Alfred Woody's Kewl Blog [ 椼森 ]: Jan 5, 2013

Saturday, January 5, 2013

Dagong puts U.S. credit rating on negative watch list

BEIJING, Dec. 25 (Xinhua) -- Chinese rating agency Dagong Global Credit Rating Co. on Tuesday announced that it has put the local and foreign currency sovereign credit ratings of the U.S. on a negative watch list.
"In regards to the U.S. debt crisis, each political party is insisting on a proposition that is favorable for its own interests," Dagong said in a statement on its website.
Therefore, it will be difficult to form a long-term consensus on solving the debt problem, it said.
The debt burden of the U.S. federal government increased 9.1 percent year on year in 2011 and 11.7 percent in 2012, far exceeding the country's nominal GDP growth rate of 3.9 percent in 2011 and 3.4 percent in 2012, Dagong said.
Dagong said it expects the outstanding debt of the U.S. to rise to 104.8 percent of its GDP and 608.7 percent of its fiscal revenues by the end of 2012, indicating that its solvency is experiencing a descending trend.
"Due to the pending fiscal cliff, the U.S. economy is likely to fall into recession in 2013 and stay weak in the long-term, which will further weaken the material basis for the government to repay debt," the statement said.
On Aug. 2, 2011, Dagong downgraded both the local and foreign currency sovereign credit ratings of the U.S. from A+ to A, each with a negative outlook.

Editor: yan

US Urged to Mint 'Trillion Dollar Platinum Coin' To Solve Debt Ceiling Debate

The Trillion Dollar Solution?

A formal petition has been submitted to the White House urging President Barack Obama to authorise the minting of a trillion dollar coin in an effort to solve the bitter partisan debate over its legal debt limit.

While it has to date gained less than a thousand signatures - well shy of the 25,000 required for an official response from the government - the petition nonetheless outlines a peculiar wrinkle in the on-going battle between Republican lawmakers and their Democratic rivals in the US House of Representatives.
Having recently agreed on a tax deal that will increase government revenues by around $620bn over the next decade, Congress now has less than two months to broker a compromise on spending cuts that would trim the requested $3.8tn budget. If and when that deal can be reached, Republicans say, they'll agree to vote for an extension of the debt ceiling, which the US technically breached on 31 December and will fully surpass, according to Treasury Secretary Tim Geithner, on 28 February.

The petition's aim, according to its advocates, is to bridge the gap between Congressional approval of a multi-trillion budget and Congressional reluctance to increase the borrowing limit in order to create the money.
By law, the US government is not permitted to simply create money on its own in order to meet its obligations. The quasi-independent US Federal Reserve was designed to allow it to put money into circulation by purchasing Federal government debt issued by the Treasury. However government bonds, bills and other securities held on the Fed's balance sheet count towards the $16.4tn debt ceiling.
In effect, the petition's supporters argue, commanding the Treasury to print a $1tn coin - something which is theoretically legal - would allow it to deposit that amount with the Federal Reserve, which could then put an equivalent amount of cash into the economy without the Treasury having to issue debt against it.
The result, in purely simplistic terms, would be a trillion cash creation that avoids the breaching of the debt ceiling and prevents the US economy from slipping back into recession.
Several problems, however, prevent the unlikely scenario from ever happening, not least of which would be the inherent damage such money creation would do to the value of the US dollar, which Fed Chairman Ben Bernanke argued in 2002 had value "only to the extent that they are strictly limited in supply."
Bill Gross, who manages the world's biggest bond fund for PIMCO, wrote Thursday that the world's most important central banks have issued more than $6tn dollars' worth of "essentially free" money into the global economy since the financial crisis in a misguided recovery effort that could erode stocks, bonds and currencies for generations to come.
Gross also noted the central paradox in the strategies of fiscal and monetary policy in most of the world's largest economies, where central bank purchases of government debt create what Bernanke called "essentially costless" money at the same time politicians are demanding the most significant spending cuts in at least half a century.
"Investors and ordinary citizens might wonder then, why the fuss over the fiscal cliff and the increasing amount of debt/GDP that current deficits portend," asked Gross in his monthly Investment Outlook column. "Why the austerity push in the U.K., and why the possibly exaggerated concern by U.S. Republicans over spending and entitlements?"
Comparing the $6tn committed by the six biggest central banks in the world since 2009 to the South Sea Bubble of the 1700s, Gross argues that the future cost of such policies will come "in the form of inflation and devaluation of currencies either relative to each other, or to commodities in less limitless supply such as oil or gold."

Reid Attends Opening of Clark County Shooting Park

Hypocrisy Watch
Flashback - April 1, 2010.
Nevada Senator Harry Reid was joined by NRA Executive Vice President Wayne LaPierre, members of Nevada's congressional delegation, state and local leaders over the weekend for the grand opening of the Clark County Shooting Park. Reid led the effort to secure the land and funding needed to build the 2,900-acre world-class shooting park. The new facility will make our communities safer, protect the natural desert environment and provide a place for people of all ages to learn about shooting sports. "Nevadans aimed high when we set out to create the largest and most advanced shooting range in the world," said Reid. "But we kept a steady eye on our target. And today, with great pride, Nevada has hit the bulls-eye."

The Cliff, The Banksters, and You

Banks ignoring foreclosure in wealthy housing markets – Beverly Hills MLS lists zero foreclosures for the 90210 zip code but distress inventory still high.

2012 was a flashback to 2005 real estate. Bidding wars, flippers, and hungry investors all diving into the market with many purchasing homes without fully analyzing the numbers. There is a very clear trend in the current housing market and how banks are processing foreclosures. It is a parallel to what Mr. Getty once said about large loans owed to banks; the bigger your mortgage, the more likely it is that the bank will not foreclose on you in a timely fashion. I usually browse Beverly Hills real estate as a source of a prime Los Angeles market and also, because many people can understand that this is a selective area. Today I was looking at my data feed and found it amusing the mix of foreclosures and MLS listed properties.

90210 Analysis
I ran a quick search and pulled up 160 properties for the 90210 zip code that are currently for sale:

Total data: 160 homes for sale (zero REOs)
This looks like one of healthiest markets around the country. What I found interesting however is when we dig into the distressed pipeline data. I went ahead and pulled the current distressed inventory for Beverly Hills and found the following:

64 homes have received a notice of default, are scheduled for auction, or are bank owned. This is a significant amount of distressed properties. Last month 24 homes sold in the 90210 zip code with a median price of $3.4 million (up 52 percent from the previous year). So I wanted to take a look at some of the REOs in the distressed pipeline for Beverly Hills.

