Tuesday, February 15, 2011

The Wallace Street Journal

Wallace, Idaho - Ron Paul has written a book, End the Fed, well known in these circles. We have a better idea: Stiff the Fed.

In case you missed it, the financial cable network CNBC actually produced something informative a little while ago. It listed our 15 biggest creditors, the entities to which the captive citizens of the United Snakes of America owes money.

Canada, which we always held as infinitely more sensible, turned up in the Top 15 for the first time. We owe Canada $3.6 billion. Coming in at 14th is Hong Kong, at $138.9 billion. We owe the Cayman Islands' banking centers $146.3 billion. Twelfth is Brazil; we're into them for $184.4 billion. We owe OPEC $210.4 billion. We owe the insurance industry $261.8 billion. We owe domestic commercial banks and credit unions $269.8 billion, making theirs our 9th biggest I.O.U. The Brits and our own state and local governments are tied for 7th place at $511.8 billion each. We owe mutual funds $637.7 billion and pension funds $706.4 billion.

Are we beginning to see a pattern here? This thing is beginning to go logarithmic. We owe Japan $877.2 billion. China ranks a measly third: they've been shedding U.S. debt like crazy, converting it to stuff we used to do, like mineral and oil production, but they're still just a hair shy of a trillion, $895.6 billion to be precise.

The last two surprised us. Holders of U.S. Savings Bonds, and a category CNBC calls "other investors" rank No. 2, at $1.458 trillion.

And the Number One I.O.U.? Drum roll, please: it is our very own United Snakes Federal Reserve Bank, which has us on the hook for a staggering $5.351 trillion! That's right. We owe the Banksters in our own midst interest-bearing debt more than five times what we owe the Chinese we're always sniveling about.

We owe Ben Bernanke's crooked, miserable Jekyll Island creature 10 times more than we owe the money-grubbers at the counting houses in London. Noise from the cute brunette talking head at CNBC: "So no big deal, then - we just owe it to ourselves."

This is indeed a Pogo moment: "We have met the enemy and he is us." Because who, exactly, is "ourselves." A good question, and one to which this writer can proffer no answers. The Economist serves up some circumlocution on the subject but basically paints the players as victims of speculation even as its editor attends the annual Bilderberg get-together, off the record of course.

But somebody shoved $5 trillion of debt up our stern-bearings, and stands to reap a tidy profit on the compound interest which we must pay to service such debt. But there is an old and worthy saying. Owe the Bank a little, and the Bank owns you. Owe the Bank a lot, and you own the Bank. So we've got some leverage here, n'est-ce pas?

Let's go down this list. No way we stiff Canada. We share North America and the Great Lakes with them, and we need their beer, lacrosse and the NHL and the three-downs-only Canadian Football League. Plus, it would just not be Polite, and Canadians are sticklers for Politeness. Settle with them, dollar-for-dollar. We spend more on chocolate bars every year (and Chicago election-fixing) than we owe the Mounties.

We're not so sanguine about the Tommies. The Brits have invaded us twice, and we think they were most likely behind that beastly Jekyll Island swindle back in 1913 that brought forth the Federal Reserve. Still, some of us have family back there on Old Blighty. Offer the Brits two bits on the dollar, and invite them to invade us again if they don't like it.

The Caymans? Interesting question. Given that it's probably all drug money down there, we should tread lightly, insofar as all those black-market drug fortunes are a direct consequence of prohibition here in the U.S. Fifty cents on the buck, with our apologies. Considering the taxes they've escaped over the years, they'll take it. Brazil? Hmmmmm, they've got more oil than Venezuela, and as we do not have the will to develop our own petroleum and metal reserves and resources, we'd better be very nice to Brazil if we want our cars, trucks and trains and furnaces to run. We'll need them. Treat them like Canada, even up.

As for the Little Old Ladies, the folks holding U.S. Savings Bonds, better square up with them as well. It would be suicidal to stiff our parents, because they fought in actual declared wars and are handy with rifles.

This leaves us with the Federal Reserve Bank, this mysterious beast in our midst, to whom for no reason known to God we are paying interest. Our interest payments to this weird ghost will in a few years' time consume all of our "discretionary" federal budget, and we won't have paid down a farthing.

Why cannot this nation, like so many millions of U.S. homeowners, simply walk away from the mess this cabal of greedy Fed banksters created? Hand 'em back the keys, and keep our pledges to Canada, Brazil, China, Japan and our own savers at the same time. The interest saved by stiffing the Fed would retire our foreign debt in short order. Besides, it's time Timothy Geithner and Helicopter Benjamin Bernanke got real jobs - like maybe in a Chinese coal mine.

The Fed Has Failed: Money Printing Can’t Create Actual Jobs

For the past three decades, the Federal Reserve has been given a dual mandate: keeping prices stable and maximizing employment. This policy relies not only on the fatal conceit of believing in the wisdom of supposed experts, but also on numerical chicanery.

Rather than understanding inflation in the classical sense as a monetary phenomenon– an increase in the money supply- it has been redefined as an increase in the Consumer Price Index (CPI). The CPI is calculated based on a weighted basket of goods which is constantly fluctuating, allowing for manipulation of the index to keep inflation expectations low. Employment figures are much the same, relying on survey data, seasonal adjustments, and birth/death models, while the major focus remains on the unemployment rate. Of course, the unemployment rate can fall as discouraged workers drop out of the labor market altogether, leading to the phenomenon of a falling unemployment rate with no job growth.

In terms of keeping stable prices, the Fed has failed miserably. According to the government’s own CPI calculators, it takes $2.65 today to purchase what cost one dollar in 1980. And since its creation in 1913, the Federal Reserve has presided over a 98% decline in the dollar’s purchasing power. The average American family sees the price of milk, eggs, and meat increasing, while packaged household goods decrease in size rather than price.

Loose fiscal policy has failed to create jobs also. Consider that we had a $700 billion TARP program, nearly $1 trillion in stimulus spending, a government takeover of General Motors, and hundreds of billions of dollars of guarantees to Fannie Mae, Freddie Mac, HUD, FDIC, etc. On top of those programs the Federal Reserve has provided over $4 trillion worth of assistance over the past few years through its credit facilities, purchases of mortgage-backed securities, and now its second round of quantitative easing. Yet even after all these trillions of dollars of spending and bailouts, total nonfarm payroll employment is still seven million jobs lower than it was before this crisis began.

In this same period of time, the total U.S. population has increased by nine million people. We would expect that roughly four million of these people should have been employed, so we are really dealing with eleven million fewer employed people than would otherwise be expected.

It should not be surprising that monetary policy is ineffective at creating actual jobs. It is the effects of monetary policy itself that cause the boom and bust of the business cycle that leads to swings in the unemployment rate. By lowering interest rates through its loose monetary policy, the Fed spurs investment in long-term projects that would not be profitable at market-determined interest rates. Everything seems to go well for awhile until businesses realize that they cannot sell their newly-built houses, their inventories of iron ore, or their new cars. Until these resources are redirected, often with great economic pain for all involved, true economic recovery cannot begin.

Over $4 trillion in bailout facilities and outright debt monetization, combined with interest rates near zero for over two years, have not and will not contribute to increased employment. What is needed is liquidation of debt and malinvested resources. Pumping money into the same sectors that have just crashed merely prolongs the crisis. Until we learn the lesson that jobs are produced through real savings and investment and not through the creation of new money, we are doomed to repeat this boom and bust cycle.

PHOTOS: $29 Cheez Whiz? High Arctic food costs

CBC News

These grocery shelves in the High Arctic community of Arctic Bay, Nunavut, have people talking this week — $38 for cranberry cocktail, $29 for Cheez Whiz, and a whopping $77 for a bag of breaded chicken.

Arctic Bay-based MLA Ron Elliott, who represents three of Canada's most northern communities, said he is concerned about already high food prices going up even more in the High Arctic.

"It's sort of the talk of the town," he told CBC News on Thursday. "You go in and people are pointing [things] out, and it's obvious to see that this has gone up, and that's gone up."

While groceries in Canada's remote northern communities are generally more expensive than elsewhere in the country, due to shipping costs, Elliott said prices in his communities have skyrocketed since the federal government changed its northern food subsidy program in the past year.

Elliott said the new subsidy program, called Nutrition North, does not cover food items that are considered not to be healthy or perishable, although those items used to be covered under the government's old Food Mail Program.

Elliott said the price hikes are hurting the most vulnerable people in his region, like elders and those on social assistance.

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Grady Memorial Hospital to cut 100 jobs

ATLANTA - Officials say Grady Memorial Hospital will cut 100 jobs and might consider trimming programs to deal with a $25 million shortfall in federal funding.

Hospital officials tell the Atlanta Journal-Constitution the layoffs will not include doctors or nurses. Officials say the layoffs are expected to save the hospital about $6 million.

Grady CEO Michael Young told board members on Monday that the downtown Atlanta hospital is seeing one of its largest-ever reductions in government funding. He said this comes at a time when the recession has spurred greater numbers of uninsured patients.

Young said the layoffs likely will happen over the next several weeks.


Information from: The Atlanta Journal-Constitution, http://www.ajc.com

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

South Carolina lawmaker wants separate currency for state

A South Carolina state politician wants the state to develop its own gold and silver-based currency in case the Federal Reserve collapses and hyper-inflation ensues. "If folks lose faith in the dollar, we need to have some kind of backup," State Sen. Lee Bright told the Spartanburg Herald Journal's Stephen Largen. His bill asks a [...]

