If The Economy Is Up, Why Isn’t Hunger Going Down?

A volunteer distributes food at CAMBA's Beyond Hunger Emergency Food Pantry on Feb. 18, 2014 in the Brooklyn borough of New York City.
A volunteer distributes food at CAMBA’s Beyond Hunger Emergency Food Pantry on Feb. 18, 2014 in the Brooklyn borough of New York City.
Spencer Platt/Getty
On November 26, 2014,  Raymond C. Offenheiser writes on MSNBC.com:

This should be a time of plenty in our country, and a season of thanks, after six years of sputtering growth since the economy came crashing down in 2008. The stock market has rocketed back up, gross domestic product is expanding at a 2% clip, household debt is shrinking, housing has rebounded and prices are up. Most importantly, unemployment is at its lowest rate in six years, indicating that millions of people are back to work.

So how can we explain why the hunger that spiked at the beginning of the recession has not declined? According to the U.S. Department of Agriculture, food insecurity increased from 10% to almost 15% of households during the financial crisis, and it has remained around this level since. More than 17 million households in our country are food insecure. If the economy is bouncing back, shouldn’t hunger be going down too?

We at Oxfam America partnered with Feeding America, the leading organization fighting domestic hunger through a network of 58,000 food pantries, to dig into the data of the more than 46 million people who turn to Feeding America’s network of food banks. What we discovered is that more than half (54%) of Feeding America client households have at least one member who has worked for pay in the past 12 months. Most surprisingly, close to half (43%) of these working client households had at least one member who worked full-time in the past year.

The ugly reality in today’s America is that hardworking people have jobs but are not earning enough to buy life’s essentials: rent, clothes, healthcare – even food.

Like many other American families, working households that seek charitable food assistance struggle to pay all of the bills necessary to sustain a family. Having to face wrenching choices – between paying for food or heating their home, buying medicine for a family member or making the mortgage – these families have found that tapping into the resources at a charitable food program ensures that, at the very least, there is enough to eat.

What’s more, these working families are not turning to food banks only in emergencies: In fact, most report depending on the local food pantry as part of their regular survival strategy.

People like Derek, a single parent who works full-time as a security guard for the St. Louis transit system. Despite long hours, he brings home so little money that he often goes to a local food pantry to be able to put a meal on the table for his three children. Working nights so that he can be with his kids during the day, Derek says that, despite his paycheck, “I still always come up short – between paying for clothes, insurance, school supplies. I knew I had to ask for help.”

The economic recovery hasn’t touched most Americans. In fact, 95% of the income gains since the recession have gone to the top 1% of earners, as most new jobs created have paid low wages, and the number of middle-income jobs has actually shrunk. About a third of all U.S. workers are paid less than $12 per hour, and most of these have no paid leave; no employer-provided health insurance; no pension plans, and often irregular hours in tenuous jobs. Millions work in retail, in restaurants, providing elder or child care, and in many other occupations that pay $8, $9, or $10 an hour—a far cry from a living wage. Worse yet, the U.S. Bureau of Labor Statistics projects that nearly half of new jobs created in the next decade will be in low-wage occupations.

“Nearly half of new jobs created in the next decade will be in low-wage occupations.”

Contrary to stereotypes that low-wage workers in America are young or have little education, the average age of workers earning less than $10 per hour is 35. Many support families, and 43% either have a four-year college education or have completed some college.

Although charitable feeding programs and government both play a vital role in supporting struggling Americans, they cannot be the long-term answer to hunger in the United States – particularly among those who work day in and day out for a meager living.

Raising the minimum wage to $10.10 would benefit more than 25 million workers, including nine million parents and more than 15 million children. It would make it more likely that people who go to work every day would bring home enough money to pay the bills and put food on the table.

Instead of private donors and taxpayers feeding our hard-working neighbors, jobs should be paying wages that make sense, fiscally and ethically.

A higher minimum wage would mean people working a full-time job could earn more to sustain themselves and their family, and to find a path out of poverty. And that’s something we would all be thankful for.

The so-called economic recovery is a mirage. The economic reality will worsen for most Americans as long as we continue our political and academia leaders and those who aspire to the presidency continue to be trapped in the “JOBS ONLY’ thinking paradigm and fail to see that INCOME is derived for both human or labor input participation and non-human capital asset input participation in the effort to produce products and services. The day that we, as a nation, realize this economic reality and begin to advocate for equal opportunity to build personal wealth through the FUTURE personal ownership of wealth-creating, income-producing capital assets is the day that we can truly be thankful that we have  national leaders who can lead us to the path to prosperity, opportunity and economic justice.

http://www.msnbc.com/msnbc/if-the-economy-why-isnt-hunger-going-down?CID=sm_FB

 

This Is Probably The 2nd-Worst Time In History To Own Stocks

On November 26, 2014, Jesse Felder writes on Business Insider:

This stock market is now the second most overbought, the second most overvalued and most most over-leveraged market in history.

Overbought: My friend, Dana Lyons, recently posted the chart below which shows the S&P 500 in relation to its exponential regression trend line. The only other time in history stocks were this “overbought” (traded more than 90% above the long-term trend) was back at the height of the internet bubble.

stocks overbought_1JLFMI

 Overvalued: A glance at the chart below, of Warren Buffett’s favorite valuation metric (total market capitalization-to-GDP), clearly shows that there was also only one other time in history when stocks were priced so dearly as they are today: 1999.

fredgraph 2 1024x680FRED

Over-leveraged: Finally, investors have never been so highly levered to equity prices. Even 1999 can’t compare with today’s aggressiveness. As the next chart shows, net free credits (cash minus margin debt) in brokerage accounts have never traveled so far into negative territory as they have now.

NYSE investor credit SPX since 1980 2pngdshort.com

I think it’s pretty pointless to debate whether this constitutes another “bubble” or not. Label it however you want. But it’s hard to deny that this is, at the very least, the second most unattractive time to own equities in history. In other words, this is probably the second worst time in history to own stocks.

http://www.businessinsider.com/second-worst-time-to-own-stocks-2014-11

 

Poor Kids Who Do Everything Right Don’t Do Better Than Rich Kids Who Do Everything Wrong

On November 27, Matt O’Brien writes in The Washington Post:

Not a day seems to go by where we’re not reminded that inequality is growing in America. But it’s not just outcomes that matter; it’s opportunity. Last month, we looked at startling new research that showed that poor kids who do what they need to do — go to college — make just about as much money later in life as wealthy kids who don’t even graduate high school. 

America is the land of opportunity, just for some more than others.

That’s because, in large part, inequality starts in the crib. Rich parents can afford to spend more time and money on their kids, and that gap has only grown the past few decades. Indeed, economists Greg Duncan and Richard Murnane calculate that, between 1972 and 2006, high-income parents increased their spending on “enrichment activities” for their children by 151 percent in inflation-adjusted terms, compared to 57 percent for low-income parents.

