The Destruction of Economic Facts

The Destruction of Economic Facts: "

Fascinating discussion in BusinessWeek from renowned Peruvian economist Hernando de Soto.

As we have discussed previously (here and here), de Soto has identified the property record keeping — he calls them “public memory systems” — as one of the major advantages of Western Capitalism. The recording, rule-bound, certified, and publicly accessible registries, titles, balance sheets, and statements of accounts, especially for land and houses — is how our system creates “economic facts.”

Various elements in our economy — Shadow banking systems, MERS, abdication of lending standards (i.e., no doc loans and origination fraud), Robosigners, mark-to-model accounting fraud, off balance sheet bank assets — have conspired to destroy those facts. These economic fact destroying gambits turned out to be prime underlying elements of the financial crisis.

Here is de Soto:

“During the second half of the 19th century, the world’s biggest economies endured a series of brutal recessions. At the time, most forms of reliable economic knowledge were organized within feudal, patrimonial, and tribal relationships. If you wanted to know who owned land or owed a debt, it was a fact recorded locally—and most likely shielded from outsiders. At the same time, the world was expanding. Travel between cities and countries became more common and global trade increased. The result was a huge rift between the old, fragmented social order and the needs of a rising, globalizing market economy.

To prevent the breakdown of industrial and commercial progress, hundreds of creative reformers concluded that the world needed a shared set of facts. Knowledge had to be gathered, organized, standardized, recorded, continually updated, and easily accessible—so that all players in the world’s widening markets could, in the words of France’s free-banking champion Charles Coquelin, “pick up the thousands of filaments that businesses are creating between themselves.”

The result was the invention of the first massive “public memory systems” to record and classify—in rule-bound, certified, and publicly accessible registries, titles, balance sheets, and statements of account—all the relevant knowledge available, whether intangible (stocks, commercial paper, deeds, ledgers, contracts, patents, companies, and promissory notes), or tangible (land, buildings, boats, machines, etc.). Knowing who owned and owed, and fixing that information in public records, made it possible for investors to infer value, take risks, and track results. The final product was a revolutionary form of knowledge: “economic facts.”

Over the past 20 years, Americans and Europeans have quietly gone about destroying these facts. The very systems that could have provided markets and governments with the means to understand the global financial crisis—and to prevent another one—are being eroded. Governments have allowed shadow markets to develop and reach a size beyond comprehension. Mortgages have been granted and recorded with such inattention that homeowners and banks often don’t know and can’t prove who owns their homes. In a few short decades the West undercut 150 years of legal reforms that made the global economy possible.



The results are hardly surprising. In the U.S., trust has broken down between banks and subprime mortgage holders; between foreclosing agents and courts; between banks and their investors—even between banks and other banks. Overall, credit (from the Latin for “trust”) continues to flow steadily, but closer examination shows that nongovernment credit has contracted. Private lending has dropped 21 percent since 2007. Outstanding loans to small businesses dropped more than 6 percent over the past year, while lending to large businesses, measured in commercial loans of more than $1 million, fell nearly 9 percent.”

De Soto articulates where economics facts were “disappeared” by the players involved in six key areas:

1. Mortgage Bundling

2. Default Swaps


3. Exemptions to “mark-to-market” accounting standards.


4. Off-Balance-Sheet Accounting


5. Government Use of Swaps and Repo Markets

6. Rating Agencies

Astonishing. Go read the entire piece here.

>

Previously:

Foreclosure Fraud Reveals Structural & Legal Crisis (October 5th, 2010)

Why Foreclosure Fraud Is So Dangerous to Property Rights (October 12th, 2010)

Source:

The Destruction of Economic Facts

Hernando de Soto

BusinessWeek April 28, 2011
http://www.businessweek.com/magazine/content/11_19/b4227060634112.htm

"

Guest Post: Anatomy Of A Crisis: 2011

Guest Post: Anatomy Of A Crisis: 2011: "

Submitted by Charles Hugh Smith from Of Two Minds

Anatomy of a Crisis: 2011

What's behind the disturbance in the financial Force? QE, ZIRP, the dollar peg and inflation, to name a few factors.

There is a great disturbance in the world's financial Force. Many sense it as a storm on the horizon, something not yet visible but telegraphed by a rising, swirling wind and a new electric scent in the air.

I don't claim to have a complete narrative that accounts for all the points of friction wearing down the moving parts, nor do I claim a 'solution.' But a few observations might help inform our awareness of the disturbance.

As many of you know, readers provide most of the intelligence on this site ('of two minds, yours and mine'). I am the student and skeptic who learns from you and tries to make sense of a few dynamics, and extend them to some sort of coherent end-state. We share the same project of encouraging critical thinking.

1. There is a rising loss of faith in the conventional (i.e. propaganda) account of the U.S. economy. Readers tell me their local coin store has no silver coinage left, as the public has been buying with a vengeance. This is significant. (Silver has long been called 'the poor man's gold.')

In the conventional view, the 'herd' always gets it wrong: the 'retail' 'small speculator' investing public buy stocks and real estate at the top just as the 'smart money' is distributing/selling. This 'dumb money' cycle is certainly evident in manias and bubbles.

But there are also examples of 'the public' acting well in advance (perhaps a form of 'crowdsourcing') of the 'experts.'

One of the most remarkable trends of the past decade is the steady rise of the classic hedges against inflation and financial disorder: precious metals.

While the Federal government and a veritable army of conventional economists have repeatedly assured us over the past 10 years that the economy and the dollar are both sound, gold has quintupled from under $300 an ounce to over $1,500 an ounce.

Given that official inflation measured 26% for the decade 2001 - 2011, then clearly the public isn't 'buying' the 'sound dollar, sound economy' story.

They're also not buying the 'you can't afford not to own stocks in the New Bull market' story: the public has sold some $350 billion of domestic mutual funds in the past two years.

These are unmistakable signs that the public has lost faith in the Federal Reserve's account of the dollar, U.S. stocks and the economy.

2. The idea that quantitative easing is benign has lost credibility. Even the MSM is reporting the dismal real-world results of QE2, for example, Stimulus by Fed Is Disappointing (understatement of the year?).

Another conventional view of QE--that it isn't 'injecting liquidity' because it's simply an asset swap-- The end of QE and what it means for the market--misses the point, which is that boosting bank reserves (what QE accomplishes) enables additional leveraged 20-to-1 (or more) lending. QE also keeps U.S. interest rates near-zero, which encourages a carry-trade of dollars flowing around the globe seeking higher returns and offsets to global inflation, which is certainly higher than officially recognized. It’s this flow of cash that’s driving up commodity costs.

