We’re in Deep State

We’re in Deep State

Matt Taibbi has a Rolling Stone article on Goldman Sachs:

After the oil bubble collapsed last fall, there was no new bubble to keep things humming — this time, the money seems to be really gone, like worldwide-depression gone. So the financial safari has moved elsewhere, and the big game in the hunt has become the only remaining pool of dumb, unguarded capital left to feed upon: taxpayer money. Here, in the biggest bailout in history, is where Goldman Sachs really started to flex its muscle. …

The collective message of all of this — the AIG bailout, the swift approval for its bank-holding conversion, the TARP funds — is that when it comes to Goldman Sachs, there isn’t a free market at all. The government might let other players on the market die, but it simply will not allow Goldman to fail under any circumstances. Its edge in the market has suddenly become an open declaration of supreme privilege. “In the past it was an implicit advantage,” says Simon Johnson, an economics professor at MIT and former official at the International Monetary Fund, who compares the bailout to the crony capitalism he has seen in Third World countries. “Now it’s more of an explicit advantage.” …
Fast-forward to today. It’s early June in Washington, D.C. Barack Obama, a popular young politician whose leading private campaign donor was an investment bank called Goldman Sachs — its employees paid some $981,000 to his campaign — sits in the White House. Having seamlessly navigated the political minefield of the bailout era, Goldman is once again back to its old business, scouting out loopholes in a new government-created market with the aid of a new set of alumni occupying key government jobs.

Gone are Hank Paulson and Neel Kashkari; in their place are Treasury chief of staff Mark Patterson and CFTC chief Gary Gensler, both former Goldmanites. (Gensler was the firm’s co-head of finance.) And instead of credit derivatives or oil futures or mortgage-backed CDOs, the new game in town, the next bubble, is in carbon credits — a booming trillion- dollar market that barely even exists yet, but will if the Democratic Party that it gave $4,452,585 to in the last election manages to push into existence a groundbreaking new commodities bubble, disguised as an “environmental plan,” called cap-and-trade. The new carbon-credit market is a virtual repeat of the commodities-market casino that’s been kind to Goldman, except it has one delicious new wrinkle: If the plan goes forward as expected, the rise in prices will be government-mandated. Goldman won’t even have to rig the game. It will be rigged in advance.

Meanwhile, Barry Ritholtz has a scanned copy of Michael Lewis’s Vanity Fair article on AIG’s Financial Products division, The Man who Crashed the World. (By the way, Barry, we haven’t heard from you lately and we miss you around here. C’mon back)

Lewis makes Joe Cassano sound like the pointy-haired boss on Dilbert.

The basic story is one of predatory securitizing. It took Cassano over a year to realize that the mortgage-backed securities he was insuring had shifted in composition between 2003 and 2005 from only slightly subprime to heavily subprime.

[AIG executive Gene Park] suspected Joe Cassano didn’t understand what he had done, but even so Park was shocked by the magnitude of the misunderstanding: these piles of consumer loans were now 95 percent U.S. subprime mortgages. Park then conducted a little survey, asking the people around A.I.G. F.P. most directly involved in insuring them how much subprime was in them. He asked Gary Gorton, a Yale professor who had helped build the model Cassano used to price the credit-default swaps. Gorton guessed that the piles were no more than 10 percent subprime. he asked a risk analyst in London, who guessed 20 percent. …

Still, Cassano agreed to meet with all the big Wall Street firms and discuss the logic of their deals … Cassano set out on a series of meetings with Morgan Stanley, Goldman Sachs, and the rest — all of whom argued unlikely it was for housing prices to fall all at once [across the country.] “They all said the same thing” … (The lone exception, he said, was Goldman Sachs. … who said: Between you and me, you’re right. These things are going to blow up.) The A.I.G. F.P. executives present were shocked by how little actual thought or analysis seemed to underpin the subprime-mortgage machine: it was simply a bet that U.S. home prices would never fall.

But how did this logic about the reliability of MBSs ever make sense even in the abstract? As it turned out, housing prices didn’t go down in large parts of the country, at least not until after the Crash. Before that, they only fell in parts of the country where they had gone up the most, i.e., California. (Also, Greater Detroit, but who cares if a house drops from $65k to $12k? It never amounted to much in the first place.) But California by itself was enough, due to high home prices, to crash the national economy. Add in Florida, Arizona, and Nevada, and there goes the world. So, who cares if home prices are stable in Dallas and Charlotte if they are plummeting in San Bernardino, Las Vegas, Phoenix, and Miami?

Greed is the whole point of Wall Street, but the big question is: Where was Fear? The Greed was based on the increasing Quantity of the population, which should drive up demand for homes, but Fear over the Quality of the population of new home buyers was simply not part of the mental universe of sophisticates.

It still isn’t.

Cassano finally admitted this was nuts in 2006, but he didn’t try to get out of previous bets on subprimes, he just stopped taking new ones. But, after AIG got out of the game, the investment banks turned out to be willing to hold subprime MBSs unhedged:

The big Wall Street firms solved the problem by taking the risk themselves. The hundreds of billions of dollars in subprime losses suffered by Merrill Lynch, Morgan Stanley, Lehman Brothers, Bear Stearns, and the others were hundreds of billions in losses that might otherwise have been suffered by AIG F.P. Unwilling to take the risk of subprime mortgage bonds in 2004 and 2005 [or, less willing than AIG was], the Wall Street firms swallowed the risk in 2006 and 2007. … A.I.G. F.P. wasn’t an aberration; what happened at A.I.G. F.P. could have happened anywhere on Wall Street … and did.

When the world finally woke up in the summer of 2007,

The subsequent race by big Wall street banks to obtain billions in collater from A.I.G. was an upmarket version of a run on the bank. Goldman Sachs was the first to the door, with shockingly low prices for subprime-mortgage bonds … A.I.G. couldn’t afford to pay Goldman off in March 2008, but that was O.K. The U.S. Treasury, led by the former head of Goldman Sachs, Hank Paulson, agreed to make good on A.I.G.’s gambling debts. One hundred cents on the dollar.
So, basically, the smart boys at Goldman knew it was nuts, but they figured that no matter who was in the White House, they’d have it all rigged that they would get bailed out. And the not-smart boys at the other Wall Street firms figured that if the smart boys at Goldman weren’t worried, why should they be worried? (Other than that they weren’t part of the Deep State like Goldman was …)

My published articles are archived at iSteve.com — Steve Sailer

Banking on Beijing- China’s priority is saving itself, not sinking the dollar.

Banking on Beijing       PDF

China’s priority is saving itself, not sinking the dollar.

By Philip Delves Broughton

There are two ways to interpret the fact that China is America’s largest creditor at a moment of stupendous American borrowing. The first is as an economist. And we’ll get to that. But the second is as a thriller writer—or paranoid economic and political nationalist—and it is much, much juicier. The thriller scenario begins in the blood-red corridors of the Zhongnanhai leadership compound in Beijing, next door to the Forbidden City. Here China’s political elite has been plotting their usurpation of American power for decades. Bent over their Lenovo Thinkpads, the brilliant sons of Communism have engineered nothing less than a global revolution.

Dissolute, wasteful, crass America has been rotting, borrowing and spending, licking lead toys and watching “The Girls Next Door.” Meanwhile, diligent, thrifty, clever China has been preparing to take its place, squirreling away money and buying American debt.

Poor America thinks only in four-year election cycles, cackle the Beijing bureaucrats, whereas China thinks in hundred- and thousand-year spans, in vast historical revolutions that must inevitably turn in their favor.

Does any issue sum it up better than patent infringement? “We can’t do business with a country which pirates ‘The Dark Knight’ and Microsoft Office,” screams America. “Fine,” say the Chinese, “But did we ever see a penny from our invention of paper?”

And so, in the spring of 2009, the time came for China to spring its trap.

As with the assassination of Archduke Ferdinand in 1914, no one believed so trivial an incident as the hassling of a U.S. naval ship in the waters of the South China Sea could precipitate the events that followed.

Sunday, March 8, 75 miles south of Hainan Island. The USNS Impeccable was cruising in international waters, dragging behind it a Surveillance Towed Array Sensor System (SURTASS), a listening device used to pick up underwater acoustical data, notably submarine movements.

Suddenly, five Chinese boats appeared and surrounded it, one coming within 25 feet. A Chinese sailor produced a grappling hook and tried to snag the Impeccable’s SURTASS. The Impeccable’s crew sprayed him and his ship with a fire hose. The Chinese sailors undressed down to their underwear and kept coming. One boat tossed wood into the water ahead of the Impeccable, forcing it to stop. Two hours later, Chinese fighter planes flew low over the American ship.

The Impeccable’s captain said Chinese harassment had increased markedly during the previous week, but he had no idea why. The Pentagon maintained that the Chinese have vastly under-reported their military spending and cloaked their intentions for years. Was the truth now starting to emerge? Was China’s pesky aggression a sign of worse to come?

The following Friday, March 13, China’s premier, Wen Jiabao, followed the military attack with an assault on America’s credit-worthiness. “We have lent a huge amount of money to the U.S.,” he said. “Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.”

With the U.S. Treasury rolling out ever more plans to borrow and spend, this was no time for one of the biggest acquirers of its debt to be making violent choking sounds.

Or was it the perfect time? With America on its knees, was this not the ideal moment to trigger the shift of power from Washington to Beijing? Would China now dump its U.S. assets, render the dollar worthless, and emerge triumphant from the wreckage of the global economy?

Get me Harrison Ford.

The truth may be more mundane—unless, of course, you are a keen follower of the patterns of global credit, in which case these are riveting times.

China’s massive acquisition of American assets in recent years, from Treasury bills to corporate bonds and equities, seems to have many people spooked. The way they talk about it, you would think some tattooed goon, seconded from a Macao casino, had cornered Lady Liberty and was demanding she pay the vigorish.

China, according to this thinking, is not someone to whom you want to owe money, especially if like America you are already in a deep financial hole and asking to dig further. China’s motives are not aligned with America’s interests. Owe them too much and one day you’ll pay a far heavier price than you imagined.

In fact, Chinese lending and U.S. borrowing have become so fundamental to the success of their respective social and economic models, and the stability of the global economy, that a quick unraveling would be a form of mutually assured destruction. There is no easy way out of the relationship for either country unless they wish to tumble like Holmes and Moriarty into the roaring Reichenbach Falls.

China’s huge dollar reserves are merely a symptom of an economic fix of its own making. Ever since Deng Xiaoping introduced his economic reforms to China 30 years ago, the country’s growth has been driven by exports—mostly to the United States and Europe.

The export focus led to the creation of millions of manufacturing jobs, which in turn served the primary goal of China’s leaders, to ensure social stability through employment and prosperity. China’s factories duly became the last stop on the global assembly line, taking in imports from more advanced Asian economies such as South Korea, Taiwan, and Japan, repackaging them, and sending them off by container ship.

Crucial to this strategy was a weak currency. If the renminbi climbed, as it should have given China’s growing economic power, the value of Chinese exports would rise and their competitiveness fall. So Beijing acted aggressively to keep the renminbi at a consistent level against the dollar. Until 2005, there was a fixed peg. Since then, the renminbi has been allowed to float and has drifted up by around 20 percent, though it still trades well below where most economists believe it should.

How the Chinese achieved this explains much of the present situation. First, the Chinese central bank simply printed renminbi to dilute the existing pool and buy foreign currencies. Then, fearing inflation, they bought back their own currency by issuing bonds and raising capital requirements on Chinese banks, which must now turn over some 20 percent of their cash deposits to the government.

In addition, China lent to its biggest export market by investing in dollar-denominated securities, notably those issued by the United States Treasury and government agencies like Fannie Mae and Freddie Mac. This kept the dollar healthy and Chinese exports relatively cheap.

For years, this policy of keeping the renminbi low against the dollar and using the dollar trade surplus to lend back to the United States to buy more Chinese goods worked. But it was a policy, like a Ponzi scheme, that became all but impossible to reverse and was merely putting off the cost China would one day have to pay for its explosive growth.

As Brad Setser, a global economic analyst at the Council on Foreign Relations, has written, “The benefits—rapid export growth, lots of investment in the export sector—associated with China’s exchange rate policy were front-loaded while the costs—export dependence, losses on China’s reserves—were back-loaded. The bill for subsidizing China’s exports during the boom is just now coming due.”

One consequence of this is that China’s leaders now view America’s economic challenges from two different, often conflicting, perspectives. On the one hand, China is America’s largest foreign creditor. U.S. Treasury and government agency securities are now estimated to comprise $1.25 trillion of China’s American portfolio. Another $250 billion or so is believed to be split between U.S. corporate bonds, money-market funds, and equities. American assets are believed to comprise 70 percent of China’s foreign reserves, with most of the rest held in euros. The numbers are murky as China’s foreign investments are handled by a number of entities, some in Hong Kong, whose holdings are not disclosed.

If America runs up more debt than it can reasonably repay, the value of China’s U.S. holdings will fall. Thinking as a lender, China would rather America tightened its belt, cut its expenses, and focused on paying back its existing debts. It wants America to keep the dollar strong and interest rates low to preserve the value of its bonds.

But if the U.S. economy does not recover quickly, whether through government stimulus or other means, China’s entire growth and export-driven economy risks unwinding. If one accepts that the size of China’s reserves is a sign of its devotion to the goal of social stability, of which the export economy is simply the means, then Beijing must be willing President Obama’s borrowing plans to succeed. Dollar be damned, China needs the American consumer to buy Chinese goods and sustain Chinese jobs.

In this context, Wen Jiabao’s fretting over a fall in the value of China’s foreign reserves, its rainy day fund, is like complaining about a dripping tap when water is pouring in from the ceiling. Even if the value of China’s U.S. portfolio were to fall by 30 percent, it would cost the Chinese around the same as their recent $586 billion stimulus plan. If the whole lot, a sum equivalent to one seventh of America’s GDP, were to go up in smoke, China would remain solvent. Except that would also mean that the United States’ economy had ceased to exist, which would be a considerably larger problem.

From America’s perspective, China’s fussing is a mild concern. If China were to stop lending money to the United States, there are other sources of capital in the world. There are plenty of investors, including American investors, who still see the full faith and credit of the United States government as a decent bet.

And realistically, where else is China going to go? It has already tried to use its economic muscle to patch together a network of oil suppliers around the world to immunize itself from price movements and supply disruptions by cutting deals with Iran, Sudan, and Angola. But it still depends on global supply for 95 percent of its energy needs. This policy of going where squeamish rivals fear to tread has also led it to become the largest trading partner of Iran, North Korea, and Sudan and the second largest of Burma and Zimbabwe. You scarcely need to be the UN High Commissioner of Human Rights to understand this is not the Peoria Chamber of Commerce.

The China Investment Corporation, a sovereign wealth fund, and the State Administration of Foreign Exchange (SAFE), a shadowy body with responsibility for managing China’s foreign reserves, have made a number of investments in Western financial firms in recent years. Two years ago, the Chinese paid $3 billion for a stake in the Blackstone Private Equity Group. The value of that has fallen by around 75 percent. In December 2007, the CIC paid $5 billion for a 10 percent stake in Morgan Stanley. That has since fallen by more than half.

The Chinese were reportedly stunned by their losses in Lehman Brothers and by the lack of support they received from the U.S. government. When Fannie Mae and Freddie Mac were close to collapse, only intervention by the Bush administration saved the Chinese from dramatic losses on hundreds of billions of dollars in mortgage-backed securities. Since then, the Chinese have sold their government agency securities and bought short-term Treasury bills, which carry less risk.

In fact, when you decompose the risks and returns on China’s portfolio, U.S. Treasuries may well be its soundest investment. Singapore’s vaunted Temasek sovereign wealth fund, for example, lost 31 percent of its value last year. Had China followed Temasek’s investment strategy, or indeed Blackstone’s, instead of buying boring old Treasuries, Wen Jiabao would have thrown himself into the Yangtze.

Over the next few months, the extent of China’s buying of U.S. assets will be closely watched. The World Bank forecasts that China ran up a $425 billion current account surplus in 2008. It has to put the money somewhere, and there is already a surfeit of domestic credit. That cash, perhaps the last of the great savings glut piled up in emerging markets over the past decade, has to go overseas.

The appetite of foreign central banks for U.S. Treasury securities is already falling as the global economy contracts. But for the next few months at least, long enough for President Obama to get his stimulus funding in place, the money, with China’s help, should be there.

And then what? Then the really hard work begins for China. Wen Jiabao has conceded that the government target of 8 percent growth this year, necessary to contain unemployment, is unrealistic. He has called on China’s businesses to “focus on adjusting product structure, improving quality and upgrading technologies in the face of economic woes.” It is high time, he was saying, for China to move up the economic value chain, to go from sweatshop to design shop, to develop its domestic markets and create investment opportunities for its own citizens.

The reason the Chinese save so much is not because they are better than us or because they all read Suze Orman. They save because they have nothing to buy or to invest in and because they are terrified that when they get sick or grow old or have to educate their children, the state will not help them.

China’s priorities are territorial integrity and economic growth, not bankrupting the United States. Growth can only continue with greater economic liberalization and a move away from the government’s mercantilist policies, notably its insistence on using an artificially low currency as its main competitive weapon. For all of its success, China’s GDP per capita still ranks only 100th in the world. It is a woefully inefficient consumer of energy, a rank polluter, and a poor provider of educational and health services to its people. If you think the United States has problems, try living in Guangzhou Province, the heart of China’s manufacturing industry, where millions of migrant workers are struggling to find work.

The stark facts of China’s relative position to the United States are these: China has four times the people and one quarter the GDP.

Wen Jiabao is within his rights to express concern about his investment in the United States. But he must also acknowledge that China’s ability to convert its surplus into loans to Americans has been crucial to China’s economic growth.

Had China pursued a different strategy over the years, letting its currency float, liberalizing its markets, and stimulating domestic consumption, its progress may have been more uneven and less predictable. It would have had a different set of problems to face today—problems that might have looked more like America’s. 
__________________________________________

Philip Delves Broughton is the author of Ahead of the Curve: Two Years at Harvard Business School and a former New York and Paris correspondent for The Daily Telegraph.

The American Conservative welcomes letters to the editor.
Send letters to: letters@amconmag.com

Bringing Down the House- Why home prices won’t rise again

Bringing Down the House       PDF

Why home prices won’t rise again

By Charles Hugh Smith

The financial media and government officials are looking for a recovery in the housing market to “restart the economy.” The entire world—or at least every exporter from Shanghai to Bonn who is desperately dependent on the free-spending American consumer—is hoping that housing is about to re-ascend to its glorious bubble-era heights. But that is not going to happen—not this year, not even in ten years, for several fundamental reasons.

1. Bubbles do not re-inflate in the asset class that just popped. Tulip-bulb valuations did not rise again to stratospheric heights after the Tulip Craze went bust, nor did the NASDAQ dot-com bubble re-inflate, for the very good reason that bubbles are never based on rational valuations. They are the result of a psychological state of mania that cannot be reinstated once lost. Consider tech stock Cisco Systems, a well-managed “real company” that continues to make profits providing goods and services. Having replaced the bankrupt General Motors in the Dow Jones Industrial Average, Cisco currently trades at around $17 a share, down from its dot-com bubble valuation of about $81 per share.

To recover its bubble-era valuation, Cisco would have to rise fivefold. That’s highly unlikely. Now that the hysteria has dissipated, Cisco is valued on more rational metrics like earnings, profits, and cash flow.

Mania always moves on to a new asset class. After the dot-com bubble, speculators turned to housing. Once the housing bubble collapsed, the mania shifted to the bond market. Now that the bond bubble is bursting—that spike to nosebleed territory in December 2008 was the dead giveaway—the only asset class that hasn’t already been blown into a bubble is precious metals and gold.

2. Inflation sets the “recovery” target ever higher. While we are in a deflationary period right now, a serious amount of inflation occurred between Cisco’s peak in January 2000 and the present. According to the Bureau of Labor Statistics’ inflation calculator, $81 in 2000 is $100 in current dollars. So Cisco would have to rise by that much more to match its bubble-era valuation. The same is true for housing. Let’s say a house that sold for $100,000 in 1995 was valued at $400,000 at the housing-bubble peak in 2006. If history is any guide, then housing will retrace to its pre-bubble valuation, as that is the usual progression of bubbles and their demises.

Now if inflation ramps up and ravages the value of the dollar, the price of a tangible good like a home might well rise more or less along with inflation, as people will be trying to turn their rapidly devaluing dollars into some tangible good as a means of preserving capital. But if inflation is clipping along at 10 percent a year, and the house returns to its bubble-era value of $400,000, that $400,000 doesn’t retain the same purchasing power as it did in 2006.

Consider the stock market in the inflationary period of the 1970s. While the market wobbled from 1,000 in 1966 to 1,000 in 1982 16 years later, inflation destroyed two-thirds of the value of the dollar. According to the Bureau of Labor Statistics, which tends to understate inflation so as not to alarm the masses unnecessarily, $1 in 1966 was worth 34 cents in 1982. Thus people who held stocks for those 16 years did not retain their wealth as the Dow Jones retouched the magic 1,000 mark—they lost two-thirds of their investment.

It is easy to foresee the same thing happening in housing should inflation ignite. Over the next 16 years, the house that sold for $400,000 in 2006 may well rise once again to that nominal price, but the inflation-adjusted value could well be closer to $100,000 when priced in (pre-housing bubble) 1995 dollars.

This is why nominal prices in stocks, housing, and bonds are essentially meaningless. All assets have to be valued in terms of purchasing power, and as imperfect as any inflation/deflation gauge might be, it’s still a better guide to purchasing power than nominal price.

3. Perhaps counterintuitively, deflation also ravages bubble-era valuations. You might think that because inflation is tough on bubble-era valuations when priced in purchasing power (or some non-paper metric like gold), then deflation would be dandy. But deflation wipes out bubble-era valuations just as assiduously as inflation does. In deflation, debt grows ever more burdensome as cash becomes scarce and wages and income drop. As a result, assets dependent on leveraged debt such as real estate drop in value. In deflation, real estate becomes a capital trap, which loses value as cash gains in value. As incomes plummet, so do rents, the income stream that real estate brings, further impairing its value.

Deflation often accompanies depression, and nothing is more of a capital trap than an empty house or building earning no income. Compared to that negative return—recall that cash-starved cities and counties will still be collecting property taxes on vacant property—cash that is earning interest looks very attractive. This capital flight creates another drag on housing valuations.

So whatever the future holds—deflation, inflation, or periods of one following the other—housing will never return to its bubble-era valuations when measured by purchasing power adjusted for inflation.

4. The fundamental driver of the housing bubble was once-in-a-lifetime low interest rates and loose lending. Bond yields and thus interest rates tend to move in generational cycles of about 20 years—occasionally as short as 17 years and as long as 27 years. The current decline in yields has now run 27 years, the historical maximum for such cycles, thus we can anticipate that yields and interest rates will be rising for the next generation.

Why would interest rates rise? Easy. The U.S. is borrowing trillions of dollars a year, and once the rest of the world either runs out of cash or the desire to give us all their surplus capital, interest rates will rocket regardless of what the Fed or U.S. Treasury do. Picture our financial royalty standing knee-deep in a rising tide demanding that the waters recede. Good luck with that, fellas.

As for loose and/or fraudulent lending, you know the story. Though there are many causes for the housing bubble’s expansion and collapse, this is the most basic: the bar for qualifying for a mortgage was lowered to near zero. This can be illustrated by a steeplechase analogy in which the prudently high mortgage qualification hurdle of “20 percent down, verified income, and no more than 35 percent of income devoted to a mortgage” was replaced by one mere inches in height. Everyone with a pulse and the will to stretch the truth not only qualified for the race, they all crossed the finish line with flying colors. Is it any wonder that millions of marginal buyers leaped in? Their marginality was quickly revealed, however, once they left the track and returned to real life.

Now that the entire charade of passing off millions of highly risky, doomed-to-default mortgages via securitization to unwary investors has ended, risk avoidance has led not just to a return to higher qualifying standards but to a raising of the original bar. In the post-bubble aftermath, the hurdle not only excludes marginal risky borrowers but some of those who might have qualified before the bubble mania infected the housing and lending markets.

So if fundamental drivers of insanely low interest rates and loose lending are not coming back, then precisely what forces will re-inflate the housing bubble? The answer: none.

Demographics? Housing density has been falling for decades. Everyone wanted not just his own room but his own condo or house. As the density trend reverses course (greetings, returning unemployed offspring—your room is untouched since you left for college), all future population growth can be easily accommodated by the existing housing stock.

Speculative mania? That drunken circus came to Housing Town and left, never to return in our lifetimes. If you’re 3 years old you may live to see another housing bubble in your dotage.

5. The bull market recession-recovery cycle is broken. Standard-issue financial pundits are hopelessly blinded by their Cargo Cult belief—in which you paint a rock to look like a radio and then use it to plead for the return of well-stocked Liberty ships—that the long postwar era of prosperity is still intact. For the past 60 years, the cycle was predictable: a recession would wring out credit and inventory excesses, setting up a recovery. But the mechanisms that provided stability to the U.S. economy are now broken. The global credit market dislocations, the extremes of leverage still not unwound, the accounting trickery and fraud still lurking in countless balance sheets (or even worse, in off-balance-sheet accounts), the unprecedented destruction of middle-class wealth—these factors plus another dozen or so too enervating to list require us to face the disagreeable conclusion that we are in uncharted territory, and appeals to rock radios (“green shoots”) are unlikely to hasten the return of prosperity.

Even worse, our government is straining with every fiber of its vast being to extend the excesses of credit, debt, and leverage that created the housing bubble and guaranteed its collapse. The catastrophically bankrupt state of California managed to find $100 million to help residents buy sparkling new homes—never mind the hundreds of thousands of perfectly livable homes now on the market.

We can safely predict that all the blandishments of bankrupt governments attempting to re-inflate the housing bubble have approximately the same chances for success as pleas screamed at a gaily-painted rock.

But there is a funny little mechanism called the free market, which has a long history of resolving credit/debt/leverage/valuation excesses by enabling prices of assets, be they mortgages, homes, land, or derivatives, to fall to the point that entrepreneurs can pick up the pieces and actually turn a profit.

In a similar fashion, the bloated inventory of unsold vacant housing will magically decline once the price of owning a house falls substantially below the cost of renting a house. In other words, when it actually makes financial sense to buy a house and live there rather than gambling on its value as a leveraged speculation, people will act in their own self-interest, and a real recovery—not one based on a speculative bubble in housing—will finally become possible.

Democracy has failed. Revolution is Coming!

Democracy has failed.

We have given the world everything, and in return the world is trying to destroy Western Civilization, our only course of action left open to us is Total war. War to rebuild our nations, war to reclaim the birth lands of the west, war to expel the parasites that are feeding off the blood of our nations, and war to eliminate those that threaten our rights to exist.

