson Reuters IBES. On October 1, 2012, earnings for Q3 2013 were still expected to grow at a phenomenal 15.9%, a sign of blind devotion to optimism. By the propitious day of Friday, September 13, 2013, growth expectations for the same quarter had plunged to 4.7%.
Earnings forecasts are cascading down for Q4 as well, but more slowly, and with less desperate urgency, there still being some room for hope and some time for miracles – a series of which is precisely what it would take to achieve the inexplicably high 11.1% earnings growth that has somehow managed to remain on the books as of Friday. Within it, given what the Fed is handing over to Wall Street on a monthly basis, earnings at financial firms were expected to balloon by a breath-taking 26%. The Fed better get busy to make that pan out.
The graph shows how analysts, a ridiculously optimistic bunch, have tempered their enthusiasm for earnings growth. Further downward revisions are likely. Earnings stagnation would be next.
Absent any miracles over the next three months, Q4 earnings forecasts are going to get kicked down brutally to bring them in line with some sort of achievable reality. Meanwhile, earnings forecasts for next year, though they have come down as well, are still showing growth of 11.3% as of September 13. Delusions in lala-land – unless the desperately hoped-for series of miracles transpires.
And how has the stock market reacted to the revenue and earnings debacle unfolding under its very nose? Since October 1, 2012, the S&P 500 has jumped 16.8% and the NASDAQ 19.6%.
Clearly, US stock markets aren’t forward looking. They’re blind. They’re no longer looking at fundamentals. They’re bedazzled by only one thing: how much money the Fed and other central banks will print. Nothing else matters.
The proof is in the pudding. On Sunday, word spread that Larry Summers had called President Obama to let him know that he was withdrawing from the race for the chairmanship of the Fed. He has been assumed to be slightly less gung-ho about the Fed’s drunken money-printing binge than some of the other names in the hat. He might even have pushed to raise interest rates earlier, if at all. Forget the corporate revenue and earnings debacle. Stock futures soared.
This disconnect between stock markets and corporate realities is the Fed’s greatest accomplishment. It’s called the Wealth Effect. It doesn’t matter what the economy does, or what companies do. Stocks always go up, and everyone is happy. There’s no longer any need for investors to keep an eye on fundamentals. They’re focused on the dazzling Fed that, as port of its stunning power-grab, has managed to monopolize everyone’s attention over the last five years. As long as the Fed continues to print $85 billion a month that need to find a place, and as long as it keeps short-term rates at zero, stock markets might simply refuse to see reality and fall in line with it. It’s the mother of all delusions. Thank you halleluiah, Fed.
But if this is true, then the corollary must also be true: once the Fed gets serious about withdrawing the addictive drug that QE has become, investors will have nothing to get high on. And all that’s left is a big hangover, withdrawal symptoms, crummy revenues, and dismal earnings. It won’t be pretty.
What are the chances? Not a week has passed over the last few months when Federal Reserve governors didn’t express their concerns about the bubbles that QE has been inflating, huge bubbles that could take down the entire financial system again if they popped. Even with Janet Yellen at the helm, QE is likely to be tapered out of existence. It’s just that US stock markets have smoked too much of QE and can’t come off their trip for now.
Men’s Warehouse joined the crowd of revenue-challenged retailers when it reported results and cut guidance. Revenue fell, profit plunged. As with its peers that had already reported, it’s not so much that sales were crummy – gosh, they were – but that the excuses it came up with to keep its stocks from crashing further were even crummier. Read…. “A difficult second half”: Fabulous Excuses By Clothing Retailers As Sales Fall Apart
The Fed’s Greatest Accomplishment
Corporate revenues have been crummy all year, with many companies seeing actual declines. It has infected a wide range of sectors, though a few, such as the auto industry – both manufacturing and retail – are still booming. Even the tech sector has been singing the revenue blues. But revenues are brushed off by the markets these days as irrelevant. When a revenue debacle is reported, it might take down the company’s stock for a few days, but then it crawls back up. Because, forget revenues. What matters is earnings growth.
But, um… forecasts of earnings for the third quarter have come crashing down, according to Thompson Reuters IBES. On October 1, 2012, earnings for Q3 2013 were still expected to grow at a phenomenal 15.9%, a sign of blind devotion to optimism. By the propitious day of Friday, September 13, 2013, growth expectations for the same quarter had plunged to 4.7%.
