Friday, December 23, 2011

Republicans cave in over payroll tax

Republicans in Congress blinked first on Thursday in a standoff with the White House over taxes, handing President Barack Obama a major political victory heading into the New Year.

For three days, House Republicans refused to back a compromise that would prevent payroll taxes from rising on January 1, hitting the pay cheques of 160 million American workers.

Speaker John Boehner, the Republican leader, rejected a deal passed overwhelmingly by the Senate because it only extended tax cuts for two months rather than a full year.

But under withering fire from the White House and a growing chorus of discontent within his own party, Mr Boehner caved in tonight and agreed to pass the short-term bill.

"It may not have been politically the smartest thing in the world but our members waged a good fight," he said when asked whether he regretted his initial opposition to the deal.

Mr Boehner said he aimed to pass the legislation would be passed by unanimous consent before Christmas, meaning neither the Senate nor the House would have to formally convene.

The deal is a rare example of President Obama outmaneuvering Congressional Republicans and is a welcome boost as he heads to Hawaii for a holiday with his family.

Flanked by examples of the "hardworking Americans", the President spoke before the deal was made and railed against the "faction of House Republicans that have refused to support this compromise".

After the announcement that Mr Boehner had backed down he said: "This is the right thing to do to strengthen our families, grow our economy, and create new jobs. This is real money that will make a real difference in people’s lives".

Recent polls show his approval rating beginning to creep upwards after a dismal year in which he has taken most of the blame for the faltering economy and high unemployment.

CNN Hit Piece: Ron Paul Is A Racist! (Nice Fair & Balanced News)

Scotland to win freedom from Britain

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Hedge-Fund Titans Got Inside Political Tips

I’m surprised this Wall Street Journal story, detailing how hedge funds manage to obtain profitable inside information, hasn’t gotten more attention. The whole story seems pretty explosive. I’d like to pull out a bit at the end, about how some hedge-fund players learned that key Democratic moderates in the Senate would jettison the public option in the health care bill in 2009:
The weekend before the Dec. 8, 2009 session, Senate Majority Leader Harry Reid (D., Nev.) held Senate sessions on Saturday and Sunday, seeking a deal. Another senator, Tom Carper (D., Del.), also was trying to help. The central issue: Would the bill call for the government to create a public health insurance plan, the position supported by President Barack Obama?
To counter Republican opposition, Democrats needed votes from Messrs. Lieberman and Nelson, who said they had major concerns with a robust government-insurance plan. As negotiations neared a resolution, JNK Securities and its hedge-fund clients met a half-dozen lawmakers in the U.S. Capitol. Among those who spoke to the hedge funds were Mr. Lieberman and Mr. Carper on Dec. 8, according to their offices. The roster included Viking Global's Scott Zinober and Karsch Capital's Eric Potoker.
The broad outlines of an agreement had been circulating for days, but the lawmakers confirmed they were close to a deal that discarded the public insurance plan, a boost to private insurers. Viking, a hedge fund that manages $13.8 billion, bought six million shares of Aetna in that fourth quarter of 2009, according to regulatory filings. Karsch, which manages $2.4 billion, bought half a million Aetna shares during the same period, according to regulatory records. Shares of Aetna rose 14% in the fourth quarter.
There was always a slightly puzzling dynamic at work in the fight over the public option. It polled extremely well, but key Democrats in the Senate opposed it. Now, you could envision a justification for Democrats from red states opposing the measure on political grounds – even if the measure itself was popular, perhaps they saw more value in breaking from the liberal wing and demonstrating “moderation,” regardless of the specifics of the issue. But then you had, among the public option skeptics, blue state Democrats like Lieberman and Carper. It’s … interesting to learn that they were meeting with hedge-fund executives and telling them about their efforts to subvert the public option.
There’s a broader problem here for the liberal economic agenda. Democrats live in a milieu that is far richer, and more attuned to the needs of business, than their broader constituencies. Republicans in Congress basically never need to pay attention to labor unions or poverty advocates. But Democrats in Congress are surrounded by rich people, and are usually rich themselves. Even putting aside their need for campaign donations, Democrats have a social support network that strongly incentivizes them to adopt “moderate” pro-business stances. Even if absolutely nothing untoward occurred between the hedge funds and the senators, the corruption inherent in the relationship is profound.

Venezuela provides home heating assistance to 400,000 Americans

Venezuela has launched its energy assistance program for the seventh consecutive year, which helps poor Americans to pay for their home heating oil during the winter, Press TV reports.
The aid, which is provided by Citgo, a branch of the Venezuelan state oil company, PDVSA, will be received by more than 400,000 poor Americans next year, a Press TV correspondent reported on Thursday.
Citgo’s president, Alejandro Granado, has said that rising energy costs continue to affect millions of Americans, impairing their quality of life.
Granado added that his company does not want the US families to be forced to choose between keeping their homes heated, and paying for other basic needs like food or medicines.
“United States is not all roses like people think there are lots of people under poverty, below their standards” Oil industry analyst, Elio Ohep says.
The heating oil program began in 2005, following the aftermath of hurricanes Rita and Katrina. The PDVSA’s subsidiary has so far invested over 400 million dollars in energy assistance for US citizens facing economic hardship.

Soldier pawns Purple Heart for Christmas

WASHINGTON – Here’s a harsh reminder that yellow ribbons and care packages aren’t always enough support for the troops: A soldier on leave from Afghanistan walked into a Michigan consignment shop last week to pawn a Purple Heart to help cover his Christmas bills. From the Holland Sentinel:
The medal, which was sold in November by a West Michigan man serving in the military, now sits in a case at A-Z Outlet, a pawn shop on North River Avenue owned by Bryan VandenBosch. “He was falling on hard times,” VandenBosch said of the sale. “He said the same thing everybody else who comes in here says. He was short on funds.”
The man, who declined a Sentinel request to be interviewed, told VandenBosch he was shot while serving in Afghanistan and the Purple Heart he sold was one of two he had earned while serving overseas.
Veterans groups and other local charities have been flooding the store with donation requests in the days since the story broke, but the owner has been directing them to other military support programs. He said he has no intention of selling the medal to someone else, and will simply keep it safe until its rightful owner returns.

Lieberman Caught Passing Insider Information to Hedge Fund Managers

To counter Republican opposition, Democrats needed votes from Messrs. Lieberman and Nelson, who said they had major concerns with a robust government-insurance plan. As negotiations neared a resolution, JNK Securities and its hedge-fund clients met a half-dozen lawmakers in the U.S. Capitol. Among those who spoke to the hedge funds were Mr. Lieberman and Mr. Carper on Dec. 8, according to their offices. The roster included Viking Global’s Scott Zinober and Karsch Capital’s Eric Potoker.
The broad outlines of an agreement had been circulating for days, but the lawmakers confirmed they were close to a deal that discarded the public insurance plan, a boost to private insurers. Viking, a hedge fund that manages $13.8 billion, bought six million shares of Aetna in that fourth quarter of 2009, according to regulatory filings. Karsch, which manages $2.4 billion, bought half a million Aetna shares during the same period, according to regulatory records. Shares of Aetna rose 14% in the fourth quarter.

If A Global Recession Is Not Looming, Then Why Are Bailouts Flying Around As If The End Of The World Is Coming?