Worst Freeze In 60 Years Wipes Out Entire Crops Across Southern U.S. and N. Mexico

Get ready to pay a lot more for produce at the supermarket. In early February the worst freeze in 60 years wiped out entire crops all across the southwestern U.S. and northern Mexico. Already, it has been reported that some U.S. supermarkets have doubled or even tripled prices for certain produce items. Yes, you read that correctly. The price of certain vegetables is actually doubling or even tripling in many U.S. supermarkets. The really bizarre weather that we have been seeing all over the globe this winter is really playing havoc with food prices. The global price of food hit an all-time record during the month of January, and most observers expect food prices to continue to soar. Even before this recent horrible freeze in the southwestern U.S. and northern Mexico, global food prices were pushed higher by unprecedented flooding in Australia and Brazil, and key agricultural areas of China are now experiencing their worst drought in 200 years. Things are getting really crazy out there. Produce prices in the U.S. are eventually expected to return back to normal levels, but this just shows how dramatically food prices can change when a major disaster happens.

Most Americans assume that the United States is generally immune to food price shocks, so this recent freeze is going to shake a lot of people up. A whole lot of Americans are going to be really surprised the next time they go shopping for fresh produce.

For example, at one supermarket in Portland, they have been forced to double or even triple the prices on many produce items as a result of this recent freeze....

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Dr. James Galbraith, Professional Fed Killer

Editor's Note - A brilliant blast from the past that we guarantee none of you saw the first time around. Except that is for Dr. Galbraith himself, who posted this Daily Bail story on the website for the Univ. of Texas LBJ School, where he serves as Chairman.

Video - Dr. Galbraith and Dr. Paul Discuss the Constitutionality of the Federal Reserve - July 26, 2009

Extraordinary discussion from today's hearings. Skip immediately to the 3 minute mark. We've always known Galbraith to be a calm, calculated truth-teller, and he doesn't disappoint here, even looking slightly possessed in this clip. His answer doesn't come until at least the 4:15 mark. He practically tells Paul that it's in their interest and within the original charter, for Congress to change the funding agreement for the Fed. Watch his expressionless body as he emasculates the Fed with serene precision and then utters the most beautiful phrase of all:

  • "And it seems to me that it would be the appropriate decision for Congress to make."

And then he repeats himself because that's what professional Fed killers do.


More from Galbraith at the same hearing....

Video: Opening statement from Dr. Galbraith -- July 9, 2009

Outstanding remarks...couldn't agree more.


Bill Isaac Vs. Hank Paulson's Bailout Machine -- How The Former FDIC Chairman ALMOST Stopped TARP

The little-known story behind the House's initial rejection of TARP from Bill Isaac's new book Senseless Panic.


Bill Isaac was Chairman of the FDIC from 1981-1985 during one of the most tumultuous decades in American banking. He oversaw the banking system during the Latin American debt crisis and the severe recessions of the early 1980's, and tried -- against enormous political pressure -- to head off the looming S&L crisis before it got worse. As many know, the S&L clean-up cost taxpayers hundreds of billions of dollars, but had Congress taken Isaac's prescient advice earlier in the decade, the ultimate costs would have only been an estimated $2B.

Fast forward to 2008. On September 18, Paulson and Bernanke had convinced the Congressional leadership that a bank bailout plan had to be passed immediately or else the entire global economy would collapse. In his new book, Senseless Panic: How Washington Failed America, Isaac writes:

  • "Having served as chairman of the Federal Deposit Insurance Corporation (FDIC) during the banking and S&L crises of the 1980's, I was disturbed, even angry, about the events that led up to the bailout plan itself. I was so upset that I wrote an opinion piece opposing the bailout plan that ran in the Washington Post of Saturday, September 27."

In his op-ed, Isaac pointed out that several of the ostensible reasons for why we had to pass the TARP bill just didn't make sense. For instance, the claim that TARP had to be passed because there was a run on money market funds was completely specious as the U.S. Treasury had announced their blanket guarantee on September 19. Similarly, if the proponents of TARP wanted to claim that ordinary depositors were scared of bank failures, then why not be more clear about "the fact that the FDIC fund is backed by the full faith and credit of the government"? (This is more or less what the FDIC did anyway, when it raised the deposit insurance limit to $250,000.) Besides, Isaac wrote, "[t]his is how the FDIC handled Washington Mutual. It would be easy to announce this as a temporary program if needed to calm depositors." As with so many of the government's excuses for TARP, actions that had already been taken disproved the claims for why TARP was necessary.

And TARP, as sold to Congress, was a blatantly stupid idea anyway. As we've pointed out so many times here at The Daily Bail, "[h]aving financial institutions sell the loans to the government at inflated prices so the government can turn around and sell the loans to well-heeled investors at lower prices strikes me as a very good deal for everyone but U.S. taxpayers. Surely we can do better."

Based on his long experience, Isaac recommended the following in his September 27 op-ed:

  • "[R]eimpose on short sellers the Depression-era regulations on speculative abuses the SEC had removed in 2007."
  • The FDIC should "declare a financial emergency and proclaim that all depositors and other creditors of banks would be protected in bank failures during the period of emergency."
  • Suspend mark-to-market accounting, thereby restoring around $500B of capital in the system.
  • Use the FDIC's existing "emergency power to restore capital in the banks along the lines of a program we used successfully in the 1980's" (i.e. the Net Worth Certificate program).

As he later wrote in Senseless Panic,

  • "I believed then and continue to believe strongly that these actions would have been much more effective in dampening the financial crisis than Paulson's ill-conceived plan to purchase toxic assets, would have cost taxpayers little, if any, money, and would not have politicized the crisis and scared the public the way the Paulson plan did."

But it was on that Saturday, the 27th of September back in 2008, that Isaac started getting phone call after phone call from members of Congress who had read his op-ed in the Washington Post. He received calls that afternoon from Democrats -- Marcy Kaptur of Ohio, Brad Sherman of California, and John Hall of New York, as well as from Republicans -- Darrell Issa of California and Isaac's own congressman, Vern Buchanan of Florida. They were all skeptical of Paulson's plan, Isaac remembers, and they were equally pissed off that the leadership had decided to ram the TARP bill through without hearings, without debate, and with zero accountability.

Each of the representatives urged Isaac to come to Washington and join the fight against TARP, but he put them off.

  • "Congress is going to approve the bailout bill on Monday," I explained, "and my presence in Washington is not going to change anything. We are taking the kids to see the Buccaneers play the Packers tomorrow and that's a much better way for me to spend my weekend."

Still, they persisted. Brad Sherman offered to pay all of Isaac's expenses. Darrell Issa offered the use of his office. Finally, Isaac relented and said he would talk to his wife. Isaac wasn't convinced and felt like he would just be wasting his time, but his wife told him: "You have to go. You feel so strongly about these things, you will always regret it if you don't."

"I could not have guessed how much my life would change," Isaac says. "I have devoted at least half of my time since September 28, 2008, to trying to help us out of this crisis and make sure we do not ever experience another one." Early that Sunday, September 28, Isaac flew to Washington.

Darrell Issa's office in D.C. became the "staging area" for the fight against TARP. His staff put out the word that Isaac would be available to meet with any member of Congress, Democrat or Republican, to discuss the crisis and the proposed bailout. Throughout the day, Isaac met with various groups of congressmen, not calling it quits until around 1:00AM Monday morning. For part of the day, he met with the Democratic Caucus alongside economists Jamie "Fed Killer" Galbraith and Dean Baker. In the end, he met with over 200 members of Congress, from both parties, of all political persuasions from left to right. He says he will never forget one meeting he had during which Jesse Jackson of Illinois and Maxine Waters of California sat together with several conservative Republicans, all united in their efforts to stop the bailout.

The next day, Monday, September 29, was the day set for the vote on TARP. The leadership had already decided that TARP would pass and "viewed the skeptics as an annoyance," but many of the rank and file, thanks in large part to Isaac's efforts, were not falling into line. As Ryan Grim reported at the time, when members of the leadership wrote to lower-ranking members to urge them to vote for TARP, those emails were often returned, not by the members themselves, but by Bill Isaac.

At lunch-time that Monday, there had still been no vote on TARP. Clearly there was trouble with the rank and file and the leadership couldn't be sure they had the votes. Otherwise, the vote would have already happened that morning. Finally, early in the afternoon, word went around that the vote would take place -- apparently enough arms had been twisted (Isaac says that Pelosi and others threatened to revoke members' committee assignments and withold support for their campaigns). One way or another, the leadership had gotten the votes.

  • "I camped out in Darrell Issa's office to watch the vote on C-SPAN. It was every bit as exciting as a football game. The vote seesawed back and forth, the yeas and nays never more than a few votes apart. As the end drew near, the nays took a decisive lead and the billl was defeated -- 228 opposed and 205 in favor."

In the wake of the defeat, "[c]heers erupted throughout Darrell's office. We turned up the volume on the news channels to see how the news was being received. The world was as flabbergasted as we were!" That night, Isaac, along with Rep. Buchanan and his wife, headed to Dulles to catch a flight back home to Florida. "We were thrilled with the vote but knew the leadership was not going to let the vote stand."

We all know the rest of the story. The bankers, it seems, always get what they want, but Bill Isaac nearly stopped them. As Grim reported two years ago, "supporters and opponents of [TARP] agree on one thing: an obscure Carter administration policymaker named Bill Isaac helped kill the bill on Monday." Grim cites "a frustrated House GOP leadership aide" who said at the time: “That guy [Isaac] is more responsible for bringing this thing down than anybody else. He whipped them up into a frenzy.”