Look at every Democratic republic throughout history, and they all follow the same path, democracy allows the poor to vote themselves more benefits at a cost to the wealth producers, the nation stagnates as more parasites bleed the nation dry through immigration and wealth redistribution, eventually the state becomes a kind of dictatorship/oligarchy interfering in the lives of everyone while the elites live high on the hog and standard of livings decline.  Eventually all wealth is gone as innovation and hard work is punished by politicians too eager to expand the welfare state for a seat at the table of power. This is the state of the American system, starting with 1965 immigration act, 3rd worlders who know nothing of our nation and its history, pouring in from every cave around the world, diluting our peoples vote, while the parasitic nature of these people is all to obvious, many come to work, and save their money only to return home with the spoils of economic war.  Our population is replaced though a new ethnic cleansing, our taxes continue to increase punishing those of us who work hard to make a living, while continuing to reward the parasites.  Our constitution is flawed, its missing one key ingredient that every nation around the world, except those in the west, follow, the government exists to serve the interests of the core population, I mean Americans and we all know who Americans are, they are not Mexicans, Korean, or African with or without the hyphenation. We Americans have been told, to shut up, enjoy and embrace population/political replacement, by those less fortunate then us, that we deserve anti-white affirmative action laws, that whites need not apply unless they are gay, or subscribe to the communist way of thinking. Our economy crumbles as political elites funnel our tax monies to their pets, and divide up our lands amongst our enemies. Our government has hollowed out our constitution, devalued our rights as citizens in the pursuit of a utopian ideal that can never be achieved, simply because man is imperfect himself.  Violation of our contract with the state, our constitution, by the state, has voided any allegiance we may once have had with the state, consciously allowing uncontrolled immigration from the 3rd world particularly Mexico, has segregated our society, dumb down our school system, crippled our healthcare system, turned inner cities into the hell holes they came from, and worse yet, they have gained control of political system in major cities and several states, they hold public office over my people, but swear allegiance to foreign powers, and ethnic separatist movements.  The elites fear only one thing, economic collapse, my Americans are buying up every gun and every round of ammunition available, and for what you might ask, just in the last 6 months we have purchased enough fire power to do what needs to be done, and you know what that is, because you fear it, you know what it means for non-Americans, you know that once we gain control of our homelands, you will not be allowed to continue to drain our nation dry, you will return home, one way or another, and no my parasitic friend you will not be taking anything that you have stolen from my people, with you.  If you are luck you may leave with your life, and if you refuse to leave, like my “African American” friends are expected to, then we will bury you where you stand.  The Game is nearly over, the state is playing every trick in the book to keep the boat afloat, but they can only delay the inevitable, we will retake our nation, and once we do there’ll be hell to pay to every nation who colluded with these traitors, we will hunt everyone of you down, you will be brought back, and tried and executed for the damage you have done.
Do you believe that a people have a right to decide their own destiny? That nations and societies have rights? Rights to exist, rights to life, right liberty, property, and the pursuit of happiness? Do western people have a right to exist, if you say yes, then why does the world continue to allow ethnic cleansing in the west through population replacement, as European population within the west continues to shrink through direct and indirect policies of the liberal politically correct unrepresentative soft-Marxist governments their numbers are in decline, while non-European population within the west is exploding.  Within two generations many European nations will no longer be European, Italy, Spain, France, and others are rapidly on decline.  Anti-White Marxist like yourself have no answers for these questions, you see diversity as the answer to everything, not diversity in your home (True homelands) but diversity in our homelands.  These immigration policies are the new ethnic cleansing of our time, the deliberate transfer of Western wealth to non-western nations, and the transfer of non-western peoples to western nations.
You maybe thinking, Scientists came out years ago and stated that there is truly no such thing as race as we think of it. Secondly, there have been multi-racial people in the US since slavery. It is only recently that multi-racial Blacks began to feel comfortable with embracing heritages from all sides of their families. The one drop rule prevented this and then, as a matter of pride, only the Black side was recognized as this was how they were identified in society. Next, there are issues which face those of mixed heritage, where it is apparent from their appearance, that do not face members that do not have an obvious mixed heritage. Folks need to get over the whole race thing. It is backwards and holds the US as a country back.
So, I guess the fact that a racially conscious America, as traditional America was, was a much better-educated, better-functioning, safer country is just a coincidence. And the fact that our present multi racial, PC America, where ignorant people say ‘there is no such thing as race’, is dysfunctional, divided, and dangerous is just mere coincidence.  Anglo-America is disparaged and derided from all sides, and those few of us who defend it and our ancestors are accused of divisiveness and ‘exclusivist’ attitudes, if not outright bigotry. And if I accept the current PC opinion that there is no White American culture or people, if WASPs are just nobodies, without race, nation, ethnicity, or culture, what do we have, then, to unify us here in America, what’s left of our constitution, our broken laws?  I say there is nothing left to unify us as a nation, except maybe the only future left for Americans, is a violent revolution to retake our nation.

California’s Empty Wallet: Turning Crisis into Opportunity

California’s Empty Wallet: Turning Crisis into Opportunity

Ellen Brown
Global Research
June 30, 2009

California State Controller John Chiang has warned that without a balanced budget in place by July 1, he will begin using IOUs to pay most of the state’s bills. On June 25, California Governor Arnold Schwarzenegger rejected a plan that would save the state $3 billion by cutting school spending, saying he would rather see the state issue IOUs than delay the funding problem with a piecemeal approach. The state’s total budget deficit is $24.3 billion.

Meanwhile, other funding doors are slamming closed. The Obama administration has said it will not use federal stimulus money to prop up California; and Fitch Ratings, a bond rating agency, announced that it was downgrading the credit rating of the state, which already has the lowest in the nation. Once downgraded, California’s rating is likely to fall below the minimum level legally required for most money market funds, forcing the funds to sell their California bonds. The result could be a cost of millions of additional dollars in higher interest rates for the state.

What to do? Perhaps California could take a lesson from the island state of Guernsey, located in the English Channel off the French Coast, which faced similar funding problems in the 19th century. Toby Birch, an asset manager who hails from there, tells the story in Gold News:

“As weary troops returned from a protracted foreign war [the Napoleonic Wars ending in 1815], they encountered a land racked with debt, high prices and a crumbling infrastructure, whose flood defenses were about to be overwhelmed . . . . While 1815 brought an end to the conflict on the battlefront, . . . severe austerity ensued on the home front. The application of the Gold Standard meant that loans issued over many years were then recalled to balance the ratio of money to precious metals. This led to economic gridlock as labor and materials were abundant, but much-needed projects could not be funded for want of cash.

“This led to a period of so-called ‘poverty amongst plenty’. . . . The situation seemed insoluble; existing borrowing costs were consuming 80% of the island’s revenues. What was already an unsustainable debt burden would need to be doubled to fund the two most essential infrastructure projects. This was when a committee of States members was formed . . . . The committee realized that if the Guernsey States issued their own notes to fund the project, rather than borrowing from an English bank, there would be no interest to pay. This would lead to substantial savings. Because as anyone with a mortgage should understand, the debtor ends up paying at least double the amount borrowed over the long-term.”

To prevent an unwanted inflation of the money supply, the Guernsey States issued the notes with a date due, and on that date the bearer was paid in gold. The money came from rents on the finished infrastructure, supplemented with a tax on liquor. Birch goes on:

“The end result of the Guernsey Experiment was spectacular – new roads, sea defenses and public buildings were established, fostering widespread trade and prosperity. Full employment was achieved, no deficits resulted and prices were stable, all without a penny paid in interest. What started as a trial led to a string of construction projects, which still stand and function to this day. Money was used in its purest form: as a convenient mechanism for oiling the wheels of commerce and development.”

Like Guernsey, California is facing “poverty amidst plenty.” The state has the eighth largest economy in the world, larger than Russia’s, Brazil’s, Canada’s and India’s.  It has the resources, labor, and technical expertise to make just about anything its citizens put their minds to.  The only thing lacking is the money to do it.  But money is merely a medium of exchange, a means of getting suppliers, laborers and customers together so that they can produce and exchange products.

  • A d v e r t i s e m e n t
  • efoods

As has been explained elsewhere, today money is simply credit. All of our money except coins is created by banks when they make loans. The current crisis stems from a credit freeze that began on Wall Street in the fall of 2007, when banks were required to revalue their assets due to a change in accounting rules, from “mark to fantasy” to “mark to market.” Banks that were previously considered in good shape, with plenty of capital for making loans, suddenly came up short. Lending fell off, and so did the available money supply.

Just understanding the problem is enough to see the solution. If a private bank can create credit on its books, so can the mighty state of California. It merely needs to form its own bank. Under the “fractional reserve” lending system, banks are allowed to extend credit – or create money as loans – in a sum equal to many times their deposit base. Congressman Jerry Voorhis, writing in 1973, explained it like this:

“[F]or every $1 or $1.50 which people – or the government – deposit in a bank, the banking system can create out of thin air and by the stroke of a pen some $10 of checkbook money or demand deposits. It can lend all that $10 into circulation at interest just so long as it has the $1 or a little more in reserve to back it up.”

The 10 percent reserve requirement is now largely obsolete, in part because banks have figured out how to get around it. What chiefly limits bank lending today is the 8 percent capital requirement imposed by the Bank for International Settlements, the head of the private global central banking system in Basel, Switzerland. With an 8 percent capital requirement, a state with its own bank could fan its revenues into 12.5 times their face value in loans (100 ÷ 8 = 12.5). And since the state would actually own the bank, it would not have to worry about shareholders or profits. It could lend to creditworthy borrowers at very low interest, perhaps limited only to a service charge covering its costs; and on loans the bank made to the state, the state would ultimately get the interest, making the loans essentially interest-free.

Precedent for this approach is to be found in North Dakota, one of only three states currently able to meet its budget. North Dakota is not only solvent but now boasts the largest surplus it has ever had. The Bank of North Dakota, the only state-owned bank in the nation, was established by the legislature in 1919 to free farmers and small businessmen from the clutches of out-of-state bankers and railroad men. By law, the state must deposit all its funds in the bank, and the state guarantees its deposits. The bank’s surplus profits are returned to the state’s coffers. The bank operates as a bankers’ bank, partnering with private banks to loan money to farmers, real estate developers, schools and small businesses. It makes 1% loans to startup farms, has a thriving student loan business, and purchases municipal bonds from public institutions.

Looking at California’s budget figures, projected state revenues for 2009 are $128 billion. At a reserve requirement of 10%, if California deposited all $128 billion in its own state-owned bank, it could issue $1.28 trillion in loans, far more than it would need to cover its $23 billion budget shortfall. To lend itself the money to cover the shortfall, it would need only $2.3 billion in

deposits and about $2 billion in capital (assuming an 8% capital requirement). What Sheldon Emry wrote of nations is equally true of states:

“It is as ridiculous for a nation to say to its citizens, ‘You must consume less because we are short of money,’ as it would be for an airline to say, ‘Our planes are flying, but we cannot take you because we are short of tickets.’”

As a card-carrying member of the banking elite, California could create all the credit it needs to fund its operations, with money to spare.

funny money schemes R Us Says:

Really? Production has been systematically moved out of the United States and expensive penniless refugees from drug-lord controlled Mexico are being allowed to pour by the many thousands into Calif. and being put on the state welfare roles — and yet creating ‘money’ out of nothing is somehow going to solve the state’s basic problem of living beyond its means?

So, the basic idea is for each troubled state to become a little counterfeiting operation, like the one operated since 1913 by the Fed and US govt. working as partners — howsomever, that counterfeiting operation is in trouble – right? Big trouble, having enabled so much federal-govt. deficit spending that all of ‘us’ are now willy nilly in debt even unto x (the number of the indebted generations keeps growing) number of future, of yet unborn, generations?

But, you say, just create that money-out-of nothing, BUT don’t charge the public any interest on it, and all will be well? With that one little change of not charging the public interest on the ‘money-for nothing’, CREATING ‘MONEY’ OUT OF THIN AIR IS GOING TO SOMEHOW SOLVE THE PROBLEM OF HAVING MORE OUTGO THAN INCOME?

I thought all that created was inflation – ie, a diminished purchasing power of the currency being created out of nothing in whatever amount needed to ‘pay the bills.’ Create enough of it and you’ve got hyperinflation. It’s just the law of supply and demand – the supply of ‘money’ goes up, and its purchasing power goes down. Don’t need a Ph.D. in economics to understand that.

Let’s review… the fed govt. and the private bankers creating ‘money’ out of nothing has in 100 years damaged the value of the dollar such that no nation wants it anymore… and yet somehow doing the same thing – WITH THE ONE DIFFERENCE OF NOT CHARGING INTEREST ON THE VALUELESS ‘MONEY’ THAT IS CREATED OUT OF THIN AIR … just not charging interest on the counterfeit ‘money’ is going to make this ‘money-for-nothing’ scheme somehow fly, somehow work, SOMEHOW SOLVE THE BASIC PROBLEM OF LIVING BEYOND ONE’S MEANS, whether one is an individual, or a state, or a country? Creating ‘money’ out of nothing is going to solve the basic problem of living beyond one’s means? (And, it is humanly possible to have that power to create money out of nothing and NOT abuse it, just so long as your name is ‘government’? Get real, dudes! That bridge won’t sell.)

Lincoln’s ‘greenbacks’ are cited by ‘funny money YES! just make it non-interest-bearing’ advocates (”Moneymasters”, Ellen Brown, and Co.) as being such a ’success’. REALLY? Lincoln’s greenbacks, non-interest-bearing ‘money’ created out of nothing, inflated – lost 40-some % of their nominal value – in only 4 years or so. THIS IS A SUCCESSFUL, a viable, CURRENCY? That means that whoever was holding their wealth in those greenbacks lost 40% of that wealth in only about 4 years. Wowza – where do I sign up for that?

Or rather, how do I sign out of it. Answer – do NOT denominate your wealth – including your labor, the only wealth most of us possess – in any fiat currency. What? You say by law I HAVE TO, have to denomenate my labor in an intrinsically worthless fiat currency, because every currency in the world is now intrinsically worthless, its value manipulated – ever downward – by spendy governments and ever richer central banks working in tandem? And somehow just making those fiat currencies NON-INTEREST BEARING is going to solve all our economic woes, somehow balance all these unbalanced books of all these debt-ridden nations? Uh-huh. Makes sense. Yup. Sure does.

The ‘Continental’, the non-interest-bearing unbacked fiat currency of the nascent US of A, lost so much of its value that it was immortalized in that phrase still known to (if not understood by) most of us, dumbed down though we are – ‘not worth a Continental.’

And yet Ellen Brown and the Moneymasters creators would have us believe that this basic plan is gonna work – somehow – ‘this time.’ Ya sure you betcha. Honey, I’d sooner trust my great-aunt Maude with the power to created money-out-of-nothing than I would any government or banker-type suit. They’re from the government (and if you got government, you got them banker-fellers, just like if you got honey, you got flies and if you’re a dog, you got fleas) and they’re here to help…

Schwarzenegger and Navarrette Compare Immigration Reform Patriots To Nazis; Joe Answers Them

Schwarzenegger and Navarrette Compare Immigration Reform Patriots To Nazis; Joe Answers Them

By Joe Guzzardi

A single opinion column written by Ruben Navarrette and published by the San Diego Union-Tribune explains why:

To understand fully the impact of what follows in my column, first read Navarrette’s. [Schwarzenegger Defends Immigrants, by Ruben Navarrette, San Diego Union-Tribune, June 17, 2009]

But if you are pressed for time or simply cannot stomach the idea of reading more Navarrette tripe, here’s a brief summary:

  • In a meeting with the Union-Tribune editorial board, Schwarzenegger repeated his often-stated position that illegal immigrants are not to blame for the state’s economic crisis.
  • Illegal immigrants, continued Schwarzenegger, contribute to California’s economy by paying taxes and doing jobs in “hard-to-staff industries”. Ignored by Schwarzenegger: many aliens work off the books and don’t contribute anything to the tax base.
  • Californians who suggest that illegal immigration is an economic drain remind Schwarzenegger of “how Jews were blamed by the Nazis for Germany’s economic difficulties after World War I.” Schwarzenegger warns that linking “hard-working people” to economic strife could lead to “atrocities,” “crime,” and “executions” just as it did when Nazis governed Germany.

Where should I start?

  • First, no problem as grave as California’s $25 billion budget deficit can be corrected if those responsible for resolving it refuse to recognize what is, at the least, a major contributor to that problem. For a complete breakdown of those costs, read Nicholas Stix’s blog here.
  • Second, no California resident believes that illegal immigration does not play a role in the state’s collapse. And the further south anyone lives (e.g., San Diego), the more crystal clear the relationship is between illegal immigration and California’s financial catastrophe.
  • Third, a newspaper’s role is to challenge its sources by asking the hard questions. For the editorial board (of which Navarrette is a member) to allow the governor to come into San Diego, make absurd statements and then print them as gospel—even in an opinion piece— is one of the major reasons no one reads newspapers anymore. Why should patriots who live in San Diego, of whom there are plenty, subscribe to or even read the Union-Tribune only to learn that it associates them with Nazis?
  • Any comparison to patriotic immigration reform proponents and Nazis is outrageous. Navarette’s hedge—he wrote: “Obviously, Schwarzenegger’s comments should not be taken literally” only adds to his insult. Obviously, to make the Nazi association and then try to water it down doesn’t fool anyone.

Unless the Union-Tribune editors live in a bubble they, like every other Californian with eyes in his head, see the impact of illegal immigration all day every day.

In most if not all California cities, no one can walk down any street, shop at any supermarket, get medical treatment at any clinic, take his kid to any school, drive on any road or walk through any park without witnessing ample evidence of how pervasive illegal immigration is.

Here’s a quick formula for calculating at least a part of California’s illegal immigration costs. According to the Department of Education website, California schools had more than 1.5 million non-English speakers enrolled during 2007-2008. The same source indicates that more than 85 percent of them speak Spanish as their primary language.

Conservatively assume that one-third is made up of legal immigrants, one-third anchor babies and one-third illegal aliens. The estimated cost (again conservative) of educating each California student is $8,000 per year—not including special language classes that of course English learners would take.

One-third of 1.5 million is 500,000. Multiply 500,000 by $8,000 to arrive at a cost of educating illegal aliens at $4 billion per year.

If you want a more accurate total, remember that anchor babies are directly related to California’s immigrant population then do your math again.

Two-thirds of 1.5 million is one million. Multiply one million by $8,000 and your revised total expenditure for educating immigrants is $8 billion—about two-thirds of the current total California deficit.

Yet according to Schwarzenegger (via Navarrette) I have “limited information” about “immigrants”

I can understand why Navarrette wants to keep beating his drum on behalf of illegal immigration. Navarrette no doubt anticipates that sooner or later an amnesty debate might occur in Congress. The more sympathetically he portrays illegal immigrants, the better their case may appear to his Capitol Hill audience.

But I don’t get where Schwarzenegger or the Union-Tribune are coming from.

Politically, Schwarzenegger is toast. And unlike in some cases where, years later, California politicians are remembered with at least a modicum of kindness (think Richard Nixon) that will not be Schwarzenegger’s case. Too many people, most prominently homeowners, have been scalded under his watch.

If you ask me, Schwarzenegger would be better off at least acknowledging the obvious: that illegal immigration adds significantly to the state’s deficit and that he wishes he had used the substantial influence of his governor’s office to do more to minimize it.

Schwarzenegger must be motivated instead by the thought that when he returns in 2010 to his Hollywood left wing friends, he’ll be embraced for his staunch defense of illegal immigrants and Jews.

And since Schwarzenegger is married to Maria Shriver, a member of the Kennedy clan, he’s no doubt better off domestically when he toes the family line.

As for the Union-Tribune, after going on the market in July 2008 it was sold in March to Beverly Hills-based Platinum Equity, a private firm that specializes in troubled buy-outs. [Union-Tribune Sold to Platinum Equity, by Thomas Kuper, San Diego Union-Tribune, March 18, 2009]

Rumors are that Platinum Equity has no interest in continuing to publish the Union-Tribune but purchased it to acquire its substantial real estate holdings that include, according to San Diego County tax records, thirteen acres in Mission Valley as well as another half-acre in La Jolla. [The Copley Sale: Real Estate (and a Newspaper), by Bob Davis, Voice of San Diego, June 23, 2009]

At best, it appears that the Union-Tribune print edition will soon end and it will be available online-only, like the Seattle Post-Intelligencer.

Maybe—given all of the gloomy news surrounding the Union-Tribune’s fate and with new bosses on the scene who will likely cut jobs— the editors were too distracted to listen closely to what Schwarzenegger said or Navarrette wrote. (Commiserate with them here.)

What I know is this: to pretend that illegal immigration has no bearing on California’s economic plight is so intellectually barren that if Schwarzenegger exits in disgrace or if the entire Union-Tribune editorial staff is fired, then “frankly, I don’t give a damn.”

Joe Guzzardi [email him] is a California native who recently fled the state because of over-immigration, over-population and a rapidly deteriorating quality of life. He has moved to Pittsburgh, PA where the air is clean and the growth rate stable. A long-time instructor in English at the Lodi Adult School, Guzzardi has been writing a weekly column since 1988. It currently appears in the Lodi News-Sentinel.

Escape from New York—Into America

Escape from New York—Into America

By Matthew Richer

John Carpenter’s 1981 film Escape from New York envisaged the national crime rate skyrocketing to such an extent that the federal government walls off Manhattan Island and turns it into a maximum security prison. Inside the city walls, the prisoners form violent gangs that rule over the city.

When Air Force One crashes inside Manhattan, an ex-soldier named Snake Plissken, played by Kurt Russell, is assigned to enter the city and rescue the President before he is killed.

I remember watching Escape from New York on television as a boy and thinking the plot was preposterous. Now, after living in New York City for several years as an adult, the film is actually starting to look plausible to me.

That is because I have decided not just to leave New York City, but to escape it—and all that it has come to represent.

I moved to New York City several years ago, like many recent college graduates, eager to experience the “greatest city in the world”—and I was hardly disappointed.

New York City is a remarkable testament to American ingenuity. Here, Americans have created some of the most extraordinary engineering and architectural marvels on earth, and made historic achievements in industry, finance, and the arts.

There are more interesting things to see and do in New York than in any other city in the world.

The Big Apple, however, has a serious dysfunctional side, as do the elites who preside over it.

Indeed, living in Manhattan has given me a unique insight into the mindset of the American elite. In college, for example, I never understood why the students from New York were so screwed up. They had looks, money, and privilege—and yet they were so utterly miserable.

The reason why became obvious when I moved to the Upper East Side. Here, and in every exclusive neighborhood in the city, you will see scores of nannies—very often Third World immigrant nannies—holding young white children by the hand, or pushing infants, even newborns, around in strollers.

Some kids have been raised by more than a dozen nannies by the time they graduate high school. One friend of mine even lost his virginity to his nanny, an apparently not uncommon rite for teenage boys here.

Members of New York’s upper class care so little for their children that they prefer to hire semi-illiterate foreigners to do the job for them. Is it any wonder then, that our ruling class cares so little about the rest of us?

When I first moved to the Upper East Side, I actually expected to find better manners among the Park Avenue crowd. Instead, I invariably found them to be as boorish and obnoxious as any people I’ve ever encountered.

Peter Brimelow recently expressed disgust on learning that William F. Buckley used to urinate onto the street from the open door of his limousine. (For my thoughts on attending Buckley’s Memorial Mass, see here). I was hardly surprised by such behavior; neither was I surprised that his son Chris found it amusing instead of embarrassing.

Big Apple elites think themselves above the standards of decency ordinary people take for granted.

In fact, what really characterizes Manhattan socialites is their obsession with status—which they define as having the right friends, attending the right schools, identifying with the right causes, and even having the right opinions.

The amusing thing is that those born into high social status, like Buckley, are often the most insecure about maintaining it. They’re always worried about falling out of favor with people, or making the wrong impression, or not getting an invite to this or that social gathering.

One of the socially approved causes that Manhattanites love to prattle on about is “diversity”. They are all for diversity—they just prefer to celebrate it from a distance.

Perhaps my most memorable experience with this racial doublethink began on Sunday June 11, 2000. On that morning, I rode my bike into Central Park, as I often do on Sundays. Except this time, I encountered hundreds of Hispanic youth waving Puerto Rican flags, swarming about me like an invading army.

I suddenly realized that I had chosen to enter Central Park on the morning of the Puerto Rican Day Parade. I quickly turned around and rode my bike home.

Others, unfortunately, were not so lucky.

Later that afternoon, gangs of black and Hispanic youth attacked a number of white women in Central Park. They doused them with beer, tore off their clothes, and sexually assaulted them—all the while laughing and shouting in jubilation.

An 18 year old British female tourist was stripped completely naked and digitally raped for some 30 minutes. A French female tourist was also stripped naked while her husband was held down and forced to watch as his wife was similarly assaulted.

Fortunately, a few people caught some of the assaults on video, and many of the culprits were later arrested. But the media aired little of the footage and buried the racial nature of the assaults.

With characteristic hypocrisy, Manhattan’s elites, who love to pay lip service to diversity, invariably leave town en masse well before the Puerto Rican Day Parade begins. While they are gone, the tony doorman buildings that line the parade route on 5th Avenue are shielded by a two mile stretch of temporary barricades.

They only return home after the city has cleaned up the trash-littered streets and arrested all the “celebrants” who committed physical and sexual assaults that day.

If you’re wondering if the famed Giuliani crime control has reformed Manhattan, the answer is that it’s not completely reformed, and it’s not all because of Giuliani. Nicholas Stix has written about how the NYPD disappears some crimes, exaggerating the crime drop.

Plus, Hispanicization has pushed blacks out of Manhattan and other boroughs. Hence, less crime for NYC, but more crime for the smaller cities in the Tri State area, like Trenton and Newark.

I asked one State Assemblyman how much it cost the city to host the parade. “Don’t even go there”, he told me.

If living in New York has taught me anything, then, it is the myth of Hispanic assimilation. Puerto Ricans, many of whom have lived in New York for generations, plant their Puerto Rican flags on everything—front lawns, cars, clothing, luggage—you name it.

They do this not out of love for the land they left, but out of contempt for the white America they live within. Displaying the Puerto Rican flag is an act of ethnic intimidation, pure and simple.

So why should we expect all these Hispanic immigrants from other countries to peacefully assimilate when the American citizens from Puerto Rico can’t even do it?

Manhattanites get very nervous when you ask such questions. Reality is not a topic they prefer to discuss.

Indeed, one thing New York has in common with Los Angeles—another status-conscious city now nearly ruined by immigration—is that people move here and live here not so much because they want to experience the good life, but because they want to avoid facing the hard realities of life.

“Don’t even go there” seems to be the standard response to politically-incorrect questions, especially on the subject of immigration.

For example, New Yorkers frequently complain about congestion: overcrowded schools, traffic jams, and cramped public transit. But few will dare suggest that we might not have these problems if the city didn’t have over one million illegal immigrants (not to mention their children).

If anything, the real “huddled masses” of New York are those who are forced to ride a subway jam-packed with illegal aliens, many of whom currently wear surgical masks over their faces to hinder the spread of Swine Flu.

This congestion crisis has spilled over into the entire Tri-State Area. Take the train into the city from New Jersey, Connecticut, or Long Island, and you will often find yourself standing in the aisle, even on weekends.

In the meantime, taxpayers nationwide must finance the overburdened transportation system of America’s largest sanctuary city. Right now, the city is digging a new train tunnel underneath the Hudson River, a new subway line underneath 2nd Avenue, and a new train terminal underneath Grand Central Station.

We are told that these multi-billion dollar projects are “investments” but any honest person knows that they are really immigration subsidies.

For all of these reasons and more, my wife and I have decided to escape from New York and move to a distant New England town. There, crime is low, traffic is light, and the shop clerks all speak perfect English.

Granted, small-town New England faces threats because it’s too white and well-functioning. Our plan, however, is to begin a new life in our peaceful small town, and enjoy it while it lasts.

Moreover, the prospect of starting a family in New York City is simply unthinkable to us.

In The Great Gatsby, F. Scott Fitzgerald describes the Manhattan skyline with the same sense of wonder it used to evoke in me: “The city seen from the Queensboro Bridge is always the city seen for the first time, in its first wild promise of all the mystery and beauty in the world.”

It’s hard to imagine anyone writing such inspired prose about New York City today. In fact, one currently popular t-shirt features an image of the Queensboro Bridge beneath the logo “Nueva York”—as the city’s surging Hispanic community prefers to call it.

The irony is that the Queensboro Bridge is also the bridge that Snake Plissken and a newly rescued American President race across in the final scene of Escape from New York.

It is also the same bridge I will drive over, in bumper to bumper traffic, when I make my own escape from New York.

And all the while I’ll be looking in the rear view mirror, hoping and praying that it is not following behind me.

Matthew Richer (email him) is a public relations specialist who used to divide his time between New York City and New Hampshire. He is the former American Editor of Right NOW.

America Has the Right to Know the Consequences of National Energy Tax

House passes climate change bill
By: Lisa Lerer and Patrick O’Connor
June 25, 2009 08:43 PM EST

Democrats narrowly passed historic climate and energy legislation Friday evening that would transform the country’s economy and industrial landscape.

But the all-hands-on-deck effort to protect politically vulnerable Democrats by corralling the minimum number of votes to pass the bill, 219-212, proves that there are limits to President Barack Obama’s ability to use his popularity to push through his legislative agenda. Forty-four Democrats voted against the bill, while just eight Republicans crossed the aisle to back it.

Despite the tough path to passage, the legislation is a significant win for House Speaker Nancy Pelosi (D-Ca.) and the bill’s two main sponsors – House Energy and Commerce committee chairman Henry Waxman (D-Ca.) and Massachusetts Rep. Edward Markey (D) – who modified the bill again and again to get skeptical members from the Rust Belt, the oil-producing southeast and rural Midwest to back the legislation.

“We passed transformational legislation which takes us into the future,” Pelosi said at a press conference following the vote, after she and other leaders took congratulatory phone calls from Obama, former Vice President Al Gore and Senate Majority Leader Harry Reid.