Earnings forecasts are cascading down for Q4 as well, but more slowly, and with less desperate urgency, there still being some room for hope and some time for miracles – a series of which is precisely what it would take to achieve the inexplicably high 11.1% earnings growth that has somehow managed to remain on the books as of Friday. Within it, given what the Fed is handing over to Wall Street on a monthly basis, earnings at financial firms were expected to balloon by a breath-taking 26%. The Fed better get busy to make that pan out.
The graph shows how analysts, a ridiculously optimistic bunch, have tempered their enthusiasm for earnings growth. Further downward revisions are likely. Earnings stagnation would be next.
Absent any miracles over the next three months, Q4 earnings forecasts are going to get kicked down brutally to bring them in line with some sort of achievable reality. Meanwhile, earnings forecasts for next year, though they have come down as well, are still showing growth of 11.3% as of September 13. Delusions in lala-land – unless the desperately hoped-for series of miracles transpires.
And how has the stock market reacted to the revenue and earnings debacle unfolding under its very nose? Since October 1, 2012, the S&P 500 has jumped 16.8% and the NASDAQ 19.6%.
Clearly, US stock markets aren’t forward looking. They’re blind. They’re no longer looking at fundamentals. They’re bedazzled by only one thing: how much money the Fed and other central banks will print. Nothing else matters.
The proof is in the pudding. On Sunday, word spread that Larry Summers had called President Obama to let him know that he was withdrawing from the race for the chairmanship of the Fed. He has been assumed to be slightly less gung-ho about the Fed’s drunken money-printing binge than some of the other names in the hat. He might even have pushed to raise interest rates earlier, if at all. Forget the corporate revenue and earnings debacle. Stock futures soared.
This disconnect between stock markets and corporate realities is the Fed’s greatest accomplishment. It’s called the Wealth Effect. It doesn’t matter what the economy does, or what companies do. Stocks always go up, and everyone is happy. There’s no longer any need for investors to keep an eye on fundamentals. They’re focused on the dazzling Fed that, as port of its stunning power-grab, has managed to monopolize everyone’s attention over the last five years. As long as the Fed continues to print $85 billion a month that need to find a place, and as long as it keeps short-term rates at zero, stock markets might simply refuse to see reality and fall in line with it. It’s the mother of all delusions. Thank you halleluiah, Fed.
But if this is true, then the corollary must also be true: once the Fed gets serious about withdrawing the addictive drug that QE has become, investors will have nothing to get high on. And all that’s left is a big hangover, withdrawal symptoms, crummy revenues, and dismal earnings. It won’t be pretty.
What are the chances? Not a week has passed over the last few months when Federal Reserve governors didn’t express their concerns about the bubbles that QE has been inflating, huge bubbles that could take down the entire financial system again if they popped. Even with Janet Yellen at the helm, QE is likely to be tapered out of existence. It’s just that US stock markets have smoked too much of QE and can’t come off their trip for now.
Men’s Warehouse joined the crowd of revenue-challenged retailers when it reported results and cut guidance. Revenue fell, profit plunged. As with its peers that had already reported, it’s not so much that sales were crummy – gosh, they were – but that the excuses it came up with to keep its stocks from crashing further were even crummier. Read…. “A difficult second half”: Fabulous Excuses By Clothing Retailers As Sales Fall Apart
25 Fast Facts About The Federal Reserve
Source: Michael Snyder, Guest Post
#1 The greatest period of economic growth in U.S. history was when there was no central bank.
#2 The United States never had a persistent, ongoing problem with inflation until the Federal Reserve was created. In the century before the Federal Reserve was created, the average annual rate of inflation was about half a percent. In the century since the Federal Reserve was created, the average annual rate of inflation has been about 3.5 percent, and it would be even higher than that if the inflation numbers were not being so grossly manipulated.
#3 Even using the official numbers, the value of the U.S. dollar has declined by more than 95 percent since the Federal Reserve was created nearly 100 years ago.
#4 The secret November 1910 gathering at Jekyll Island, Georgia during which the plan for the Federal Reserve was hatched was attended by U.S. Senator Nelson W. Aldrich, Assistant Secretary of the Treasury Department A.P. Andrews and a whole host of representatives from the upper crust of the Wall Street banking establishment.
#5 In 1913, Congress was promised that if the Federal Reserve Act was passed that it would eliminate the business cycle.
#6 The following comes directly from the Fed's official mission statement: "To provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, its role in banking and the economy has expanded."