Japan Officially Slips Back Into Recession! Government Officials Blame Momentary Pause, Call For MORE Printing; All Global Efforts Focused On Dow 25,0

The Japanese economy shrank an annualized 1.1% in Q4 of 2010. Meanwhile, food and commodity prices continue to rise, giving Japan the worst of both worlds in having to contend with both price inflation in food and energy and deflation in asset prices. You may be wondering what happened to "Welcome to The Recovery"? Not to worry -- when the numbers don't add up, you can expect a flurry of metaphors from government officials and economists, both of whom have advocated spending and printing money in prodigious amounts. Masaaki Shirakawa of the Japanese central bank said the 4th quarter dip was just a momentary "pause" on the path to recovery. Taro Saito of Nippon Life said the economy was just undergoing a brief "lull" -- soon we'll "hit bottom," "gain traction," etc. This is just a little "blip," anyway, recovery is just around the corner. Of course, recovery is always just around the corner. Or gosh, maybe it's just a "soft patch."

Geithner and Bernanke have been crowing about "recovery" since 2009, but there has been no recovery. We've seen nothing but an insane run-up in stocks and a massive bubble in US government and corporate debt that will NOT end well. See Karl Denninger's great chart:

And remember, Japan has been doing this song and dance for over twenty years -- ever since their own stock market and real estate bubbles burst back in 1989-90. Unfortunately, our policy response here in the US, despite protestations to the contrary, is mimicking Japan's. We've bailed out our banks and large corporations, we continue to allow them to lie about asset values. There is virtually no new credit growth outside of the government, and zero interest rates have done nothing but punish savers in favor of the large banks. And see this chart from Denninger (revolving credit looks like Mt. Fuji):

Rather than "recovery," the numbers out of Japan this morning only foreshadow what's likely in store for us, unless the American people get their act together and FORCE Washington and the Fed to stop wrecking the real economy in favor of the banks. Because that's what they're doing, whether they know it or not, which is always an open question.


Japan Q4 GDP Slumps on Policy Change

TOKYO (MNI) - The Japanese economy suffered its first contraction in just over a year in the last quarter of 2010 as the government unwinds crisis measures, but the world's third-largest economy is expected to avoid a recession as overseas economies are now on the mend.

Gross domestic product shrank by a real 0.3% on quarter in October-December after a revised 0.8% rise in July-September, hit by what appears to be a temporary dip in spending and slumping exports, Cabinet Office data released on Monday showed.

GDP dropped at an annualized pace of 1.1% in Q4, compared with a revised 3.3% rise in Q3 (revised down from the initial reading of +1.1% q/q, or +4.5% annualized).

But the Q4 drop was smaller than the median forecast by economists for a 0.5% quarter-on-quarter fall, or an annualized rate of 1.9%, with economist forecasts ranging from 0.2% to 0.8% fall, or at an annualized pace of 0.8% to 3.1%.

Japanese financial markets showed little reaction to the GDP data, with the Nikkei 225 Stock Average rising 0.8% this morning and the yield on 10-year JGBs falling half a basis point to 1.300%. The yen moved in a range of Y83.15 to Y83.57 versus the dollar.

"The GDP data confirmed that the Japanese economy was indeed in a soft-patch in the last quarter of 2010, hit by swings in demand for autos following the end to the government's subsidies and a temporary downturn in overseas demand," said Taro Saito, senior economist at NLI Research Institute, a unit of Japan's largest life insurer Nippon Life Insurance Co.

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Where Are the AIG Dividends? The Federal Reserve Is Getting Paid Back, Why Not Taxpayers?Bush, Hank Paulson, Bernanke Editor's Note: A republish fro

Bush, Hank Paulson, Bernanke

Editor's Note: A republish from last Fall for readers who missed it the first time around. It's now been two years and taxpayers are still waiting for dividends on our remaining $49 billion invested in AIG. Meanwhile, the Federal Reserve is having NO TROUBLE collecting on its loan. In fact, as you will read, the bailout was STRUCTURED that way from the beginning - All to assure the Fed was paid back FIRST.


Reprinted with permission.

If there is one bailout where the U.S. Treasury should be uncompromising in protecting taxpayer interests, it is the rescue of American International Group.

Yet, nearly two years after its near-collapse, AIG has yet to pay any cash dividends to the Treasury on the $49 billion of public money it still has invested in the company.

That fact is a jarring reminder of the big compromises the government made in shoring up AIG—and the potential conflicts the Treasury still has to navigate as it tries to exit the company.

AIG is making payments on the government support provided by the Federal Reserve. In fact, the bailout was deliberately structured so the Fed effectively gets paid ahead of the Treasury. Even so, few would have expected that, for this long, AIG would be paying employees, creditors and policyholders, but not compensating taxpayers on nearly $50 billion of their money.

One of the reasons is that the government believed AIG would struggle to find the cash to pay the 10% dividend rate on its preferred shares. That is why, in April 2009, the Treasury swapped $40 billion of AIG preferred shares for new, more lenient preferreds. Unlike the first set, which left the company on the hook for any unpaid dividends into the future, the new preferreds don't.

In foregoing cash payments on the preferreds, the Treasury has effectively placed its hopes on getting paid back later through funds raised via a common-stock offering. In theory, once the Fed has been repaid and AIG restructured, private investors should be more willing to buy the company's shares.

The government could convert its preferreds into common stock that it could then sell in the market, a strategy it has taken with Citigroup. But there is one difference: Citi made its payments of over $2 billion in cash dividends on Treasury preferreds before they were either repaid or swapped into common shares and other securities.

Making matters worse, the Treasury now faces a freeloader problem. Forgoing cash dividends on preferreds supports the value of AIG's common stock, and is effectively a giveaway to outside holders of those shares.

True, the Treasury also effectively owns nearly 80% of AIG's common shares, a stake it acquired during the bailout. But the remaining 20%, owned by private shareholders whose interests were never supposed to be protected by the bailout, are benefiting from the Treasury's lenience.

One way to avoid this might be for the government to decide that AIG should start paying the dividends on the $49 billion of preferreds, or at least a portion of them. True, the Treasury's existing holding of common stock might lose some of its value. But it would be getting hard cash today—and showing private common holders that there are risks to freeloading off the government.

Two years on, the taxpayer deserves nothing less.


John Kenneth Galbraith and Marriner Eccles Explained 50 Years Ago that Inequality Causes Crashes

Preface: If you think that only liberals are concerned about inequality, please read this.

In his definitive study of the Great Depression, The Great Crash, 1929, John Kenneth Galbraith wrote:

There seems little question that in 1929, modifying a famous cliche, the economy was fundamentally unsound. This is a circumstance of first-rate importance. Many things were wrong, but five weaknesses seem to have had an especially intimate bearing on the ensuing disaster. They are:

(1) The bad distribution of income. In 1929 the rich were indubitable rich. The figures are not entirely satisfactory, but it seems certain that the five per cent of the population with the highest incomes in that year received approximately one-third of all income. The proportion of personal income received in the form of interest, dividends, and rent – the income, broadly speaking, of the well-to-do – was about twice as great as in the years following the Second World War.

This highly unequal income distribution meant that the economy was dependent on a high level of investment or a high level of luxury consumer spending or both. The rich cannot buy great quantities of bread. If they are to dispose of what they receive it must be on luxuries or by way of investment in new plants and new projects. Both investment and luxury spending are subject, inevitably, to more erratic influences and to wider fluctuations than the bread and rent outlays of the $25-week workman. This high bracket spending and investment was especially susceptible, one may assume, to the crushing news from the stock market in October 1929.

Galbraith wrote that in 1954.

Marriner S. Eccles - Federal Reserve chairman from 1934 to 1948 - made a similar point in his 1951 book Beckoning Frontiers:

As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth -- not of existing wealth, but of wealth as it is currently produced -- to provide men with buying power equal to the amount of goods and services offered by the nation's economic machinery. Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.

Numerous prominent economists in government and academia have since agreed that large inequalities can cause - or at least contribute to - financial crises, including:

Paul Krugman and Simon Johnson are also open to the possibility..

In addition, a large and healthy middle class has long been understood to lead to political stability. But America's middle class is being decimated.

Given that revolts are partly being waged in a number of Arabic countries because of inequality, and that inequality in America is worse than in Tunisia, Egypt or Yemen, this is a cause for concern. (As NPR notes, inequality in America is now also worse than in many Latin America banana republics.)

As Robert Shiller said recently:

I think inequality is a huge emerging problem, and that our society has to think about dealing with it in a constructive and real way – not through ‘Let them eat credit,’ [a reference to the "let them eat cake" statement of the soon-to-be-deposed French aristocracy] not through wishful thinking. We have to understand how we get inequality and what we can do about it.

Shiller said in 2009:
To me, I would hope that this would spur public discussion about the structural problem that inequality, economic inequality, has been worsening in the United States and in other countries for 30 years. And it's gotten really -- especially at the high end -- it's gotten really off.

And it's not like we want to level income. I'm not saying spread the wealth around, which got Obama in trouble. But I think, I would hope that this would be a time for a national consideration about policies that would focus on restraining any possible further increases in inequality.

This, I think, is potentially the big problem which is bigger than this whole financial crisis.


If these trends that we've seen for 30 years now in inequality continue for another 30 years, we're going to look like -- it's going to create resentment and hostility. It's not a country that -- we could turn into a country that even the rich would rather not be in.

QE2 Is a Total Failure and Bernanke Is Delusional About Inflation

The discontent and seeds of rebellion existed for a long time in Egypt as it has in many other countries. The major powers of the world were content with Mr. Mubarak, especially the US, which gave him $60 billion over 30 years and allowed him to move $70 billion over that period into secret bank accounts in England, Switzerland and Europe, while Egyptians lived on the edge of starvation over that time frame. Both the US and UK never saw a dictator they didn’t like. This was their dictator, as was his predecessor. Mubarak did exactly as he was told including doing everything Israel desired. Mubarak represented stability even though his subjects barely survived. Most of the aid sent by the US was used to keep the military and Secret Police strong to enforce his powerful hold over the people. Thus, the US was happy to have such a “moderate” in power. He helped keep Egypt and Israel in a sea of tranquility in the desert. Mr. Mubarak was a model dictator.

