Busted: Bankers and The Global Economy

July 31, 2011

Realities Behind the U.S. Debt Crisis

While incompetent and corrupt politics continues to announce a huge divide between sides, the real truth is that Americans have been deceived. The last election proved how little difference exists between moderates on either side, and that is what politics in the United States plays to. Despite the rhetoric in debt crisis debate, there are few meaningful differences in the plans that are being voted on.

Both bills have been estimated to reduce the national budget deficit by around $900 billion over the next 10 years, which is small change in a nation that is overspending by 50%. $750 billion is linked to actual decisions to cut spending. The remaining savings are another accounting gimmick, a projected reduction in interest payments on the national debt because of the proposed budget cuts. $70 billion of the “huge savings” will be applied to 2012 and 2013. As usual, deciding to do anything meaningful always points off somewhere in the distant future. $70 billion is small potatoes for a large economy that continually overspends by increasing margins.

The real issue resides in the fact that the nation has an unstable fiat currency that has been losing its purchasing power for decades. Today, the well is virtually dry, which could easily result in the collapse of the dollar as international currency. This makes the reality of planning ahead a mere mental exercise instead of meaningful in any way. What is worse is that all this fancy accounting is dependent on an unrealistic gross national product of 4.86%. As a result, this budgeting is an exercise in smoke and mirrors.

If you live in the United States, you’ve probably heard the grim news. National GDP growth for the first quarter of 2011 was just revised down yesterday by 81% from 1.91% to 0.36%. Never mind that 1.91% is paltry growth anyway. Second quarter estimates for the nation look even worse as the Federal Reserve prints more fiat dollars than ever before. Printing greenbacks doesn’t create economic growth or employment.

As the Federal Government wriggles in credit agony, the Treasury had $51.6 billion available for discretionary spending. The U.S. Treasury expects to bring in $172.4 billion from August 3rd through August 31st in tax receipts, while being scheduled to pay out $306.7 billion. This means a projected deficit of $134.3 billion. The Federal Government is scheduled to make its interest payment of $30 billion on the national debt on August 15th. They are now on track to spend a record $514.5 billion this year on interest payments alone. The nation faces an increase of the interest rate because of a likelihood of a credit downgrade, which would destroy any deficit reductions proposed by national politicians.

The Treasury has been able to pay bills in recent weeks by using accounting gimmicks, but that has come to an end in a few days. The Federal Government is in a real pickle without more fiat money printed by the Federal Reserve. Prioritizing incoming tax receipts of an expected $174.2 billion is essential, which will include the $30 billion interest payment on August 15th to avoid default.

The immediate obligations to the populace in August are $49.2 billion in Social Security, $50 billion in Medicare and Medicaid, topped by $12.8 billion in unemployment benefits. $23 billion of $49.2 billion in Social Security payments are due to be paid on August 3rd. $59 billion in treasury bills are due on August 4th to pay back investors. This says nothing of $31.7 billion in defense payments to pay soldiers and the like.

As a U.S. debt default and credit shortage looms, investors continue (so far) to invest in Treasury Bonds as a safe haven, which would be worthless in the event of a national default. All of this assumes, of course, that they don’t rewrite all the rules because of the need to save the international economy. I’m surprised that they haven’t already taken over the ‘renegade’ credit agencies in the name of national security so that the world can continue to ride the dollar bubble.

After all the politics, interest rates are likely to be propelled rapidly upward, resulting in obvious hyperinflation that cannot be quietly manipulated or explained away. The world is flooded with American greenbacks, thanks in no small part to the uninspired management of Ben Bernanke and the Federal Reserve. As a result, the Federal Reserve is likely to be the only buyer for U.S. debt. How long will that last as it is?

November 5, 2010

USA Economy: Bernanke Gets ‘Creative’

The Federal Reserve has been mandated by Congress to reduce unemployment while holding their interest rate near zero.  They plan to buy $600 billion in Treasury securities to keep prices from falling and reduce further the long-term borrowing costs, even as 8,000 commercial banks are being locked out of the money flow that could be used to begin financial healing on Main Street.

Bernanke plans to use the tools created during the recession to pump life into the USA economy. They have been projecting that the USA economy has been expanding for 15 months, but not to their satisfaction. They want the USA economy to grow at a larger rate. The reaction of the market has caused the dollar to fall and stocks to rise, as if Wall Street is a true measure of the USA economy. The focus is on Wall Street. Main Street be damned.

Bernanke hopes that he can encourage Wall Street investors to take more risks without risking inflation or encouraging price bubbles of assets by pushing the unemployment rate, which has been above 9 percent since June 2009.

Allen Sinai, the chief global economist at Decision Economics Inc. in New York claims that the Federal Reserve is not working up to standard. He criticized that they are paid to do the job more effectively, but their work is not up to standard. The fact remains that no human institution is truly equipped to deal with the crisis. We are in new economic territory with a global currency at stake, currently propped up by Wall Street as a distraction from the truth.

To push the rate of unemployment down, the central bank wants to spur the rate of US economic growth above a 2.5 annual growth rate.