A T-Bill sits there earning interest but cash is mobile--it can go anywhere to seek a return. A T-bill cannot. So QE is not just some benign asset swap--it has the pernicious effect of feeding a vast risk trade in stocks, emerging markets and commodities.

If that flow of new cash ceases (QE ends), then the risk trade (and Treasury bonds) both lose a key support.

3. Much of the analysis of U.S. policy is narrowly U.S.-centric. The U.S. has often ignored the international consequence of its parochial concern with domestic politics. Indeed, the U.S. has dropped 5 million tons of bombs and killed 500,000 people (as well as cost its own citizens their lives) overseas in pursuit of domestic policy ('we can't 'afford' to lose Vietnam to the Commies because that would cost me the election.')

This blindness to the consequences of domestic policy is most striking when it comes to China.

The key dynamic is the linkage of the renminbi (yuan) and the U.S. dollar. When the dollar tanks, oil rises when priced in dollars--and thus it also rises when priced in yuan. Thus the decline of the dollar and the consequent rise in commodities has directly fueled inflation in China, which is more dependent on a per capita basis on materials than the U.S.

Yes, the yuan peg has declined from the 8.5 range down to 6.5 to the USD, but it is still firmly pegged. As the cost of materials priced in dollars soars, it feeds higher input costs in China.

China's policy-makers have exacerbated inflation by excessive money creation and lending by their own banks, but that alone is not sufficient cause for gasoline/petrol to cost as much in China as it does in the U.S. Oil is the foundation for petrochemicals, fertilizers, transport, plastics, etc., so the rise of oil driven by dollar depreciation is a driver of inflation throughout the Chinese economy.

No wonder the Chinese leadership is unhappy with the Fed's crush-the-dollar strategy.

Though the cost of soy beans imported from the U.S. remains fixed in terms of currency, the relentless rise in oil is also raising the cost of China's imports which are heavily dependent on oil, such as soy beans from the U.S.

4. China appears to be in the grip of a classic wage-price spiral inflation. Minimum wages are leaping by 25%, prices of many food items are doubling--this self-reinforcing dynamic is clearly visible in China. That is not the case in the U.S., which is being throttled by stagflation (rising prices and stagnant wages except for the top tier).

As I have noted before, price inflation in essentials hurts the lower income citizenry much harder than the top tier, as essentials make up a much larger percentage of the household expenses. A 30% jump in the cost of gasoline means little to a household in which gasoline accounts for 2% of total net income, but it certainly hurts a household in which gas accounts for 10% of total net income.

As noted in Your Pick, Ben, But One Goes Off the Cliff, the Fed's ZIRP and QE policies have pared future policy down to a stark fork in the road: end ZIRP and QE, and send the risk trade (stocks and commodities) off the cliff, or keep pushing the dollar down and the rising cost of oil will shove the U.S. economy over the cliff.

That would also feed inflation in China, which already threatens to destabilize its economy. Correspondents within China recall that rising inflation was an important (if conveniently forgotten) dynamic in the 1989 era of dissent and disruption. The heavy-handed repression of domestic dissent and foreign reporting is evidence that the leadership in China has a keen appreciation of the connection between instability and rampant inflation.

So why is the Fed carpet-bombing the global economy? To protect the domestic economy? That makes no sense, for the Fed's policies are pushing oil up to the point where there is no way to keep the U.S. economy from tipping into recession. It isn't acting on behalf of the domestic economy, of course; it's acting on behalf of domestic banking and Wall Street.

The Fed is busily destroying the village, suposedly to save it--only it's the global village. But the Fed isn't the only player with a stake in its game, and the other players, notably China, are tipping their hand that they will have to act, and soon, to protect their own domestic economies from the Fed's destructive policies.

Additional note: I have often asked how hyperinflation would benefit the Financial Elites; blogger FOFOA kindly offered a detailed answer.

"

Financial timeline of 10 events from the Great Depression and parallels to our current economy: Lessons from the Great Depression Part 30. When government and financial institutions become one.

Financial timeline of 10 events from the Great Depression and parallels to our current economy: Lessons from the Great Depression Part 30. When government and financial institutions become one.: "Our current economy is facing unique circumstances. In no time in our past have we had such a large number of American retiring and living many years post-work. Average life expectancy in 1900 for a male was 46 and today it is up to 73 (for females it is 48 and 79 respectively). The baby [...]

"

Homeowners on Home Price Recovery

Homeowners on Home Price Recovery: "

How long will it take for home prices to recover? Well the rents are climbing in several metro areas so the truth is we can't be that far away. Valuations won't see the levels that many are hoping for of course, but as employment rebounds and rentals get less attractive, we'll be gradually lifting off the bottom.

The Pew Research Center has a massive piece up based on a national survey of homeowners. I carved out the below to give you an idea of how various homeowner age groups assess the time frame of a rebound...

Homeowners are not blind to what has happened to home prices, nor are they expecting a speedy recovery. Among the 1,222 homeowners in the nationwide Pew Research telephone survey, about half (47%) say their home is worth less now than before the recession began, and 31% say its value has stayed the same. Just 17% say their home is worth more.

Of those who say their home has lost value, 86% say they expect it to take at least three years for values to recover to pre-recession levels; 42% say it will take at least six years; and 10% say it will take more than 10 years.

Even with the acknowledgment that recovery is a long way off, most homeowners are still in Home Sweet Home mode psychologically. This jibes with my comments this week about how Americans still hate stocks, even when compared to their slumping real estate.

There's some other good stuff in the report about how different generations feel about their home as an investment as well as some stats on buyer's remorse, head over at the link below.

Source:

Home Sweet Home. Still. (Pew Research Center)

Read Also:

Two Things I Know for Certain (TRB)

"

Where to Find the “Anti-Dollar” (Hint: It’s Not Gold)

Where to Find the “Anti-Dollar” (Hint: It’s Not Gold): "

There’s a currency I think of as the “anti-dollar” that continues to appreciate against the US dollar.

Unlike gold, the “anti dollar” can be used to maximize other investments. I’ll reveal this currency in a moment.

But first, why would you want an “anti-dollar” in the first place?

The US has a multi-decade history of borrow and spend. Worse than that, it’s more extreme today than ever before. The government has to borrow about half of what it spends. And policy makers are printing money like crazy to “stimulate” the economy (even if they do give it fancy names like “quantitative easing”).