This home is not listed on the market for sale even though it is currently bank owned. But it might help to follow the history on this place and see how motivated banks are to act on these kinds of properties:
October 1992:                    $155,000
November 1999:              $860,000 (sale price)
July 2004:                             $500,000 (WaMu Loan)
Aug 2005:                            $750,000 (WaMu Loan)
Aug 2006:                            $250,000 (WaMu Loan)
Aug 2007:                            $1,292,000 (WaMu Loan)
From looking at the history, it looks like the home was bought in 1999 for $860,000 and was then used as a home equity withdrawal machine. By August of 2007 WaMu had made loans on the property up to $1,292,000. Hard to say how much down was put on the initial purchase but by the end, it really did not matter since nearly $1.3 million was owed.
At a certain point this became too high of a cost. So let us look at how quickly banks will move on high priced Beverly Hills homes:
Notice of default (June 2011):                    $65,237
So by the first notice of default, the owners were already in arrears by $65,237 which is already higher than the median annual income of California families. An auction was then scheduled on September of 2011. By this point, the balance was $1,411,201. Still nothing. Then another auction was scheduled for April of 2012 and at this point, $1,474,396 was owed. Keep in mind the last refinance put the place at $1,292,000.
So run the numbers:
Last refinance 2007:                        $1,292,000
Last auction filing 2012:               $1,474,396
In other words, the bank allowed the loan balance to balloon by $182,396 with missed payments and fees for more than 1.5 years. Finally in November of 2012 JP Morgan that took over WaMu ended up taking the house as an REO. This is probably the unsettling truth for many when they examine these numbers. As it turns out, the bigger your mortgage and the wealthier the neighborhood, the more likely it is that banks are not going to foreclose on you quickly. Keep in mind that these families also have more disposable income and also know the loops of the game. For example stalling tactics or legal filings that reset the entire foreclosure process. In the end, this family likely stayed in a million dollar home without paying a dime for over 1.5 years.
This is merely one example of the 64 properties in distress. Banks now realize that prices are going up so why rush to sell? This home is not listed for sale but the market has been hot in 2012. Better to constrain inventory and inflate prices since the entire accounting system is frozen in place to allow for easy disposal at high prices of this distressed inventory.
Don’t you just love California? Even when you go broke in a wealthy neighborhood you still get the privileges that are not available to most Americans. Compare this to Arizona, Nevada, or even the Inland Empire where banks are yanking homes quickly to unload to hungry investors and flippers.

3 Huge Myths About The Trillion Dollar Coin Plan To Save The Economy

en.wikipedia.org

The hottest idea to save the economy from another debt ceiling fight (and a potential default) is the Trillion Dollar Platinum Coin. In order to understand how it works, we first need a very quick lesson in how the government spends money.
This is a super-crude version of it, but here's the gist:
The Treasury Department has a bank account at The Federal Reserve, specifically the New York branch of the Federal Reserve. When the Treasury writes a check to a company (say a defense contracted owed $100 million) that check is "cashed" at the Fed. When the Treasury needs money (which is all the time) it sells bonds in an auction. The proceeds of those bonds go into the account.
Okay, now there's this thing called the debt ceiling, which sets a maximum cap on the amount of debt that the US can carry at one time. Every time we come close to hitting it, the US has to ask Congress to raise the limit. In recent years, since the rise of the Tea Party, what used to be a mildly frustrating event has grown into a systemic economic threat.
So where does the Trillion Dollar Platinum Coin fit in?
In the section of the law which specifically relates to the Treasury's ability to create money (coins and bills) section K says this:

(k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.

In other words, when it comes to platinum coins, the Secretary (who is currently Tim Geithner) has discretion on the designs, specifications, quantities, and denominations of platinum coinage.
So let's say, Tim Geithner decided to stamp out a $1 trillion coin. What does that accomplish?
The idea is that after it was created, Geithner could walk it over to the Federal Reserve, and deposit it in the Treasury's bank account. Then the Treasury, rather than having to issue new debt (because remember, Congress hasn't raised the limit) can make sure its checks clear against this money.
Voila, crisis averted!
Now, that sounds all nice, but people have all kinds of objections upon hearing this idea. So we'll address them here.
MYTH #1: This will cause massive hyperinflation.
This is an understandable fear, because the idea of creating new money out of thin air to pay our debts brings to mind situations like Weimar and Zimbabwe, and trillion dollar bills being tossed about it in the streets.
But this is not about using the coin to pay back our debts, it's staying within the law, while avoiding the technically nonsensical debt ceiling.
Think about the mechanics, the trillion dollar coin goes to the Fed, but in terms of the real economy, government spending takes place exactly as normal. Now it is true that the Treasury might not be doing bond purchases at this time, and that this could leave more money in the system, that could heat up and cause inflation, but this is easily remedied, because the Fed has a gigantic pile of Treasuries it's sitting on that it could sell back into the open market to "sterilize" the government spending.
The bottom line is: Because this trillion dollar coin isn't being used as "helicopter money" (money dropped directly into the economy) you don't get the inflationary effects you're used to seeing when you hear about governments creating money in large denominations.
This is purely a technical fix for a bad situation.
MYTH #2: The trillion dollar coin will destroy the dollar!
This is pretty much the same as the first argument. What would destroy the dollar is if the government just started printing $1 trillion bills, declared them legal tender, and then dropped them from a helicopter onto cities. Soon, the buying power of a single dollar bill would be zilch. But alas, because the coin isn't a direct injection into the economy, but rather a stopgap that lets the government continue to spend on various services, you don't have that destructive effect.
MYTH #3: If this idea is so great, then minting a $16 trillion dollar coin could just solve our debt problem!
This line of reasoning ignores the point completely. People who say this (or say we should print a $100 trillion coin) are mistakenly thinking that the point of this exercise is to pay off our debts and get out of the hole.
That's not it. Our debts are plenty manageable at current levels, and with interest rates the way the are. The point is to stay within the law, while getting around the technical problem of the debt ceiling. So there's no point to the $16 trillion coin or the $100 trillion coin, or anything else so absurd. This is not about having money to spend. This is about avoiding a legal crisis where the government had obligations to much (such as on its debt) but didn't have the authority to borrow and spend money.
And furthermore, if we actually did try to eliminate our debts just by creating a coin, we would create the aforementioned inflation problem (via a massive expansion of money) and it would result in buyers less inclined to buy dollar assets.
BOTTOM LINE: This won't create hyperinflation, and it's not the solution to all of our economic problems. It's just a way to stay within the law, while avoiding the debt ceiling nonsense.
Is it silly? Of course it is. But what's sillier is a rich nation having a debate on whether it will pay what it owes, which is what the debt ceiling fight is all about. So in the face of such silliness, this unfortunately may be required.
For more reading, see:

Josh Barro: Why We Must Go Off The Platinum Coin Cliff
Michael Sankowski: Trillion Dollar Coin Explodes: Krugman, Congress is talking about it
JKH: How the trillion dollar coin is like regular QE

There you go!

