The End Of All Crossroads

Where the TAXI makes a stop, to ponder upon which road mayhap be true

Tag: fiscal cliff

Our Collapsing Economy and Currency

“Is the “fiscal cliff” real or just another hoax? The answer is that the fiscal cliff is real, but it is a result, not a cause. The hoax is the way the fiscal cliff is being used.”

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December 1, 2012

The fiscal cliff is the result of the inability to close the federal budget deficit. The budget deficit cannot be closed because large numbers of US middle class jobs and the GDP and tax base associated with them have been moved offshore, thus reducing federal revenues. The fiscal cliff cannot be closed because of the unfunded liabilities of eleven years of US-initiated wars against a half dozen Muslim countries–wars that have benefitted only the profits of the military/security complex and the territorial ambitions of Israel. The budget deficit cannot be closed, because economic policy is focused only on saving banks that wrongful financial deregulation allowed to speculate, to merge, and to become too big to fail, thus requiring public subsidies that vastly dwarf the totality of US welfare spending.

The hoax is the propaganda that the fiscal cliff can be avoided by reneging on promised Social Security and Medicare benefits that people have paid for with the payroll tax and by cutting back all aspects of the social safety net from food stamps to unemployment benefits to Medicaid, to housing subsidies. The right-wing has been trying to get rid of the social safety net ever since Franklin D. Roosevelt constructed it, out of fear or compassion or both, during the Great Depression.

Washington’s response to the fiscal cliff is austerity: spending cuts and tax increases. The Republicans say they will vote for the Democrats’ tax increases if the Democrats vote for the Republican’s assault on the social safety net. What bipartisan compromise means is a double-barreled dose of austerity.

Ever since John Maynard Keynes, economists have understood that tax increases and spending cuts suppress, not stimulate, economic activity. This is especially the case in an economy such as the American one, which is driven by consumer spending. When spending declines, so does the economy. When the economy declines, the budget deficit rises.

This is especially the case when an economy is weak and already in decline. A declining economy means less sales, less employment, less tax revenues. This works against the effort to close the federal budget deficit with austerity measures. Instead of strengthening the economy, the austerity measures weaken it further. To cut unemployment benefits and food stamps when unemployment is high or rising would be to provoke social and political instability.

America: The Food Stamp Nation

Bread Lines of the Modern Era– The Great Recession
IF all EBT recipients shopped at only Walmart Super Centers for ALL their SNAP benefits, then this is how the Bread Line would look each month– 14,588 people.
There are 3051 Walmart Super Centers in USA and 44,510,598 participants in SNAP (2011), making the average SNAP line at each Walmart at 14,588 people.
The Modern Era’s Bread Lines are not visible because the business is handled discreetly through EBT Cards.
According to this Food Stamps report pg 16-17, Walmart receives half of all SNAP dollars in Oklahoma.
Walmart is the largest retailer in America.
Short Facts:
47% of Food Stamp participants are children.
78.6% of all SNAP participants are in metropolitan areas.
93.2% of all SNAP benefits go to US citizens.
Only 4% are self-employed.
(CLICK IMAGE FOR SOURCEPAGE)

Some economists, such as Robert Barro at Harvard University, claim that stimulative measures, the opposite of austerity, don’t work, because consumers anticipate the higher taxes that will be needed to cover the budget deficit and, therefore, reduce their spending and increase their saving in order to be able to pay the anticipated higher taxes.

In other words, the Keynesian effort to stimulate spending causes consumers to reduce their spending. I don’t know of any empirical evidence for this claim.

Regardless, the situation on the ground at the present time is that for the majority of people, incomes are stretched to the limit and beyond. Many cannot pay their bills, their mortgages, their car payments, their student loans. They are drowning in debt, and there is nothing that they can cut back in order to save money with which to pay higher taxes.

Many commentators are complaining that Congress will refuse to face the difficult issues and kick the can down the road, leaving the fiscal cliff looming. This would probably be the best outcome. As the fiscal cliff is a result, not a cause, to focus on the fiscal cliff is to focus on the symptoms rather than the disease.

The US economy has two serious diseases, and neither one is too much welfare spending.

One disease is the offshoring of US middle class jobs, both manufacturing jobs and professional service jobs such as engineering, research, design, and information technology, jobs that formerly were filled by US university graduates, but which today are sent abroad or are filled by foreigners brought in on H-1B work visas at two-thirds of the salary.

The other disease is the deregulation, especially the financial deregulation, that caused the ongoing financial crisis and created banks too big to fail, which has prevented capitalism from working and closing down insolvent corporations.

