Twelve Trillion * * * Twelve Trillion * * *
The US National Debt has increased an average of $2.27 billion per day since 2005 until this year!
Now, due to the bailout of the rich bankers and world elite, the US National Debt is increasing substantially faster!
The US trade deficit is on track to set a record for a seventh consecutive year, running at an annual rate of $780 billion.
During fiscal year 2009 the U.S. Treasury is on-track to pay over $500 billion just in interest payments to finance the already-existing debt.
Annual interest payments for individuals, households, businesses, and all levels of US government are likely to reach $3 trillion — out of a $14 trillion annual GDP, an annual GDP that is now in sharp decline. |
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In six years, U.S. Public debt has increased from 4 trillion to Eleven trillion dollars
The debt limit was raised for the third time in less than a year with the passage of American Recovery and Reinvestment Act of 2009 on February 13, 2009 (ARRA; H.R. 1).
Signed into law on February 17, 2009 (P.L. 111-5), the debt limit was increased to $12,104 billion
The estimated population of the United States 2006 is around 300,000,000 people. David M. Walker, Comptroller General of the US and head of the Government Accountability Office, in his December 17, 2007, report to the US Congress on the financial statements of the US government noted that "the federal government did not maintain effective internal control over financial reporting (including safeguarding assets) and compliance with significant laws and regulations as of September 30, 2007."
The US government cannot pass an audit.
The GAO report states accrued liabilities of the federal government "totaled approximately $53 trillion as of September 30, 2007", likely to increase to $70 trillion by the end of 2009.
USA TODAY May 28, 2009, used federal data to compute all government liabilities, from Treasury bonds to Medicare to military pensions.
Bottom line: The government took on $6.8 trillion in new obligations in 2008, pushing the total owed to a record $63.8 trillion.
No funds have been set aside against the liability.
The estimated net worth of all Americans including all business is about $47 trillion, reducing as property and company value reduces.
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New World Order Statistic
The gifts of billions of dollars of taxpayers' money provided the banks with an abundance of low cost capital that has boosted the banks' profits, while the taxpayers who provided the capital are increasingly unemployed and homeless.
JPMorgan Chase announced that it has earned $3.6 billion in the third quarter of this year.
Meanwhile, New York City's homeless shelters have reached the all time high of 39,000, 16,000 of whom are children.
London Evening Standard reports about Goldman Sachs'
“5,500 London staff can look forward to record average payouts of around 500,000 pounds ($800,000) each.
Senior executives will get bonuses of several million pounds each with the highest paid as much as 10 million pounds ($16 million).“
The Financial Times is offering a new magazine — ”How To Spend It.”
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The Rich Have Stolen The Economy
click here |
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This period — up to a future where the veil can no longer cloak — is going to see heightening dissembling within our present structures!
Dissemble — to hide under a false semblance or seeming; to feign (something) not to be what it really is; to put an untrue appearance upon; to disguise; to mask.
And from now — and for the next few years — we are going to see major dismembering of everything we have viewed and expected as a progression of our Earth lives!
Whatever they are telling you, the time to prepare is fast coming to an end!
Prepare means food procurement and private storage and other survival mechanisms!
This applies to people in all Western countries, and all other nation-states also!
Kewe |
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Barack Obama: Crime Boss
Stephen Lendman April 18, 2009 |
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Since taking office, Obama, wittingly or otherwise, has headed the largest criminal enterprise in history — the mass looting of national wealth to enrich his Wall Street benefactors.
He assembled a rogue economic team of Clinton/Robert Rubin retreads — to fix the current crisis they engineered.
In a March 13 article, (author and former Republican strategist) Kevin Phillips called them:
"recycled senior (Clinton administration) Democrats (responsible for the) tech mania, deregulation binge and (1997 — 2000) stock market bubble and crash.
Obama) extend(ed) the (disastrous) mismanagement and pro-Wall Street bias of the 2008 Bush regime bailout."
He called Geithner and Bernanke "hapless," the result of their ruinous misjudgments (and, along with Alan Greenspan, complicit) with finance-sector malfeasance."
He said Summers will be "remembered for helping to block federal regulation of financial derivatives and orchestrat(ing) the 1999" Glass-Steagall repeal, among his other "achievements."
He went down the list of key economic officials and trashed them all as the very types to be avoided, not appointed.
He noted that Bernanke was chairman of George Bush's Council of Economic Advisers and added:
"Imagine if FDR had retained Herbert Hoover's chief economic advisor and loyal Republican Fed Chairman in 1933....
To think that the pussycat Fed (would become) a saber-toothed tiger is a deception."
Worse still, ruinous economic policies "could prove fatal" if White House policies favor "Wall Street but not the national economy or American people" — the very direction they've now taken.
In a follow-up April 7 article, Phillips highlighted:
"The Disaster Stage of US Financialization....a much grander-scale disaster than anything that happened in 1929 — 1933.
Worse, it dwarfs the abuses of debt, finance and financialization that brought down previous leading world economic powers like Britain and Holland."
Today's crisis represents:
"the bursting of the huge 25-year, almost $50 trillion debt bubble that helped underwrite the hijacking of the US economy by a rabid financial sector...."
It's realigning global power with America losing its economic leadership won in WW II.
"The ignominy deserved by Wall Street after 1929-1933 is peanuts compared with the opprobrium the US financial sector and its political and regulatory allies deserve this time." Financialized America radically transformed the country, now "doubly staggering because of the crushing burden of its collapse."
Yet major media pundits and reporters barely noticed and now claim relief is just a few quarters away — ignoring a metastasizing cancer, a national disaster, while policy makers heap fuel on a raging blaze now consuming us, yet too little public rage confronts them.
A Former Insider Speaks Out
Economics Professor William Black is a former senior bank regulator and Savings and Loan prosecutor, currently teaching economics and law at the University of Missouri.
In an April 13 Barrons interview, he referred to "failed bankers (advising) failed regulators on how to deal with failed assets" they all had a hand in creating and proliferating.
His conclusion: "How can it result in anything but failure."
He called the scale of financial fraud "immense," and said "Unless the current administration changes course pretty drastically, the scandal will destroy Barack Obama's presidency," besides what it's doing to the country, global economies, and many millions of people here and abroad.
He scathed Summers and Geithner, both "important architects of (today's) problems," and the latter as a failed and dishonest regulator, yet "numbering himself among those who convey tough medicine when he's really pandering to the interests of a select group of banks."
No need to mention which ones.
The law mandates corrective action, the kind FDR took in the 1930s.
He, Bernanke and Summers flout the law, "in naked violation, in order to pursue the kind of favoritism that the law was designed to prevent."
They've turned taxpayers into "suckers" who'll pay dearly for decades, maybe generations. [Not unless they are very, very, very, stupid — Kewe]
His refusal to put insolvent banks into receivership, resorting to deceptive language like "legacy assets," and pursuing the worst of Chicago School economics "is positively Orwellian....If cheaters prosper, (they'll) dominate.
It's like Gresham's law: Bad money drives out the good.
Well, bad behavior" does the same thing "without good enforcement."
His bailout plans are disastrous.
They prop up zombie banks by:
"mispricing toxic assets....The last thing we need is a further drain on our resources....by promoting this toxic asset market (and notions of) too-big-to-fail."
Multi-trillion dollar cover-up by publicly traded enterprises
With most, perhaps all, the big banks insolvent (a polite term for bankrupt), what's going on is "a multi-trillion dollar cover-up by publicly traded (enterprises), which amounts to felony securities fraud on a massive scale."
Ultimately, these firms will be forced into receivership, their "managements and boards stripped of office, title, and compensation."
What's needed is a 1930s-style Pecora investigation to get to the bottom of their fraud, deceit, and cover-up, along with government complicity to hide it.
More on that below.
Black cited billions to AIG as the single worst abuse so far — to bail out their counterparties like Switzerland's UBS at the same time we were prosecuting it for tax fraud. As bad was following Goldman Sachs' advice to direct a $13 billion counterparty windfall to itself.
The whole process reeks of corruption.
It must be stopped, and a new direction instituted under a reformist economic team — one that will admit the nature and depth of the problem, cut the tie to Wall Street, and take corrective action the law mandates.
That's "precisely what isn't happening."
Washington is "wedded to the bad idea of bigness" and power of Wall Street.
In today's America, financialization is predominant.
It's a cancer eating away at the fabric of the nation and many millions affected, the result of the grandest of grand thefts.
A good start would be to break up the financial giants into more effectively managed and less powerful units — maybe the way Standard Oil was dismantled through a simple share spinoff.
In addition, "a new seriousness must be put into regulation," and a new resolve to enforce it.
Today, the whole system encourages fraud, one based on results at any cost, so "fudging the numbers" becomes de rigueur and global bigness the holy grail.
It sends the wrong message — play or pay with your job and future on Wall Street.
"The basis for all regulation and white-collar crime is to take the competitive advantage away from the cheats, so the good guys can prevail.
We need to get back to that."
It's been decades since we've been there and high time we took it seriously.
Job one is a thorough housecleaning and new direction, much like what's described below.
On April 3, Black appeared on Bill Moyers Journal on PBS and explained what's briefly enumerated below.
From his experience as a regulator and prosecutor, he said:
In an April 6 article, Black calls ongoing "stress tests a complete sham.... to fool people.... make us chumps" and essentially say 'If we lie and they believe us, all will be well'" when, in fact, it's not.
Greatest ever criminal fraud by bankers and complicit government officials
It's part of the giant cover-up and greatest ever criminal fraud — by bankers and complicit government officials.
On April 13, Nouriel Roubini shared Black's view.
He cited the stress test "spin machine" leaking stories to the press that all 19 banks in question will pass.
None will fail.
If more "exceptional assistance" is needed, Washington will provide it.
However, Q 1 macro data tells another story as growth, unemployment, and falling home prices alone "are worse than those in FDIC's baseline scenario for 2009 AND even worse than those for the more adverse stressed scenario for 2009.
Make believe
Thus, the stress test results are meaningless" as worsening data are outdistancing "the worst case scenario."
In other words, test results "are not worth the paper (they'll be) written on" as their assumptions are fraudulently based.
They're "fudge tests....blatantly rigged" to put a brave face on a very bleak economic picture.
They're in addition to other changes, including the recent Financial Accounting Standards Board (FASB) ruling.
It's responsible for developing "generally accepted accounting principles" known as GAAP.
On April 3, it changed so-called "mark-to-market" standards to "mark-to-make believe" ones.
It also voted to allow banks to book smaller impaired asset losses to paint a brighter profits picture.
It let Wells Fargo, for example, claim a Q 1 profit when it's drowning in losses, ones it can hide and not take.
Also likely coming is restoration of the "uptick rule" that prohibited short-selling in a down market.
Established in 1938 to prevent disorderly selling, it allows shorts only when shares trade up.
In June 2007, it was removed.
Re-introductory proposals are now being considered to artificially boost prices.
Roubini calls it "a form of legalized manipulation of the stock market by regulators....to prevent short-sellers (from doing) their job, i.e. make stock prices reflect fundamentals and prevent bubbles."
Overall, alarm bells should be warning about reckless monetary and fiscal policies, but perverse market reaction was relief.
That's wildly premature according to some like Roubini.
Others see a protracted downturn, a prolonged winter, and if conditions deteriorate enough perhaps a nuclear one, unlike anything before seen, and why not:
From Bubble to Depression
On April 6, Professor Vernon Smith (a 2002 economics Nobel laureate) and research associate Steven Gjerstad headlined a Wall Street Journal op-ed: "From Bubble to Depression?"
They asked:
What creates bubbles?
Why does a large one, like the dot.com bubble, do no damage to the financial system while another (housing) caused collapse?
They believe "events of the past 10 years have an eerie similarity to the period leading up to the Great Depression," including rising mortgage debt and speculation, then asked:
Had banking system difficulties "been caused by losses on brokers loans for margin purchases in 1929, the results should have been felt in the banks immediately after the stock market crash."
But they weren't apparent until fall 1930, a year later.
Further, if money supply contraction caused bank failures, why haven't massive infusions today prevented the crisis?
They conclude that conventional wisdom needs reassessing and believe "excessive consumer debt — especially mortgage debt — was transmitted into the financial sector" causing the Great Depression.
Their hypothesis:
"Is that a financial crisis (originating) in consumer debt, concentrated at the low end of the wealth and income distribution (affecting so many households), can be transmitted quickly and forcefully into the financial system....
We're witnessing the second great consumer debt crash, the end of a massive consumption binge," but want more study to prove it.
However, much more than that is needed — real reform, a complete reversal from current policy of the kind addressed below.
Also, Smith and Gjerstad omitted a crucial fact — how misdirected today's massive infusions have been.
Instead of helping beleaguered households, they've gone mostly to bankers for purposes other than economic recovery; namely, recapitalizations, for acquisitions, and big bonuses at the same time they fire thousands of lower level staff.
The 1930s Pecora Commission
On March 4, 1932 (one year to the day before FDR took office), a majority-Republican Senate Banking, Housing, and Urban Affairs Committee established it to investigate the causes of the 1929 crash.
It was little more than a fig leaf until Democrats took over, appointed Ferdinand Pecora as special counsel, and made a real effort for banking and regulatory reform.
Straightaway, Pecora looked into Wall Street's seamy underside by placing powerful bankers in the dock, holding them accountable for their actions, and doing through hearings what would have been impossible in open court given their ability to "buy" justice.
He confronted Wall Street's biggest names:
Richard Whitney, president of the New York Stock Exchange;
Noted investment bankers, including Thomas Lamont, Otto Kahn, Charles E. Mitchell, Albert Wiggin, and JP Morgan, Jr., scion of the man who dominated the Street for decades as its boss and de facto Fed chairman before the central bank was established
Market speculators like Arthur Cutten.
No income taxes paid
He got Morgan to admit that he and his 20 partners paid no income taxes in 1931 and 1932.
Neither did its Philadelphia operation, Drexel and Co., in the same years and way underpaid them in previous ones.
It made headlines, was stunning, and galvanized critics to demand reform.
Pecora went further.
He questioned Morgan and others on various matters, including sweetheart deals for political figures and insider ones for Wall Street cronies, similar shenanigans to today but not on the same scale, and under a president then who cared once Roosevelt took office.
He directed "pitiless publicity" on Street corruption, what they easily got away with under Republicans.
Pecora was a former New York district attorney, an Eliot Spitzer-type with a reputation for toughness and fearlessness, but one serving at the behest of the President.
He established straightaway that some of Wall Street's most powerful lied to their shareholders, manipulated stocks to their advantage, and profited hugely through malfeasance.
Roosevelt encouraged him in his March 4, 1933 inaugural address saying:
"There must be a strict supervision of all banking and credits and investments
There must be an end to speculation with other people's money
There must be provision for an adequate but sound currency....
The rulers of the exchange of mankind's goods have failed through their own stubbornness and their own incompetence, have admitted their failure and abdicated.
Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men...."
"They know only the rules of a generation of self-seekers.
They have no vision, and when there is no vision the people perish.
The money changers have fled their high seats in the temple of our civilization.
We must now restore that temple to the ancient truths.
(Doing it requires) apply(ing) social values more noble than mere monetary profit."
Imagine Obama saying this
Imagine Obama saying this, followed by strong policies for enforcement under Roosevelt-style officials.
Men like Pecora who asked tough questions and demanded answers, including on the House of Morgan's operations, something unimaginable today under any leadership.
Morgan's counsel, John W. Davis, called Pecora's questions outrageous, but Morgan had to answer in detail enough to shake the "secret government's" foundations.