But, of course, it’s not just a matter of dollars and cents. It’s also a matter of letters and words. Affluent parents talk to their kids three more hours a week on average than poor parents, which is critical during a child’s formative early years. That’s why, as Stanford professor Sean Reardonexplains, “rich students are increasingly entering kindergarten much better prepared to succeed in school than middle-class students,” and they’re staying that way.

It’s an educational arms race that’s leaving many kids far, far behind.

It’s depressing, but not nearly so much as this:

Even poor kids who do everything right don’t do much better than rich kids who do everything wrong. Advantages and disadvantages, in other words, tend to perpetuate themselves. You can see that in the above chart, based on a new paper from Richard Reeves and Isabel Sawhill, presented at the Federal Reserve Bank of Boston’s annual conference, which is underway.

Specifically, rich high school dropouts remain in the top about as much as poor college grads stay stuck in the bottom — 14 versus 16 percent, respectively. Not only that, but these low-income strivers are just as likely to end up in the bottom as these wealthy ne’er-do-wells. Some meritocracy.

What’s going on? Well, it’s all about glass floors and glass ceilings. Rich kids who can go work for the family business — and, in Canada at least, 70 percent of the sons of the top 1 percent do just that — or inherit the family estate don’t need a high school diploma to get ahead. It’s an extreme example of what economists call “opportunity hoarding.” That includes everything from legacy college admissions to unpaid internships that let affluent parents rig the game a little more in their children’s favor.

But even if they didn’t, low-income kids would still have a hard time getting ahead. That’s, in part, because they’re targets for diploma mills that load them up with debt, but not a lot of prospects. And even if they do get a good degree, at least when it comes to black families, they’re more likely to still live in impoverished neighborhoods that keep them disconnected from opportunities.

It’s not quite a heads-I-win, tails-you-lose game where rich kids get better educations, yet still get ahead even if they don’t—but it’s close enough. And if it keeps up, the American Dream will be just that.

http://www.washingtonpost.com/blogs/wonkblog/wp/2014/11/27/poor-kids-who-do-everything-right-dont-do-better-than-rich-kids-who-do-everything-wrong/

 

Ponzi: Treasury Issues $1T In New Debt In 8 Weeks—To Pay Old Debt

Treasury Secretary Jacob Lew

Treasury Secretary Jacob Lew (AP Photo)

On November 28, 2014, Terence P. Jeffrey writes on CNS  News:

The Daily Treasury Statement that was released Wednesday afternoon as Americans were preparing to celebrate Thanksgiving revealed that the U.S. Treasury has been forced to issue $1,040,965,000,000 in new debt since fiscal 2015 started just eight weeks ago in order to raise the money to pay off Treasury securities that were maturing and to cover new deficit spending by the government.

During those eight weeks, Treasury took in $341,591,000,000 in revenues. That was a record for the period between Oct. 1 and Nov. 25. But that record $341,591,000,000 in revenues was not enough to finance ongoing government spending let alone pay off old debt that matured.

The Treasury also drew down its cash balance by $45.057 billion during the period, starting with $126,568,000,000 in cash and ending with $81,511,000,000.

The only way the Treasury could handle the $942,103,000,000 in old debt that matured during the period plus finance the new deficit spending the government engaged in was to roll over the old debt into new debt and issue enough additional new debt to cover the new deficit spending.

This mode of financing the federal government resembles what the Securities and Exchange Commission calls a Ponzi scheme. “A Ponzi scheme,” says the Securities and Exchange Commission, “is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors,” says the Securities and Exchange Commission.

“With little or no legitimate earnings, the schemes require a consistent flow of money from new investors to continue,” explains the SEC. “Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out.”

In testimony before the Senate Finance Committee in October 2013, Lew explained why he wanted the Congress to agree to increase the federal debt limit—and why the Treasury has no choice but to constantly issue new debt.

“Every week we roll over approximately $100 billion in U.S. bills,” Lew told the committee. “If U.S. bondholders decided that they wanted to be repaid rather than continuing to roll over their investments, we could unexpectedly dissipate our entire cash balance.”

“There is no plan other than raising the debt limit that permits us to meet all of our obligations,” Lew said.

“Let me remind everyone,” Lew said, “principal on the debt is not something we pay out of our cash flow of revenues. Principal on the debt is something that is a function of the markets rolling over.”

The vast amount of debt that the Treasury must roll over in such a short time frame is driven by the fact the Treasury has put most of the debt into short-term “bills” and mid-term “notes”—on which it can pay lower interest rates—rather than into long-term bonds, which demand significantly higher interest rates.

At the end of October, according to the Treasury’s Monthly Statement of the Public Debt, the total debt of the federal government was $17,937,160,000,000.

Of this, $5,080,104,000,000 was what the Treasury calls “intragovernmental” debt, which is money the Treasury has borrowed and spent out of trust funds theoretically set aside for other purposes—such as the Social Security Trust Fund.

The remaining $12,857,056,000,000 was “debt held by the public.” This part of the debt included $517,029,000,000 “nonmarketable” Treasury securities (such as savings bonds) and $12,340,028,000,000 in “marketable” Treasury securities, including bills, notes, bonds and Treasuring Inflation-Protected Securities.

But only $1,547,073,000,000 of the $12,857,056,000,000 in marketable debt was in long-term Treasury bonds that mature in 30 years. These bonds carried an average interest rate of 4.919 percent as of the end of October, according to the Treasury.

The largest share of the marketable debt–$8,192,466,000,000—was in notes that mature in 2,3,5,7 or 10 years, and which haf an average interest rate of 1.807 percent as of the end of October.

Another $1,412,388,000,000 of the marketable debt was in Treasury bills, which carry “maturities ranging from a few days to 52 weeks,” says the Treasury. These $1.4 trillion in short-term Treasury bills had an average interest rate of 0.056 percent as of the end of October, according to the Treasury.

The continual rolling over of these short-term, low-interest bills helped drive over the $1-trillion mark the new debt the Treasury had to issue in the first eight weeks of this fiscal year.

The Treasury has taken out what amounts to an adjustable-rate mortgage on our ever-growing national debt.

If the Treasury were forced to convert the $1.4 trillion in short-term bills (on which it now pays an average interest rate of 0.056 percent) into 30-year bonds at the average rate it is now paying on such bonds (4.919 percent) the interest on that $1.4 trillion in debt would increase 88-fold.

http://cnsnews.com/mrctv-blog/terence-p-jeffrey/ponzi-treasury-issues-1t-new-debt-8-weeks-pay-old-debt

 

Bernie Sanders And Congressional Liberals Team Up With Obama To Kill Corporate Tax Cuts

On November 28, 2014, Jason Easley writes on Politicus USA:

obama and congressional liberals kill corporate tax cuts

A group of congressional liberals being that include Sen. Bernie Sanders (I-VT) and Sen. Sherrod Brown (D-OH) teamed up with President Obama to kill tax cut deal that would have given hundreds of billions of dollars to the wealthy and corporations.