If there is more money but the same amount of things to buy with it, prices of the things go up, measured in money. This is inflation, and it shows up in different places at different times. Whether its food, gasoline or house prices.

This might sound a bit weird at first, but money has a price like everything else. Looked at in reverse, inflation means the “price” of money has gone down, when measured in “things.” Money has lost value. It buys less.

One way to protect yourself from inflation is to have investments in stronger currencies. These can be held as cash, bonds, stocks, or real estate. Where I live in Argentina, the locals keep their savings in dollars, because they keep their value better than Argentine pesos. Everything’s relative. But there are much stronger currencies than the US dollar.

One such strong currency is the Singapore dollar (SGD).

A hedge fund trader who is a friend of mine recently described it to me as an “Asian version of the Swiss Franc”. This is a big compliment. Switzerland’s currency has been strong for decades, and is well known as a safe haven in times of trouble.

The reason that Switzerland, and now Singapore, have strong currencies is that these countries live within their means. While the US borrows and spends, these countries earn and save. This is how people get rich, and it’s the same for countries. No one got rich by spending money faster than they earned it.

In 2009, Singapore’s current account balance – the net money coming into or going out of the country – was a surplus of $26 billion. That was just behind Saudi Arabia, the world’s biggest oil exporter. By comparison, the US had a deficit of $420 billion!

Singapore has very low external debt. That means it owes very little to people overseas. Again this is the opposite of the US, which owes trillions to places like China, Japan and Saudi Arabia.

And foreign exchange reserves – the country’s rainy day piggy bank – work out at $40,000 for every man, woman and child.

In the future, Singapore has a crucial advantage over Switzerland. Switzerland sits in the middle of the “old continent” of Europe, which looks set for a decade of slow growth and stagnation.

But Singapore sits in the middle of Asia – in fact right on some of the busiest shipping lanes in the world. And Asia is home to 60% of the world’s population, and with many decades of fast economic growth ahead of it.

This means that over time the Singaporean dollar is likely to gain value against the US dollar. In fact over the past five years it’s gained over 23% in value, measured in US dollars.

That’s a really useful kicker to any type of investment. So I’m on the hunt for ways to profit from the Singaporean “anti-dollar”. You should be, too.

Regards,

Rob Marstrand

for The Daily Reckoning

Where to Find the “Anti-Dollar” (Hint: It’s Not Gold) originally appeared in the Daily Reckoning. The Daily Reckoning recently featured articles on stagflation, best libertarian books, and QE2


.

"

America's Fiscal Dead End: A 2013 "Minsky Moment"

America's Fiscal Dead End: A 2013 "Minsky Moment": "

Often times we are amazed that Deutsche Bank's Peter Hooper works in the same place as that other 'economist.' The reason is that yesterday, Hooper, who tends to have some of the most original sellside thoughts, came out with one of the best summaries of America's fiscal dead end:an 8 page summary far more accurate and detailed than anything to ever come out of the rating agencies, yet one which reaches the correct conclusion. What is startling is that a Wall Street institution (well technically desk.... there is of course that other 'economist') is willing to come to grips with the truth. Which according to Hooper is rather ugly: America may have 2 years at the most before it all comes crashing down when the world's former superpower hits its own Minsky Moment.

Hooper's summation:

A 2013 solution? A bigger risk is that after having raised expectations that more fundamental progress can be made in dealing with the unsustainable US fiscal position, the political process breaks down and no meaningful progress is made even with the debt ceiling and default avoided. Certainly it will be difficult for any elected politician to be too specific about major cuts in entitlement benefits or increases in taxes ahead of the next election. The Obama Administration is likely to resist measures that could add significantly more fiscal drag than is already in the pipeline for 2012. Scuttling the still fragile recovery could be political suicide. In any event, it would make sense to have fundamental decisions about the size and redistributive nature of the US government made after a full airing of this debate in the next Presidential election. If the ratings agencies and the market give the US government the benefit of the doubt for a time, given that the debate has begun and recognizing that any longer-term resolution will be difficult in an election season, a better opportunity for resolution may come in 2013. Conventional wisdom holds that if the economic recovery progresses as expected, President Obama will be re-elected. At the same time, assuming the Ryan plan does not backfire, the political winds may favor a Republican takeover of the Senate, given that nearly twice as many Democrats in the Senate are up for reelection as Republicans, and only a three-vote swing is needed. A Democratic President dealing with a Republican Congress and a popular mandate to resolve the fiscal problem would be a repeat of the conditions that led to the last major fiscal reform move with President Clinton in the early-mid 1990s. And Obama would have the added advantage of being a second term president. This mix would necessitate a political compromise in a case where compromise will clearly be needed to achieve a lasting resolution. However, there are no guarantees that such a scenario would materialize, and even if it did, deep-seated political differences on taxes and spending could still prevent a resolution of the problem in 2013. In this case, markets could very well balk, leading to a US Minsky moment, with potentially far greater consequences than the one Europe has experienced.

Full report:

US Minsky Moment"

Birth and Death of the Celtic Tiger: Video on Ireland Bailout

Birth and Death of the Celtic Tiger: Video on Ireland Bailout: "Inquiring minds are watching an excellent exposé by Max Keiser on how the bad debts of the Irish banks were transferred to the balance sheets of Irish taxpayers.

Hot Spots with Max Keiser - Ireland Part 1



Link if above video does not play: Ireland Hot Spots 1

Hot Spots with Max Keiser - Ireland Part 2



Max Keiser: 'The people of Ireland have been carpet-bombed with debt. An IMF loan has been forced on them to pay off the government debt forced on the to pay off bankers' debt. Most of the bankers have fled the country but their bad debts continue to explode like financial roadside bombs across Ireland.'

'The IMF is raising money to do what could be called a hostile raid of Ireland. They are putting up Ireland's own assets including the national electric company as collateral for the money to do the hostile raid to pay off banks that made tragically poor investment decisions.'

One interviewee said, 'We are borrowing from tomorrow to pay for yesterday, forgetting about today'.

The key question is: How long will the citizens of Ireland put up with this criminal behavior?

For more videos or to leave a comment for Max, please see Hotspots with Max Keiser: Ireland

Mike 'Mish' Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Mike 'Mish' Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

"

20 Signs That A Horrific Global Food Crisis Is Coming

20 Signs That A Horrific Global Food Crisis Is Coming: "

20 Signs That A Horrific Global Food Crisis Is Coming

Courtesy of Michael Snyder, Economic Collapse

In case you haven't noticed, the world is on the verge of a horrific global food crisis. At some point, this crisis will affect you and your family. It may not be today, and it may not be tomorrow, but it is going to happen. Crazy weather and horrifying natural disasters have played havoc with agricultural production in many areas of the globe over the past couple of years. Meanwhile, the price of oil has begun to skyrocket.