Pecora's staff examined company records that revealed financial manipulations among the Street's powerful to reap enormous profits — enough for Morgan to gain control of most US industry, buy politicians and diplomats, and effectively control the most powerful banks in the country.
Small group of highly placed financiers holds more real power
Years later in his book, Wall Street Under Fire, Pecora wrote:
"Undoubtedly, this small group of highly placed financiers, controlling the very springs of economic activity, holds more real power than any similar group in the United States."
Morgan called it performing a "service" and exercising no more control than through "argument and persuasion."
His managing partner, Thomas Lamont, told the committee that the firm only offered advice that clients could accept or reject.
Pecora learned otherwise as he peeled away the layers of company power and influence.
Friends of the bank lists in two tiers
He discovered "preferred clients" and friends of the bank lists in two tiers — special allies, operatives, and cronies and a "fishing list" from which new ones were recruited.
In total, it showed Morgan was more powerful than Washington — that the firm effectively controlled a network of companies that made US financial policy for over three decades plus leading politicians and much of the federal bench.
Pecora discovered what's as true today — that a select group of giant banks run things.
They set policy, rig the game to their advantage, buy politicians the way Morgan did, and pretty much run the country and the world.
Again Pecora from his book:
Morgan's power was "a stark fact.
It was a great stream that was fed by many sources
By its deposits
By its loans
By its promotions
By its directorships
By its pre-eminent position as investment bankers
By its control of holding companies which, in turn, controlled scores of subsidiaries
By its silken bonds of gratitude in which it skillfully enmeshed the chosen ranks of the 'preferred lists.'
It reached into every corner of the nation and penetrated in public, as well as business affairs.
The problems raised by such an institution go far beyond banking regulation in the narrow sense.
It might be a formidable rival to the government itself."
Pecora proceeded from Morgan to others, powerful bankers in their own right like Kuhn, Loeb's Otto Kahn.
Roosevelt championed the hearings and from them came legislative reforms, the kinds so desperately needed now but nowhere in sight by an administration totally subservient to money and power and thoroughly corrupted by them — after a scant three months in office.
Congressional Oversight Panel (COP) Calls for Sweeping Changes
Its head, Elizabeth Warren, called on the Treasury to get tough on TARP recipients, including:
Given the extent and long-term nature of today's crisis, it's shocking that bad policy practically assures the worst outcome.
Maybe a government/Wall Street cabal prefers it to capitalize on the wreckage at fire sale prices, at home and globally, as part of a long-term process of sucking wealth to the top while ignoring its fallout, both human and economic.
Those calculations don't enter their sophisticated models, only bottom line ones they can bank on.
Other Bank Bailout Critics
Willem Buiter was a former member of the Bank of England's Monetary Policy Committee (1997 — 2000).
He's now has a Maverecon blog and is a Financial Times (FT) regular.
He's also a fierce critic of bank bailouts, a policy he says wastes good time and money and is destined to fail.
"The good bank solution and slaughter of the unsecured creditors should have been pursued actively as soon as it became clear that most (US international banks were) insolvent."
Soon enough it will be apparent anyway, before year end.
"At that point, (their) de facto insolvency will be so self-evident that even the joint and several obfuscation of banks and Treasury will be unable to deny the obvious."
And they'll be no fiscal resources to the rescue.
"The likelihood of Congress voting even a nickel in additional financial support for the banks is zero."
Bailing out bankers at expense of economy
Joseph Stiglitz was even blunter in an April 17, 2009, Bloomberg interview headlined: "Stiglitz Says White House Ties to Wall Street Doom Bank Rescue."
He accused the administration of bailing out bankers at the expense of the economy.
"All the ingredients they have so far are weak, and there are several missing" ones. The people who created this monster are "either in the pocket of the banks or they're incompetent."
"We don't have enough money, they don't want to go back to Congress, they don't want to do it in an open way, and they" won't act responsibly and place the banks in receivership where they belong and let shareholders, not taxpayers take the pain.
This policy guarantees failure.
It's "an absolute mess."
It's a strategy to re-inflate a bubble that will do nothing to speed recovery.
"It's a recipe for Japanese-style malaise."
Government clearly cooking the books
Financial expert and investor safety advocate Martin Weiss is most critical of all.
He calls bank stress tests "FLIM-FLAM" in accusing Washington of hiding the true condition of the nation's 19 largest banks.
Key economic indicators like GDP contraction and unemployment are far worse than stress test parameters.
"Our own government is clearly cooking the books — using (false) criteria to deceive you; hoping you'll trust banks that are clearly hanging by a thread."
Economy sinking, not stabilizing, let alone recovering
On May 4, they'll announce the results — jerry-rigged to present an illusion of solvency, but clearly a deceptive lie.
The economy is sinking, not stabilizing, let alone recovering.
The administration is bailing out bankers while wrecking the economy and millions of households.
Why isn't Washington addressing the tough questions, he asks.
Answers have them terrified
Because the answers have them "terrified," so they play for time while:
Home foreclosures are exploding
Factories are sitting idle
Consumption keeps falling
Yet they hope conditions will improve.
No one asks:
What if that day is today
What if one day we discover America is no longer America.
What if we realize that day is today.
Another Day, Another Scheme — the latest one lets ordinary people participate in Geithner's Public-Private Partnership Program (PPIP) that sounds suspiciously like "liars' loan" fraud, except this time "investments" in worthless junk are involved that will separate fools from their money.
The New York Times headlined the plan by comparing it to WW I Liberty Bonds that helped the country win the war.
Now it's "to come to the aid of their banks — with the added inducement of possibly making some money...."
The idea is for "large investment companies to create the financial-crisis equivalent of war bonds: bailout funds" to sucker the unwary to "invest" and, simultaneously, quiet opposition to the handouts.
According to money management firm BlackRock director Steven Baffico:
"It's giving the guy on Main Street an equal seat at the table next to the big guys." Pimco's Bill Gross called it a "win-win-win policy."
Absolutely for him so he loves it.
Plans are still being discussed.
They won't likely be announced for several months, but already the scheme is apparent.
It's to offload toxic junk on the public, let unwary investors take losses, relieve troubled banks of more of them, and arrange for investment fund issuers (like Pimco and BlackRock) to reap healthy fees if enough suckers can be enlisted to go along.
As troublesome is FDIC's role in the scam — through its transformation from insuring depositors to a much greater one guaranteeing over $1 trillion in junk assets, way over its charter $30 billion limit by twisting the rules to arrange it.
Its charter allows extraordinary steps to be taken when an "emergency determination by secretary of the Treasury" is made to mitigate "systemic risk." However, its Section 14 Borrowing Authority states:
"The Corporation is authorized to borrow from the Treasury.... for insurance purposes (not speculation, bailouts, or other schemes, an amount) not exceeding in the aggregate $30,000,000,000 outstanding at any one time....
Any such loan shall be used by the Corporation solely in carrying out its functions with respect to such insurance (of bank deposits, then up to $5000, now temporarily at $250,000)...."
"Before issuing an obligation or making a guarantee, the Corporation shall estimate the cost of such obligations (as well as market value)....
The Corporation may not issue or incur any obligation, if, after (so doing) the aggregate amount of obligations of the Deposit Insurance Fund (exceeds) the total of the amounts authorized ($30 billion under) section 14(a)."
PPIP violates FDIC rules.
If it's opened to the public, greater fraud will result with ordinary people hit hardest as usual, the best reason to avoid this and alert others to be as prudent.
Do it at inflated prices and stick taxpayers with the risk
It's another dubious scheme to separate the unwary from their money and redirect it to the top — to the same fraudsters responsible for the crisis and their investment company partners going along with the scam.
The Treasury extended the deadline for PPIP participants (to April 24) and loosened some of its guidelines — suggesting that investor support has been less than expected.
However, on April 2, the Financial Times (FT) headlined: "Bailed-out banks eye toxic asset buys."
Giants like JP Morgan Chase, Citigroup, Bank of America, and Goldman Sachs "are considering buying (each other's) toxic assets," and why not when it's a win-win way to offload each other's junk, do it at inflated prices, and stick taxpayers with the risk.
New York University's Stern School of Business Professor Lawrence White put it this way:
"I'm worried about the following scenario: You and I have troubled assets, I buy assets from you, you buy them them from me, and at the end of the day it (looks) suspiciously like you bought assets from yourself" with Treasury funds.
PPIP prohibits banks from buying their own assets but lets them do it from other firms, either directly or through investment funds set up for that purpose, and according to Treasury: "It's an open program designed to get markets going."
On April 3, Reuters reported that "US regulators may be open to letting TARP recipients participate in the new program," and already Goldman Sachs and Morgan Stanley suggested they'll do it.
Others expressed interest in what some observers call a giant money laundering scheme compounding the colossal flimflam that in the end most likely won't work — except to extract multi-trillions from the public to banksters with Washington acting complicitly as transfer agent.
Meanwhile economic fundamentals are deteriorating at depression-level speed and depth while Obama remains in denial.
On April 2 at the G 20, he cited "a very productive summit that will be, I believe, a turning point in our pursuit of global economic recovery" when, in fact, it produced nothing beyond the usual hype — plus this time the quadrupling of the IMF's budget to inflict debt bondage on its willing partakers.
We're clearly in early stage unchartered waters of what Michel Chossudovsky calls "The Great Depression of the 21st Century" heading America for "fiscal collapse" because of policies amounting to "the most drastic curtailment in public spending in American history" — directing most of it for militarism and foreign wars, Wall Street bailouts, and half a trillion for public debt service.
In an April 12 commentary, longtime, well-respected Chicago financial journalist Terry Savage headlined "Social Security Myth" in reporting on some of the fallout.
Someone has to pay for "fixes" and militarism, that someone is us, and target one is Social Security. According to Savage:
"Most likely, Social Security will become a "needs-based" payout to low income, elderly recipients — not a return of the 'investments' you made with all those FICA deductions from your pay check every month over your working career."
In other words, Washington intends to renege on the 74-year old promise FDR announced to the nation on August 14, 1935:
"Today a hope of many years' standing is in large part fulfilled....
This social security measure gives at least some protection to thirty millions of our citizens (now over 56 million, including Supplement Security Income recipients) who will reap direct benefits....
This law represents a cornerstone in a structure....by no means complete.
(It) will take care of human needs and at the same time provide the United States an economic structure of vastly greater soundness.
(The passage of this bill marks) a historic (achievement) for all time."
It's now in jeopardy, so here's what Savage advises.
Prepare.
"Save more money, (and) start from an honest assessment" of what's coming.
What FDR gave will be taken away.
"And that's The Savage Truth."
A disturbing and outrageous one as well as all the other ways we've been betrayed.
[Better to prepare with items such as food and other valuable commodities your home and family will need — worthless money is just that, worthless — Kewe]
Stephen Lendman is a Research Associate of the Centre for Research on Globalization.
He lives in Chicago and can be reached at: http://sjlendman.blogspot.com thepeoplesvoice.org — click here ©2009 by thepeoplesvoice.org |
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Too big to fail? We'll see
“...The capital we thought was there is gone. A lot of it was actually translated over the years into Hamptons villas, Gulfstream jets, and other playthings that will now go up on Ebay or some equivalent as we turn into Yard Sale Nation in a general liquidation of remaining assets.... Everything is for sale and nobody has any money.”
— James H. Kunstler, 9/15/08
Richard Rhames Friday, September 17, 2008 |
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A bail-out to nowhere
The tremors come faster now. Candidate McCain mimics Herbert Hoover asserting that the economic “fundamentals” are sound, even as Wall Street asset Hank Paulson announces the latest lofting of US Treasury life preservers.
The fiscal flotation devices will allow Hank’s cohorts a “soft landing” in more comfortable climes than await the majority here in America the Deflating.
Even the corporate media, reflexively dedicated to promoting “consumer confidence” and keeping the gullible in their seats long enough for the swag-toting executive larcenists to make for the exits, murmur about a new 1929.
As if stock market mattered to ordinary people
With the usual misdirection, the press reports plummeting Wall Street stock prices as if they mattered to ordinary people.
In fact, as economist Dean Baker has repeatedly pointed out
“[T]he stock market is not a good barometer of the economy’s health.
“It can be driven up as a result of a redistribution from wages to profits, or simply as a result of irrational exuberance.
“Neither is good for the economy as a whole, although anything that pushes up stock prices is obviously good news for the small minority of people who own substantial amounts of stock.”
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Real wages stagnant for 34 years
Meanwhile, Baker’s colleague at the Center for Economic and Policy Research, Mark Weisbrot informed Miami Herald (9/1/08) readers that real — inflation adjusted — wages have been virtually stagnant for 34 years.
Since 1973, as the stock market climbed, “productivity — the amount that workers produce per hour — increased quite substantially...”
But, while this “ ‘useable productivity’ — the increased production that we can expect to be reflected in rising wages —” rose 48 percent from 1973 to 2007, paychecks didn’t.
Only well-connected at top benefited
The “economy” grew but only the well-connected at the top benefited.
Wall Street exulted in the new profits extracted from the under-compensated toil of the same working people who were now repeatedly urged to cheer the increasing fortunes of their masters.
As the downscale waged workers fell behind, they were offered EZ credit, first through deregulated credit card loan sharkery, and then, as the real estate bubble was ruthlessly inflated, through the infamous “home equity extraction” gambit and/or serial “house flipping.”
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Deferred wages converted into crap-shoot schemes
Their “defined benefit” pension plans — deferred wages — were converted into crap-shoot “defined contribution” schemes and Enronized.
Most people’s “wealth” is represented by their house and maybe their car.
People were encouraged to feel (and act) richer as the housing bubble and its heady irrational exuberance seemed to boost house values by $8 trillion nationwide.
But now the music has stopped, the chickens flutter home to roost, and the piper shrieks for payment.
As massive asset deflation continues, housing prices return to their long-term historic levels, and on average Baker notes, that vanishing $8 trillion in illusory “housing bubble wealth” translates into a $110,000 hit per homeowner.
These hapless folks, “will see much of the equity in their home disappear.”
Using house as an ATM machine
Since so many Americans essentially re-mortgaged themselves in bubble time — using their house as an ATM machine through an equity withdrawal — and continued to consume at a level their stagnant or declining wages no longer allowed, this implacable (and unfinished) deflationary swoon spells real pain.
Yet the media / political focus is on the Wall Street Weak and Dr. Hank’s hundred billion dollar injections.
Pundits and “analysts” worry aloud about the fate of a rumored “free market economy” — a construct that exists only in the misty realm of unicorns, Easter bunnies, tooth fairies, “honest Republicans”, and “good corporate citizens.”
Government securing outlandish private profits of society’s greediest people
Sadly and unsurprisingly the story is an old an familiar one: Government socializing costs and risk while securing the outlandish private profits of society’s greediest people.
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There’s nothing new here.
The more interesting question is whether we are at a point in our rather lamentable and bloody history when the usual tricks may no longer work.
In a country that no longer manufactures much except weapons of war, or cultural weapons of mass distraction, kept afloat mainly by massive infusions of foreign capital, with a domestic/domesticated population famously dependent on “credit” and buried in personal debt, are we approaching the End of Something?
Great Depression U.S. still had —
As James H. Kunstler has reminded us lately, in that last great greed-induced deflationary spiral, called the Great Depression, the US had not yet squandered its vast oil and gas reserves, its productive industrial base, demeaned and vanquished its proud and self-conscious working class, depopulated its agricultural landscape, emptied and beggared its great cities.
And outside of a few genocidal romps against the American Indian and the “pockmarked Khadiak ladrone” Filipinos, the population had not perhaps yet acquired the taste for blood, booty, and blitzkrieg that now so exemplifies The American Way.