Politico reported,

“Everyone felt that Reid had suddenly given the store to Republicans and not gotten much in return,” said a Democratic House aide.

“The president, with liberal Democratic backing on the Hill, issued the veto threat and the plan imploded, making the tax deal the first major collateral damage of the White House’s immigration action.

….
“We should go back to the drawing board,” said Michigan Rep.Sander Levin, the top Democrat on the Ways and Means Committee. Those concerns were echoed in public by Sen.Sherrod Brown (D-Ohio), who sits on the tax-writing Finance Committee and Rep. Chris Van Hollen of Maryland, the top Democrat on the House Budget Committee.

“A few hours after White House aides spoke with Senate Finance, Obama himself called Wyden to tell him he’d made a decision: He’d veto the deal.”

Senators Reid and Schumer tried to do an end run around President Obama and congressional liberals and got caught. Sen. Bernie Sanders called the plan to give corporations more tax breaks crazy, “This tax cut agreement does exactly the wrong things. At a time of massive wealth and income inequality, it extends huge tax cuts to the rich and large corporations while threatening programs that help low-income children. At a time when we need to reverse climate change and aggressively move to sustainable energy, this agreement fails to eliminate tax benefits for the fossil fuel industry but phases out tax credits for wind and solar. This is pretty crazy stuff. I strongly support the president’s decision to veto it.”

With the red state Democrats out of the Senate, liberals are going to gain power and influence. The entire Senate Democratic caucus doesn’t need to be unified to uphold a presidential veto. It’s now clear that President Obama is working with the congressional liberals to fence in what the Republican congressional majority will be able to accomplish.

Obama won’t have much trouble gathering up votes to sustain a veto as long as Republicans try to pass through wildly unpopular legislation. A smaller Democratic caucus in both the House and Senate does give the president more flexibility when it comes to working with his fellow Democrats. The liberal Hell No caucus is already flexing their muscles. The blocking of the Keystone XL pipeline, and the killing of tax cuts for corporations were only the beginning.

The Republican fantasy of a congress that could challenge Obama has gone up in smoke. If the White House continues to work with congressional liberals, Boehner and McConnell will be pinched in and complaining about their inability to get anything done in a matter of weeks.

The shoe is sliding over to the other foot as Mitch McConnell is about to get a taste of his own medicine.

http://www.politicususa.com/2014/11/28/bernie-sanders-congressional-liberals-team-obama-kill-corporate-tax-cuts.html

Justice-based tax reform is desperately needed and well as shift to capital asset growth financing that frees economic growth from the slavery of “past” savings, and instead require the Federal Reserve to issue interest-free capital credit loans to EVERY citizen that are insurable and repaid out of the FUTURE earnings (savings) the investments.

The ONLY justification for reducing or eliminating the corporate tax burden on corporations is the stipulation that they are broadly owned, including employees, and pay out fully dividend earnings, which then would be taxed at personal income tax rates. This would effectively abate the use of retained earnings and debt financing, neither of which creates any new owners but instead constantly enriches the value of capital assets owned by the present owners. Instead, new growth should be financed with the issuance of new stock and its purchase by citizens and employees of the corporation. Such purchases can be transacted using insured, interest-free capital credit loans payed for with the FUTURE earnings of the investments in capital asset growth, without taking ownership shares from those who already own. The proposed Capital Homestead Act would accomplish this objective.
The President should support the Capital Homestead Act athttp://www.cesj.org/…/capital-homestead-act-a-plan-for-get…/ andhttp://www.cesj.org/…/capita…/capital-homestead-act-summary/.

Central Bank “Wealth Effects” Doctrine At Work: Meet The $550K “Crap Shack” In Culver City CA

On November 26, 2014, David Stockman writes on Contra Corner:

The purpose of central bank financial repression and ZIRP is to distort and inflate asset prices. Our monetary politburo even admits that it is in the monetary scam business via its self-serving doctrine called “wealth effects”.

The game here is to drive the stock market averages ever higher through massive liquidity injections into the Wall Street dealer markets. This purportedly causes people to feel richer and to spend and invest more, creating a virtuous circle of prosperity, world without end.

We know by now, however, that “wealth effects” money printing does not help the main street economy. And while it does produce awesome financial market gains—–these turn out to be unsustainable bubbles that inexorably crash. Since the turn of the century, most central banks have participated in this scam—either because they have embraced the Keynesian gospel or have joined the money printing party out of defensive necessity to protect against inflation of their own exchange rates. So the resulting financial bubbles have been global in scope.

During the last global boom cycle, central banks led by the Fed and the US housing bubble drove the aggregate capitalization of world stock markets from $30 trillion to $60 trillion in less than 48 months. Needless to say, the world’s sustainable wealth did not grow by even a fraction of that amount during this brief interval between 2004 and 2008.

Indeed, in much of Europe and the US real wealth was being destroyed by vast malinvestments in housing, real estate and public infrastructure; and in EM economies like China’s, similar wealth destruction was manifested in monumental, uneconomic investments in resource extraction and industrial production and transportation. Nevertheless, this central bank fueled financial bubble reached a tipping point in 2008, and then plunged violently.

As shown below, within a 15 month period, nearly $35 trillion of global equity value evaporated, taking global market cap to below its pre-2004 level.

It didn’t take central banks long to double down, of course. During the period since the Lehman failure in September 2008, the aggregate balance sheet of global central banks has exploded from approximately $6 trillion to $16 trillion, thereby inciting the recrudescence of an even more fantastic global financial bubble.

As shown above, global equity market cap has soared by $40 trillion since the March 2009 bottom to new all-time highs. But do not be troubled. The Wall Street stock peddlers who moonlight as “economists” and ” equity strategists” assure us that the 2008-2009 plunge was all a vast mistake——a temporary panic in the financial markets caused by a lapse of faith in the capacity of the state through its central banking and fiscal branches to keep the GDP “print” expanding, profits growing and the stock averages rising.

Lets see. If we just forget the 2008-2009 “mistake” and wind back to the 2004 starting point in the above graph, we see that the global equity market cap has grown by about 120% over the 10 year period. That computes to a compound annual growth rate of 8%.

Yet why in the world would the paper wealth of the world’s stock markets grow at such a robust rate when the entire global economy has been foundering since 2004 in most of the DM world; or simply printing higher but unsustainable GDP stats through the foolish expedient of massive, state subsidized spending on infrastructure and real estate development in much of the EM world. Think the ghost cities, empty malls and unutilized airports, bridges and highways in China.

Starting here at home, therefore, the last decade does not provide much support for the $35 trillion equity gain since 2004. In fact, US real GDP has expanded by a paltry 1.5% annually during that period—–which is by far the lowest rate for any ten year period in modern US history.

