Archive for September, 2011
I have recently come across an article that I thought was worth sharing with you. I take no credit for writing it and I do believe the writer has done an excellent job reminding us WHY our economy is on the verge of collapsing and why most Americans will be severely impacted. I sincerely hope you’ll find it as enlightening as I have.
September 26, 2011 by Bob Livingston
America is a warfare/welfare state. In fiscal year 2010, the Federal government spent $3.5 trillion. Warfare and welfare made up the vast bulk of the spending.
About 20 percent of that $3.5 trillion — $705 billion — went to defense and “security-related” international activities. That’s governmentspeak for nation-destroying/woman- and-child-killing-bombing/nation-building/installing-dictators-friendly-to-the-U.S.-and-paying-them-to-oppress-their-people-in-the-phony-war-on-terror activities. Out of that $705 billion, about $170 billion financed the operations in Afghanistan and Iraq (see above).
(As an aside: The war in Iraq has been going on for 21 years, the war in Afghanistan for almost 10. Perpetual war is the norm.)
Social Security received another 20 percent of the spending pie. About $707 billion went for retirement benefits for 34.6 million workers and 19.5 million spouses and children of retired workers, surviving children and spouses of deceased workers and disabled workers and their dependents.
Medicare, Medicaid and the Children’s Health Insurance Program (CHIP) consumed about 21 percent of the budget, or $732 billion.
Another 14 percent — $496 billion — went to other safety-net programs like Supplemental Security Income (SSI), food stamps, school meals, low-income housing assistance, child care assistance and other social programs.
This means that 75 percent of the total United States budget goes to making war or paying people to do nothing. Of course, in theory, the Social Security Trust Fund is supposed to consist of money the government confiscated from workers and set aside on their behalf. But Congressional thieves long ago looted the fund, making it the Ponzi scheme that Governor Rick Perry was reviled for characterizing it as a few weeks ago.
As Perry learned, however, you’re not supposed to mention the obvious. The sacred principals of Ingsoc apply: newspeak, doublethink, the mutability of the past. War is peace, freedom is slavery, ignorance is strength, Social Security is flush with cash, we’re from the government and we’re here to help you, the not-war in Libya will be over in days not weeks, the Federal Reserve is not printing money.
In Washington, the word “cuts” also falls under the category doublespeak. Cuts are not cuts in the sense that regular people understand cuts. Cuts in Washington are actually no more than a reduction in growth. If something that would normally see an annual increase of — say — 10 percent gets reduced to an increase of 8 percent, the politicians cry gloom and doom at the prospect of a massive “cut” in spending.
But why would we expect the elites to cut off their largesse? After all, former Fed Chairman Alan Greenspan so deftly affirmed a point I have made before: There is no chance of default when we can just print more money.
When George W. Bush entered the White House in January 2001, the Federal government had expenditures of $1.79 trillion and revenues of more than $2.03 trillion. Now, we are told that 2011 projected revenues of $2.28 trillion are not enough to fund a functioning government, even though that was more than enough 10 years ago.
The warfare/welfare state grows out of control. President Barack Obama plays the class warfare game to gin up support for stealing more from the middle class under the guise of “making the rich pay their fair share.” But no one in Washington and none of those trolling for your votes in the GOP beauty contest are proposing cutting anything from the bulk of the Federal spending (except, of course, Representative Ron Paul, whom the mainstream media and Republican Party apparatchik continue to label as a kook in an attempt to marginalize him and force him from the race).
If you are pinning your hopes on the Congressional “supercommittee” to cut the budget in any meaningful way, you are delusional at best. The entire supercomittee has been bought and paid for by the military-industrial complex. Committee member Senator Jon Kyl (R-Ariz.) put any notion of military cuts to rest right out of the gate when, at a recent forum sponsored by conservative think tanks, he said, “When we had our first meeting the chairman asked, ‘Well what do we think about defense spending (cuts)?’ and I said, ‘I’m off the committee if we’re gonna talk about further defense spending.’” And Kyl gets less from the military-industrial complex than most others on the supercommittee.