“The Great Depression of the thirties never came to an end,” wrote John Kenneth Galbraith (American Capitalism, 1952).
“It merely disappeared in the great [W.W.II] mobilization of the forties.”
And — by the 1950s —in an effort to prevent another Depression, “the permanent war economy was born.”
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For decades, a not-yet bankrupt America found the money for easy living, suburban sprawling, and endless war: Guns and butter.
But now the butter may have to be put aside.
Our foreign creditors grow weary of enabling our haughty bloodlust.
European Union with its prosperous cities
The European Union, with its prosperous cities, assertive worker culture, and strengthening currency has surpassed the US in economic size and power — not to mention standard-of-living.
Presidential candidates flatter a distracted public that the US is “the hope of the world — the shining city on the hill.”
But like much of their hucksterism, it’s a comforting lie.
That hour (if ever it existed) has passed.
Something less congenial this way comes.
Click here to read and view Liberty News TV |
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The problems cannot be resolved by shifting the debts of the banks onto the taxpayer.
That's an illusion.
By adding another $1 or $2 trillion dollars to the National Debt, Paulson is just ensuring that interest rates will go up, real estate will crash, unemployment will soar, and foreign central banks will abandon the dollar.
In truth, there is no fix for a deleveraging market anymore than there is a fix for gravity.
The belief that massive debts and insolvency can be erased by increasing liquidity just shows a fundamental misunderstanding of economics.
That's why Henry Paulson is the worst possible person to be orchestrating the so called rescue project.
Paulson comes from a business culture which rewards deception, personal acquisitiveness, and extreme risk-taking.
...No one has any idea of the magnitude of the deleveraging ahead or the size of the debts that will have to be written down.
That's because 30 years of deregulation has allowed a parallel financial system to arise in which over $500 trillion dollars in derivatives are traded without any government supervision or accounting.
Mike Whitney |
Saving the Elite
The present system doesn't work; it's as simple as that.
It makes no sense to provide trillions of dollars of taxpayer money to shore up a system that is essentially dysfunctional.
The taxpayer is being asked to rescue a failed industry that has been used for private gain so that speculators will not have to suffer the losses.
Fannie and Freddie have written hundreds of billions of dollars worth of mortgages that have not yet defaulted, but will certainly default within the next two years.
By creating a backstop for Fannie and Freddie — the two war-horses of the mortgage industry, that currently underwrite nearly 80 per cent of all new mortgages in the US — the Fed is linking US sovereign debt with mortgages and derivatives that are already known to be fraudulent.
The housing boom never had anything to do with Bush's Utopian-sounding "ownership society".
It was always just a swindle to enrich the banking establishment and divert middle class wealth to ruling class elites.
Barron's
...a considerable portion of Fannie's losses come from speculative forays into higher-yielding but riskier mortgage products like subprime, Alt-A (a category between subprime and prime in credit quality) and dicey mortgages requiring monthly payments of interest only or less.
MIKE WHITNEY — Swan Song for Fanny Mae, Eulogy for the Ownership Society |
Image: www.globalresearch.ca |
Presidential candidates Barack Obama and John McCain are calling for “change.”
Well, if I were standing on a beach with a 100-foot tsunami roaring in my direction, I would call for change too.
Once economic growth stops, as has now happened, and all the bubbles to restart it have blown up, as has also happened, the end really is nigh.
Especially if the host — the U.S. — is bankrupt.
What is coming at us today isn’t just another downturn.
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 Image: http://benbittrolff.blogspot.com/ |
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benbittrolff.blogspot.com
The Monetary Base has turned down
That is the monetary base is being eroded faster than it can be replaced as debt destruction continues to accelerate.
The Fed is ‘injecting’ liquidity through REPO agreements.
The Fed is NOT ‘printing’ money.
Either way, debt destruction is exceeding liquidity injections.
As I benbittrolff.blogspot.com wrote in my first post:
“In the land of economics, debt and money are ‘fungible’.
That simply means they are interchangeable and for all intents and purposes the same.
Debt is money and money is debt.
The sudden rapid destruction of debt (every write down you hear coming out of the financial sector) has the effect of destroying money.
If debt is destroyed fast enough, and it will be, then you get a rather sudden contraction in money supply.
This is known as DEFLATION... and it ALWAYS happens when a debt bubble bursts.
ALWAYS.”
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| 9 percent of American homeowners with mortgage either behind on payments or in foreclosureJune 2008
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| "So it would be rational for the banks to take Carlyle's assets and exchange them for top-quality, liquid US government bonds, rather than leave loans in place to a business, Carlyle, whose assets remain highly illiquid gone." [Modification by TheWE.cc]
BBC |
| 9 percent of American homeowners with mortgage either behind on payments or in foreclosureJune 2008
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| US unemployment jumped to a five-year high of 6.1 percent in August as 84,000 jobs were slashed
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$516 trillion
To grasp how significant this five-fold bubble increase is, let's put that $516 trillion in the context of some other domestic and international monetary data:
* U.S. annual gross domestic product is about $15 trillion
* U.S. money supply is also about $15 trillion
* Current proposed U.S. federal budget is $3 trillion
* U.S. government's maximum legal debt is $9 trillion
* U.S. mutual fund companies manage about $12 trillion
* World's GDPs for all nations is approximately $50 trillion
* Unfunded Social Security and Medicare benefits $50 trillion to $65 trillion
* Total value of the world's real estate is estimated at about $75 trillion
* Total value of world's stock and bond markets is more than $100 trillion
* BIS valuation of world's derivatives back in 2002 was about $100 trillion
* BIS 2007 valuation of the world's derivatives is now a whopping $516 trillion
Recently Pimco's bond fund king Bill Gross said "What we are witnessing is essentially the breakdown of our modern-day banking system, a complex of leveraged lending so hard to understand that Federal Reserve Chairman Ben Bernanke required a face-to-face refresher course from hedge fund managers in mid-August."
In short, not only Warren Buffett, but Bond King Bill Gross, our Fed Chairman Ben Bernanke, the Treasury Secretary Henry Paulson and the rest of America's leaders can't "figure out" the world's $516 trillion derivatives.
PAUL B. FARRELLBuffett and Gross warn: $516 trillion bubble is a disaster waiting to happen |
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"An imminent response is not likely!"
It's not true of course.
Those black ops boys and girls — you know the one's funded by your taxpaying dollars....
The unaccounted billions passed through the US budget by authorization of your Congress person.
The US black budget that starts it all — that pays for the growth of the cells.
The billions perhaps trillions missing — events coming from the cells....
Even drug money traded out of Columbia and Afghanistan....
They have more than enough to attack America.
Have they done it before?
Is red the color of blood? |
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How it went wrong |
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Daniel Castillo — German Economy in the 1920s
There were several characteristics which Germany possessed after the First World War which made them vulnerable to being manipulated by someone like Adolf Hitler
As in most nations, the economic factors of the time play a significant role in determining how a society will behave.... |
The rich are playing and you are paying
Rich elite setting up derivatives on India Stock Exchange
Cannot get enough of the poison that is causing the rise in food commodity prices and oil prices
The reason your food bill is going up |
The reason your house mortgage is going up
The reason the price of your home is going down
The reason your gas — petrol — oil has gone up
The reason all bills are going up
The reason the price of everything you touch is going up!
It's the rich elite playing the derivative market
The rich are playing and you are paying |
The international elite cartel running the US government will not make the rich pay for their play
The international elite cartel running Europe will not make the rich pay for their play
The international elite cartel who control everything
They are the one's doing the playing
Watch out India!
That middle class you think is being created
Just like in the US!
Just like in the UK!
Going! Going! Going! Gone! |
| They are expecting China, Japan and YOU to pay for this!
I feel like it's pre-second-world-war all over again!
Germany!
You get that feeling!
Kewe |
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Status Report on the Collapse of the U.S. Economy
by Richard C. Cook Global Research, July 16, 2008 With the economic news of the week of July 14—the continuing crisis among mortgage lenders, the onset of bank failures, the announced downsizing of General Motors, the slide of the Dow-Jones below 11,000 — we are seeing the ongoing collapse of the U.S. economy. |
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Even the super-rich are becoming nervous as cries for an emergency suspension of short selling ring out.
Crushed by overall debt burden
What is really taking place, however, is that the producing economy of working men and women is being crushed by the overall debt burden on households, businesses, and governments that could reach $70 trillion by 2010.
Financial system bankrupt
The financial system, including mortgage giants Fannie Mae and Freddie Mac, is bankrupt, as the debts it is based on cannot be repaid.
This is because the producing economy of people who work for a living simply can no longer generate enough purchasing power for people either to pay their debts or allow them to purchase what is being sold in the marketplace.
In turn it is the debt burden and the loss of societal purchasing power that are crashing the stock market.
Destroying producing economy
Thus the collapse of the financial economy has started to destroy the producing economy as well.
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It’s a “perfect storm,” the result of a 200-year-old financial system where money is largely created by bank lending and where since 1980 our industry and jobs have been increasingly outsourced abroad to cheap labor markets.
Thus domestic incomes have stagnated while the nation’s GDP has not been able to keep up with the exponential growth of debt.
Jobs taken away, pensions eroded, homes foreclosed
While the mainstream media are blind, deaf, and dumb as to the causes, the victims within the middle and working classes are seeing their livelihoods ruined, jobs taken away, pensions eroded, homes foreclosed on, and are being saddled with ever-increasing debt and forced to work under more and more stress due to rising burdens of taxation, gas and food price inflation, and bureaucratic rules and regulations.
The only places a more-or-less normal life may still be possible will be the wealthiest imperial centers like Washington, New York, Houston, Chicago, or San Francisco.
Creating more debt to shore up failing financial institutions
All that the current bailouts being engineered by the Federal Reserve are doing is to create more debt to shore up failing financial institutions. No new wealth is being created.
It’s band-aids on band-aids.
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The problem politically is that control of the U.S. long ago was turned over to the bankers and the financiers of the Western world.
It was called financial “deregulation,” accelerated under President Ronald Reagan, and has run amok since then.
From a longer historical view, it’s the same phenomenon that first created and then ruined the British Empire , and it’s what created and is now ruining the American Empire today.
Side-effect of control by bankers and financiers is that they are also Zionists
A side-effect of control by the bankers and financiers is that they are also Zionists, so we have the added multi-trillion dollar burden of trying to conquer the Middle East on behalf of the international oil interests and the state of Israel.
The situation has deteriorated sharply since the 1970s as U.S. affairs have been managed on behalf of the financial interests by what you might call the “Three Amigos” — Henry Kissinger, Paul Volcker, and Alan Greenspan.
Kissinger, while Nixon’s secretary of state, made the U.S. dependent on the Middle East for oil, lavished billions on Israel ’s war machine, and created the petrodollar to support our trade and fiscal deficits.
Volcker, while chairman of the Federal Reserve, crashed the U.S. producing economy in the recession of 1979-1983, leading to the rise of the “service economy.”
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Greenspan presided over bubble economy created through massive official fraud
Greenspan, during his own Federal Reserve chairmanship, presided over the bubble economy which was created through massive official fraud in home mortgage lending and is now sinking like the Titanic.
The politicians have enabled these financial crimes.
Above all it’s been the Bush family
Above all it’s been the Bush family which has served as a political Trojan Horse for the financiers for three generations, with affairs having become much worse since George H.W. Bush invaded Iraq for the first time in 1991.
The enablers have included a majority of the members of the U.S. Congress.
(See the conclusion of Patrick Buchanan’s new book, Churchill, Hitler, and the Unnecessary War for an account of how the U.S. since the Bush I presidency has replicated the catastrophic errors of failed British imperialism.)
The American people are not entirely innocent.
Financier-owned media
We have been so lulled to sleep by the financier-owned media that we have allowed these disasters to take place and are now reaping the consequences.
We have been the fodder for their wars and the signers of their loans.
We have tried to carve out our own piece of the pie which is now crumbling.
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What is taking place is not just the collapse of the U.S., but more than likely the final crash of Western civilization, since we are the last of the world empires to go down the drain.
World War I saw the end of the German, Austro-Hungarian, Russian, and Ottoman empires.
World War II saw the disappearance of the French, British, Japanese, and Italian empires, along with Nazi Germany.
The Soviet empire collapsed in 1991.
The American is next.
The danger is that we may lash out and start a nuclear World War III out of frustration and to appease the elitists of the world who see war and famine as their pathway to world control.
Such a war would also mean a military takeover domestically to manage the pathetically weak nation that we are becoming.
Bankers and financiers do not care if nations and empires destroy themselves because they are internationalists
The bankers and financiers do not care if nations and empires destroy themselves and each other, because they are internationalists.
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In fact, the more war and mass starvation there is the better off they feel.
All they need is a base from which to operate.
London has been their main base of operations since the Bank of England was founded in 1694, though they have a strong presence in other nations.
Elitism in the form of Freemasonry
They have been especially influential in northwest Europe, where elitism in the form of Freemasonry endeavored since the time of the French Revolution to destroy the authority of the Catholic Church.
In fact, World War I was a project of the Freemasons in dismembering Germany and the Austro-Hungarian Empire, both largely Catholic.
This destruction allowed the masters of usury to flourish within the atheistic and materialistic culture that Freemasonry fostered across Europe.
World War I also resulted in the virus of Communism, largely egged on by the internationalists and Freemasons, though it had such a tragic impact on Russia and Central Europe before spreading to China and East Asia.
It is theoretically possible that the US as a nation could still save itself through an internal revolution, while playing a much reduced role in the world.
After all, England , France , and Italy still exist as shadows of their past greatness.
Try to survive
But, realistically, all ordinary people can do today is try to survive, perhaps by working with friends and neighbors in planting food and living within the underground economy.
At least people might not then have to starve to death, because hard as it is to believe that “it could happen here,” widespread famine in the U.S. seems a real possibility over the next several years.
Nations take such risks when they allow capitalist agribusiness to destroy local agriculture.
On a national level, it is likely that as a response to the economic crisis some attempt will be made by desperate politicians to try to replicate the New Deal, but to do this effectively would require political control by a nationalistic reform party.
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Even then, additional reform measures such as control of credit as a public utility, a basic income guarantee, and a national dividend would be needed for real economic security to replace the current madness that could soon make the U.S. a relic of history.
www.RichardCCook.com
© Copyright 2005-2008 GlobalResearch.ca |
| This is not the Depression of the 30's, folks
This is much more serious!
Deflation in times of great crisis does not apply to gold
But then you cannot eat gold
You can eat stored food
Something you will not be able to buy, even with gold, makes gold somewhat pointless
Until things start to get better
Then it will be good to have stored gold
Kewe |
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Most Americans, including the presidential candidates and the media, are unaware that the US government today, now at this minute, is unable to finance its day-to-day operations and must rely on foreigners to purchase its bonds.
The government pays the interest to foreigners by selling more bonds, and when the bonds come due, the government redeems the bonds by selling new bonds.
The day the foreigners do not buy is the day the American people and their government are brought to reality.
Paul Craig Roberts |
When airlines were regulated, they could afford standby equipment, and cancelled flights were rareDeregulating the airlines destroyed famous American brand names such as Pan Am shrank the number of companies, and caused a decline in service Goods and services for American markets that US corporations outsource offshore return as imports which widen the US trade deficit All that's left is finance, and it is crumbling before our eyes |
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Only a glimmer of the truth, folks!