And in the rest of the DM world, there results have been even more meager. Real GDP in the EC, for example, has grown at a 0.5% annual rate during the last decade. In Japan, the results have been equally dismal—with GDP growth clocking at a hardly recordable 0.4% per annum.

So when upwards of 60% of the global economy is in “creeper gear” and shows no signs of breaking out of this trend, why would the market cap of publicly traded companies, which rely on these DM economies for an overwhelming share of their profits, soar by $35 trillion or 8% per annum?

The answer, of course, is that PE multiples have risen sharply—from about 10X to 20X reported earnings—and the profit share of these faltering GDP levels have also soared to historic peaks. Stated differently, much of this $35 trillion paper gain over the last decade is a product of central bank driven financialization, not sustainable growth in world output and real wealth.

The former has produced a dangerously expanding gap between rising PE multiples and stagnating real growth; and has also incentivized global corporations to shed investments in labor, fixed assets and R&D in order to fund financial engineering schemes such as stock buybacks and M&A which goose accounting profits in the short-run, but liquidate the ingredients of long-term growth and innovation. Currently, IBM, Hewlett-Packard, Cisco Systems and Proctor & Gamble are among the obvious poster boys.

To be sure, the Wall Street pitch men counter with the “BRICS” story—the notion that the growth baton has been handed off to the EM world and that soaring growth and corporate profits in China, Korea, Brazil and even Africa will take up the slack. In a word, that’s just unadulterated nonsense.

The reported GDPs of the EM economies are vastly bloated by a one-time parlor trick. Namely, the fantastic money printing campaigns of their own central banks, which have resulted in drastic mispricing of capital and out-of-this-world growth in fixed assets. Needless to say, however, the law of  supply and demand has not yet been repealed–even in Beijing and Brasilia. It is only a matter of time, therefore, before the EM economies experience their own day of reckoning.

Thus, during the decade through 2014, the People’s Printing Press of China expanded its balance sheet by 7X. Not only has that never been done before, but why in the world would the Wall Street pitch men believe that a command economy, which is entirely controlled from the center and which has expanded its debt from $1 trillion to $25 trillion during the brief course of this century, is even remotely capable of the moderately stable performance history of the DM economies which comprise their data bases and charts.

Historical Data Chart

The fact is, China is a colossal house of cards, and so are the satellite economies which have fed raw materials into the maws of its overheated industrial furnaces.

Take Brazil, for example. It has been run by crony capitalists and labor-socialists for the past decade, who, like their Chinese counterparts, have had no difficulty cranking up the printing presses at their central bank. As shown below, the Brazilian central bank expanded its balance sheet by a blistering 4X in the course of the last decade.

But with the China boom now rapidly cooling and iron ore prices, for example, rapidly collapsing, the accumulated waste, inefficiency and corruption of the past ten years of global central bank money printing has begun to catch-up with what is the third and latest version of the Brazilian miracle. In fact, Brazil is tumbling into recession and political crisis, and is likely to remain there for years to come. There has been no permanent growth miracle there; just a red hot printing press and a statist simulacrum of prosperity.

Historical Data Chart

So that brings us to the true nature of today’s Keynesian central banking. The actual impact of the current “wealth effects” regime is not economic growth and rising profits, but, instead, a vast inflation of financial assets. Yet owing to the passage of time and the serial efforts by the central banking cartel to reflate each busted bubble, the degree to watch valuations have become distorted is completely lost in the recency bias of Wall Street and its financial media echo boxes.

In short, the current $65 trillion of global equity market cap and roughly $75 trillion of GDP can’t be remotely true or sustainable. Both grew out of a central bank money printing spree—–not out of enterprise, labor, invention, savings and productivity.

Perhaps, then, it takes a picture to discredit the endless bogus word clouds of the mainstream narrative. The latter, in truth, is little more than a sales pitch which treats the present global bubble as if it had been earned the old fashioned way; it is an economic fairy tale which falsely claims that present nose bleed valuations are but another rung on an ever ascending ladder.

The thing about central bank driven bubble finance, however, is that it infects all asset valuations—every last one. By enabling carry trade speculators to ply their trades with zero cost money, it creates an endless bid for financial assets at ever higher prices. By radically depressing financial “cap rates” below their natural free market levels, it falsely justifies the drastically inflated valuations of all financial assets and real estate.

But at some point—–even the Cool Aid drinkers have to start wondering about the ever widening disconnect between struggling real economies and the soaring valuations of the financial claims upon them. So here is a short cut: meet your  $550k “crap shack” in one of southern California’s most distorted and over-heated housing markets.

As Dr. Housing Bubble well explains, we have now reached the point where central bank financial repression has brought casino finance to every nook and cranny of the main street economy—including to the owners of the cement block shack at 9435 Lucerne Ave, Culver City, CA.

Sure, when the hedge funds and private equity high rollers came rumbling through the neighborhood a couple of years back with their endless wad of cheap capital supplied by the Fed, valuations got boosted by 40-80% nearly over night and expectations of existing home owners undoubtedly soared with them. Likewise, when the Fed drove the 30-year GSE mortgage rate from 6.5% to 3.3% in less than 36 months, it caused property values to get a further bid. And when the FHA found ways to get money into the housing market based on the absurdity of 3% down Federally-insured mortgages, the party got another boost.

So perhaps the sellers of this “874 square foot….. granite countertop and stainless steel appliance filled sarcophagus”, to use Dr. Housing Bubbles felicitous phrase, got carried away and reached a tad too far in their listing price.

But so what. The average household income in Southern California is about $65k. How could this crap shack be worth even a fraction of the asking price based on actual household incomes which are shrinking in real terms and an over-taxed local economy that is migrating every which way—–except back to California.

Stated differently, the world’s central banks have not created $35 trillion of new wealth since 2004.  But they have fueled the rise of “crap shack” valuations nearly everywhere on the planet.

From Dr. Housing Bubble

Take a look at this Culver City home:

culver city

9435 Lucerne Ave, Culver City, CA 90232

2 beds, 1 bath, 874 square feet

I love the effort that went into the photo.  Bars on the windows and garbage cans in the yard.  You also have deferred gardening here.  But of course, it is in Culver City so let the buying begin.  Let us look at the ad and the pitch being used:

“Ideal Culver City Location! This wonderful home is located simply a stone away to the heart of downtown Culver City. Don’t miss this great opportunity.”

A stone away from downtown?  Maybe a couple of Waste Management trash bins away from downtown.  Here is a different viewpoint on the place:

google maps

Street parking might be a pain and you also have massive electrical wiring near the property:

electrical

Then again, who cares since we are talking about Culver City.  This place is listed at $550,000.  Take a look at the price history:

price history culver city

20 percent down is $110,000 of cold hard cash.  Your total PITI will be around $2,500 per month after plunking down $110,000.  Good deal?