The entire global economy is predicated on the ability to use massive amounts of inexpensive oil to cheaply produce food and other goods and transport them over vast distances. Without cheap oil the whole game changes. Topsoil is being depleted at a staggering rate and key aquifers all over the world are being drained at an alarming pace. Global food prices are already at an all-time high and they continue to move up aggressively. So what is going to happen to our world when hundreds of millions more people cannot afford to feed themselves?

Most Americans are so accustomed to supermarkets that are absolutely packed to the gills with massive amounts of really inexpensive food that they cannot even imagine that life could be any other way. Unfortunately, that era is ending.

There are all kinds of indications that we are now entering a time when there will not be nearly enough food for everyone in the world. As competition for food supplies increases, food prices are going to go up. In fact, at some point they are going to go way up.

Let's look at some of the key reasons why an increasing number of people believe that a massive food crisis is on the horizon.

The following are 20 signs that a horrific global food crisis is coming....

#1 According to the World Bank, 44 million people around the globe have been pushed into extreme poverty since last June because of rising food prices.

#2 The world is losing topsoil at an astounding rate. In fact, according to Lester Brown, 'one third of the world's cropland is losing topsoil faster than new soil is forming through natural processes'.

#3 Due to U.S. ethanol subsidies, almost a third of all corn grown in the United States is now used for fuel. This is putting a lot of stress on the price of corn.

#4 Due to a lack of water, some countries in the Middle East find themselves forced to almost totally rely on other nations for basic food staples. For example, it is being projected that there will be no more wheat production in Saudi Arabia by the year 2012.

#5 Water tables all over the globe are being depleted at an alarming rate due to "overpumping". According to the World Bank, there are 130 million people in China and 175 million people in India that are being fed with grain with water that is being pumped out of aquifers faster than it can be replaced. So what happens once all of that water is gone?

#6 In the United States, the systematic depletion of the Ogallala Aquifercould eventually turn 'America's Breadbasket' back into the 'Dust Bowl'.

#7 Diseases such as UG99 wheat rust are wiping out increasingly large segments of the world food supply.

#8 The tsunami and subsequent nuclear crisis in Japan have rendered vast agricultural areas in that nation unusable. In fact, there are many that believe that eventually a significant portion of northern Japan will be considered to beuninhabitable. Not only that, many are now convinced that the Japanese economy, the third largest economy in the world, is likely to totally collapse as a result of all this.

#9 The price of oil may be the biggest factor on this list. The way that we produce our food is very heavily dependent on oil. The way that we transport our food is very heavily dependent on oil. When you have skyrocketing oil prices, our entire food production system becomes much more expensive. If the price of oil continues to stay high, we are going to see much higher food prices and some forms of food production will no longer make economic sense at all.

#10 At some point the world could experience a very serious fertilizer shortage. According to scientists with the Global Phosphorus Research Initiative, the world is not going to have enough phosphorous to meet agricultural demand in just 30 to 40 years.

#11 Food inflation is already devastating many economies around the globe. For example, India is dealing with an annual food inflation rate of 18 percent.

#12 According to the United Nations, the global price of food reached a new all-time high in February.

#13 According to the World Bank, the global price of food has risen 36%over the past 12 months.

#14 The commodity price of wheat has approximately doubled since last summer.

#15 The commodity price of corn has also about doubled since last summer.

#16 The commodity price of soybeans is up about 50% since last June.

#17 The commodity price of orange juice has doubled since 2009.

#18 There are about 3 billion people around the globe that live on the equivalent of 2 dollars a day or less and the world was already on the verge ofeconomic disaster before this year even began.

#19 2011 has already been one of the craziest years since World War 2. Revolutions have swept across the Middle East, the United States has gotten involved in the civil war in Libya, Europe is on the verge of a financial meltdown and the U.S. dollar is dying. None of this is good news for global food production.

#20 There have been persistent rumors of shortages at some of the biggest suppliers of emergency food in the United States. The following is an excerpt from a recent "special alert" posted on Raiders News Network....

Look around you. Read the headlines. See the largest factories of food, potassium iodide, and other emergency product manufacturers literally closing their online stores and putting up signs like those on Mountain House's Official Website and Thyrosafe's Factory Webpage that explain, due to overwhelming demand, they are shutting down sales for the time being and hope to reopen someday.

So what does all of this mean?

It means that time is short.

For years, many 'doom and gloomers' have been yelling and screaming that a food crisis is coming.

Well, up to this point there hasn't been much to get alarmed about. Food prices have started to rise, but the truth is that our stores are still packed to the rafters will gigantic amounts of relatively cheap food.

However, you would have to be an idiot not to see the warning signs. Just look at what happened in Japan after March 11th. Store shelves were cleared out almost instantly.

It isn't going to happen today, and it probably isn't going to happen tomorrow, but at some point a major league food crisis is going to strike.

So what are you and your family going to do then?

You might want to start thinking about that.

"

Guest Post: The Fundamental Injustice That Is Poisoning the Nation

Guest Post: The Fundamental Injustice That Is Poisoning the Nation: "

Submitted by Charles Hugh Smith from Of Two Minds

The Fundamental Injustice That Is Poisoning the Nation

The guilty are powerful and free, the innocent burdened and oppressed: that is injustice.

There is a fundamental injustice that is poisoning the soul of the nation, and if it is not openly addressed then the nation will face the explosive consequences of institutionalized injustice.

Simply put, it is this: those responsible for the nation's financial crisis and its catastrophic after-effects are not paying for the consequences of their actions--it is the innocent, those who were not responsible, who are paying the price.

You can call it whatever you want: the Anarchy of the Super-Rich (as per Paul Farrell), the Financial Power Elite, the financial Oligarchy, Plutocracy or Corporatocracy, or the unprecedented concentration of financial wealth and political power in a financialized post-industrial economy. Whatever you call it, we all know this class of financiers and its minions got away with high financial crimes.

Do the crime, do the time--unless it's 'white-collar' financial crime on a vast scale. Then you might pay a wrist-slap fine (a few million dollars from your treasure of embezzled hundreds of millions) and then you're free to go on your merry way.