The Federal Reserve’s policy is focused on saving the banks, not on saving the economy. The Federal Reserve is purchasing not only new Treasury bonds issued to finance the more than one trillion dollar annual federal deficit but also the banks’ underwater financial instruments, taking them off the banks’ books and putting them on the Federal Reserve’s books.

Normally, debt monetization of this amount results in rising inflation, but the money that the Federal Reserve is creating in its attempt to manage the public debt and the banks’ private debt is hung up in the banking system as excess reserves and is not finding its way into the economy. The banks are too busted to lend, and consumers are too indebted to borrow.

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However, the debt monetization poses a second threat that is capable of biting the US economy and consumer living standards very hard. Foreign central banks, foreign investors in US stocks and financial instruments, and Americans themselves observing the Federal Reserve’s continuous monetization of US debt cannot avoid concern about the dollar’s value as the supply of ever more dollars continues to pour out of the Federal Reserve.

Already there is evidence of central banks and individuals moving out of dollars into gold and silver bullion and into other currencies of countries that are not hemorrhaging debt and money. According to John Williams of Shadowstats.com, the US dollar as a percentage of global holdings of reserve assets has declined from 36.6% in 2006 to 28.7% in 2012. Gold has increased from 10.5% to 12.8% and other foreign currencies except the euro increased from 38.4% to 44.4%.

Russia, China, Brazil, India, and South Africa intend to conduct trade among themselves in their own currencies without use of the dollar as reserve currency. The EU countries conduct their trade with one another in euros, and although not reported in the US media, Asian countries are discussing a new common currency for trade among themselves.

The world is abandoning the use of the dollar to settle international accounts, and the demand for dollars is falling as the Federal Reserve increases the supply of dollars.

This means that the price of the dollar is threatened.

Concern over the dollar means concern over dollar-denominated financial instruments such as stocks and bonds. The Chinese hold some $2 trillion in US financial instruments. The Japanese hold about $1 trillion in US Treasuries. The Saudis and the oil emirates also hold large quantities of US dollar financial instruments. At some point the move away from the dollar also means a move away from US financial instruments. The dumping of US stocks and bonds would destabilize US financial markets and wipe out the remainder of US wealth.

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As I have previously written, the Federal Reserve can create new money with which to purchase the dumped financial instruments, thus maintaining their prices. But the Federal Reserve cannot print gold or foreign currencies with which to buy up the dollars that foreigners are paid for their US stocks and bonds. When the dollars in turn are dumped, the exchange value of the dollar will collapse, and US inflation will explode.

The onset of hyperinflation can be as sudden as the collapse of a currency’s exchange value.

The real crisis facing the US is the impending collapse of the US dollar’s foreign exchange value. The US dollar’s value in relation to silver and gold has already collapsed. In the past ten years, gold’s price in US dollars has increased from $250 per ounce to $1,750 per ounce, an increase of $1,500. Silver’s price has risen from $4 per ounce to $34 per ounce. These price rises are not due to a sudden scarcity of gold and silver, but to a flight from the dollar into the two forms of historical money that cannot be created with the printing press.

The price of oil has risen from $20 a barrel ten years ago to as high as $120 per barrel earlier this year and currently $90 a barrel. This price rise has come about despite a weak world economy and without any supply restrictions other than those caused by the attempted US occupation of Iraq, the Western assault on Libya, and the self-harming Western sanctions on Iran, impacts most likely offset by the Saudis, still Washington’s faithful puppet, a country that pumps out its precious life fluid in order to save the West from its own mistakes. The moronic neoconservatives wish to overthrow the Saudi Arabian government, but what more faithful servant has Washington ever had than the Saudi royal house?

What can be done? For a number of years I have pointed out that the problem is the loss of US employment, consumer income, GDP, and tax base to offshoring. The solution is to reverse the outward flow of jobs and to bring them back to the US. This can be done, as Ralph Gomory has made clear, by taxing corporations according to where they add value to their product. If the value is added abroad, corporations would have a high tax rate. If they add value domestically with US labor, they would face a low tax rate. The difference in tax rates can be calculated to offset the benefit of the lower cost of foreign labor.

As all offshored production that is brought to the US to be marketed to Americans counts as imports, relocating the production in the US would decrease the trade deficit, thus strengthening belief in the dollar. The increase in US consumer incomes would raise tax revenues, thus lowering the budget deficit. It is a win-win solution.