Woman Trying To Buy iPads With Food Stamps Card! (EBT Card)

Let them eat iPads.
Woman tries buying iPads with Food Stamps (EBT Card).

Goldman Sachs Succeeds In Tax Evasion Where Al Gore Fails

Goldman awards Blankfein before the tax deadline.
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The tax hypocrisy in this story should become legend.
Al Gore was not the only one who tried to avoid the higher tax rates that took effect in 2013.
Gore tried, but failed, to push through the $500 million sale of Current TV to Al Jazeera by Dec. 31 to avoid paying the higher tax rates that came with the fiscal cliff deal.
Unlike Gore, however, Goldman Sachs succeeded in evading the tax hike by awarding $65 million to its top executives one month ahead of time.
The Wall Street Journal reports:
As 2012 wound down, Goldman Sachs awarded 10 of its top executives a combined 508,104 shares one month earlier than normal and ahead of higher tax rates that kick in this year.
At Monday's $127.56 closing price, the shares were valued at $64.8 million.
The grants are related to restricted shares awarded as part of prior years' compensation, according to a series of filings with the Securities and Exchange Commission late Monday. They are not related to 2012 compensation, the filings said. About 48%, or 245,838 of the shares granted overall, were withheld by Goldman to pay taxes, the filings show.
Such awards are typically paid in January, when Goldman also pays out bonuses for the prior year. The early awards weren't limited to the top of the company, either. "The December delivery of shares went to a wider group of employees than the named executive officers," a spokesman said, though he declined to elaborate.
In December, Mr. Blankfein received 66,065 shares, 33,245 of which were withheld, netting him an award valued at more than $4 million.
Mr. Blankfein wrote in a November op-ed piece in The Wall Street Journal that tax increases are a necessary part of U.S. fiscal reform. "I believe that tax increases, especially for the wealthiest, are appropriate, but only if they are joined by serious cuts in discretionary spending and entitlements."
Continue reading...
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More on Current TV's sale to Al Jazeera
Gore Pockets $100 Million on Current TV Sale...
Green Gore sells to one of world's biggest oil exporters!
NYT: Gore tried to complete deal by Dec. 31 'lest it be subject to higher tax rates'
Time Warner Cable Immediately DROPS Current TV Upon Sale To Al Jazeera

Jim Sinclair: The Federal Reserve Has No Practical Option To End QE Without Collapsing Financial System

The legendary Jim Sinclair has sent another email alert to subscribers regarding the take-down in the gold and silver markets Thursday on the release of the December Fed minutes.
Sinclair states that contrary to the Fed’s MOPE attempting to convince the market that QE will be phased out in 2013 as the economy recovers, There is no practical way that QE can cease here or in Euroland without a total and final collapse of the financial system.
Sinclair points out that the entire derivatives market hinges on the Fed’s unceasing QE, as the moment QE ceases, the US bond market collapses and the Fed must debt monetize all required debt, which means if QE stops, it starts up again immediately and in a crisis mode.
Sinclair states that QE cannot stop or the world as we know it instantly ends, and that the implications to what the Fed has done cannot be talked or manipulated away. The consequences are coming.
Full alert below:

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From Jim Sinclair:

Such an announcement has been part of QE either from MSM or some Fed board member since it began. The implication of stopping QE is so dire to the economy that it is in a practical sense impossible. When gold was being sold by central banks during the 1970s market announcements were made constantly with the bias to depress metals.

There is no way that the implications and consequences of what has been done up to now can be talked or manipulated away. There is no practical way that QE can cease here or in Euroland without a total and final collapse of the financial system. Just go back to the IMF report on OTC derivatives I posted this morning. If QE ceases, the US bond market collapses and the Fed must debt monetize all required debt, which means if QE stops, it starts up again immediately and in a crisis mode.

I have to admit that if you have been a reader here for any length of time you should know this without asking me. The pressure that people unload on me during any gold reaction is downright mean.

The statement that QE can stop is simply MOPE. QE cannot stop or the world ends as you know it.

Please print this out and post it on your computer because every time the long cycle guy repeats his year old bear gold price prediction or the Fed says anything about stopping QE, you all go wild. It is embarrassing really.

If you do not understand what you are in, why are you in it?

Truman said it all when he said if you can’t stand the heat, get out of the kitchen.

The Federal Reserve has no practical option to end QE without ending the economic world for decades to come. Should that actually occur in some parallel universe, only gold will protect those citizens from the collapse of the by-default reserve currency. I am sure i have written this at least 200 times.

Jim Sinclair: The Federal Reserve Has No Practical Option To End QE Without Collapsing Financial System

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From Jim Sinclair:

Such an announcement has been part of QE either from MSM or some Fed board member since it began. The implication of stopping QE is so dire to the economy that it is in a practical sense impossible. When gold was being sold by central banks during the 1970s market announcements were made constantly with the bias to depress metals.

There is no way that the implications and consequences of what has been done up to now can be talked or manipulated away. There is no practical way that QE can cease here or in Euroland without a total and final collapse of the financial system. Just go back to the IMF report on OTC derivatives I posted this morning. If QE ceases, the US bond market collapses and the Fed must debt monetize all required debt, which means if QE stops, it starts up again immediately and in a crisis mode.

I have to admit that if you have been a reader here for any length of time you should know this without asking me. The pressure that people unload on me during any gold reaction is downright mean.

The statement that QE can stop is simply MOPE. QE cannot stop or the world ends as you know it.

Please print this out and post it on your computer because every time the long cycle guy repeats his year old bear gold price prediction or the Fed says anything about stopping QE, you all go wild. It is embarrassing really.

If you do not understand what you are in, why are you in it?

Truman said it all when he said if you can’t stand the heat, get out of the kitchen.

The Federal Reserve has no practical option to end QE without ending the economic world for decades to come. Should that actually occur in some parallel universe, only gold will protect those citizens from the collapse of the by-default reserve currency. I am sure i have written this at least 200 times.

The Essence Of The Banking Industry...

By Michael Rivero

Back in 2008, in testimony before Congress in the wake of the crash of Wall Street's mortgage-backed securities scam, fromer Federal Reserve Chairman Allan Greenspan made the admission that his "ideology" had a flaw.