“It has been an incredible six months, to go from a point where no one believed we could pass this legislation to a point now where we can begin to say that we are going to send president Obama to Copenhagen in December as the leader of the of the world on climate change,” said Markey, referring to world climate talks scheduled this winter.

After months of negotiations, 211 Democrats and eight Republicans voted for the bill of more than 1,200 pages, setting the legislation on a path towards the Senate. There, it faces a far more uncertain future given the opposition of key moderates and the already-heated battle over health care.

Republicans are sure to try and use against other Democrats in 2010, with accusations that they raised electricity bills for already-strapped consumers in the midst of a deep recession.

Indeed, the National Republican Congressional Committee wasted little time before blasting out a press release targeting more than two dozen Democrats for supporting “Democrats’ ongoing crusade against economic recovery.”

“I’m in a tough spot. I really am,” Rep. John Salazar (D-Colo.), one of the Democrats who opposed the bill, said before the vote, citing his fears the legislation could raise energy costs and hurt the coal industry in his low-income, rural district.

“Either way I’m going to get creamed.”

Democratic leadership attempted to protect their most vulnerable freshman by cajoling yes votes from more senior members such as Lloyd Doggett of Texas.

Doggett announced his change of heart from “strong objection” earlier in the day during the final stage of the floor debate.

Doggett told POLITICO that he made his switch after speaking to Obama and having lengthy conversations with Waxman, Markey, Gore and Pelosi, but ultimately, he decided to support the bill so he could have a seat at the negotiating table when California Sen. Barbara Boxer introduces it in the Senate later this summer.

“It has been a difficult and significant decision,” Doggett said. “I just decided that I will have a better chance to make changes later in the process if I acted in good faith now. But don’t think this means I’m signing off on the conference report,” he said.

When the bill passed, the chamber erupted in applause, and colleagues shook Markey and Waxman’s hands. Even some Republicans clapped, mocking the Democrats for casting what they deemed a politically unpopular vote.

The vote itself proceeded with much less drama than hung in the chamber for most of the day leading up to the much anticipated roll call; Democrats looked relieved and Republicans resigned as they watched votes register on the big board above the House floor. Fence-sitting Republicans such as Washington Rep. Dave Reichert and New Jersey Rep. Leonard Lance waited to vote “yes” on the bill, in a game of chicken with moderate Democrats.

Many of those moderate Democrats, like freshman Rep. Bobby Bright of Alabama, also waited until the end of the roll call to cast votes against the package.

In the end, Democrats had the votes they needed, and many veteran moderates were able to cast votes against the bill without hanging junior Democrats out to dry. One possible exception – Maryland Rep. Frank Kratovil, a freshman – accepted handshakes from colleagues after casting an early vote in favor of the package.

The debate leading up to the vote was nevertheless intense.

Democrats touted the legislation as a measure that would improve national security, create jobs, protect the environment and reestablish the United States as a world leader. Republicans slammed the bill as an economic catastrophe.

“I look forward to spending the next 100 years trying to fix this legislation,” said California Republican Brian Bilbray.

“This is the biggest job killing bill that’s ever been on the floor of the House of Representatives. Right here, this bill,” said House Minority Leader John Boehner. “And I don’t think that’s what the American people want.”

Donning reading glasses, Boehner then delayed the roll call vote by reading page-by-page through a 300-page managers’ amendment Democrats added at around 3 a.m. on Friday. Boehner seemed to relish the hour-long stunt, picking out the bill’s most obscure language and then pontificating about what it might – or might not – mean. Republicans laughed along with him and roared with applause when he was done.

The complex bill mandates a 17-percent cut in greenhouse gas emissions by 2020 and a 83-percent cut by 2050, reductions that will be accomplished by putting a price on carbon dioxide through a cap-and-trade system. It mandates that 20 percent of electricity comes from renewable sources and increased energy efficiency by 2020. And the legislation gives electric utilities, coal plants, energy-intensive manufacturers, farmers, petroleum refiners, and other industries special protections to help them transition to new, less-fossil fuel-intensive ways of doing business.

It will also raise electricity prices for consumers by $175 a year per household by 2020, according to a report by the Congressional Budget Office, significantly less than the $3,000 price hike predicted by Republicans who say the “energy tax” will increase energy bills and the cost of consumer goods.

Obama praised the House for taking a “bold and necessary step,” then wasted no time in turning up the heat on the upper chamber. “Now it’s up to the Senate to take the next step. And I’m confident that in the coming weeks and months the Senate will demonstrate the same commitment to addressing what is a tremendous challenge and an extraordinary opportunity,” he said in a statement.

The White House played a significant role in drumming up support for the legislation, which is a key piece of the administration’s first-year agenda. The administration is under pressure to make significant progress towards cutting greenhouse gas emissions before the Copenhagen international climate talks next December.

A long list of Cabinet secretaries, key staffers and even Obama himself lobbied undecided members. Gore, the don of the climate-change world, spent several days calling on the fence lawmakers.

The legislation spilt both the environmental and business communities. Although environmentalists have pushed for stricter controls on greenhouse-gas emissions for more than a decade, more left-wing groups like Greenpeace wanted stronger emissions reductions and fewer protections for greenhouse-gas guzzling industries like coal. While some electric utilities, auto manufacturers, and Fortune 500 companies supported the bill, large business associations like the Chamber of Commerce argued that it would impose a crippling regulatory burden on the economy that would push factories and jobs abroad.

The House chamber took on the feeling of a momentous vote on Friday, with lobbyists, administration officials and even the stray senator –in this case, Udall – working the hallways off the floor to convince fence sitters in one direction or another. After the rule vote, Markey quickly collared Holt for a brief conversation.

“We are fond of seeing headlines that say this is the Democrats’ toughest challenge yet,” said House Whip James Clyburn, tweaking the media’s hyperbole. “Well, today that what quite true.”

He joined many other Democrats in giving the ultimate credit to Pelosi making the difference on the vote.
“Nancy Pelosi was the whip on this,” he said.

– Victoria McGrane contributed to this story.

America Has the Right to Know the Consequences of National Energy Tax

Friday, June 26, 2009
YouTube.com

House Democrats didnt want the American people to understand the true impact of Speaker Pelosis 1,500-page national energy tax. So House Republican Leader John Boehner took to the House floor and read portions of it to the American people, explaining how it would to raise electricity prices, increase gasoline prices, and ship American jobs overseas to countries like China and India.

House Democrats didnt much like it either, and they tried to shut him down. But Boehner asked Chairman Henry Waxman and other Democrats: Dont you think the American people expect us to understand whats in the bill before we vote on it?

Locust:  I think this is great news, thank you Michael Jackson, anyways, these events will insure the continuation of the current economic collapse of the United States, America is the proverbial lynch pin of the egalitarian humanist socialist movement within the Western world, once America falls into a ceaseless deepening depression with ever increasing unemployment, crime, poverty, and ethnic intolerance, Racial tension will flare up and trigger the coming bloody revolution against this alien government of socialist Republicrats.  White males will either grow a spine and take to the streets to defend their homeland or they will be slaughtered, ensuring the birth of an ethnocentric nationalist United States that will undoubtedly become stronger, and willing to bring to bear our ethnic mastery of science and technology in the coming war to reclaim Europe, exterminate the Islamic scourge, and annihilate before they annihilate us, China “the RED Dragon.”

CONTROL & LOSS OF FREEDOM: Cap and trade- ULTIMATE GOAL OF THE GLOBAL WARMING LOBBY

CONTROL & LOSS OF FREEDOM:

ULTIMATE GOAL OF THE GLOBAL WARMING LOBBY

Cap and trade has been used to “control” pollutants like sulfur dioxide and now the left wants to use it to control petroleum use. It should be noted however, that what the EPA is calling success in “controlling” sulfur dioxide emissions is largely the result of the decline in much of the Northeast’s industrial base, which reduced the use of coal for fuel and in steel production.

Locust: Update folks Cap and trade has passed! Not long now, cap and trade will bring about the end of economic freedom, and then, only then, will white America wake the hell up, their deal with the devil will be over!

By William Hunt, M.S.
June 1, 2009
NewsWithViews.com

Every proposal of the Global Warming/Climate Change lobby involves control. The control of energy production, use by individuals, corporations and governments, and the control of the design, type and the use of devices that use energy.

Naturally, this is to control the use of energy by the ordinary citizen. President B. Hussein Obama used 9,000 gallons of aviation kerosene to visit Iowa on Earth Day. The hypocrisy of that can be felt in the very air. Do as I say, not as I do.

Other politicians and celebrities are similar and if they truly believed what they say, they would be the first to conserve, but despite their rhetoric, they use resources at rates hundreds to millions of times that of the ordinary citizen, but I digress.

The restrictive control of how you or others use energy now is being aimed to extend to all petroleum products and use.

This translates to restrictions on the use of gasoline, diesel, kerosene, heating oil, bunker oils, lubricating oils, coal, natural gas, propane, butane and hundreds of other primary energy products. Electrical energy— mostly generated from aforementioned coal and petroleum products, as well as hydroelectric generation will also be controlled plus the consumer’s ability to use the electricity will be controlled. The net result of such controls will be increased prices on everything that requires energy to manufacture, build, produce or use. In other words, every sort of economic and home activity will be more expensive.

The proposed “Cap and Trade” is emblematic of this “let’s control energy” mindset and has a long history, with similar proposals being the darling of environmental groups for more than a decade. In 2007, Congress unsuccessfully introduced legislation to cap greenhouse emissions and trade “carbon credits”.

In 2008, the UK’s House of Commons in the United Kingdom and the U.S. Congress decided to eliminate the incandescent light bulb to cut “carbon emissions” and reduce energy use. (However, the House of Commons didn’t take the increased amount of energy required to mine the rare earth metals, build the electronics and other components required by compact fluorescents.)

California’s failed attempt in 2008 to modify their law (Title 24, Subchapter 2, Section 112) to make it mandatory that all thermostats respond to RF signals from the state to control minimum and maximum settings. Reason prevailed in that it would have required a monstrous amount of infrastructure that would far, far exceed any possible cost or energy savings of such a system.

In 2008, the State of Oregon floated the idea of adding a GPS to every car and gas pump to determine taxes because so many energy-efficient cars were supposedly cutting into the taxes collected. (This was a lie, of course, as 2008 saw the addition of 10% ethanol, which reduced vehicle mileage by an average of 30%).

The problems with these speak for themselves: incandescent bulbs do not cause epileptic seizures or eye strain as many alternative lighting sources do. PCTs, or programmable thermostats connected to a state network would be vulnerable to ecoterrorists wanting to “send a message”, such as turning off the heat in those parts of the state that have cold weather or shutting down the air conditioning when it’s 120°.

It would cost billions in infrastructure to fit gas stations and other places with GPS receiver/computing equipment to download GPS information. The GPS system would make it less attractive to drive fuel-efficient cars as these would pay more taxes per gallon than other vehicles. The real reason for the GPS system would be to see where people drive and while this could have beneficial uses, ultimately, it would be used for nonlegitimate purposes, such as tracking political opponents or even modifying the data in their systems to make it seem as if they had done illegal or scandalous things, given the fundamental nature of many of those currently in power in Oregon.

The Federal government and many states, including Oregon, California and Washington are poised to adopt “cap and trade” and “carbon taxes”. Ostensibly to “save the world” by reducing carbon dioxide.

Cap and Trade

Cap and trade has been used to “control” pollutants like sulfur dioxide and now the left wants to use it to control petroleum use. It should be noted however, that what the EPA is calling success in “controlling” sulfur dioxide emissions is largely the result of the decline in much of the Northeast’s industrial base, which reduced the use of coal for fuel and in steel production. In addition, the closing of older steel plants in the late 1970s and early 1980s which were built during the 1880s, and replacing some of them with new plants with modern emission controls reduced SO2 emissions, as well.

The basic mechanism of cap and trade is to provide incentives for coal-electric power plants and other sulfur dioxide producers to modernize, but only to a certain point. A total amount of pollution was selected as a “cap” for emissions and then the sulfur dioxide emitters were a preselected amount of pollutants that they could emit or they could they could “trade” this amount of pollution, i.e., sell it to another emitter in the form of pollution “credits”, in the event that they didn’t need it and some other emitter couldn’t afford to reduce its emissions.

One problem was that the emitting plant or manufacturer had incentive to modernize only so far, unless the cap was periodically reduced, which it was not. Some emitters voluntarily reduced their emissions quickly when their situations made sense to do it and could sell their pollution allowance to someone else. In a way, it moved pollution from one area to another.


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Because every mechanism for efficiently-producing energy except for hydroelectric and nuclear power requires the combustion of hydrocarbons, the United States is locked into coal for 50% of its power and natural gas had been 22%, but the most recent EIA figures are suspect— The January 2009 report’s numbers literally don’t add up when you calculate the ones listed— Coal is claimed to have gone from 50% to 30% in one year by these “figures,” for example.)

What the left wants to do is to cap the total amount of carbon dioxide and thus all fuels— the amount of energy that you, the consumer use, and the total amounts that industry and commerce use— in the same way that was done with sulfur dioxide. Credits for carbon dioxide emissions would be traded the same way.

The whole point of Cap and Trade is to reduce you and to punish you, the user for using energy. It would be a complete disaster for the economy as every alternative thus suggested by the left either doesn’t exist yet, can’t exist because of basic physics or is hopelessly inefficient.

Carbon Taxes will Control Energy Use Like Never Before

Another, direct method for controlling our energy use, carbon taxes will tax carbon dioxide emissions. Initially, they might take the form of a straightforward tax, probably on tons of carbon dioxide emitted. However, in order to buy votes, every special interest group, every business type, every industry will have their own rates, exemptions and other special tax statuses and quickly it will be a mess like the rest of the tax code. Or, it would be initially enacted in such a fashion as to “punish” large emitters of carbon dioxide, like coal electric plants. (Obviously this would be a disaster as half of our electrical power comes from coal.)

Like Cap and Trade, the idea of Carbon Taxes is to punish the use of fossil fuels— control of energy.

What’s next in control of energy use? Congress requiring you to take a vital capacity test and then tax you for carbon emissions based on how much you breathe? It’s getting that ridiculous when groups want to control your thermostat by remote control.

Dire Results

These and indeed, all other measures suggested by politicians, regulators and NGOs to deal with global warming are about controlling what you do with your life by controlling energy. They avoid the issues of energy supply, the consumer’s need for energy and the economy’s need for energy. Cap and trade and carbon taxes do nothing to actually “stop” the emissions of carbon dioxide, so they cannot rationally claim that is why they are putting such devices into place. All such things do is to raise the price consumers have to pay for basic needs. They harm the poor most of all by hitting them by raising the costs for basic costs like heat, light, water, sewer, food, gasoline for commuting to work, and every consumer good— clothes, soap, cars, everything.

California’s Example- The Great Sponge

So, what happens when a state becomes a “green” dream like the people advocating for all of this energy control?

It ceases to be industrial, businesses suffer, manufacturing and production of goods and services crash. Production of natural resources crash. Protection of natural resources crash. Welfare roles swell. Government agencies increase their oversight of pretty much everything. California is the archetype.

California has become a parasite in many ways. It has become dependent upon other states for its water, oil, natural gas, electricity, wood and tax money.

Roughly half of the resources that it consumes come from other states. California once led the nation in technology and innovation of all sorts— electronic, medical, chemical, engineering, computers— you name it, it happened in California first.

Once an economic dynamo that drew people from every state for jobs and a better life, California is a textbook case for why socialism coupled with false environmentalism cannot work. Because of its environmental lobby wanting everything to be “green”, California merely imports what it needs from other states, producing less and less in return. Let someone else produce what we need… This year, reality finally started shining through the clouds of marijuana smoke with 11.2% unemployment and the Assembly’s budget problems.

To use one of the environmentalist’s buzzwords— this is “sustainable”?? For California to go from providing most of its own needs to importing what they need— this is what “being green” is all about?

Isn’t this exactly the opposite of what the environmental movement claims they want?

Oregon is following hard in California’s footsteps. Businesses are failing and fleeing the state. Washington is not far behind.

So, what happens when Congress shuts down the states that provide the resources for the state that no longer will produce their own?

© 2009 William Hunt – All Rights Reserved

U.S. Economy Trending Towards an Inflationary Depression – Spending, Debt and Collapse Predicts Hyperinflation – The Fed The Ultimate Zombie

U.S. Economy Trending Towards an Inflationary Depression

conomics / Great Depression II Jun 20, 2009 – 11:06 AM

By: Global_Research

Economics

Diamond Rated - Best Financial Markets Analysis ArticleBob Chapman writes: As Emperor Obama (Romulus the Usurper) fires GM’s CEO, steals money from Chrysler’s bondholders, puts together Public-Private Investment Partnerships (PPIP’s) that will privatize gains and socialize losses in an attempt to stabilize derivative prices by having banks buy their toxic waste from one another in the usual “smoke and mirror” tradition of Wall Street, and creates what currently is an annualized 1.8 trillion dollar federal budget deficit that will grow exponentially over time to finance zombie banker bailouts, to fascistically nationalize the financial, insurance and auto manufacturing industries, and to provide inane, flash-in-the-pan, socialistic spending programs (euphemistically called “stimulus packages” that will do little or nothing to stimulate production or to create permanent jobs).

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While simultaneously supporting the Fed’s actions, which amount to little more than using chewing gum and bailing wire to keep the money and credit markets from collapsing as it creates and distributes, in arrogant, secretive, crony-capitalist fashion, a gargantuan pile of counterfeit monopoly money in an amount on par with total US GDP for an entire year, you can just sense and feel that there is now a runaway, hyperinflationary freight train rumbling down the tracks at ever greater speed that is soon going to derail and create a train wreck out of our economy.

Since hyperinflation is clearly in our future, let’s talk about what inflation really is, what causes it, what the different degrees or levels of inflation are, and what it takes to put a stop to inflation?

By modern definitions, inflation is basically an overall increase in the prices charged for goods and services in a particular economy over time. This is a pretty simple concept, but there is some real confusion as to what the root cause of inflation is. It does not come from people willy-nilly charging more for their goods and services. People can raise prices all they like, but if there is not enough money and credit available to purchase their goods and services at the prices they are charging, they will eventually have to either lower their prices, or expect to make far fewer sales.

What you have witnessed for the past two years is the above concept in overdrive, especially in the real estate and automobile markets, as the supply of money and credit has greatly contracted for all but the anointed Illuminist institutions that are parking their profits and bailout money at interest with the Fed for fear that they might lend it out to a zombie financial institution or business corporation and never get it back. As their money is sidelined with the Fed to sterilize it (i.e. to keep it from stoking inflation) the smaller fry who depend on them for their supply of financial capital are being allowed to die of money and credit starvation so the anointed can purchase the most valuable parts of their financial carcasses at pennies on the dollar via bankruptcy auctions and fire-sales in a blatant attempt to eliminate their competition and consolidate their power.

This deflationary contraction in the supply of money and credit due to the exposed loan, mortgage and derivative fraud is a strong undertow to our economy which threatens to drag it out to sea until it runs out of air and drowns. The Fed must therefore inflate and swim for shore, or die. And inflate they will. We can absolutely guarantee it. Obama will go down in history as the King of Stagflation, as he joins forces with the inimitable Gordon Brown, the King of Fire-Sale Gold.

On a microeconomic scale, prices for specific goods and services are usually set by supply and demand (that, of course, would be in a free economy which we no longer have, so manipulation becomes an input for pricing specific goods and services in our economy, and is sometimes even the main input, as with gold and silver prices). However, the microeconomic factors which determine prices for goods and services are by far trumped by the macroeconomic factors of supply and demand. The supply side on a macroeconomic scale is determined by the amount of goods and services that are produced for sale in the overall economy. The demand side on a macroeconomic scale is the amount of money and credit available to the overall economy with which those goods and services can be purchased, or expressed another way, the amount of money and credit that is available to chase after those goods and services.

This is why the price of gold and silver must eventually skyrocket. The microeconomic supply, demand and manipulation factors which currently have sway over gold and silver prices will eventually be trumped by the macroeconomic factors, namely, a profligate increase in the supply of money and credit to unheard of levels which will drive prices up across the board. The Fed cannot suppress the price of all goods and services as it rampantly expands the supply of money and credit, and can only influence a chosen few, such as gold and silver, which are suppressed because they are the canaries in the coal mine. When everything else gets more expensive, and as fiat currencies are shown to be the “worthless paper” they really are, gold and silver will become the only real safe-havens from the resulting inflation and financial deterioration.

That will then generate a demand for precious metals that is so great, it will drive the price of gold and silver up until they catch up with the overall supply of money and credit, and there is nothing the Fed can do to stop it, short of pulling the plug on money and credit and destroying our economy, along with the privately owned Fed itself and its Illuminist cronies with it. This eventual destruction is planned to be sure, in order to pave the way for a one world Orwellian police state. The trick for the Illuminists is how to get out of their paper assets and convert them to real assets on the cheap before pulling the plug on money and credit. The problem is that as they bail out of paper, and into tangible assets, along with other foreign creditor nations anxious to trade their “worthless paper” in for things of real value, their bailing activities will drive inflation, and the price of gold, silver and other tangible assets, to unheard of levels, thereby dramatically decreasing the amount of tangible assets that they can absorb with their dollar reserves and their sales proceeds from the dumping of paper assets. The US and its creditors will be competing with one another in the race to dump dollar-denominated paper assets in exchange for precious metals, commodities, real estate, factories and equipment and other tangible assets, as well as shares in companies which own such assets, including shares in gold and silver producers.

The obvious answer is, of course, that they can’t pull this off on the cheap, and they will use the resulting hyperinflation to wreck the rest of the economy while they are desperately attempting to bail out of dollar-denominated paper assets behind everyone’s backs, as part of their Big Sting Two criminal enterprise. They will attempt to accomplish this insider trading scam in secret through unregulated dark pools of liquidity such as Project Turquoise and Baikal, as well as through the unregulated gambling casino which some dare to call the OTC derivatives market. They will use their sales proceeds to buy all the real, tangible assets they can get their hands on and leave everyone else holding a bag full of “worthless paper,” aka Federal Reserve notes, US Treasury bonds and GSE bonds.

But the amount of “worthless paper” is so great, and there are so many substantial players who will be trying to do the same thing, that market chaos will result, and the paper assets will deteriorate, and the price of tangible assets will simultaneously appreciate, at a rate that leaves everyone breathless. Truly, this will be a situation where he who loses the least, and he who buys gold and silver and their related shares early on, are the ultimate winners. The biggest losers will be those who fail to take physical delivery of their precious metals, such as gold and silver ETF shareholders and holders of mint certificates, who will be thoroughly Madoff’d, as well as holders of any leveraged gold and silver futures positions who will be wiped out by manipulations before the final run-up, thus losing all their investment capital.

The elitist oligarchs who run America, Canada and Western Europe and their privately owned central banks own tens of thousands of tons of gold already, and will seek to take the proceeds from the sale of their paper assets and use them to increase their gold holdings in an attempt to maintain monetary dominance over major players like China and Russia, who will also attempt to add to their holdings by many thousands of tons. There is only so much gold to go around, and when all the big players become gold bugs themselves, gold, and also silver, will go ballistic. They want the gold mine (literally), while you get the shaft. That is, has been, and always will be, “The Plan.” Bernanke and Geithner are now Obama’s twin Tattoo’s, with our apologies to the producers of “Fantasy Island,” a show which has become a perfect metaphor for what the US economy with its so-called “Green Shoots” has become. De plan, boss, de plan. De plan indeed.

On a technical macroeconomic basis, an economy suffers from inflation when the amount of its total money and credit available over a period of time (the demand) grows at a rate in excess of the rate of growth in its total value of goods and services produced over that period of time (the supply), which valuation is based on price levels in effect at the beginning of that period of time. In more simple terms, inflation occurs when the rate of expansion of the supply of money and credit exceeds the rate of expansion in the production of goods and services. In fact, in the past when we still had a modicum of integrity in measuring economic statistics, inflation was defined as an increase in the supply of money and credit, period. Higher prices were simply a symptom of inflation, not a definition of inflation. The supply of money and credit was what was inflated, not the prices of goods and services, which simply rose as a direct outcome of the inflated supply of money and credit.

Since central banks are currently in control of the supply of money and credit in most modern economies, it is the bankster-gangsters who are, ergo, solely responsible for any overall increases in inflation, and that goes double for any large increases.

In the US, the privately owned Fed plays the role of our central bank, and it presides over our nefarious banking system, which is a fiat-money, debt-based, European form of fractional reserve banking that once powered the British mercantilist system. All major US inflationary issues and debacles can therefore be squarely placed at the doorsteps of the Fed, and of our Treasury Department, which is little more than a doormat for the Fed, which together with Wall Street, runs a revolving door with the Treasury. In fact, our current Treasury Secretary is the former President of the New York branch of the Federal Reserve Bank. So much for checks and balances and avoidance of conflicts of interest.

We now have the Fed increasing total money and credit (M3) at a rate of 18% while our GDP is contracting at a rate of minus 6%. That is a 24% differential, and that means that the amount of goods and services being produced has an ever-growing supply of money chasing after it, money and credit that is growing at a pace that is 24% more than the pace at which goods and services are growing. Based on all the foregoing, we’ll give you three guesses as to what the outcome will be somewhere down the road when the Fed’s ever-burgeoning money blob starts chasing after a shrinking supply of goods and services.

Inflation comes in basically three varieties. Normal inflation, which is basically harmless, is a temporary increase in prices caused by an increase in the supply of money and credit by the central bank which is intended to precisely anticipate the rate of growth in the production of goods and services. You have more money and credit, but you also have more goods and services being produced. The temporary bout of minimal inflation caused by the anticipatory increase in the supply of money and credit is offset or absorbed by the greater pile of goods and services that is accumulating, so prices remain stable over time. This is obviously not an exact science, so there are some up-ticks if the money supply grows a little too fast, but over time this can be corrected. It is best to overshoot a little so as not to start an economic contraction, which, if left unchecked, could lead to a recession or depression.

The next type of inflation we would characterize as elevated inflation. This is what we have currently at a rate of about 10% and growing. This type of inflation results where the central bank consistently grows money and credit at a rate far in excess of the rate of growth in the production of goods and services, measured in terms of GDP growth, over an extended period of time. What the Illuminati have done for over 20 years now, was to have the Fed, which they privately own, raise the level of growth in the supply of money and credit to ludicrous levels, while they simultaneously ordered their lackeys at the BLS to lie about the rate of the resulting inflation by using hedonics (statistical manipulations) that were intended to greatly understate inflation. As a result, when real GDP was calculated, the GDP deflator, which is based substantially on the official (and falsely low) rate of inflation, and which is used to calculate real GDP, was obviously far too low. This farce resulted in higher levels of real GDP than were warranted by the data, because inflation was not being properly taken into account.

This is how they covered up the destruction of our economy via free trade, globalization, off-shoring and outsourcing, along with both legal and illegal immigration (slave labor). If the true figures were used, our real GDP would show that the rate of growth in our economy has been virtually flat to negative since 1990. That means all the growth in our stock markets since the early 1990′s has been nothing but false puffery, which resulted from profligate growth in the supply of money and credit, and not from growth in production. For this reason, when the Dow finally bottoms, we expect it to track back to its levels during the early 1990′s, which means roughly 2,500 to 3,500. That level will destroy everything, especially the wealth of our middle class, but the elitists themselves are going to take it on the chin. They are afraid the system will implode before they can bail, and that they will go down with the ship also. We wholeheartedly confirm their fears.

The Illuminati are about to learn a hard lesson: Hell hath no fury like an American deceitfully parted from his money!!! These unfortunate souls now risk being torn to shreds by rabid mobs using their bare hands. They have gone way beyond tar and feathers this time, or a humane execution. A large portion of the American people will not go into their internment camps, but will instead expend their last breath and bullets tracking these miscreants down like dogs. They will be chased relentlessly to the utter ends of the earth until they are systematically and utterly destroyed. You can run, but you can’t hide, from angry Americans robbed of their health and their wealth. If they try to hide in their bunkers, Americans will get small nukes from our nuclear arsenal and our patriotic soldiers, or from the Russians or Chinese, drill a hole down into their lair, drop the warhead down, and detonate it in their rabbit hole. They’ll go out in a blaze of glory! Have you really thought this thing through, morons?