Hunger and tyranny only last for so long and then one way or another they come to an end. You might say that the rebellion in Tunisia against another dictator was the catalyst or forerunner of what happened in Egypt. This was to be where it would all begin. We had seen many such operations over the past 50 years. In both countries the groundwork was all there, poverty, lack of proper food and spiriling food and other costs. All of the change agents were on the scene coordinating the well prepared uprising. The president and his entourage left the country of course accompanied by 1-1/2 tons of gold. Mubarak in Egypt was better prepared. He had been moving out the wealth of the starving Egyptian people systematically for years having been well schooled by his handlers in London and Washington. This planned uprising was not what the planners had expected, particularly in Egypt. More violence was expected. Mubarak is out, although he hangs on to the visages of power, but the real problem for these planners is that their chosen successor, Mr. Suleiman will not be accepted by the people. This is the man who ran the CIA’s retention operation in Egypt and oversaw the torture of innocent people. We can understand why they would not want such an inhuman person to lead them.

Just more of the same. There are 25 million young men under 20 years old in Egypt. Does the military want to attempt to kill them? We do not think so. Those are insurmountable odds. People in Egypt are fed up and threatening them with death for demonstrating in the streets in the worst thing the Vice President could have done. The gauntlet has been thrown down to the people and that was a very bad idea by those who prefer force to persuasion. It seems the current government doesn’t at all understand that it’s their job to safeguard the people not to threaten them.

If you have any doubt as to who planned this episode we refer to secret meetings in Washington set up to decide who was going to replace Murbarak and how quickly it could be accomplished. That was a week ago and no headway has been made by the US, because all of their replacements are unacceptable to the people. After causing this fiasco the US and UK find they have lost control, at least for the moment, in their effort to retain Egypt aa a client state. We think that this diversion is going to be very expensive for both parties. They jeopardized power over Egypt to distract Europeans and Americans from their terrible economic and financial situations. The choice has turned out to be a very poor one and even if they cobble together a solution the relationship with Egypt will never be the same. Who ever planned this caper should have their head examined. That said, the discontent was obvious and the US stepped in for what they saw as an opportunity to distract fears in the US and Europe over the financial situation there and it backfired. Part of the American colonial empire could be lost here in a foolish gamble. This is all about power and the misuse of power, as well as the subjugation of 80 million people. America was a partner in Egyptian despotism long before Murbarak came to power 30 years ago. Blowback has begun and short of sending US troops in the US has lost the game. The risk reward for the US in this operation was without foundation. The odds had to be 20-1 it would be a loser and it looks like it is going to be. The White House has admitted their plan is out of their control and much worse the world sees control is slipping away, just as they see the US, UK and European control of the financial nightmare slipping away.

You might ask why did all this happen in Tunisia and Egypt? It was a distraction pure and simple and an expensive one. The elitists behind the scenes are trying to find a way to deal with the eminent collapse of the municipal bond market as hundreds of municipalities choose bankruptcy. Newt Gingrich, neocon Bilderberger, wants to pass legislation to allow states to go bankrupt. That would allow the states to dispense with all or part of their pension and benefit obligations changing their financial obligations dramatically. The concept is horrible for people who worked all their lives for a pension.

The Fed continues to buy all the new Treasury bonds and others in circulation. This is a policy that cannot continue indefinitely because it will lead to hyperinflation. Europe has similar problems. The healthier countries have pledged $1 trillion to rescue the spend thrifts. There is a problem, as we sited last May, and that is that they are going to need $3 trillion plus to accomplish rescue – a sum that will bankrupt solvent European states and bring depression to the entire region. Yes, China and Japan have ridden to the rescue in an effort to dump Treasuries and buy the euro bonds of Greece, Portugal and Spain. This is an exercise in futility. Do the Chinese and Japanese intend on coming up with $2 trillion? We don’t think so, and if they did, by selling treasuries, the US dollar would collapse. Another short-term stopgap measure doomed to failure.
By early May Congress has to pass an extension of the debt limit. The Republicans do not want a new extension unless there are major cuts in the budget deficit. In the interim solutions presented to Treasury Secretary Geithner have been found by him to be unworkable. Things are going to come to a head in this game of chicken. Wall Street and banking want the extension, so their game of looting can continue. No extension means financial chaos, which had to come sooner or later. Monetization of debt is inflationary and destructive. The quicker we bite the bullet the better.

That should have happened three years ago. We have reminded you of the problems faced by the US, UK and Europe, because they were the reason for the distractions in Tunisia and Egypt. They are extremely serious problems indeed, but the risks for distraction were too high and now we are witnessing that in a scenario where the US, UK and Israel could lose a key element of control in the Middle East. We will soon find out who wins – the people or the elitists.

Switching over to China we find a country with long experience in using money of all kinds. Copper, iron and paper – they tried it all. About a thousand years ago government took over control and issuance of paper money. Today China still likes to create money and in fact the increase in M2 has been close to 20%, that is similar to what the US Fed was doing a couple of years ago. The US and others have stopped doing so, but China continues on its merry way. China has followed such a course for hundreds of years, as has Europe. They all know that from long experience that the creation of superfluous amounts of money and credit lead to inflation, hyperinflation and economic and political chaos, yet they all do the same thing over and over again with the same tragic results. Obviously many people in China are aware of monetary history and they are purchasing gold and silver at an ever-increasing rate.

Today in China inflation rages, but it varies from province to province. Some areas have a net 5% inflation and some average 35%. Subscribers returning from China have varying and differing accounts of what is happening there financially. China like the US has negative real interest rates, particularly when matched up with real inflation. The government says inflation is 4.6%. That should average out to about 12% and we might add that is a guess. Either way, whatever it is, it is not good.

Ongoing inflation such as China is experiencing will perpetually lead to an accelerating purchasing of gold and silver. That has been part of Chinese culture for centuries, as a result demand has been unbelievable. This year China could import 1,000 tons of gold, which is hard to believe, when China is the world’s top gold producer. That is because the government has been purchasing production for a number of years and at the same time has been buying gold and silver in international markets, usually by using a go between. Gold and silver have not been the only refuge for the average Chinese. They have been accumulating other physical assets, food, commodities and real estate. Illiquidity in today’s overpriced real estate market has forced more and more money into food, gold and silver. China is faced with the same runaway inflation as the US and like the US they do not know what to do about it. They have become enmeshed in a Keynesianism trap from which there is no escape. Very simply, food prices have gone through the roof and this is only the beginning. What is stunning in both cases, China and the US, is that they both know what the end result will be. It’s a matter of history, yet they both still march toward financial oblivion.

In China and the US we see the producer price index at more than 14%. Are the producers, manufactures and distributors going to let these price increases eat into profit? We do not believe so. Prices are advancing at about 8% a month, although for now we do not expect that to continue.
On another note, if in fact higher food prices caused revolt in Tunisia, Egypt, Yemen and Jordan could it be that such conditions could cause worldwide revolt? It is possible and it is probable. Most certainly it is possible in China and perhaps in the US as well. We are often asked on radio programs what will finally wake the people up and spur them to action, and we have always said empty bellies. Thus, a classic syndrome is developing worldwide – a syndrome of revolt and we are now witnessing the beginning of it. Food prices are going substantially higher, because of floods and drought and the flight from currencies to some thing real such as commodities and gold and silver. All of what you are seeing is classic response. Just read history – it is all there, but then again only 8% of Americans are readers today – how sad.

In the late 1970s gold and silver prices rocketed due to 14-3/8% official inflation. That is in the process of happening again. Yes, the run in both metals over the past 2-1/2 years has been due to a flight to quality to gold and silver – the only real money in the world. This segment or phase for gold and silver will be propelled by inflation. This time it will make the 1970s look like child’s play. Just do not forget history is fully on your side. The upside in gold and silver is a lock.

In a brief announcement, Omar Suleiman said on Friday that Mubarak had “abandoned the presidency,” handing over the power to the Supreme Council of the Egyptian Armed Forces, which is headed by Defense Minister Gen. Mohammed Tantawi.

The transition of power to the military comes while Mubarak, Suleiman and Prime Minister Ahmad Shafiq are all former military men. Analysts believe despite the transition Mubarak would still remain in power.

The transition means that Egypt, which has been under a state of emergency for the past 30 years, will continue to be ruled by the military.
This is while millions of Egyptians have for the past 18 days called for the departure of Mubarak and the establishment of a democratic government.

Egyptians poured into the streets to celebrate the toppling of the 82-year old dictator.

Meanwhile, the main opposition party Muslim Brotherhood, has called on the military to swiftly hand over power to a civilian-led government.
Muslim Brotherhood has also called for the establishment of a constitution that “guarantees freedom and human Rights.”

Earlier in the day vigilantes opened fire on pro-democracy protesters in Egypt in a move unprecedented over the past couple of days.
The shooting in El-Kharga came as protesters took over several government buildings in major cities across Egypt on Friday. The last time that live bullets were used against protesters was on Wednesday, when six protesters were killed and hundreds of others were injured some of them critically.

Reports say protesters have also clashed with security forces and attacked police stations in El-Arish. About 1,000 protesters attacked the police station in El-Arish in an attempt to free political prisoners held by the regime for their anti-Mubarak stance.
More than 20,000 Egyptians have marched toward the City Council in the port city.

Millions of protesters in various cities across Egypt are calling on President Hosni Mubarak to step down.

A large number of Egyptians have surrounded the Presidential Palace and the state Radio and Television building in Cairo as the Mubarak regime dispatches scores of vigilantes to attack pro-democracy protesters. The Army, however, has prevented protesters from entering the buildings.
According to a Press TV correspondent, the republican guards have been deployed around the palace with snipers positioned on the rooftop of the building.