A dim and intermittent flicker |
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Tuesday, 13 November 2007
Carnage on Wall Street as loans go bad
By Steve Schifferes
Economics reporter, BBC News, New York
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The US sub-prime crisis is leading to a wave of foreclosures across the US that is having a devastating effect on the US housing market, and is likely to lead to the halving of the US economic growth rate in the next six months.
At the root of the problem is the breakdown of the new model of mortgage lending, when instead of giving mortgages directly to their customers, banks borrowed money from credit markets to fund a growing volume of mortgages.
Show and tell
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The big Wall Street banks and investment houses who are most exposed could find their profits, and much of their capital base, wiped out.
But its biggest impact is likely to be on the financial sector, which made billions of dollars in profits in the past few years by betting heavily on the sub-prime market.
Already the big Wall Street banks have revealed losses totalling $50bn (£24bn), and the head of the biggest bank — Chuck Prince of Citigroup — and the biggest investment firm — Stan O'Neill of Merrill Lynch — have departed.
But experts estimate that the total losses facing the financial sector could amount to between $150bn and $450bn, and that many of the banks have hidden losses that have been concealed in off-balance sheet instruments like "special investment vehicles".
To restore their profits, and indeed in some cases to remain solvent, they will be forced to sell off many assets and lay off many workers, as well as cutting the bonuses of their remaining staff and limiting their future lending.
The size of the financial sector in the US economy — with banks making up 30% of the profits of all US companies last year — means that the effects will be felt both in the real economy and on the stock market.
And with $2.8 trillion in distressed mortgage bonds, including $1.3 trillion in sub-prime bonds, there is enough distress to go around.
Dick Syron, the head of Freddie Mac, a government-sponsored agency that also trades mortgage-backed securities, reckons he has never seen circumstances so bad, and that the credit crunch is having a "dramatic effect" on the US housing market.
Investors strike
But even that impact could be dwarfed by the effects of the credit squeeze spreading beyond sub-prime loans to other sectors of the bond market.
The non-government mortgage backed securities market has rapidly in recent years, and mortgages are now the largest since part of the $27bn bond market.
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Bus since 9 August, bondholders have effectively gone on strike, refusing to buy some $2.8 trillion worth of sub-prime, Alt-A, and other types of securities not guaranteed by government-sponsored agencies.
Meanwhile, the value of sub-prime mortgage-backed bonds has plummeted since the beginning of the year.
The fear is that the whole of the bond market, which funds everything from government debt to company borrowing to credit cards and car loans, will begin to dry up as investors worry about undisclosed problems.
How big are the potential losses?
According to US Federal Reserve chairman Ben Bernanke, "although it was the problems with sub-prime mortgages that initiated the financial turmoil, credit concerns quickly spread into a number of other areas".
The credit markets are frozen because of uncertainty and lack of information.
"In the short term, these events do imply a greater measure of financial restraint on economic growth as credit becomes more expensive and difficult to obtain."
Already there are signs that it is getting harder to sell bonds linked to credit cards and car loans, and there are worries that spreads on corporate bonds are tightening.
The tightening of credit will hurt economic growth because in the US consumers have borrowed heavily to fund their consumption.
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The latest figures indicate that consumer and business confidence is slumping both in the US and Europe as worries about the effects of the credit crunch grow.
No one knows how much mortgage-backed securities are now worth, and no one wants to sell them to find out.
Also, no one knows where these losses are hidden among the banks and other financial institutions.
The gargantuan scale of potential losses is terrifying investors in banking stocks — which have fallen by 30% — as well as mortgage-bond investors.
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There are three ways to estimate the size of the possible losses from the sub-prime crisis.
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He estimates that about half of these, $625bn, are likely to go into arrears leading to court action, and that after reschedulings and foreclosures, about $220bn is likely to be lost, net of the auction sales of such properties.
Other organisations, such as the Center for Responsible Lending, also estimate that about 20% of sub-prime mortgages will go into foreclosure.
But, as Mr Zandi points out, both his estimate and the Fed's are very sensitive to changes in house prices.
If house prices were to fall by 20% rather than 12% as Mr Zandi's model currently estimates, he says that the total losses could double to $450bn.
And if the US goes into recession, or if the Fed raises interest rates to combat inflation, then the losses would also increase dramatically.
Meanwhile, fear has led the bond markets — through derivative trading — to cut the value of sub-prime mortgage bonds by an even larger amount.
Since the beginning of the year, sub-prime mortgage bonds issued in early 2007 have dropped in value by between 20% and 80%, depending on their bond rating.
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Using an arithmetic average, and assuming that other mortgage bonds are equally distressed, this implies they have lost at least half their value, or $625bn.
Truth or consequences
Measuring the likely losses faced by individual banks is an even more difficult task.
But what is clear is that most financial institutions have not begun to reveal the full scale of their potential losses.
"The reality is that most financial institutions have barely started to recognise the lower 'fair value' of their impaired securities," says Professor Nouriel Roubini of New York University.
"The credit crunch is getting much worse and its financial and real fallout will be severe."
Some estimates suggest that banks may have vastly under-estimated their potential liability, especially in connection with off-balance sheet activities.
One look at Citigroup, using SEC data, suggested that their potential liability could be $343bn rather than the $55bn they declared.
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Another issue is how much of the potential liabilities may eventually have to be written off.
In recent announcements, Citigroup wrote off 20% of its admitted $55bn liability, while other banks have written off between 10% and 40%.
Another measure of potential losses is how much Tier 3 capital the banks have — these are risky loans that cannot be valued except by a model because there is no market for them..
By that measure, the big investment banks like Goldman Sachs and Morgan Stanley are much more exposed, relative to their capital base, than Citigroup or Merrill Lynch.
Hidden losses
Changes in US accounting rules which come into force on 15 November, known as FASB 157, may force the big Wall Street banks to come clean on the scale of their losses — especially when accountants have to sign off their annual accounts in January.
In particular, it may force them to reveal some of the hidden losses which they have concealed through the use of off-balance-sheet funds (such as special investment vehicles, or SIVs.)
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These are bank-sponsored financial funds which buy up mortgages — using money borrowed from the short-term commercial paper markets — bundle them up and then sell them to the bond markets.
Thus the banks charge two fees — one at each side of the transaction — and officially have no risk, as they never owned the mortgages.
But in practice, when these funds go bad, the banks are liable either to continue to fund them, or to repurchase the underlying mortgages.
Currently the banks have an estimated $340bn in such SIVs, and since the market in short-term asset-backed commercial paper (ABCP) has dried up completely, they are forced to put up the short-term funding themselves.
Citigroup, JP Morgan Chase, and Bank of America are the most exposed by this measure.
Rescue fund
The big banks are hoping that they can rescue about $75bn of this debt, which they say is perfectly sound, by putting it in a special super-SIV, a plan endorsed by US Treasury Secretary Hank Paulson in the hope that it will calm the credit markets and help restart their normal functioning.
But even Mr Paulson now admits that the fund will do only a little to reassure investors about the broader mortgage-backed securities market.
And others are clear that the only thing that will restore confidence in the markets is the full disclosure of all the potential losses.
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Dick Syron, the chairman of Freddie Mac, says he has experienced many financial crises during his work at the Federal Reserve.
"You don't begin to get resolution of these questions until you get price discovery," he says.
"The problem in the market is not just liquidity. The problem in the market is lack of certainty and lack of information."
Why did the financial sector get it so wrong?
But why did it take so long for the banks and the mortgage bond market to realise the scale of the problem that sub-prime lending would cause?
The main reason was that the new system broke the link between the lender and the borrower.
The institutions who owned the loans — the people who bought bonds — had too little information about how dangerous they were.
They relied on the ratings agencies to reassure them that the complex mortgage bonds they were buying were indeed investment-grade.
But those ratings agencies did not understand how, under conditions of "stress," i.e., falling house price, those bonds would fall in value.
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And since most pension funds are managed by several different fund managers who all compete with each other to get the best quarterly rate of return, there was a strong incentive to buy as much as they could of these supposedly safe yet high-yielding bonds.
According to David Pitt-Watson, who manages the pension fund business at Hermes, the pension funds failed to exercise their rights to find out enough about what they were buying — or question the way the banks were run.
And he says the system did not give the right financial incentives to encourage lenders to be careful.
Wrong incentives
The system created challenges at the other end as well.
"Gone are the days when a homebuyer only went to the corner bank to take out a mortgage," says US Treasury Secretary Hank Paulson.
"Today the mortgage system is disaggregated and less personal... a homeowner having trouble making payments does not know who to turn to for assistance."
In addition, the new system of mortgage finance did not give the right financial incentives to ensure that proper checks were made on the individuals who applied for sub-prime mortgagees.
The banks who offered mortgages and sold them on did not care as much whether the loans went into foreclosure.
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They were paid a fee for selling the mortgage on, and another fee for servicing (collecting the loan payments), and even got additional fees if they had to foreclose.
As the banks who sold on these mortgages were not putting up their own money as collateral, they no longer used their own in-house bank managers to assess the income of their borrowers and check the real value of the house they were giving a mortgage on.
Instead, they increasingly turned to mortgage brokers to sell them even more mortgages.
And there is evidence that the poorly-regulated mortgage brokers — whose job it was to check the income of potential mortgagees — and the home appraisers, who had to value the property — began to exaggerate both the income of their clients and the value of the homes, thus getting higher fees themselves.
"The sub-prime mortgage market in recent years was also accompanied by a deterioration in underwriting standards, says Fed governor Randall Kroszner.
"In some cases, abusive or fraudulent lending practices resulted in homeowners taking on mortgage obligations they could not afford, with terms they may not have fully understood."
It is now up to the regulators and policy makers in Washington to correct the broken mortgage system — before the damage to home owners, banks and the US economy becomes too great.
But whatever is done, it is bound to be painful.
"We can't make all the pain go away," says Mr Syron.
""We can ameliorate it and most importantly we can try and prevent it happening again but we can't eliminate all of it.
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THE NEW MODEL OF MORTGAGE LENDING  | |
How it went wrong  | |
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The people in the mountains of Afghanistan have won
— first established by U.S. taxpayer money, then influenced, encouraged by US black budget special operation elite controlled cells, given help by the same, then assisted by US special black budget cells back home, to magnify the damage to an intensity beyond even these people in the mountains of Aghanistan's wildest hopes —
Yes! The people first paid by the Americans to fight the Russians and then take over as American puppets in Afghanistan have won
Well, not of course the ordinary Afghan and Iraq people
They have suffered
Continue to suffer
More than 1 million killed to present, untold number of people injured.
The dream you see was to see the muslim lands restored to the rightful owners
That was the dream those people in the mountains of Afghanistan had
They knew many of their own people would suffer
But such is fate
Such is life
Such is death
It is the fault of the Americans after all
They have the planes
They do most of the killing
And if that strange action of one, two airplanes flying into a building of great repute, a lesson signaled surely
You cannot take our land!
You cannot take our land!
You cannot take our land!
As a far away nation called America begins to fall, little to care about — so big, so far away — you cannot take our land. So be it!
The land of the muslim people return to the rightful owners
Always the dream
Nothing more
You see we can talk about it because there is nothing to do now but talk about it!
The deaths continue — sure!
So does the injuring!
The maiming!
But as to what takes place in that country, for many so far away?
Well, nothing we say will bring it forward more quickly!
Nothing we say we make it not happen!
The U.S dollar now no longer the world's reserve currency
Ceased to perform as such sometime early this year
The U.S dollar soon will cease to be a currency
Historical paper for people in Asia to show to each other
Time to get rid of that fat you don't need
Time to slim down
Hey! You could be a whole new person
The world is a teaching planet
Kewe
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Over time I was increasingly shocked by the speed and ease with which many intelligent and seemingly competent members of the CFR [ Council on Foreign Relations ] appeared to eagerly justify policies and actions that supported growing corruption.
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The regularity with which many CFR members would protect insiders from accountability regarding another appalling fraud surprised even me.
Many of them seemed delighted with the advantages of being an insider while being entirely indifferent to the extraordinary cost to all citizens of having our lives, health and resources drained to increase insider wealth in a manner that violated the most basic principles of fiduciary obligation and respect for the law.
In short, the CFR was operating in a win-lose economic paradigm that centralized economic and political power.
I was trying to find a way for us to shift to a win-win economic paradigm that was — by its nature — decentralizing.
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James Forrestal’s oil portrait always hung prominently in one of the private Dillon Read dining rooms for the eleven years that I worked at the firm. Forrestal, a highly regarded Dillon partner and President of the firm, had gone to Washington, D.C. in 1940 to lead the Navy during WWII and then played a critical role in creating the National Security Act of 1947.
He then became Secretary of War (later termed Secretary of Defense) in September 1947 and served until March 28, 1949.
Given the central banking-warfare investment model that rules our planet, it was appropriate that Dillon
partners at various times lead both the Treasury Department and the Defense Department.
Shortly after resigning from government, Forrestal died falling out of a window of the Bethesda Naval Hospital outside of Washington, D.C. on May 22, 1949.
There is some controversy around the official explanation of his death — ruled a suicide.
Some insist he had a nervous breakdown. Some say that he was opposed to the creation of the state of Israel.
Others say that he argued for transparency and accountability in government, and against the provisions instituted at this time to create a secrete “black budget.”
He lost and was pretty upset about it — and the loss was a violent one.
Since the professional killers who operate inside the Washington beltway have numerous techniques to get perfectly sane people to kill themselves, I am not sure it makes a big difference.
Approximately a month later, the CIA Act of 1949 was passed.
The Act created the CIA and endowed it with the statutory authority that became one of the chief components of financing the “black” budget — the power to claw monies from other agencies for the benefit of secretly funding the intelligence communities and their corporate contractors.
This was to turn out to be a devastating development for the forces of transparency, without which there can be no rule of law, free markets or democracy.
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Protecting the brand with dirty tricks — Enforcement Terrorism The profitable liquidation of every place — Coutts, bank for British Queen and royals Catherine Austin Fitts — Dillon Reid and Co. Inc. And the Aristocracy of Stock Profits |
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The reader can appreciate why Wall Street would welcome someone as accommodating as Gorelick at Fannie Mae.
This was a period when the profits rolled in from engineering the most spectacular growth in mortgage debt in U.S. history.
As one real estate broker said, “They have turned our homes into ATM machines.”
Fannie Mae has been a leading player in centralizing control of the mortgage markets into Washington D.C. and Wall Street.
And that means as people were rounded up and shipped to prison as part of Operation Safe Home, Fannie was right behind to finance the gentrification of neighborhoods.
And that is before we ask questions about the extent to which the estimated annual financial flows of $500 billion–$1 trillion money laundering through the U.S. financial system or money missing from the US government are reinvested into Fannie Mae securities.
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BIS warns of Great Depression dangers from credit spree
By Ambrose Evans-Pritchard
(Filed: 25/06/2007) The Bank for International Settlements, the world's most prestigious financial body, has warned that years of loose monetary policy has fuelled a dangerous credit bubble, leaving the global economy more vulnerable to another 1930s-style slump than generally understood.
"Virtually nobody foresaw the Great Depression of the 1930s, or the crises which affected Japan and southeast Asia in the early and late 1990s. In fact, each downturn was preceded by a period of non-inflationary growth exuberant enough to lead many commentators to suggest that a 'new era' had arrived", said the bank.
The BIS, the ultimate bank of central bankers, pointed to a confluence a worrying signs, citing mass issuance of new-fangled credit instruments, soaring levels of household debt, extreme appetite for risk shown by investors, and entrenched imbalances in the world currency system.
"Behind each set of concerns lurks the common factor of highly accommodating financial conditions. Tail events affecting the global economy might at some point have much higher costs than is commonly supposed," it said.