The second part to the solution is to end the expensive unfunded wars that have ruined the federal budget for the past 11 years as well as future budgets due to the cost of veterans’ hospital care and benefits. According to ABC World News, “In the decade since the Sept. 11, 2001 terrorist attacks on the World Trade Center, 2,333,972 American military personnel have been deployed to Iraq, Afghanistan or both, as of Aug. 30, 2011 [more than a year ago].” These 2.3 million veterans have rights to various unfunded benefits including life-long health care. Already, according to ABC, 711,986 have used Veterans Administration health care between fiscal year 2002 and the third-quarter of fiscal year 2011. http://abcnews.go.com/Politics/us-veterans-numbers/story?id=14928136#1

The Republicans are determined to continue the gratuitous wars and to make the 99 percent pay for the neoconservatives’ Wars of Hegemony while protecting the 1 percent from tax increases.

The Democrats are little different.

No one in the White House and no more than one dozen members of the 535 member US Congress represents the American people. This is the reason that despite obvious remedies nothing can be done. America is going to crash big time.

And the rest of the world will be thankful. America along with Israel is the world’s most hated country. Don’t expect any foreign bailouts of the failed “superpower.”

 

SOURCE:
http://www.paulcraigroberts.org/2012/12/01/our-collapsing-economy-and-currency/

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US households already went off their fiscal cliff and breached their debt ceiling – US quickly approaching another debt ceiling limit aligning with the fiscal cliff

Few people realize that the debt ceiling is aligning right on track with the fiscal cliff. Total public outstanding debt is now at $16.369 trillion and is only $63 billion away from breaching the limit. Not a coincidence that the fiscal cliff is also on the horizon. In essence, we are addicted to debt. However US households have been on a multi-year long process of deleveraging yet this is not being asked from banks or governmental institutions. Of course we knew this was coming. Anyone that was honestly objective realized that we were on an unsustainable path. Yet the name of the game is now about kicking the can furiously down the road so it falls beyond or line of vision. Then we act surprised when we arrive at the can and it has only gotten heavier with debt. So as we are T-minus a few days from the fiscal cliff, let us examine the debt ceiling.

Debt ceiling being breached

We are fast approaching the debt ceiling:

total-debt-to-gdp_0

As stated, we are $63 billion away from hitting this.  This week another $26 billion will be added courtesy of a few auctions so we will hit this before the New Year.  Debt has been expanding at a furious pace:

Total-Debt-Dec-3

snowball. The reality is, the only way out of these mountains of debt is through a slow methodical inflation. The Fed is not even shy about admitting this. Why else would they be digitally printing money with no fear? They realize the debt destruction of American households is enough to offset the trillions of extensions and side programs that are being offered to the banking system. But after years of this, we are now seeing spillover effects via housing bubbles, student loan bubbles, food price hikes, healthcare costs soaring, and other items of that nature all in line with stagnant incomes.

An interesting parallel is looking at US households. Instead of adjusting to lower incomes in the 1990s and 2000s, US households decided to go into massive debt. Yet that access to debt has now been breached. In essence, US households hit their own debt ceiling and fiscal cliff:

household-debt

It is rather clear where the deleveraging started to happen. This is now a typical recession. This is shifting the landscape of how much debt households can really take on. Yet for government and banks, there doesn’t seem to be a limit although globally we are starting to see peak debt situations. Many countries are having issues even servicing their interest payments let alone thinking about paying back the debt they owe. These bailouts are simply methods of extending lines of credits to pay off already existing lines.

US households are clearly facing the grim reality that maybe they were not as wealthy as they once thought. After all, many do not even have enough for retirement and millions will completely rely on Social Security for years to come. This works well when you have a small older population with a large healthy working young population. Today we have a larger older population with a young less affluent population, with many not even working unfortunately.

So here we are hitting another debt ceiling limit right on time for the fiscal cliff. Combine this with 47 million Americans on food stamps and you need to ask yourself if this really sounds like an economic recovery.

 

SOURCE:
http://www.mybudget360.com/us-households-fiscal-cliff-debt-ceiling-2012-peak-debt/

Soros Buying Gold as Record Prices Seen on Stimulus

By Nicholas Larkin and Debarati Roy – Nov 20, 2012 7:39 PM GMT-0200

Gold’s 12-year rally, the longest in at least nine decades, is poised to continue in 2013 as central bank stimulus spurs investors from John Paulson to George Soros to accumulate the highest combined bullion holdings ever.