If you believe it is, then why not go out and buy this place?  Simple enough.  You can easily look up this place and give a real estate agent a ring. The mentality right now is that some “other” buyer is going to step in and purchase this place so the gig continues.  Yet when I talk with serious investors they are absolutely not looking to buy in these markets.  Flippers seem to be more cautious with their purchases as the year comes to an end.

This place was built in 1946 and looks like it will need work.  It last sold in 1997 for $157,500.  The current sellers are in fantastic shape and have a lot of wiggle room in terms of price and coming out ahead.  I have a hard time seeing someone paying $550,000 on this 874 square foot place and making it their granite countertop and stainless steel appliance filled sarcophagus.  What I do see is someone pitching this place as a pit stop before moving into a much larger$700,000 crap shack.  You have to love California real estate!

http://www.doctorhousingbubble.com/culver-city-real-estate-starter-home-real-homes-of-genius/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+DrHousingBubble-HowILearnedToLoveSocal+%28Dr.+Housing+Bubble+-+How+I+learned+to+Love+SoCal%29

http://davidstockmanscontracorner.com/central-bank-wealth-effects-doctrine-at-work-meet-the-500k-crap-shack-in-culver-city-ca/?utm_source=wysija&utm_medium=email&utm_campaign=Mailing+List+Mid+Day+Thursday

Here Comes The Ultimate Keynesian Scam: Helicopter Money For The People, Not Just Banks

On November 27, 2014, Peter Tenebrarum writes on Contra Corner:

A recent article in the Guardian mocks JC Juncker’s latest scheme to produce some €300 billion in “investment” with a magical money multiplication scheme. Naturally, we agree that Juncker’s plan is deeply flawed, to put it as politely as possible. We have pointed this out already, even before he made the financing details known, which make very little sense.

The article also correctly notes that “QE” has not achieved anything worth noting. However, it is otherwise based on an utterly flawed analysis. The author pleads for “QE bombing” the citizenry itself, i.e., he wants central banks to print money and simply hand it out to everybody. A similar proposal has been made by several economists recently, in Germany and elsewhere. It follows on the heels of the just as absurd idea that central banks should simply “cancel” the government debt they have bought.

Apparently the purveyors of these hoary inflationist schemes – which arguably are economically an order of magnitude more crazy than what modern-day central bankers have already perpetrated – have forgotten about John Law and post-revolution France. The assumption that the British pound would have retained anything close to its current purchasing power if 24,000 pounds had been mailed to every family in the UK is absurd. But this is by far not the only or even the most important problem. The main problem is that all these supporters of unbridled inflationism are making the cardinal mistake of confusing money with wealth.

30wpjyc

(© despair.com)

We want to pick out just one quote from the article and briefly explain what is wrong with it:

“Ever since the credit crunch the continent has been suffering what Keynes called a classic liquidity trap. There is too little money around and thus a chronic shortage of demand. People have too little to spend, which means shops close, supplies dry up and no one invests.”

This analysis is makes no sense whatsoever. There is no such thing as a “liquidity trap” or a “demand deficiency”. Those are Keynesian figments of the imagination. We personally know people in Europe who want to buy a big yacht, their own jet plane and their own island. They are evidently anything but “demand deficient”.

Their problem is only that they have not enough to offer in exchange.  This is however not a question of there being “too little money”. As the chart below shows, there is now more money in the euro area than ever before and the money supply in fact continues to grow by leaps and bounds (current y/y growth rate: 6.5% and rising).

The problem is that a massive amount of capital was malinvested and consumed in the previous boom and that due to the ECB’s inflationary policy since the outbreak of the crisis, more of the same has happened subsequently.

Euro area M1-ann2
Euro area M1 (currency and demand deposits, i.e., “money”) – click to enlarge.

It is important to realize that much of this consumption of real wealth has already happened. It cannot be undone by printing money. On the contrary, even more real wealth is now consumed. So why are the banks are not lending, even though there is more than enough money? This is not because they have no access to “money”. It is because there is literally nothing left to lend.

The Economy’s Pool of Real Funding is Under Pressure

The European economy’s pool of real funding is evidently under severe pressure . It may even be close to exhaustion. Consider how the economy’s production structure works. It is a complex latticework (paraphrasing Rothbard) of individual plans and processes, the aim of which is to ultimately produce consumer goods. For this purpose, goods must move through a great many stages of production, from raw materials to intermediate goods and finally consumer goods.

It should be obvious that these processes not only take effort, but alsotake time. Many of them take a lot of time actually – and this is quite independent of the fact that these processes take place in synchronous fashion (the time from when a raw material is produced to the point when it has become part of a consumer good still has to pass).

How do all the people engaged in raw material and intermediate goods production, or what is known as the higher stages of the capital structure, get paid? Iron ore miners are evidently not condemned to wait for their product to be turned into a consumer good and sold as such before they get paid. The payments are advanced to them by the company in the form of money. However, money is merely a medium of exchange. What actually sustains these workers is the economy’s pool of real funding, its “free capital” if you will (this terminology was employed by Richard von Strigl).

A production structure of a certain length requires that previously produced, but not consumed final goods are available. Some of them have to have been saved beforehand, some need to emerge “in time” as a result of ongoing production processes. The entire process must mesh like the gears in a gear box to ensure this actually happens. It is moreover a highly dynamic process, subject to constant change, as entrepreneurs reallocate investments, found new companies and disband old ones, etc.

savings-effect2
The effect of lower consumption, and hence higher savings and gross investment on interest rate spreads and the production structure (adapted from Rothbard, man, Economy and State). The old, pre-savings structure is represented by the line A-A, the new post savings structure by B-B. Interest rate spreads decline, and longer processes increase in viability, allowing the structure to be lengthened. If it is lengthened due to new money, but no additional real savings entering the economy, it becomes unsustainable. This is why every artificial boom is followed by a bust.

When central banks or commercial banks add new money to the money supply, not one iota of real wealth is created. If the ECB were to send out a “money bomb” to every citizen tomorrow, society’s wealth would have increased by precisely zero.

However, monetary pumping does disturb the finely tuned dynamic processes mentioned above, as it distorts interest rates and prices. Economic calculation is then falsified and malinvestment invariably ensues. Have the housing bubbles in e.g. Spain and the US not shown this quite clearly? The profits made during such artificial booms are illusory. They are “money profits”, but they are the result of erroneous economic calculation. The emergence of such illusory profits leads to the consumption of capital, as they are paid out as higher dividends, higher wages, higher taxes, and so forth.

Eventually it turns out that companies actually lack the funds to maintain their real capital. This is what we mean when we refer to the pool of real funding being under pressure: the capital structure has been damaged. Actors in the economy need to be given the opportunity to so to speak “repair” it again – this invariably means that it must be shortened, as its previous, artificially induced lengthening can no longer be sustained. Then the economy is in “recession”, but this is really a healing process. It takes time to heal.