Greenspan and the members of Congress relied heavily on euphemisms like "ideology" and spoke in vague terms to obfuscate from the American people that there are fundamental flaws in the way the US Financial system works.
The first and largest flaw in the system is the Federal Reserve itself. Not actually a part of the government (the Federal Reserve is no more "Federal" than Federal Express), the Federal Reserve is a privately owned central bank which has been given the authority by the US Congress to create money, something which under any other circumstances would be called counterfeiting. Created by act of Congress in 1913 and signed into law by President Woodrow Wilson, the Federal Reserve now exercises the power to create money originally granted to the government itself under the Constitution. It might be argued that such a dramatic reassignment of constitutional powers should have required a Constitutional Amendment, but that is a discussion for another article. What is germane is that the Federal Reserve system is unstable because by design it creates more debt than it creates money with which to pay that debt.
"I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is now controlled by its system of credit.We are no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men." -- Woodrow Wilson 1919
What few Americans realize is that under the private central banking system, all currency enters circulation as a loan at interest from the central bank. The money you are paid for work, the money you pay for food; all of it first entered the economy as a loan at interest form the Federal Reserve. Loans to the Us Government, loans to other banks, loans to businesses and loans to consumers. As that money circulates, passing from hand to hand to hand to hand, it accrues interest on that loan, which must eventually be repaid through higher prices and increased taxation.
The trap of private central banking lies in the fact that the moment that first paper note enters circulation, more money is owed to the private central bank than actually exists. The only way that interest can be paid is if new money is created through more lending, with part of that newly created money used to pay the interest on the old money. The system can only perpetuate itself as long as ever-larger generations of new borrowers can be found to allow the creation of that new money. It is because of this basic principle that private central banks are little more than pyramid, or Ponzi schemes, albeit cloaked with an image of respectability.

It is also because of this principle that every nation enslaved to a private central bank is drowning in accumulated debt, and unable to find the money with which to pay that debt. That debt, in turn, is used to exercise control over that nation and its people.
"This is the very essence of the banking industry; to make us all, whether we be nations or individuals, slaves to debt!"
But there are three other flaws which doom the economy as it is currently constituted to failure.
The first flaw is inside modern economic theory itself, and even Allan Greenspan admitted before Congress that the best minds of Wall Street missed (or did not want to see) what was going on.
There are two kinds of purchases, goods and assets. Goods are items you purchase to use and expect to sell (if ever) at a reduced price. Assets are things purchased with the expectation of re-selling at a higher price. Normal rules of supply and demand (the wisdom of the crowd) are that as the cost of goods rises, demand will lessen, and commerce will slow until the price of the good succumbs to market pressures and comes back down. This is a naturally stable system that needs little interference.

The mistake that the Federal Reserve and Wall Street made was assuming the same stability also applies to assets. As the price of gold rises, demand will slacken, for example. But this is not always true.
Houses inhabit a grey area. They are bought to use, like goods, but their price will usually increase like an asset. But Wall Street still viewed houses primarily as goods, with the increase in value really the accumulation of mortgage interest carried forward to the next buyer. And that was where they failed.
During the early 2000s, more and more Americans started viewing housing purchases as assets. As housing prices rose, demand actually increased as the promise of overnight profits lured more people to mortgage out the equity in their homes and invest the cash into additional houses. That demand in turn stimulated greater price increases, which stimulated more demand, etc.

This is a naturally UNstable system, chaotic in the mathematical sense. Controls should have been imposed, but were not, and that is how the housing bubble was created. Everyone on the inside was too busy getting rich to realize the obvious smell of tulips in the air.
Worse, they were also too busy to notice two other major problems.
For any economic system to work, all parts of the system must work. Money must flow to all sectors and all levels to maintain a stable economy.

Capital is invested in factories, farms, new product development, as well as home mortgages and consumer debt. The investment in factories and farms provides jobs with which consumers can repay their consumer debt and home mortgages, keeping the system stable and self-sustaining.
However, with real-estate and mortgage-backed securities paying such high rates of returns (until the crash), investment money was lured away from other capital ventures like farming and manufacturing. Profits were higher investing in consumer debt than in investing in businesses with which to provide jobs so that consumers could pay that debt! American entrepreneurs outside the financial services sector were starved for investment cash and never opened their doors. This accelerated the loss of jobs, which triggered the mortgage and retail crashes.

Put simply, essential parts of the US economy were allowed to starve to death because they did not provide the highest immediate profits.
This illustrates very clearly that Adam Smith was wrong about individual greed being good for the society as a whole. And this also proves John Nash was correct that one must keep an eye on the system as a whole to have the best outcome. Keeping that eye on the whole is, of course, the advertised job of the US Federal Government, and obviously, they dropped the ball on this one; too busy selling us solutions to make-believe crisis to notice the real disaster that was unfolding before them.

Click for larger
Again, Greenspan admitted that simply allowing bankers to do what served their own interests did not work out.
In essence, Greenspan admitted that the deregulation of the financial system in 1999 had not worked out; hardly a surprise to anyone who studied the events leading up to the passage of the Glass-Steagal act in 1933.
It is for this reason that Russia is correct to take control of their central bank, to make certain that instability (greed) does not strangle essential parts of the entire system for the sake of a quick profit.
The final flaw relates to the issue of stability versus chaotic markets. Obviously, stable markets are best for normal investors, businessmen, government, banks, and homeowners. The flow of cash is reliable and predictable. Long term planning is easy as forecasts and expense are reliable. There is little excitement.

But for the growing population of hedge fund managers, arbitragers, and players in derivatives, profits (and the emotional thrill that goes with them) are faster and greater during times of chaos and instability. And just like drug addicts and gamblers, money junkies will consciously or unconsciously reinforce those parts of their existence which feed their addictions.

The US economy has thus become more unstable over time under the influence of money-junkies, who favor the volatile over the calm. This psychology of the money-junkies as an influence over financial practices was a factor totally overlooked by the bankers and the US Government, who see the economy wholly as numbers and never looked into the psychology of the Wall Street crowd, possibly out of fear as to the very unflattering mental illness they would find.

Keiser Report: Banker Infestation (E386)

From YouTube – Max Keiser
In this episode, Max Keiser and Stacy Herbert argue over whether things are looking better or worse for the American worker.
While Stacy argues that the return of some manufacturing is a sign that wealth creating jobs may return to the US, Max counters that the system is so corrupt that the chances of labor getting any cut of the wealth is nil and that the Internet giants will prevent the rise of a powerful decentralized economy online.
In the second half, Max Keiser talks to Professor Jonathan Feldman about the Global Teach-In and about a boycott and short sale campaign and creating an industrial policy for America because right now the US even outsources some military production to China.