The BIS said China may have repeated the disastrous errors made by Japan in the 1980s when Tokyo let rip with excess liquidity.
"The Chinese economy seems to be demonstrating very similar, disquieting symptoms," it said, citing ballooning credit, an asset boom, and "massive investments" in heavy industry.
Some 40pc of China's state-owned enterprises are loss-making, exposing the banking system to likely stress in a downturn.
It said China's growth was "unstable, unbalanced, uncoordinated and unsustainable", borrowing a line from Chinese premier Wen Jiabao
In a thinly-veiled rebuke to the US Federal Reserve, the BIS said central banks were starting to doubt the wisdom of letting asset bubbles build up on the assumption that they could safely be "cleaned up" afterwards — which was more or less the strategy pursued by former Fed chief Alan Greenspan after the dotcom bust.
It said this approach had failed in the US in 1930 and in Japan in 1991 because excess debt and investment built up in the boom years had suffocating effects.
While cutting interest rates in such a crisis may help, it has the effect of transferring wealth from creditors to debtors and "sowing the seeds for more serious problems further ahead."
The bank said it was far from clear whether the US would be able to shrug off the consequences of its latest imbalances, citing a current account deficit running at 6.5pc of GDP, a rise in US external liabilities by over $4 trillion from 2001 to 2005, and an unpredented drop in the savings rate. "The dollar clearly remains vulnerable to a sudden loss of private sector confidence," it said.
The BIS said last year's record issuance of $470bn in collateralized debt obligations (CDO), and a further $524bn in "synthetic" CDOs had effectively opened the lending taps even further. "Mortgage credit has become more available and on easier terms to borrowers almost everywhere. Only in recent months has the downside become more apparent," it said.
CDO's are bond-like packages of mortgages and other forms of debt. The BIS said banks transfer the exposure to buyers of the securities, giving them little incentive to assess risk or carry out due diligence.
Mergers and takeovers reached $4.1 trillion worldwide last year.
Leveraged buy-outs touched $753bn, with an average debt/cash flow ratio hitting a record 5:4.
"Sooner or later the credit cycle will turn and default rates will begin to rise," said the bank.
"The levels of leverage employed in private equity transactions have raised questions about their longer-term sustainability. The strategy depends on the availability of cheap funding," it said.
That may not last much longer.
© Copyright of Telegraph Group Limited 2007 |
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The financial system including mortgage giants Fannie Mae and Freddie Mac is bankrupt as the debts the financial system is based on cannot be repaid This is because the producing economy of people who work for a living simply can no longer generate enough purchasing power for people either to pay their debts or allow them to purchase what is being sold in the marketplace Posted July 17, 2008 Dow Jones ended up 207.38 — TheWE.cc |
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US Income Gap Widening Significantly, Data Shows
Top 300,000 collectively taking as much money annually as total annual incomes of 150 million Americans Not seen since 1928 — shortly before Depression Income inequality grew significantly in 2005, with the top 1 percent of Americans — those with incomes that year of more than $348,000 — receiving their largest share of national income since 1928, analysis of newly released tax data shows. The top 10 percent, roughly those earning more than $100,000, also reached a level of income share not seen since before the Depression. While total reported income in the United States increased almost 9 percent in 2005, the most recent year for which such data is available, average incomes for those in the bottom 90 percent dipped slightly compared with the year before, dropping $172, or 0.6 percent. The gains went largely to the top 1 percent, whose incomes rose to an average of more than $1.1 million each, an increase of more than $139,000, or about 14 percent. The new data also shows that the top 300,000 Americans collectively enjoyed almost as much income as the bottom 150 million Americans. Per person, the top group received 440 times as much as the average person in the bottom half earned, nearly doubling the gap from 1980. by David Cay Johnston March 29, 2007 New York Times |
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Strategy of disguised redistribution of national resources from the bottom to the top is carried out by a combination of:
(a) drastic hikes in the Pentagon budget
(b) equally drastic tax cuts for the wealthy. |
April 16, 2007
Income Redistribution in Disguise
By ISMAEL HOSSEIN-ZADEH
Escalating Military Spending |
C ritics of the recent U.S. wars of choice have long argued that they are all about oil.
"No Blood for Oil" has been a rallying cry for most of the opponents of the war.
It can be demonstrated, however, that there is another (less obvious but perhaps more critical) factor behind the recent rise of U.S. military aggressions abroad: war profiteering by the Pentagon contractors.
Frequently invoking dubious "threats to our national security and/or interests," these beneficiaries of war dividends, the military-industrial complex and related businesses whose interests are vested in the Pentagon's appropriation of public money, have successfully used war and military spending to justify their lion's share of tax dollars and to disguise their strategy of redistributing national income in their favor.
This cynical strategy of disguised redistribution of national resources from the bottom to the top is carried out by a combination of (a) drastic hikes in the Pentagon budget, and (b) equally drastic tax cuts for the wealthy.
As this combination creates large budget deficits, it then forces cuts in non-military public spending as a way to fill the gaps that are thus created.
As a result, the rich are growing considerably richer at the expense of middle- and low-income classes.
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U.S. military no longer simply a means — more importantly now an end in itself
Despite its critical importance, most opponents of war seem to have given short shrift to the crucial role of the Pentagon budget and its contractors as major sources of war and militarism — a phenomenon that the late President Eisenhower warned against nearly half a century ago.
Perhaps a major reason for this oversight is that critics of war and militarism tend to view the U.S. military force as primarily a means for imperialist gains — oil or otherwise.
The fact is, however, that as the U.S. military establishment has grown in size, it has also evolved in quality and character: it is no longer simply a means but, perhaps more importantly, an end in itself — an imperial force in its own right.
Accordingly, the rising militarization of U.S. foreign policy in recent years is driven not so much by some general/abstract national interests as it is by the powerful special interests that are vested in the military capital, that is, war industries and war-related businesses.
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It appears clear that content areas and content limitations for this interview were negotiated in advance.
Or it could be that Simon and Albright have so internalized Zionist prohibitions on discourse that no overt agreements were necessary.
For the Democratic Party as for NPR it is forbidden to discuss Palestine-Israel in the same interview as one discusses Iraq, Iran or the Middle East in general.
The Magnitude of U.S. Military Spending
Even without the costs of the wars in Iraq and Afghanistan, which are fast surpassing half a trillion dollars, U.S. military spending is now the largest item in the federal budget.
Officially, it is the second highest item after Social Security payments.
But Social Security is a self-financing trust fund.
So, in reality, military spending is the highest budget item.
The Pentagon budget for the current fiscal year (2007) is about $456 billion.
President Bush's proposed increase of 10% for next year will raise this figure to over half a trillion dollars, that is, $501.6 billion for fiscal year 2008.
A proposed supplemental appropriation to pay for the wars in Afghanistan and Iraq "brings proposed military spending for FY 2008 to $647.2 billion, the highest level of military spending since the end of World War II-higher than Vietnam, higher than Korea, higher than the peak of the Reagan buildup."[1]
Using official budget figures, William D. Hartung, Senior Fellow at the World Policy Institute in New York, provides a number of helpful comparisons: policy. |
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Iraq war spending larger than military budgets of China and Russia combined
Proposed U.S. military spending for FY 2008 is larger than military spending by all of the other nations in the world combined.
At $141.7 billion, this year's proposed spending on the Iraq war is larger than the military budgets of China and Russia combined.
Total U.S. military spending for FY2008 is roughly ten times the military budget of the second largest military spending country in the world, China.
Proposed U.S. military spending is larger than the combined gross domestic products (GDP) of all 47 countries in sub-Saharan Africa.
The FY 2008 military budget proposal is more than 30 times higher than all spending on State Department operations and non-military foreign aid combined.
The FY 2008 military budget is over 120 times higher than the roughly $5 billion per year the U.S. government spends on combating global warming.
The FY 2008 military spending represents 58 cents out of every dollar spent by the U.S. government on discretionary programs: education, health, housing assistance, international affairs, natural resources and environment, justice, veterans' benefits, science and space, transportation, training/employment and social services, economic development, and several more items.[2]
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Real military budget twice as much as official budget
Although the official military budget already eats up the lion's share of the public money (crowding out vital domestic needs), it nonetheless grossly understates the true magnitude of military spending.
The real national defense budget, according to Robert Higgs of the Independent Institute, is nearly twice as much as the official budget.
The reason for this understatement is that the official Department of Defense budget excludes not only the cost of wars in Iraq and Afghanistan, but also a number of other major cost items.[3]
These disguised cost items include:
Budgets for the Coast Guard and the Department of Homeland Security.
Nuclear weapons research and development, testing, and storage (placed in the Energy budget).
Veterans programs (in the Veteran's Administration budget).
Most military retiree payments (in the Treasury budget).
Foreign military aid in the form of weapons grants for allies (in the State Department budget).
Interest payments on money borrowed to fund military programs in past years (in the Treasury budget).
Sales and property taxes at military bases (in local government budgets).
Hidden expenses of tax-free food, housing, and combat pay allowances.
After adding these camouflaged and misplaced expenses to the official Department of Defense budget, Higgs concludes:
"I propose that in considering future defense budgetary costs, a well-founded rule of thumb is to take the Pentagon's (always well publicized) basic budget total and double it.
You may overstate the truth, but if so, you'll not do so by much."[4]
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Escalation of the Pentagon Budget and the Rising Fortunes of Its Contractors
The Bush administration's escalation of war and military spending has been a boon for Pentagon contractors.
That the fortunes of Pentagon contractors should rise in tandem with the rise of military spending is not surprising.
What is surprising, however, is the fact that these profiteers of war and militarism have also played a critical role in creating the necessary conditions for war profiteering, that is, in instigating the escalation of the recent wars of choice and the concomitant boom of military spending.[5]
Giant arms manufacturers such as Lockheed Martin, Boeing, and Northrop Grumman have been the main beneficiaries of the Pentagon's spending bonanza.
This is clearly reflected in the continuing rise of the value of their shares in the stock market:
"Shares of U.S. defense companies, which have nearly trebled since the beginning of the occupation of Iraq, show no signs of slowing down. . . . The feeling that makers of ships, planes and weapons are just getting into their stride has driven shares of leading Pentagon contractors Lockheed Martin Corp., Northrop Grumman Corp., and General Dynamics Corp. to all-time highs."[6]
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Income Redistribution in Disguise
By ISMAEL HOSSEIN-ZADEH
L ike its manufacturing contractors, the Pentagon's fast-growing service contractors have equally been making fortunes by virtue of its tendency to shower private contractors with tax-payers' money.
These services are not limited to the relatively simple or routine tasks and responsibilities such food and sanitation services.
More importantly, they include "contracts for services that are highly sophisticated [and] strategic in nature," such as the contracting of security services to corporate private armies, or modern day mercenaries.
The rapid growth of the Pentagon's service contracting is reflected (among other indicators) in these statistics: "In 1984, almost two-thirds of the contracting budget went for products rather than services. . . . By fiscal year 2003, 56 percent of Defense Department contracts paid for services rather than goods."[7]
The spoils of war and the devastation in Iraq have been so attractive that an extremely large number of war profiteers have set up shop in that country in order to participate in the booty:
"There are about 100,000 government contractors operating in Iraq, not counting subcontractors, a total that is approaching the size of the U.S. military force there, according to the military's first census of the growing population of civilians operating in the battlefield," reported The Washington Post in its 5 December 2006 issue. |
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Outsourcing and privatizing
T he rise in the Pentagon contracting is, of course, a reflection of an overall policy and philosophy of outsourcing and privatizing that has become fashionable ever since President Reagan arrived in the White House in 1980.
Reporting on some of the effects of this policy, Scott Shane and Ron Nixon of the New York Times recently wrote:
"Without a public debate or formal policy decision, contractors have become a virtual fourth branch of government.
On the rise for decades, spending on federal contracts has soared during the Bush administration, to about $400 billion last year from $207 billion in 2000, fueled by the war in Iraq, domestic security and Hurricane Katrina, but also by a philosophy that encourages outsourcing almost everything government does."[8]
Redistributive Militarism: Escalation of Military Spending Redistributes Income from Bottom to Top
But while the Pentagon contractors and other beneficiaries of war dividends are showered with public money, low- and middle-income Americans are squeezed out of economic or subsistence resources in order to make up for the resulting budgetary shortfalls.
For example, as the official Pentagon budget for 2008 fiscal year is projected to rise by more than 10 percent, or nearly $50 billion, "a total of 141 government programs will be eliminated or sharply reduced" to pay for the increase.
These would include cuts in housing assistance for low-income seniors by 25 percent, home heating/energy assistance to low-income people by 18 percent, funding for community development grants by 12.7 percent, and grants for education and employment training by 8 percent.[9]
Combined with redistributive militarism and generous tax cuts for the wealthy, these cuts have further exacerbated the ominously growing income inequality that started under President Reagan.
Ever since Reagan arrived in the White House in 1980, opponents of non-military public spending have been using an insidious strategy to cut social spending, to reverse the New Deal and other social safety net programs, and to redistribute national/public resources in favor of the wealthy.
That cynical strategy consists of a combination of drastic increases in military spending coupled with equally drastic tax cuts for the wealthy.
As this combination creates large budget deficits, it then forces cuts in non-military public spending (along with borrowing) to fill the gaps thus created. |
Ninth Ward area residents attend a memorial anniversary ceremony dedicated to the victims of the breaking of the underfunded levee at the now reconstructed wall of the levee at the Lower Ninth Ward canal in New Orleans August 29, 2006. |
Cut includes over 140 programs that provide support for basic needs
For example, at the same time that President Bush is planning to raise military spending by $50 billion for the next fiscal year, he is also proposing to make his affluent-targeted tax cuts permanent at a cost of $1.6 trillion over 10 years, or an average yearly cut of $160 billion.
Simultaneously, "funding for domestic discretionary programs would be cut a total of $114 billion" in order to pay for these handouts to the rich.
The targeted discretionary programs to be cut include over 140 programs that provide support for the basic needs of low- and middle-income families such as elementary and secondary education, job training, environmental protection, veterans' health care, medical research, Meals on Wheels, child care and HeadStart, low-income home energy assistance, and many more.[10]
According to the Urban Institute-Brookings Institution Tax Policy Center:
"...if the President's tax cuts are made permanent, households in the top 1 percent of the population (currently those with incomes over $400,000) will receive tax cuts averaging $67,000 a year by 2012. . . . The tax cuts for those with incomes of over $1 million a year would average $162,000 a year by 2012."[11]
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tax cuts for those with incomes of |
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Escalating military spending
Official macroeconomic figures show that, over the past five decades or so, government spending (at the federal, state and local levels) as a percentage of gross national product (GNP) has remained fairly steady-at about 20 percent.
Given this nearly constant share of the public sector of national output/income, it is not surprising that increases in military spending have almost always been accompanied or followed by compensating decreases in non-military public spending, and vice versa.
For example, when by virtue of FDR's New Deal reforms and LBJ's metaphorical War on Poverty, the share of non-military government spending rose significantly the share of military spending declined accordingly.
From the mid 1950s to the mid 1970s, the share of non-military government spending of GNP rose from 9.2 to 14.3 percent, an increase of 5.1 percent.
During that time period, the share of military spending of GNP declined from 10.1 to 5.8 percent, a decline of 4.3 percent.[12]
That trend was reversed when President Reagan took office in 1980.
In the early 1980s, as President Reagan drastically increased military spending, he also just as drastically lowered tax rates on higher incomes.