The final type of inflation is what we would call hyperinflation. This is the nightmarish stuff which destroyed Germany’s Weimar Republic and Zimbabwe. But you don’t get to hyperinflation by having the government simply increase spending. You cannot attain million percent and billion percent inflation through government spending alone, as they could never spend money at such levels under normal circumstances to fight a run-of-the-mill recession or depression. No, to get this type of runaway inflation, or hyperinflation, requires two ingredients. The first ingredient is currency speculators. And the second ingredient is a central bank that is corrupt enough, or moronic enough, to print as much money as those speculators demand, creating a carry trade in that currency that destroys it in hyperbolic fashion. This is what really destroyed the German and Zimbabwean currencies utterly. The speculators are loaned currency from the central bank, which they sell short into the international currency market for stronger currencies in anticipation of further declines.

They keep borrowing money as long as the central bank cooperates and prints it, thus driving down the value of the currency ad nauseam. It’s like being able to have your own self-fulfilling prophecy.

In the case of Germany’s Weimar Republic, and the rise of Hitler to power, we see the shadowy hands of the US and European Illuminists all over this situation. Hitler was more of a madman than a genius. The genius part came from the US and European Illuminists who sponsored, supported and aided Hitler in resurrecting Germany as a militaristic police state so we could have a second world war to take us out of the Illuminist-created Great Depression. They told Hitler that they would destroy the German mark to break Germany out of the clutches of the admittedly onerous and disgusting Treaty of Versailles, which required Germany to make reparations to Allied nations in amounts that were impossible for a country destroyed in a world war to manage. Germany would pay their reparations with increasingly debauched German marks. (Does this not sound familiar with what the Fed and US Treasury are up to as they debauch the dollar in a stealth default on their debts to international creditors?

Looks like they are taking another page out of Hitler’s Nazi playbook, which they originally wrote for Hitler). The Illuminists, on their part, had their currency speculators keep borrowing from Germany’s recently privatized central bank, which was more than happy to print the German mark out of existence as the currency speculators did their dirty work. This then created the financial and social chaos, which brought Hitler to power, and was the perfect excuse to set up the Jews, with their many banking connections, as scapegoats.

But the Illuminists also did something very, very interesting. Once Hitler came to power, they told Hitler to have his fledgling Nazi government issue a new German currency that was only good inside Germany so it could not be manipulated by outside speculation, and told him to print only as much currency as would be needed to cover the anticipated production that would occur as Germany underwent reconstruction and remilitarization.

This was their idea as Hitler was hardly that well versed in economics to come up with it on his own. Hitler of course had his own German advisors, but we can assure you that they got most of their ideas from the Illuminist Puppet Masters, who were experts on currency manipulations and on monetary history. In fact, it was the Puppet Masters and their predecessors who in fact made much of monetary history. This move, of course, worked, as the Illuminists knew it would, and soon Nazi Germany, with all kinds of financial and political support from the Illuminists, was ready to start its conquest, thus generating trillions in profits for the US military-industrial complex, and providing an escape from a terrible depression.

We can assure you that the war-to-escape-depression idea will be used again shortly. We wonder who the next Hitler will be who will take us into World War III to put an end to the Much Greater Depression that is currently underway and getting worse by the minute. Stay tuned. You haven’t seen anything yet.

The second part of the above dissertation will appear in the next issue. Whether people realize it or not we started an inflationary depression in February. You wouldn’t know that reading the mainstream media, or by listening to criminal enterprises known as Wall Street and government. The US dollar is on its irreversible path to losing its status as world reserve currency, as we enter the worst depression in our nation’s history. Americans may be unaware of it, but we know as do many foreigners that America is bankrupt. This knowledge is going to continue to inhibit the purchase of US government debt and will induce dollar holders to sell current dollar holdings. These countries have their own problems and they do not think it is their responsibility to fund US deficits.

The BRIC nations led by China and Russia are going to use each other’s currency in trade as much as possible and they want a new international trading unit or currency. The Russians said they want gold to be weighted in SDR’s, Special Drawing Rights, to gain more balance within the unit.

We are seeing the beginnings finally of foreigners hesitating to continue to accumulate dollars and to fund the profligate lifestyle of Americans and America’s imperial outreach. They obviously are serious because the US asked to attend the meeting of the Shanghai Cooperation Organization and were refused. A rebuttal, something US elitists have not experienced in some time. This was a very important meeting for the six nation participants and refusing entry to the US was certainly a political and diplomatic slap in the face, something that was completely ignored by the controlled media.

The problem America has is that the conclusions of the BRIC nations will put major continual downward pressure on the dollar and short of world war there is little they can do about it. These nations are now determined to replace the dollar as the world’s reserve currency. That means the dollar is headed lower and that means inflation will rise as the cost of imported goods rises. It also means all things traded or denominated in dollars will be more expensive – inflated. Over the last ten years we’ve had just the opposite, cheap foreign goods keeping down US inflation. It is going to prove very expensive for Americans.

The wild creation of money and credit will most certainly bring on hyperinflation. It will be far too copious and strong over the next few years for deflation to take over, but ultimately deflation will win out.

The world banking system, as we know it is about to slide into history, as did the Oracle at Delphi, which so long ago played central bank and eventually brought tragedy to Greece. The days of our current elitists are numbered. We are not children to be simply dealt with. We may think our republic is democratically free, but it isn’t. It is controlled by a privately owned Federal Reserve just as England is with the Bank of England.

The next move by BRIC nations will be to extend their influence throughout Asia and bring an end to American and British meddling in the region. This will be done in part by not recycling dollars – or in fact refusing to use them. No more dollar losses and no more funding for America’s military machine. It means the end of American dominance. There now will be a race to dump dollars.

Special Drawing Rights, SDRs, are not the answer. They are simply another fiat currency. The Russians in part have it right, there must be a gold component and there will be if the SDRs are to be used. A better idea for an international trade unit is a gold backed basket of the ten top currencies, which would include the dollar. Until this happens dollar owners will continue to dump dollars by buying commodities, factories, land, etc., worldwide. America’s refusal to allow investment into certain areas, such as industries they consider to be off limits, due to security concerns will lead to an ever greater flow of dollars back to the US bringing inflation and eventually currency controls. Dollars will be allowed to leave but not enter the US. This will as well tighten government control over the wealth and finances of American citizens. If you had planned on leaving the US you had best do it now. The opportunity may not be there for you in the future.

The fall of the dollar will mean a whole new way of life for Americans. We compare it to living during the 1940s and 1950s. That will last for a few years and then we’ll graduate into living as we did in the 1930s. If we are lucky there will not be a revolution. All markets will eventually collapse taking all investments down 60% to 95% from their 2006 highs. The only exception will be gold and silver assets, which will hold their value and appreciate.

Military spending will fade and with that the end of US military dominance. It simply won’t be able to be financed. The days of printing money and issuing credit with abandon are coming to a close. The cycle is being ended.

This will create distrust and confusion with higher unemployment, which could lead to social instability. The very rich elitists will control 80% of the country’s wealth, while the nation suffers 35% or more unemployment. Such a situation harbors the seeds of rebellion.

We cannot spend our way out of our current dilemma. It is impossible. Those who deliberately created this situation know that. It was the price they were willing to pay to bring America and Europe to their knees economically and financially to force their populations to accept one-world government. This is not going to work and it will bring disaster on many levels to our planet.

Saving Wall Street and banking isn’t going to work. They are insolvent. The losses have to be absorbed sooner or later. The later it is the worse it will be. If you look at history you will find this has happened over and over again. The result is fascist dictatorial government, accompanied by a big war or a number of smaller wars. This is how the elites hope to again extricate themselves and still hold power. We have news for them. This time it is going to be different. A police state won’t work on Americans. They will die rather than to submit, and the Illuminists are about to find that out.

General Motors Corp. said it has reversed decisions to end franchise agreements with 60 dealers, as the largest US automaker scales back its retail network under bankruptcy reorganization.

Some franchise owners were able to show that GM used inaccurate financial information in placing them on the list for closing, Susan Garontakos, a company spokeswoman, said yesterday.

The revisions mean fewer shutdowns after Detroit-based GM began notifying about 1,330 dealers on May 15 that it didn’t intend to renew their franchises when they expire next year.

Consumer prices have dropped 1.3% year in May, the largest drop in the last 60 years. Month on month, consumer prices have edged up 0.1%, the market consensus had advanced a 0.3% month on month increase and a 0.9% decline year on year. The Dollar remains steady.

The deficit in the broadest measure of trade has plunged sharply in the first three months of the year as the country’s deep recession depressed imports of oil and other goods.

The Commerce Department said Wednesday the current account trade deficit dropped to $101.5 billion in the first quarter, a 34.5 percent decline from the deficit in the fourth quarter. It was the lowest current account deficit since the final three months of 2001 when the country was mired in the last recession. U.S. overall consumer confidence fell last week, according to an ABC News poll released Tuesday.

The consumer comfort index fell two points to -49 in the week ended June 14, from -47 a week earlier.

Federal Reserve officials are considering whether to use next week’s policy statement to suppress any speculation they’re prepared to raise interest rates as soon as this year.

While policy makers have signaled they accept an increase in longer-term Treasury yields as the economy improves, some are concerned at any premature anticipation of rate rises. Fed staff have examined the Bank of Canada’s public intention of foregoing an increase until 2010, according to a person familiar with the matter, without concluding the statement has proven effective.

JPMorgan Chase & Co. and four of the nation’s largest banks repaid $54.7 billion to the U.S. Treasury’s bailout fund in a step toward ridding themselves of government restrictions on lending and pay.

JPMorgan repaid $25 billion, and New York-based Morgan Stanley and Goldman Sachs Group Inc. each gave back $10 billion. U.S. Bancorp, with its headquarters in Minneapolis, refunded $6.6 billion and Winston-Salem, North Carolina-based BB&T Corp. paid $3.1 billion, the banks said today in separate statements.

The lenders are among 10 companies that last week said they would repay a total of $68 billion to the Troubled Asset Relief Program after Treasury approved the payments. Banks have unveiled plans to raise more than $100 billion in capital, and financial stocks have climbed in the past three months on signs the global credit contraction is easing.

The largest expansion of U.S. health care since the creation of Medicare in 1965 may emerge from legislation designed to reshape the medical industry and change how Americans receive and pay for care.

Congress today began crafting legislation that Democratic leaders plan to push through both chambers by their August recess. The measure may require all Americans to get medical insurance, force insurers to accept all patients and end the tax break for employer-paid health benefits. These changes may be hammered out with unprecedented speed at the urging of President Barack Obama, who four days ago said “this is the moment.”

Obama has made a health-care overhaul his top domestic priority, using his February budget proposal to call it a “moral” imperative to extend coverage to the country’s 46 million uninsured. Obama also tied the long-term fiscal soundness of the U.S. to controlling medical costs. Health care consumes 18 percent of the U.S. economy and may rise to 34 percent by 2040, the White House Council of Economic Advisers reported June 2.

“I don’t think we’ve ever had anything this large in American history aimed to go this quickly that touches everybody’s lives,” said Robert J. Blendon, a professor of health policy and political analysis at Harvard University in Cambridge, Massachusetts, in a telephone interview. “They’re moving at a pace we’ve never seen before.”

California Treasurer Bill Lockyer has insisted all through Sacramento’s latest budget crisis that he would never allow the state to renege on what it owes bondholders.

Yet when credit-rating firm Standard & Poor’s on Tuesday warned that it might cut California’s credit grade — which already is the lowest of the 50 states — S&P flagged at least the possibility of default.

In the first paragraph of its statement, S&P says that “although we continue to believe the state retains a fundamental capacity to meet its debt service, insufficient or untimely adoption of budget reforms serve to increase the risk of missed payments in our view.”

S&P’s language incensed Lockyer’s spokesman, Tom Dresslar.

“S&P raises undue alarm about the potential for missed bond payments,” he said. “There is zero chance of that happening.”

Worries about the state’s fiscal fate, combined with an early-June jump in U.S. Treasury bond yields, have driven market prices of the state’s bonds sharply lower since mid-May, sending yields soaring.

Tax-free yields on 10-year California general obligation bonds were between 5% and 5.1% on Tuesday, according to several traders. The yield was under 4.4% in mid-May. From his lips to God’s ears.

Struggling mall retailer Eddie Bauer Holdings Inc. filed for Chapter 11 bankruptcy protection on Wednesday but said a bidder already has agreed to keep the majority of its 371 stores open, honor gift cards and hold onto most employees.

Drunken Arizona drivers with the late-night munchies may soon be getting more than chicken strips at drive-through windows.

The Pima County Sheriff’s Department has a new campaign targeting drunken driving. Operation Would U Like Fries, or Operation WULF, will put undercover deputies inside 24-hour fast-food restaurants to spot impaired drivers placing their orders.

Sgt. Doug Hanna, a DUI unit supervisor, says if deputies notice someone with classic symptoms of impairment — slurred speech, red or watery eyes or beer breath — they will have a uniformed deputy stationed outside pull the driver over.

Hanna says money for the intermittent program is coming from a $128,000 grant from the Governor’s Office of Highway Safety.

Retail gas prices climbed for the 50th straight day Wednesday, the longest streak in records dating to 1996, even as benchmark crude fell for the fourth day in a row.

Historically, filling station prices tend to rise during the summer as millions of vacationing Americans pour onto the highways. But a surge in crude prices during the past few months and less production from the refiners that make gasoline has added even more pressure on prices.

“Refiners slowed production and did a lot of maintenance on the expectation that this was going to be a lousy year for demand,” said Fred Rozell, retail pricing director at Oil Price Information Service. “It turns out it wasn’t so bad.”

Yet it’s still pretty bad. Before the most recent government report on demand, gasoline supplied to the market was down 3 percent, and prices were still cheaper than they were three years ago at this point in June.

Pump prices added a half cent overnight to a new national average of $2.679 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular gas has jumped nearly 37 cents in a month.

Mid-Atlantic factory activity booked its smallest retreat since last September in June, raising hopes for the economic recovery.

The Federal Reserve Bank of Philadelphia reported Thursday that its index of general business activity for the manufacturing sector came in at -2.2 in June, compared with -22.6 in May.

That reading was the least bad since the fall, when it tilted very near the zero mark that represents the break even point between contraction and expansion.

June’s reading was well above the -18.0 expected by economists. The Philadelphia Fed report bears particular importance for financial markets and economists, who see it as a proxy and leading indicator for national economic activity.

As such, the report helps raise hopes that the manufacturing sector is emerging from the recession, and increases chances that a recovery will take place later this year, as many policy makers and analysts expect.

Michael Trebing, an economist with the bank, offered a note of caution, saying the report “showed continued weakening in manufacturing.” But he added, “the declines were much less in evidence this month.”

Meanwhile, the report noted “most of the survey’s broad indicators of future activity showed continued improvement, suggesting that the region’s manufacturing executives are becoming more optimistic that a recovery in business will occur over the next six months.”

The report’s components were a bit of a mixed bag. On the positive side, the June shipments index stood at 2.1, compared with -19.0, while the new orders index was -4.8, after May’s -25.9.

The report also showed inflation pressures as waning, which is a sign of improved activity and higher energy costs. The prices paid index hit -13.0, compared with -22.8, while the price received index was -16.6, versus -33.8 in May.

But hiring continued to contract, with the employment index at -21.8. It stood at -26.8 in May.

The May index of leading indicators offered more signs that the U.S. economy has moved closer to recovery.

The leading index jumped 1.2% last month, after April’s index increase was revised to 1.1%, the Conference Board reported Thursday. April’s rise was originally reported as 1.0%.

Economists surveyed by Dow Jones Newswires had expected an increase of 1.0% in the May index.

“The recession is losing steam. Confidence is rebuilding and financial market volatility is abating,” said Ken Goldstein, economist at the Board. But he warned that “employment will take longer to turn around.”

Vendor performance, interest-rate spread, real money supply, stock prices, consumer expectations and building permits made positive contributions to the May index. Weekly hours worked and new jobless claims were negative contributors.

The coincident index fell 0.2% in May, after a revised drop of 0.3% in April. April’s decline was first reported as 0.2%.

The lagging index dropped 0.2% in May, after a revised 0.8% decline in the prior month. The April drop was originally reported as 0.5%.

The number of U.S. workers filing new claims for jobless benefits rose slightly as expected last week, suggesting that while job losses have moderated since the beginning of the year, a rapid turnaround in labor market conditions is unlikely.

Meanwhile, total claims lasting more than one week plunged by their largest amount since November 2001, breaking a streak of 21-straight increases in a rare reprieve for the unemployed in this recession.

Initial claims for jobless benefits rose 3,000 to 608,000 in the week ended June 13, the Labor Department said in its weekly report Thursday. Economists surveyed by Dow Jones Newswires had expected a 2,000 rise. The previous week’s level was revised up.

The four-week average of new claims, which aims to smooth volatility in the data, fell 7,000 to 615,750, the lowest level since mid-February.

The latest initial-claims data include the survey week for the June payroll report. When employers are surveyed for the monthly employment report, they are asked about staffing levels for the pay period that includes the 12th day of the month. For that reason, many economists pay close attention to the jobless-claims data for that week.

Nonfarm payrolls fell 345,000 in May, the smallest decline since September, though the unemployment rate jumped 0.5 percentage point to a quarter-century high of 9.4%.

Meanwhile, according to Thursday’s report the tally of continuing claims – those drawn by workers for more than one week in the week ended June 6 – fell 148,000 to 6,687,000, the first weekly decline since the Jan. 3 week and largest since Nov. 24, 2001.

Including extended benefit and other federal programs, the total number of people collecting jobless benefits was almost 8.8 million in the May 30 week, up from about 8.5 million the previous week. That number, which lags the initial and continuing claims figures, isn’t adjusted for seasonal fluctuations.

The unemployment rate for workers with unemployment insurance was 5% in the June 6 week, down 0.1 percentage point from the previous week.

Credit ratings agency Standard & Poor’s lowered its ratings and revised its outlooks on 22 U.S. banks on Wednesday, citing concerns that operating conditions will be less favorable than they were in the past due to volatile financial markets during credit cycles and tighter regulatory supervision.

Standard & Poor’s also said the changes reflect its ongoing broad-ranging reassessment of industry risk for U.S. financial institutions. The agency indicated that the banking industry is now in a transition period and will likely undergo material structural changes.

Further, the agency said its overall assessment of the industry includes expectations that loan losses are likely to continue to increase and could rise beyond current expectations.

Standard & Poor’s credit analyst Rodrigo Quintanilla said, “We believe the banking industry is undergoing a structural transformation that may include radical changes with permanent repercussions.”

“Financial institutions are now shedding balance-sheet risk and altering funding profiles and strategies for the marketplace’s new reality,” Quintanilla added. “Such a transition period justifies lower ratings as industry players implement changes.”

BB&T Corp.(BBT: News ), Capital One Financial Corp.(COF: News ), Key Corp. (KEY: News ) U.S. Bancorp (USB: News ), and Wells Fargo & Co.(WFC: News ) were among the larger banks on the list that saw their ratings cut by S&P.

Additionally, Standard & Poor’s reassessed the relative creditworthiness of many institutions based on their ability to deal with the increased risks during this transition period and inferred that some firms may be better able to weather the risks ahead than others.

However, the agency stated that it could foresee raising ratings in the long term if lower earnings and reduced risk go along with stronger risk-adjusted capital and effective governance.

The other banks on the list include Associated Banc Corp. (ASBC), Astoria Financial Corp. (AF), Comerica Inc. (CMA), Fifth Third Bancorp (FITB), M&T Bank Corp. (MTB), PNC Financial Services Group (PNC), Regions Financial Corp. (RF), Susquehanna Bancshares Inc. (SUSQ), Valley National Bancorp (VLY), Webster Financial Corp.(WBS), Wilmington Trust Corp (WL), and First National Bank of Omaha.

Regional banks cut to junk status included Carolina First Bank, Citizens Republic Bancorp Inc. (CRBC), Huntington Bancshares Inc. (HBAN), Synovus Financial Corp. (SNV), and Whitney Holding Corp. (WTNY).

The Senate today overwhelmingly passed a bill that would fund military operations in Iraq and Afghanistan through Sept. 30, giving congressional backing to President Obama’s plan to increase troops and resources for the war in Afghanistan. The 91-5 vote sends the bill to President Obama for signing.

The $105.9 billion bill also includes $7.7 billion to prepare for a potential outbreak of a pandemic flu, an increased U.S. contribution to the International Monetary Fund and $1 billion to start the “cash for clunkers” program that will give Americans vouchers of up to $4,500 to turn in their old cars and purchase more fuel-efficient vehicles.

Payrolls fell in most of the U.S. during May as companies squeezed by the recession kept unloading workers, but fewer states lost jobs than in April.

Non-farm payroll employment decreased in 39 states and increased in 11 states and the District of Columbia last month, the Labor Department said Friday. In its state unemployment breakdown for April, Labor said non-farm payrolls fell in 44 states and the District of Columbia, rising in six states.

The moderation in the drop echoes other data showing the economy is not as bad as it had been – but it still isn’t good.

Two weeks ago the Labor Department said non-farm payrolls shrank by 345,000 jobs in the U.S. during May – about half the average monthly decline for the prior six months. In April, payrolls shed 504,000 jobs. Since the recession began in December 2007, 6 million jobs have vanished.

The jobless rate rose in May to 9.4% from 8.9% in April.

California lost the most jobs of all states in May, at 68,900. Florida dropped 61,000, with Texas losing 24,700 and Michigan down 23,900, Labor said.

Michigan, the heart of the automobile industry, had the highest jobless rate in May, at 14.1%. Oregon had a jobless rate of 12.4% and Rhode Island and South Carolina each had 12.1%.

The Federal Reserve’s latest weekly money supply report Thursday shows seasonally adjusted M1 rose by $34.3 billion to $1.631 trillion, while M2 rose $4.4 billion to $8.354 trillion.

The figures are preliminary estimates for the week extending through June 8 and are subject to revisions.

The Fed expanded its balance sheet by $29.406B in the latest week. The Fed monetized $42.766B of securities. $15.5B of swaps were disgorged. If Congress intends to investigate Sammy Sosa for lying about steroids, Bernanke should be investigated for lying about monetizing debt and threatening Lewis.

The real reason for Thursday’s collapse in bonds is the Treasury announced that it would auction $104B of debt next week – $40B of 2s, $ 37B of 5s and $ 27B of 7s. Plus $61B of T-Bills totals $165B!

President Obama’s plan to revamp financial regulations triggered immediate criticism Wednesday from both the political left and right over the expanded policing authorities given to the Federal Reserve while business groups grumbled about a powerful new agency charged with protecting consumers against abusive lending.

Lawmakers picked apart virtually every element of the Obama administration’s regulatory reform plan during a hearing Thursday, but there was one question that dominated: Would it really prevent another financial crisis?

Senators were astounded that there were no reforms for Fannie and Freddie. That’s because Congress intends for GSEs to provide unwarranted benefits to certain constituents.

President Obama signed the American Recovery and Reinvestment Act (ARRA) into law, thus launching a bold new initiative to modernize state unemployment insurance programs with the help of $7 billion in federal incentive funds. That is because the ARRA covered 100 percent of the costs associated with the 13- to 20-week program of Extended Benefits, which is normally paid for 50 percent by the states.

Government figures, in fact, show the proportion of recipients who used up their jobless benefits averaged 49 percent in May, a record.

A market manipulation vehicle will be investigated. The FT: SEC to turn spotlight on ‘dark pools’:

The increasingly popular trading venues known as “dark pools’’ are to come under fresh scrutiny from regulators concerned about the emerging risks they pose to the wider markets, the head of the US Securities and Exchange Commission said on Thursday.

Mary Schapiro, SEC chairwoman, has asked her staff to investigate the impact of automated “dark pools”, off-exchange trading venues that do not display quotes to the public. Investorscan anonymously trade large blocks of shares on dark pools, leading to concerns about their impact on public prices and markets.

New York Fed President William Dudley set expectations low, saying in a June 4 speech that he didn’t foresee any activity because the securitization process “takes quite a while to ramp up.” He asked his audience not to “take that as a mark of the success of the CMBS effort, please.”

The stakes of TALF aid for CMBS extend beyond the markets for office and retail space. Worsening problems in the commercial mortgage market may accelerate the drop in property values, increase defaults and weaken banks’ finances, Dudley said in the speech.

Among asset classes targeted by the Fed through the TALF, “commercial real estate is going to be the toughest to crack as its financing is very long-term in nature,” Rupkey said.

Personal Income Tax Revenues Portend Deepening Trouble for Many States

Preliminary data show deep declines in overall personal income tax revenues in nearly every reporting state. These declines signal continued difficult fiscal challenges ahead, particularly for the states that rely most heavily on personal income taxes…

Looking at the most recent recession years, personal income tax revenue declined by only 1.4 percent in April-June 1993 and by a dramatic 22.3 percent in April-June 2002. Given the severe declines in April 2009 personal income tax collections, we expect that the April-June 2009 quarter will be even more dramatically negative than the April-June 2002 quarter.

Total personal income tax collections in January-April 2009 were 26 percent, or about $28.8 billion below the level of a year ago in states for which we have data. In April 2009 alone (April being the month when many states receive the bulk of their balance due or final payments), personal income tax receipts

fell by 36.5 percent, or $18.2 billion.

They are all fraudulent, it’s obvious. We don’t even have paper securities outstanding for that value,’’ said Mckayla Braden, senior adviser for public affairs at the Bureau of Public Debt at the US Treasury department. “This type of scam has been going on for years.

From a fundamental and technical viewpoint the stock market and bond markets are under pressure. They both should not be able to launch any kind of a sustainable rally from present levels. From here on out markets will tend to be boring and cautious.

The Fed on Wednesday bought $7 billion of bills and notes and monetized $6.45 billion of 3 and 4-year bills.

There is gloom and doom at the highest levels of the banking industry because collateral values keep deteriorating and there is no end in sight. Few banks have as yet writing off their holdings of HELOC paper. They are faced with the next leg down as prime mortgage defaults hit the market.

Commercial paper outstanding fell $27.7 billion in the week ended 6/17 versus $14.8 billion the previous week.

Asset backed CP outstanding fell $22.2 billion versus a $32.5 billion.

CP outstanding was $1.202 trillion versus $1.230 trillion. ABCP outstanding was $502.7 billion versus $524.9 billion.

Unsecured CP issuance fell $100 million to $15.9 billion.

This is the lowest level of CP in 8-12/ years.

The preliminary take on the sweeping new Obama rules for the nation’s financial system to be are an insult to the American people – as they say the best defense is a strong offense. A preeminent move in psychological warfare is to heap more responsibility on the shoulders of the Fed. This is so Congress won’t pass legislation to investigate and audit the Fed. It is also to prevent the real culprits from going to jail. The excuse is the system failed and needs to be overhauled. It was those who created the conditions for unbridled lending, which launched the housing bubble and the securitization that followed. All the rules were broken and the Fed led the pack. No new rules or regulations are needed. All those who broke the rules have to be tried, sentenced and jailed and their wealth taken from them. All those who aided them at the SEC and CFTC should be jailed as well. The overhaul is pure misdirection. The Fed orchestrated all this and they want to put them in charge. These changes put the fed in charge of the country. They are leading a financial dictatorship unless we can make HR 1207 and S 604 the law. Once even Congress understands what they are doing, even they will dump the Fed.

California’s unemployment rate jumped from 11.0% to 11.4% in May.

In the bond market, the Treasuries are close to the trend line that began from the bear market lows in 1981. Further weakness will break that line and we believe that will happen.

As HR 1207 appears to be ready to pass – 258 co-sponsors – to investigate the Fed. The pros on Wall Street are quaking in their boots. If HR 1207 is passed and not vetoed the issue of unconstitionaility will surface.

The Fed could soon be exposed as the fraud it really is. As we said earlier the new responsibilities of the Fed is a psy-op cover, an offensivecover.
This is a private company owned by US and European bankers, which has been responsible for the debauching of our currency by 95%.

The Dow fell 2.9%; S&P fell 2.6%; the Russell small cap lost 2.7% and Nasdaq fell 1.3%. Banks lost 3.4%; broker/dealers lost 5%; cyclicals lost 6.2%; transports fell 4.2%; consumers fell 1.4%; utilities fell 1.4%; high tech fell 2.4%; semis fell 3.8%; Internets fell 3.5% and biotechs were off 0.6%. Gold bullion fell $4.00 and the HUI fell 2.8%.

Two-year T-bills fell 7 bps to 1.19% and the 10’s fell 2 bps to 3.78%. The 10-year German bunds fell 13 bps to 3.50%.

Freddie Mac’s 30-year fixed rate mortgage fell 21 bps to 5.38%; the 15’s fell 17 bps to 4.89% and the one-year ARMs fell 9 bps to 4.95%.