Bank of England’s glittering stash of £156 BILLION in gold bars stored in former canteen under London. (click image for sourcepage)

The metal will rise every quarter next year and average $1,925 an ounce in the final three months, or 11 percent more than now, according to the median of 16 analyst estimates compiled by Bloomberg. Paulson & Co. has a $3.66 billion bet through the SPDR Gold Trust, the biggest gold-backed exchange- traded product, and Soros Fund Management LLC increased its holdings by 49 percent in the third quarter, U.S. Securities and Exchange Commission filings show.

Central banks from Europe to China are pledging more steps to boost growth, raising concern about inflation and currency devaluation. Investors bought 247.5 metric tons through ETPs this year, exceeding annual U.S. mine output. While both sides said talks Nov. 16 between President Barack Obama and Congress over the so-called fiscal cliff were “constructive,” the Congressional Budget Office has warned the U.S. risks a recession if spending cuts and tax rises aren’t resolved.

“We see gold as a hedge against the follies of politicians,” said Michael Mullaney, who helps manage $9.5 billion of assets as chief investment officer at Fiduciary Trust in Boston. “It’s a good time to garner some protection in portfolios by having some real asset like gold.”
Longest Streak

Gold advanced 11 percent to $1,728.85 in London this year, headed for a 12th consecutive annual gain, the longest streak in data compiled by Bloomberg going back to 1920. Prices reached a record $1,921.15 in September 2011. The Standard & Poor’s GSCI gauge of 24 commodities slipped 0.3 percent and the MSCI All- Country World Index (MXWD) of equities climbed 8.2 percent. Treasuries returned 2.7 percent, a Bank of America Corp. index shows.

Bullion held through ETPs, the first of which listed in 2003, reached a record 2,604.2 tons yesterday, valued at $144.9 billion. That exceeds the official reserves of every nation except the U.S. and Germany, World Gold Council data show. The SPDR Gold Trust (GLD) alone holds 1,342.2 tons.

 

Global Teutonic Zionists – Working towards that New World Order: 1) Lord Jacob de Rothschild. 2) His spooky son, Nathaniel. 3) Baron John de Rothschild, who recently said they are working towards global governance. 4) Sir Evelyn de Rothschild. His wife Lynn Forrester is a big mover and shaker in the Democratic party. 5) David Rockefeller, Sephardic Crypto-Teutonic, who’s son Nick told film director Aaron Russo about 9/11 in advance. 6) Nathan Warburg. His family was not only instrumental in creating the Federal Reserve, etc. they were also behind the rise of Adolf Hitler. 7) Henry Kissinger, Globalist genocidal schemer. 8 George Soros, another Teutonic schemer and NGO manipulator. 9) Paul Volcker, Crypto-Jew big-time Globalist and economic advisor to Obama. 10) Larry Summers, Crypto-Teutonic economic advisor to Obama. 11) Lloyd Blankfein, CEO to the rapidly growing Goldman Sachs banking behemoth. 12) Ben Shalom Bernanke, current Teutonic master of the Federal Reserve (a private entity, neither “Federal” nor a “Reserve”). What’s the common denominator here? (click image for sourcepage – ’tis a nice political blog, albeit somewhat homophobic, in my opinion. Nothing is perfect, after all…)

Soros increased his investment in the trust to 1.32 million shares in the third quarter, the most since 2010, a Nov. 14 SEC filing showed. The stake, with each share representing about a 10th of an ounce, is valued at $221.4 million. Prices advanced 60 percent since January 2010, when Soros called gold the “ultimate asset bubble.” Michael Vachon, a spokesman for the 82-year-old who made $1 billion breaking the Bank of England’s defense of the pound in 1992, declined to comment.
Official Reserves

Paulson, who became a billionaire in 2007 by wagering against the subprime mortgage market, owns 21.8 million shares in the SPDR Gold Trust, making him the biggest shareholder, a Nov. 15 SEC filing showed. The 56-year-old raised his stake by 26 percent in the second quarter and his holding of about 66 tons exceeds the official reserves of nations from Brazil to Bulgaria to Bolivia.

The New York-based hedge fund company reduced its investments in Anglogold Ashanti Ltd. (ANG) and Gold Fields Ltd., the third- and fourth-biggest producers. Armel Leslie of Walek & Associates, a spokesman for Paulson’s fund, declined to comment.