The after-effects are not just the losses which can be totalled on a calculator: the really catastrophic losses are to the foundations of democracy and the economy. Democracy has been subverted--oh please, spare us the happy-story propaganda about 'reform' and 'the system worked'--and the economy has been incentivized to favor poisonously addictive financialization and the shadow institutions of corruption, fraud, embezzlement, favoritism, collusion and misrepresentation of risk. This might be summarized as the protection of vested interests, engineered and overseen by the partnership of the ever more intrusive Central State and the nation's Financial Power Elite.

The Central State, designed to protect the citizenry from an oppressive monarchy or Elite, now protects this Elite from the citizenry. That is how thoroughly the injustice has been institutionalized.

There is a second part to this fundamental injustice: look who will pay for the bailouts, guarantees and the interest on the borrowed trillions. Not the banks and bankers, to be sure. Who will pay? Those who the Central State can easily tap: taxpayers who earn most of their income from wages, and those politically weak players dependent on government payments.

Now that the bills of the bailout are coming due, the State isn't going after GE for more taxes. Heavens no--if you try that, the Panzer Division of GE's tax avoidance army would overrun you. No, the politically easy thing to do is raise taxes on wage earners and trim entitlements, because all the government needs to do is send down the orders and it is done: the taxes are withheld and the bennies trimmed.

To go after the Power Elite is just too difficult. They have the tax attorneys, the lobbyists, the campaign fundraisers, and all the rest.

The U.S. is just a third world kleptocracy on an Imperial scale. I explored the parallels with the Roman Empire in Survival+: the Elites increasingly avoided military service and taxation, the bedrock of Roman power, while the taxes on the middle class rose to such heights that this productive class was basically driven into serfdom. The bottom layer of State dependents was placated and made complicit with bread and circuses--yes, Rome had a vast 'welfare state' and much of Rome's population received free bread to keep them quiet and pliant.

That is of course a road to ruin: let the Elite plunder at will, protected by the Imperial Central State, tax the productive class to fund the armed forces and free bread, and then buy off the lower class with bread and circuses.

The only successful model of reconciliation and justice we have is the 'truth commissions' in other post-oppression autocratic kleptocracies. In countries that were deeply divided and poisoned by institutionalized injustice and exploitation, the healing process requires a public, transparent 'truth commission' in which the guilty are brought forth to confess their sins against the innocent and face the consequences of their actions.

If a society cannot rouse itself to cleanse the fundamental injustice at the heart of its institutions, then it is effectively choosing self-destruction.

So far, the U.S. is pursuing the Roman Imperial model with an institutional zeal unmatched since Rome's fall.

Embedded institutional injustice has a price, a price which rises with every passing day of propaganda and prevarication. Some day the bill will come due and a terrible price paid in full. For those in power, the only concern is that it not be today or tomorrow.

"

DEEP THOUGHTS FROM MICHAEL BURRY

DEEP THOUGHTS FROM MICHAEL BURRY: "

Dr. Michael Burry, the small hedge fund manager who famously shorted the housing bust, recently spoke at Vanderbilt University. Burry goes through the series of events that led up to the housing crisis. He focuses intently on de-regulation and how these developments led him to believe the housing market was increasingly unstable. He touches on several topics including the fiscal problems in the USA (I largely disagree with his opinions here), moral hazard and the continuing woes in the USA. It’s a rare look at Burry’s thinking. Certainly worth 30 minutes. Readers might also be interested in his Bloomberg interview which is summarized here. The Vanderbilt discussion is attached:

"

Jim Grant On Inflation: "There Will Be A Lot Of It Suddenly" Because Our Interest Rate Structure Is "Beyond Strange"

Jim Grant On Inflation: "There Will Be A Lot Of It Suddenly" Because Our Interest Rate Structure Is "Beyond Strange": "

One of our favorite economic commentators - Jim Grant of Grant's Interest Rate Observer - was on Consuelo Mack continuing his ongoing crusade against Ben Bernanke's lunacy, and the monetary central planning of the Federal Reserve, particularly focusing on the topic of pernicious inflation which for good reason has received much attention of the past year. Grant, who unlike Steve Liesman correctly observes that inflation is now rampant (those who need a reminder can do so at the only objective source for actual inflation tracking, MIT's Billion Price Index), is eating away at the standard of living of the bulk of the population, even as this same population can not benefit from anything beyond minimal rates on their saving deposits. 'The Fed is unconscionably complacent about the consequences of what it is doing, and let us not blink at what it is doing: it has imposed the lowest money market interest rates anyone remembers, it has expanded its balance sheet into something grotesque all in the space of a couple of years. These are monetary events that have never before been seen, and indeed, never before imagined...The Fed's policies are certainly great for one class of society: the speculative classes.... We have socialized risk, we have privatized gains, much to the relief of Greenwich, CT where our zillionaires live, and the unconscionable and indefensible fallout of this is that savers get zero on their savings balances, and the speculative classes get to borrow in wholesale markets at zero and get to make their zillions all over again... The Chairman is whistling by the graveyard in this manner of 2% inflation rate being harmless.' On Grant's expectations for inflation rates: 'there will be a lot of suddenly - 4 or 5% let us say...So much of our speculative apparatus is powered on these zero percent interest rates... Think how hard it is to hold back a cash reserve in this economy... Your stupid neighbor who is watching this program is making a lot fo money in the stock market: how hard is it not to participate? You can't do it... But 4% inflation would mean that the party is over... Everything would fall out of bed... Gold and silver would right themselves, because they are money that would come into their own at the end of the cycle of disillusionment but for a time there would be terrific chaos in investment markets.'

As for the gold standard: 'If I am right about the dynamics of the Federal debt, not only is the mathematics for a gold standard compelling but so are the politics.' In other words, and this should be no surprise to anyone, the transition to real money will continue until the fraud that is unbacked fiat is finally eliminated, with or without the Fed's support.

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Guest Post: Here's The Setup For The Con Of The Decade

Guest Post: Here's The Setup For The Con Of The Decade: "

Submitted by Charles Hugh Smith from Of Two Minds

Here's the Setup for the Con of the Decade

The Con of the Decade, which I described last July, is being set up nicely.

I described The Con of the Decade last July (2010). The Con makes me a heretic in the cult religion of Hyperinflation. I consider myself an agnostic about the destruction of the U.S. dollar and hyperinflation (basically the same thing), but my idea that hyperinflation is fundamantally a political process makes me a heretic. I skimmed a few of the dozens of comments posted on Rick's Picks and Zero Hedge after they posted one of my expositions on this dynamic, and didn't see even one comment in favor of this perspective.