LINKS: Obama Gears Up For Carbon Tax Fight

A new regular feature on the Bail, John provides a weekly update on corruption, graft and waste in the green energy sector.
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US Gears Up For Carbon Tax Fight
A major battle will erupt in 2013 over whether the US should implement a national carbon tax, observers are warning. “It’s unlikely to happen in the next few weeks, when the fiscal cliff needs to be dealt with,” Caperton said. “But they’re definitely going to work on it and people are going to be talking about it.”
Congress should direct the Department of Energy to determine the carbon price that will put the US on a path toward necessary greenhouse gas (GHG) pollution reductions, using $25 per tonne as a starting point for their analysis, he said.
The tax should be phased in on a pre-determined schedule along the lines of 25% of the target price in year one, 50% in year two, and 100% in year three, meaning a carbon price of $6.25/t in the first year, $12.50/t in the second year, and the full $25/t in the third year.
Why It's The End Of The Line For Wind Power - Forbes
Obama Administration Still Supports Wind Power Projects
The Obama administration wants the U.S. offshore wind industry to flourish. As it reposes hope in renewable sources of energy, it decided to award $28 million in grants to seven projects. Those projects are aimed at developing different kinds of power-generation technologies.
Obama's Grants
As the Obama administration believes in the beneficial use of renewable energy, the Department of Energy announced that it would grant as much as $168 million in the next several years. Grants are expected to help companies develop and build first offshore wind farms in the U.S. To date, nine wind farms are at the advance level of development and as many as 24 are at the initial levels of development.
What is interesting is that the Obama administration supports new projects and introduces policies aimed at generating approximately 80 percent of the US electricity out of renewable source of energy by 2035. The administration believes that the US has a great potential for renewable energy as it possesses "untapped clean energy sources." Therefore, several decisions were made to support the development of new clean energy technologies. In addition, the Obama administration makes moves aimed at accelerating and facilitating leasing for offshore wind projects.
Wind proponents prepare for fiscal cliff deal without extension
An energy security group told The Hill on Friday that it does not expect the one-year wind credit extension it has supported to make it into a “fiscal cliff” deal. The 2.2-cent per kilowatt-hour credit for wind power production expires Dec. 31.
UPDATE: Wind Companies Get Fiscal Cliff Bailout
Wind energy advocates have lobbied hard to prevent the production tax credit from expiring Dec. 31. The number of new wind projects has dropped sharply when the credit has been allowed to lapse in the past, which last occurred in 2004.
Kerry to face climate test at State Dept
President Barack Obama nominated Kerry on Friday for Hillary Clinton's job and the senator is expected to win swift Senate confirmation. Kerry has been a dedicated, long-time campaigner for action on climate change. In 1992 he attended the first Rio Summit on climate, which formed the framework of U.N. climate talks. In 2010, he and Senator Joe Lieberman authored a sweeping climate bill that ultimately failed.
More on this story here and here.
Clinton lays out goal of integrated power grid in the Americas
Secretary of State Hillary Rodham Clinton, in a major energy address Oct. 18 at Georgetown University in Washington, said: “Earlier this year, at the Summit of the Americas, Colombia launched a new initiative it is leading with the United States called Connecting the Americas 2022.
Modernization of Electricity Grids
To support a successful implementation of the European Grid Declaration, signed by a coalition of Europe’s 29 largest environmental NGOs and grid operators in 2011, the Renewables-Grid-Initiative (RGI) launches the European Grid Report. The report publishes over 80 selected practical experiences by different RGI members across Europe. Today at the 2nd European Grid Conference in Brussels, jointly organised by RGI and Smart Energy for Europe Platform (SEFEP), the report and the extended European Grid Declaration on Transparency and Public Participation were presented to European Commissioner for Energy Günther H. Oettinger and to European Commissioner for the Environment Janez Potočnik.
POLAND AND CZECH REPUBLIC BAN GERMANY’S GREEN ENERGY
In order to boost Germany’s ‘ecological wonder’ and its green energy transition, the Federal Republic has used power grids of neighbouring countries – without asking for permission. For this short-sighted policy, the German government is now being punished.
Germany considers itself the environmental conscience of the world: with its nuclear phase-out and its green energy transition, the federal government wanted to give the world a model to follow. However, blinded by its own halo Germany overlooked that others have to pay for this green image boost and are suffering as a result.
For example, Germany’s ‘eco-miracle’ simply used the power grids of neighboring countries not only without asking for permission but also without paying for it. Now Poland and the Czech Republic have pulled the plug and are building a huge switch-off at their borders to block the uninvited import of green energy from Germany which is destabalising their grids and is thus risking blackouts.
Iberdrola Sells Wind Farms to GE
Chairman Ignacio Sanchez Galan said in a Dec. 2 interview he was negotiating sales of French, German and Polish wind farms, and has now announced deals in Germany and France. The latest sale means Iberdrola has divested about 850 million euros of assets in 2012 as part of a plan to sell 2 billion euros worth by the end of 2014 to strengthen its balance sheet. The French unit that Iberdrola is selling directly or indirectly owns 32 wind farms, with a total of 321.4 megawatts of capacity, according to the filing.
Edward Markey to run for Kerry's Senate seat in special election
New Hawaii Senator Says Climate Change Most Urgent Challenge
Hawaii Lt. Gov. Brian Schatz (D), who was yesterday named to fill the Senate seat vacated by the death of Sen. Daniel Inouye (D), wants to tackle an issue that has largely disappeared from Washington’s political agenda in recent years: climate change. Speaking briefly after being named to the seat by Gov. Neil Abercrombie (D), Schatz voiced his concern over the threat climate change poses to the world if nothing is done:
“For me, personally, I believe global climate change is real and it is the most urgent challenge of our generation,” Lt. Gov. Brian Schatz (D), whom Hawaii Gov. Neil Abercrombie (D) tapped for the seat, said in brief comments Wednesday.
EPA Chief Stepping Down
Environmental Protection Agency Administration Lisa Jackson says she's stepping down after nearly four years on the job.
Accusations fly as First Wind fights Clipper for refund

First Wind said it paid the money for a batch of Clipper's 2.5MW Liberty turbines, which were never delivered. It also said Clipper has effectively stopped manufacturing the turbines. As of mid-December 2012, the Iowa suit was still ongoing, while a similar action in California was withdrawn on 5 November by First Wind for reasons that are not clear.

First Wind, a former major customer of Clipper, has been trying to freeze $59.5 million of Clipper's assets in three different court jurisdictions. The aim is to ensure that the private equity-owned turbine manufacturer can pay an arbitration settlement under way with First Wind in Chicago currently being overseen by the American Arbitration Association.
S&P Affirms Rating on First Wind Capital
First Wind Sees Future With Sun
Enron’s Kyoto Memo Turns 15
Enron had 6 profit centers tied to pricing CO2, 7 under cap and trade
Patrick Wood III - Enron All Over Again
Patrick Wood's Reaction to Enron Tapes Exposing Energy Manipulation
Patrick Wood III at the Milken Institute
Patrick Wood on Fraud Task Force
Patrick Wood III on board of battery maker Xtreme Power
Xtreme Power blamed the fire dept for First Wind Hawaii Fire
Patrick Wood is also on the board at First Wind and many others.
Google Search - Patrick Wood III Insider Trading
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Other Industry News
DE Shaw, part owner of First Wind, disclosure on natural gas sector
San Leon Energy
George Soros takes stake in San Leon
Brookfield to acquire 19 hydropower dams in Maine
Brookfield (Bermuda based) to acquire Western Wind
BP Wind Hawaii Goes Into Operation
BP Wind Ozarks Comes Online in 2013
Nebraska wind farm project can't get customers
When will Warren Buffett short this one? - Mid-American Wind
Mid American completes 3 new wind projects
Vermont utility calls for renewables moratorium
PTC-ITC or Cash Grant?
Carbon Taxes Make Ireland Even Greener - NYT
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Read Last Week's Green Energy Stories...