Paul Touradji’s Touradji Capital Management LP sold all of its 82,000 shares in the SPDR Gold Trust in the third quarter, according to an SEC filing. Lone Pine Capital LLC, the hedge fund run by Stephen Mandel Jr., cut its stake by 31 percent to 2.6 million shares, and Dan Loeb’s Third Point LLC lowered its bet by 10 percent to 130,000 shares, filings showed last week. Officials from all three companies declined to comment.
Nine Strategists

While some investors expect stimulus to devalue currencies, the median of nine strategist estimates compiled by Bloomberg show the U.S. Dollar Index, a measure against six major trading partners, will average 82.8 next year, from 80.9 now. Steven Englander, Citigroup Inc.’s head of G-10 strategy, said in an interview this month that the currency market is signaling it isn’t yet convinced the Federal Reserve will fulfill its pledge to pump record amounts of cash into the economy through 2015.

Third-quarter demand for gold fell 11 percent, the most since 2009, as China’s slowing growth curbed purchases, the London-based World Gold Council said Nov. 15. India, the biggest buyer in the quarter, consumed 24 percent less in the year’s first nine months as bullion priced in rupees reached a record in September. The Washington-based International Monetary Fund cut its 2013 forecast for world growth twice since July, to 3.6 percent.
Inflation Adjusted

While prices rose 25 percent since November 2010, the size of the futures market, based on contracts outstanding, fell 30 percent, bourse data show. The metal, down 3.7 percent from this year’s high, has yet to exceed previous records when adjusted for inflation, with its 1980 record of $850 equal to $2,398 today, data compiled by the Fed Bank of Minneapolis show.

Hedge funds and other large speculators pared bets on a rally in futures traded on the Comex bourse in New York by 29 percent since Oct. 9, U.S. Commodity Futures Trading Commission data show. They’re still holding a net-long position of 140,162 futures and options, about 10 percent more than this year’s average, and increased wagers by 7.7 percent last week.

The Fed said Oct. 24 it will maintain $40 billion in monthly purchases of mortgage debt and probably hold interest rates near zero until mid-2015. The European Central Bank said it’s ready to buy bonds of indebted nations and the Bank of Japan raised its asset-purchase program for the second time in two months on Oct. 30.
Quantitative Easing

Gold rallied 70 percent as the Fed bought $2.3 trillion of debt in two rounds of quantitative easing from December 2008 through June 2011.

Investors buying bullion as a hedge against inflation and a weaker dollar generally earn returns only through price gains, increasing its allure as interest rates decline. It rose sixfold since the end of 2000, beating the 34 percent advance in the S&P 500, with dividends reinvested, and the 91 percent return on Treasuries. The Dollar Index fell 26 percent.

The first face-to-face meeting between Obama and leaders from Congress on the fiscal cliff yielded optimism and few details about how it would be resolved. The $607 billion of automatic spending cuts and tax increases is scheduled to take effect in January. U.S. equities and Treasuries rose Nov. 16 and gold futures were little changed.
Options Trading

Credit Suisse Group AG’s Tom Kendall, the most accurate gold forecaster tracked by Bloomberg over the past two years, sees prices averaging $1,880 in the fourth quarter next year and UniCredit SpA’s Jochen Hitzfeld, ranked second, expects $1,950. Deutsche Bank AG’s Daniel Brebner, the next most accurate, predicts $2,300 in the third quarter.

Options traders are also bullish, with the seven most widely held contracts conferring the right to buy at prices from $1,800 to $2,200 between November and March, Comex data show.

Central banks added to reserves for 19 consecutive months through August, the longest streak since 1964, IMF data show. Nations from Russia to South Korea to Mexico bought more to bring combined holdings to 31,461 tons, equal to about 18 percent of all the metal ever mined.

Barrick Gold Corp. (ABX), the world’s largest producer, will report a 41 percent gain in profit to a record $5.04 billion next year, the mean of 10 analyst estimates compiled by Bloomberg shows. The Toronto-based company’s shares fell 25 percent this year and will gain 43 percent in the next 12 months, according to the average of 23 forecasts.
Monetary Stimulus

Analysts predict Newmont Mining Corp. (NEM) and AngloGold Ashanti, the next-biggest, will also report the most profit ever next year.

“It looks as though global monetary stimulus is likely to continue, particularly in the wake of growing fiscal austerity,” said Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion of assets. “That puts pressure on the monetary authorities to stimulate the economy and that will debase the currencies and put a bid under gold.”

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Debarati Roy in New York at droy5@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

 

SOURCE: Bloomberg
http://www.bloomberg.com/news/2012-11-20/soros-buying-gold-as-record-prices-seen-on-stimulus-commodities.html

 

The Fed’s Nuclear Balance Sheet. Stand Back: This Baby’s Going to Explode

“The political ructions of the next few weeks will simply constitute the first scenes in a drama that will run for the next ten or fifteen years. And what’s more, this is a play where we already know the ending. Taxes will have to go up. Spending will have to come down. No other outcome is available: just ask the Greeks.”