June 27, 2010

Jobs & G20: Budget Slashing Fever & Fantasy

To hear the G-20 proclaim it, the U.S. and other “prime economies” had better slash their budget deficits before the world comes to an end. The U.S. Senate quashes continued aid for the unemployed. Wall Street investment firms and banking succeeds in watering down financial reform. The fantasy continues while economists and politicians worry behind the scenes.  Even VP Joe Biden openly admitted that the United States will not regain the jobs that were lost in the “Great Recession.”

The official jobless rate, projected at below 10%, is pure fiction and must treated as such by those that seek the truth. It doesn’t consider many unemployed people that have dropped off the charts into oblivion. Underemployment is a national plague that the Labor Bureau of Statistics has revealed. Many are the discouraged job seekers and those that have settled for part-time work. The U.S. Labor Department shows that there are 79 million men in America between the ages of 25 and 65. Nearly 18 million of them, a record 22%, are out of work. This doesn’t include the underemployed. The impact is larger in African-American men.

The financial markets, like the government lawmakers, could care less about the deficit. Perhaps they should. As a result, investment rates in bonds is down. Almost all of them ignore engineered inflation which pays off central bankers to the tune of about 10% yearly, the real loss in buying power for the nation. In the meantime, the official inflation rate is a “convenient” 3% most years. Powers that be project an inflation rate 2.3% yearly for the next 30 years. Dreamland. Because of what is really a stagflation economy, falling prices and deflation of the dollar are more likely.

Wall Street and multinational capitalism seems to be in robust condition, to the cost of everyone but them. Corporate profit margins have reached record levels at 36% as the average American is short circuited entirely. These profits have never been so high since record keeping began. These figures are much the same as they were in the Reagan administration.

More than half of the national budget funds defense (don’t forget the wars), national debt interest and Social Security/Medicare. Politicians are eyeballing cuts on the latter, often silent as a senior political voice fades away. Don’t kid yourself. You’ll pay for seniors and the disabled one way or the other. Don’t kid yourself about the other major expenses either. Meanwhile, the national budget has climbed steadily for decades in the 6% to 10% range, much higher than the professed inflation rate.

There are no easy answers beyond beginning to live within our means as a nation. For years, Americans had forgotten about this necessity, encouraged by the system to spend endlessly, until the recession hit us between the eyes. Only bankers, multinationals and Wall Street have profited in their own economic bubble. Government has forgotten what economic balance and locally productive jobs mean, threatening to destroy their own system of weights and balances with unfettered spending and wars overseas, designed to keep terrorist attacks overseas and out of America. We have created our own reality. Are we willing to change?

February 24, 2010

U.S. Consumer Confidence Remains Low Despite Projected Optimism

The measure of U.S. consumer confidence fell in February to the lowest level since April 2009 as the outlook for jobs diminished. This is an obvious sign spending will be slow “as the economy recovers.” The banking community is gridlocked and recent short-term gains in the business community indicate an upturn. Meanwhile, a real recovery depends on consumers. Why?

Since consumer spending accounts for approximately 70 percent of overall U.S. economic activity depressed consumer confidence will undoubtedly lead to less consumer spending and sluggish growth in the economy. The economy that I refer to is the real economy as opposed to the Wall Street economy. The fact remains that if consumers have a lack of confidence in the economy, they are not likely to engage in spending sprees if they can and they certainly won’t make major purchases like appliances, houses and automobiles.

Despite media hype and the government spending, Americans are not seeing any real change in the economy. Politics seems to continually pin its hopes on Wall Street and stock market as a measure of confidence. Wall Street, now absorbed into the banking system, continues to function within the same dynamics as before the meltdown. Bundling securities continues unabated even though this, in large measure, has resulted in substantial reverses in resolving bank debt and cleaning up the meltdown mess. Lawmakers remain weak willed even though hands have been figuratively slapped for financial illiteracy by the Federal Reserve, the new kingpin of financial law.

This is no different from allowing the “Big 3” Credit Tracking Agencies to run the show in managing consumer credit, a definite conflict of interest since these businesses and the Federal Reserve have so much to gain from the system in place. This is illustrative as to why so little has been accomplished. The system has its’ hands in its’ own pockets. Corporations have adopted functions of government as lines continue to blur. The system grows with little benefit to anyone as corruption further stagnates the system. Politics is working in the same way to involve health care on a larger level. The government may have a system of checks and balances, but the founders of the country did not count on the corporate oligarchy now in place.

September 16, 2009

Double Dip Recession or Recovery?

Filed under: corporatism, credit, economy — Tags: , , , , , , , , , , , , , — digitaleconomy @ 7:55 am

Global industrial production now shows clear signs of recovering at least when comparing the current ‘recession’ with the Great Depression. During that time, a decline in industrial production continued for a full three years. The question remains regarding final demand for this increased production. Will renewed demand actually materialize or did the U.S. government create a small bubble with $2 billion “Cash for Clunkers” program? Will consumer spending, especially in the US, remain weak, causing the increase in production to go into inventories? If production simply falls into inventories, this will result in sharp cut backs and result in a return to recession. The labor market combined with ailing business credit and finance in the U.S. does not hold out much promise for an end to the recession. Will the Obama administration jigger with credit markets to somehow expand credit markets?