The Con is being set up right now, and the outlines are clearly visible. The Con works like this:

1. The Financial Elites/Oligarchy raked in billions in private profit from the orgy of leverage, credit expansion, fraud, embezzlement and misrepresentation of risk that resulted in the Housing Bubble.

2. The losses were transferred to the public (Federal government, i.e. The central State) or its proxy, the Federal Reserve (i.e. the central bank), via bailouts, backstops, guarantees, the Fed's purchase of taxic assets, and an open window for the financiers to borrow billions at zero interest (ZIRP) for further speculations.

3. The Treasury now borrows $1.6 trillion every year, fully 11% of the nation's GDP, as the Central State has replaced private demand and credit expansion with its own borrowing and spending.

4. Non-U.S. central banks have largely ceased to support this unprecedented scale of borrowing, so the Federal Reserve now buys most of the Treasury's issuance of debt via QE2 (quantitative easing, the direct purchase of $600 billion in Treasury bonds).

5. Unlike Japan, the U.S. cannot self-fund its own government borrowing: while U.S. investors, banks and insurance companies do own a significant chunk of Treasuries, the U.S. savings rate (capital accumulation) is still abysmally low, around 4%, which is half the historical average savings rate.

This is the result of the Keynesian Cult's One Big Idea, which is to pull demand forward and encourage borrowing and spending now by any means necessary, and thus sacrifice capital formation/saving.

So the basic outline of the Con is that private losses from the financialization of the U.S. economy were shifted to the public. Now to keep the Status Quo and Financial Plutocracy from imploding, the public is on the hook for $1.6 trillion in additional borrowing every year until Doomsday (around 2021 or so).

Having secured the backing of the Central Bank and Central State, the Plutocracy's only problem now is that it needs a risk-free source of high-yield income. Yes, it has a trillion dollars or so sitting in bank reserves, collecting interest from the Federal Reserve; this is certainly risk-free, but the Fed's Zero Interest Rate Policy (ZIRP) keeps the rate of return absurdly low.

Here's where we see the Con taking shape. The ideal setup for risk-free returns is to own Treasurys that pay a high yield. The way to get higher interest rates is to first make the Treasury market supremely dependent on a central bank or single buyer: Done. That buyer is the Federal Reserve.

Next, have that buyer stop buying. Suddenly, interest rates start moving up. If you don't believe this is possible, or part of a larger project, then please explain why PIMCO sold all its Treasuries. Duh--because interest rates are set to rise, and not by a little bit or for a brief span, but by a lot and for years.

That means holders of long-term Treasuries (and other debt) will be cremated as rates rise. (Holders of TIPS will do OK, unless the government fraudulently sets the rate of inflation well below reality. Hmm, isn't that exactly what's it's already doing?)

Once long-term rates have leaped up, then start accumulating the high-yield bonds. Why would rates jump? Supply and demand: as the demand for low-yield Treasuries dries up, the supply keeps rising: every month, the Treasury has to auction tens of billions of dollars of bonds, or even hundreds of billions of dollars. There is no Plan B, the bonds must be sold, and if there are no buyers, then the yield has to rise.

Once rates have been engineered much higher, the Financial Oligarchy accumulates the high yielding bonds.

Here's where 'austerity' comes in. Once rates are so high that they're choking the real economy, then voices arise demanding the Federal government stop borrowing and spending so much. Austerity (forced or otherwise) soon reduces the supply of bonds hitting the market and so rates decline, boosting the value of the high-yield debt.

To service the cost of all this Federal borrowing, taxes are raised on what's left of the productive members of society.

To add insult to injury, it will become 'patriotic' to 'buy bonds.'

OK, let's check the setup:

1. Treasury market now dependent on one buyer: check.

2. That buyer stops buying, pushing rates higher: no QE3. Check.

3. 'Austerity' is now seen as inevitable--but not just yet: check.

What the true believers of hyperinflation and the destruction of the dollar cannot accept is that debt is an asset to the owner of that debt. In focusing solely on the advantages of inflation to borrowers, they ignore the critical fact that inflation quickly destroys the value of the asset that debt represents to the owner. And debt is a primary asset to pension funds, insurance companies, banks, and indeed the entire financial sector.

So in claiming high inflation is guaranteed, adherents are claiming that the entire financial sector will accept being wiped out, just so Mr. and Mrs. Taxpayer won't have to pay interest on the ballooning government debt.

That's exactly backward: the entire point is for Mr. and Mrs. Taxpayer to pay high yields on Treasury debt, owned by the Financial sector's Oligarchs. The Con is to stripmine the public coffers, then impose higher rates and 'austerity', buy the debt with the cash plundered from the public, and then sit back and enjoy risk-free returns as taxes are raised on the remaining tax donkeys. Inexpensive Bread and Circuses (SNAP food stamps and the political theater of the two parties staging a partisan 'fight to the death') will keep the peasantry entertained and complicit.

As I concluded in the first foray into the Con:

In essence, the financial Elites would own the revenue stream of the Federal government and its taxpayers. Neat con, and the marks will never understand how 'saving our financial system' led to their servitude to the very interests they bailed out.

The circle is now complete: in 'saving our financial system,' the public borrowed trillions and transferred the money to private Power Elites, who then buy the public debt with the money swindled out of the taxpayer. Then the taxpayers transfer more wealth every year to the Power Elites/Plutocracy in the form of interest on the Treasury debt. The Power Elites will own the debt that was taken on to bail them out of bad private bets: this is the culmination of privatized gains, socialized risk.

In effect, it's a Third World/colonial scam on a gigantic scale: plunder the public treasury, then buy the debt which was borrowed and transferred to your pockets. You are buying the country with money you borrowed from its taxpayers. No despot could do better.

This is the ultimate endgame of the financialization of the U.S. economy and the concentration of wealth and thus political power in the hands of those who skimmed the immense gains from that financialization.

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JOHN TAYLOR: PREPARE FOR THE COMING RECESSION

JOHN TAYLOR: PREPARE FOR THE COMING RECESSION: "

The world’s largest FX hedge fund manager doesn’t mince words in this CNBC interview. Taylor says the economy will be back into recession by the end of 2011. He believes the recovery has been entirely artificial and once the Fed lifts the veil from QE2, government spending slows and high oil prices hit the consumer, the weak economy will be exposed again. From an investment perspective Taylor views the world as follows:

• Turkey is attractive


• Europe is weaker than the USA


• The Euro is justified at $1.45


• Asian economies remain very strong.


• Commodities should continue to correlate with Asian growth.


• US stocks are “fully priced”.