 

 

Mitch Feierstein
Author, ‘Planet Ponzi’
Posted: 11/16/2012 4:54 pm

Over the coming weeks, we’re going to be hearing a lot about the ‘fiscal cliff’: the threat that some 5% of GDP is going to be ripped out of the economy in a combination of tax hikes and spending cuts. A fiscal slow-down on that scale will almost certainly trigger recession. The CBO thinks so, though their numbers look optimistic to me. (If you cut demand by 5%, more or less overnight, then you shouldn’t expect the economy to grow by more than 1% in the year following.)

Because the process of fiscal compromise acts itself out on the political stage – all big personalities and high drama – the media loves to report it. Loves to imply that vast questions are at stake, that political careers will stand or fall by the outcome.

But they’re not. Not really. This so-called ‘cliff’ is really just the first in a series of steps. The US budget is arguably the most distorted in the Western world. Greece and Japan may have higher debts, Italy and Portugal may have worse growth prospects – but for sheer budgetary insanity, the US is probably the world leader, combining huge current deficits with vast unfunded promises to retirees, and welfare entitlement program recipients. You don’t need to take my word for this. The IMF states, ‘under our baseline scenario, a full elimination of the fiscal and generational imbalances would require all taxes to go up and all transfers to be cut immediately and permanently by 35 percent. A delay in the adjustment makes it more costly.’

The political ructions of the next few weeks will simply constitute the first scenes in a drama that will run for the next ten or fifteen years. And what’s more, this is a play where we already know the ending. Taxes will have to go up. Spending will have to come down. No other outcome is available: just ask the Greeks.

And meantime, there is a monetary time-bomb charged and ticking. A bomb which is being constantly primed with further explosive, further destructive force. Remember that the economic catastrophe of 2008 was created by loose monetary policy, the indisciplined expansion of credit and a market where increasingly shoddy securities were sold as investment grade assets. You might think that a logical reaction would be the steady tightening of policy and encouraging a climate of credit discipline.

Alas, however, such logic has no place at the Fed. Interest rates are on the floor, and have been for four years now. Because four years of loose money isn’t enough for the ivory-tower academics in charge of monetary policy, the Fed has explicitly committed to keep rates low indefinitely.

Loose money in the past, loose money guaranteed into the future … but that’s still not enough. The Fed has enlarged its balance sheet by $2 trillion since the crisis began to unfold. But that doesn’t even say it. The unelected officials at the Fed handed out an extraordinary $16 trillion in secret loans to bail out banks and businesses in the 2008-10 period. Those loans were not known to, or authorized by, Congress and many of the recipients were firms owned and headquarter abroad. Sen. Bernie Sanders, who has much to call attention to these issues, comments, ‘No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president.’ Well, duh! It’s frankly extraordinary that there should be any question about this.

As Sanders also points out, the actual operation of the bailouts was largely outsourced in large part to investment banking firms on Wall Street who benefitted directly from the bailout. According to the Government Accountability Office, some two-thirds of such outsourcing contracts were awarded on a no-bid basis, an extraordinary failure. And meantime in a ‘money-laundering’ style operation, the Fed is acquiring $40 billion of low-quality mortgage backed securities – in many cases from the firms that created and missold them – thereby cleaning corrupt balance sheets at the risk of the US taxpayer.

The problems created by this unconstitutional misconduct go far beyond the mere trillions of dollars involved. The US Treasury market is being currently manipulated on a heroic scale. At times we’ve seen the Fed buying as much as 70% of US government bond issuance. Worse still, it’s effectively told the market that it intends to continue supporting the market as much as necessary for as long as necessary. In effect, we have a tiny group of unelected officials pursuing a set of radical and experimental policies – QE infinity, money-printing, unlimited bond buying, call it what you will.

And the theory behind this activity is simply crazy. When have price controls and state intervention ever worked? I don’t just mean for the US Treasuries market, but for any major market at any time? State intervention always fails. The Fed is simply setting up what looks set to be the largest Ponzi Scheme in history.