I have learned that watching what people do is much more important than listening to what they say.
Back in 2008, financial authorities in the United States insisted that everything was gone to be okay.  But we all know now that was a lie.
Well, right now financial authorities in the U.S. and Europe are once again trying to assure us that everything is under control and that we are not headed for a global recession.
Unfortunately, their actions are telling a very different story.  All over the world, bailouts are flying around as if the end of the world is coming.  Governments and central banks are stepping in with gigantic mountains of money to prop up bond yields, major banks and even stock markets.
What we have seen over the past few months has been absolutely unprecedented.  So why are such desperate measures being taken if everything is going to be just fine?
Unfortunately, debt problems are never solved with more debt, so these bailouts really aren’t solving anything.  We are still headed for a massive amount of financial pain.
It would just be nice if the authorities would quit lying to us and would actually admit how bad things really are.
Today it was announced that the European Central Bank has agreed to make $638 billion in 3 year loans to 523 different banks.  Never before (not even during the last financial crisis) has the ECB loaned so much cheap money to European banks at one time.
This move by the ECB made headlines all over the globe.  CNBC is calling them “ultra-long and ultra-cheap loans“.
European authorities are hoping that European banks will use this money to make loans to businesses and to buy up the debt of troubled European governments.
But as we have seen in the United States, bailout money does not always get spent the way that the authorities intend for it to be spent.
The truth is that the banks could end up just sitting on the money.  That is what happened with a lot of bailout money in the United States during the last financial crisis.
European authorities hope, however, that European banks will take this super cheap money and lend it to European governments at much higher interest rates.
Unfortunately, global financial markets were not terribly impressed with this move by the ECB.  European bond yields actually rose and the euro just kept on falling.
Every few days another major “solution” to the European debt crisis is put out there, but so far nothing has worked.
For example, the European Central Bank has already spent over 274 billion dollars directly buying up European government bonds, and yet bond yields continue to hover in very dangerous territory.
But without ECB intervention, we probably would have already seen a major financial collapse in Europe.
The financial system of Europe is a total mess right now, and everyone is becoming incredibly dependent on the ECB.  The following comes from a recent Reuters article….
One of the key factors certain to have boosted demand is that banks are now more reliant than ever on central bank funds. The ECB said on Monday, in its semi-annual Financial Stability Review, that this dependency could be difficult to cure.
French banks have almost quadrupled their intake of ECB money since June to 150 billion euros, while banks in Italy and Spain are each taking more than 100 billion euros.
At this point, the ECB has the weight of the entire world on its shoulders.  One false move and we could see a huge wave of bank failures and we could be plunged into a major global recession.
But even with all of this unprecedented assistance, we have already seen some big time European banks fail.
Back in Obtober, Dexia was the first major European bank to be bailed out, and the cost of that bailout is going to exceed 100 billion dollars.
The funny thing is that Dexia actually passed the banking stress test that was conducted earlier this year with flying colors.
So what does that say about all of the other major European banks that did not do so well on the stress test?
In addition, it was recently announced that Germany’s second largest bank is going to need a bailout.
The following comes from a Sky News report….
Germany’s second largest bank, Commerzbank, is reportedly in discussions with the German government about a bailout after regulators said it needed to raise more money to cope with a potential default on its loans to governments.
“Intense talks” have been going on for several days, according to sources who spoke to the news agency Reuters.
Even with unprecedented intervention by the ECB, the truth is that the European banking system is rapidly failing.
In Greece, a full-blown run on the banks is happening.  According to a recent Der Spiegel article, funds are being pulled out of Greek banks at a pace that is astounding….
He means that the outflow of funds from Greek bank accounts has been accelerating rapidly. At the start of 2010, savings and time deposits held by private households in Greece totalled €237.7 billion — by the end of 2011, they had fallen by €49 billion. Since then, the decline has been gaining momentum. Savings fell by a further €5.4 billion in September and by an estimated €8.5 billion in October — the biggest monthly outflow of funds since the start of the debt crisis in late 2009.
In all, approximately 20 percent of all deposits in Greek banks have been withdrawn since the start of 2011.
Other European nations are implementing draconian measures in an attempt to protect their banks.  For example, in Italy all cash transactions over 1000 euros have been permanently banned.  People will either have to use checks, debit cards or credit cards for large transactions.  This will “encourage” people to keep more money in the banks, and this will also make it much easier for the Italian government to track transactions and to collect taxes.
But it is not just in the EU where we find unusual steps being taken.
In the UK, the Bank of England is acting like the end of the world is about to happen.  The following comes from a recent article on the This Is Money website….
The deputy governor of the Bank of England today warned the situation surrounding the single currency was ‘worrying’ and that the Bank was making preparations to support British banks, should the eurozone collapse.
A temporary loan facility has been introduced as a precaution, for use in the event of contagion from the eurozone crisis endangering UK institutions, Charlie Bean said in an interview on BBC Radio 4’s World at One.
An article posted on Business Insider a while back says that Switzerland is also preparing for “a euro collapse”….
The Swiss government is preparing for a collapse of the euro, according to Swiss Finance Minister Eveline Widmer-Schlumpf.
She told parliament that a work group was studying the imposition of capital controls and negative interest rates to protect Switzerland from the capital flight that a euro collapse would engender
Frightening stuff.
On the other side of the world, the government of China is also taking action.  In fact, China is actually injecting money into the stock market in order to prop up stock prices.
The following comes from an article in the China Post….
In a movement considered “long overdue” by some analysts, the injection of government money into the tanking stock market to prop up stock prices has been given the green light, government officials announced yesterday.
Vice Premier Chen, the topmost government official charged with the country’s financial stability, however, insisted the fundamentals of the economy and the stock market are sound, expressing his hope for continued optimism among the people.
Of course the Federal Reserve is not going to stand on the sideline while all of this is going on.  In a recent article, I described how the Federal Reserve is helping to bail out European banks….
The Federal Reserve, the European Central Bank, the Bank of England, the Bank of Canada, the Bank of Japan and the Swiss National Bank have announced a coordinated plan to provide liquidity support to the global financial system.  According to the plan, the Federal Reserve is going to substantially reduce the interest rate that it charges the European Central Bank to borrow dollars.  In turn, that will enable the ECB to lend dollars to European banks at a much cheaper rate.  The hope is that this will alleviate the credit crunch which has gripped the European financial system by the throat.  So where is the Federal Reserve going to get all of these dollars that it will be loaning out at very low interest rates?  You guessed it – the Fed is just going to create them out of thin air.  Our currency is being debased so that Europe can be helped out.
If the global financial system was in good shape, all of these bailouts would not be happening.
These desperate measures are a clear sign that something is up.
The financial authorities of the world are doing their best to keep the system together, but in the end they are not going to be able to prevent the collapse that is coming.
The world is heading for incredibly hard economic times.
So is the end of the world coming?
But to many in the financial world it may feel like it.  The coming global recession is not going to be fun.
We have now reached a point where it has become “normal” for governments and central banks to throw money at one financial crisis after another.
At one time, bailouts were so unusual that they provoked a great deal of outrage.
Today, bailouts have become standard operating procedure.
The bailouts will continue to get larger and larger, and authorities all over the globe will do their very best to keep the house of cards from coming crashing down.
Unfortunately, they will not be successful.