Cartoons by Steve Hunter via Andy's Rant...

You Wanted Proof That Wall Street Owns Washington?

New documents reveal that former marine Scott Olsen took a tear gas canister to the head, and suffered brain damage, courtesy of Wall Street.

Learn to love the Domestic Security Alliance Council.
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This is a shocking report. Read the summary here:
FBI Documents Reveal Secret Nationwide Occupy Monitoring
Consider yourself excused if you missed this story during the holidays. How interesting that after 12 months of FOIA delays and outright lies from the FBI, the documents were finally released between Christmas and New Years when no one was paying attention.
So why in the hell was the Richmond Federal Reserve monitoring Occupy Tampa?
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How the FBI worked with Wall Street banks to destroy Occupy
Guardian
By Naomi Wolf
New documents prove what was once dismissed as paranoid fantasy: totally integrated corporate-state repression of dissent.
It was more sophisticated than we had imagined: new documents show that the violent crackdown on Occupy last fall – so mystifying at the time – was not just coordinated at the level of the FBI, the Department of Homeland Security, and local police. The crackdown, which involved, as you may recall, violent arrests, group disruption, canister missiles to the skulls of protesters, people held in handcuffs so tight they were injured, people held in bondage till they were forced to wet or soil themselves – was coordinated with the big banks themselves.
The Partnership for Civil Justice Fund, in a groundbreaking scoop that should once more shame major US media outlets (why are nonprofits now some of the only entities in America left breaking major civil liberties news?), filed this request.
The document – reproduced here in an easily searchable format – shows a terrifying network of coordinated DHS, FBI, police, regional fusion center, and private-sector activity so completely merged into one another that the monstrous whole is, in fact, one entity: in some cases, bearing a single name, the Domestic Security Alliance Council. And it reveals this merged entity to have one centrally planned, locally executed mission. The documents, in short, show the cops and DHS working for and with banks to target, arrest, and politically disable peaceful American citizens.
The documents, released after long delay in the week between Christmas and New Year, show a nationwide meta-plot unfolding in city after city in an Orwellian world: six American universities are sites where campus police funneled information about students involved with OWS to the FBI, with the administrations' knowledge (p51); banks sat down with FBI officials to pool information about OWS protesters harvested by private security; plans to crush Occupy events, planned for a month down the road, were made by the FBI – and offered to the representatives of the same organizations that the protests would target; and even threats of the assassination of OWS leaders by sniper fire – by whom? Where? – now remain redacted and undisclosed to those American citizens in danger, contrary to standard FBI practice to inform the person concerned when there is a threat against a political leader (p61).
As Mara Verheyden-Hilliard, executive director of the PCJF, put it, the documents show that from the start, the FBI – though it acknowledges Occupy movement as being, in fact, a peaceful organization – nonetheless designated OWS repeatedly as a "terrorist threat":
"FBI documents just obtained by the Partnership for Civil Justice Fund (PCJF) … reveal that from its inception, the FBI treated the Occupy movement as a potential criminal and terrorist threat … The PCJF has obtained heavily redacted documents showing that FBI offices and agents around the country were in high gear conducting surveillance against the movement even as early as August 2011, a month prior to the establishment of the OWS encampment in Zuccotti Park and other Occupy actions around the country."
Hilliard points out the close partnering of banks, the NYSE and at least one local Federal Reserve with the FBI and DHS, and calls it 'police-statism':
"This production [of documents], which we believe is just the tip of the iceberg, is a window into the nationwide scope of the FBI's surveillance, monitoring, and reporting on peaceful protestors organizing with the Occupy movement … These documents also show these federal agencies functioning as a de facto intelligence arm of Wall Street and Corporate America."
The documents show stunning range: in Denver, Colorado, that branch of the FBI and a "Bank Fraud Working Group" met in November 2011 – during the Occupy protests – to surveil the group. The Federal Reserve of Richmond, Virginia had its own private security surveilling Occupy Tampa and Tampa Veterans for Peace and passing privately-collected information on activists back to the Richmond FBI, which, in turn, categorized OWS activities under its "domestic terrorism" unit. The Anchorage, Alaska "terrorism task force" was watching Occupy Anchorage. The Jackson, Mississippi "joint terrorism task force" was issuing a "counterterrorism preparedness alert" about the ill-organized grandmas and college sophomores in Occupy there. Also in Jackson, Mississippi, the FBI and the "Bank Security Group" – multiple private banks – met to discuss the reaction to "National Bad Bank Sit-in Day" (the response was violent, as you may recall). The Virginia FBI sent that state's Occupy members' details to the Virginia terrorism fusion center. The Memphis FBI tracked OWS under its "joint terrorism task force" aegis, too. And so on, for over 100 pages.
Jason Leopold, at Truthout.org, who has sought similar documents for more than a year, reported that the FBI falsely asserted in response to his own FOIA requests that no documents related to its infiltration of Occupy Wall Street existed at all. But the release may be strategic: if you are an Occupy activist and see how your information is being sent to terrorism task forces and fusion centers, not to mention the "longterm plans" of some redacted group to shoot you, this document is quite the deterrent.
Continue reading...
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Occupy Oakland and Scott Olsen:
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A protester shows his wound after the police shot him with a rubber bullet while he helped carry Scott Olsen. The bullet had to be removed from his body.
The Oakland police violated their own rules (page 9), and violated the Geneva Convention against targeting wounded combatants or those attempting to render medical aid. Amnesty International has condemned the use of tear gas as well as the actions of Mayor Jean Quan of Oakland, who said the measures were justified.
The Obama administration and Eric Holder have shown no interest in investigating.

Wall Street's last gravy train may be running out of steam

Bankers fear good times for bad debt might come to an end in 2013.