The resulting large budget deficits were then paid for by more than a decade of steady cuts on non-military spending.
Income inequality also rose considerably
Likewise, the administration of President George W. Bush has been pursuing a similarly sinister fiscal policy of cutting non-military public spending in order to pay for the skyrocketing military spending and the generous tax cuts for the affluent.
Interestingly (though not surprisingly), changes in income inequality have mirrored changes in government spending priorities, as reflected in the fiscal policies of different administrations.
Thus, when the share of non-military public spending rose relative to that of military spending from the mid 1950 to the mid 1970s, and the taxation system or policy remained relatively more progressive compared to what it is today, income inequality declined accordingly.
But as President Reagan reversed that fiscal policy by raising the share of military spending relative to non-military public spending and cutting taxes for the wealthy, income inequality also rose considerably.
As Reagan's twin policies of drastic increases in military spending and equally sweeping tax cuts for the rich were somewhat tempered in the 1990s, growth in income inequality slowed down accordingly.
In the 2000s, however, the ominous trends that were left off by President Reagan have been picked up by President George W. Bush: increasing military spending, decreasing taxes for the rich, and (thereby) exacerbating income inequality (see Figure 1). |
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1968 lowest level of inequality
Leaving small, short-term fluctuations aside, Figure 1 shows two major peaks and a trough of the long-term picture of income inequality in the United States.
The first peak was reached during the turbulent years of the Great Depression (1929-1933).
But it soon began to decline with the implementation of the New Deal reforms in the mid 1930s.
The ensuing decline continued almost unabated until 1968, at which time we note the lowest level of inequality.
After 1968, the improving trend in inequality changed course.
But the reversal was not very perceptible until the early 1980s, after which time it began to accelerate-by virtue (or vice) of Reaganomics.
Although the deterioration that was thus set in motion by the rise of neoliberalism and supply-side economics somewhat slowed down in the 1990s, it has once again gathered steam under President George W. Bush, and is fast approaching the peak of the Great Depression.
It is worth noting that even at its lowest level of 1968, income inequality was still quite lopsided: the richest 20 percent of households made as much as ten times more than the poorest 20 percent.
But, as Doug Henwood of the Left Business Observer points out, "that looks almost Swedish next to today's ratio of fifteen times."[13]
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Income of top one percent of population tripled
The following are some specific statistics of how redistributive militarism and supply-side fiscal policies have exacerbated income inequality since the late 1970s and early 1980s-making after-tax income gaps wider than pre-tax ones.
According to recently released data by the Congressional Budget Office (CBO), since 1979 income gains among high-income households have dwarfed those of middle- and low-income households.
Specifically:
The average after-tax income of the top one percent of the population nearly tripled, rising from $314,000 to nearly $868,000-for a total increase of $554,000, or 176 percent. (Figures are adjusted by CBO for inflation.)
By contrast, the average after-tax income of the middle fifth of the population rose a relatively modest 21 percent, or $8,500, reaching $48,400 in 2004.
The average after-tax income of the poorest fifth of the population rose just 6 percent, or $800, during this period, reaching $14,700 in 2004.[14] |
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Legislation enacted since 2001 has provided taxpayers with about $1 trillion in tax cuts over the past six years.
These large tax reductions have made the distribution of after-tax income more unequal by further concentrating income at the top of the income range.
According to the Urban Institute-Brookings Institution Tax Policy Center, as a result of the tax cuts enacted since 2001:
In 2006, households in the bottom fifth of the income spectrum received tax cuts (averaging $20) that raised their after-tax incomes by an average of 0.3 percent.
Households in the middle fifth of the income spectrum received tax cuts (averaging $740) that raised their after-tax incomes an average of 2.5 percent.
The top one percent of households received tax cuts in 2006 (averaging $44,200) that increased their after-tax income by an average of 5.4 percent.
Households with incomes exceeding $1 million received an average tax cut of $118,000 in 2006, which represented an increase of 6.0 percent in their after-tax income.[15] |
April 16, 2007 Income Redistribution in Disguise
By ISMAEL HOSSEIN-ZADEH
Escalating Military Spending |
C lose scrutiny of the Pentagon budget shows that, ever since the election of Ronald Reagan as president in 1980, opponents of social spending have successfully used military spending as a regulatory mechanism to cut non-military public spending, to reverse the New Deal and other social safety net programs, and to redistribute national/public resources in favor of the wealthy.
Close examination of the dynamics of redistributive militarism also helps explain why powerful beneficiaries of the Pentagon budget prefer war and military spending to peace and non-military public spending: military spending benefits the wealthy whereas the benefits of non-military public spending would spread to wider social strata.
It further helps explain why beneficiaries of war dividends frequently invent new enemies and new "threats to our national interests" in order to justify continued escalation of military spending.
Viewed in this light, militaristic tendencies to war abroad can be seen largely as reflections of the metaphorical domestic fights over allocation of public finance at home, of a subtle or insidious strategy to redistribute national resources from the bottom to the top.
External Wars as Reflections of Domestic Fights over National Resources
Despite the critical role of redistributive militarism, or of the Pentagon budget, as a major driving force to war, most opponents of war have paid only scant attention to this crucial force behind the recent U.S. wars of choice.
The reason for this oversight is probably due to the fact that most critics of war continue to view U.S. military force as simply or primarily a means to achieve certain imperialist ends, instead of having become an end in itself.
Yet, as the U.S. military establishment has grown in size, it has also evolved in quality and character: it is no longer simply a means but, perhaps more importantly, an end in itself, an imperial power in its own right, or to put it differently, it is a case of the tail wagging the dog-a phenomenon that the late President Eisenhower so presciently warned against.
Accordingly, rising militarization of U.S. foreign policy in recent years is driven not so much by some general/abstract national interests, or by the interests of Big Oil and other non-military transnational corporations (as most traditional theories of imperialism continue to argue), as it is by powerful special interests that are vested in the war industry and related war-induced businesses that need an atmosphere of war and militarism in order to justify their lion's share of the public money.
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Preservation, justification, and expansion of the military-industrial colossus critical big business objectives
Preservation, justification, and expansion of the military-industrial colossus, especially of the armaments industry and other Pentagon contractors, have become critical big business objectives in themselves.
They have, indeed, become powerful driving forces behind the new, parasitic U.S. military imperialism.
I call this new imperialism parasitic because its military adventures abroad are often prompted not so much by a desire to expand the empire's wealth beyond the existing levels, as did the imperial powers of the past, but by a desire to appropriate the lion's share of the existing wealth and treasure for the military establishment, especially for the war-profiteering contractors.
In addition to being parasitic, the new U.S. military imperialism can also be called dual imperialism because not only does it exploit defenseless peoples and their resources abroad but also the overwhelming majority of U.S. citizens and their resources at home.
Ismael Hossein-zadeh is a professor of economics at Drake
University, Des Moines, Iowa. He is the author of the newly published
book, The
Political Economy of U.S. Militarism
His Web page is http://www.cbpa.drake.edu/hossein-zadeh Notes [1] William D. Hartung, "Bush Military Budget Highest Since WW II," Common Dreams(10 February 2007). [2] Ibid. [3] Robert Higgs, "The Defense Budget Is Bigger Than You Think," antiwar.com (25 January 2004). [4] Ibid. [5] Ismael Hossein-zadeh, "Why the US is Not Leaving Iraq,". [6] Bill Rigby, "Defense stocks may jump higher with big profits," Reuter (12 April 2006). [7] The Center for Public Integrity, "Outsourcing the Pentagon" (29 September 2004). [8] Scott Shane and Ron Nixon, "In Washington, Contractors Take On Biggest Role Ever," The New York Times (4 February 2007). [9] Faiz Shakir et al., Center for American Progress Action Fund, "The Progress Report" (6 February 2007). [10] Robert Greenstein, "DESPITE THE RHETORIC, BUDGET WOULD MAKE NATION'S FISCAL PROBLEMS WORSE AND FURTHER WIDEN INEQUALITY," Center for Budget and Policy Priorities (6 February 2007). [11] Ibid. [12] Richard Du Boff, "What Military Spending Really Costs," Challenge 32 (September/October 1989), pp. 4-10. [13] Doug Henwood, Left Business Observer, No. 114 (31 December 2006), p. 4. [14] Congressional Budget Office, Historical Effective Federal Tax Rates: 1979 to 2004, December 2006; as reported by Center on Budget and Policy Priorities. [15] See Tax Policy Center tables T06-0273 and T06-0279 at. |
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Biloxi/Gulfportempty lots where houses and businesses used to stand
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Iraq: the hidden cost of the war
Andrew Stephen
Published 12 March 2007
America won't simply be paying with its dead. The Pentagon is trying to silence economists who predict that several decades of care for the wounded will amount to an unbelievable $2.5 trillion.
They roar in every day, usually direct from the Landstuhl US air-force base in the Rhineland: giant C-17 cargo planes capable of lifting and flying the 65-tonne M1 Abrams tank to battlefields anywhere in the world.
But Landstuhl is the first staging post for transporting most of the American wounded in Iraq and Afghanistan back to the United States, and these planes act as CCATs ("critical care air transport") with their AETs — "aeromedical evacuation teams" of doctors, nurses and medical technicians, whose task is to make sure that gravely wounded US troops arrive alive and fit enough for intensive treatment at the Walter Reed Army Medical Centre, just six miles up the road from me in Washington.
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These days it is de rigueur for all politicians, ranging from President Bush and Ibrahim al-Jaafari (Iraq's previous "prime minister") to junior congressmen, to visit the 113-acre Walter Reed complex to pay tribute to the valour of horribly wounded soldiers.
Last Christmas, the centre was so overwhelmed by the 500,000 cards and presents it received for wounded soldiers that it announced it could accept no more.
Yet the story of the US wounded reveals yet another deception by the Bush administration, masking monumental miscalculations that will haunt generations to come.
Thanks to the work of a Harvard professor and former Clinton administration economist named Linda Bilmes, and some other hard-working academics, we have discovered that the administration has been putting out two entirely separate and conflicting sets of numbers of those wounded in the wars.
This might sound like chicanery by George W Bush and his cronies — or characteristic incompetence — but Bilmes and Professor Joseph Stiglitz, the Nobel laureate economist from Columbia University, have established not only that the number wounded in Iraq and Afghanistan is far higher than the Pentagon has been saying, but that looking after them alone could cost present and future US taxpayers a sum they estimate to be $536bn, but which could get considerably bigger still.
Just one soldier out of the 1.4 million troops so far deployed who has returned with a debilitating brain injury, for example, may need round-the-clock care for five, six, or even seven decades.
In present-day money, according to one study, care for that soldier alone will cost a minimum of $4.3m.
Article continued here: Iraq: the hidden cost of the war
© New Statesman 1913–2007 |
Pentagon Eyes $468.9 Billion Budget for 2008
By Andrea Shalal-Esa and Jim Wolf Reuters Friday 15 December 2006 [Images inserted by TheWE.cc] Washington - The White House has approved a $468.9 billion budget for the Pentagon in fiscal year 2008, a six-percent increase over last year's request, according to a Defense Department document obtained by Reuters.
It is also asking the Pentagon to cover some Army and Marine Corps war costs in Iraq and Afghanistan as part of the regular budget, rather than through emergency budget requests.
The 2008 budget request is $4.7 billion more than the level the Pentagon forecast in its 2007 budget documents.
Deputy Defense Secretary Gordon England welcomed the increase in a letter to Rob Portman, director of the White House Office of Management and Budget.
But he strongly objected to OMB's orders that "costs to accelerate Army and Marine Corps combat and combat support units, Army Force Readiness and replacement of additional aircraft losses" should be funded as part of the 2008 budget.
England said that violated the Pentagon's earlier agreement with the White House that the extra spending would be used to cover Army budget shortfalls, and that war costs would continue to be funded through supplemental budgets.
The Bush administration is continuing to discuss budgets with various government agencies, including the Pentagon, and will submit a fiscal 2008 budget to Congress in February.
"The inconsistency ... is that adding war costs in the budget would effectively negate the prior agreement for a topline increase," England said in the December 14 memorandum.
Offsets proposed by White House budget officials would "significantly weaken the department's strategic position" and jeopardize the Pentagon's joint warfighting concept, he said.
England did not give details on the proposed offsets.
However, he said the Pentagon's initial budget proposal - before the suggested offsets - was based on thousands of hours of work, and the best judgment by senior military and civilian leaders.
"It is balanced and provides for our nation's defense at a time of diverse and dramatic threats," England said.
War Costs
U.S. lawmakers have grown increasingly frustrated about the Pentagon's use of supplemental budgets to fund war costs, given that the costs are no longer "unanticipated," said Steven Kosiak of the Center for Strategy and Budgetary Assessments, a Washington-based research group. |
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But he said lawmakers wanted more oversight of that spending than permitted in the supplemental budgets, and there was no suggestion that they would curb funding for the war.
"They would like the administration to ask for most of the funding up front," he said.
Kosiak also rejected England's statement in the memo that the 2008 increase "reverses a trend of declining real growth", calling England's description "flat-out wrong".
"There has been a upward trend in real terms, above the rate of inflation," he said, citing a 23 percent real increase, above inflation, in the Pentagon's budget from 2000 to 2007.
Loren Thompson of the Virginia-based Lexington Institute, said England's letter revealed the Pentagon's growing concern about being able to modernize its forces and fund new weapons programs while paying escalating war bills.
"This has real significance for the Pentagon in terms of being able to fund other items besides the war," he said.
The Pentagon is likely to ask for an additional $100 billion to fund the Iraq and Afghanistan wars early next year.
The Pentagon's 2008 overall budget request of $468.9 for fiscal 2008 is 6.3 percent higher than its fiscal 2007 budget request of $441.2 billion.
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November 10, 2006
The Down Side of Capitalism
By Alexander Cockburn
Hogwash
N ow that the biennial democratic pretense here in the U.S.A. has run its course, can we talk about something serious?
We can?
Good.
Hmmm. Ha!
Here's a good one we can sink our teeth into for a few paragraphs: the distinct possibility that the world economic system could soon blow up in our faces.
You say nobody mentioned this in Campaign 2006?
Of course they didn't.
Who said political campaigns have anything to do with reality?
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Let me direct you to a recent series of polite coughs, reminiscent of a sheep quietly clearing its throat somewhere on a fog-bound hillside in the north of England.
Aforementioned coughs emanated at the start of this week from the Financial Services Authority, (FSA), a body set up under the purview of the British Treasury a few years ago to monitor financial markets and protect the public interest by raising the alarm about shady practices and any dangerous slides towards instability..
In a briefing paper under the chaste title, "Private Equity: A Discussion of Risk and Regulatory Engagement", the FSA raises the alarm.
"Excessive leverage: The amount of credit that lenders are willing to extend on private equity transactions has risen substantially.
This lending may not, in some circumstances, be entirely prudent.
Given current leverage levels and recent developments in the economic/credit cycle, the default of a large private equity backed company or a cluster of smaller private equity backed companies seems inevitable.
This has negative implications for lenders, purchasers of the debt, orderly markets and conceivably, in extreme circumstances, financial stability and elements of the UK economy."
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Translation: It's about to blow!
"The duration and potential impact of any credit event may be exacerbated by operational issues which make it difficult to identify who ultimately owns the economic risk associated with a leveraged buy out and how these owners will react in a crisis.
"These operational issues arise out of the extensive use of opaque, complex and time consuming risk transfer practices such as assignment and sub-participation, together with the increased use of credit derivatives.
"These credit derivatives may not be confirmed in a timely manner and the amount traded may substantially exceed the amount of the underlying assets."