PIMCO Releases 2012 Economic Forecasts; Presenting The Wall Street 2011 Market Forecast Track Record

Here are the just released 2012 forecasts by Bill Gross, via Bloomberg and the WSJ:
  • PIMCO: U.S. TO GROW BETWEEN 0% AND 1 % IN 2012
Of course, Jim Cramer's response is to ignore this forecast and instead to listen only to "hot hand" analysts who have been correct in the recent past.
Curiously here is how the Wall Street permaclown brigade saw the now unchanged in all of 2011 market, back in December 2010, courtesy of John Lohman.

full Pimco forecast:
PIMCO Cyclical Outlook: Deleveraging, Austerity and Europe’s Potential Minsky Moment

  • ? As things stand today, it is more likely that the ECB will leap to a rescue only when it is too late. Absent any increase in private or external sources of aggregate demand, the eurozone economy will likely experience a recession in 2012.
  • Chinese deleveraging and rebalancing could mean much slower Chinese growth and a smaller impact of Chinese aggregate demand on the global economy.
  • We expect the global economy to grow by 1% to 1.5% in 2012. This is significantly slower than the 2.5% growth rate achieved in 2011 and the 4.1% rate achieved in 2010. 

The year ahead will likely be very challenging for the global economy. Growth faces several hurdles that we believe collectively will impose a sense of greater uncertainty and increased volatility on financial markets. These hurdles include the need for accelerated balance sheet deleveraging, slowly creeping but surely rising risks of financial and economic de-globalization, and the constant drum beat of re-regulation, particularly in developed country banking systems.

Global balance sheet deleveraging will play the dominant role in PIMCO's current cyclical economic outlook. Front and center in this regard is the rapidly progressing sovereign debt crisis in the eurozone, the debt deflationary feedback loop associated with it, and the quality and quantity of policy responses applied to contain it. As goes the eurozone deleveraging, so goes the global economy over the next six to 12 months.
The eurozone is facing an accelerated reversal of imbalances accumulated over several years after the creation of the euro. These imbalances are the product of differing real trends in productivity, labor flexibility, and national savings and investment rates across the member nations of the eurozone. Prior to the implementation of the single European currency, current members had individual currencies and individual control of their respective money supply, making it relatively easy to absorb real economic differences via relative currency value changes and inflation differentials. Today, however, those countries that adopted the euro do not possess the same degree of flexibility needed to smoothly diffuse frictions along these fault-lines. With one common currency and one common central bank, but individual fiscal agents and differentiated trends in economic performance and governance, the full burden of reversing sovereign deficit and debt imbalances falls onto the shoulders of only the fiscal agents. And as we see it, fiscal agents have one option and one option alone: deleverage the government balance sheet by practicing secular austerity.
To judge the impact of eurozone deleveraging on the global economy, we must answer three questions. First, how much austerity will the eurozone impose upon itself to restore the balance between debtors and creditors? Second, will eurozone sovereign haircuts or defaults remain a part of the deleveraging process? And third, what role will the European Central Bank (ECB) play in controlling the depth, breadth and velocity of sovereign debt deleveraging?
Stress Testing the Plan
Eurozone governments are about to legislate a plan of significant fiscal austerity over the coming years. By PIMCO estimates, austerity programs across both healthy and unhealthy balance sheet countries in the eurozone will pose a drag on growth to the tune of 1.5 to 2 percentage points over the next 12 to 24 months. This means that, absent any increase in private or external sources of aggregate demand, the eurozone economy will likely experience a recession in 2012. Indeed, PIMCO expects the eurozone economy to shrink by 1% to 1.5% in 2012.
Eurozone sovereign haircuts and defaults will likely remain a part of the deleveraging outlook. The acceleration of the European Stability Mechanism (ESM) and the introduction of collective action clauses on newly issued sovereign debt under the ESM mean that future haircuts, write-downs and private-sector subordination are still possible -- and probable. This, in turn, means that eurozone banks -- which have been the chief private-sector financiers of eurozone sovereigns -- will need a substantial amount of new capital to maintain their own balance sheets and provide ongoing credit to the real economy for growth. This new capital will be needed primarily to fill the ex ante equity hole generated by now “risky" sovereign credit exposures. It will also be a necessary condition for maintaining an effective monetary policy transmission mechanism to the eurozone real economy. If eurozone banks remain under-capitalized for much longer, their borrowing costs could climb too high for credit growth, and they would be forced to deleverage private credit commitments at a time when eurozone sovereigns are attempting to do the same with fiscal policy.
To be clear: The eurozone economy cannot bear a concomitant deleveraging in sovereign and banking system balance sheets, given an already weak growth outlook.
The ECB, therefore, must play the critical role of deleveraging police in the year ahead. Only the ECB has a balance sheet large enough, credible enough, and flexible enough to prevent the eurozone sovereign and banking system deleveraging from turning into an uncontrolled Minsky Moment (referencing economist Herman Minsky and referring to the inflection point when investors must sell assets to pay off debts, pushing down asset prices across the board). An acceleration of the debt deflationary feedback loop will be the odds-on outcome if the ECB continues to play coy with its own balance sheet. The ECB must, at some juncture in the not so distant future, become a lender of last resort to eurozone sovereigns. And, equally important, it must do so with a transparent and credible plan such that private sector demand for eurozone sovereign debt is crowded back in before it is permanently destroyed. 
But what will it take for the ECB to make this leap from a bankers' banker to a sovereigns’ banker? To begin to answer this question, we have to consider the mandate of the ECB and the "game of chicken" being played between European fiscal agent and the ECB.
The ECB’s Evolving Mission
First, the ECB has a clear mandate of maintaining price stability and nothing else. In the best traditions of the German Bundesbank, the ECB maintains fierce independence from fiscal policy and financing sovereign deficits and does not believe it is responsible for shaping cyclical real growth outcomes (unlike the U.S. Federal Reserve). A key question, however, is whether the ECB's mandate is symmetrical around low and stable inflation? Will the ECB act aggressively to combat deflation, as it does to combat above-target inflation when the time comes? And if it will, what tools will it be willing to use, especially if policy rates are already at the zero-bound and the transmission mechanism of policy is broken? At this point, the rate of inflation in the eurozone is too high for the ECB's liking and is thus likely to prevent the ECB from taking any dramatic steps to pre-emptively combat the forward deflation risks arising from a deteriorating economic outlook across the eurozone.
Second, the ECB is engaged in a dangerous but necessary game of chicken with eurozone fiscal agents, which prevents it from becoming a transparent and credible lender of last resort to eurozone sovereigns. On the one hand, with the credit transmission mechanism broken and bank balance sheets stressed, the ECB recognizes that it must prevent sovereign bond prices from falling too far. On the other hand, the ECB remains fearful of introducing secular moral hazard into the process of enhancing fiscal unity and stability across the eurozone by pre-emptively financing fiscal deficits. This game cannot continue for too much longer. If it does, we believe either the deteriorating economic prospects for the eurozone will accelerate the feedback loop to its Minsky Moment, at which point sovereigns and banks will enter a race to try to out-deleverage the other; or the ECB will take pre-emptive action to become a transparent and credible lender of last resort to sovereigns thereby stabilizing the eurozone banking system and the eurozone economy. As things stand today, it is more likely that the ECB will leap to a rescue only when it is too late. As a result, the odds of a European Minsky Moment are uncomfortably high now.
Chinese Growth Levels Off as U.S. Deleveraging Continues
Moving from Europe to Asia, China has joined the U.S., the eurozone, Japan, and the UK in some form of balance sheet deleveraging. However, we expect Chinese deleveraging to be rather benign as long as policymakers use their substantial financial resources to manage the process over time. China for the last two years has engaged in an accelerated program of domestic investment via rapid credit creation in its domestic banking system. This has provided the global economy with a substantial and much-needed boost to aggregate demand at a time when developed economies were all undergoing private sector deleveraging. But this source of global aggregate demand is slowing significantly now. 
Due to a combination of issues ranging from excess capacity, rising income inequality and bank capital stresses that will require a slowdown in the rate of credit creation, China is likely to slow future domestic investment in favor of a more balanced and stability focused growth model. China is likely to use its substantial public financial resources to address imbalances between domestic investment and consumption, between capital and labor shares of national income, and to slowly re-capitalize its banking system as non-performing loans crystallize to losses. The major implication for the global economy is that the process of Chinese deleveraging and rebalancing could mean much slower Chinese growth and a smaller impact of Chinese aggregate demand on the global economy. PIMCO expects the Chinese economy to grow by just 7% in 2012, significantly below consensus expectations of 8% to 8.5% real growth.
And what of the States? The U.S. economy continues to make steady progress in private sector deleveraging, but little to no progress when public sector balance sheets are included. U.S. households and banks have generally reduced debt either via defaults or orderly recapitalizations, and many companies have benefitted tremendously from a weaker dollar and strong growth in global trade via the emerging market economies. Despite the progress made to date, the process of U.S. deleveraging is not nearly complete. This is especially the case given that the U.S. government continues to run large structural deficits to support private sector aggregate demand, and that demographically driven unfunded liabilities are starting to crystallize onto public balance sheets at a faster rate.
Were it not for the brewing crisis in the eurozone, and the expected slowdown in aggregate demand in China (and other emerging economies), the outlook for the U.S. economy might have been relatively sanguine for the year ahead. In 2011, U.S. GDP grew by a modest but decent 1.5% to 1.75%. But with global headwinds gathering -- and U.S. expansionary fiscal policy becoming much more difficult to maintain -- we think the U.S. economy will only manage 0% to 1% growth in 2012. This is substantially below the industry consensus expectation of 2% to 2.5% growth.
Turning from deleveraging to de-globalization, we believe the most important component of this creeping process is occurring in global finance. Global imbalances between savings and investment have long been sustained via cross-border intermediation across an integrated global banking system. European banks have played the major role in this process, with American and Asian banks being perhaps a degree less important. We have discussed the potential impact of European bank deleveraging on the eurozone economy, but have not spent much time on how they might impact the global economy in a direct way. The eurozone banking system is 2.5 times as large as the U.S. banking system, in part because it plays an important role in intermediating global savings. At $41 trillion in total balance sheet assets, the impact of a eurozone banking system deleveraging would dwarf the effect of any successful re-leveraging of the U.S. banking system, which is only about $16 trillion in size. The race to higher capital ratios combined with sovereign stresses means that the global banking system will likely turn inward and the process of cross-border savings intermediation could slow substantially in the year ahead. This is yet another hurdle for global growth.
A second component of de-globalization is the glacial but observable increase in trade skirmishes between the U.S. and China. There have been a series of tit-for-tat tariff increases lately, and the U.S. political machine has begun to increase calls for a more transparent and open Chinese economy only to be summarily rebuffed by Chinese officials. This glacial trend is an important one to watch, as trade between U.S. and China has been a very important source of strength for large portions of the global economy.
Finally, the cyclical outlook would not be complete without a mention of MF Global and the implications thereof on financial re-regulation.  We have long suggested that the developed world financial system has begun a gradual  process of returning to "utility banking,” a boring destination where the financial system largely separates deposit taking and loan making from the riskier endeavors of leveraged finance and asset price speculation. MF Global is likely to spark an acceleration in this process, only because it has shown that the regulatory changes planned (and yet to be fully implemented) after the collapse of Lehman Brothers in 2008 have done little to protect investors from concentrated financial system risks. We expect to see changes in the regulatory architecture of capital markets that may reduce system-wide liquidity, increase financial transaction costs and de-risk balance sheets even further. Think of this as an incremental source of friction to global growth in the year ahead.
In sum, we expect the global economy to grow by 1% to 1.5% in 2012. This is significantly slower than the 2.5% growth rate achieved in 2011 and the 4.1% rate achieved in 2010.  The risks to this forecast lay to the downside, which speaks to the question of inflation expectations.  We expect global inflation to slow to 2% in 2012 from 3.1% in 2011.