JPMorgan was the top underwriter of risky debt in 2012

FORTUNE -- Wall Street's profits have never been so pumped up by junk.
At a time when most of Wall Street's lucrative businesses -- mergers and acquisitions, initial public offerings -- seem stuck in first gear, sales of high-yield debt have taken off. Worldwide, corporations, municipalities and other issuers sold $420 billion in so-called junk bonds in 2012. In the U.S., high-yield debt issuance topped $350 billion, capping a record three-year run.
In 2010, sales of junk bonds, dubbed so because they are generally considered riskier than higher-rated debt, hit $290 billion. Before that, high-yield bond issuance had topped out at about $150 billion in the best years. Over the past three years, though, sales have averaged roughly double that.
MORE: Private equity for the Average Joe? It's coming
It's not clear how much Wall Street makes off of the high-yield market, but everyone agrees it's a lot. Dealogic estimates that investment banks raked in $7.1 billion in fees arranging sales of new high-yield bonds in 2012. The large banks tend to dominate the business. JPMorgan Chase (JPM) was the largest underwriter of high-yield bonds last year, generating $716 million in revenue from the business, according to Dealogic. Bank of America (BAC) was No.2 with $646 million in fees. Goldman Sachs (GS), normally a Wall Street titan, ranked sixth, but still generated over $500 million in fees from junk bond sales last year.
But that's just new issues. On top of that, the banks make money buying and selling existing bonds for their customers on their trading desks. More junk bonds should boost that business as well. And bond trading revenue does appear to be up at the banks, though it's hard to tell how much of that is from high-yield. Plain-vanilla bond offerings are up as well, but they are not nearly as lucrative for the banks as high-yield deals.
MORE: Just how risky is Amazon's debt?
One of the surprising things about the high-yield market is that despite the boom, recruiters say few banks are hiring in the area. That could speak to the overall state of banks, which in generally have been laying off staffers in order to cut costs. Or to the fact that many think the good times in high-yield could be fleeting.
After all, it does seem like an unlikely time for a worldwide surge in risky debt. Investors are still smarting from the financial crisis. The euro remains on the brink. The U.S. recovery continues to be anemic more than three years after the official recession ended. And growth in China and the emerging markets in general appears to be slowing.
Oddly enough, that's all created the environment for a junk bond boom. In an effort to boost the U.S. economy, the Federal Reserve has kept interest rates on government bonds as low as possible. That's sent investors looking for yield elsewhere. High-yield bond prices have surged. The riskiest debt returned 18% in 2012. That's pushed yields, which move in the opposite direction of prices and are typically around 8%, to a recent average of just over 6%. As a result, companies, some of which paid double digits to borrow in the financial crisis, are rushing to refinance their debt.
And that's what has some bankers worried. Mergers and acquisitions, in particular leveraged buyouts, are usually the driver of the high-yield market. Refinance activity typically makes up about 30% of high yield bond issuance. But with M&A in an prolonged slowdown, hurt by economic concerns, and rates hitting new lows, refinance activity has come to make up about 70% of the high-yield bond market. Some wonder how long that can continue.
MORE: Wall Street experts: Where to make money in 2013
There is just over $1 trillion in high-yield debt outstanding. This year alone about $250 billion, or nearly a quarter of the total, was refinanced. Refinance activity has been high for the past three years. And bankers say some companies are refinancing long before they have to in order to take advantage of the low rates. The result could be that many deals that would have happened in 2013 or 2014 have already been done, causing a lull.
Junk bond bulls counter that the average rate on outstanding high-yield bonds is about 7.5%, meaning a number of issuers could still lower their payments by refinancing. But that's only if rates stay where they are. After a number of years of good returns, long-time high-yield bond market guru Martin Fridson recently said he thinks junk bonds will disappoint for the next few years. Fridson expects the spread between U.S. Treasury rates and high-yield bonds should increase by about 1.5 percentage points. That means if Treasuires stay where they are, the rate incentive to refinance would disappear, taking Wall Street's recent outsized profits from the high-yield business along with it.

'US dollar will collapse in 2013'

A prominent economist tells Press TV that the United States so-called fiscal cliff is more like a ‘bottomless pit of debt’ that the country is diving into. He also added that the United States risks collapsing of dollar in 2013. US President Barack Obama has signed into law a bill backed by the Senate that averted the so-called fiscal cliff, the White House says. Obama signed the ‘American Taxpayer Relief Act of 2012′ on Wednesday, the White House said in a statement. On January 1, the House of Representatives voted 257 to 167, approving the bill, which consists of raising taxes on the wealthiest Americans, while exempting others who earn less than $450,000 a year. It will also put off 109 billion dollars in budget cuts for two months.
To further discuss the issue, Press TV’s News Analysis program has conducted an interview with Max Keiser, a journalist and broadcaster in London, Eric Draitser, founder of stopimperialism.com in New York, and Rollin Amore who is an economist and political commentator in Washington.

The US dollar is expected to take a value nosedive in 2013 if China refuses to continue financing Washington’s spiraling debt, an economic analyst tells Press TV.

Touching upon the recent tax law and spending cuts in the United States, Max Keiser noted in a Thursday interview with Press TV that when America takes on more debt than it is able to repay by collecting taxes, the difference is paid for and financed by China.
China’s support for the US debts has turned America into the worst G20 economy in terms of the gap between its spending and revenues, he pointed out.
more here

65 Percent Of Americans Believe That 2013 Will Be A Year Of Economic Difficulty

Michal Snyder, Contributor
Activist Post

Do you believe that economic trouble is coming in 2013? If so, you have a lot of company. According to a brand new Gallup poll that was just released, 65 percent of Americans believe that 2013 will be a year of "economic difficulty" while only 33 percent of Americans believe that 2013 will be a year of "economic prosperity".

Gallup has been asking this question for a lot of years, and the percentage of Americans that are anticipating economic difficulty in the year ahead has not been this high since the early 1980s. And without a doubt, there are a whole lot of reasons to be deeply concerned about the economy as we head into the new year.

But it isn't just 2013 that Americans are pessimistic about. According to the new Gallup poll, 50 percent of all Americans believe that the best days of America are behind us, and only 47 percent of all Americans believe that the best days of America are ahead of us. Those are very sobering numbers. Half the country believes that it is only downhill from here for the United States.

Unfortunately, they are exactly right. Things are rapidly going to get worse for our economy and for our nation as a whole. We are going to start reaping the consequences of decades of very foolish decisions, and the pain is going to be immense.

Gallup asked some other very interesting questions as well. The following are some of the other results from the poll...

-68 percent of Americans believe that 2013 will be a year of rising crime rates.

-57 percent of Americans believe that 2013 will be a year in which American power will decline in the world.

-82 percent of Americans believe that 2013 will be a year in which taxes in the United States will rise.

So why are so many people so pessimistic as we enter 2013?

That is a good question. I think that a lot of people are starting to wake up and are realizing the gigantic problems that are staring the U.S. right in the face.

Even our friends over in Europe can see what is happening to us. We are like a former athletic champion that is now clearly on the wrong side of "middle age" and is exhibiting obvious signs of decline. We still like to think of ourselves as "the champ", but the truth is that we are fat, lazy, broken down and bankrupt. The following is a brief excerpt from an article that appeared in a major UK news source the other day...

The rest of the world — dangerously reliant on a buoyant U.S. — should note one thing above all: the fundamentals of America’s economy are, frankly, terrible, and its international dominance is not nearly as assured as it once was.

Its economic culture has started to change since President Obama entered the White House four years ago this month.

America more closely resembles Europe in living beyond its means and in the President’s determination to build a massive welfare state.