• He would be US bullish on stocks after a 20% decline.

Source: CNBC

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Peak Fish and Other Insights from Agriculture 2.0

Peak Fish and Other Insights from Agriculture 2.0: "

Agriculture 2.0 San Francisco was a great event. So much knowledge, so many smart people...

Here are the points that stuck with me most on the State of Ag Investing:

1. The big stat that was most consistently repeated: The global population will be 9 billion by 2050.

2. There was a bit of a disconnect here, the sustainable farming faction bumping up against the fact that if the world went to all-organic farming overnight, half of humanity would starve to death immediately.

3. There are some amazing startups working on things like bio-pesticides (naturally-occurring agents to fight pests instead of chemicals) and nutrient imput technology (not all areas of a field require the same amounts of fertilizers, 2/3rds of all used fertilizer is wasted).

4. The water guys were here, they view water as the most unappreciated and undervalued ag commodity of all. They look at water as the software of agriculture, the land being the hardware. They point to the fact that Bill Gates couldn't convince IBM of the importance of software - water investors and owners view themselves as being overlooked in much the same way - for now.

5. Everyone speaks to being aware of geopolitical risk when making international farmland investments, but there are no real concrete solutions. The guy from TIAA-Cref, a huge farmland investor, acknowledged that there is a real risk of land being confiscated in a true geopolitical crisis scenario. At least the ag guys acknowledge worst-case scenario risks.

6. Emily French is a Rockstar. She trades both ag property and agricultural commodities and makes many appearances on CNBC. She also dropped a few curse words on stage before I had the chance to, so that helps. You'll have to watch for her, she knows her stuff.

7. It is very early, farmland-wise. Less than 1% of US farmland is held by investing institutions. Most importantly, there is almost no leverage in the system...so far.

8. The threat of China becoming a big importer of corn is very real - they're expected to buy 1.6 million tons this year and there are estimates of up to 15 million tons being imported into China by 2015. This against the backdrop of 15 year supply lows.

9. Aquaculture could get hot. There is a real thing called Peak Fish - the amount of ocean-caught fish is flat over the last decade. Peak Fish, who knew?

10. This is most important: There is an Agriculture Put according to many of the hedge fund guys here. This means that yes, ag commodities will be susceptible to a rise in interest rates in the short-term - but they must be bought furiously if and when they come down because nothing the Fed does can change the demographics and population realities. Ultimately, the improving and increasingly diverse diets of 7 billion people will trump the end of QE2 and there is one direction for consumption to go.

I'm glad I came out here to be a part of the conference, the most important thing I learned is how much more I still have to learn about ag, it is relentlessly fascinating and essential to understand.

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The Market Ticker - Simon Johnson At "Bretton Woods"

The Market Ticker - Simon Johnson At "Bretton Woods": "

You know, the rogue one over the weekend.... well-worth a watch.

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The Market Ticker - Tossing The Tea Cart

The Market Ticker - Tossing The Tea Cart: "

GDP = C + I + G + (X - M)

C = Consumption
I = Net Investment
G = Government expenditures
X = Exports
M = Imports

The fundamental equation of a nation's output. Memorize that, because there will be a test.

It is amusing and somewhat-distressing to see all of the jockeying that people do on a daily basis trying to take credit for this or that, or even worse, re-writing history. Such appears to be the case of late with whatever you care to call "The Tea Party."

Let's start with what "The Tea Party" is and is not.

It is an idea. It began in 1773. The idea has survived for more than 225 years and was, somewhere around the original time of the act, represented No Taxation Without Representation.

It is not a singular organization. Nobody (in their right mind) claims that it is. Even the "Tea Party Patriots", one of the organizations that attempts to coalesce other groups, says on its "about" page:

Tea Party Patriots is a national grassroot organization that provides logistical, educational, networking and other types of support to over 1000 community based tea party groups around the country. Tea Party Patriots national coordinators understand that we are mere servants to the grassroot groups. We understand that we do not set the course for our member groups, as they have developed their own vision and plan for how to address the local and national challenges that they are facing.

I don't think I could say it any better than this, so I simply cite them.

There it is.

"The Tea Party", as an idea, began in the 1700s. Nobody now alive is old enough to claim to have been "THE owner" or "THE originator" (note the definite article, for those who are English-challenged) of that idea. More to the point, ideas are not, broadly (with damn few exceptions) able to be owned or controlled. They just are.

Those of us who are honest state quite-clearly that we have, are, and will continue to build upon the idea embodied in The Tea Party (as occurred in Boston.) Indeed, not even Samuel Adams' ghost, were he to be queried, could take direct credit for the act, as the meeting he was chairing at the time had not adjourned and he was, at the point where Colonists turned idea into act, attempting to regain control of his meeting! History records, of course, that he post-hoc adopted the act and both publicized and defended it. He is, as such, a (note the indefinite article again) founder of "The Tea Party" (reduced from idea to act.)

There are thousands of people across this nation that are "one of the" (note those three words) founders of "The Tea Party" (in the physical sense of a group of people, one of many such groups) or "The Tea Party Movement" (more broadly, some collection of groups) yet remaining inclusive, not exclusive. The dictionary tells us that "found" means to establish, formulate or coalesce. If you were or are one of the people who has put together a sign, waved it in people's faces, and demanded that the government become responsive to the people - the broad idea that came from 1773 - you are a (note the indefinite article, again for the English-challenged who are disturbingly common among those who claim to possess even ordinary skill in the English language, and a more-convenient and ink-conservative, digital or otherwise way to write "one of the") "Tea Party Founder."

As for one of many physical manifestations of that idea, I provide the following as (again, one of many elements of) evidence:

Every one of the individuals who marched that day, and in the days before and after, those who waved signs, those who organized, those who said "Taxation without representation: Isn't that why we had the Revolution?" to a camera - here, there, or anywhere: you have, and if you in the future so act, you are A (again note the indefinite and inclusive, not exclusive article) "founder" as you have reduced an idea to action - whether by speech, by pounding shoe leather or waving signs in people's faces.

In short, for those who claim that I, or anyone else, has (or has claimed) some "right of control" over what is today called "The Tea Party" I respond with this as my last and final statement on the matter, entirely consistent with that which I have said before: Learn the difference between the definite and indefinite article in the English language, the use of exclusive and inclusive language, the difference between an idea, a group of people, and an action of peaceful protest by a group of people, and then grow up - you can't own or control an idea and any alleged premise to the contrary is ridiculous.

Now let's get to why I have raised so much hell in relationship to those who claim affiliation with "The Tea Party" as an idea, including my rant back in October of this year before the election.