The measure was taken after protesters began gathering outside the presidential palace following the Friday Prayers.

This is while, a huge crowd of pro-democracy protesters have already gathered in Cairo’s Liberation Square.

Reports say protesters have marched to the US Embassy, which is under tight security. The families of US diplomats have already been evacuated from Cairo.

Aside from Cairo, Alexandria and the port city of Suez have also been the scene of large protests since the country’s pro-democracy rallies began 18 days ago.

Suez has also seen some of the most violent clashes in the same timescale.

Police have used tear gas and rubber bullets to disperse protesters.

More than one million pro-democracy protesters have taken to the streets of Alexandria. Protests have also broken out in Mansura, Port Said and Beni Suef. About 10,000 people took to the streets of Ismailia.

The US trade deficit with China has hit a record high, fuelling tensions between the countries over currency imbalances.

The gap between US imports from China and what it sold to the country rose to $273.1bn (£170bn) last year, the largest trade imbalance the US has ever recorded with a single country. While US exports to China grew by a third last year to an all-time high of $91.9bn, imports worth $364.9bn travelled in the other direction, an increase of 23.1%. Some US politicians blame Beijing for the size of the trade gap between the nations, claiming it is unfairly keeping the yuan’s value too low. On Thursday a bipartisan group in Congress proposed a bill that would allow the US to impose emergency tariffs against China if its currency was found to be undervalued.

China, though, has long denied that it is responsible for American exports lagging so far behind its imports.

The overall US trade deficit jumped by a third during 2010 to $497.8bn as the US economy recovered following the trauma of the financial crisis. This is the largest annual percentage rise since 2000. The rising cost of oil was a key driver in pushing up the total cost of imports. In December, the US trade deficit widened by 5.9% to $40.6bn, the commerce department reported.

Economists warned the US deficit was likely to keep growing in 2011, although manufacturers may benefit from a weaker dollar. “Exports remain strong and are a bright spot in the US expansion,” said Cary Leahey, at Decision Economics.

Ken Warsh, who opposed Bloody Ben’s QE 2.0 resigned his Fed Governor post. Inquiring minds wonder if this is a protest move. Regardless, another inflation hawk has resigned a key post. On Wednesday Germany’s Axel Weber resigned from the ECB. [They see real trouble ahead.]

His departure may give Bernanke a stronger hand to complete or potentially expand $600 billion in Treasury purchases through June. At the same time, Bernanke loses a link to Wall Street executives and Republican politicians as he carries out Congress’s overhaul of financial regulation and faces criticism from a political party that in the midterm election gained control of the U.S. House.

In January 2009, Warsh was passed over for the presidency of the New York Fed in favor of William Dudley, a former Goldman Sachs Group Inc. economist and leading advocate of the Fed’s stimulus that’s been dubbed QE2 by investors for a second round of quantitative easing.

Kevin M. Warsh, who helped manage the Federal Reserves response to the financial crisis and was Chairman Ben S. Bernanke’s liaison to Wall Street and conservative Republicans, plans to leave the bank’s board of governors around March 31. The departure of Mr. Warsh, 40, gives President Obama another opportunity to leave his stamp on the Fed. In addition to naming Mr. Bernanke to another four-year term last year, Mr. Obama has named three others to the seven-member board; a fourth nominee is awaiting Senate confirmation.

Mr. Warsh, a former investment banker at Morgan Stanley, was had pivotal role in the Fed’s response to the financial crisis in 2008: arranging the sale of Bear Stearns to JPMorgan Chase, allowing Lehman Brothers to go into bankruptcy (the Fed maintains there was no other option), and then bailing out the American International Group, the insurance giant. In a statement, Mr. Bernanke praised Mr. Warsh for “exemplary service” and said “his intimate knowledge of financial markets and institutions proved invaluable during the recent crisis.”

“I deeply appreciate his insights and wise counsel and, most especially, his fortitude and friendship during the difficult days, nights and weekends of the crisis,” Mr. Bernanke said in the statement. In recent months, Mr. Warsh has at times distanced himself from Mr. Bernanke, who has pushed the Fed to take extraordinary measures to speed the recovery. Five days after the Fed’s policy-marking arm voted on Nov. 3 to buy $600 billion in Treasury securities the second round of a strategy intended to lower long-term interest rates The Wall Street Journal published an op-ed article by Mr. Warsh expressing considerable doubt.

Though Mr. Warsh voted for the bond-buying plan by Fed tradition, members of the board almost never vote against the chairman he said he considered the strategy a “necessarily limited, circumscribed, and subject to regular review,” and added that “policies should be altered if certain objectives are satisfied, purported benefits disappoint, or potential risks threaten to materialize.”

In his resignation letter to Mr. Obama on Thursday, Mr. Warsh wrote, “I am honored to have served at a time of great consequence.”

The Fed’s balance sheet is now above $2.5 trillion due. It increased over $31B due to $28.9B of debt monetization.

For January, the Fed’s H8 statement shows ‘Bank Credit’ has declined $53B or 0.0058% (6.6% annualized). But ‘Derivatives’ have increased $11.8B or 0.0284% (39% annualized).

Good thing the big banks were bailed out by taxpayers and QE is lowering rates for consumers. On Wednesday, Bloody Ben told the House Budget Com. that he’s not worried about inflation because the Fed has the means to reduce its $2.5+ trillion portfolio and hike rates “at the appropriate time.”

This is preposterous! If the Fed tries to sell $10B of bonds, the bond market would tank or collapse. If the Fed sold $25B of bonds per week, it would take 2 years to purge the Fed’s portfolio. How would the US Treasury sell bonds? How would states & municipalities sell bonds? What about companies?

QE2 is a “total failure,” except for those folks who work on Wall Street,” Rep. Paul says. “It hasn’t done anything for Main Street; hasn’t done anything to give us real jobs; hasn’t done anything for people who are losing their houses.”

As for inflation, “I think there’s plenty,” Rep. Paul says, citing “skyrocketing” commodity prices and rising food prices. One problem is the Fed’s reliance on core CPI, which famously excludes food and energy and relies on hedonic adjustments. “They rig that number,” he says. “[Bernanke] looks at government stats that are fudged to reassure him he doesn’t have to do anything.”

With the Republicans controlling the House and Rep. Paul’s views now more mainstream, the Texas Congressman has somewhat toned down his public criticisms of the Fed lately. Still, he hasn’t changed a fundamental view that central economic policymaking via the Fed is doomed to fail.
“We’re trying to correct the massive problems we had this decade with more” of the same policies, he laments. “He’s supposed to give us full employment and stable prices and we have neither. How did the Fed do?”

Rep. Paul says he’d support stripping the Fed of its dual mandate – full employment and price stability – as others in Congress have discussed. But he doesn’t think it will do much good and continue to push for a full audit of the Fed and some “competition” for the dollar, as you’ll see in part 2 of this interview.

Ron Paul: QE2 Is a Total Failure and Bernanke Is Delusional About Inflation

QE2 is a “total failure,” except for those folks who work on Wall Street,” Rep. Paul says. “It hasn’t done anything for Main Street; hasn’t done anything to give us real jobs; hasn’t done anything for people.”

As for inflation, “I think there’s plenty,” Rep. Paul says, citing “skyrocketing” commodity prices and rising food prices. One problem is the Fed’s reliance on core CPI, which famously excludes food and energy and relies on hedonic adjustments. “They rig that number,” he says. “[Bernanke] looks at government stats that are fudged to reassure him he doesn’t have to do anything.”

Ben Bernanke faced some tough questions at the House Budget Committee hearing Wednesday. Still, the Fed chairman is probably glad he wasn’t before the House Domestic Monetary Policy and Technology Subcommittee, which is chaired by Rep. Ron Paul (R-Tx.)

Rep. Paul joined Dan Gross and me Wednesday afternoon to discuss Bernanke’s testimony and his subcommittee’s hearing. As you might expect, the longtime Fed critic took umbrage with Bernanke’s testimony, most notably the chairman’s claims that QE2 is working and that inflation isn’t brewing. (See: Under Pressure: Bernanke-Ryan Square Off as Ron Paul Waits in the Wings.)

Treasuries Drop as $16 Billion 30-Year Bond Sale Demand Slips. Indirect bidders, a class of investors that includes foreign central banks, bought 43.1 percent of the bonds, compared with 37.8 percent in January. The average for the past 10 sales is 38.29 percent.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 8% of the debt, compared with 12.4% at the January offering and a 10-sale average of 15.10 percent.

After the Treasury auction, the Fed announced its new POMOs (Permanent Open Market Operations).

U.S. Treasury Secretary Timothy F. Geithner will present Congress with three options for reducing the government’s role in the nation’s decades-old housing finance system and shrinking the footprint of mortgage companies Fannie Mae and Freddie Mac, according to two people familiar with the plan.

Geithner will release the proposal as soon as Friday, according to an administration official, who spoke on condition of anonymity yesterday because the proposal isn’t public. One option would eliminate the two firms and their government-backed guarantee of mortgages while another would hew closer to the present system, according to the two people familiar with the plan.

President Barack Obama met with Geithner and other top aides at the White House yesterday to put final touches on the proposal, according to the administration official. Under the Dodd-Frank financial regulatory overhaul enacted in July, the administration was required to submit to lawmakers a plan for ending taxpayer support for Fannie Mae and Freddie Mac. The government took control of the companies in September 2008 and they since have drawn more than $150 billion from the Treasury to cover losses linked to sub-prime mortgages.

China's wheat crop at risk, world wary

NEW DELHI: There is bad news on the global food front. In an alert issued this week, the Food and Agriculture Organisation (FAO) warned that more than two-thirds of China's gigantic wheat crop may be under risk "because of substantially below-normal rainfall" this winter.