2010-11-17 Foreclosure Hearing.mp4

Video - Georgetown Law Professor Dr. Adam Levitin

Start watching at 1:35, though the bomb from Levitin comes near the end...

  • "If they started writing off their second-lien mortgages, they would have no capital left. They would be insolvent."

He mentions Citigroup (nyse:C), JP Morgan (nyse:jpm), Bank of America (nyse:BAC), and Wells Fargo (nyse:wfc) by name.

Though it's nice to hear the truth leak out in front of a small Congressional committee, this is nothing new to Daily Bail readers. It's not even close, really. The 4 largest banks are insolvent many times over. Their puny and massively over-leveraged capital bases would not just be wiped out, they would be turned into negative multiples of the original equity.

Then take the next step and understand that these same criminally fraudulent and insolvent institutions, are paying their executives $144 billion in bonuses this year, based on false accounting that was endorsed by Congress and jammed down the throats of FASB in June of 2009.

I wrote about the criminal insolvency of banks here.

And here:


Bill Black has made the case recently here...


Adam Levitin's thoughts can be found in more detail here...


Quotes from Levitin's testimony before Congress...

"It is important to emphasize that junk fees on homeowners ultimately come out of the pocket of MBS investors. If the homeowner lacks sufficient equity in the property to cover the amount owed on the loan, including junk fees, then there is a deficiency from the foreclosure sale. As many mortgages are legally or functionally non-recourse, this means that the deficiency cannot be collected from the homeowner’s other assets. Mortgage servicers recover their expenses off the top in foreclosure sales, before MBS investors are paid. Therefore, when a servicer lards on illegal fees in a foreclosure, it is stealing from investors such as pension plans and the US government.

Many foreclosure complaints are facially defective and should be dismissed because they fail to attach the note. I have recently examined a small sample of foreclosure cases filed in Allegheny County, Pennsylvania (Pittsburgh and environs) in May 2010. In over 60% of those foreclosure filings, the complaint failed to include a copy of the note. Failure to attach the note appears to be routine practice for some of the foreclosure mill law firms, including two that handle all of Bank of America’s foreclosures.

Recently, arguments have been raised in foreclosure litigation about whether the notes and mortgages were in fact properly transferred to the securitization trusts. This is a critical issue because the trust has standing to foreclose if, and only if it is the mortgagee. If the notes and mortgages were not transferred to the trust, then the trust lacks standing to foreclose."

DB here. We played a game of roulette in the 1980s when all of our large money-center banks were technically insolvent due to Latin American exposure, and most sloggged their way back to solvency over the the next 10 years. The difference this time is simple - LEVERAGE. Paulson's 2004 SEC-enhanced gift of unlimited leverage for the 5 largest investment banks changed the game.

From the New York Times:


Video - Ratigan on Paulson and the SEC rule change...

Both of these clips are outstanding.