Global stock markets and investment banking and profiteering have mounted a sharp recovery since the beginning of the year. Still, the decline in stock market wealth remains even greater than at a comparable stage of the Great Depression. The downward spiral in global trade volumes has abated. This may be due to the return of the old ways of doing business that President Obama has decried publicly in the last few days. Data exists for June that shows a modest uptick in trade, but  the collapse of global trade remains dramatic by the standards of the Great Depression.

June 10, 2009

Economy: Good Prospects Beyond White Collar Jobs

Voices of reason have long proclaimed that the only key to a decent future is a college education as we trumpet excess, luxury and credit for all. The halls of academia do not suit every temperament, nor can the world operate only through the league of white collar employment and office jobs. Who will take care of the national infrastructure, manufacturing and all those green jobs that the nation has been promised? A sedentary, artery-clogging, boss-centered lifestyle is not a requirement to exist in America. Yet, hundreds of thousands of American youth have been or continue to buy into massive college loans if credit is available. Nearly half of students who start college will drop out before graduating. Our country has been facing major workforce shortages for years, which have been taken up by illegals in many cases. They are the latest attempt by big business and government to create a new subclass of American worker in which to found a new nation.

white-collar-crimeWithout question, the nation has been suffering where jobs are concerned, brought about by nothing less than white collar crime. You can’t really talk about careers since corporates nip millions of so-called careers in the bud every year due to their own self-interest. That reality existed before the recession stripped the nation of what millions of Americans see as their only self-respect: the job.

America has been convinced working a corporate job is the only way to live. The white collar job has been sold as the American stock and trade. The federal government has been very happy with this campaign as corporations and big business are highly complicit with federal law and the collection of taxes. As a result of this nearsighted approach, the American labor force has been selling itself short and has allowed itself to be deluded about the future and personal potential for the future.

We are being told that only by following rules and leadership of big business, the corporate and the academic world, can Americans possibly prosper. Has this proclaimed fact proved to be true? Are you truly being prospered now? Has the nation prospered? Think for yourself. You are your own best friend and are fully capable of supporting yourself if you are willing to think outside the box that the government, big business and corporates have made for you. There is hope. Great personal success can exist outside the cubicle. You are not a slave…at least not per the founding documents of America. ~ E. Manning

May 4, 2009

Krugman: Falling Wages and a Recovery

Paul Krugman makes some excellent points:

So what should we conclude from the growing evidence of sagging wages in America? Mainly that stabilizing the economy isn’t enough: we need a real recovery.

But the unemployment rate is almost certainly still rising. And all signs point to a terrible job market for many months if not years to come — which is a recipe for continuing wage cuts, which will in turn keep the economy weak.

To break that vicious circle, we basically need more: more stimulus, more decisive action on the banks, more job creation.

Credit where credit is due: President Obama and his economic advisers seem to have steered the economy away from the abyss. But the risk that America will turn into Japan — that we’ll face years of deflation and stagnation — seems, if anything, to be rising.

The Falling Wage Syndrome by Paul Krugman

Inflation-adjusted American wages have remained ‘stagnant’ since 1975 but the cost of living has steadily increased. This contributes to the use of credit, the nation’s current plight regarding credit slavery and the high prices of market goods, notably automobiles. The recovery of the auto industry, for example, depends on moving cars and trucks. The problem remains in high prices versus wages of Americans. Houston: we have a problem.

In a review of the Census Bureau’s Historical Income Tables, the truth is not stagnation in an actual sense.  For example, the median income for white men fell nearly 10% between 1974 and 1982. The income for the same group climbed 15% from 1982 to 2007. Income for women increased only slightly between 1974 and 1982 and actually fell slightly for blacks during the same period. Meanwhile costs and expenses spiraled out of control at an annual average inflation rate hovering around 10%, fostered by runaway spending created by credit.

Some argue that wages have increased by 40% since the 1970’s. A recent study by the Federal Reserve Bank of Minneapolis discovered that wages for the average American worker went up by 20 percent between 1975 and 2005. However, one cannot accept the current 3% inflation rate pushed by the Federal Reserve and the federal government as fact. Assuming an average 10% inflation rate which is closer to truth, neither 20% or 40% hold a candle to the real and hidden inflation rate. Given a median inflation rate of 10%, you are looking a loss of buying power at a staggering 100% every ten years instead of a professed 30% reduction in buying power. Now you know where the problem really is. Inflation is not our friend. Living on predatory and usurious credit has come at great cost to the entire globe. The bottom line is that a liberal fractional reserve that has allowed runaway credit is truly responsible for the current plight of global financial malaise. The current mindset continues that monetary credit is the answer to the global meltdown. The actions of central bankers continue to dilute the value of the dollar as global currency.

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