Fed credit jumped $29.4 billion. Holdings of Treasuries for foreigners and Agency debt increased $2.1 billion to a record $2.752 trillion. Custody holdings for foreign central banks have risen 20.3% ytd.

Bank credit fell $59 billion. It is up $317 billion yoy. Securities credit sank $32.6 billion; loans and leases fell $26.4 billion; C&I loans declined $5.9 billion; real estate loans fell $7.4 billion; consumer loans fell $4.3 billion and securities loans fell $5.5 billion. Other loans fell $3.2 billion.

M2 – narrow money supply gained $4.4 billion. Total money market fund assets fell $72.9 to $3.675 trillion.

The USDX, the dollar index gained 0.2%.

Almost two years into the worst financial calamity since the 1930s, companies are doing everything they can to reduce their indebtedness, selling record amounts of equity to pay back bonds and loans. ‘Stock buybacks are a thing of the past: It’s reducing debt and bond buybacks that are in vogue,’ said Kathleen Gaffney, co-manager of the Loomis Sayles Bond Fund. ‘Stocks aren’t going to move and earnings aren’t going to move without a healthier balance sheet,’ said Gaffney. More than 165 companies raised a record $87 billion in U.S. secondary share sales this quarter, and 77% of them used the proceeds to slash leverage, according to Bloomberg.

Irish retail sales fell 17% during April from the same month last year, the country’s Central Statistics Office said… When car sales are excluded, sales fell 7.1%.

National Income declined a modest $48bn (annualized) during the first quarter to a $12.255 TN pace. This was a slower contraction than Q4’s $189bn (annualized), with National Income declining 1.6% y-o-y. Total Compensation was up 0.2% y-o-y to $8.024 TN. From my analytical perspective, the massive – almost $2.2 TN – “federal” Credit boom has for now stabilized system-wide Compensation and Income. Yet the sustainability and consequences of the Government Finance Bubble create – at best – great uncertainty. I’ll stick with the analysis that two Trillion-plus of government Credit creation is necessary to hold Bubble Economy implosion at bay – and that this amount of Washington-based finance comes with its own set of serious issues (including exacerbating global financial and economic distortions).

Household Balance Sheet data make for dreadful analysis. Despite incredible government stimulus, Household sector Assets declined a further $1.444 Trillion during the quarter. This brought the one-year drop to an unrivaled $10.075 Trillion (13.5%). At $64.517 TN, Household Assets have returned to year-end 2005 levels. Over the past year, Financial Assets declined $7.869 TN (16.3%) to $40.296 TN and Real Estate dropped $2.279 TN (10.3%) to $19.819 TN. Household Liabilities contracted at a 3.2% rate during the quarter to $14.141 TN, with a one-year drop of 2.1% ($301bn). As such, Household Net Worth contracted $1.330 TN, or at a 10.3% rate, during Q1 to $50.376 TN. Household Net Worth dropped $9.774 TN over the past four quarters, or 16.2%, deflating back to about the Q3 2005 level.

For more insghts consult the www.TheInternationalForecaster.com

Public Private Investment Partnerships sell off toxic waste, hyperinflation clearly in our future, gold and silver must eventually skyrocket, bailouts behind everyones backs, since central banks control the money flow, they are responsible, the king of stagflation

As Emperor Obama (Romulus the Usurper) fires GM’s CEO, steals money from Chrysler’s bondholders, puts together Public-Private Investment Partnerships (PPIP’s) that will privatize gains and socialize losses in an attempt to stabilize derivative prices by having banks buy their toxic waste from one another in the usual “smoke and mirror” tradition of Wall Street, and creates what currently is an annualized 1.8 trillion dollar federal budget deficit that will grow exponentially over time to finance zombie banker bailouts, to fascistically nationalize the financial, insurance and auto manufacturing industries, and to provide inane, flash-in-the-pan, socialistic spending programs (euphemistically called “stimulus packages” that will do little or nothing to stimulate production or to create permanent jobs), while simultaneously supporting the Fed’s actions, which amount to little more than using chewing gum and bailing wire to keep the money and credit markets from collapsing as it creates and distributes, in arrogant, secretive, crony-capitalist fashion, a gargantuan pile of counterfeit monopoly money in an amount on par with total US GDP for an entire year, you can just sense and feel that there is now a runaway, hyperinflationary freight train rumbling down the tracks at ever greater speed that is soon going to derail and create a train wreck out of our economy.

Since hyperinflation is clearly in our future, let’s talk about what inflation really is, what causes it, what the different degrees or levels of inflation are, and what it takes to put a stop to inflation?

By modern definitions, inflation is basically an overall increase in the prices charged for goods and services in a particular economy over time. This is a pretty simple concept, but there is some real confusion as to what the root cause of inflation is.  It does not come from people willy-nilly charging more for their goods and services.  People can raise prices all they like, but if there is not enough money and credit available to purchase their goods and services at the prices they are charging, they will eventually have to either lower their prices, or expect to make far fewer sales.
What you have witnessed for the past two years is the above concept in overdrive, especially in the real estate and automobile markets, as the supply of money and credit has greatly contracted for all but the anointed Illuminist institutions that are parking their profits and bailout money at interest with the Fed for fear that they might lend it out to a zombie financial institution or business corporation and never get it back.  As their money is sidelined with the Fed to sterilize it (i.e. to keep it from stoking inflation) the smaller fry who depend on them for their supply of financial capital are being allowed to die of money and credit starvation so the anointed can purchase the most valuable parts of their financial carcasses at pennies on the dollar via bankruptcy auctions and fire-sales in a blatant attempt to eliminate their competition and consolidate their power.  This deflationary contraction in the supply of money and credit due to the exposed loan, mortgage and derivative fraud is a strong undertow to our economy which threatens to drag it out to sea until it runs out of air and drowns.  The Fed must therefore inflate and swim for shore, or die.  And inflate they will.  We can absolutely guarantee it.  Obama will go down in history as the King of Stagflation, as he joins forces with the inimitable Gordon Brown, the King of Fire-Sale Gold.

On a microeconomic scale, prices for specific goods and services are usually set by supply and demand (that, of course, would be in a free economy which we no longer have, so manipulation becomes an input for pricing specific goods and services in our economy, and is sometimes even the main input, as with gold and silver prices).  However, the microeconomic factors which determine prices for goods and services are by far trumped by the macroeconomic factors of supply and demand.  The supply side on a macroeconomic scale is determined by the amount of goods and services that are produced for sale in the overall economy.  The demand side on a macroeconomic scale is the amount of money and credit available to the overall economy with which those goods and services can be purchased, or expressed another way, the amount of money and credit that is available to chase after those goods and services.

This is why the price of gold and silver must eventually skyrocket. The microeconomic supply, demand and manipulation factors which currently have sway over gold and silver prices will eventually be trumped by the macroeconomic factors, namely, a profligate increase in the supply of money and credit to unheard of levels which will drive prices up across the board.  The Fed cannot suppress the price of all goods and services as it rampantly expands the supply of money and credit, and can only influence a chosen few, such as gold and silver, which are suppressed because they are the canaries in the coal mine.  When everything else gets more expensive, and as fiat currencies are shown to be the “worthless paper” they really are, gold and silver will become the only real safe-havens from the resulting inflation and financial deterioration.  That will then generate a demand for precious metals that is so great, it will drive the price of gold and silver up until they catch up with the overall supply of money and credit, and there is nothing the Fed can do to stop it, short of pulling the plug on money and credit and destroying our economy, along with the privately owned Fed itself and its Illuminist cronies with it.  This eventual destruction is planned to be sure, in order to pave the way for a one world Orwellian police state.  The trick for the Illuminists is how to get out of their paper assets and convert them to real assets on the cheap before pulling the plug on money and credit.  The problem is that as they bail out of paper, and into tangible assets, along with other foreign creditor nations anxious to trade their “worthless paper” in for things of real value, their bailing activities will drive inflation, and the price of gold, silver and other tangible assets, to unheard of levels, thereby dramatically decreasing the amount of tangible assets that they can absorb with their dollar reserves and their sales proceeds from the dumping of paper assets.  The US and its creditors will be competing with one another in the race to dump dollar-denominated paper assets in exchange for precious metals, commodities, real estate, factories and equipment and other tangible assets, as well as shares in companies which own such assets, including shares in gold and silver producers.
The obvious answer is, of course, that they can’t pull this off on the cheap, and they will use the resulting hyperinflation to wreck the rest of the economy while they are desperately attempting to bail out of dollar-denominated paper assets behind everyone’s backs, as part of their Big Sting Two criminal enterprise.  They will attempt to accomplish this insider trading scam in secret through unregulated dark pools of liquidity such as Project Turquoise and Baikal, as well as through the unregulated gambling casino which some dare to call the OTC derivatives market.  They will use their sales proceeds to buy all the real, tangible assets they can get their hands on and leave everyone else holding a bag full of “worthless paper,” aka Federal Reserve notes, US Treasury bonds and GSE bonds.  But the amount of “worthless paper” is so great, and there are so many substantial players who will be trying to do the same thing, that market chaos will result, and the paper assets will deteriorate, and the price of tangible assets will simultaneously appreciate, at a rate that leaves everyone breathless.  Truly, this will be a situation where he who loses the least, and he who buys gold and silver and their related shares early on, are the ultimate winners.  The biggest losers will be those who fail to take physical delivery of their precious metals, such as gold and silver ETF shareholders and  holders of mint certificates, who will be thoroughly Madoff’d, as well as holders of any leveraged gold and silver futures positions who will be wiped out by manipulations before the final run-up, thus losing all their investment capital.

The elitist oligarchs who run America, Canada and Western Europe and their privately owned central banks own tens of thousands of tons of gold already, and will seek to take the proceeds from the sale of their paper assets and use them to increase their gold holdings in an attempt to maintain monetary dominance over major players like China and Russia, who will also attempt to add to their holdings by many thousands of tons.  There is only so much gold to go around, and when all the big players become gold bugs themselves, gold, and also silver, will go ballistic.  They want the gold mine (literally), while you get the shaft.  That is, has been, and always will be, “The Plan.”  Bernanke and Geithner are now Obama’s twin Tattoo’s, with our apologies to the producers of “Fantasy Island,” a show which has become a perfect metaphor for what the US economy with its so-called “Green Shoots” has become.  De plan, boss, de plan.  De plan indeed.

On a technical macroeconomic basis, an economy suffers from inflation when the amount of its total money and credit available over a period of time (the demand) grows at a rate in excess of the rate of growth in its total value of goods and services produced over that period of time (the supply), which valuation is based on price levels in effect at the beginning of that period of time.  In more simple terms, inflation occurs when the rate of expansion of the supply of money and credit exceeds the rate of expansion in the production of goods and services.  In fact, in the past when we still had a modicum of integrity in measuring economic statistics, inflation was defined as an increase in the supply of money and credit, period.  Higher prices were simply a symptom of inflation, not a definition of inflation.  The supply of money and credit was what was inflated, not the prices of goods and services, which simply rose as a direct outcome of the inflated supply of money and credit.

Since central banks are currently in control of the supply of money and credit in most modern economies, it is the bankster-gangsters who are, ergo, solely responsible for any overall increases in inflation, and that goes double for any large increases.

In the US, the privately owned Fed plays the role of our central bank, and it presides over our nefarious banking system, which is a fiat-money, debt-based, European form of fractional reserve banking that once powered the British mercantilist system.  All major US inflationary issues and debacles can therefore be squarely placed at the doorsteps of the Fed, and of our Treasury Department, which is little more than a doormat for the Fed, which together with Wall Street, runs a revolving door with the Treasury.  In fact, our current Treasury Secretary is the former President of the New York branch of the Federal Reserve Bank.  So much for checks and balances and avoidance of conflicts of interest.

We now have the Fed increasing total money and credit (M3) at a rate of 18% while our GDP is contracting at a rate of minus 6%.  That is a 24% differential, and that means that the amount of goods and services being produced has an ever-growing supply of money chasing after it, money and credit that is growing at a pace that is 24% more than the pace at which goods and services are growing.  Based on all the foregoing, we’ll give you three guesses as to what the outcome will be somewhere down the road when the Fed’s ever-burgeoning money blob starts chasing after a shrinking supply of goods and services.

The Fed The Ultimate Zombie

Posted: June 24 2009
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Mistakes of and good intentions of Lincoln and Kennedy, As the Fed absorbs the toxic waste of its friends, it becomes a zombie bank in  its own right, the perils of printing the dollar, the deliberate march to the destruction of the dollar,
This idea of a non-bank currency issued directly by a government free of any interest burden is along the lines of what Presidents Lincoln and Kennedy did, and tried to do, respectively, for the US.  Their boldness in promoting the welfare of US citizens cost them their lives.  They did not want to become interest slaves to a private national bank, and chose to issue our own official currency directly from our Treasury Department free of the interest burden imposed by a privately owned, debt-based, European-style fractional reserve banking system, which is what our Founding Fathers fought a war to free themselves, and their posterity, from.
Note that Baron Rothschild started and bankrolled the War of 1812 when the first private US central bank charter was not renewed by our then gutsy Congress, which, unlike our current corrupt and cowardly Congress, saw through the ruse of the British crown, which was attempting to take back its colonies via monetary extortion.   Lincoln made the mistake of not backing US notes with gold and silver as required by our Constitution, an error that was confirmed as being a mistake by the Supreme Court of the United States, and the US notes that were used to fund the Civil War efforts of the North soon became worthless, triggering a long, hard, devastating depression in the 1870′s.  President Kennedy was assassinated before Executive Order 11110 could be implemented, and the Fed was allowed to continue on with its blatant criminality.
You might also note that Presidents Garfield and McKinley were both ardently opposed to the idea of a private central bank, and we know what happened to them.  Andrew Jackson, who the Illuminists tried to assassinate on multiple occasions, was our most vehement objector to a private central bank, and his face now appears on the front of a twenty dollar bill.  If he was alive today, he would throw a “hissy fit” the likes of which has never been recorded in human history.  This is the way the Illuminists chose to rub Jackson’s face in their final victory to establish a private central bank with the passing of the Federal Reserve Act in 1913, albeit their insult was delivered posthumously.  In addition, President Lincoln’s face is on the front of a five dollar bill, which is yet another posthumous insult to the leader who rejected the European Illuminists and their private banking interests.  Next we’ll see President Kennedy’s face on the front of a thousand dollar bill, which will be created so that you don’t need a wheelbarrow to cart around the cash necessary to pay the ridiculously high prices of goods and services that will be caused by the coming hyperinflation.  On second thought, let’s not give them any more ideas!
So, in the case of the Federal Reserve Note (which is a private note backed by the full faith and credit of the US government, and not a US note issued directly from the US Treasury), do these two ingredients for the creation of hyperinflation exist?  Currency speculators we always have, but are the Fed and our Treasury Department corrupt enough to keep printing the dollar so speculators can short it into oblivion by creating a dollar carry trade?  Is the Pope a Catholic?  Does a bear crap in the woods?   So the answer to that question is: Abso-freaking-lutely!!!
But the Illuminists had a problem.  They could not print money, thus creating an interest-bearing debt for the US government, without the consent of the US Treasury, which was in turn limited as to how much it could borrow by the US Congress.  So how on earth could they get the Treasury and Congress to spend a totally unprecedented amount money by borrowing it at interest from the Fed, which then creates it out of thin air, such that hyperinflation, and the destruction of the US economy to pave the way for world government, is accomplished as the desired and ultimate end?  The politics of such a move would be horrendous unless justified by an extremely compelling reason.
Naturally, they would have to start their sting operation by buying off or compromising the Executive Branch and its various Departments, especially the Treasury Department, as well as the Legislative Branch, the Judicial Branch, and most of the relevant regulatory agencies, which they had very nearly accomplished already in any case when they put their plans for a hyperinflationary recession, followed by a deflationary depression, into motion.  And remember, the ultimate aim of this sting operation is to take down the US economy, along with the economies of Canada and most of Western Europe, to pave the way for world government, which they will attempt to put into place in the ensuing chaos.
So what is an Illuminist with a compelling desire for hyperinflation to do?  We’ll tell you what they did.
They started by having the Fed create profligate amounts of money and credit well beyond the amounts necessary to absorb any increases in production, thus creating an elevated level of inflation for almost two decades.  They continuously lied officially about the rate of inflation by understating it.  This was done to cover up their destruction of our economy via free trade and globalization by creating bogus increases in production that were just inflation in disguise.  This inflation was implemented to get us started down the road to economic destruction from which a hyperinflationary environment could be created.
To take us out of recession, and prevent the purging which our economy needed from the destruction wreaked in the early 1990′s in the aftermath of the Savings and Loan Crisis and the collapse of the real estate market, both of which they also created, they pushed tech stocks into a dot.com bubble, followed by a real estate bubble to cover up the dot.com destruction, which real estate was then re-bubbled after 9/11 via ultra-low interest rates and their if-you-can-fog-a-mirror-you-can-have-a-mortgage-loan policy.  This was done to keep the debt snowball rolling, and to prevent the purging of losses from fraud and speculation out of our economy by keeping those losses in the system so they could later become the reason for future defaults, losses and bailouts that would help lead us into hyperinflation when the Illuminati were ready.
They engineered the 9/11 false flag attack to take US citizens, via fraudulent intelligence, into a multi-trillion dollar, two-front war in Iraq and Afghanistan to get the big spending sprees started.  These were wars for profit intended to enrich Illuminists while simultaneously bankrupting America and pushing us down the road to hyperinflation.
They bankrupted the Social Security system by stealing from its reserves to pay for Illuminist pork projects and benefits for illegal immigrants (slave labor), drove up medical and pharmaceutical costs, and created an entitlement indebtedness in the tens of trillions of dollars that they know can never be repaid, thus ensuring the destruction of the dollar by curtailing the ability of the US to repay its creditors, and providing a backdrop for huge bailouts and expenditures to keep paying out benefits and to fund medical insurance reforms that can only be paid for through debt monetizations that will propel us toward hyperinflation.
They got rid of the Glass, Steagall Act via the Gramm, Leach, Bliley Act so they could defraud investors with new flimflam financial products in the complete absence of any checks and balances.  They deregulated the already opaque OTC derivative market with the Commodity Futures Modernization Act so that derivatives could be issued naked (without collateral backing the guarantees against default) to back securities that in many cases were not even owned by the buyers of derivatives backing those securities (credit default swaps), and further allowed investors to gamble on interest rates (interest rate swaps), thus turning the entire OTC derivatives market into a gambling casino.  They continued to foster mortgage and other consumer loan fraud, via liar loans, false appraisals, slack credit standards, false derivative ratings and fraudulent derivative sales, using Fannie, Freddie and the unregulated OTC derivative market to accomplish their dirty work until a Quadrillion Dollar Derivative Death Star was created.  All of this fraud was allowed in order to plant and build a fatal flaw into the entire debt system, and this flaw would be used to ignite the Derivative Death Star, and start the bankster-gangster bailouts that will eventually run into the tens of trillions of dollars unless stopped by US citizens.  How’s that for spending us into hyperinflation!
They also allowed investment banks to use 40 or even as much as 60 to 1 leverage to fund the Derivative Death Star, and allowed commercial banks to reduce their reserve requirements to unprecedented levels. They increased money and credit to psychopathic levels to feed the hedge funds, pensions funds, endowment funds, and sovereign wealth funds, which then went berserk on a wild spending binge, thus driving stock and bond prices up to ludicrous levels, which have now imploded or are in the process of imploding, thus giving more cause for bailouts and profligate borrowing and spending by our government at taxpayer expense, once again socializing losses after profits have been privatized.
By exposing the fatal flaw just alluded to that was built into the debt system via rampant fraud, they created an implosion of financial markets by showing how vulnerable, flawed and over-rated derivatives really were (in this case, the exposure of the fatal flaw may have happened sooner than planned by an untoward event, thus throwing a wrench into the works), and set up the 19 anointed financial institutions, and the Fed, as too-big-to-fail institutions, and made sure that no Illuminist companies were allowed to fail. Instead of allowing failure through bankruptcies to purge the economy, they bailed out Illuminist banks and corporations in typical crony capitalist fashion at taxpayer expense, thus socializing losses after profits had been grandly earned and privatized, using the oh-we-can’t-let-this-happen routine and the fear of increased unemployment and horrendous amounts of asset losses, which will of course occur anyway further down the road, but this time on steroids.  Needless to say, non-anointed companies can go suck an egg.
They hid the losses of Illuminist-anointed financial institutions via false accounting which was approved by “regulators,” and caused the BLS and other government agencies to lie about every known economic statistic, in order to convince taxpayers and private investors that there are Green Shoots and that they should once again invest in these zombie institutions which later will implode, thus rendering the stock worthless.  In the meanwhile, they allowed non-Illuminist companies to fail, thus reducing their competition and consolidating their power.  They then had their government flunkies create fascistic, socialized spending programs, and termed the first of what will be many such programs as an “economic stimulus,” when in reality these are all going to be nothing more than flash-in-the-pan, pork-laden masterpieces of profligate spending that stimulate nothing, create few if any permanent jobs, and virtually ignore the middle class, which got a token tax break – big deal.  As the economy unravels, they will just keep up the same oh-we-can’t-let-this-happen routine, and continue to play on taxpayer fears while they totally ignore the Constitution which in no way authorizes these bailouts of private companies on a secret, crony-capitalist basis, which bailouts are also being extended to foreign banks and corporations stung by the Illuminist derivative fraud (hence the lack of lawsuits).  In this fashion, they will continue to spend and spend as the PBGC and FDIC go bankrupt while our middle class is wiped out.  This spending will have to monetized.  Hyperinflation is the inevitable outcome.
They have also created Public Private Investment Partnerships so Illuminist institutions can buy their toxic waste from each other in what will be a failed attempt to prop up toxic derivative prices, with the public being the big loser because they will absorb most of the losses while most of the profits, if any, will go to Illuminist investors.  This is just another method of converting private red ink into public red ink, thus adding to the debt blob that will debauch the dollar and help send us into hyperinflation.
The Fed will continue to absorb the toxic waste of its member banks, setting itself up as the ultimate too-big-to-fail zombie financial institution which is now helpless to stop the oncoming hyperinflationary freight train because all its assets are unmarketable cess pools of toxic waste that no one in their right mind would purchase for more the 10 cents on the dollar.  Thus, the Fed has been intentionally disabled from fighting  against the inflationary consequences that will result from the rampant spending and bailouts that are now ongoing right before your eyes.  The Fed has been hamstrung so that hyperinflation can be assured.  They can no longer suck money out of the system because the value of their assets is laughable.
After they achieve an elevated level of inflation by all this spending on pork, bailouts and socialist programs while the hamstrung Fed continues to profligately spew out money and credit at an ever-increasing rate via monetization of treasuries which investors are starting to shun more and more for obvious reasons, interest rates will rise, the real estate, stock and bond markets will collapse, credit default and interest rate swaps will implode, and suddenly there will be tens of trillions in losses that of course will have to be bailed out.
As this debacle transpires, everyone owning dollar-denominated assets will be running for the exits, all the dollars parked in foreign currency reserves will be repatriated, and the currency speculators will go to town as the Fed pumps out money in ever-increasing quantities to fund bailout after totally illegal and disgusting bailout.   This will mark the start of the period during which the Much Greater Depression will be at its most severe level, and is where will we be Weimarized.  You won’t know about the foreign investment until it is too late because, conveniently, like the cessation of M3 statistics by the Fed, the FTC no longer provides figures regarding foreign investment in the US.
During this whole process, only the Illuminist institutions and corporations will receive any bailouts, so in the end, all the money for which taxpayers and their descendents become indebted will have been paid as salaries and bonuses to the Illuminati and their henchmen, and as free booty to their Illuminist business corporations to keep them from failing and to resettle them overseas.  Taxpayers will be lucky if they get a lump of coal in their stockings as they watch their pensions, benefits and entitlements trickle down to nothing, especially after hyperinflation becomes full blown.  Note how the losses are allowed to be trickled out as slowly as possible so that taxpayers are less prone to say that the losses are just too big to handle and that the elitist institutions must be allowed to fail and let the chips fall where they may as the market sorts things out.

Unemployment Crisis Grips U.S. States

Unemployment Crisis Grips U.S. States

Economics / US Economy Jun 23, 2009 – 01:55 AM

By: Global_Research

Economics

Best Financial Markets Analysis ArticleTom Eley writes: The unemployment rate increased in 48 of 50 states and Washington, DC, in May, according to US Department of Labor statistics. For the year as a whole, the jobless rate has increased in every state, and in eight states it is now at its highest level since 1976, when monthly state-level statistics were first issued by the federal government. The national jobless rate in May rose to 9.4 percent.

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// The state of Michigan again had both the highest unemployment rate in the nation at 14.1 percent, and its biggest monthly increase, up 1.3 percentage points from 12.9 percent in April. Michigan, Indiana, and Ohio have been devastated by the shutdown of auto plants and their suppliers, orchestrated by President Barack Obama’s Auto Task Force. In Ohio, unemployment increased to 10.8 percent, and in Indiana it rose to 10.6 percent. The Midwest as a whole had an unemployment rate of 9.8 percent. Kentucky, whose economy is also tied to the auto industry, saw its unemployment rate increase to 10.6 percent.

California, the nation’s most populous state with about 37 million residents, lost the largest number of jobs, and its unemployment rate rose to 11.5 percent, the highest level on record and an enormous increase over May 2008, when the rate stood at 6.8 percent. There are now 2.1 million officially unemployed in the state, 885,000 more than last May. California has been hammered by a near-bankruptcy of the state government (14,000 public sector jobs were lost in May), the housing crisis (10,000 construction jobs lost) and a sharp fall-off in manufacturing (10,000 factory jobs lost.)

Among the regions, the West Coast had the highest jobless rate at 10.1 percent. Oregon, the state with the second highest unemployment rate, saw an increase to 12.4 percent from 12 percent in April. The state’s wood products industry has lost tens of thousands of jobs in the past year. Washington state’s unemployment rate rose to 9.4 percent in May. In Nevada, unemployment rose to its highest recorded level ever, at 11.3 percent.

The rapid increase in unemployment in the Southeast took economists by surprise. South Carolina’s unemployment rate surged to 12.1 percent. The state has been hard-hit by layoffs in manufacturing, purging about 30,000 jobs since last May. In one South Carolina county, Allendale, unemployment is over 22 percent. In neighboring North Carolina, the jobless rate rose to 11.1 percent, nearly double the level of a year ago, largely owing to layoffs in banking, furniture manufacture, and metal fabrication industries. In Georgia the unemployment rate climbed to a record high of 9.7 percent. Georgia has been particularly hard hit by the financial crisis, with several regional banks collapsing so far this year. In Alabama, the unemployment rate increased rapidly from 9 percent to 9.8 percent in one month.

In Florida, the fourth most populous American state, the jobless rate vaulted to 10.2 percent, its highest level in 34 years. Florida lost 61,000 jobs in May, only slightly fewer than California. Arizona joined Florida as the states with the most rapid increase in unemployment. In Texas, the second most populous state, the unemployment rate increased for the seventh consecutive month and now stands at 7.4 percent.

Of the regions, the Northeast had the lowest unemployment rate, at 8.3 percent. Rhode Island paced the area in joblessness, with its rate increasing a full percentage point from April to 12.1 percent in May.

Major metropolitan areas are experiencing drastic increases in unemployment, as well. Metro Los Angeles now has an unemployment rate of 11.6 percent. In New York City there were about 360,000 officially unemployed in May, or nine percent of the workforce. In Washington, DC, unemployment rose to 10.7 percent, and in Chicago it climbed to 9.9 percent. The Detroit metropolitan area had the highest unemployment rate of any major US city, increasing to 15.4 percent. It is much higher—close to 25 percent—in the city proper.

Only in the sparsely populated states of Nebraska and Vermont did the unemployment rate hold steady. The agricultural states of Nebraska and nearby North Dakota share the lowest unemployment rate, both at 4.4 percent. This may reverse itself as the decline in agricultural commodity prices ripples through the plains states’ economies.

As always, the official rate belies the true scope of unemployment by removing from the workforce count a large number of workers who are inactive or “discouraged” in seeking work, and by counting as employed those who are only able to get part-time hours. While state-by-state statistics for this expanded definition of unemployment are not available, it is very likely that the real unemployment rate in Michigan is now approaching 25 percent, and that in a number of states, including California, it is around 20 percent. On a national level, this broader rate of unemployment and underemployment stood at 16.4 percent in May. These are near-depression-level figures.