What’s more, because financial markets are interlinked, indiscipline in one market soon ripples through the system and unintended consequences impact many other markets. Wall Street traders, both currently and historically, price junk bonds off the US ten year treasury, which currently trades at an implausible 1.61%. But since the US Treasury market is flawed, every related market is too. As the Economist notes, a bubble is being inflated in government bonds, quality corporate bonds, junk bonds, and (I would add) global equities. As that newspaper comments, ‘When the market does turn everyone will want to head for the exit at once, as was the case with mortgage-related bonds in 2007. That might turn a retreat into a rout.’ I’d agree, except that the word might ought to be will.

And all this wouldn’t be so bad, except for one thing. What’s the exit strategy? Could it be hope-based by any chance? How do you climb down from these heights? Who will buy these bonds when the Fed stops? Who absorbs the losses? What exactly happens to the economy when interest rates normalize and bond prices collapse back to normal levels? Indeed, what happens to the banks when they can no longer sell their lousy assets to the Fed, can’t bump up their profits by selling no-bid services to the dumbest buyer in town? Too big to fail is still getting bigger.

The fiscal cliff is scary, because an abrupt one-off change in fiscal posture is a dumb way to do something that needs doing. But still, it needs doing. If a temporary economic slowdown is the price we pay for that, too bad. We’ll still be in better shape for taking the hit.

The monetary neutron bomb is worse. We’re still building it. No one’s talking about it. And the amounts are colossal.

Congressman: Greece-like ‘day of reckoning’ complete with ‘riots’ to hit America soon if country keeps going down same path

“What I fear is we’re going to be too late, and we’re going to run into a Greece-like situation,where we have riots and unemployment levels are up around 11 percent.”

 

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Louisiana Republican Rep. John Fleming told The Daily Caller that, ever since President Barack Obama’s re-election last Tuesday, he has been advising Americans to play it safe financially because he believes the economy — and the state of the country — may soon get much worse.

 

Fleming said he’s telling concerned constituents and business owners to “not extend yourselves in debt, make sure that you pay off things, don’t get into debt with credit cards, stay as liquid as possible. Don’t take risk, and don’t get into debt. You need to stay less vulnerable economically over the next two to four years, in hopes that the economy will sort itself out, and that Washington will get its act together.”

Fleming said he thinks the presidential election was hardly a mandate for Obama’s liberal policies, or a populist rejection of Republicans’ conservative ideals.

“I think always, when you have a candidate promising free stuff, and another promising less stuff or nothing, the one who promises more is always going to have the advantage,” he said. “The problem is that we’ve been doing that for about five decades, and it’s getting us into serious trouble.”

Ultimately, Fleming said he believes the rising national debt is analogous to “reaching into the next generation” and “taxing kids who aren’t even born yet,” and must be addressed. “That’s really what we’re dealing with,” he said, adding that if it isn’t fixed, it’ll “backfire on the American people.” (RELATED: Federal debt per household skyrockets in last three years)

After Obama’s re-election, Fleming said now it looks like “the American people chose to continue down that road, despite the fact that we have other countries ahead of us, like Greece, that are suffering massively.”

“It looks like we’re going to have to go through the same or similar pain [as Greece] to get real reforms,” Fleming said.

If America doesn’t band together to halt America’s fiscal woes, Fleming said, “what’s going to happen is there’s going to be a day of reckoning that gets into a serious situation where we have to make tough choices.”

“Both Republicans and Democrats are going to have to do that [turn the country around],” Fleming said. “What I fear is we’re going to be too late, and we’re going to run into a Greece-like situation,where we have riots and unemployment levels are up around 11 percent. That’s what we’ve been trying to avoid.”

Ultimately, Fleming said he thinks President Obama should be the one who compromises with House Republicans – not the other way around.

“I think that we should not compromise,” he said. “We need to hold to what’s important, because the real danger for this country is our debt and deficit and the impact it’s having on the economy. Just because the president was re-elected – and certainly many of the things that he believes in and wants to do, the private sector and economy doesn’t agree with that. We just had a number of companies announce layoffs as a result of Obama being re-elected. The stock market didn’t take the news very well. I’m getting calls already from private business owners telling me that they are pulling their fins in, they’re reducing their debt, and they’re just going to go on cash flow – they’re not going to grow or invest or hire.”

Fleming is upset with House Speaker John Boehner for promising via an interview with ABC News’ Diane Sawyer that the House GOP will seek a “comprehensive approach” to immigration reform in the wake of Tuesday’s election. (RELATED: Lawmaker rebukes Speaker of the House John Boehner for making promises to the media)

Fleming said he’s upset Boehner made such a promise without talking to House Republicans about it first. Obama raked in the Hispanic vote en masse over Mitt Romney and Republicans on Tuesday.