Additional money printing actively sabotages this healing process. It achieves nothing but even more impoverishment in the end, especially if it succeeds in igniting another boom by redistributing existing wealth and spurring more capital-consuming activities in the economy.

Conclusion:

Inflationism is apparently more popular than ever. It doesn’t seem to matter how often and how consistently it fails to produce the desired results, there are always more people in the world who have an epiphany about saving the economy by printing money. When we say that the “banks have literally nothing left to lend” we are saying this: the economy has become so structurally damaged by previous credit booms that if banks indeed were to lend out more money, they would be almost guaranteed to lose most of it.

What is necessary to “fix” the economy is not the printing of more money, not even if it is distributed to citizens directly instead of being given to banks in exchange for both their dodgy and not-so-dodgy securities. The best thing government can do is nothing at all. However, we will amend this advice by adding that if governments really feel a need to be proactive, they should reduce regulations, lower taxes or simply generally shrink the State with all that implies.

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Main Street America: Stuck In Reverse And Descending Into Trauma

On November 26, 2014, Raul Ilargi Meijer writes on Contra Corner:

US Q3 GDP was revised up by the BEA to 3.89%, but that’s no longer what financial markets react to. They sit and wait for more QE somewhere on the planet to be doled out. Will Americans, if they see this at all, take those numbers, add them to the sweet drop in prices at the pump and spend what they save on more holiday purchases? I’m not saying I know, but I do see that US consumer confidence is down, as is global business confidence – the latter at a five year low.

The Case/Shiller index reports a “broad-based slowdown” for US home prices, and that in the rear view mirror that looks at Q3. So that’s not where those 3.89% came from, it wasn’t housing (wonder what it was). The Gallup Christmas survey lost 8% of exuberance in one month. What this adds up to is that Americans may not spend all of that saved gas money, and that means there’s a real danger of deflation coming to America too – as if Japanese and European attempts to export their own were not enough yet.

While the media continue to just about exclusively paint a picture of recovery and an improving economy, certainly in the US – Europe and Japan it’s harder to get away with that rosy image -, in ordinary people’s reality a completely different picture is being painted in sweat, blood, agony and despair. Whatever part of the recovery mirage may have a grain of reality in it, it is paid for by something being taken away from people leading real lives. US unemployment numbers are being massages three ways to Sunday, as is common knowledge, or should be; the amounts of working age people not working, and not being counted as unemployed either, is staggering.

But there’s a very large, and growing, number of people who do work, but find it impossible to sustain either themselves or their families on their wages. That’s how the recovery, fake as it even is, is paid for. And this will have grave consequences for many years, if not decades, to come.

If a government would come clean with its citizens, explain the overwhelming debt situation a nation is in, that everyone will have to do with less at least for a while, and then openly start restructuring the debts, those consequences would be much less damaging. But all governments choose to talk about only recovery and growth, and to let their people suffer the consequences of the policies enacted to achieve these goals, even if after 6-7 years of crisis and dozens of trillions in stimulus, we’re no closer to either. Quite the contrary. We’re not in ‘drive’, we’re stuck in ‘reverse’. We’re backing up. We’re moving backwards.

Lance Roberts at StreetTalkLive provides stats on how many Americans have been made dependent on some sort of handout:

The Dismal Economy: 148 Million Government Beneficiaries

“.. the Federal Reserve has stopped their latest rounds of bond buying and are now starting to discuss the immediacy of increasing interest rates. This, of course, is based on the “hopes” that the economy has started to grow organically as headline unemployment rates have fallen to just 5.9%. If such activity were real then both inflation and wage pressures should be rising – they are not. According to the Congressional Budget Office study that was just released, approximately 60% of all U.S. households get more in transfer payments from the government than they pay in taxes.

“Roughly 70% of all government spending now goes toward dependence-creating programs. From 2009 through 2013, the U.S. government spent an astounding 3.7 trillion dollars on welfare programs. In fact, today, the percentage of the U.S. population that gets money from the federal government grew by an astounding 62% between 1988 and 2011. Recent analysis of U.S. government numbers conducted by Terrence P. Jeffrey, shows that there are 86 million full-time private sector workers in the United States paying taxes to support the government, and nearly 148 million Americans that are receiving benefits from the government each month.Yet Janet Yellen, and most other mainstream economists suggests that employment is booming in the U.S. Okay, if we assume that this is indeed the case then why, according to the Survey of Income and Program Participation conducted by the U.S. Census, are well over 100 million Americans are enrolled in at least one welfare program run by the federal government. Importantly, that figure does not even include Social Security or Medicare. (Here are the numbers for Social Security, Medicaid and Medicare: More than 64 million are receiving Social Security benefits, more than 54 million Americans are enrolled in Medicare and more than 70 million Americans are enrolled in Medicaid.) Furthermore, how do you explain the chart below? With roughly 45% of the working age population sitting outside the labor force, it should not be surprising that the ratio of social welfare as a percentage of real, inflation-adjusted, disposable personal income is at the highest level EVER on record.

Tyler Durden addresses deteriorating wages in America with a great metaphor:

The Mystery Of America’s “Schrodinger” Middle Class, Which Is Either Thriving Or About To Go Extinct

“On one hand, the US middle class has rarely if ever had it worse. At least, if one actually dares to venture into this thing called the real world, and/or believes the NYT’s report: “Falling Wages at Factories Squeeze the Middle Class.” Some excerpts:

“For nearly 20 years, Darrell Eberhardt worked in an Ohio factory putting together wheelchairs, earning $18.50 an hour, enough to gain a toehold in the middle class and feel respected at work. He is still working with his hands, assembling seats for Chevrolet Cruze cars at the Camaco auto parts factory in Lorain, Ohio, but now he makes $10.50 an hour and is barely hanging on. “I’d like to earn more,” said Mr. Eberhardt, who is 49 and went back to school a few years ago to earn an associate’s degree. “But the chances of finding something like I used to have are slim to none.” Even as the White House and leaders on Capitol Hill and in Fortune 500 boardrooms all agree that expanding the country’s manufacturing base is a key to prosperity, evidence is growing that the pay of many blue-collar jobs is shrinking to the point where they can no longer support a middle-class life.

“In short: America’s manufacturing sector is being obliterated: “A new study by the National Employment Law Project, to be released on Friday, reveals that many factory jobs nowadays pay far less than what workers in almost identical positions earned in the past.

“Perhaps even more significant, while the typical production job in the manufacturing sector paid more than the private sector average in the 1980s, 1990s and early 2000s, that relationship flipped in 2007, and line work in factories now pays less than the typical private sector job. That gap has been widening — in 2013, production jobs paid an average of $19.29 an hour, compared with $20.13 for all private sector positions. Pressured by temporary hiring practices and a sharp decrease in salaries in the auto parts sector, real wages for manufacturing workers fell by 4.4% from 2003 to 2013, NELP researchers found, nearly three times the decline for workers as a whole.