Layoff announcements continue. Rupert Murdoch’s News Corp. on June 16 announced that it would cut the workforce of its social networking division, MySpace, by 30 percent, dismissing 420 workers. On June 12, Textron announced it would lay off 1,300 workers from its Cessna Aircraft plants in Kansas. Lockheed Martin will lay off 750 workers from its Owego, New York, factory. The Broward County public school system in South Florida is going forward with plans to lay off 400 teachers. Metalcraft, a machine fabricating plant located in the town of Mayville, Wisconsin, said it would indefinitely extend the layoffs of 375 workers who have been out of work since April. This will devastate the small town, which has fewer than 5,000 residents.

In one revealing layoff announcement, Hartford County, Maryland, carried forward plans to lay off over 35 employees from its public libraries. It will also likely close a branch, reduce library hours and services, even as patron use reaches an all-time high. “I am distressed that the library, which is seeing increased usage due to the economy, will have to limit its hours, services and maybe locations just when the community needs those services the most,” local resident Patricia H. Fisher told the Baltimore Sun.

The first quarter of 2009 has also witnessed a fall-off in personal income. According to data from the Bureau of Economic Analysis (BEA), personal income fell 0.5 percent nationally. In California and Michigan, it tumbled by 0.8 percent. Meanwhile, private sector earnings fell in the first quarter by 1.4 percent nationally, and dropped in all 50 states.

The declines in private sector earnings and personal income spell disaster for state and local budgets, already in dire straits in much of the country due to the twin economic and financial crises. According to a recently-released analysis by the Nelson A. Rockefeller Institute of Government, state-level income tax collections fell a staggering 26 percent in the first quarter of 2009 compared to the previous year.

The fall-off was most pronounced in the states that have been hardest hit by the collapse in real estate and manufacturing. In Arizona, first quarter personal income tax revenue fell by 55 percent from the previous year; in South Carolina the decline was 38.6 percent; in Michigan, 34.4 percent. California, which is already teetering on the brink of bankruptcy, saw a decline of 33.8 percent in personal income tax receipts. The data bodes ill for the largest US state, which collects nearly half of its state revenues from income taxes, one of the highest proportions in the nation.

The drop in personal income tax revenue results from layoffs, wage cuts, and reductions in hours worked. The budget crisis in the states will be aggravated by declining revenue from real estate and sales taxes. The Rockefeller Institute predicted declining revenue will require a new round of austerity measures. It “will punch still deeper holes in the budgets of many states [and] increases the risk that state budget agreements for 2009-10 will not close budget gaps completely, and that states will need to make midyear budget cuts,” the report notes.

Some analysts tried to find a silver lining in the latest spate of dismal economic data, latching on to a Labor Department report that found that the total number of unemployed workers collecting benefits fell last week for the first time since January, by 148,000. Now, a total of 6.69 million workers are receiving unemployment benefits. However, as Forbes pointed out, the drop came after 21 consecutive weeks of increases, and about “half of the unemployed have been reaching the end of their 26 weeks of unemployment payments without finding jobs—so they disappear from that unemployment statistic without actually being employed.” The number of US workers filing for new jobless benefits claims also rose last week by 3,000 to 608,000.

Obama’s economic advisers predicted in January that with passage of the economic stimulus package, the US unemployment rate this year would not exceed 8 percent in 2009. It has already hit 9.4 percent, rendering meaningless the stimulus package’s modest promises of job creation. Most economists now believe that the US unemployment rate will top 10 percent by year’s end, and that it could rise to 11 percent at some point in 2011.

There is general agreement, moreover, that employment levels and conditions of labor will not return to those that prevailed prior to the financial crisis. This is no accident. The ruling elite, led by the Obama administration, has seized on the crisis as a long-awaited chance to restructure class relations to its advantage for decades to come.

World Socialist Web Site

Tom Eley is a frequent contributor to Global Research.  Global Research Articles by Tom Eley

© Copyright Tom Eley , Global Research, 2009

Disclaimer: The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of the Centre for Research on Globalization. The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible or liable for any inaccurate or incorrect statements contained in this article.

Bankrupt Banking System Bailouts & Stimulus , You Can’t Borrow Your Way Out of Debt

Bankrupt Banking System Bailouts & Stimulus ,

You Can’t Borrow Your Way Out of Debt

Economics / Credit Crisis Bailouts Jun 24, 2009 – 10:28 AM

By: James_Quinn

“Rather than love, than money, than fame, give me truth.” – Henry David Thoreau

Time is running out. The public relations campaign being conducted by the Obama administration, Federal Reserve and nation’s largest banks is beginning to fail. The lies, half-truths, and cover-up regarding the solvency of the largest banks in the U.S. will be revealed as reality interrupts their master plan. The politicians and government bureaucrats know that 80% of the population don’t understand or care about economic issues. The plan is insidious, systematic and deceptively simple:

Part 1 of the plan was for the Federal Reserve to print billions of dollars and lend this money to the insolvent banks in return for worthless toxic assets as collateral. They have not revealed which banks received the money or the “assets” that have been hidden on the Federal Reserve balance sheet.

Part 2 of the plan was to reduce short term interest to 0% so that the insolvent banks could borrow money from the Fed for free and then lend it out at 6% or higher to consumers and businesses. Therefore, risk averse senior citizens like my mother are receiving 0.5% on their money market funds, while the horribly run insolvent banks are being propped up and enriched by the Fed. With billions in TARP funds, the FASB no longer requiring mark to market accounting, and free money from the Fed, the large banks reported fake profits in the 1st Quarter of 2009.

Part 3 of the plan was the fake stress test conducted by Tim Geithner, his Treasury Department, and the Federal Reserve. The entire stress test was a publicity stunt conducted to provide a false sense of confidence in the largest banks so they could fool investors into pouring billions of new capital into their bankrupt banks. The assumptions used in the stress test were stress free. Unemployment is already higher than the worst case scenario. The stress test time frame ended in 2010. The next wave of mortgage resets and foreclosures will hit in 2011 and 2012. William Black, former bank regulator and author of the book The Best Way to Rob a Bank Is to Own One, concluded:

“There were no real examinations. Banks continue to overstate asset quality. The bankers pressured Congress, which extorted the Financial Accounting Standards Board, which gutted the accounting rules on loss recognition. Because there were no real examinations, there were no real stress tests.”

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Even the Congressionally-appointed panel overseeing the Troubled Asset Relief Program concluded:  “unanswered questions about the details of the tests, make it impossible to replicate the tests to determine how robust they are or to vary the assumptions to see whether different projections might yield very different results.”

Part 4 of the plan had billions in TARP funds going to the likes of GMAC, Capital One and American Express so they would lend it out to over-indebted consumers and jump start the economy. The $787 billion porkulus plan has dumped wads of dollar bills into the laps of government bureaucrats and unions throughout the country with hopes that something productive might happen. Senator Coburn of Oklahoma issued a report last week regarding stimulus spending. Millions of dollars are going toward bicycle lockers, bike paths, walking trails and skate parks. One town in North Carolina is using stimulus funds to hire an administrator whose job will be to procure more stimulus funds. You judge whether these projects will jump start our moribund economy:

  • Optima Lake is in line to receive $1.15 million in federal stimulus money to construct a new guardrail for a lake that does not exist. The guardrail is needed for “public safety,” says the Army Corps of Engineers, but there is not much of the public around to protect. Because the lake has never filled with water it is all but useless to potential visitors.
  • The repair of 37 rural bridges in Wisconsin that average little more than 500 vehicles apiece each day – with one carrying no more than 10 cars a day. The projects jumped over larger, urban repairs because they were “shovel ready.” $840,000 to repair a bridge in Portage County, Wis., that carries 260 vehicles a day largely to a backwater saloon and a country club.
  • $3.4 million Florida Department of Transportation project for an “eco-passage” – an underground wildlife road crossing for turtles and other wildlife in Lake Jackson, Fla., along U.S. 27.
  • A Bureau of Land Management project to study the impact wind farms have on the sage grouse population in Oregon. The proposal calls for hiring people to tag sage grouse in areas where wind farms may be built, to help determine where turbines could be located.
  • $1.5 million in stimulus money for a $5 million new wastewater treatment plant in Perkins, Okla. The stimulus money came with strings that will increase the costs. With a new total cost of $7.2 million, the city will be forced to borrow money and, as a result, utility taxes have increased by 60 percent this year.
  • Grants and loans totaling $1.3 million to Solon Township in Leelanau County, Mich., to help pay for construction of a wastewater treatment plant. Local opposition killed the project. The money will now be used for a future treatment plant, for which there is no plan and questionable local support.
  • Road signs costing $300 each, being placed at construction sites to alert motorists that the project is being paid for by the stimulus money. Transportation Department spokesman Jill Zuckman said each state decides whether to use stimulus money for signs, and the cost would vary in each state.
  • A $3 million project to repair taxiways at Hanscom Field, Mass., which Coburn said is for corporate jets. Richard Walsh, a spokesman for the independent state agency that runs the airport, Massport, said only 18 percent of the traffic at the airport is for corporate jets. Most of the use, 70 percent cent, is for flight students, he said.
  • Montana’s state-run liquor warehouse, to receive $2.2 million in stimulus cash to install skylights. The project is part of the $27.7 million the state has been awarded for energy programs.

If Only the Dead Could be Stimulated

James Hagner: It shocked me and I laughed all at the same time and though how in the world could they do this.

TV Commentator: 83 year old James Hagner says he isn’t too big on surprises, but he got quite a big one when he visited his mailbox last Thursday.

James Hagner: I got a check for my mother. She has been dead 43 years, and I got a check for my mother. The $250 stimulus check in the mail.

TV Commentator: As part of President Obama’s American Recovery and Reinstatement act, the Social Security Administration somehow mailed a $250 stimulus check to his mother Rose, who passed away Memorial Day 1967.

James Hagner: I didn’t even expect to get one for myself, but to get one for my mother from 43 years ago…

Interviewer: kind of strange, right?

James Hagner: Yes sir.

TV Commentator: We contacted Social Security representatives over the phone and they told us there is a good explanation here. First of all, Social Security has mailed or is mailing out 52 million checks, and of those 8,000 to 10,000 have been sent to people who are deceased. Social Security blames the error on the strict mid-June deadline for mailing out all the checks which didn’t leave officials much time to clean up all their records. So that means there are 8 to 10 thousand James Hagners all over the country getting the same surprise in the mail box. The thing is what do you do with the check? Social Security kindly asks that you return it. As far as Hagner is concerned, he would like to frame it and hang it on a wall.

James Hagner: I just want to keep it as a souvenir. That’s all. I will never cash it.

This is just another quaint funny story about our incompetent government working to improve our lives. They sent $2.5 million to dead people. Social Security’s records haven’t been “cleaned up” for people who died before we put a man on the moon? Picture the scene when a government bureaucrat explains to your family that taking out your liver instead of your appendix was due to some computer system glitch. Once the government puts its efficiency expertise gained from running the IRS, Social Security, the Postal Service, and Amtrak to work on your healthcare, the fun will really begin. It will make dealing with Verizon’s “customer service” seem like a treat.

This is only the tip of the iceberg.  A report by Deloitte Touche last week said that about $500 billion of the $787 billion in stimulus will be spent through the “traditional (government) procurement network.” Using past performance as a gauge, Deloitte Touche predicted as much as $50 billion will end up being fraudulently spent — or 10% of the total. The entire United States government outlays in 1952 totaled less than $50 billion. Now, $50 billion is an acceptable fraud write-off.

Reality Bites

“Society in every state is a blessing, but government, even in its best stage, is but a necessary evil; in its worst state an intolerable one.” – Thomas Paine

I’ve laid out the master plan of our “leaders”. The only problem is the are about to get in the way of a good yarn. Below is a chart that tells a disturbing truth for the largest banks in the U.S. The government supported banks have only written off $1.3 trillion thus far. Based on the realistic estimates from Nouriel Roubini and T2 Partners, there is only $2.3 trillion more write-offs to go for our glorious banking behemoths. The 19 stress tested banks were able to convince foolish investors to drop another $75 billion of capital onto their balance sheets after the stress test fraud publicity campaign.  This $75 billion only comes up 30 times short of covering $2.3 trillion in future losses. As Mr. Roubini recently reported we need a little of Joseph Schumpter’s creative destruction.

“Once again, the question will be how the near-insolvent banks can be kept afloat, to avoid systemic risk. But the question we really should be asking is: why keep insolvent banks afloat? We believe there is no convincing answer; we should instead find ways to manage the systemic risk of bank failures. Why did creditors not prevent the banks taking excessive risks before the crisis hit? For the very same reason creditors are getting a free pass now: they expected to be bailed out. For capitalism to move forward, it is time for a little orderly creative destruction.”

The Obama administration has chosen to go with a plan centered around creative accounting, creative financing, and a creative public relations campaign versus the system correcting creative destruction. This is a plan of imminent destruction of our economic system.

The country has lost jobs in every month since December 2007. The number of unemployed has doubled over this time to approaching 15 million people. While 7 million people have lost their jobs in the private sector, government has increased their hiring by 600,000, from 21 million to 21.6 million. We can all be thankful there are 600,000 more bureaucrats increasing the efficiency of our government.  Despite happy talk by CNBC pundits, investment managers, and government officials another 2 million people will lose their jobs this year. The unemployment rate will approach 11% by the end of 2009. Last week the “business correspondents” at CNBC proclaimed that the reduction in continuing unemployment claims was another green shoot. If they had just scratched the surface like Barry Ritholtz, they would have found the truth.

“The ‘exhaustion rate’ for jobless benefits reveals that people are not leaving the pool of continuing unemployment claims because they are getting new jobs; Rather, they are leaving because they have exhausted their benefits. They are now unemployed AND broke.”

[WeeklyClaimsJune18.jpg]

The continuing deterioration in employment, the tsunami of Alt-A mortgage resets coming in 2010 and 2011, home prices declining another 10% to 15%, doubling in oil prices since January, billions in credit card write-offs in the pipeline and the progressing collapse of the commercial real estate market will throw cold water on the Obama master plan to save the banks and the economy. The sooner this occurs, the better. Their solution of trying to borrow and spend our way out of debt was flawed and asinine from the start. If Americans are ready to accept the inevitable pain of deleveraging today, we can take back the country from the banking crime syndicate and the politicians that are in their back pocket.

Money is Power

“Money is power, and in that government which pays all the public officers of the states will all political power be substantially concentrated.”Andrew Jackson

The chart below shows that after 182 years as a country we had accumulated a National Debt of $389 billion. Then in 1971, President Nixon closed the gold window. The Federal Reserve was free to print dollars with no constraints. And print they did. Politicians used the printed dollars to spend on any costly initiative that would help them get re-elected. From 1970 to 1980, the National Debt went up by 2.4 times. From 1980 until 1990, the National Debt went up by 3.5 times. From 1990 until 2000, the National Debt went up by 1.8 times. From 2000 until today, the National Debt has gone up 2.0 times. Based on the spending implemented and proposed over the next few years, it will go up 1.5 times during Obama’s 1st term. It will have gone from 33.3% of GDP in 1980 to 100% of GDP by the end of Obama’s 1st term. At that point we will have entered the Argentina – Weimer Republic zone.

End of
Fiscal Year
US Gross Debt
USD billions
US Gross Debt as % of GDP
1910 2.6
1920 25.9
1930 16.2
1940 43.0 52.4
1950 257.4 94.1
1960 290.2 56.1
1970 389.2 37.6
1980 930.2 33.3
1990 3,233 55.9
2000 5,674 58
2005 7,933 64.6
2007 9,008 65.5
2008 10,699 74.6
3rd Quarter of 2009 11,383 82.5

“Debt is the fatal disease of republics, the first thing and the mightiest to undermine governments and corrupt the people.” Wendell Phillips

When looking at a graph of government revenues and outlays since 1962 a few things stand out. The government was able to keep revenues in line with outlays until about 1982. Even while fighting the Vietnam War, the budget deficit was kept relatively under control. Since then we have had cooperation between the Republican and Democratic parties for the majority of the last 27 years. The Democrats allowed the Republicans to reduce taxes and increase military spending, therefore decreasing revenues. The Republicans allowed the Democrats to increase spending on social welfare programs. The only time revenues exceeded expenditures was when gridlock reigned during the Clinton administration. New spending slowed down and capital gains taxes from the Dot.com era provided a one-time boost to revenues. The CBO projects a $1.8 trillion budget deficit in 2009. This equals our entire National Debt in 1985.

“Blessed are the young for they shall inherit the national debt.” – Herbert Hoover

41470824GovernmentSpendingUpTaxesDown

As can be expected when politicians make projections, the likelihood of them being within $10 trillion is nil. It is fascinating that individual income tax revenue will jump by 32% and corporate income taxes by 30% in 2011 from 2009 levels. The inconvenient fact that you need a job to pay taxes and corporations need to have profits to pay taxes is brushed aside. I presume they also are counting on a windfall when the Bush tax cuts expire. The largest tax increase in history will surely lead to 4.7% GDP growth in 2011 and 6.0% GDP growth in 2012. Maybe the Cap & Trade tax and the additional $1 or $2 trillion for government takeover of the healthcare system will lead to a boom in our economy. These projections are at best pure fantasy and at worst a bold faced lie. The scary part is that even with the pie in the sky numbers, they still project the National Debt to grow by $4 trillion between 2009 and 2014. The likely number will be $8 trillion.

“In general, the art of government consists of taking as much money as possible from one class of citizens to give to another.” – Voltaire

The single biggest risk to the Obama rosy scenarios is interest rates. The CBO assumes interest rates will stay below 5% through 2019. This is a ridiculous assumption. The Federal Reserve is printing trillions of dollars, we are fighting two wars, we have just committed $787 billion in pork spending, we’ve committed billions to our banks and auto companies, and now we are about to commit at least a trillion dollars to national healthcare. The countries lending us this money will absolutely require higher interest rates to account for their risk. If interest rates don’t approach double digits in the next five years, all economic reason will be out the window. As Bud Conrad from Casey Research points out, just a 1% increase per year over the assumption in the budget will double the debt. The government has pushed this country to the limit of debt induced growth and we are no longer in control.

Any good corporate Treasurer worth their salt would have been taking advantage of the lowest long term Treasury rates in decades by locking in their debt for 20 to 30 years. Not our brilliant chieftains of finance at the Treasury Department. 40% of all U.S. debt rolls over in less than one year. Less than 5% of all U.S. debt is locked in for 20 years or more. The average maturity is 50 months, a three decade low. The extremely short duration of this debt leaves the country susceptible to a spike in interest rates. A spike in interest rates could drive annual interest expense from $250 billion to $500 billion virtually overnight. The worst part is that a large portion of this interest expense is flowing out of the country to foreigners.

41446084GovernmentInterestCompoundsIfRatesRise

41470824BudsDoubleCHart

Foreigner Invasion

Warren Buffet described the problem the U.S. was getting itself into a few years ago:

“In effect, our country has been behaving like an extraordinarily rich family that possesses an immense farm. In order to consume 4 percent more than we produce—that’s the trade deficit—we have, day by day, been both selling pieces of the farm and increasing the mortgage on what we still own.”

Warren was right. We’ve now sold off more than half the farm and the mortgage owed to foreigners threatens to force us into foreclosure. Foreigners currently hold 30% of all U.S. debt and have been buyers of more than 50% of new issuance in recent years. The U.S. will need to issue $2 trillion of new debt in the next year. Who is going to buy this debt? What pension manager or foreign treasury official would buy long term U.S. Treasury bonds paying 4.3%. The chart below shows that foreigners were purchasing hundreds of billions in U.S. debt between 2004 and 2007. Even a Treasury bureaucrat can look at the chart and realize they have a problem. Foreigners are now selling U.S. long term debt. They will not be the buyers of the $2 trillion coming to the market unless rates rise to 6% or higher. The Fed will not allow that to happen, so the buyer of the $2 trillion will be the Fed. They will monetize the debt and push the country closer to default. The coming crash in the dollar will ruin Ben Bernanke’s academic textbook plan.

ForeignInvestmentsinUSLongTermDebtRemainsLow

Starve the Beast

“The budget should be balanced, the treasury should be refilled, the public debt should be reduced and the arrogance of public officials should be controlled.” – Ross Perot

As a country we face an extremely difficult challenge. The deceptive scheme instituted by the government bureaucrats, dishonest bankers, corrupt politicians  and the Federal Reserve has convinced millions to believe their deceit. The foundations of their scheme are built upon a blizzard of lies. The only way to confront lies is with the truth. They are counting on some givens. Doug Casey describes a large portion of the U.S. population as Boobus Americanus. These are the functionally illiterate who have been pushed through our government run public school system. They don’t know the name of our Vice President. They can’t add, subtract or write a sentence. They will believe anything they are told by Obama. There are also the ultra-liberals who will believe anything their Messiah utters. Lastly, the large banks, Treasury, and Federal Reserve will do anything to maintain their wealth and power. This coalition of greed, sloth, and avarice presents a daunting challenge.

The cards have been stacked against Americans who don’t borrow too much, save for a rainy day, drive 10 year old cars, and didn’t spend all the equity in their houses. But, all is not lost. The large portion of middle class Americans who have lived their lives prudently have more control than they might think. I recently refinanced my mortgage. I’ve had a mortgage with Citadel Federal Credit Union since 1995 and have refinanced to a lower rate three times. Even though I have been banking with them for 25 years, they required an appraisal and shockingly, proof of income before allowing me to refinance. What a concept. While speaking with the mortgage specialist at the Credit Union, I asked how the financial crisis had impacted them. She said their insurance had gone up dramatically to pay for a few big credit unions that had collapsed due to bad lending practices. I asked how many mortgage loans they had to write off. The answer was NONE. Amazingly, if you get a legitimate appraisal, proof of income, and proof of assets, and keep the loans on your books, you can make loans that will be repaid. It is called prudent banking. My question is why are we saving the worst run banks in the history of the world when we have thousands of prudent banks willing and able to step up to the plate?

“Disobedience is the true foundation of liberty. The obedient must be slaves.” – Henry David Thoreau

My plan to reinstitute prudence and common sense into our economic system has two parts. The first part is to heap ridicule and scorn upon Congress, the Federal Reserve, the Treasury, and the banking cartel trying to maintain their stranglehold upon the American people. This part is quite easy. Since their entire plan is based upon lies, just telling the truth will weaken the foundations of their plan. The results of their past policy decisions, lack of transparency, proof of insider dealings, covering up of secret deals, and examples of incompetence and fraud makes it easy to undermine the solutions put forth by these people.

Part two of my plan is more difficult, but with a concerted effort by millions of sensible Americans, we can bring the country back from the brink of disaster. The plan is to put the banks responsible for the collapse of our financial system out of business. The Federal Reserve and the Obama administration do not want creative destruction to revive our economy, so we will have to force creative destruction upon them.

The 20 biggest banks in the country control $3.5 trillion of the $7.1 trillion deposits in the country. There are 8,400 banks in the country and 20 banks control 50% of the deposits. The list below reads like a who’s who list of the worst run banks in history that took the greatest risks and lost the most money.

Bank Holding Company Name State
Headquartered
No.
of
Offices
Total
Deposits
June 30, 2008
BANK OF AMERICA CORPORATION North Carolina 6,146 701,485,101
JPMORGAN CHASE & CO. New York 3,195 497,215,362
WACHOVIA CORPORATION North Carolina 3,363 422,002,374
WELLS FARGO & COMPANY California 3,378 293,406,008
CITIGROUP INC. New York 1,079 271,290,597
U.S. BANCORP Minnesota 2,597 127,849,616
SUNTRUST BANKS, INC. Georgia 1,759 115,603,668
NATIONAL CITY CORPORATION Ohio 1,568 97,764,933
ROYAL BANK OF SCOTLAND GROUP PLC, THE Foreign * 1,654 95,255,161
TORONTO-DOMINION BANK, THE Foreign * 1,090 89,756,985
CAPITAL ONE FINANCIAL CORPORATION Virginia 740 88,916,281
REGIONS FINANCIAL CORPORATION Alabama 1,924 86,225,760
BB&T CORPORATION North Carolina 1,492 85,930,565
HSBC HOLDINGS PLC Foreign * 477 83,045,865
PNC FINANCIAL SERVICES GROUP, INC., THE Pennsylvania 1,200 82,424,564
FIFTH THIRD BANCORP Ohio 1,356 74,656,971
KEYCORP Ohio 997 61,023,875
BANK OF NEW YORK MELLON CORPORATION, THE New York 49 55,028,475
BANCO SANTANDER, S.A. Foreign * 806 53,824,517
BNP PARIBAS Foreign * 739 43,887,185

The total credit card debt outstanding in the U.S. at the end of 2008 was $960 billion. The top 15 credit card issuers hold $793 billion of this credit card debt, or 83% of all the debt. They also hold a major portion of auto loans, home equity loans and personal loans. Do any of these banks ring a bell?

Top 15 issuers of general purpose credit cards for 2008 based on outstandings

1. Chase – $183.32 billion
2. Bank of America – $166.32 billion
3. Citicorp – $106.74 billion
4. American Express – $88.02 billion
5. Capital One – $60.08 billion
6. Discover – $49.69 billion
7. Wells Fargo – $36.36 billion
8. HSBC – $29.97 billion
9. US Bank – $18.53 billion
10. USAA – $17.48 billion
11. Barclays – $11 billion
12. Target – $8.65 billion
13. GE Money – $7.51 billion
14. Advanta – $5.02 billion
15. First National – $4.93 billion
(Source: Nilson Report, March 2009)

There are currently $15 trillion of mortgage loans outstanding in the U.S. You may be surprised to learn that the biggest banks in the U.S. hold the majority of the mortgages in the country. These banks issued the subprime and Alt-A toxic mortgages that brought the financial system to the brink of collapse. There is no doubt after examining these figures that the mega-banks control the country’s financial system. Ben Bernanke, Hank Paulson, and Tim Geithner have decided that these banks need to be saved at the expense of senior citizens and the American taxpayer.

Top 10 originators of mortgage loans in 2008

1.Wells Fargo
2.Bank of America
3.JPMorgan Chase
4.Citigroup Inc.
5.SunTrust Bank Inc.
6.U.S. Bank Home Mortgage
7.Residential Capital LLC
8.MetLife
9.Flagstar Bank
10.PHH Mortgage

Fiscal Sanity Movement

“How does it become a man to behave towards the American government today? I answer, that he cannot without disgrace be associated with it.” – Henry David Thoreau

The largest banks in the United States have balance sheets populated by trillions in toxic worthless assets. The lifeblood of any bank is deposits. If a bank is denied its deposits, it will collapse. There are 8,000 other banks and 8,000 credit unions in the country. Thousands of these institutions never made a bad loan. If you have money on deposit with one of these mega-banks withdraw the money and deposit it into a small local bank or credit union. You will have the same FDIC insurance and won’t sacrifice any income, since these mega-banks are paying less than 0.5% on your deposits, while charging you 8% for car loans and 20% on credit card balances.

These banks continue to write-off billions in bad credit card and mortgage debt, quarter after quarter. These banks make billions in late fees and interest income by charging 20% to people who pay their debts over time. If the good credits take their business elsewhere, the mega-banks will be left with only bad credits. Most people have 5 to 10 credit cards. Stop using your mega-bank credit card and use a credit card issued by a local bank or credit union. With mortgage rates near generational lows many people have an opportunity to refinance. If this opportunity arises, choose a local bank or credit union. If you decide to buy a car, don’t buy a General Motors or Chrysler vehicle. The government controls these entities. Don’t finance your car through GMAC. By denying the government beast its revenue stream, it will slowly die.

The average individual tax refund for 2008 was $2,700. This was effectively a $200 billion interest free loan to the U.S. government. If every working American walked into their place of employment on Monday morning and increased their W-4 exemptions by 2, we would deny the politicians in Washington of billions for a year. This is a legal way of starving the beast. The corrupt political machinery in Washington DC is dependent upon Americans to spend money. Our spending accounts for 70% of the U.S. economy. Surprisingly, American citizens have more control over the situation than we know. The mega-banks and our government are rotting from the inside like a diseased Oak tree. A gale force wind provided by the prudent Americans can topple the diseased tree.

“If you would convince a man that he does wrong, do right. Men will believe what they see.” – Henry David Thoreau

The current fiscal course of the country is unsustainable. We can choose to let the country drift toward a corporate fascist run government which will collapse under the weight of debt, corruption and mismanagement or we can make a stand today with our own money.  If enough Americans choose to put the horribly run mega-banks out of business it can be done. There would be absolutely nothing that Obama or Bernanke could do stop it from happening. It is time to do the right thing. Do you know what’s worth fighting for?