#7 It was not an accident that a permanent income tax was also introduced the same year when the Federal Reserve system was established. The whole idea was to transfer wealth from our pockets to the federal government and from the federal government to the bankers.
#8 Within 20 years of the creation of the Federal Reserve, the U.S. economy was plunged into the Great Depression.
#9 If you can believe it, there have been 10 different economic recessions since 1950. The Federal Reserve created the "dotcom bubble", the Federal Reserve created the "housing bubble" and now it has created the largest bond bubble in the history of the planet.
#10 According to an official government report, the Federal Reserve made 16.1 trillion dollars in secret loans to the big banks during the last financial crisis. The following is a list of loan recipients that was taken directly from page 131 of the report...
Citigroup - $2.513 trillion
Morgan Stanley - $2.041 trillion
Merrill Lynch - $1.949 trillion
Bank of America - $1.344 trillion
Barclays PLC - $868 billion
Bear Sterns - $853 billion
Goldman Sachs - $814 billion
Royal Bank of Scotland - $541 billion
JP Morgan Chase - $391 billion
Deutsche Bank - $354 billion
UBS - $287 billion
Credit Suisse - $262 billion
Lehman Brothers - $183 billion
Bank of Scotland - $181 billion
BNP Paribas - $175 billion
Wells Fargo - $159 billion
Dexia - $159 billion
Wachovia - $142 billion
Dresdner Bank - $135 billion
Societe Generale - $124 billion
"All Other Borrowers" - $2.639 trillion
#11 The Federal Reserve also paid those big banks $659.4 million in fees to help "administer" those secret loans.
#12 The Federal Reserve has created approximately 2.75 trillion dollars out of thin air and injected it into the financial system over the past five years. This has allowed the stock market to soar to unprecedented heights, but it has also caused our financial system to become extremely unstable.
#13 We were told that the purpose of quantitative easing is to help "stimulate the economy", but today the Federal Reserve is actually paying the big banks not to lend out 1.8 trillion dollars in "excess reserves" that they have parked at the Fed.
#14 Quantitative easing overwhelming benefits those that own stocks and other financial investments. In other words, quantitative easing overwhelmingly favors the very wealthy. Even Barack Obama has admitted that 95 percent of the income gains since he has been president have gone to the top one percent of income earners.
#15 The gap between the top one percent and the rest of the country is now the greatest that it has been since the 1920s.
#16 The Federal Reserve has argued vehemently in federal court that it is "not an agency" of the federal government and therefore not subject to the Freedom of Information Act.
#17 The Federal Reserve openly admits that the 12 regional Federal Reserve banks are organized "much like private corporations".
#18 The regional Federal Reserve banks issue shares of stock to the "member banks" that own them.
#19 The Federal Reserve system greatly favors the biggest banks. Back in 1970, the five largest U.S. banks held 17 percent of all U.S. banking industry assets. Today, the five largest U.S. banks hold 52 percent of all U.S. banking industry assets.
#20 The Federal Reserve is supposed to "regulate" the big banks, but it has done nothing to stop a 441 trillion dollar interest rate derivatives bubble from inflating which could absolutely devastate our entire financial system.
#21 The Federal Reserve was designed to be a perpetual debt machine. The bankers that designed it intended to trap the U.S. government in a perpetual debt spiral from which it could never possibly escape. Since the Federal Reserve was established nearly 100 years ago, the U.S. national debt has gotten more than 5000 times larger.
#22 The U.S. government will spend more than 400 billion dollars just on interest on the national debt this year.
#23 If the average rate of interest on U.S. government debt rises to just 6 percent (and it has been much higher than that in the past), we will be paying out more than a trillion dollars a year just in interest on the national debt.
#24 According to Article I, Section 8 of the U.S. Constitution, the U.S. Congress is the one that is supposed to have the authority to "coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures". So exactly why is the Federal Reserve doing it?
#2 The United States never had a persistent, ongoing problem with inflation until the Federal Reserve was created. In the century before the Federal Reserve was created, the average annual rate of inflation was about half a percent. In the century since the Federal Reserve was created, the average annual rate of inflation has been about 3.5 percent, and it would be even higher than that if the inflation numbers were not being so grossly manipulated.
#3 Even using the official numbers, the value of the U.S. dollar has declined by more than 95 percent since the Federal Reserve was created nearly 100 years ago.