Video - More of the same from Ratigan with a touch more focus on failed bank CEOs and the Wall Street bonus structure.

9 Steps to Keep Your Assets Safe From an Out-of-Control Government

Terry Coxon
Casey Research

By keeping all your assets in the country where you live, you commit, ahead of time, to ratify whatever policy your home government might adopt, no matter how objectionable, unreasonable or pernicious that policy happens to be. If the next new mandate is "Register today to get a nail pounded into your head," you're already signed up.

Americans, by and large, run all their affairs within the confines of the United States. The US economy is so large and so varied that it's easy to assume that everything you want to do with your wealth can be done without crossing any borders. And people in the US, like people anywhere, live with the habits and attitudes developed over generations. They're only human. In the case of Americans, those habits grew out of long experience with a government that was small and that generally practiced the rare virtue of following its own laws. In a happy exception to mankind's experience with rulers, there was little to fear from it.

Stay at home is still the norm for Americans, but it's a norm that is slowly fading.

Every billion-dollar tick of the government debt clock, every expansion of the government's regulatory apparatus, every overreaching judicial decision made in the name of a compelling public need, every inversion of protection for citizens into license for the state and every intellectually tortured discovery of a new meaning in the Constitution's 4,400 old words leaves a few thousand more people wondering how prudent it is to consign all their eggs to a single national basket. Encounters with high-handed IRS agents and eager TSA gropers do nothing to ease that concern. And for those who listen thoughtfully, the messages from our designated leaders and their would-be replacements only hurry the dawning sense of unease.

 Specific worries include exposure to predatory lawsuits, especially claims that could draw extra go-power by association with politically favored causes or legally favored groups; fear of where income tax rates might climb; the prospect of losing a family business in a regulatory battle or simply through estate tax; the fragility of financial institutions that have operated for forty years with the assurance that the Federal Reserve would rescue them from any folly; the possibility that a government desperate to protect the dollar from collapse might impose foreign exchange controls or capital controls; the memory and precedent of the forced gold sales of 1933; and the thought that a government floundering in deficits might start pilfering from IRAs and other pension plans.

But beyond those particular worries and perhaps more important than any of them is the sense that from here on, anything goes. The politicians will do whatever they find convenient, because there is no longer anything to stop them – not an electorate that is jealous of its freedoms and certainly not the Constitution, which is now just a playhouse for judicial imagineering. No one can know what's coming next from the government and the financial system it has fostered, but for many of us there is an awful suspicion that we are not going to like it.

Most Americans still have yet to stick a single financial toe across the border, but more and more are considering it. Many, perhaps millions of toes are now twitching at the thought. Their owners want to end their absolute dependence on what happens in the US. They want to prepare for whatever is coming down the road, even though they don't know what it will be. They want to be as ready as possible, even though their worries can only guess at what's ahead.

Because internationalizing your financial life means dealing with the unfamiliar, the project can seem more complex than it really is, so it's best to start with the simplest measures, even if by themselves they don't give you all the safety you're looking for. Even from a simple beginning, what you learn with each step will make the next step easier to plan. Start with the first rung on the ladder of internationalization. Then climb, at your own speed, to reach the right level of protection.

Rung 1: Coins in Your Pocket
Gold coins that you've stored personally give you something whose value doesn't depend on the health of the US economy, doesn't depend on any financial institution in the US and doesn't depend on any US government policy. Gold coins are portable and hold their value no matter where in the world you might take them. They're internationalization in a wafer. Safety cookies.

It's best to buy the coins for cash, for maximum privacy. And there is a good reason to favor one-tenth-ounce gold Eagles. Gold coins mean readiness for troubled times; if you ever need to dispose of the gold in an informal market, it will be easier to do so with small-denomination coins that are widely recognizable and whose value matches the scale on which large numbers of people normally trade.

The premium on one-tenth-ounce coins (the price compared with the value of the gold content) is higher than on the larger coins – usually about 15% for the small coins vs. 5% for one-ounce Eagles. But the premium isn't a dead cost, like a commission or bid-ask spread. The premium is a second investment; it's what you pay for the packaging, and you can expect to recover it when you sell or trade. And in the circumstances when you would have the strongest reasons for thanking yourself for having bought some gold, the premium you paid will look like a bargain.

 Rung 2: A Foreign Bank Account

On its own initiative, the IRS can freeze any bank account in the US without warning. The action might arise from mistaken identity, from an erroneous filing by some other taxpayer, from your failure to respond to an IRS notice in time or even from a postal error. And that's what can happen without malice. Other government agencies have similar powers to act on their own, without giving you an opportunity to object in court. And any one of them might act against you for any of their specialized reasons – perhaps because someone resents your inattention to the needs of the migratory birds that visit your property or perhaps because someone thinks it would be fun to point to you as a terrorist, drug smuggler, arms dealer or child-porn merchant.

In principle, there are legal avenues for undoing a freeze or a seizure. But you'd need a lawyer, and being suddenly penniless could get in the way of hiring one.

A foreign bank account protects you from being trapped in such a nightmare. The US government can get to your foreign bank account eventually, because it can get to you. But a lightning seizure is very unlikely, because it would require a foreign government to override its own legal processes, which it generally wouldn't be willing to do except in a grave emergency. So if your liquid assets at home were frozen, you would have cash outside the US to fund the legal cost of untangling the problem.

A foreign bank account is also a way to step back from the uncertainties of the US dollar, since the account could be denominated in another currency.

The US government has seen to it that Americans are no longer welcome customers at foreign banks. So forget about opening a Swiss bank account in your own name. However, if you apply in person (not by mail), you still can open a bank account in Canada. Be prepared to show your passport and to give the bank an original utility bill that confirms your place of residence.

Rung 3: Gold Abroad
The forced gold sales of 1933 were the work of an executive order signed by President Roosevelt. The purported legal basis for the order was the Trading With The Enemy Act, a legislative artifact of World War I. I have yet to find an explanation of how the authority for an order requiring Americans to sell their gold to the government at the government's official price of $20 per ounce could be found in the Trading With The Enemy Act, but the fact that the enemy in question had gone out of business 15 years earlier didn't seem to interfere with the legal logic.

The forced sale was a prelude to an increase in the official gold price to $35. The government's reason for wanting that price rise was to gain leeway for a substantial, though limited, inflation of the dollar while keeping the dollar on the international gold standard. The forced sale was a way for the government, which operated in a political environment that still disfavored deficit spending, to capture the profit from the price rise. That profit would be a kitty for more spending without more borrowing.

Today there is no gold standard for the government to stay on. And deficit spending isn't something politicians especially want to avoid; they've promoted it as a civic duty, to stimulate the economy. So the depression-era motives for a gold grab don't seem to apply. Yet you can't listen to a conversation between two gold investors without hearing the seizure topic coming up.

Are they just scaring each other? I don't believe so. There are two potential motives for the government to again treat gold differently from everything else.

If the dollar's slide in foreign exchange markets threatens to turn into a panic, the government might want to use gold sales to foreigners to mop up foreign-held dollars – in which case it might see a need to mop up the gold owned by its own citizens. That's bad enough, but a second motive is a good bit nastier. At a visceral level, people who have centered their lives on government just don't like gold. It's an affront to the government's authority to command and control and an insult to government's supposed aptitude for solving economic problems. So disrespectful. From their point of view, every ounce purchased by an American is another tomato hurled at the political class. And the purchasers still constitute a tiny minority of the voting population. What could be more satisfying and convenient for the politicians than to kick sand in the face of gold investors for being such lousy citizens?