“All endeavor calls for the ability to tramp the last mile, shape the last plan, endure the last hours toil. The fight to the finish spirit is the one… characteristic we must posses if we are to face the future as finishers.” -Henry David Thoreau

To join the discussion of how to take back our country from the banking cartel and government central planners, go to www.TheBurningPlatform.com.

By James Quinn

quinnadvisors@comcast.net

James Quinn is a senior director of strategic planning for a major university. James has held financial positions with a retailer, homebuilder and university in his 22-year career. Those positions included treasurer, controller, and head of strategic planning. He is married with three boys and is writing these articles because he cares about their future. He earned a BS in accounting from Drexel University and an MBA from Villanova University. He is a certified public accountant and a certified cash manager.

These articles reflect the personal views of James Quinn. They do not necessarily represent the views of his employer, and are not sponsored or endorsed by his employer.

© 2009 Copyright James Quinn – All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Countrywide’s Angelo Mozilo: He Warned Us—But Washington Didn’t Want To Know

Countrywide’s Angelo Mozilo: He Warned Us—But Washington Didn’t Want To Know

By Steve Sailer

The Securities and Exchange Commission filed an insider-trading civil suit earlier this month against perhaps the most widely loathed wheeler-dealer of the Housing Bubble: Angelo Mozilo, co-founder and longtime CEO of Countrywide Financial Corporation, the largest mortgage lender at the peak of the boom.

The Economist writes: “As is the way these days, the SEC’s case rests largely on internal emails.” [Accusing Angelo June 5, 2009]The SEC released excerpts from Mozilo’s emails to even more aggressive Countrywide executives in which the boss privately questioned his own firm’s new lax credit products. For example, on April 17, 2006, he sensibly lambasted Countrywide’s subprime 80/20 loans (in which borrowers would fund their nominal 20 percent downpayment by taking out a simultaneous second mortgage):

“In all my years in the business I have never seen a more toxic prduct [sic]. It’s not only subordinated to the first, but the first is subprime. In addition, the FICOs are below 600, below 500 and some below 400[.]“

Unfortunately, Mozilo’s intermittent spasms of skepticism didn’t have much effect—because he was also:

  • Imploring government regulators to allow more zero down payment mortgages and liar loans in the name of fighting racist redlining;
  • Publicly reassuring investors about the creditworthiness of Countrywide’s increasingly bottom-of-the-barrel borrowers;
  • And…accelerating his own stock sales.

In February 2007, Countrywide’s shares peaked at over $45. The following summer the subprime resale market collapsed, setting off the current global economic collapse. Mozilo was lucky to talk hapless Bank of America into buying Countrywide in 2008 for less than one-tenth of its peak price.

Still, you can’t say that Mozilo didn’t warn you in countless speeches over the years that Countrywide’s corporate strategy depended upon pouring colossal sums down the rathole of lending to underserved Americans(i.e., minority and lower income borrowers).

For instance, in the top story in National Mortgage News on February 17, 2003:

“Mr. Mozilo labeled downpayments as ‘nonsense’ and said credit score requirements are ‘still much too high.’… the outspoken industry leader called on his colleagues to ‘take a chance on making mistakes rather than foreclose on the opportunity’ to put minorities and other underserved families into homes of their own.”

Or consider Mozilo’s January 14, 2005 press release that trumpeted Countrywide’s commitment of one trillion dollars through 2010 to politically favored groups:

“The $1 Trillion We House America Challenge … embodies Countrywide’s long-standing commitment to lead the mortgage industry in closing the homeownership gap for minority and lower-income families and communities,” said Countrywide Financial Corporation Chairman and CEO Angelo Mozilo…

And that was up $400 billion from the $600 billion Mozilo had promised in 2003 during a prestigious Harvard address entitled The American Dream of Homeownership: From Cliché to Mission.

I may have mentioned this before—but a trillion dollars here, a trillion dollars there, pretty soon we’re talking about real money.

And that trillion dollar figure was not just talk. Mozilo testified to Congress on March 7, 2008:

“To date, we have met $850 billion of that goal, and we remain committed to beating the goal by 2010.”

Countrywide’s reckless strategy in 2005-2006 is readily visible in the federal government’s Home Mortgage Disclosure Act database. This graph shows Countrywide’s subprime lending in just the Riverside-San Bernardino exurbs of Southern California, which are home to close to one-tenth of all the defaulted dollars in America. In the Inland Empire, Countrywide quintupled its subprime lending in one year, with the great majority going to minorities.

This 2005 data was downloadable by investors and journalists in October 2006, months before Countrywide’s stock price reached its apogee. But who would be so uncouth as to use the HMDA database to raise doubts about minorities’ ability to repay mortgages? The HMDA exists to help the federal government and community organizers drive more lending to minorities, not less!

The roots of Countrywide’s catastrophic trillion dollar pledge go back to the early years of the Clinton Administration. As Steve Malanga explained in the Spring 2009 City Journal:

“Pressuring nonbank lenders to make more loans to poor minorities didn’t stop … If it didn’t happen, Clinton officials warned, they’d seek to extend [Community Reinvestment Act] regulations to all mortgage makers. … To rebuff the criticism, the Mortgage Bankers Association (MBA) shocked the financial world by signing a 1994 agreement with the Department of Housing and Urban Development (HUD), pledging to increase lending to minorities and join in new efforts to rewrite lending standards. The first MBA member to sign up: Countrywide Financial, the mortgage firm that would be at the core of the subprime meltdown.”[Obsessive Housing Disorder]

Interestingly, the Secretary of Housing and Urban Development who signed that 1994 deal with Countrywide was Henry Cisneros, who later served on Countrywide’s Board of Directors from 2001 to 2007, the Bubble Years. Cisneros made over $6 million from Countrywide fees and stock options.

In his 2005 “$1 Trillion We House America Challenge” press release, Mozilo announced:

“We have also called upon one of our esteemed directors, the Honorable Henry Cisneros … Henry will put to use his long and respected experience as an advocate for affordable housing who understands the benefits to communities of homeownership.”

Cisneros chimed in:

“Countrywide’s $1 trillion commitment is very tangible proof of this company’s commitment to fair, affordable and responsible lending. This company is leading the industry in closing the homeownership gap …”

An October 18, 2008 New York Times article about Cisneros by David Streitfeld and Gretchen Morgenson, Building Flawed American Dreams, recounts:

“But until recently getting a mortgage was a challenge for low-income families. Many of these families were minorities, which naturally made the subject of special interest to Mr. Cisneros, who, in 1993, became the first Hispanic head of the Department of Housing and Urban Development. He had President Clinton’s ear, an easy charisma and a determination to increase a homeownership rate that had been stagnant for nearly three decades. Thus was born the National Homeownership Strategy, which promoted ownership as patriotic and an easy win for all.”

Cisneros rationalized to the NYT:

“It was, he argues, impossible to know in the beginning that the federal push to increase homeownership would end so badly. Once the housing boom got going, he suggests, laws and regulations barely had a chance. ‘You think you have a finely tuned instrument that you can use to say: ‘Stop! We’re at 69 percent homeownership. We should not go further. There are people who should remain renters,’ he says. ‘But you really are just given a sledgehammer and an ax.’ “

Mozilo was hardly a victim of the politicians, however. They were co-conspirators.

For example, Mozilo notoriously provided special discount mortgages to a host of politically connected Friends of Angelo,” such as the chairman of the Senate Banking Committee, Chris Dodd (D-CN).

Mozilo pocketed an estimated $387 million from 2002 through 2006. As it turns out, of course, it would have been cheaper for all concerned if the Friends of Angelo in Congress had simply voted to give $387 million of the taxpayers’ money to Mozilo.

A tell-tale sign: According to his employment contract, Countrywide paid $95,000 annually for Mozilo’s country club dues at Sherwood Country Club in Thousand Oaks, CA, Quarry Country Club in La Quinta, CA and Robert Trent Jones Golf Club in Gainesville, VA.” Why did the Southern California financier belong to a golf club in the Washington D.C. suburbs? Obviously, to aid in schmoozing Washington politicians, regulators, and Fannie Mae / Freddie Mac executives, who bought vast quantities of mortgage-backed securities from Mozilo.

Back when Mozilo was riding high, Jeff Bailey’s New York Times profile of him pointed out:

“By buying his mortgages and thus freeing up his capital to solicit even more business, Fannie and Freddie are a big reason Mr. Mozilo has driven Countrywide past the Citigroups and the Wells Fargos to the top of the mortgage heap. ‘If it wasn’t for them,’ he said of Fannie and Freddie, ‘Wells knows they’d have us.’” [The Mortgage Maker vs. the World, October 16, 2005]

(By the way, from the Unfortunate Metaphor Department:

“‘We didn’t really know what we were buying,’ said Marc Gott, a former director in Fannie’s loan servicing department. ‘This system was designed for plain vanilla loans, and we were trying to push chocolate sundaes through the gears.’ “[Pressured to Take More Risk, Fannie Reached Tipping Point, Charles Duhigg, New York Times, October 4, 2008])

It’s crucial to understand the subtle way in which government pressure for more minority lending affected the mortgage industry—selecting for success those executives like Mozilo who were both wildly ambitious and true believers in the diversity mantra.

As I pointed out in my VDARE.com analysis of the 2008 failure of Kerry Killinger’s Washington Mutual after it had pledged $375 billion in CRA lending to win FDIC approval for acquisitions, the government can’t force financial institutions to lend to likely deadbeats. You can always stay small and under the radar.

What the government can do, using a host of threats, is block from growing big those firms whose executives don’t share its dogma that lending more to minorities is a great idea.

Further, the government can excommunicate with anti-discrimination lawsuits anybody who expresses his skepticism on paper (or pixels). Imagine if a financial executive’s private emails turned up in discovery for a lawsuit had read: “Why are we lending so much money to Mexicans in the Inland Empire? How can Mexicans ever pay off these huge mortgages?” He would have been flayed alive in the press and in the courts.

So nobody in Corporate America puts their Doubts about Diversity into text where plaintiffs’ attorneys can later read them.

And that means they mostly don’t get communicated anymore—which explains much about why the Mortgage Meltdown, which has been highly concentrated among minority borrowers, was a surprise to so many.

Over the decades, the federal government changed the entire culture of the mortgage industry from penny-pinching skeptics to politically correct pollyannas.

Nobody took less persuading, however, than Mozilo. He always felt discriminated against by the old WASP financial elite. He said: “At least in my generation, when you are Italian in the financial services industry, you are terribly underestimated. A natural reaction for some in the financial community was to infer or suggest that perhaps you were associated with the Mafia.”

Bailey’s 2005 NYT article about Mozilo begins:

“A touch of resentment—based on income, education, social class—motivates countless ambitious people, though few will admit to it once they become successful. An exception is Angelo R. Mozilo … Modest origins—a butcher’s son from the Bronx who worked his way through Fordham University—drove Mr. Mozilo to push Countrywide past the mortgage businesses of far larger companies, including Citigroup, Wells Fargo and Washington Mutual. He readily admits to having a chip on his shoulder …”

Connie Bruck’s fairly sympathetic new article, Angelo’s Ashes: The man who became the face of the financial crisis, in the June 29, 2009 New Yorker (an abstract is online here) documents just how driven Mozilo always has been by his Commitment to Diversity. Mozilo’s sister told Bruck:

“He was always this Italian guy people didn’t want to accept. When he tans he gets really dark. My mother told me that when he worked in Florida he was asked to sit in the back of the bus.”

(Actually, in many photographs, Mozilo looks less brown than orange, more like an Oompa-Loompa in Willy Wonka and the Chocolate Factory, or the victim of a bad spray-on tan.)

Bruck notes:

“Mozilo always saw himself as providing mortgages to many who were like him — disenfranchised. (‘So they’re not upper-middle-class white people—so what?’ he would say. ‘They’re Hispanics, and maybe their money is not in a bank—but they are responsible.’)’

Bruck’s article suggests that Mozilo actually believes what he told Congress in 2008:

“By the early 1990s, the government had recognized the obvious truth that our housing finance system was leaving major segments of society behind. In 1992, a landmark study by the Federal Reserve Bank of Boston made it clear that there were systemic underwriting issues relating to the treatment of African American and Hispanic borrowers. Policymakers called upon the mortgage industry to change their practices and redouble their efforts to better serve minorities and underserved communities. While many in the industry discounted the Boston Fed study as flawed, at Countrywide, we stepped up to the challenge by creating our affordable lending initiative known as ‘House America.‘ “

Bruck’s New Yorker article supports Mozilo’s sincerity—or self-delusion:

“… In 1992, shortly after Mozilo became chairman of the Mortgage Bankers Association, the Federal Reserve Bank of Boston issued a report stating that it had found systemic discrimination by mortgage lenders against African-American and Hispanic borrowers. … Mozilo was appalled. He ordered that all Countrywide’s records on rejected minority applicants be sent to him, and he retroactively approved about half of them. …”

(This Boston Fed report was the one that Peter Brimelow and Leslie Spencer easily refuted in Forbes Magazine at the time, by demonstrating that it had misunderstood the meaning of mortgage default rates. But no-one, not just Mozilo, wanted to hear that.)

In 2002, a UCLA business professor named Eric Flamholtz suggested to Mozilo the disastrous strategy of trying to grow Countrywide’s share of the mortgage market from ten percent to an oligopolistic 30 to 40 percent. But to pursue its goal of market dominance, Countrywide’s marginal customers would inevitably have to be drawn increasingly from the ranks of those who had never qualified for a mortgage before: in other words, they’d be largely minority.

Result: Mozilo grew into the ultimate embodiment of the type of financial executive the federal government had been cultivating: a monster of ambition combined with a diva of diversity.

Bruck goes on:

“By 2004, Countrywide had become a leading U.S. mortgage lender to what it called ‘multicultural market communities.’ Mozilo always described Countrywide’s inclusion of minority and immigrant populations as both business and mission, and he had become perhaps the single most important advocate of those who believed in advancing homeownership as a means of achieving a more equitable society.”

According to The New Yorker, my kind of thinking about the Minority Mortgage Meltdown is personally and politically offensive to Mozilo:

“Several years ago, at the Midwinter Housing Conference, in Park City, Utah, after hearing some mortgage bankers saying that minorities didn’t deserve loans, he declared in a speech, ‘Homeownership is not a privilege but a right!’ Now he abhors the idea that the retrograde view has gained credence. As the Fox Business Network anchor Neil Cavuto said last September, ‘Loaning to minorities and risky folks is a disaster.’”

Sorry about that, Angelo. Tell you what: don’t worry yourself about bringing down the world financial system.

[Steve Sailer (email him) is movie critic for The American Conservative. His website www.iSteve.blogspot.com features his daily blog. His new book, AMERICA’S HALF-BLOOD PRINCE: BARACK OBAMA’S "STORY OF RACE AND INHERITANCE", is available here.]

The Case Of The “Disappeared” Subprime Minority Borrower

By Takuan Seiyo

It was on a bitterly cold and frosty morning, towards the end of the winter of ’07, that I was awakened by a tugging at my shoulder. It was Holmes. The flashlight in his hand shone upon his intense face. I knew at once that something was amiss.

“Come, Watson, come!” he cried. “The game is afoot. Not a word! Into your clothes and come!”

My friend had recently sunk into his customary melancholy, his presence but a wailing violin behind a closed door. Nevertheless, as I was hurriedly getting dressed, I remembered that a change had come upon him on the previous morning.

Mrs. Hudson had just brought in the morning papers, along with our toast. I was fiddling with the dial of our new Marconi, when Holmes’ sharp cry from the breakfast table diverted my attention. He was marking with his fountain pen an item in the paper. The luster had returned to his eyes. Curious, I let go of the dial knob and leaned over Holmes’ shoulder.

The underlined column read: Study: Minorities’ ‘dream’ foreclosed“, and underneath, The subprime-mortgage crisis will cost black and Hispanic homeowners up to $256 billion—the worst financial hit for minorities in modern U.S. history”.

Just then, the Afro-American voice that had been carrying on in the radio program cohered into distinctive words:

“… money-lenders have already sucked the value out of whole communities, urban and suburban. The wealth loss is staggering: People of color have collectively lost between $164 billion to $213 billion over the past eight years, with Latinos losing slightly more than African Americans.”

Holmes was buttering his toast and listening.

“Before the crisis hit,” the distinctive voice was now choked with indignation, “it was estimated that it would take 594 years—more than half a millennium!—for Blacks to catch up with Whites in household wealth. Now, in the aftermath of the home mortgage massacre, it could take ten times as long—more than 5,000 years!—before Blacks achieve homeowner parity with Whites.”

Holmes leaned back in his chair with a whimsical smile, as the commentary concluded: “Looking backward, that stretches from now to when the great pyramids were built!”

I turned off the wireless and sat down at the table.

“A cup of tea, Watson?” Holmes said.

“A nation destroys its banking system and its currency to fake the putative minorities’ creditworthiness,” my friend continued as he poured my morning restorative, “… and showers unearned benefits on them. When the subterfuge falls apart, its impact on the same minorities is twisted around to bolster an imputation of racial discrimination.”

He stood up, tying the sash of his dressing gown.

“I say, Watson, from the point of view of the criminal expert, new opportunities are arising that may alleviate my singular boredom since the death of the late lamented Professor Moriarty.”

As we alighted into the hansom cab, I had a premonition that a new adventure had just begun, related somehow to that statement…

—After The Adventure of the Abbey Grange, with apologies to Sir Arthur Conan-Doyle

The financial debacle of a $1.4 trillion pool of subprime mortgages of which at least half are unpayable and 25% are irrecoverable did not start in a political vacuum. For years, the American political Establishment badgered the banking industry about the “racism” implied in its loan portfolio. The denial of mortgage loans to “minorities” at a greater percentage than denial to whites has been deemed a prima facie evidence of racial discrimination.

“Classical socialism called for direct state ownership of the means of production, distribution, and exchange”, wrote Peter Brimelow in a 1993 National Review article discussing a clash he had had in Forbes Magazine with the race-drunk mortgage industry critics.

“Neosocialism just aims at political control. Socialism claimed to be more efficient. Neosocialism claims to be more equitable. Above all, neosocialism professes to combat ‘racism,’ since this magic word cows all opposition. Apparent neosocialist objective of the season: commandeering the banking system and forcing it to subsidize key client constituencies.” [Racism At Work? By Peter Brimelow, National Review, April 12, 1993].

Brimelow related how the Wall Street Journal had carried five stories in late 1992 alleging, based on raw rejection rates, that lenders were discriminating against minorities. Such allegations were obvious rubbish, as they took no account of standard credit considerations like employment, income, and net worth.

Finally, the WSJ reported on a Federal Reserve Bank of Boston study that did correct for these criteria, and still found that minorities were rejected at a slightly higher rate. [Mortgage lending in Boston: Interpreting HMDA data (Working Paper 92-7)] This difference, the Boston Fed had concluded, could only be due to racism.

Brimelow and his Forbes magazine co-author Leslie Spencer had inquired of the Boston Fed whether it had taken under account default rates for black and white mortgage holders. It had, the Boston Fed’s Research Director replied, and it had found equal default rates. [The Hidden Clue, Forbes, January 4, 1993]

Brimelow then pointed out that this proved pure market forces were working in mortgage lending. Mortgage lenders were somehow able to weed out impartially credit risks, reducing defaults down to the same rate for whites and blacks.

“[That] is a sophisticated point”, responded the Boston Fed’s Research Director. “I do believe discrimination occurs”, she reiterated, but then conceded, “I do not have evidence … no one has evidence”.

“They don’t have evidence, but they sure have convictions”, concluded Brimelow, presaging how the Boston Fed study’s fatal flaw would be passed over by the mass media. He concluded:

“Neosocialism, however, is not science. What’s going on here is a witch-hunt, conducted by the religious Left and aided by key elements of the civil service. The innocent victims will be the banking system, the savers of America, the economy, and ultimately liberty itself. The craven banking industry cannot be expected to resist. It is time conservatives stopped piously chanting about capital-gains tax cuts and woke up to the fact that their capital is under attack”

The same wishful assumptions masquerading as “research” by high public officials and reported by journalists as the truth were examined by four specialists, who published their findings in a 1996 paper, Mortgage Discrimination and FHA Loan Performance [PDF]. Their conclusion:

“Results of the analysis fail to find evidence of better performance on loans granted to minority borrowers. Indeed, black borrowers are found, all else being equal, to exhibit a higher likelihood of mortgage default than other borrowers. These findings argue against allegations of substantial levels of bias in mortgage lending.”

Three years later, two finance professors, Stanley D. Longhofer and Stephen Peters, pointed to the same fatal flaw behind all the caterwauling about the higher rejection rates for black and Hispanic mortgage applicants.

The US Fair Housing Act and the Equal Credit Opportunity Act prohibit discriminatory lending considerations by reasons of race, gender, marital status, religion, national origin, familial status, and handicap. Longhofer and Peters stated that, grand labels notwithstanding, these laws have nothing to do with fairness: they target social inequality, not bigotry. It’s socialism through the back door.

[E]verything else being the same, minority applicants are probably less creditworthy, on average, than whites. Therefore, in the absence of fair lending laws, it is likely that minorities would be denied loans more frequently than whites and would pay higher interest rates and fees on approved loans… [F]air-lending laws have the perverse effect of forcing lenders to cross-subsidize minority borrowers from the higher profits they earn on white borrowers. Such cross-subsidization is inherently ‘unfair’ because it works as a tax on one group that is used as a subsidy for another.” [Why Is Mortgage Discrimination Illegal? A Fresh Look at the Mortgage Discrimination Debate, Longhofer and Peters, Cato Institute, PDF]

Thirty years of faked research and horrendous noise from “social justice” carnies, all amplified by the left-driven mass media, and the political elite figured out which direction held out the most rewards. A heavy dose of demagoguery followed. Some of these sub-eligible politicians, such as Congressman Barney Frank, Chairman of the Financial Services Committee, are still on the job, acting as though they have no part in the financial train wreck they have instigated.

Finally, with further pushing by different government branches and agencies, mortgage lenders found a solution to inconvenient reality. It was the subprime loan, with sub-viable variations such as “interest-only” and “no-money-down.”

No forces were available to combat the American economy’s unbalancing by cultural Marxists, socialists, noisy “minority” chieftains and power-hungry opportunists. Instead of leading a counteroffensive, the federal government (mostly under Republicans) pushed toward the fall. And the bankers went along—even though it was their depositors’ capital they were converting to cotton candy.

Banks started dishing out mortgages as though they were consolation prizes for the poorly educated of shaky employability, or achievement awards for the undisciplined and uneducable with no collateral.

Overwhelmingly, these prize-winners have been “people of color.”

Presto! Many more “people of color” could achieve “the American Dream”—some a few times over, as people with no money and no assets were able to buy several houses each, hoping for a quick and profitable flip.

And the occupants of CEO suites were happy too. They had gained points with neosocialist/ “minority” lobbies and their vast cohorts of useful idiots. Not to mention the favors of weathervane politicians—and enormous end-of-year bonuses to boot.

In trampling on rules of sound banking going back at least to medieval Italy, our financial wizards discovered the eternal quest of alchemy—how to convert lead into gold, for a while at least, before it turns into garbage. Employing PhD’s in high mathematics, they diced and mixed financial offal, stuffed it into sausage skins, gave this dubious bologna properly pinstriped labels such as Mortgage-backed Securities and “Collateralized Debt Obligations”, and sold it off by the slice to equally greedy and heedless financial institutions down the line.

From inception through each change of hands, each putrid sausage slice (tranche) generated fat fees for its handlers.

But reality is stubborn. The underlying loans went sputtering, then died. The new, miracle collateral reverted to the ordure it had always been. Mortgage lenders started dying off from collateral toxemia. The sausage makers—the major financial powerhouses of the United States and Europe—started writing off tens, eventually hundreds, of billions of dollars in “nonperforming” assets. Insurance companies that guaranteed all that pungent charcuterie, and the guarantors of the fermenting meat byproducts that went into them—Fannie and Freddie to you—started swooning too.

In February 2008, the forward estimated total of total losses in the global banking industry was $600 billion. By mid-July 2008, that estimate had risen to $1.6 trillion. With the $10.1 trillion equity loss in the global stock market between December 2007 and July 2008 alone, the subprime debacle qualifies as the greatest financial disaster in history.

That’s before the demise of Lehman Brothers, the world’s largest underwriter of mortgage bonds; the US Federal Reserve’s $85 billion loan to rescue the world’s largest insurance company, AIG, from a similar fate; and the shotgun marriage of America’s largest brokerage house, Merrill Lynch. And before the black week’s wipe-out of another $3.6 trillion dollars in equity, reversed when the government announced a plan to buy all US stocks, bonds, mortgages and bank deposits for a down payment of $1 trillion plus fateful installments down the road.

And it’s before this financial system shock has fully fed through into the real economy, precipitating what Steve Sailer has aptly named The Diversity Recession“.

The mega-hustlers who steered venerable financial institutions into this mega-iceberg, are not hurting. The press described the CEOs of two of the greatest malpractitioners of banking, Merrill Lynch and Citigroup, as having “fallen on their swords”—but not for these types such a noble end. Stan O’Neal, the ousted CEO of subprime-bombed Merrill Lynch, received a $160 million “retirement” package. The golden chute for Chuck Prince, the CEO who led Citigroup to the biggest loss in its 196-year history, was $42 million. John Mack, the CEO of Morgan Stanley, had to forego his 2007 bonus, but it’s some consolation that at the height of the subprime scam, in 2006, he copped $41 million.

Dick Fuld, the CEO of bankrupt Lehman, took home $45 million in 2007, so he won’t have to mourn the vaporization of his 401k. “Jimmy” Cayne, the former CEO of the former Bear Stearns, similarly burned on his vested stocks, presumably retired to his $28 million apartment in the Plaza Hotel, to lick his wounds.

The banks themselves have not had to drink the hemlock they had brewed either. Instead of falling under the weight of their own malpractice, except for Lehman they have basked in the largesse of the Federal Government. Technically, it’s not a bailout using taxpayer money—just a wide-open “discount window”, a spigot from which poured over a quarter trillion dollars in just four days in mid-September ’08. But it’s a bailout nonetheless, as pointed out by Barry Grey on the World Socialist Website:

“The government-backed bailout plan for Citigroup and Wall Street underscores the increasingly parasitic and socially destructive operations of American and world capitalism”, says this socialist writer. “The role of the SIVs [Structured Investment Vehicle, funds that raise capital by selling short-term securities at low interest and then buy long-term securities at higher interest, very often packaged, subprime mortgage loan products] exemplifies the degree to which immense wealth is generated for a layer of multimillionaires and billionaires on the basis of financial manipulations almost entirely divorced from the process of production and socially useful investment.”

Exactly right, says this anti-socialist. America’s main industry, finance, has turned out to be a pyramid scheme of reckless, interlocking bets, essentially a stratospheric swindle.

But all this is just one side of the picture. For at the other end of the spectrum from the princes of finance are the mostly “minority” rubes who bought houses they could not afford with money they did not have, based on income data they had falsified, egged on frequently by crooks in the employ of companies such as Ameriquest—that self-lauded proud sponsor of the American Dream“. And there are enough of them, and their skin tones are compelling enough, to generate enormous political pressure for government action to bail them out too.

Entering subprime minority into Google recently yielded 544,000 links, with typical items reading:

Even this small sample reveals the main sources of the incessant harangue: ethnic grievance lobbies, socialist fronts, and their three megaphones: lawyers, academics and the Mainstream Media.

To save greed-demented bankers and freeloading borrowers from themselves, the Fed has repeatedly cut interest rates and pumped tens of billions of dollars at artificially low rates to the subprime-tainted banks. As of September 7, 2008, the Bush administration, on behalf of the American taxpayer, essentially wrote a check for $200 billion to bail out the two fences of illicit mortgage lootFannie and Freddie to you—and assumed over $5 trillion in their liabilities, doubling the national debt.

When Fannie and Freddie were profitable, their profits went to the investors. Now that they have losses, those have been assumed by the US taxpayer.

And so we have a government practicing selective socialism on behalf of insatiable corporations on one end and improvident individuals on the other—at the expense of the vast majority in between.

It’s socialism that plunders the renters, the old and retired, the savers and the bond investors in order to shower their money onto home owners-by-error, the debtors, and speculators in financial fancy.

This is even more unjust and stupid than simple socialism, for that socialism aimed to plunder a rich minority in order to benefit the middle and bottom majority. This American mutation, however, aims to plunder the middle majority in order to bail out the bottom and top minorities of race and riches.