The affected areas in the northern plains of China produced over 75 million tonne of China's total production of 112 million tonne of wheat last year. Any shortfall in Chinese production would have serial effects on availability and prices of wheat around the world.

Global food prices have been silently climbing upward through the past six months and with production and consumption very finely balanced, any disruption in production may wreak havoc with prices. Already, food prices are touching the record levels set in 2008 although prices of rice—the world's largest staple food— are still below those levels.

High food prices have been feeding growing restlessness and anger in a swathe of countries including West Asia. Egypt had experienced an 18.5% rate of inflation driving up prices of all food commodities except bread which is subsidized by the government to the tune of $1.5 billion annually. This was a major contributory factor to the 18-day uprising that dislodged the three-decade-long dictatorship of Hosni Mubarak. Protests against high food prices have taken place in Oman, Israel and Jordan and have contributed to political unrest in Yemen, Tunisia and Algeria.

Wheat flour prices were 16% higher than a year ago in China driven by fears of drought. The Chinese government has announced a $1.96-billion package to fight drought, including attempts to create artificial rain by cloud seeding.

Apart from staples, sugar prices are running at 30-year highs. Weather-related disruption in Australia, Brazil and China has caused international refined sugar prices to reach 35.6 cents per pound. The average price for sugar in 2010 was 27.78 cents per pound. The last time sugar prices reached these sky-high levels was in 1980.

Meanwhile, the World Sugar Committee, representing leading traders, wrote to the ICE futures commodity exchange blaming parasitic speculators for the high prices of sugar.

Nervous governments across the world are trying to stem the tide in different ways. Several countries in West Asia are stocking up on foodgrain. Iraq, where agricultural production has declined considerably, has placed orders for 300,000 tonne of wheat from the US, with options for another 100,000 tonne. Jordan and Lebanon submitted tenders for 100,000 tonne and 22,500 tonne respectively. Algeria, Tunisia and Saudi Arabia too placed large orders recently. Others, like Russia, have banned exports. Vietnam has devalued its currency, the dong, by 9% to curb inflation.

Obama Budget Proposal: Cuts To Target Working Poor, Middle Class & Students (LIVE UPDATES)

WASHINGTON -- Less than two months after signing tax cuts for the wealthiest Americans into law, President Barack Obama proposed a spending plan to Congress that cuts funding to programs that assist the working poor, help the needy heat their homes, and expand access to graduate-level education, undermining the kind of community-based organizations that helped Obama launch his political career in Chicago.

Obama's new budget puts forward a plan to achieve $1.1 trillion in deficit reductions over the next decade, according to an administration official who spoke to the Associated Press on condition of anonymity in advance of the formal release of the budget.

Those reductions -- averaging just over $100 billion each year -- are achieved mainly by squeezing social programs. A deal struck to extend the Bush tax cuts for just two years, meanwhile, increased the deficit by $858 billion dollars. More than $500 billion of that bargain constituted tax cuts, with billions more funding business tax breaks and a reduction in the estate tax. Roughly $56 billion went to reauthorize emergency unemployment benefits.

The president's budget was expected to mostly target "non-defense discretionary spending," which makes up less than one-quarter of the overall budget, making balancing the budget with such cuts mathematically impossible.

Indeed, the driver of the deficit is tax cuts. The Wall Street Journal is reporting that as a result of the tax cut deal, the projected deficit in Obama's budget will reach a "record" level of $1.6 trillion this year, though that figure, relative to the size of the American economy, is far lower than many other governments around the world, according to data compiled by the Central Intelligence Agency. And the relative deficit is well below the levels of the 1940s, a time of economic prosperity. "President Barack Obama's 2012 budget proposal projects this year's deficit will reach $1.6 trillion, the largest on record, as December's tax-cut deal begins to reduce federal revenues, a senior Democrat said Sunday," the Journal reported Sunday evening. (The deficit is only a record if it is neither adjusted for inflation nor considered relative to the size of GDP.)

A closer look at surveys suggests that when people say they are concerned about the deficit, they are actually worried about the economy.

The president's official budget proposal was released Monday morning and we'll be adding updates with breaking news and reactions throughout the day.

Moody’s rates Irish banks as ‘junk’

The credit ratings agency Moody's yesterday cut its rating of four Irish banks to junk status, citing its concerns over the imminence of new funding which was due at the end of February.

The outgoing Irish government told the press this week it will not make extra funds available before the general election on 25 February.

But the main Irish opposition parties, who are assured to form the next government, have expressed their opposition to further bank aid for Ireland.

Bank of Ireland, Allied Irish Banks, EBS Building Society and Irish Life & Permanent were all downgraded by the agency.

Meanwhile, Anglo Irish Bank and Irish Nationwide, both of which have already been given junk status, were cut even further.

Moody's Investors Service is one of the big three credit ratings agencies.


“And the great owners, who must lose their land in an upheaval, the great owners with access to history, with eyes to read history and to know the great fact: when property accumulates in too few hands it is taken away. And that companion fact: when a majority of the people are hungry and cold they will take by force what they need. And the little screaming fact that sounds through all history: repression works only to strengthen and knit the repressed.” – John SteinbeckGrapes of Wrath

John Steinbeck wrote his masterpiece The Grapes of Wrath at the age of 37 in 1939, at the tail end of the Great Depression. Steinbeck won the Nobel Prize and Pulitzer Prize for literature. John Ford then made a classic film adaption in 1941, starring Henry Fonda. It is considered one of the top 25 films in American history. The book was also one of the most banned in US history. Steinbeck was ridiculed as a communist and anti-capitalist by showing support for the working poor. Some things never change, as the moneyed interests that control the media message have attempted to deflect the blame for our current Depression away from their fraudulent deeds. The novel stands as a chronicle of the Great Depression and as a commentary on the economic and social system that gave rise to it. Steinbeck’s opus to the working poor reverberates across the decades. He wrote the novel in the midst of the last Fourth Turning Crisis. His themes of man’s inhumanity to man, the dignity and rage of the working class, and the selfishness and greed of the moneyed class ring true today.

Steinbeck became the champion of the working class. When he decided to write a novel about the plight of migrant farm workers, he took his task very seriously. To prepare, he lived with an Oklahoma farm family and made the journey with them to California. Seventy years later the plight of the working class is the same. If Steinbeck were alive today he would live with a Michigan auto manufacturing family making a journey to fantasyland of green energy, where automobiles ran on corn and sunshine. The working class bore the brunt of the Great Depression in the 1930s and they are bearing the burden during our current Greater Depression. Steinbeck knew who the culprits were seventy years ago. We know who the culprits are today. They are one in the same. The moneyed banking interests caused the Great Depression and they created the disastrous collapse that has thus far destroyed 7 million middle class jobs. Steinbeck understood that the poor working class of this country had more dignity and compassion for their fellow man than any Wall Street banker out for enrichment at the expense of the working class.

Okies and the Land of Milk & Honey

“How can you frighten a man whose hunger is not only in his own cramped stomach but in the wretched bellies of his children? You can’t scare him–he has known a fear beyond every other.” - John Steinbeck – Grapes of Wrath

The America of 1930 was different in many aspects from the America of 2011. The population of the U.S. was 123 million, living in 26 million households, or 4.7 people per household. Today the population of the U.S. is 310 million, living in 118 million households, or 2.6 people per household. The living and working structure of the country was dramatically different in 1930. The percentage of the population that lived in rural areas exceeded 40%, down from 60% in 1900, as the country rapidly industrialized. One quarter of the population still worked on farms. Today, less than 20% of Americans live in rural areas, while less than 2% live on farms. In 1935, there were 6.8 million farms in the U.S. Today there are 2.1 million farms. The family farm has been slowly but surely displaced by corporate mega-farms since the 1920s, with 46,000 farms now accounting for 50% of all farm production today.

figure 1 - both the U.S. farm population and rural population have dwindled as a share of the Nation's overall population

The sad plight of the American working farmer did not begin with the Stock Market Crash of 1929. The seeds of destruction were planted prior to and during World War I. Automation through technology allowed for more cultivation of land. Agricultural prices rose due to strong worldwide demand, leading farmers to dramatically increase cultivation. With food commodity prices soaring, farmers fell into the classic trap that McMansion buyers fell into from 2000 through 2006. Farmers took on huge amounts of debt to acquire more land and farming equipment as local banks were willing to feed their illusions with loans. It was a can’t miss proposition. Jim Grant in his book Money of the Mind: Borrowing and Lending from the Civil War to Michael Milken described the end result:

Like bull markets in stocks, the bull market in farmland engendered the belief that prices would rise forever. “Speculators who had no interest whatever in farming bought land for the 6 percent or 8 percent annual rise that seemed a certainty throughout the early years of the century…” The rise in farm prices had only begun. The price of wheat was 62 cents a bushel in 1900. It was 99 cents in 1909, $1.43 in 1916, and $2.19 at the peak in 1919. To put $2.19 in perspective, it was not a price seen again until 1947.

The collapse of prices in the early 1920s would have been devastating enough, but the damage was compounded by debt. By the summer of 1921, crop prices were down by no less than 85 percent from the postwar peak. Nebraskans, finding that corn had become cheaper than coal, burned it. As it does in every market, the fall in prices revealed the weaknesses in the structure of credit that had financed the rise.

Between 1919 and 1921, the number of banks that failed totaled 724, with only one of the largest, National City Bank, being bailed out by Washington DC. The heartland, where more than 40% of the population lived, did not participate in the Roaring Twenties. Wall Street and the urbanized Northeast experienced the rapid wealth accumulation during the 1920s. The working poor of the farm belt struggled to subsist. Land under cultivation continued to rise even after the bust of the early 1920s, tripling between 1925 and 1930. The land was over farmed and not properly cared for, depriving the soil of organic nutrients and increasing exposure to erosion. Then Mother Nature took her pound of flesh, much like she is doing today across the globe.