Go back and read the top of this Ticker again.

GDP = C + I + G + (X - M)

The fundamental equation that determines what everyone calls "economic health." The output of the nation and which way it's trending.

It is my considered opinion and has been since I started writing on this matter in early 2007 almost exactly four years ago, and indeed even before 2007 back in the Nasdaq-bubble-bursting days where I was occasionally quoted in various media, that the intentional distortion of this equation is the mother and father of all frauds upon the public and we are going to eventually have to cut it out!

Here's the most-recent GDP release with the above terms labeled for you in nice, bold red letters:

So you want to cut government spending ("G") eh?

Ok, every dollar you cut will reduce GDP by (at least) one dollar. See the above equation.

You prefer instead to tax the rich?

Ok, every dollar you tax (from "the rich" or otherwise) will reduce GDP by (at least) one dollar, as it must by definition reduce either "C" or "I". Once the government steals your money via taxation you cannot spend or invest (save) it.

In fact GDP will fall by more than one dollar, because the extra limousine that President Obama was going buy and now doesn't is no longer demanded, and the people who were going to build that car won't have a job. They will thus demand less, and again, "C" and "I" will fall. The exact amount of this additional loss of GDP is the subject of much complex mathematical modeling by economists and plenty of argument. It is sufficient for the purpose of understanding what is going on, and what has gone on, to understand the basic principle that for each thing not bought someone doesn't get employed to make that thing.

But, you argue, the economy is recovering!

No it's not.

Look closely at that graph. $1,700 billion borrowed and spent last year by Government, more or less. Take that $1,700 billion off of a combination of "G" (less government direct spending) or "C" (transfer payments - that is, entitlements of one form or another) as both were direct and intentional distortions to GDP.

The really bad news is what the government has been trying to cover up and why we hit the wall. That's found here:

That's the change, quarter-over-quarter (not annualized) for both debt everywhere in the system (according to The Fed Z1) and GDP. For a literal thirty years we have "goosed" GDP numbers by borrowing more and more money - vastly more than the increase in GDP, each and every year.

But every dollar you borrow you have to pay back with tomorrow's production with interest. We have as a consequence of these actions blown a massive, outrageous and utterly unsustainable bubble in our alleged "GDP" and contrary to the assertions of the left, right, Tea and otherwise in the political sphere, which is where I write from today, it has not been corrected and there has been no recovery.

Back to that basic equation: Paying down or servicing debt by government and private parties, where that debt is held outside the United States, means capital flows that go outside the US and cannot be recaptured in GDP since those funds are not here in the US any more. And before you say "but they export to us" go look at that equation again - "M", imports, are a subtraction to GDP.

Borrowing for the purpose of consumption or speculation does not constitute actual growth of the common weal of the nation. Borrowing for consumption is nothing more than pulling forward tomorrow's car, home or hamburger purchase into today. Neither does running a trade deficit that "finances" our budget imbalance. These acts produce a distortion in GDP. When the blue line is increasing in distance above the red line the distortion is getting worse, not better, as net leverage in the system is increasing. When it is constant then so is the distortion. And when the blue line is below the red line it is signaling a return to health, even though such a return will result in a net decrease in GDP as it occurs and the distortion is removed.

Note that none of this has anything to do with how a currency is backed or based, or who controls it. The Ron Paul crowd and similar who argue for "hard money" are arguing for a chimera, whether they realize it or not. So long as one can lend at interest the attempted expansion of borrowing in excess of GDP will occur. It cannot be otherwise because every dollar borrowed must be paid with interest. As a consequence it is a mathematical certainty that "busts" must occur in which debt and output are brought back into balance. We call that process by which the weakest borrowers and lenders go bankrupt and clear the economy "recession", and when it is intentionally delayed, obfuscated, covered over and tampered with, it becomes more and more severe the longer attempted denial of basic arithmetic continues.

For those on the left or right, Tea Party or Coffee Party, these are economic facts. They are trivially reducible to third grade arithmetic. The fundamental equation of GDP is taught in your first formal economics exposure, no matter where you have it (in High School, College, or right here on The Ticker.)

The turn-down in the economy occurred because private debt accumulation reached its limit of service. On this there is no debate - the American public was unable to pay its mortgages and credit cards. The GDP "increase" over the years from the early 1990s on forward was not purchased with output - the effort of people - but rather with ever-increasing amounts of debt. That debt increase, net-on-net, reached one of three dollars spent in the economy in 2007 before it collapsed.

There has been no net increase in consumer borrowing capacity as household incomes adjusted for inflation have in fact been stagnant or declining since 2000. The only category of personal consumer debt (e.g. ex-housing) that has increased since the decline in credit growth began in 2008 has been student loans.

Government has attempted to prevent recognition of the GDP contraction that must take place to restore balance to the economy. That balance can be restored either by paying down or defaulting (restructuring) that excess debt, and there's a lot of it. Either will result in a serious contraction in GDP.

In 2000 I argued that the net contraction required was about 10% of GDP. In 2007, if you go back to my earlier writing, I argued that this amount was about 20% of GDP. Today, a quick back-of-the-envelope look at the distortions created since 2007 by the Federal Government and their infantile attempt to prevent the inevitable has added at least 25% to the total damage net-net, and likely more.

Withdrawal of the government's taking over of private debt addition will result in a contraction of GDP, no matter whether it is done by raising taxes, cutting spending, or some combination of the two.

This is a serious time for serious people. Those who wish to play political "gotcha" and games, along with making demonstrably false statements about how "I was sent to Washington to quit spending more than we make", but who will not stand before the camera and tell the truth on this matter are not serious people. They are playing politics as we have done for the last 30 years through more and more "deregulation" and "tax cuts", both of which are simply another way to cheat on the economic realities by goading someone (whether private or government) to go out and borrow more and more money to print up false claims of economic prosperity which they then use to get reelected.

And that is why I tossed, and will continue to toss, the "Tea Cart", along with that of the "conventional" political left and right.

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Video: Of the 1%, by the 1%, for the 1%

Video: Of the 1%, by the 1%, for the 1%: "

Nobel Laurelate and professor at Columbia University Joseph Stiglitz:

“It’s not just that the people at the top are getting richer. Actually, they’re gaining, and everybody else is decreasing… And right now, we are worse than Old Europe.”

See also this Stiglitz column:

Of the 1%, by the 1%, for the 1% (Vanity Fair)

Part I

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Part II

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Hat tip Jesse’s Café Américain

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