The refreshingly named Dr. Housing Bubble has named this fiscal mega-crime Crony Capitalism for Dummies.

What’s going on is a base perversion of both morality and justice. It substitutes an innocent party to be punished for the malfeasance of another.

All the “noble” government efforts to prop up falling dominoes stoke inflation, devaluing savings, and sabotaging the responsible, provident citizen.

As of August 2008, inflation in the United States is rising at the fastest pace since 1981. The government, knowing this, cooks the books.  Summer ’08 inflation rates were up to 12.5%, but the government Core Consumer Price Index figures were 7% lower. To know the truth, one has to rely on American equivalents of samizdat, in the best USSR tradition.

A de facto devaluation of the dollar has now accelerated so much that a formal devaluation may be necessary. Therein lies the specter of the Weimar Republic: people exchanging wheelbarrows of banknotes for a loaf of bread…and a strong, indignant leader saving them from the nightmare with passionate oratory, national socialism, and the goose-step.

Already bank branches are under siege by people facing foreclosure who were primitive enough to sign mortgage papers that they did not understand, in a language they often did not know—English.

In effect, what’s going on in the realms of both the subprime Wall Street swells and the little mortgage borrowers with subprime intelligence is a slow but relentless pressure to unravel contracts entered into by consenting adults. That is an erosion of Contract Law, the very foundation of civilized society.

This farce in four acts, with wigs, masks and costumes, trapdoors, sliding plywood scenery and weeping violins in the orchestra pit has been enacted for 40 years without letup for one reason only: to camouflage or otherwise deny racial group differences in IQ, and in mean ethnocultural traits such as the importance attached to education and to obeying the law. In the realm of statistical reality, all these, and not “racism”, bear directly on the chances of material success in life—including home ownership.

The statistical facts imbedded in the last paragraph are  considered so unacceptable in this country that the verb “to disappear” is deployed here in its transitive mode, the way it has been in the political practice of banana republics. Nevertheless, these phenomena are not only observable in one’s daily life—if one but unplug those electrodes implanted in the brain since kindergarten—but are based on thousands of peer-reviewed studies going back 100 years. Corollary issues of ethno-cultural group differences have been studied with conclusive results for almost as long. [Race and Psychopathic Personality, By Richard Lynn, American Renaissance, July 2002]. But woe is him who dabbles in proscribed science.

“Minorities” register mean group IQs of 70 for sub-Saharan Africans, 85 for Afro-Americans and Polynesians and 88 for the main “minority” in the US, the Mexican mestizos, versus 100 for American whites. (The latter containing subgroups with an IQ mean as high as 115.) This is as close to science as anything has ever got in the social sciences. An authoritative review of the last 30 years of relevant research is here and a comprehensive understanding of the subject is available for the intelligent layperson at websites such as gnxp.com or Steve Sailer’s archive, the best available bridge between the relative science and common sense interpretation.

The implications of the mean IQ differences for success in education, employment, home ownership etc. are overwhelming and, again, covered in depth by major researchers, ad infinitum. Here is Professor Linda Gottfredson:

“People with IQs between 75 and 90 are 88 times more likely to drop out of high school, seven times more likely to be jailed, and five times more likely as adults to live in poverty than people with IQs between 110 and 125. The 75-to-90 IQ woman is eight times more likely to become a chronic welfare recipient, and four times as likely to bear an illegitimate child than the 110-to-125-IQ woman.” [The General Intelligence Factor, Linda Gottfredson, Scientific American, Volume 9, Number 4, Winter 1998.]

Due to the mathematical properties of the bell curve, 68.3% of the distribution lies within one standard deviation (“sigma”) from the mean, and 95.5% lies within 2 sigmas. Since the sigma in intelligence studies of the American population is set at 15, that has deep implications relative to educational and other attainments.

An IQ of 100 is considered necessary for a successful completion of high school—real completion of a real high school, as opposed to the “social promotion” of the dumb through the already dumbed-down curriculum in American Schools (11). With a mean IQ of 100 for American whites, 50% of them have the capacity to acquire that high school graduation ticket to further knowledge and prosperity. But a mean IQ of 85 for American blacks means that only 15.9% of them have that capability. Nonwhite Mexicans have a slightly higher ratio. Nature, unlike Lake Wobegon, does leave children behind.

The subprime scandal is only one example of the political elite’s willful blindness. Other adventures of “disappeared” minorities:

  • The US Transportation Security Administration spends $5 billion a year to delay, harass and annoy 677 million passengers on 10.3 billion occasions per year for the sake of weeding out their toothpaste tubes and making them feel equally debased as they crawl toward the selection chute beltless and barefoot.

All this in order not to have to notice that a definite statistical portrait—excluding the overwhelming majority of all passengers—emerges from tabulating the ethnic and demographic markers of the thousands of terrorists who have attacked American and European targets over the last quarter century.

  • The American educational systems spends over half a trillion dollars per year K-12 education—but it’s a Sisyphean labor.

In a 2007 comparison of 29 OECD countries, the US came up  first in education expenditure, spending approximately $10,000 per year, per pupil, while scoring (among 15 year olds) 24th in math and 17th in Science. In the latest reading skills comparison of 44 countries, the US was 23rd.. Meanwhile, to cite one of many, the Czech Republic spends on education about $3,000 per year per pupil, yet in international comparisons it’s 6th in math, 5th in science and 2nd in reading.

Could it be, perchance, that America ’s vaunted “strength in diversity” has been overhyped when compared to boringly nondiversified” societies—the Czechs, the Finns, the Japanese?

Per US Government statistics, 42% of students enrolled in American public schools in 2005 were minorities”, and 20% spoke a language other than English at home.

“Minorities” is a euphemism that has nothing to do with population percentages but everything to do with disappearing” the inconvenient truth of mean racial group differences that handicap the “minorities”, but not the majority, in education and wealth acquisition.

In reckoning with these metrics lie the answers to all societal woes of the Third World-infused multiracial society. We have a criterion by which to stop the pouring of further enormous treasure down a bottomless well to “correct” what are not the faults of society but the woof and warp of the manifest forces of nature—or God, to one so inclined. We have a yardstick by which to assess the national interest with regard to unrestricted immigration. We have a map by which to pursue more effective solutions to the problems of crime, welfare, education, cultural dissolution and more.

But perhaps not in our lifetime—not until many more people can be described by  Irving Kristol’s quip that a conservative is a liberal who has been mugged by reality.

Ultimately, each individual must be judged on his own merit. His group’s mean characteristics are essentially irrelevant.

But by granting racial group preferences to “minorities” based on the spurious assertion of racial discrimination, demagogues and bien pensant liberals actually compel truth-seekers to dig for statistical findings related to such groups, to refute the fraudulent charges of “racism”.

Instead of condemning the suicidal magnanimity of bestowing home ownership on the mostly-“minority” improvident whose only qualifications were their skin tones and loudmouth advocates, America is busy pouring ashes on its head because of the inevitable consequences of folly that, by incredible coincidence, fall disproportionately on the selfsame “minorities”.

It’s not often in history that such extraordinary delusions have been so pervasive, with such negative consequences. But instead of facing reality and learning to work with it, our Moriartys lunge at our Sherlocks and wrestle them over the precipice of the Reichenbach Falls—to the ultimate doom of the whole of society.

It’s a fraud to attack those who speak out on racial differences as “racists”, as though reckoning with salient characteristics of group averages denies the potential of individual members of such groups. It’s inexcusable to brainwash generations of vulnerable schoolchildren that a pervasive “racist” environment is responsible for the under-achievement of “minorities” It’s the “minorities’” own  hereditary qualities that are in free play here: IQ, parents, ancestral culture, the hand that fate has dealt.

The cultural Marxist, or useful idiot, intent on shouting down reality and seeing “racism” everywhere, may drown in a lake whose mean depth is four inches, while protesting that the second and third tallest men in the world, who are Chinese, invalidate comparisons of the mean height of the Chinese and the Dutch.

For forty years now, and perhaps for the first time in 350 years, the West, en masse, has been retreating from the Enlightenment that had catapulted it to the pinnacle of civilization. The forces of reason, empiricism, truth-seeking, basic freedoms (before they became “rights”); the flowering of genius in all areas of human endeavor, all are in retreat everywhere at the same time.

A liberal dogma, a totalitarian taboo divorced from any reality that has ever existed, has taken hold. The new Nicean creed posits that discrimination, i.e. the perception of differences between groups—males v. females; shepherd Muslims v. urban post-Christians; Mexican mestizo peasants v. Danish professors of physics; High Protestant culture v. Hmong tribal custom—are the greatest, the cardinal, sin.

The overwhelming preponderance of black multimillionaires in sports and Rap passes without a comment. No affirmative redress action is available for short Ashkenazi Jews and Bengali Indians who feel unfairly excluded from the NBA. But the preponderance of whites in the sciences, the professions and upper corporate ranks, and the material rewards that accrue to that, are seen as racism that requires a disastrous re-engineering of society.

In finance, we have gone laissez faire on a group of reckless buccaneers disguised in Savile Row finery, selling spoiled meat from the back seats of Maybach limos. But we have banished laissez faire in the main area where it is salutary: liberty to pursue happiness with the hand of cards one has been dealt by fate and DNA, played with will and character by the rules of pure meritocracy. And this, rather than the subprime meltdown of faked homeownership, is the destruction of the American Dream.

A roomful of Professor Moriartys could not have conceived a more diabolical scheme to destroy, morally and materially, the United States.

Takuan Seiyo [Email him] is a multiethnic and multilingual Euro-American immigrant, writer and former international media executive. A happy and highly contributive Californian for decades, TS left as a demographic, political and fiscal refugee. He is now content to live in Japan, a country that does not actively pursue its own extinction, where he is an oft-fingerprinted and respectfully discriminated-against minority. An earlier, shorter version of this essay appeared in print in the Quarterly Review,  March 2008.

Sailer’s Next Big Idea: Immigration Brings “Diversity Deduction”—Not A “Diversity Dividend”

By Steve Sailer

At least since September, I’ve been pounding the table in VDARE.com about the most overlooked cause of the Crash of 2008: President Bush’s 2002-2004 crusade to raise minority homeownership by 5.5 million households through easy credit (for example, eliminating down payments) in order to bribe minorities into becoming Republican-voting homeowners.

Needless to say, our ruling class hasn’t much paid attention to me. Republicans didn’t want to hear about Bush messing up again. Democrats didn’t want to think about the role “diversity” played in the disaster.

The causal connection, though, is so obvious that the establishment press is starting to echo my analysis.

For example, the long New York Times article White House Philosophy Stoked Mortgage Bonfire [by Jo Becker, Sheryl Gay Stolberg, and Stephen Labaton, December 21, 2008 appears to have been drawn in part from my VDARE.com columns, such as my September 28, 2008 essay Karl Rove—Architect of the Minority Mortgage Meltdown.

And on Sunday, the Washington Post pointed out in Karl Vick’s Silver Lining of Subprime Slips Away in Calif. Suburb [December 28, 2008] about a Central Valley town that blacks flocked to from violent Oakland:

“And if Stockton [CA] today is the foreclosure capital of the nation—as several surveys show it to be—it also showcases a little-known upside of the ‘subprime crisis’: the elevation nationwide of hundreds of thousands of African Americans into homeownership.”

Vick goes on to quote a black activist:

“For every $1 of net worth in a household headed by a white person, a household headed by a minority has 13 cents. Earlier this decade it was 6 cents … It is all because of homeownership that we’ve at least moved up to 13 cents.”

Sadly, not for long.

Additionally, in Saturday’s New York Times, Peter S. Goodman and Gretchen Morgenson profile one of the most egregious subprime lenders, Washington Mutual ["WaMu"]. (By Saying Yes, WaMu Built Empire on Shaky Loans, December 27, 2008). Their anecdotes about “stated income” mortgage fraud give a sense of the ethnic angle:

“Yet even by WaMu’s relaxed standards, one mortgage four years ago raised eyebrows. The borrower was claiming a six-figure income and an unusual profession: mariachi singer. Mr. Parsons could not verify the singer’s income, so he had him photographed in front of his home dressed in his mariachi outfit. The photo went into a WaMu file. Approved. …

“On one loan application in 2005, a borrower identified himself as a gardener and listed his monthly income at $12,000, Ms. Zaback recalled. She could not verify his business license, so she took the file to her boss, Mr. Parsons. He used the mariachi singer as inspiration: a photo of the borrower’s truck emblazoned with the name of his landscaping business went into the file. Approved.”

In short, my Big Idea—that there’s been a Minority Mortgage Meltdown, precipitating a Diversity Recession—is now well on its way from scurrilous, racist calumny to part of the Mainstream Media’s [MSM] Conventional Wisdom [CW].

Isn’t it great that Pulitzer Prizes can now be awarded to webzine writers?

So now let me suggest another even less welcome Big Idea for the rest of the media to get around to in the next several months:

The Crash is telling us that this readjustment can no longer be papered over or postponed.

There are three kinds of financial crashes—in order of severity:

  1. A liquidity crisis, in which lending drops because lenders worry that some people and institutions are too broke to repay.
  2. A solvency crisis, in which lending drops because lenders know that many people and institutions are too broke to repay.
  3. A wealth crisis, in which lending drops because nobody is as wealthy as they had thought they were.

Unfortunately, we appear to be at Level Three. Much of the wealth we thought we had two years ago didn’t really exist.

Why not?

One reason is that there was supposed to be what we should call an immigration-driven “Diversity Dividend”. But of course it turned out to be politically-correct hot air.

Notice that a large majority of defaulted mortgage dollars are in just four states: California, Nevada, Arizona, and Florida. Each has a long history of massive Hispanic immigration.

Now if you assume, as you are constantly assured, that every ethnic group is equal in productive capacity per capita, a huge influx from south of the border would have to make land prices go up.

So, naturally, the Housing Bubble would be concentrated in the four Hispanic-impacted states.

Essentially, the Bubble was a speculative bet that Hispanicization of the population was “good for the economy.

If you had been lectured for your entire life on the virtues of multiculturalism, as most young Wall Streeters have been, that assumption made perfect sense. Or, to be precise, its converse—that diversity is not strength but weakness—is nowadays literally almost unthinkable to well-socialized younger people.

California’s strength was its diversity, right? So, of course, Californians could pay off all those half million dollar with zero down payment mortgages. They’re diverse!

But in fact, as we’ve since seen, there is no “Diversity Dividend”. The law of financial gravity wasn’t suspended in California.

The real—and quite frightening—question: is there a “Diversity Deduction”?

There’s no doubt that, say, Mexicans tend to be more economically productive in America than in Mexico, due to the superiority of American institutions and American managers. But how much more productive?

The conventional wisdom in America is that the simple act of immigration makes immigrants equally, if not more, productive, than the average American. When you point out that there’s no statistical evidence for this widespread belief, then you are told that their children will no doubt rise up to complete equality. When you point out that Latino sociologists have studied this question out to the fourth and fifth generations after immigration and concluded that convergence just doesn’t eventuate—well, typically the conversation ends.

From 1970 to 2007, the minority share of the U.S. population doubled, from 17 percent to 34 percent. The Census Bureau predicts that minorities will exceed 50 percent by 2042—only a third of a century from now.

Hispanics and blacks tend to average somewhere around two-thirds of the income of non-Hispanic whites. That suggests that the increase in minority share of the population over the last 37 years lowered the national income by about five percent, compared to what it would have been if the increase had been in proportion to the U.S. racial balance in 1970.

However, the disparity in net worth between whites and non-Asian minorities (NAMs) is much greater than the income gap, running about an order of magnitude.

This suggests that the per capita wealth shortfall caused by demographic change is more like 15 percent.

And, it’s only going to get worse—unless immigration policy is changed.

Now.

With the Immigration Act of 1965, which unleashed mass immigration again after a forty-year pause, our ruling class in effect decided that the U.S. would not evolve into a Switzerland, but instead into a Brazil.

This doesn’t just mean intensified racial division and social stratification—a land of gated communities and favelas.  It also means systematically poorer economic performance.

[Steve Sailer (email him) is movie critic for The American Conservative. His website www.iSteve.blogspot.com features his daily blog. His new book, AMERICA’S HALF-BLOOD PRINCE: BARACK OBAMA’S "STORY OF RACE AND INHERITANCE", is available here.]

Is Neil Cavuto racist?

The Left is accusing Neil Cavuto of racism for asserting that “pushing for more minority lending” contributed to the mortgage meltdown. Here’s the clip from Sept. 18:

Isaiah Poole at Firedoglake:

The assertion that a $700 billion Wall Street bailout became necessary, even in part, because financial institutions were catering to black people is deeply offensive and profoundly false. Yet it is not just the blather of an insensitive, right-wing cable talk host. It is part of a systematic campaign on the part of the right and the financial services industry to get out from under one of the few laws on the books that addresses discrimination in lending.

Look, there is no question at all — none whatsoever — that the current crisis was caused by subprime lending. What is “subprime lending”? Loans to people rated as higher credit risks. (People with good credit are rated “prime,” thus “subprime” to denote loans to riskier clients.)

The 1977 Community Reinvestment Act, whose purpose was to abolish “redlining” and thereby to make credit more available to minorities, was hijacked by the Clinton administration, which pressured banks to increase their share of loans to minorities without regard to credit risk. That is to say, the feds didn’t care what the default rates were, so long as the banks were making more loans to minorities. Economist Jim Haughey wrote in February:

To generate more mortgage paper and hence more commissions, mortgage brokers and banks progressively lowered underwriting standards with the tacit approval of CRA auditors and community groups. This spawned no downpayment and no income documentation loans. It was sufficient that an applicant with a poor credit record and income too low or too insecure was taking a credit counseling course.

Stephen Schwarzman explained last week how the policy that began under Clinton actually expanded under the Bush administration:

It started with Congress encouraging lending to lower-income people. You went from subprime loans being 2% of total loans in 2002 to 30% of total loans in 2006. That kind of enormous increase swept into the net people who shouldn’t have been borrowing.

This is not some recent, radical, racist accusation. This has been explained by Investors Business Daily. As early as 2000, Howard Husock warned about the potential problems in City Journal.

Contrary to Isaiah Poole’s assertion that this was entirely about “financial institutions catering to black people,” in fact many areas with the highest mortage default rates are in areas with large Hispanic populations.

Why does this matter? Why even discuss it? Because the Left wants to blame the crisis on greedy capitalists and evil Republicans, and to ensure the continuation of the same policies that caused the this crisis. But the lending market can’t recover if lenders aren’t required to judge credit-worthiness by neutral, objective financial standards. It was the abandonment of those standards due to CRA that is at the root of this problem, and accusing Neil Cavuto of racism won’t solve the problem.

UPDATE: Guess the Left can go ahead and add House Minority Leader John Boehner to their list of racists:

[T]he American people are taking note of a left-wing giveaway Democrats are pushing to force taxpayers to bankroll a slush fund for a discredited ally of the Democratic Party. . . . Democrats want to first reward their radical allies at ACORN for their help – often illegal help – in getting Democrats elected to office.

If you oppose giving money to ACORN so they can commit more vote fraud for Democrats, you’re a racist.

UPDATE II: Let me address an argument by our friendly liberal commenter Young 4-Eyes, who says that Cavuto has branded all minorities high credit risks. Cavuto is a TV host, trying to address in abbreviated form what is admittedly a complex problem.

People with good credit ratings didn’t need any special programs or policies to qualify for home loans, and these people — whether white, black, Hispanic, Asian or whatever — were not subprime borrowers targeted by the CRA-on-steroids policies aimed at increasing minority homeownership.

Homeowners who continue to make their mortgage payments are not the problem, whatever their ethnicity. But in an eagerness increase minority homeownership, federal policies encouraged or allowed lending institutions to overlook bad credit ratings of minority mortgage applicants, creating a distinct class of minority homeowners whose subprime mortgages went into default. Since they were supposedly backed by the quasi-government agencies Freddie Mac and Fannie Mae, these bad mortgages were re-sold to financial institutions as AAA-rated securities.

For Cavuto to shorthand this is natural to the TV medium, which is not suited for complex essays. But no one is asserting, or could assert, that all minority borrowers are bad credit risks. What is asserted is that federal policy promoted lending to minorities (and whites, for that matter) with bad credit histories, and that the predictable default of these loans is at the root of the current crisis.

PREVIOUSLY:
9/26: Arnold Kling on the bailout
9/26: Ace going soft on Paulson plan?
9/26: ACORN bailout?
9/26: What caused the crisis?
9/26: No bailout, no debate?
9/25: Porking up the bailout bill
9/18: How Clinton caused the current crisis
9/17: Feeling the pain he helped cause
9/16: Jamie Gorelick & Fannie Mae

The Strawberries of Wrath: Abel Maldonado Plants A New People—At Taxpayer Expense

The Strawberries of Wrath: Abel Maldonado Plants A New People—At Taxpayer Expense

By Linda Thom

During the Great Depression, John Steinbeck penned his Pulitzer Prize-winning book, The Grapes of Wrath about the Joad family from Oklahoma and their travails in the farm fields of California.

Today, California farm laborers come mostly from Mexico. They toil in many of the same California fields as did the fictional Joads. But the primary crop in Monterey County, the home of John Steinbeck, is no longer head lettuce, but strawberries.

Strawberries also top the list of lucrative crops in Santa Barbara County. That’s the home of state Senator Abel Maldonado, the nominal Republican whom Joe Guzzardi predicts will be the next but one Governor of California, possibly completing the Mexican takeover of the state.

Maldonado and his extended family own and operate Agro Jal which farms hundreds of acres of strawberries. Maldonado is the son of one of those allegedly temporary Mexican Braceros, who has somehow contrived to live in the United States for forty years. He only recently became a U.S. citizen—so that he could vote for his son.

It is fitting, therefore, that Maldonado represents a district which stretches from Santa Maria in the south to Watsonville in Santa Cruz County in the north. This is the heart of strawberry land which Eric Schlosser exposed in his celebrated 1995 Atlantic article In the Strawberry Fields.

Throughout that article, Schlosser referred to the farm workers as “migrants”. But they are not migrants at all. And although Schlosser emphasized the dismal conditions of the farm workers, he failed to describe the negative impacts of labor-intensive agriculture on the communities where the farm workers live.

Schlosser began his story in Guadalupe in northern Santa Barbara County. Strawberry fields now reign supreme there, but that was not always the case.

Each year, county agricultural commissioners are required by law to publish crop reports, so that one can view crop yields for decades past. In 1938 and 1939, lemons and walnuts topped the list of high revenue crops in Santa Barbara County. But then the lemon fields were paved over for houses. By 1980, avocados were producing the highest revenue. That year, strawberries were merely the seventh highest revenue earner with 836 acres harvested.

But by 1985, strawberry production rose to first place with 1,606 acres harvested. By 2007, 6,414 acres were harvested.

The table below shows Santa Barbara County’s four top revenue-producing crops by acres and revenue.

2007 Crops

Acres Harvested

Crop Revenue

Value per acre

Strawberries

6,414

$312,754,997

$48,761

Broccoli

28,376

$131,070,223

$4,619

Wine Grapes

21,263

$99,918,573

$4,699

Head lettuce

12,835

$87,845,590

$6,844

So 6,414 acres of strawberries produced $312 million in revenue and 28,376 acres of broccoli produced $131 million in revenue. Strawberries generated more than ten times the revenue per acre.

No wonder strawberry acreage rose nearly eight times 1980-2007!

What happened? Strawberries are very labor-intensive. Monterey County produces 40 percent of the U.S. strawberries. The 2007 Monterey crop report [PDF] describes the work involved in growing this fruit.

“. . . strawberries are replanted annually on raised beds. The beds are covered with plastic. . . Drip irrigation is standard in the industry. Soil preparation typically begins in the late summer and extends into fall with the nursery plants going into the ground in November and December. . . .Depending on the weather, the plants begin flowering in March or April and continue to bloom and produce fruit into October.”

To make the conversion to strawberry acreage possible using current technology, growers needed huge numbers of farm workers. These were not available until the 1980s, when a surge of illegal aliens hit California. After the Immigration Reform and Control Act passed in 1986, illegal aliens continued pouring in.

In effect, the Maldonados and their fellow-farmers were subsidized by federal failure to enforce U.S. immigration law.

And the immigrants brought their families. The resultant increase in Hispanics is visible from school enrollment. For example, Maldonado grew up in Santa Maria, and he and his family still live there. The elementary school district is Santa Maria-Bonita. In 1981, 5,344 students attended schools there. By 1986-87, the enrollment increased by 484 to 5,828 students. By 2007, enrollment increased to 13,142 students.

The racial and ethnic composition of the change in students:

Year

Native Am

Asian/PI

Hispanic

African Am

White

Total

1986-87

96

423

3,710

175

1,424

5,828

2007-08

65

450

11,554

189

884

13,142

Change

-31

27

7,844

14

-540

7,314

In other words, in twenty years, the Santa Maria Bonita School District Hispanic students increased by 7,844, to about 88% of the total. White students declined by 540, to about 7% of the total.

Thirty percent of the Santa Maria Bonita School District students are “English Learners”. Their primary language is Spanish. That probably means that most of these Hispanic elementary children are U.S. citizens because they were born here. During the 1990s, an incredible 45 percent of the births in Santa Barbara County were to foreign-born women.

California’s school finances have an odd structure, the result of 1978’s Proposition 13, a tax revolt which had the unexpected consequence of causing the state government to supply monies that in most states are raised locally, through property taxes. In 2007-8, the state of California paid almost two-thirds of total educational costs of each Santa Maria Bonita student, which total some $8,334.

Additionally, the state and federal governments provide revenue to schools with low-achieving students from low income families. This is called Compensatory Education. (Federal Title I /State Economic Impact aid). All of the 19 schools in the district receive this aid. And 81% of the students participate in the federal lunch program.

But if 81% of the students are poor enough to qualify, this must mean that their parents pay no income taxes. And state income taxes are the primary source of school funding in the state of California.

Conclusion: California taxpayers are funding this ethnic displacement.

And what are California taxpayers getting for this money? Mediocrity. Of the 19 schools in the district, 14 scored in the lowest 30% for schools of their size. The other five schools scored in the middle 50% for schools of their size.

Is Santa Maria-Bonita School District a mere aberration? No. Other examples of agriculture’s ethnic impact can be tracked through the agricultural belt along Highway 101—Senator Maldonado’s district.

Southern Monterey County abounds with fields visible from the highway. A few of the local school districts are listed below.

2007-08 school year

Greenfield Union

Chualar Union

Gonzales Unified

Total Students

2,506

325

2,251

Hispanic students

2,397

316

2,101

Compensatory Education

100%

100%

100%

English learners

40%

82%

57%

Lunch program

87%

92%

69%

(Numbers are from the 2007-2008 school year and are available on the California Department of Education website.)

To trace longitudinal data for any district or school, one has only to go to the named county’s education office data pages. For Santa Barbara County that is here. One can also find other schools and districts with equally appalling statistics on the state education website—for example, Guadalupe Union Elementary School District in Santa Barbara County.

So the Maldonados are being subsidized, not merely by the federal failure to enforce immigration laws, but by state subsidies to the families of their workers. The Maldonados have planted not merely strawberries, but a whole new people—and a political base. And they have done so at taxpayer expense.

What do the leaders of California agriculture say about their impact on the lives and futures of their fellow Californians?

William Gillette, the Santa Barbara County Agricultural Commissioner, stated in his April 14, 2008, report on crops,

“The 2007 gross production was valued at $1,103,322,033. . . .Santa Barbara County’s diversified agriculture continues to provide a strong base for our local economy. Through the multiplier effect, it has a local impact in excess of 2.2 billion dollars.”

But this income statement only reports the private revenues. It omits the public costs.

And schools and services are not the only cost, of course. In a June 4, 2009, Santa Maria Times article on the City’s drunken-driving checkpoints, the final paragraph reads,

“For a city its size, Santa Maria ranks first in the state in hit-and-run accidents, alcohol-related deaths and injuries, and traffic accidents involving drunken drivers between the ages of 21 to 34, according to the state Office of Traffic Safety.” .”[City rejects PUEBLO requests, By Julian J. Ramos]

Might this have something to do with illegal aliens? Local Hispanics apparently think so. The story reports that a group called People United for Economic Justice Building Leadership through Organizing, (PUEBLO), [Email them] “contend that the crackdown targets illegal immigrants.”

So what price strawberries? In early June, at my rural grocery store on an island in Washington State’s Puget Sound, strawberries were $1.49 for a one-pound plastic shell full of berries grown in Santa Maria.

Thank you, taxpayers of California.