#4 The secret November 1910 gathering at Jekyll Island, Georgia during which the plan for the Federal Reserve was hatched was attended by U.S. Senator Nelson W. Aldrich, Assistant Secretary of the Treasury Department A.P. Andrews and a whole host of representatives from the upper crust of the Wall Street banking establishment.
#5 In 1913, Congress was promised that if the Federal Reserve Act was passed that it would eliminate the business cycle.
#6 The following comes directly from the Fed's official mission statement: "To provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, its role in banking and the economy has expanded."
#7 It was not an accident that a permanent income tax was also introduced the same year when the Federal Reserve system was established. The whole idea was to transfer wealth from our pockets to the federal government and from the federal government to the bankers.
#8 Within 20 years of the creation of the Federal Reserve, the U.S. economy was plunged into the Great Depression.
#9 If you can believe it, there have been 10 different economic recessions since 1950. The Federal Reserve created the "dotcom bubble", the Federal Reserve created the "housing bubble" and now it has created the largest bond bubble in the history of the planet.
#10 According to an official government report, the Federal Reserve made 16.1 trillion dollars in secret loans to the big banks during the last financial crisis. The following is a list of loan recipients that was taken directly from page 131 of the report...
Citigroup - $2.513 trillion
Morgan Stanley - $2.041 trillion
Merrill Lynch - $1.949 trillion
Bank of America - $1.344 trillion
Barclays PLC - $868 billion
Bear Sterns - $853 billion
Goldman Sachs - $814 billion
Royal Bank of Scotland - $541 billion
JP Morgan Chase - $391 billion
Deutsche Bank - $354 billion
UBS - $287 billion
Credit Suisse - $262 billion
Lehman Brothers - $183 billion
Bank of Scotland - $181 billion
BNP Paribas - $175 billion
Wells Fargo - $159 billion
Dexia - $159 billion
Wachovia - $142 billion
Dresdner Bank - $135 billion
Societe Generale - $124 billion
"All Other Borrowers" - $2.639 trillion
#11 The Federal Reserve also paid those big banks $659.4 million in fees to help "administer" those secret loans.
#12 The Federal Reserve has created approximately 2.75 trillion dollars out of thin air and injected it into the financial system over the past five years. This has allowed the stock market to soar to unprecedented heights, but it has also caused our financial system to become extremely unstable.
#13 We were told that the purpose of quantitative easing is to help "stimulate the economy", but today the Federal Reserve is actually paying the big banks not to lend out 1.8 trillion dollars in "excess reserves" that they have parked at the Fed.
#14 Quantitative easing overwhelming benefits those that own stocks and other financial investments. In other words, quantitative easing overwhelmingly favors the very wealthy. Even Barack Obama has admitted that 95 percent of the income gains since he has been president have gone to the top one percent of income earners.
#15 The gap between the top one percent and the rest of the country is now the greatest that it has been since the 1920s.
#16 The Federal Reserve has argued vehemently in federal court that it is "not an agency" of the federal government and therefore not subject to the Freedom of Information Act.
#17 The Federal Reserve openly admits that the 12 regional Federal Reserve banks are organized "much like private corporations".
#18 The regional Federal Reserve banks issue shares of stock to the "member banks" that own them.
#19 The Federal Reserve system greatly favors the biggest banks. Back in 1970, the five largest U.S. banks held 17 percent of all U.S. banking industry assets. Today, the five largest U.S. banks hold 52 percent of all U.S. banking industry assets.
#20 The Federal Reserve is supposed to "regulate" the big banks, but it has done nothing to stop a 441 trillion dollar interest rate derivatives bubble from inflating which could absolutely devastate our entire financial system.
#21 The Federal Reserve was designed to be a perpetual debt machine. The bankers that designed it intended to trap the U.S. government in a perpetual debt spiral from which it could never possibly escape. Since the Federal Reserve was established nearly 100 years ago, the U.S. national debt has gotten more than 5000 times larger.
#22 The U.S. government will spend more than 400 billion dollars just on interest on the national debt this year.
#23 If the average rate of interest on U.S. government debt rises to just 6 percent (and it has been much higher than that in the past), we will be paying out more than a trillion dollars a year just in interest on the national debt.
#24 According to Article I, Section 8 of the U.S. Constitution, the U.S. Congress is the one that is supposed to have the authority to "coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures". So exactly why is the Federal Reserve doing it?
#25 There are plenty of possible alternative financial systems, but at this point all 187 nations that belong to the IMF have a central bank. Are we supposed to believe that this is just some sort of a bizarre coincidence?
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