The mainstream media and most of our politicians endlessly proclaim that things are about to turn around and that a "recovery" is on the way, but that is not even close to the truth.

Fortunately, a few of our politicians realize what is really happening and are willing to talk about it. Unfortunately, not enough people are listening to them.

For example, Ron Paul has a really good grasp on how destructive the U.S. national debt is and how we are literally destroying the bright future that our children and our grandchildren should have had. The following is what he posted on his Facebook page the other day about the "fiscal cliff deal" that just got pushed through Congress...

We Are Already Over the Fiscal Cliff
2 January 2013

Despite claims that the Administration and Congress saved America from the fiscal cliff with an early morning vote today, the fact is that government spending has already pushed Americans over the cliff. Only serious reductions in federal spending will stop the cliff dive from ending in a crash landing, yet the events of this past month show that most elected officials remain committed to expanding the welfare-warfare state.

While there was much hand-wringing over the “draconian” cuts that would be imposed by sequestration, in fact sequestration does not cut spending at all. Under the sequestration plan, government spending will increase by 1.6 trillion over the next eight years. Congress calls this a cut because without sequestration spending will increase by 1.7 trillion over the same time frame. Either way it is an increase in spending.

Yet even these minuscule cuts in the “projected rate of spending” were too much for Washington politicians to bear. The last minute “deal” was the worst of both worlds: higher taxes on nearly all Americans now and a promise to revisit these modest reductions in spending growth two months down the road. We were here before, when in 2011 Republicans demanded these automatic modest decreases in government growth down the road in exchange for a massive increase in the debt ceiling. As the time drew closer, both parties clamored to avoid even these modest moves.

Make no mistake: the spending addiction is a bipartisan problem. It is generally believed that one party refuses to accept any reductions in military spending while the other party refuses to accept any serious reductions in domestic welfare programs. In fact, both parties support increases in both military and domestic welfare spending. The two parties may disagree on some details of what kind of military or domestic welfare spending they favor, but they do agree that they both need to increase. This is what is called “bipartisanship” in Washington.

While the media played up the drama of the down-to-the-wire negotiations, there was never any real chance that a deal would not be worked out. It was just drama. That is how Washington operates. As it happened, a small handful of Congressional and Administration leaders gathered in the dark of the night behind closed doors to hammer out a deal that would be shoved down the throats of Members whose constituents had been told repeatedly that the world would end if this miniscule decrease in the rate of government spending was allowed to go through.

While many on both sides express satisfaction that this deal only increases taxes on the “rich,” most Americans will see more of their paycheck going to Washington because of the deal. The Tax Policy Center has estimated that 77 percent of Americans would see higher taxes because of the elimination of the payroll tax cut.

The arguments against the automatic “cuts” in military spending were particularly dishonest. Hawks on both sides warned of doom and gloom if, as the plan called for, the defense budget would have returned to 2007 levels of spending! Does anybody really believe that our defense spending was woefully inadequate just five years ago? And since 2007 we have been told that the wars in Iraq and Afghanistan are winding down.

According to the Congressional Budget Office, over the next eight years military spending would increase 20 percent without the sequester and would increase 18 percent with the sequester. And this is what is called a dangerous reduction in defense spending?

Ironically, some of the members who are most vocal against tax increases and in favor of cuts to domestic spending are the biggest opponents of cutting a penny from the Pentagon budget. Over and over we were told of the hundreds of thousands of jobs that would be lost should military spending be returned to 2007 levels. Is it really healthy to think of our defense budget as a jobs program? Many of these allegedly free-market members sound more Keynesian than Paul Krugman when they praise the economic “stimulus” created by militarism.

As Chris Preble of the Cato Institute wrote recently, “It’s easy to focus exclusively on the companies and individuals hurt by the cuts and forget that the taxed wealth that funded them is being employed elsewhere.”

While Congress ultimately bears responsibility for deficit spending, we must never forget that the Federal Reserve is the chief enabler of deficit spending. Without a central bank eager to monetize the debt, Congress would be unable to fund the welfare-warfare state without imposing unacceptable levels of taxation on the American people. Of course, the Federal Reserve’s policies do impose an “inflation” tax on the American people; however, since this tax is hidden Congress does not fear the same public backlash it would experience if it directly raised income taxes.

I have little hope that a majority of Congress and the President will change their ways and support real spending reductions unless forced to by an economic crisis or by a change in people’s attitudes toward government. Fortunately, increasing numbers of Americans are awakening to the dangers posed by the growth of the welfare-warfare state. Hopefully this movement will continue to grow and force the politicians to reverse course before government spending, taxing, and inflation destroys our economy entirely.

It was good that Ron Paul placed blame on both political parties and on the Federal Reserve for our debt problems.

The Federal Reserve is not often talked about much when it comes to assigning blame for the debt, but it truly is one of the primary reasons why our debt is so enormous today. The Federal Reserve system was designed to be a perpetual government debt machine, and it has accomplished that task very well.

When the Federal Reserve was first created, the total U.S. national debt was less than 3 billion dollars. That is about as much as we add to the U.S. national debt every single day at this point. And since Ben Bernanke took the reigns at the Fed, our debt problems have greatly accelerated. The U.S. national debt has more than doubled from a little over $8 trillion to more than $16.4 trillion since Ben Bernanke became chairman of the Federal Reserve in 2006.

But disaster has not struck yet, so most Americans think that everything must be okay.

Well, if you want to ignore all of the evidence of our impending economic demise, go ahead and do that. Go on lots of expensive vacations, run up your credit cards, buy a new boat and party like its 1999. Enjoy every minute of our debt-fueled prosperity while you still can. You only live once, right?

But if you are wise, you will try to understand what is coming and you will make preparations so that you and your family will be able to withstand the storm that is coming. Here are some basic steps that I suggest...

-Use this time of relative prosperity to work hard and make money while you still can. You want to store up your finances during the good times to help you get through the lean times.

-Get out of debt. You don't want massive amounts of debt weighing you down when things get really hard.

-Get more independent of the world system. Start a side business in the evenings and the weekends. Learn how to grow your own food. Get your house off of the grid if possible. Anything you can do to become more independent and more self-sufficient is good.

-Store food and other essential supplies. Right now we take for granted that the supermarkets and the big box stores will always be packed with mountains of quality goods at affordable prices. That may not always be the case. You want to be prepared for whatever may happen.

For even more tips, please see my previous article entitled "How To Prepare For The Difficult Years Ahead".

All bubbles eventually burst.

Our national debt bubble will eventually burst.

The derivatives bubble will eventually burst.

The consumer debt bubble will eventually burst.

When those bubbles burst, will you be ready?

I hope and pray that you will.

This article first appeared here at the Economic Collapse Blog. Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream and Economic Collapse Blog. Follow him on Twitter here.