The Dust Bowl was a period of severe dust storms causing major ecological and agricultural damage to Midwest prairie lands from 1930 to 1936. The phenomenon was caused by severe drought coupled with decades of extensive farming without crop rotation, fallow fields, cover crops or other techniques to prevent erosion. Deep plowing of the virgin topsoil of the Great Plains had displaced the natural deep-rooted grasses that normally kept the soil in place and trapped moisture even during periods of drought and high winds. These immense dust storms—given names such as “Black Blizzards” and “Black Rollers”—often reduced visibility to a few feet. The Dust Bowl affected 100,000,000 acres, centered on the panhandles of Texas and Oklahoma.

Small farmers were hit especially hard. Even before the dust storms hit, the invention of the tractor drastically cut the need for manpower on farms. These small farmers were usually already in debt, borrowing money for seed and paying it back when their crops came in. When the dust storms damaged the crops, not only could the small farmer not feed himself and his family, he could not pay back his debt. Banks would then foreclose on the small farms and the farmer’s family would be both homeless and unemployed. Between 1930 and 1935, nearly 750,000 farms were lost through bankruptcy or sheriff sales.

Millions of acres of farmland became useless, and hundreds of thousands of people were forced to leave their lifelong homes. They set out on Route 66 toward the land of milk and honey – California. Hundreds of thousands of families traveled this lonely road during the 1930s.


Many of these families, often known as “Okies”, since so many came from Oklahoma migrated to California and other states, where they found economic conditions little better during the Great Depression than those they had left. Owning no land, many became migrant workers who traveled from farm to farm to pick fruit and other crops at starvation wages. While the Great Depression affected all Americans, about 40% of the population was relatively unscathed. Not so for the “Okies”.

Californians tried to stop migrants from moving into their state by creating checkpoints on main highways called “bum blockades.” California even initiated an “anti-Okie” law which punished anyone bringing in “indigents” with jail time. While Steinbeck highlights the plight of migrant farm families in The Grapes of Wrath, in reality, less than half (43%) of the migrants were farmers. Most migrants came from east of the Dust Bowl and did not work on farms. By 1940, 2.5 million people had moved out of the Plains states; of those, 200,000 moved to California.

Man’s Inhumanity to Man

“It has always seemed strange to me… the things we admire in men, kindness and generosity, openness, honesty, understanding and feeling, are the concomitants of failure in our system. And those traits we detest, sharpness, greed, acquisitiveness, meanness, egotism and self-interest, are the traits of success. And while men admire the quality of the first they love the produce of the second.”John Steinbeck

Steinbeck’s novel was a national phenomenon. The book won Steinbeck the admiration of the working class, due to the book’s sympathy to the common man and its accessible prose style. It also got him branded a communist by the large California land barons and the non-stop harassment by J. Edgar Hoover and the IRS for most of his life. The book was lauded, debated, banned and burned. A book can only generate that amount of heat by getting too close to a truth that those in power do not want revealed. The Grapes of Wrath did just that. Steinbeck meant to pin the blame where it belonged:

“I want to put a tag of shame on the greedy bastards who are responsible for this [the Great Depression and its effects].”

The bankers who took their farms and cast them aside like a piece of trash, the Wall Street speculators who got rich by peddling debt to the working class, and the wealthy land barons who treated the migrant farm workers like criminals, were to blame for the suffering of millions. The pyramid of wealth was as unequal in 1929 as it is today. Unequal wealthThe 1% of the population at the very top of the pyramid had incomes 650% greater than those 11% of Americans at the bottom of the pyramid. The tremendous concentration of wealth in the hands of a few meant that continued economic prosperity was dependent on the high investment and luxury spending of the wealthy.

By 1929, the richest 1% owned 40% of the nation’s wealth. The top 5% earned 33% of the income in the country. The bottom 93% experienced a 4% drop in real disposable income between 1923 and 1929. The middle class comprised only 20% of all Americans. Society was skewed heavily towards the haves. By 1929, more than half of all Americans were living below a minimum subsistence level. Those with means were taking advantage of low interest rates by using margin to invest in stocks. The margin requirement was only 10%, so you could buy $10,000 worth of stock for $1,000 and borrow the rest. With artificially low interest rates and a booming economy, companies extrapolated the good times and invested in huge expansions. During the 1920s there were 1,200 mergers that swallowed up more than 6,000 companies. By 1929, only 200 mega-corporations controlled over half of all American industry. The few were enriched, while the many wallowed in poverty and despair.

When self proclaimed experts on the Great Depression, like Ben Bernanke, proclaim that the Federal Reserve contributed to the Depression by not expanding the monetary supply fast enough, they practice the art of the Big Lie. The Great Depression was mainly caused by the expansion of the money supply by the Federal Reserve in the 1920’s that led to an unsustainable credit driven boom. Both Friedrich Hayek and Ludwig von Mises predicted an economic collapse in early 1929. In the Austrian view it was this inflation of the money supply that led to an unsustainable boom in both asset prices (stocks and bonds) and capital goods. Ben Strong, the head of the Federal Reserve, attempted to help Britain by keeping interest rates low and the USD weak versus the Pound. The artificially low interest rates led to over investment in textiles, farming and autos. In 1927 he lowered rates yet again leading to a speculative frenzy leading up to the Great Crash. The ruling elite of society were the Wall Street speculators. Only 1.5 million people out of an entire population of 127 million invested in the stock market. Margin loans increased from $3.5 billion in 1927 to $8.5 billion in 1929. Stock prices rose 40% between May 1928 and September 1929, while daily trading rose from 2 million shares to 5 million shares per day. By the time the Federal Reserve belatedly tightened in 1928, it was far too late to avoid a stock market crash and depression.

The Federal Reserve was created by bankers to benefit bankers. The Federal Reserve purchased $1.1 billion of government securities from February to July 1932, which raised its total holding to $1.8 billion. Total bank reserves only rose by $212 million, but this was because the American populace lost faith in the banking system and began hoarding more cash, a factor very much beyond the control of the Central Bank. The potential for a run on the banks caused local bankers to be more conservative in lending out their reserves, and was the cause of the Federal Reserve’s inability to inflate. From its backroom middle of the night creation in 1913, the bank owned Federal Reserve has sought to benefit its owners, the large Wall Street banking interests and its politician protectors in Congress. The working class has always been nothing more than hosts used by the parasites to tax and peddle debt to.

Income and wealth inequality reached a new peak in 2007, the highest level of inequality since 1929. William Domhoff details this inequality in the following terms:

In the United States, wealth is highly concentrated in a relatively few hands. As of 2007, the top 1% of households (the upper class) owned 34.6% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.5%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth (total net worth minus the value of one’s home), the top 1% of households had an even greater share: 42.7%.

Source: Domhoff

Real median household income in the U.S. is $49,777 today. It was $52,388 in 1999 before George Bush took office. This is a 5% decline over ten years. Even more disturbing is the fact that the top 20% of households showed real increases in income. The bottom 50% lost income during the last ten years, with the bottom 20% losing 8% of income over this time frame. No wonder there is so much anger among the working middle class in the country regarding the bailout for the top 1%. Sixty million households make less today than they made 10 years ago. The policies of the Federal Reserve over the last ten years have benefitted speculators and punished seniors, savers and the working middle class. Every policy, program and regulation rolled out by the Federal Reserve in the last three years has been to prop up, enrich, and support their Too Big To Fail Wall Street owners. The middle class American working family is Too Small To Matter.

Steinbeck presciently realized that the suffering of the working class was not due to bad weather, bad luck, or the actions of the working class. It was caused by the rich ruling elite wielding their power and influence across the land in their effort to enrich themselves by any means necessary. Historical, social, and economic circumstances separate people into rich and poor, landowner and tenant, and the people in the dominant roles struggle viciously to preserve their positions. During the Great Depression it was the brokers, bankers and businessmen who maintained a dominant role, while farmers, workers, and the common man were treated like dogs. Steinbeck used this symbolism by having the Joad’s family dog be run over by a rich person driving a fancy roadster early in the novel. Steinbeck saw the large California landowners as the epitome of the evil Haves. The landowners created a system in which the migrants were treated like animals, shuffled from one filthy roadside camp to the next, denied livable wages, and forced to turn against their brethren simply to survive.

Steinbeck’s world was black and white, good and evil, rich and poor. Today, the corporate mainstream media would brand him a anti-capitalist, socialist crackpot. Those in control want to keep the masses lost in shades of grey. In the 1930s it was clearer regarding who was to blame. The social safety net of New Deal programs from FDR had just begun. At the time, I’m sure they seemed like a good idea to ease the suffering of the poor. In reality, they did little to help, as the unemployment rate was still 18% in 1939, ten years after the Depression began. These programs, along with hundreds implemented since the 1930s, have created a dependent underclassand have left America with unfunded liabilities in excess of $100 trillion. The rich use the 70,000 page IRS tax code to avoid taxes. They use their wealth to buy influence in Washington DC, rigging the game in their favor. The bottom 50% of the population pays no income taxes. The working middle class, with declining real incomes, foot the bill. They are bamboozled into believing they can live like the rich by a financial industry willing to lie, obfuscate and defraud them. Corporate superstar CEOs, fawned over by the corporate media, outsourced their good paying middle class jobs to foreign lands, boosting EPS, their stock price and their mega-million bonuses. This may not look like the 1930s, but it is worse for millions of American working middle class families.