“There has been no discussion about comprehensive immigration reform – which is really, as we all know, a code for some degree or another, amnesty,” Fleming told TheDC. “There’s been no discussion in the last two years that I can recall – no discussion on that issue.”

“On amnesty and immigration, the kneejerk response here – and you even see it from some of the conservatives like Charles Krauthammer – is to say ‘look, we need to start pandering to those people,’” Fleming said. “The problem with doing that is we’ll never be able to compete with Democrats when it comes to offering things up. Many things that have happened since [Richard] Nixon [was president] have been to help certain groups, and then they came back and voted in Democrats. We’ll never win that race pandering to specific groups.”

 

SOURCE: http://dailycaller.com/2012/11/11/congressman-greece-like-day-of-reckoning-complete-with-riots-to-hit-america-soon-if-country-keeps-going-down-same-path/1/

US Bank Run Imminent as FDIC Expanded Deposit Insurance Ends Dec 31st

“This irreducible math is going to prove an insurmountable obstacle to those who are recently retired, have long live genes or plan to retire in the next 10 years.”

InternationalLiberty

To Know More:

How does the banksystem work?

(Money as Debt – worth watching)

 

How much does US have in debt

(WARNING: extremelly graphic 😉

http://demonocracy.info

 

Tick-Tock-Tick-Tock

http://usdebtclock.org/

Click each image to access its source

-x-x-x-x-x-x-x-x-

With the media fixated on the fiscal cliff, no one seems to be noticing the fact that the FDIC’s expanded 100% coverage for insured deposits ends January 1st, 2013.

CNN

Submitted by SD Contributor AGXIIK:

 

As of January 2013 the FDIC stops offering 100% coverage for all insured deposits. That amounts to $1.6 trillion in deposits, 85-90% deposited with the TBTF mega banks. Once the insurance ramps back to $250,000 the FDIC risk amelioration offered to large depositors will cause them to flee from the insecurity of the much reduced FDIC coverage. This money will rotate immediately into short term Treasury securities. The treasury, in order to handle this flood of money, will immediately offer negative interest rates. This financing will resemble the .5% negative interest rate offered by the Swiss and Germans on the funds flooding to their banks from Spain, Greece and Italy.

 

This will be a bank run much larger than the Euro banks flight to safety.

 

I have noticed two disturbing matters that will most certainly come as a result of the Fed MBS program.

1. The funds from the Fed purchases will rotate to the Too Big To Fail Banks. This debt is already junk bond status due to the nature of the underwater mortgages and delinquencies, hence the reason for the new Fed goon Squad going after borrowers. This debt will be as bad or worse than the debt of Greece, Spain and Italy, rated CCC-

2. The banks receiving these funds will rotate the money immediately into short term treasury securities that will be priced at NIRP. the reason for that follows:

3. As of January 2013 the FDIC stops offering 100% coverage for all insured deposits. That amounts to $1.6 trillion in deposits, 85-90% deposited with the TBTF mega banks. Once the insurance ramps back to $250,000 the FDIC risk amelioration offered to large depositors will cause them to flee from the insecurity of the much reduced FDIC coverage. This money will rotate immediately into short term Treasury securities. The treasury, in order to handle this flood of money, will immediately offer negative interest rates. This financing will resemble the .5% negative interest rate offered by the Swiss and Germans on the funds flooding to their banks from Spain, Greece and Italy. This will be a bank run much larger that the Euro banks flight to safety.

4. The Social Security Trust fund must make at least 5-6% return to maintain its balance and provide income to the SS recipients. The TF is still guaranteed to go bankrupt by 2033, 21 years from now. The TF is required by law to invest in Treasury bonds. The actuarial problem now facing the TF is that they will be rolling old bonds yielding 5.6% into a yield pool averaging 1.4%, a 75% drop in income. This dramatic yield drop coupled with a 60% increase in SS recipients from 50 million to 91 million in the next 10 years will assure the TF will go bankrupt in about 10 years.

BloombergBusinessweek – Fiscal Time Bomb

This irreducible math is going to prove an insurmountable obstacle to those who are recently retired, have long live genes or plan to retire in the next 10 years. If the SS TF goes bankrupt then benefits will be cut by 25% . Inflation adjustments were never able to front run the lost in income. The inflation rate of 8% today and 15% tomorrow will destroy the senior investment pool. Another few unintended consequences of QE 3. Thanks Ben. May you rot in hell!

 

SOURCE: http://www.silverdoctors.com/us-bank-run-imminent-as-fdic-expanded-deposit-insurance-ends-dec-31st/