A new attack on gold ownership probably wouldn't be a point-for-point reenactment of 1933. There are many weapons for mugging gold investors. It could be a prohibition on gold ownership coupled with a prohibition on sales of gold to foreigners. The only one left to buy would be the government, and being the only bidder, it would be a very low bidder. It could be a commandeering of privately owned gold, with token compensation like the $15 per day paid for jury duty. It could be a super tax, say 90%, on gold profits, which would get the job done slowly... or quickly if it were accompanied by a mark-to-market rule. Or it could be something none of us has thought of yet.

Not only can't we know the shape of a future gold grab, we can't know whether or how the rules would touch foreign-held gold. Owners of gold stored outside the US would be a minority of a minority.

Their gold wouldn't be the low-hanging fruit – it would be higher up in the tree and more trouble to get to. That's why, in a casino sense, gold overseas is a different bet and a better bet than gold at home.

Maybe it will turn out that storing gold overseas won't matter at all, in which case a little effort will have been wasted. And maybe it will turn out to matter a great deal.

Rung 4: A Swiss Annuity
A conventional annuity contract is a device for accumulating investment returns and eventually converting the value into a lifetime income. The investment return on an annuity from a US insurance company is tax deferred until it is paid out to you. If you buy an annuity from a foreign company, tax deferral is available only if the annuity's value is tied to the performance of a pool of investments (a variable annuity).

Swiss annuities have long held a special place in personal financial planning. Such an annuity is denominated in Swiss francs, i.e., it's francs, not dollars, that are owed to you. The Swiss insurance industry has a perfect record; policyholders have never been hurt by a default. And a Swiss annuity comes with an element of protection from would-be lawsuit creditors.

The Swiss franc is, like every other modern-day currency, just a piece of paper. It's not redeemable for anything, not even a piece of chocolate. But the Swiss National Bank has a remarkable record of restraint in issuing new francs, which means that the franc's prospects for holding its value have long been rated better than for any other currency.

I believe that is still the case, despite the Swiss National Bank's current policy of suppressing any further increase in the price of the franc. In September, in order to save export industries from being crushed by the franc's rapid appreciation against other currencies, the Swiss National Bank announced that it would purchase euros without limit to enforce a minimum exchange rate of 1.2 francs per euro – which implies printing enough francs to pay for those euros. By itself, it is an inflationary move, but it's not a suicide pact with the European Central Bank (the issuing authority for euros). If the ECB turns to a policy of rapid inflation, I would expect the Swiss National Bank at some point to decouple the franc from the euro and let the franc's price rise. So owning some Swiss francs, whether directly or through an annuity, is still a good step toward internationalizing your financial life.

Under Swiss law, an annuity is protected from the owner's creditors if the beneficiaries consist of family members or if the owner has made a beneficiary designation that is irrevocable. For an owner in the US, that protection is not an impenetrable barrier to the winner of a lawsuit, but it is a barrier, and it makes the annuity a less-than-ideal prize for an attacker.

Earnings that are accumulating in a Swiss annuity are not eligible for tax deferral for a US taxpayer. The advantages are currency protection, the reliability of Swiss insurance companies and a measure of asset protection.

Rung 5: Foreign Real Estate
Owning real estate in another country gives you a suite of protections that distinguishes it from other steps toward internationalization.

First, the property's value will depend on economic conditions in the country you've chosen, not on what happens in the US. If the economy of the foreign country grows and prospers, there is likely to be a spillover effect on the market value of your house, apartment, farm or patch of land – regardless of what is going on in the US.

Second, a foreign real estate investment would be hard to digest for any future capital controls imposed by the US. New rules could compel you to repatriate the cash you have in a foreign bank; rules forcing you to liquidate your foreign real estate and bring the money home would be another matter. Selling real estate isn't quick or easy. How does the government compel an unwilling citizen to do what an eager seller often finds difficult to accomplish?

Third, as a potential prize for a lawsuit attacker, foreign real estate is a stinker. Even if he wins a judgment against you, foreclosing on your foreign property would be difficult to impossible, since it would require the cooperation of the courts in the foreign country, about whose rules and procedures the attacker's attorney probably knows nothing. But he does know that even if he persuades a court in the US to order you to sell the property, the inherent illiquidity of real estate would give you plenty of opportunities for foot-dragging.

Where to buy? The whole world is open to you... which can be a problem. So many possibilities and no obvious place to start. One approach is to think about where you've been that you'd like to visit again or about some place you've long wanted to see. Plan to spend a few weeks there. Minimize your hotel hours, to maximize your exposure to the rest of the locale. Try to meet Americans, perhaps expatriates, who know their way around the place and who can point you toward a real estate broker who won't try to treat you as an out-of-town sucker.

Buying foreign real estate isn't for everyone. It requires a big investment in time and effort, but it could repay you with an asset that is low on the list of things anyone might try to take from you.

Rung 6: A Foreign LLC for Investments
A limited liability company organized under the laws of a foreign country is easy to set up and not too expensive. To bring the company into existence, you (or a service you hire) would file a simple form with a government office in the country you've chosen and pay a small fee. Then you as the LLC's Manager and you as the LLC's owner would enter into an agreement (the "operating agreement") that would be the company's governing instrument.

As the LLC's Manager, you would open a non-US bank account or brokerage account in the name of the LLC and transfer your personal cash and investments to that account. Again as Manager, you would make all the investment decisions.

For a US person, a foreign LLC can be a powerful door-opener. It is welcome at many banks and brokerage firms where you personally would be turned away. This enables you to keep a wider range of assets outside the US, which puts more wealth beyond the reach of any arbitrary bureaucratic action. It also gives you investment choices that aren't available at home.

Access to foreign investments and overseas financial services is reason enough to consider using a foreign limited liability company. But it can do much more for you, although at the cost of some complexity.

Notice the fundamental difference between a foreign LLC and what is going on at the first four rungs of the ladder of internationalization. With the LLC, you no longer personally own the assets you are trying to protect; the company owns them. This makes the LLC a powerful device for reducing your family's expose to gift and estate taxes. And with the right provisions in the operating agreement, it can provide strong protection against loss to any malicious lawsuit.

If you are the sole owner of a foreign LLC intended for holding investments, you can and almost certainly should file an election for the LLC to be treated as a disregarded entity (indistinguishable from you for income tax purposes). If your spouse or anyone else is going to share in ownership of the LLC, the company can and should elect to be treated as a partnership for income tax purposes.

Rung 7: A Foreign LLC for Business
A business that operates outside the US does even more than a portfolio of foreign investments to give you the benefits of internationalization.

By its nature, a foreign business lives in a different environment than a business in the US. Economic troubles at home might not touch it. If it's a business that depends on your personal efforts, it's even less attractive as a lawsuit prize than foreign real estate. Being foreign, it would be outside the range of capital controls in the US. And many of the financial institutions that might turn away an investment-owning LLC because it is owned by an American will welcome an LLC that makes or sells goods or services.

If you already have a business in the US that has foreign customers or foreign suppliers, you may be able to relocate the business's non-US activities to a foreign LLC. Internet-based businesses are especially amenable to internationalization.