The Dignity of Wrath

“…and in the eyes of the people there is the failure; and in the eyes of the hungry there is a growing wrath. In the souls of the people the grapes of wrath are filling and growing heavy, growing heavy for the vintage.” - John Steinbeck - Grapes of Wrath

Steinbeck’s feelings about the people he was writing about can be summed up in this passage:

“If you’re in trouble, or hurt or need – go to the poor people. They’re the only ones that’ll help – the only ones.”

The Joads refuse to be broken by their circumstances. They maintain their dignity, honor and self respect, despite the trials and tribulations that befall them. Hunger, tragic death, and maltreatment by the authorities do not break their spirit. Their dignity in the face of tragedy stands in contrast to the vileness of the rich landowners and the cops that treated the migrant workers like criminals.

No matter how much misfortune and degradation are heaped upon the Joads, their sense of justice, family, and honor never waver. Steinbeck believed that as long as people maintained a sense of injustice—a sense of anger against those who sought to undercut their pride in themselves—they would never lose their dignity. Tom Joad is the symbol of all the mistreated working poor who refuse to be beaten down. The landowners and the police are the oppressors. Tom kills a policeman in a struggle for the dignity of the workers. Tom’s farewell to his Ma, captures the essence of the struggle:

“Wherever they’s a fight so hungry people can eat, I’ll be there. Wherever they’s a cop beatin’ up a guy, I’ll be there. If Casy knowed, why, I’ll be in the way guys yell when they’re mad an’—I’ll be in the way kids laugh when they’re hungry n’ they know supper’s ready. An’ when our folks eat the stuff they raise an’ live in the houses they build—why, I’ll be there.” – Tom Joad – Grapes of Wrath


Steinbeck’s wrath was directed towards the bankers who stole the farms, the California landowners that treated the workers like vermin, and the police who sided with the wealthy and carried out the brutality on the workers. Tom Joad’s anger and wrath toward those who meant to make them cower is portrayed powerfully in this passage:

“I know, Ma. I’m a-tryin’. But them deputies- Did you ever see a deputy that didn’t have a fat ass? An’ they waggle their ass an’ flop their gun aroun’. Ma”, he said, “if it was the law they was workin’ with, why we could take it. But it ain’t the law. They’re a-working away at our spirits. They’re a-tryin’ to make us cringe an’ crawl like a whipped bitch. They’re tryin’ to break us. Why, Jesus Christ, Ma, they comes a time when the on’y way a fella can keep his decency is by takin’ a sock at a cop. They’re working on our decency”.”

Today, Steinbeck’s wrath would be focused upon Wall Street Mega-Banks, Mega-Corporations and the politicians that allow them to pillage the wealth of the nation. Droughts, foreclosures and technology drove millions of farmers into the cities during the 1930s and it accelerated with the onset of World War II. America became manufacturer to the world, with manufacturing accounting for over 28% of GDP in the mid-1950s. The business of banking, insurance and real estate accounted for less than 11% of GDP.

Since the adoption of the credit card on a large scale in the late 1960′s, the role of bankers and debt in our society has grown relentlessly and recklessly. The point of no return occurred in the mid-1980′s when the financial sector passed the manufacturing sector in relative importance for our economy. Today, banker generated profits from peddling debt to the middle class, creating derivatives to defraud widows and pension funds, and running their institutions like leveraged casinos on steroids account for 21.5% of GDP. Manufacturing profits now account for a pitiful 11.2% of GDP, as the CEO titans of industry at General Electric, Hewlett Packard, Intel, and Apple shipped the manufacturing jobs to Asia in a noble effort to boost earnings per share and reward themselves with $30 million pay packages.

Source: www.mybudget360.com

Total U.S. debt as a percentage of GDP was remarkably stable at approximately 130% for three decades, while financial profits as a percentage of GDP consistently ranged just below 1%. The ascension of Alan Greenspan to the throne of the Federal Reserve unleashed a dust storm of debt and banking profits over the last 25 years. Total credit and financial industry profits each grew by more than 250%. Real wages of middle class workers are lower today than they were in 1971. Since the higher paying manufacturing jobs were shipped overseas, Wall Street stepped into the breach by providing trillions of debt to the average American so they could buy stuff being produced in China by people who took their jobs. Wall Street and the corporate media convinced middle class Americans that their standard of living was increasing upon the waves of debt. The godfather, Greenspan, watched over and protected the big banks. When they screwed up in their efforts to pillage and plunder on a grand scale, the godfather would reduce interest rates and flood the system with liquidity. Heads they win, tails America loses.

Source: Barry Ritholtz

The powerful Wall Street banks were un-refrained, unregulated and unscrupulous in their unquenchable looting and ransacking of the wealth of the American public. The Federal Reserve provided the fuel and Congress lit the fuse with the repeal of Glass-Steagall, ultimately leading to the biggest financial explosion in world financial history in 2008. The financial crisis was created by the biggest Wall Street banks and the policies of the Federal Reserve. It is a tribute to their monetary power, complete capture of the mainstream media, and total ensnarement of the corrupt politicians in Washington DC, that somehow the Too Big To Fail banks are bigger than they were before the crisis. The working middle class has footed the bill for the trillions that have been shoveled into the coffers of these criminal enterprises. As a reward, the savers receive .25% on their savings. These men have put 8.5 million people out of work in the last three years. Steinbeck understood that bankers who foreclosed on the homes of poor farmers and fed the speculation that led to the Great Crash were nothing more than extensions of an evil monster:

“No, you’re wrong there—quite wrong there. The bank is something else than men. It happens that every man in a bank hates what the bank does, and yet the bank does it. The bank is something more than men, I tell you. It’s the monster. Men made it, but they can’t control it.”

The bankers that control our economy today deserve the same scorn and wrath that Steinbeck heaped on bankers and California landowners in the 1930′s. Jesse, from Jesse’s Café Americain captures the wrath in this assessment of our current state of affairs:

“The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained recovery. All else is looting and folly, with apathy and complacent self-interest as their accomplices.”

Selfishness & Altruism

I ain’t never gonna be scared no more. I was, though. For a while it looked as though we was beat. Good and beat. Looked like we didn’t have nobody in the whole wide world but enemies. Like nobody was friendly no more. Made me feel kinda bad and scared too, like we was lost and nobody cared…. Rich fellas come up and they die, and their kids ain’t no good and they die out, but we keep on coming. We’re the people that live. They can’t wipe us out, they can’t lick us. We’ll go on forever, Pa, cos we’re the people. – Ma Joad - Grapes of Wrath

The power elite that believe they can control the masses as puppet master commands a puppet should beware. The wrath of the masses can be fierce and sudden. Ask Hosni Mubarak. As Steinbeck realized many decades ago, selfishness run amok, supported and encouraged by the authorities lead to poverty, despair and sometimes revolution. The false mantra of an economy based on self-interest and free markets is a smokescreen blown by the few with wealth and power to obscure the truth that they have used their wealth and power to rig the game in their favor. The have-nots can dream about becoming a have, but the chances of achieving that dream today are miniscule. Steinbeck pointedly distinguishes between the selfishness of the moneyed class and the altruism of the working poor. In contrast to and in conflict with this policy of selfishness stands the migrants’ behavior toward one another. Aware that their livelihood and survival depend upon their devotion to the collective good, the migrants unite—sharing their dreams as well as their burdens—in order to survive.

Those in control need to keep the masses divided. They need Americans to be distracted by phantom terrorist threats, inconsequential political differences, American Idol, Charlie Sheen, Lindsey Lohan and Lady Gaga. They need Americans to be focused on “I”. Their greatest fear is that the American people realize that “We” can change the direction of this country and bring the perpetrators of crimes against the people of this country to justice. John Steinbeck saw the potential power of the common man if they became “We”:

One man, one family driven from the land; this rusty car creaking along the highway to the west. I lost my land, a single tractor took my land. I am alone and bewildered. And in the night one family camps in a ditch and another family pulls in and the tents come out. The two men squat on their hams and the women and children listen. Here is the node, you who hate change and fear revolution. Keep these two squatting men apart; make them hate, fear, suspect each other. Here is the anlarge of the thing you fear. This is the zygote. For here “I lost my land” is changed; a cell is split and from its splitting grows the thing you hate–”We lost our land.” The danger is here, for two men are not as lonely and perplexed as one. And from this first “we” there grows a still more dangerous thing: “I have a little food” plus “I have none.” If from this problem the sum is “We have a little food,” the thing is on its way, the movement has direction. Only a little multiplication now, and this land, this tractor are ours. The two men squatting in a ditch, the little fire, the side-meat stewing in a single pot, the silent, stone-eyed women; behind, the children listening with their souls to words their minds do not understand. The night draws down. The baby has a cold. Here, take this blanket. It’s wool. It was my mother’s blanket–take it for the baby. This is the thing to bomb. This is the beginning–from “I” to “we.” - John Steinbeck - Grapes of Wrath

The American people have a choice. They can continue on a course of apathy, selfishness and worship of mammon, or they can rally together with selflessness and concern for the welfare of their fellow man and future unborn generations. The current path, forged by a minority of privileged wealthy elite, will lead to the destruction of this country and misery on an unprecedented scale. It is up to each of us to show the courage of John Steinbeck, who without a thought for himself, stood up against the stones of condemnation, and spoke for those who were given no real voice in the halls of justice, or the halls of government. By doing so he became an enemy of the political status quo. Are you prepared to incur the wrath of the vested interests and meet their lies and propaganda with the fury of your own wrath in search for the truth? These men are sure you don’t have the courage, fortitude and wrath to defeat them.

Mine eyes have seen the glory of the coming of the Lord:
He is trampling out the vintage where the grapes of wrath are stored;
He hath loosed the fateful lightning of His terrible swift sword:
His truth is marching on.

- Battle Hymn of the Republic