Of course, any talk of cutting “entitlement” — welfare — spending is met with instant derision from all sides. Government has created a dependency class that keeps the elites in power. And its policies — combined with those of the Federal Reserve — have grown the class of those who now see no hope beyond becoming part of the dependency class.
We have a “lost generation,” according to a report by The Associated Press. Young adults entering the job market during this prolonged economic disaster are finding few job prospects but are saddled with enormous college loan debt and no way out. Their career choices are mostly limited to tending bar, waiting tables and finding odd jobs. If the slump ever ends — and it’s not likely as long as the government continues to make bad choices (see Japan) — they will be older but will have no experience in their chosen field and will be competing for jobs with new college graduates. It’s a bleak outlook for them.
Meanwhile, Helicopter Ben Bernanke continues to stoke the fires of hyperinflation with his ridiculous money-printing policies. Printing money steals the wealth of society’s producers to the benefit of the elites. It’s a hidden tax. It finds the cash you’ve stored under your mattress or in your savings account and plunders it. Few people understand this.
The elites and the MSM say QE2 and “twists” and stimulus and bailouts are the only way to end the economic disaster. Most of the mindless government-school non-educated zombies walking the streets today accept such drivel without question, bang, banging their heads against the wall in a never-ending quest for something different from what’s always been the same.
“American Idol” and “Dancing With The Stars” are what is important to them. Give them Monday Night Football and beer and chips. No more silly, boring talk of economics, the Federal Reserve, legislative bills.
Welcome to life in the warfare/welfare state. It cannot sustain itself forever. The collapse will be ugly, but it is inevitable.
Posted 9/20/2011 by Allen Sykora
Montreal– (Kitco News) — A cultural affinity for gold coupled with expanding economies and individual wealth are likely to mean continued strong demand for the metal in the key nations of India and China for years to come, speakers told the London Bullion Market Association Tuesday.
One session was titled, “China & India—the Evolution of Golden Giants.”
The citizens of both nations are only enjoying higher incomes that mean greater consumer spending, including luxury items, the speakers told the LBMA annual conference in Montreal. Further, they have a natural propensity toward saving, particularly without a retirement program such Social Security in the U.S.
In fact, the Chinese save 38% of their disposable income, while the people of India save 29%, according to one graphic shown to the audience. The U.S. rate was listed as 3.2%. As the Chinese build their savings, they are faced with low interest rates at banks, a stock market not performing well and limitations on real estate and foreign investments, the audience was told.
“Where else can they turn to?” asked Albert Cheng, managing director, Far East, for the World Gold Council. “We saw in the last year, they put some of it in gold.” Wai-Chan Chan, director and partner in the Greater China office of the global strategy consulting firm OC&C, described a rapid urbanization and “remarkable” economic growth in China. The country recently became the second-largest economy in the world.
“Fifteen years ago, rush hour was bicycles. No one had a car. Look at it now,” he said, showing a slide with bumper-to-bumper traffic. For the 20-year period beginning in 1990, per-capita spending grew at a rate of 11% a year, he said. By contrast, the growth was 4% in the U.S. and U.K. and 3% in Germany and France. In particular, the so-called “luxury” market has “exploded” in China, he said. “Chinese consumers are spending more on gold jewelry, due to higher willingness to spend, better product offering and (the) investment function of gold,” he said.
India has an ingrained cultural affinity for gold, further helped by macroeconomic factors, said Rujan Panjwani, president of Edelweiss Financial Services. He cited estimates that Indian households have hoarded an estimated 20,000 metric tons in the form of ornaments. Gold ornaments account for some 10% to 15% of the cost of an average Indian wedding, he said. And, he added, there is a likelihood of 125 million to 150 million weddings in the next decade. Further, he said, the lack of Social Security and scarcity of insurance or pensions has also made India a nation of savers. Yet, the country of more than 1.2 billion people has only 350 million bank accounts.
“Where do you save? Cash under your mattress? No,” he said, then offering one of the answers: “Gold.” An estimated 7% of India’s $256 billion in total household savings is currently held in gold, he said, citing the McKinsey Report. In 2010 alone, Indians bought 963 metric tons of gold worth an estimated $38 billion. Like China, India has a rapidly growing economy. Gross domestic product is headed to an estimated $2 trillion for 2011 from $473 billion in 2001, and is expected to be $4.5 trillion by 2021.