Translation: "The world's credit system is a vast recycling bin of untraceable transactions of wildly inflated value.
"The significant flow of price sensitive information in relation to private equity transactions creates considerable potential for market abuse.
"Although transparency to existing investors is extensive, transparency to the wider market is limited and is subject to significant variation in methodology (e.g. with respect to valuation, fee disclosure etc) and format.
"The duration and potential impact of any credit event may be exacerbated by operational issues which make it difficult to identify who ultimately owns the economic risk associated with a leveraged buy out and how these owners will react in a crisis."
Translation: Crooks could blow us all up any minute now and we don't even know who's holding the detonator.
And you thought Osama was a problem!
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The problem is that the oversight and stability of the world credit system is no longer within the purview of familiar international institutions like the International Monetary Fund or the Bank of International Settlements.
Credit derivatives nonexistent in 2001 reached $17.3 trillion in 2005
Private traders are now installed at all the strategic nodes, gambling with stratospheric sums in such speculative pyramids as the credit derivative market which was almost nonexistent in 2001, yet which reached $17.3 trillion by the end of 2005.
Warren Buffett, America's most famous investor, has called credit derivatives "financial weapons of mass destruction."
On the political hustings there hasn't been a whisper about this, though the London Financial Times has been issuing frequent alarms, as have such well known figures here as Stephen Roach, chief economist at Morgan Stanley.
As the great American historian Gabriel Kolko remarked in a detailed run-down on the crisis in CounterPunch at the end of July:
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"Contradictions now wrack the world's financial system, and a growing consensus now exists between those who endorse it and those, like myself, who believe the status quo is both crisis-prone as well as immoral.
If we are to believe the institutions and personalities who have been in the forefront of the defense of capitalism, and we should, it may very well be on the verge of serious crises."
Translation: Capitalism has its downsides, and right now we're at the edge of the precipice.
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Deficit Hits New Record By Dean Baker t r u t h o u t | PerspectiveWednesday 13 September 2006 Because the short-term winners have much more political power, and own the newspapers and write the news stories, we don't hear much about the trade deficit. Even though the foreign payments tax promises to be much larger than taxes resulting from current budget deficits, it receives almost no attention. There are two reasons for this.
The first has to do with partisan politics.
The budget deficit is largely the fault of the Bush administration's tax cuts and the war in Iraq.
If President Bush had not cut taxes and gone to war in Iraq, the overall budget would be in surplus.
Even deducting the money borrowed from Social Security would still only leave a modest deficit.
High-dollar policy
The record trade deficit is a bi-partisan policy.
It had its origins in the high-dollar policy that Robert Rubin put in place as President Clinton's treasury secretary in 1996.
The over-valued dollar, which has been advocated, or at least tolerated, by both Clinton and Bush, is the main cause of the trade deficit.
Strong class bias to the short-term gains and pain
The other reason that the trade deficit draws less attention than the budget deficit is that there is a strong class bias to the short-term gains and pain.
In the short-term, the main beneficiaries are the people who work in occupations that are largely protected from international competition, like doctors, lawyers, accountants, and economists.
The people who are hurt by the high dollar policy are the people whom US trade policy has subjected to international competition, most importantly manufacturing workers.
Because the short-term winners have much more political power, and own the newspapers and write the news stories, we don't hear much about the trade deficit.
So, until we get a better press corps, if you want the news that will really impact your life, you will have to hunt for it.
Trade deficit soared to new record
Most people didn't see this headline: the deficit just soared to a new record.
The newly released trade data for July showed the deficit running at an annual rate of almost $820 billion, more than 6 percent of GDP.
The budget deficit now projected for 2006 is $260 billion dollar — or without money borrowed from Social Security, $437 billion.
Living standards in the future
The long-run impact of a trade deficit is pretty much the same as the long-run impact of a budget deficit: lower living standards in the future.
As the editorialists and pundits continuously warn us, our children and grandchildren will have a higher tax burden because of the budget deficits that we are running at present.
Budget and Trade deficit allows us to enjoy a higher standard of living — at the moment
The trade deficit means that we import more than we export — in effect, we are consuming goods and services that we are not paying for.
This allows us to have a higher standard of living at the moment than if we had
balanced trade, just as lowering taxes allows us to enjoy a higher standard of living at the moment.
Well, our children and grandchildren will in effect face a foreign payments tax because of the trade deficit that we are running today.
The foreign payments tax is essentially the flip side of the trade deficit we face today.
In the same way that the government is borrowing to finance the budget deficit, the country as a whole is borrowing to finance the trade deficit.
We are selling off a wide variety of financial assets, such as stocks and bonds, to foreigners (individuals, corporations, and governments).
Lose our ability to borrow
At some future point, we will lose our ability to borrow, or at least to borrow at the same rate.
At that point, the interest and dividends that we will be paying to foreigners will be a net drain on the US economy, which will require that we export more goods and services than we import.
Instead of consuming more goods and services than we produce, we will be producing more goods and services than we consume.
The difference will be the foreign payments tax that is the long-term result of our current trade deficit.
© : t r u t h o u t 2006 |
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| What are credit derivatives? The Financial Times’ chief capital markets writer, Gillian Tett, tried to find out — but failed. About ten years ago some J.P. Morgan bankers were in Boca Raton, Florida, drinking, throwing each other into the swimming pool, and the like, and they came up with a notion of a new financial instrument that was too complex to be easily copied (financial ideas cannot be copyrighted) and which was sure to make them money. But Tett was highly critical of its potential for causing a chain reaction of losses that will engulf the hedge funds that have leaped into this market. Warren Buffett, second richest man in the world, who knows the financial game as well as anyone, has called credit derivatives “financial weapons of mass destruction.” Nominally insurance against defaults, they encourage far greater gambles and credit expansion. Enron used them extensively Enron used them extensively, and it was one secret of their success — and eventual bankruptcy with $100 billion in losses. They are not monitored in any real sense, and two experts called them “maddeningly opaque.” Many of these innovative financial products, according to one finance director, “exist in cyberspace” only, and often are simply tax dodges for the ultra-rich. It is for reasons such as these, and yet others such as: Split capital trusts, Collateralized debt obligations, Market credit default swaps, that are even more opaque, that the IMF and financial authorities are so worried. |
Do you know what kind of weapons causes this damage?
Invasion of Lebanon paid by YOU
US Taxpayer gives Israel more than 15 million dollars a day
Every day 15 million dollars given by US to Israel
Secret deadly weapons Tanks Missiles Warplanes Artillery Shells All funded by the US |
How it went wrong |
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Major arms soar to twice pre-9/11 cost |
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Systems to have little direct role in terror fight By Bryan Bender, Globe Staff | August 19, 2006
WASHINGTON — The estimated costs for the development of major weapons systems for the US military have doubled since September 11, 2001, with a trillion-dollar price tag for new planes, ships, and missiles that would have little direct role in the fight against insurgents in Afghanistan and Iraq.
The soaring cost estimates — disclosed in a report for the Republican-led Senate Budget Committee — have led to concerns that supporters of multibillion-dollar weapons programs in Congress, the Pentagon, and the defense industry are using the conflicts and the war on terrorism to fulfill a wish-list of defense expenditures, whether they are needed or not for the war on terrorism.
The report, based on Defense Department data, concluded that the best way to keep defense spending in check in the coming years lies in “controlling the cost of weaponry,” especially those programs that the Pentagon might not necessarily need.
The projections of what it will cost to acquire “major weapons programs” currently in production or on the drawing board soared from $790 billion in September 2001 to $1.61 trillion in June 2006, according to the congressional analysis of Pentagon data.
Costs for some of the most expensive new weapon systems — such as satellite-linked combat vehicles for ground troops; a next-generation fighter plane ; and a cutting-edge, stealth-technology destroyer for the Navy — are predicted to cost even more by the time they are delivered, because many of them are still in their early phases. In a quarterly report to Congress on weapons costs earlier this month, the Pentagon reported that of the $1.61 trillion it thinks it will need for big-ticket weapons, it has spent more than half so far — about $909 billion.
But the huge increase in weapons costs is already placing enormous strain on the federal budget, according to government budget specialists, who predict major increases in defense spending for years to come so that the Pentagon can afford all the weapons it has on the books. The nonpartisan Congressional Budget Office, for example, estimates that between 2012 and 2024 the Pentagon budget will have to grow between 18 percent and 34 percent over what was appropriated this year.
Overall, annual defense spending has increased by about 11 percent per year since 2001, to about $400 billion this year, not including hundreds of billions of dollars that Congress has set aside to pay for military operations in Afghanistan and Iraq. Military operations and maintenance costs, as well as salaries and health benefits for people in uniform, have all gone up by about 40 percent.
But the price tag for major weapons has garnered new attention from watchdog groups and government auditors, who contend that many of the arms already on the drawing board don't have much to do with ongoing combat or the war on terrorism.
In fact, most of the weapon systems being designed, tested , or built had been in the Pentagon's pipeline long before the Sept. 11 attacks. Despite the steep price jump, there has been a relatively modest increase in the number of new weapons projects over the past five years, according to Pentagon figures.
Still, “only a portion of these increased costs are a result of the war on terror,” said Winslow Wheeler , a former congressional budget specialist now at the nonprofit Center for Defense Information in Washington and the author of “ The Wastrels of Defense.”
The weapons projects designated as “major acquisition programs” require at least $365 million in research funding and $2.1 billion is acquisition costs. They include new armored vehicles; two new fighter jets; an advanced Navy destroyer; a package of land, air , and space-based missile defense systems; and sophisticated electronic and intelligence systems such as a new satellite communications network.
Defense specialists attribute the spiral ing costs to a variety of factors. Some projects have increased in scope, while other weapons systems have taken longer to acquire, adding to the cost. Other projects turned out to be far more expensive than project managers and contractors predicted.
For example, the Future Combat System, a high-tech fleet of armored combat vehicles being developed by the Army , was forecast to cost $92 billion when its development began in 2003, according to the GOP committee's report. As of December 2005, however, the price tag had skyrocketed to $165 billion, about an 80 percent increase in just two years.
The Government Accountability Office, the government's nonpartisan audit bureau, warned of “the risks of conducting business as usual,” and concluded in a report in November that the major weapons programs are at “high risk” for fraud, waste, abuse , and mismanagement.
The Department of Defense “has experienced cost overruns, missed deadlines, performance shortfalls, and persistent management problems,” the report said. “In light of the serious budget pressures facing the nation, such problems are especially troubling.”
The GOP committee report was blunt about the impact of rising weapons costs on the federal budget, and expressed little confidence that Congress has the political will to reign in spending on weapons that are not critical to the war effort. Noting that “every project has local employment implications,” the report said “weapon system politics” will make it extremely difficult to make cuts.
“Controlling the long-term costs of the Pentagon's arsenal are very nearly as complex as restraining the cost of government entitlements like Social Security and Medicare,” the analysis said.© Copyright 2006 Globe Newspaper Company. |
| What are credit derivatives? Banks simply do not understand the chain of exposure and who owns what — senior financial regulators and bankers now admit this. The Long-Term Capital Management hedge fund meltdown in 1998, which involved only about $5 billion in equity, revealed this. The financial structure is now infinitely more complex and far larger — the top 10 hedge funds alone in March 2006 had $157 billion in assets. Hedge funds claim to be honest but those who guide them are compensated for the profits they make, which means taking risks. But there are thousands of hedge funds and many collect inside information, which is technically illegal but it occurs anyway. The system is fraught with dangers, starting with the compensation structure, but it also assumes a constantly rising stock market and much, much else. Many fund managers are incompetent. But the 26 leading hedge fund managers earned an average of $363 million each in 2005; James Simons of Renaissance Technologies earned $1.5 billion. |
Invasion of Lebanon paid by YOU |
Look at the eye
Issam Mostafa, a 3-year-old Lebanese boy in a hospital in Shtora in the Bekaa valley.
US Taxpayer gives Israel more than 15 million dollars a day
Every day 15 million dollars given by US to Israel
Secret deadly weapons Tanks Missiles Warplanes Artillery Shells All funded by the US |
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| What are credit derivatives? Hedge funds still make lots of profits, and by the spring of 2006 they were worth about $1.2 trillion worldwide, but they are increasingly dangerous. More than half of them give preferential treatment to certain big investors, and the U.S. Security and Exchange Commission has since mid-June 2006 openly deplored the practice because the panic, if not chaos, potential in such favoritism is now too obvious to ignore. The practice is “a ticking time bomb,” one industry lawyer described it. These credit risks — risks that exist in other forms as well — seemed ready to materialize when the Financial Times’ Tett reported at the end of June that an unnamed investment bank was trying to unload “several billion dollars” in loans it had made to hedge funds. If true, “this marks a startling watershed for the financial system.” Bankers had become “ultracreative… in their efforts to slice, dice and redistribute risk, at this time of easy liquidity.” Low-interest rates, Avinash Persaud, one of the gurus of finance concluded, had led investors to use borrowed money to play the markets, and “a painful deleveraging is as inevitable as night follows day.... The only question is its timing.” |
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| What are credit derivatives? Problems are structural, such as the greatly increasing corporate debt loads to core earnings, which have grown substantially from four to six times over the past year because there are fewer legal clauses to protect investors from loss — and keep companies from going bankrupt when they should. So long as interest rates have been low, leveraged loans have been the solution. With hedge funds and other financial instruments, there is now a market for incompetent, debt-ridden firms. The rules some once erroneously associated with capitalism — probity and the like — no longer hold. Stephen Roach, Morgan Stanley’s chief economist, on April 24 of this year wrote that a major financial crisis was in the offing and that the global institutions to forestall it – ranging from the IMF and World Bank to other mechanisms of the international financial architecture – were utterly inadequate. Hong Kong’s chief secretary in early June deplored the hedge funds’ risks and dangers. The IMF’s iconoclastic chief economist, Raghuram Rajan, at the same time warned that the hedge funds’ compensation structure encouraged those in charge of them to increasingly take risks, thereby endangering the whole financial system. By late June, Roach was even more pessimistic: “a certain sense of anarchy” dominated the academic and political communities, and they were “unable to explain the way the new world is working.” In its place, mystery prevailed. Reality was out of control. |
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| Between $1 trillion and $2 trillion
The real cost to the US of the Iraq war is likely to be between $1 trillion and $2 trillion (£1.1 trillion), up to 10 times more than previously thought, according to a report written by a Nobel prize-winning economist and a Harvard budget expert.
Mr Stiglitz told the Guardian that despite the staggering costs laid out in their paper the economists had erred on the side of caution.
"Our estimates are very conservative, and it could be that the final costs will be much higher. And it should be noted they do not include the costs of the conflict to either Iraq or the UK."
...The economists' costings went much further than the economic value of lives lost.
They factored in items such as the higher oil prices which could partly be attributed to the war.
They also calculated the effect if a proportion of the money spent on the Iraq war was allocated to other causes.
These factors could add tens of billions of dollars.
Mr Stiglitz, a former World Bank chief economist, said the paper, which will be available on josephstiglitz.com, did not attempt to explain whether Americans were deliberately misled or whether the underestimate was due to incompetence.
Guardian January 7, 2006 www.guardian.co.uk |
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Published on Saturday, April 1, 2006 by the Boston Globe
Stagnant Wages? Made in USA by Robert Kuttner As Congress grapples with immigration policy, most experts agree that wide-open immigration slightly depresses wages, especially among unskilled workers. But the main reason for static wages has more do with policies made in the United States. Immigrants, coming from destitution at home, will work for less than American wages. | ||||
And, if they are here illegally, they can't defend themselves against subminimum wages and working conditions otherwise against the law.