“How is this possible: aren’t post-bankruptcy GM, and Ford, now widely touted as a symbol of the New Normal American manufacturing renaissance? Well yes. But there is a problem: recall what we wrote in December 2010: ‘Charting America’s Transformation To A Part-Time Worker Society:”

.. one of the most important reasons for lower pay is the increased use of temporary workers. Some manufacturers have turned to staffing agencies for hiring rather than employing workers directly on their own payroll. For the first half of 2014, these agencies supplied one out of seven workers employed by auto parts manufacturers. The increased use of these lower-paid workers, particularly on the assembly line, not only eats into the number of industry jobs available, but also has a ripple effect on full-time, regular workers. Even veteran full-time auto parts workers who have managed to work their way up the assembly-line chain of command have eked out only modest gains.”

And that’s not some isolated incident, as the Guardian makes clear, it’s the same thing in Britain.:

Record Numbers Of UK Working Families In Poverty Due To Low-Paid Jobs

“Insecure, low-paid jobs are leaving record numbers of working families in poverty, with two-thirds of people who found work in the past year taking jobs for less than the living wage, according to the latest annual report from the Joseph Rowntree Foundation. The research shows that over the last decade, increasing numbers of pensioners have become comfortable, but at the same time incomes among the worst-off have dropped almost 10% in real terms. Painting a picture of huge numbers trapped on low wages, the foundation said during the decade only a fifth of low-paid workers managed to move to better paid jobs. The living wage is calculated at £7.85 an hour nationally, or £9.15 in London – much higher than the legally enforceable £6.50 minimum wage.

“As many people from working families are now in poverty as from workless ones, partly due to a vast increase in insecure work on zero-hours contracts, or in part-time or low-paid self-employment. Nearly 1.4 million people are on the controversial contracts that do not guarantee minimum hours, most of them in catering, accommodation, retail and administrative jobs. Meanwhile, the self-employed earn on average 13% less than they did five years ago, the foundation said. Average wages for men working full time have dropped from £13.90 to £12.90 an hour in real terms between 2008 and 2013 and for women from £10.80 to £10.30.

“Poverty wages have been exacerbated by the number of people reliant on private rented accommodation and unable to get social housing, the report said. Evictions of tenants by private landlords outstrip mortgage repossessions and are the most common cause of homelessness. The report noted that price rises for food, energy and transport have far outstripped the accepted CPI inflation of 30% in the last decade. Julia Unwin, chief executive of the foundation, said the report showed a real change in UK society over a relatively short period of time. “We are concerned that the economic recovery we face will still have so many people living in poverty. It is a risk, waste and cost we cannot afford: we will never reach our full economic potential with so many people struggling to make ends meet.”

And it’s even worse in Greece and Spain and Italy, all so northern Europe and the Brussels politicos can keep alive the idea that Germany and Holland are doing well, and overall growth is almost at hand. That southern Europe must suffer for that idea has been justified away for years now, and it’s not even an issue deemed worth discussing anymore.

And that attitude will blow up in their faces, it’s inevitable that it will. Very few people understand how dangerous the games are that our governments and central banks play. And when the effects do play out, they will be blamed on other causes. Debt and propaganda rule our world supreme.

Excellent writer and great friend Jim Kunstler shows how simple the entire facade is to fathom, and how the next step away from the mess we’re in is so painfully obvious: downscale.

Buy the All Time High

“Wall Street is only one of several financial roach motels in what has become a giant slum of a global economy. Notional “money” scuttles in for safety and nourishment, but may never get out alive. Tom Friedman of The New York Times really put one over on the soft-headed American public when he declared in a string of books that the global economy was a permanent installation in the human condition. What we’re seeing “out there” these days is the basic operating system of that economy trying to shake itself to pieces. The reason it has to try so hard is that the various players in the global economy game have constructed an armature of falsehood to hold it in place — for instance the pipeline of central bank “liquidity” creation that pretends to be capital propping up markets.

“It would be most accurate to call it fake wealth. It is not liquid at all but rather gaseous, and that is why it tends to blow “bubbles” in the places to which it flows. When the bubbles pop, the gas will tend to escape quickly and dramatically, and the ground will be littered with the pathetic broken balloons of so many hopes and dreams. All of this mighty, tragic effort to prop up a matrix of lies might have gone into a set of activities aimed at preserving the project of remaining civilized. But that would have required the dismantling of rackets such as agri-business, big-box commerce, the medical-hostage game, the Happy Motoring channel-stuffing scam, the suburban sprawl “industry,” and the higher ed loan swindle.”

All of these evil systems have to go and must be replaced by more straightforward and honest endeavors aimed at growing food, doing trade, healing people, traveling, building places worth living in, and learning useful things.

All of those endeavors have to become smaller, less complex, more local, and reality-based rather than based, as now, on overgrown and sinister intermediaries creaming off layers of value, leaving nothing behind but a thin entropic gruel of waste. All of this inescapable reform is being held up by the intransigence of a banking system that can’t admit that it has entered the stage of criticality. It sustains itself on its sheer faith in perpetual levitation. It is reasonable to believe that upsetting that faith might lead to war.

But that’s not yet where we are, though Ferguson sure looks close to that war Jim talks about. Our leading classes will not let us downscale, no matter how much sense that makes for the ‘lower’ 95% of the population, because that would risk their leading positions. And so we’ll have to deal with a lot more misery before the whole edifice finally blows up, and we’ll end up with huge swaths of traumatized people. In a great article, Lynn Stuart Parramore describes how that works:

So Many People Are Badly Traumatized by Life in America: It’s Time We Admit It

“Recently Don Hazen, the executive editor of AlterNet, asked me to think about trauma in the context of America’s political system. As I sifted through my thoughts on this topic, I began to sense an enormous weight in my body and a paralysis in my brain. What could I say? What could I possibly offer to my fellow citizens? Or to myself? After six years writing about the financial crisis and its gruesome aftermath, I feel weariness and fear. When I close my eyes, I see a great ogre with gold coins spilling from his pockets and pollution spewing from his maw lurching toward me with increasing speed. I don’t know how to stop him. Do you feel this way, too?

“All along the watchtower, America’s alarms are sounding loudly. Voter turnout this last go-round was the worst in 72 years, as if we needed another sign that faith in democracy is waning. Is it really any wonder? When your choices range from the corrupt to the demented, how can you not feel that citizenship is a sham? Research by Martin Gilens and Benjamin I. Page clearly shows that our lawmakers create policy based on the desires of monied elites while “mass-based interest groups and average citizens have little or no independent influence.” Our voices are not heard.