Locating your business in a low-tax or no-tax jurisdiction, if it is practical to do so, can reduce your overall tax burden. In many cases, a foreign LLC that operates a business should elect to be treated as a foreign corporation for US income tax purposes. That can allow the business to reinvest its earnings while it pays little in current taxes and you personally pay nothing.

Rung 8: An International Trust That You Establish
Establishing a trust outside the US is the strongest internationalization step you can take for yourself and your family. Doing so costs more than any other measure, but the costs needn't be prohibitive if your goal is to move $500,000 or more into the safest structure possible. What you achieve is a very high level of protection from aggressive lawsuits, from potential capital controls and from the possibility of a gold seizure. The trust also puts your wealth in a far better environment for income tax planning and for estate planning.

To serve the purposes of protection and tax savings, an international trust is irrevocable (you can't simply call the institution you've chosen as trustee and say you've changed your mind) and discretionary (meaning that the trustee has a responsibility to decide when to send a check to you or to any of the other beneficiaries you've included). Putting assets under the control of a trust company under such an arrangement is a big step. You're not going to do it unless you've done the homework needed to understand how and why you can count on the trustee to handle the assets in the way you intend.

Getting the protection and tax savings of an international trust doesn't require you to give up management control of the assets. The trust can be limited to owning just one thing – an LLC that you manage. The LLC owns all the investments, under your supervision as LLC Manager.
If you establish an international trust, it will be tied to you for income tax purposes. But at the end of your lifetime, it will completely disconnect from the US tax system. At that point, for the benefit of your survivors, it becomes...

Rung 9: An International Trust Someone Else Established
Being a beneficiary of an international trust established by someone other than a living US person is as good as it gets. It's not linked to you by any transfers you've made to it, and you don't have a determinable percentage interest in it (since it's a discretionary trust). So until you actually receive a distribution, there is nothing for you to report, nothing for you to pay tax on and nothing a potential lawsuit creditor can hope to take from you. And, having no living connection to the US, the trust is as far beyond the orbit of any conceivable US gold seizure or currency controls as the former planet Pluto.

One Toe over the Line
It's a long way from walking into the local coin shop and buying a few one-tenth-ounce gold Eagles to setting up a trust in a foreign country. But the distance isn't nearly as great as you might imagine, and it will get shorter both in fact and in apprehension with each step you take.

As you move up the ladder, you'll learn about the reporting requirements for US taxpayers. Rung 1 (gold coins in your pocket) entails no reporting, nor does Rung 8 until you actually receive a distribution. Rung 5 (foreign real estate) also is free of reporting requirements, at least for now. But under rules in effect now or soon to come, everything else covered in this article entails filing a form with the US government. The most reliable way to make sure that you stay within the rules, so that internationalization adds to your safety and not to your problems, is to let your accountant know what you are doing. Keep him informed, so that he can see to it that all the reporting requirements are satisfied.

[Every day you delay beginning your internationalization strategy is another day your bank accounts are hemorrhaging. Learn how to protect yourself.]

George Bush: we want everybody in America to own their own home. That's ...

Racist Bank of America fined $335 million for discrimination against African-Americans

The case is the latest for Bank of America relating to the sub-prime mortgage crash Continue reading the main story.

Bank of America's Countrywide Financial business has agreed to pay a record fine of $335m (£214m, 257m euros) to settle discrimination charges.

The US justice department said around 200,000 qualified African-American and Hispanic borrowers were charged with higher rates "solely because of their race or national origin".


The Empire Smokes Crack

by Keith Johnson
Some of you older readers may remember this public service announcement (PSA) from the late 1980’s:
The scene unfolds in a men’s restroom, where we find a young white urban professional snorting up a spoonful of cocaine.  He then looks into the camera and says, “I do coke…so I can work longer…so I can earn more money…so I can do more cokeso I can work longer…so I can earn more money…so I can do more coke…”
He begins to pace around in tight circles as he continues to recite those same three lines.  His pace picks up faster and faster until he spins into a blur that eventually fades away into nothingness.
Such is the insane life of an addict, caught in a vicious circle that compels them to do the same things over and over while expecting different results.
The same could be said for the addicts who have seized control of our nation’s monetary system.  If we were to produce a PSA to appeal to them, we’d probably have to change the lines to something like, “We print dollars…so we can pay for the budget…which puts us further in debt…so we print more dollars…so we can pay for the budget…which puts us further in debt…so we print more dollars…”
This is precisely the kind of thinking that prevails in the minds of those who occupy seats of power in places like the U.S. Department of Treasury and the privately owned Federal Reserve.  Unfortunately, nothing short of an intervention will ever put an end to their insanity.  Like the hardcore substance abuser, these money addicts have succumbed to a latter stage in their disease that renders them incapable of rational thought.  They cannot be reasoned with, they cannot be negotiated with, and they will not stop until they have consumed every last resource on the face of the earth.
Their drug of choice is currency, and they all picked up their habits on Wall Street.  But these are no small time junkies.  They’ve parlayed their dependencies into a lucrative criminal enterprise.  They are the kingpins of their trade, and their career paths are identical to any other successful drug lord.  They started out as pushers, became suppliers, and then eventually worked their way into the cartel itself.  Now they’re making the stuff, and there seems to be no earthly power capable of stopping them.
The word “addict” usually conjures up images of the weak lost souls who have alienated themselves from society. They cannot hide their disease for long, and soon begin their rapid spiral into total despair and ruin.  They lose their dignity, their homes, and eventually end up squatting behind a filthy dumpster with a glass pipe pursed between their lips.  This stereotypical perception often blinds us from identifying the well-groomed addicts in our midst.  They ride in limousines, spend holidays in the Hamptons, and are celebrated with awards and illustrious titles.  But they do not suffer the physical manifestations of their addiction.  Instead they transfer that pain and hardship upon the backs of those whom they have stolen from.  It is their victims who end up losing their homes, jobs, family—and eventually—their dignity.
Kazuo Ishiguro’s Never Let Me Go is a dystopian science fiction novel that follows the lives of three children as they grow into young adults. The story begins while they are schoolmates at the fictitious Hailsham boarding academy in East Sussex, England. According to a summary of the book from wikipedia:
It is clear from the peculiar way the teachers—known as “guardians”—treat the students, that Hailsham is not a normal boarding school. Eventually, it is revealed to the reader and to the students that the children are clones created to provide vital organs for non-clones (“originals”). The students are not taught any life skills, though the teachers encourage the students to produce various forms of art and poetry.
By the time the children transition into adulthood, the years of indoctrination renders them incapable of offering up any resistance to their ultimate fate. When called, they voluntarily take to the operating table so their vital organs can be removed. Some die of complications after the first surgery, but many more are capable of withstanding three operations before they ultimately expire. Most die before reaching the age of thirty, but their sacrifice allows their betters to live beyond the age of 100 despite their unhealthy lifestyles.
Are our lives really much different than those chronicled in Ishiguro’s book? Most of us  have attended public schools that do nothing but indoctrinate us to accept our fate as slaves to the power elite. We are trained to be good workers, but are denied the life skills and education that would make us capable of competing against—and ultimately defeating—this ruthless system of greed and corruption.
We have become the surrogate bodies of the money addicts. We toil in endless pursuit of a dream that has already been denied. The fruits of our labor are devoured by the elite, and the nectar that drips from their mouths is all we are afforded—just enough to provide for our basic necessities—so that we can continue to work and feed their insatiable appetites.
We must stop being “enablers” to these money junkies. This cycle of dependancy must stop. It’s time for an intervention.
Vote for Dr. Ron Paul and let him put this nation into rehab—and the drug lords behind bars!