With the devaluation of the Swiss franc, the world’s last “safe haven” currency has disappeared, Free Gold Money Report editor James Turk writes this week. But Turk, founder of GoldMoney and consultant to GATA, adds that the Swiss franc actually has been devaluing against gold for a long time, along with all the other major currencies.
Turk’s commentary is headlined “The Swiss National Bank Gives Up” and you can find it at http://www.fgmr.com/swiss-national-bank-gives-up.html
On August 26, the world’s investors were holding their breath before the Federal Reserve chairman ascended to the stage. They were anxiously looking to hear two words. Quantitative Easing. So there was a sign of relief when those words didn’t come out of Ben Bernanke’s mouth. As a matter of fact he proposed no new steps to boost the economy. But how can that be? With a ballooning federal debt and no sign of economic recovery, the federal government must surely be desperate. The debt ceiling has been raised to accommodate the increase of new federal debt, and the Central Bank has been assigned the responsibility to find the funding solution, but its name cannot be Quantitative Easing. And why is that? Because by now most of the people know that QE stands for newly created (out of thin air) money. The world’s investors know that expansion of the money supply leads to inflation and the debasement of the dollar. They also know that if we have to print more money we must not have our economic house in order.
A while back I wrote an article about one of the most important factors that could trigger hyperinflation without much warning to the American people. I describe how banks are currently holding over $1 trillion in excess reserves and why lending has contracted. If banks start lending out at their full potential – via the fractional reserve banking system – the money stock could be increased by a factor of six. Does a $18 per gallon of oil sound exciting to you? It is obvious it would be devastating to most Americans because the resulting massive inflation would erode people’s savings and drastically reduce the purchasing power and standard of living.
In normal circumstances the banks excess reserves would be at a few tens of billions. But the current high levels of $1.76 trillion are reflective of banks’ reluctance to lend and qualified borrowers unwilling to borrow. So the answer to the federal government budget deficit lies in these reserves, which are now significant in the success of the Federal Reserve’s new scheme. Remember why QE is not the desirable solution? Simply because just about everyone understands the perversity of such a program. So why not call it RRP (Reverse Repurchase or Reverse Repo)? After all, very few understand the repercussions of credit expansion and when you add fancy terms such as Reverse Repurchase the world can be fooled a little longer. Make no mistake, QE or RRP, the end result is still the same.
For just a moment pretend that I am in serious debt due to a lavishing lifestyle and I come to you asking for help. Because I am a person of known importance in my community my promises have become legal contracts. Simply put, I have the authority to create a financial asset (bond) out of my promises to repay. So, I offer to sell you my newly created financial assets today with an agreement that I will buy them back at a fixed price at a future date. Because you cannot provide the amount of money I need (to support my lifestyle) you borrow money from the bank. This sounds like a good deal to you as long as the interest that you receive from me is higher than the interest you pay to the bank. When time comes and I buy back from you the financial assets, I will pay you the initially agreed upon purchase price (possibly higher) plus interest at which time you should be able to repay the loan to the bank and make a nice profit. But the question is what happens if, in the near future, I become bankrupt and I cannot keep my promise? It is obvious that the financial assets that you hold will also become worthless so you most likely won’t be able to sell them to repay the bank loan.
Now hold this thought because in real life the seller of the financial assets (created out of thin air) is the federal government and the buyers are Fannie Mae, Goldman Sachs and the rest of the institutions from the NY Fed’s Reverse Repo Counterparties List. The banks are currently holding $1.76 trillion of excess reserves with the Federal Reserve for which are being guaranteed a yield of 25 basis points. Finally someone found the solution to put these funds to “good” use. All that is required for this program to work is the interest rate certainty, assurance that Bernanke already gave not long ago when he announced the rates would be kept close to zero for the next two years. Lending these reserves through the fractional reserve system is inflationary regardless whether it’s the private sector or the government that receives them. The scary thought however is the large appetite the federal government has and its unwillingness to tighten its belt, appetite that the already impoverished Americans and the future generations will have to feed.