Some of this is supply and demand — more workers competing for the same supply of jobs. But as former labor secretary Robert Reich has noted, if labor laws were enforced, immigrants would be less likely to depress wages.
Moreover, the supply of jobs is not static. As immigrants enter the stream of commerce, they generate economic activities and jobs.
The Republican Party is now split between business groups who want cheap workers and jingoists who are just plain anti-immigrant.
The nativist wing of the GOP plays both to the national security and economic fears of ordinary Americans.
The attacks of 9/11 did happen (though the attackers were not Mexican.)
Wages of ordinary workers are in fact depressed (though immigrants are not the main cause.)
Both sets of fears make it harder for Congress to legislate sensible policy.
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However, it is worth leaving the immigration debate to explore the deeper causes of stagnant living standards that make so many Americans fearful of immigrants.
In the current recovery, for the first time since the government has kept such statistics, median household income has lagged behind inflation in a recovery for five straight years.
Census data show median household income fell 3.8 percent or $1,700, from 1999 to 2004, according to economist Jared Bernstein of the Economic Policy Institute (on whose board I serve.)
And this drop occurred during a period when average productivity rose three percent per year.
Moreover, as economist Jeff Madrick has observed in his book "Why Economies Grow," the reality is worse because prices of commodities that make us middle class are rising much faster than inflation generally: housing, college education, health care, and also child care.
These very rapid price increases are offset by falling costs of consumer electronics, basic food, and clothing, creating misleadingly low inflation measures.
It's great that shirts are cheaper than a decade ago, and that we all have cell phones. But that doesn't exactly substitute for a house, an affordable college education, or health care.
According to economist Bernstein, whose study covers the years 1991-2002, households in the middle fifth of the economy increased their incomes (not adjusted for inflation) by 41 percent.
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Inflation during that period, as measured by the government's Consumer Price Index, went up 33 percent. That implies real living standards rose by a not very impressive 8 percent during more than a decade.
But hold on. During the same period, housing, healthcare, education, and child care went up 46 percent, or more than incomes. We cannot afford the big things we need and comfort ourselves with gadgets.
The cheaper laptop, plasma TV, and GPS screen in your car make it appear statistically that living standards are not falling as much as they are.
The emblem of the new economy might be a 35-year-old, listening to an iPod, living in a house much smaller than the one he grew up in.
To use a favorite word of my grandmother's, call it the Tchotchke Economy (a Tchotchke is a small trinket): Plenty of nifty, ever cheaper electronic stuff — and ever more costly housing, education, healthcare. An iPod is swell, but it doesn't exactly make you middle class.
Why does this describe America in 2006?
Don't blame it on immigrants.
Blame it on the people running the government, who have made sure that the lion's share of the productivity gains go to the richest 1 percent of Americans.
With different tax, labor, health, and housing policies, native-born workers and immigrants alike could get a fairer share of our productive economy — and still have the nifty iPods.
Robert Kuttner is co-editor of The American Prospect. His column appears regularly in the Globe.
© 2006 The Boston Globe Common Dreams © 1997-2006 |
Invasion paid by YOU |
The corpse of a dead man lies admist rubble
Devastating Israeli air strikes in Tyre, south Lebanon
US Taxpayer gives Israel more than 15 million dollars a day
Every day 15 million dollars given by US to Israel
Secret deadly weapons Tanks Missiles Warplanes Artillery Shells All funded by the US |
| What are credit derivatives? The entire global financial structure is becoming uncontrollable in crucial ways its nominal leaders never expected, and instability is increasingly its hallmark. Financial liberalization has produced a monster, and resolving the many problems that have emerged is scarcely possible for those who deplore controls on those who seek to make money – whatever means it takes to do so. The Bank for International Settlements’ annual report, released June 26, discusses all these problems and the triumph of predatory economic behavior and trends “difficult to rationalize.” The sharks have outfoxed the more conservative bankers. “Given the complexity of the situation and the limits of our knowledge, it is extremely difficult to predict how all this might unfold.” The BIS (does not want its fears to cause a panic, and circumstances compel it to remain on the side of those who are not alarmist. But it now concedes that a big “bang” in the markets is a possibility, and it sees “several market-specific reasons for a concern about a degree of disorder.” We are “currently not in a situation” where a meltdown is likely to occur but “expecting the best but planning for the worst” is still prudent. For a decade, it admits, global economic trends and “financial imbalances” have created increasing dangers, and “understanding how we got to where we are is crucial in choosing policies to reduce current risks.” The BIS is very worried. |
Invasion paid by YOU |
Corpse of a Lebanese civilian
Devastating Israeli air strikes in Tyre, south Lebanon
US Taxpayer gives Israel more than 15 million dollars a day
Every day 15 million dollars given by US to Israel
Secret deadly weapons Tanks Missiles Warplanes Artillery Shells All funded by the US |
The Negative Return Economy — a discourse on America’s black budget Fascinating and lucrative Black Budget? What Black Budget? |
Personal Debts and US Capitalism
by Rick Wolff There is no precedent in US — or any other — history for the level of personal debt now carried by the American people. Consider the raw numbers. In 1974, Federal Reserve data show that US mortgage plus other consumer debt totaled $627 billion. |
Invasion paid by YOU |
Corpse of a Lebanese civilian
Civil defense member transports after devastating Israeli air strikes in Tyre, south Lebanon
US Taxpayer gives Israel more than 15 million dollars a day
Every day 15 million dollars given by US to Israel
Secret deadly weapons Tanks Missiles Warplanes Artillery Shells All funded by the US |
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China, the Yuan and US
By Nicolas Barré
Le Figaro We don't often see Communist China give up a piece of its sovereignty, still less so to "obscure market forces." Yet that's what's happening now with the remarkable development Beijing has initiated regarding the status of its currency, the Yuan. Three weeks after putting an end to the fixed rate regime against the American dollar, China is entering a new stage by announcing that from now on the Yuan's value will be determined in relationship to major currencies. The Chinese currency's fluctuations will certainly continue to be narrowly controlled by the Central Bank, but we can see very clearly where the wind of history is blowing.
After accepting the rules of international trade and having observed the benefits it could derive from liberalization of exchanges, China decided to normalize its financial relations with the world.
Taking into account its weight in the world economy, this normalization generates upsets at least as significant as those produced the last several years by China's penetration of global markets.
For ten years, China has, in effect, had an "arrangement" with the United States.
In exchange for a fixed exchange rate between its currency and the greenback, massive Chinese capital flows have streamed into Wall Street.
Beijing became one of the primary purchasers of American debt, thus filling in the United States' considerable budget deficit.
It's in large part thanks to these capital flows that the Bush Administration has been able to finance the Iraq war without the least consequence to its credit conditions.
Washington's dependence on its "Chinese banker" has not escaped the notice of American leaders, some of them finding it a worrying loss of sovereignty.
But it has allowed the US to maintain a very low interest rate on debt.
It's in that sense that one could say American interest rates, like t-shirts or toys, are "made in China."
We can measure what the end of this monetary "arrangement" could mean for the millions of American households that buy their house or their car on credit: higher monthly payments, a less prosperous life-style.
The developed countries of Europe could be affected in turn by a boomerang effect.
It seems unlikely that China would allow its currency to float freely at any time in the near future.
The liberalization to which it has committed has expressed itself, for the moment, only in a very small revaluation of the Yuan, inadequate to relieve western industrialists in direct competition with the "world's factory."
The weak Yuan, like the weak Yen during the 1970s, continues to procure a significant advantage for Chinese exporters.
But it would be a mistake to want to precipitate the float, taking into account the upsets it could provoke for the financing of the American economy.
The White House has understood that well and has dissociated itself from the anti-Chinese speech in fashion with Congress's "hawks."
It's never good to fall out with one's banker.
Translation: www.truthout.org French language correspondent Leslie Thatcher.
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Invasion paid by YOU |
Carry the body of woman
Civilian car struck by US Israel warplane missile
US Taxpayer gives Israel more than 15 million dollars a day
Every day 15 million dollars given by US to Israel
Secret deadly weapons Tanks Missiles Warplanes Artillery Shells All funded by the US |
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Imposed on future generations of American taxpayers
Of course, part of the point of fiscal responsibility, after all, is that disasters do happen and the government should have fiscal leeway to respond to them.
But the US today has no leeway at all, thanks to this president and his party.
The "compassion and resolve of our nation" are amply demonstrated by a whopping huge expenditure, the costs of which are to be imposed on future generations of American taxpayers.
Or more accurately, coming during a week which also saw the annual rate of growth in the current account deficit hitting nearly $750 billion, (more than 6% of GDP), the President's latest act of "compassionate conservatism" puts the rest of the world on notice that it is going to have to stump up even more credit for this Argentina of the northern hemisphere.
One wonders whether these particular creditors' goodwill is likely to prove as durable as the levees of New Orleans.
Marshall Auerback, International equity strategist, London. |
Invasion paid by YOU |
Look at his face
A 7-year-old Lebanese boy fights for his life in a hospital bed in Saida
US Taxpayer gives Israel more than 15 million dollars a day
Every day 15 million dollars given by US to Israel
Secret deadly weapons Tanks Missiles Warplanes Artillery Shells All funded by the US |
| What are credit derivatives? Given such profound and widespread pessimism, the vultures from the investment houses and banks have begun to position themselves to profit from the imminent business distress — a crisis they see as a matter of timing rather than principle. Investment banks since the beginning of 2006 have vastly expanded their loans to leveraged buy-outs, pushing commercial banks out of a market they once dominated. To win a greater share of the market, they are making riskier deals and increasing the danger of defaults among highly leveraged firms. There is now a growing consensus among financial analysts that defaults will increase substantially in the very near future. But because there is money to be made, experts in distressed debt and restructuring companies in or near bankruptcy are in greater demand. Goldman Sachs has just hired one of Rothschild’s stars in restructuring. All the factors which make for crashes — excessive leveraging, rising interest rates, etc. — exist, and those in the know anticipate that companies in difficulty will be in a much more advanced stage of trouble when investment banks enter the picture. But this time they expect to squeeze hedge funds out of the potential profits because they have more capital to play with. Contradictions now wrack the world’s financial system, and a growing consensus now exists between those who endorse it and those, like myself, who believe the status quo is both crisis-prone as well as immoral. If we are to believe the institutions and personalities who have been in the forefront of the defense of capitalism, and we should, it may very well be on the verge of serious crises. |
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James Forrestal’s oil portrait always hung prominently in one of the private Dillon Read dining rooms for the eleven years that I worked at the firm. Forrestal, a highly regarded Dillon partner and President of the firm, had gone to Washington, D.C. in 1940 to lead the Navy during WWII and then played a critical role in creating the National Security Act of 1947.
He then became Secretary of War (later termed Secretary of Defense) in September 1947 and served until March 28, 1949.
Given the central banking-warfare investment model that rules our planet, it was appropriate that Dillon
partners at various times lead both the Treasury Department and the Defense Department.
Shortly after resigning from government, Forrestal died falling out of a window of the Bethesda Naval Hospital outside of Washington, D.C. on May 22, 1949.
There is some controversy around the official explanation of his death — ruled a suicide.
Some insist he had a nervous breakdown. Some say that he was opposed to the creation of the state of Israel.
Others say that he argued for transparency and accountability in government, and against the provisions instituted at this time to create a secrete “black budget.”
He lost and was pretty upset about it — and the loss was a violent one.
Since the professional killers who operate inside the Washington beltway have numerous techniques to get perfectly sane people to kill themselves, I am not sure it makes a big difference.
Approximately a month later, the CIA Act of 1949 was passed.
The Act created the CIA and endowed it with the statutory authority that became one of the chief components of financing the “black” budget — the power to claw monies from other agencies for the benefit of secretly funding the intelligence communities and their corporate contractors.
This was to turn out to be a devastating development for the forces of transparency, without which there can be no rule of law, free markets or democracy.
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Protecting the brand with dirty tricks — Enforcement Terrorism The profitable liquidation of every place — Coutts, bank for British Queen and royals Catherine Austin Fitts — Dillon Reid and Co. Inc. And the Aristocracy of Stock Profits |
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What Briody does not mention is allegations regarding Brown & Root's involvement in narcotics trafficking. Former LAPD narcotics investigator Mike Ruppert once described his break up with fiance Teddy — an agent dealing narcotics and weapons for the CIA while working with Brown & Root, as follows:
“Arriving in New Orleans in early July, 1977 I found her living in an apartment across the river in Gretna. Equipped with scrambler phones, night vision devices and working from sealed communiqués delivered by naval and air force personnel from nearby Belle Chasse Naval Air Station, Teddy was involved in something truly ugly.
She was arranging for large quantities of weapons to be loaded onto ships leaving for Iran.
At the same time she was working with Mafia associates of New Orleans Mafia boss Carlos Marcello to coordinate the movement of service boats that were bringing large quantities of heroin into the city.
The boats arrived at Marcello controlled docks, unmolested by even the New Orleans police she introduced me to, along with divers, military men, former Green Berets and CIA personnel.
“The service boats were retrieving the heroin from oil rigs in the Gulf of Mexico, oil rigs in international waters, oil rigs built and serviced by Brown and Root.
The guns that Teddy monitored, apparently Vietnam era surplus AK 47s and M16s, were being loaded onto ships also owned or leased by Brown and Root.
And more than once during the eight days I spent in New Orleans I met and ate at restaurants with Brown and Root employees who were boarding those ships and leaving for Iran within days.
Once, while leaving a bar and apparently having asked the wrong question, I was shot at in an attempt to scare me off.”
Source: "Halliburton’s Brown and Root is One of the Major Components of the Bush-Cheney Drug Empire" by Michael Ruppert, From the Wilderness
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Dark Alliance — The Story Behind the Crack Explosion The "Good Guys" Who Can Do No Wrong
Profoundest suspicions of white malfeasance were true |
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The Clinton Administration took the groundwork laid by Nixon, Reagan and Bush and embraced and blossomed the expansion and promotion of federal support for police, enforcement and the War on Drugs with a passion that was hard to understand unless and until you realized that the American financial system was deeply dependent on attracting an estimated $500 billion-$1 trillion of annual money laundering.
Globalizing corporations and deepening deficits and housing bubbles required attracting vast amounts of capital.
Attracting capital also required making the world safe for the reinvestment of the profits of organized crime and the war machine.
Without growing organized crime and military activities through government budgets and contracts, the economy would stop centralizing.
The Clinton Administration was to govern a doubling of the federal prison population.
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| U.S. Debt Part II |
US Dention centers Rise of Paramilitary Police Raids in America State of the Union |
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Depleted Uranium — its use in Afghanistan, Iraq, Balkans
Photos of Iraq children being born deformed
He was a young boy and he spent three days in the detainee facilities US soldiers sent to Iraq committing suicide NSA coverup - Vietnam - Kerry More atrocities — Lest we forget — Ahmed and Asma, story of two children dying All with U.S. Money:More on the building of the wall. US and Israel's use of chemical agents All with U.S. Money: Israel agents stole identity of New Zealand cerebral palsy victim. (IsraelNN.com July 15, 2004) The Foreign Ministry will take steps towards restoring relations with New Zealand. New Zealand Prime Minister Helen Clark today announced she was implementing diplomatic sanctions after two Israelis were sentenced |
These events do imply a greater measure of financial restraint on economic growth as credit becomes more expensive and difficult to obtain
Don't blame it on immigrants.
Blame it on the people running the government, who have made sure that the lion's share of the productivity gains go to the richest 1 percent of Americans.