Getting Worse: 40 Undeniable Pieces Of Evidence That Show That America Is In Decline

Getting Worse: 40 Undeniable Pieces Of Evidence That Show That America Is In Decline

Is America in decline? That is a very provocative question. I have found that most people that hate the United States are very eager to agree that America is in decline, while a lot of those that love the United States are very hesitant to admit that America is in decline. Well, I am proud to be an American, but I cannot lie and tell you that America is doing just fine. The pieces of evidence compiled below are undeniable. Our economy is deathly ill and is rapidly getting worse. We were handed the keys to the greatest economic machine in the history of the world and we have wrecked it. But until we are willing to look in the mirror and admit how bad things have gotten, we won't be ready for the solutions that are necessary. The truth is that there are things that we can do to reverse the decline. It does not have to be permanent. We have gotten away from the things that made America great, and we need to admit that we are on the wrong path and start fixing this country. But if we choose to continue down the road that we are currently on, it will lead us into the darkest chapters in American history.

The following are 40 undeniable pieces of evidence that show that America is in decline....

#1 Back in 1985, 11 million vehicles were sold in America. In 2009, only 5.4 million vehicles were sold in America.

#2 In 1990, the median age of a vehicle in the United States was just 6.5 years. Today, the median age of a vehicle in the United States is approximately 10 years.

#3 The average price of a gallon of gasoline in 2011 has been $3.50. That is a new all-time record. The previous record was $3.24 in 2008.

#4 The average American household will have spent an astounding $4,155 on gasoline by the time the year is over.

#5 The number of children in the United States without a permanent home has increased by 38 percent since 2007.

#6 A decade ago, the United States was ranked number one in average wealth per adult. By 2010, the United States had fallen to seventh.

#7 The U.S. tax code is now more than 50,000 pages longer than it used to be.

#8 American 15-year-olds do not even rank in the top half of all advanced nations when it comes to math or science literacy.

#9 The United States once had the highest proportion of young adults with post-secondary degrees in the world. Today, the U.S. has fallen to 12th.

#10 After adjusting for inflation, U.S. college students are borrowing about twice as much money as they did a decade ago.

#11 The student loan default rate has nearly doubled since 2005.

#12 Our economy is not producing nearly enough jobs for our college graduates. The percentage of mail carriers with a college degree is now 4 times higher than it was back in 1970.

#13 Our infrastructure was once the envy of the world. Today, U.S. infrastructure is ranked 23rd.

#14 Since December 2007, median household income in the United States has declined by a total of 6.8% once you account for inflation.

#15 Since the year 2000, incomes for U.S. households led by someone between the ages of 25 and 34 have fallen by about 12 percent after you adjust for inflation.

#16 According to U.S. Representative Betty Sutton, America has lost an average of 15 manufacturing facilities a day over the last 10 years. During 2010 it got even worse. Last year, an average of 23 manufacturing facilities a day shut down in the United States.

#17 In all, more than 56,000 manufacturing facilities in the United States have shut down since 2001.

#18 The United States has lost a staggering 32 percent of its manufacturing jobs since the year 2000.

#19 Manufacturing employment in the U.S. computer industry was actually lower in 2010 than it was in 1975.

#20 In 1959, manufacturing represented 28 percent of all U.S. economic output. In 2008, it represented only 11.5 percent.

#21 The television manufacturing industry began in the United States. So how many televisions are manufactured in the United States today? According to Princeton University economist Alan S. Blinder, the grand total is zero.

#22 The U.S. trade deficit with China in 2010 was 27 times larger than it was back in 1990.

#23 The Economic Policy Institute says that since 2001 America has lost approximately 2.8 million jobs due to our trade deficit with China alone.

#24 According to one study, between 1969 and 2009 the median wages earned by American men between the ages of 30 and 50 dropped by 27 percent after you account for inflation.

#25 Back in 1980, less than 30% of all jobs in the United States were low income jobs. Today, more than 40% of all jobs in the United States are low income jobs.

#26 The size of the economy in India is projected to surpass the size of the U.S. economy by the year 2050.

#27 One prominent economist believes that the Chinese economy will be three times larger than the U.S. economy by the year 2040.

#28 In 2001, the United States ranked fourth in the world in per capita broadband Internet use. Today it ranks 15th.

#29 Back in the year 2000, 11.3% of all Americans were living in poverty. Today, 15.1% of all Americans are living in poverty.

#30 Last year, 2.6 million more Americans dropped into poverty. That was the largest increase that we have seen since the U.S. government began keeping statistics on this back in 1959.

#31 According to the U.S. Census Bureau, 6.7% of all Americans are living in "extreme poverty", and that is the highest level that has ever been recorded before.

#32 The percentage of children living in poverty in the United States increased from 16.9 percent in 2006 to nearly 22 percent in 2010. In the UK and in France the child poverty rate is well under 10 percent.

#33 As I wrote about the other day, since 2007 the number of children living in poverty in the state of California has increased by 30 percent.

#34 A staggering 48.5% of all Americans live in a household that receives some form of government benefits. Back in 1983, that number was below 30 percent.

#35 Back in 1965, only one out of every 50 Americans was on Medicaid. Today, one out of every 6 Americans is on Medicaid.

#36 Between 1991 and 2007 the number of Americans between the ages of 65 and 74 that filed for bankruptcy rose by a staggering 178 percent.

#37 Today, the "too big to fail" banks are larger than ever. The total assets of the six largest U.S. banks increased by 39 percent between September 30, 2006 and September 30, 2011.

#38 Since the Federal Reserve was created in 1913, the U.S. dollar has lost over 95 percent of its purchasing power.

#39 During the Obama administration, the U.S. government has accumulated more debt than it did from the time that George Washington took office to the time that Bill Clinton took office.

#40 The U.S. national debt is now nearly 15 times larger than it was just 30 years ago.

Sadly, most Americans are not fired up about turning this country around. Way too many of them realize that things are getting worse, but they have "checked out" and are just going through the motions of life.

We all need to start caring again. We all need to start taking pride in what we do. We all need to start working hard again. We all need to make sure that we are living with a sense of personal integrity.

When a nation simply does not care anymore, even a con man can become president.

During a recent 60 Minutes interview, Barack Obama said that only 3 presidents in U.S. history accomplished more than he did during the first two years of his presidency....

“The issue here is not going be a list of accomplishments. As you said yourself, Steve, you know, I would put our legislative and foreign policy accomplishments in our first two years against any president — with the possible exceptions of Johnson, F.D.R., and Lincoln — just in terms of what we’ve gotten done in modern history. But, you know, but when it comes to the economy, we’ve got a lot more work to do.”

He had to be joking, right?

Sadly, he was not joking.

But it is not just Barack Obama. The truth is that both political parties are absolutely littered with con men, charlatans and corrupt politicians.

It is going to be up to the American people to get educated about how bad things have really gotten, to start demanding solutions, and to start voting much better people into positions of authority.

If dramatic changes are not made, our economy will continue to get worse and the decline of America will continue to accelerate.

We cannot stay on this road my friends.

It is only going to lead to a total nightmare.

Please share this information as widely as possible, and please try to wake up as many of your fellow Americans as you can while there is still time.