“When our government does pay attention to us, the focus seems to be more on intimidation and control than addressing our needs. We are surveilled through our phones and laptops. As the New York Times recently reported, a surge in undercover operations from a bewildering array of agencies has unleashed an army of unsupervised rogues poised to spy upon and victimize ordinary people rather than challenge the real predators who pillage at will. Aggressive and militarized police seem more likely to harm us than to protect us, even to mow us down if necessary.

“Our policies amplify the harm. The mentally ill are locked away in solitary confinement, and even left there to die. Pregnant women in need of medical treatment are arrested and criminalized. Young people simply trying to get an education are crippled with debt. The elderly are left to wander the country in RVs in search of temporary jobs. If you’ve seen yourself as part of the middle class, you may have noticed cries of agony ripping through your ranks in ways that once seemed to belong to worlds far away.

“[..] A 2012 study of hospital patients in Atlanta’s inner-city communities showed that rates of post-traumatic stress are now on par with those of veterans returning from war zones. At least 1 out of 3 surveyed said they had experienced stress responses like flashbacks, persistent fear, a sense of alienation, and aggressive behavior. All across the country, in Detroit, New Orleans, and in what historian Louis Ferleger describes as economic “dead zones” — places where people have simply given up and sunk into “involuntary idleness” — the pain is written on slumped bodies and faces that have become masks of despair. We are starting to break down.When our alarm systems are set off too often, they start to malfunction, and we can end up in a state of hyper-vigilance, unable to properly assess the threats. It’s easy for the powerful to manipulate this tense condition and present an array of bogeymen to distract our attention, from immigrants to the unemployed, so that we focus our energy on the wrong enemy. Guns give a false sense of control, and hatred of those who do not look like us channels our impotent rage. Meanwhile, dietary supplements and prescription painkillers lure us into thinking that if we just find the right pill, we can shut off the sound of the sirens. Popular culture brings us movies with loud explosions that deafen us to what’s crashing all around us.

“The 21st century, forged in the images of flames and bodies falling from the Twin Towers, has sputtered on with wars, financial ruin and crushing public policies that have left us ever more shaken, angry and afraid. At each crisis, people at the top have seized the opportunity to secure their positions and push the rest of us further down. They are not finished, not by a long shot.

“Trauma is not just about experiencing wars and sexual violence, though there is plenty of that. Psychology researchers have discussed trauma as something intense that happens in your life that you can’t adequately respond to, and which causes you long-lasting negative effects. [..] trauma comes with a very high rate of interest. The children of traumatized people carry the legacy of pain forward in their brains and bodies, becoming more vulnerable to disease, mental breakdown, addiction, and violence. Psychiatrist Bessel van der Kolk, an expert on trauma, emphasizes that it’s not just personal.

“Trauma occupies a space much bigger than our individual neurons: it’s political. If your parents lost their jobs, their home or their sense of security in the wake of the financial crisis, you will carry those wounds with you, even if conditions improve. Budget cuts to education and the social safety net produce trauma. Falling income produces trauma. Job insecurity produces trauma.”

There’s much more at the link, and every word is worth reading. The mental consequences of the gutting of our societies by governments and the financial industry does not get nearly enough scrutiny. We act, or politicians and media do, as if millions of people losing their jobs, and over half of young people in certain nations never having had a chance of a job, is just a matter of numbers, of mere statistics.

And then all sorts of ‘experts’ claim it’s all just the price to pay for technological progress, that will make everything so much better for everyone some sunny day soon. But that sunny say will never come, the techno happy ideal version of the future has already died with the debt incurred to facilitate it. We need to take a step backwards, or we’ll continue to drive backwards. Or be driven, to be more precise, since we’ve handed over the steering wheel to people who have no intention of taking us where we want to, and should, go. They are only intent on taking us where they can squeeze us most.

Thing is, there’s precious little left to squeeze. And they know that much better than most of us do. That’s why it’s imperative that we should get rid of these clowns, or there’ll be a whole lot more trauma. We can organize our societies, and we can even organize ways to downscale them peacefully . But not with those at the helm who see us only as mere entities to draw blood from.

We need to be a whole lot more assertive about this; we shouldn’t want to be surrounded by traumatized friends and family members and neighbors There’s nothing good for us in that. It’ll be used against us in increased surveillance and clampdowns and all that comes with it.

We can have good jobs for everyone, all it takes is to have what we need, produced in our own communities and societies, instead of having it shipped over from China. It’s not rocket science. It’s just that there’s a certain segment in society, which unfortunately happens to be the most powerful one, that doesn’t want us to do that. They want more and bigger, not smaller and better.

Until we solve that issue, things will keep getting worse. And not just a little bit. We need to find leaders that actually represent us, our needs and desires and ideas, and we need to find ways to elect them. If we don’t, we face a very bleak future in which there won’t be much left for us to choose. Or enjoy. We live in a pivotal moment in time, but we don’t recognize it for what it is. We seem to think it’s all some minor hiccup. We are dead wrong.

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Emerging Deal Is Everything That's Wrong With Washington

On November 25, 2014, Danny Vinik writes in The New Republic:

Imagine somebody asked you to imagine the worst possible deal on taxes. It’d probably have the following qualities:

It would be bad for the environment.

It would be bad for the deficit.

It would give short shrift to the working poor.

And it would be a bonanza for corporations.

Unfortunately, you don’t have to conjure up such a package. Congressional Republicans already have. And for some unfathomable reason, Senate Democrats including Harry Reid seem inclined to go alongalthough the White House has vowed to veto such a deal if Congress goes ahead and passes it.

On Tuesday, Politico reported that Reid and House Ways and Means Committee Chair Dave Camp had nearly reached an agreement on so-calledtax extenders. Tax extenders are a collection of 55 tax breaks that Congress has traditionally renewed at the end of the calendar year. Ninety percent of them are for big business. Some target specific constituencies, such as owners of NASCAR racetracks.

Congress failed to extend them at the end of 2013, leading to a yearlong debate about what to do: temporarily renew them again or make permanent changes. The reported deal, brokered by Reid and Camp, would do some of both. It would expand and makes permanent a credit for research and development along with smaller tax breaks for college tuition, mass transit and state and local taxes. The arrangement would also extend bonus depreciationwhich allows businesses to write off investments more quicklyand most of the 55 extenders for another two years.

The economic benefits of these credits, although real, are mild. Given the economic climate, a temporary, deficit-increasing extensionsomething Congress has done beforewould make sense. But this deal wouldn’t be temporary. It’d be permanent. The bill would increase the deficit by more than $400 billion over the next decade and billions more thereafter. That’s a great deal of money. For comparison, the heralded fiscal cliff deal increased revenue by $770 billion:

 

The hypocrisy among Republicans is breathtaking. In the spring, they demanded a spending offset for an extension of federal unemployment benefits, which would be temporary and cost just $9.7 billion. That’s less than 2 percent of what the tax extenders would cost. They also fought for$39 billion in food stamp cuts, insisting the reductions were essential for fiscal balance.

For liberals, the problem isn’t simply what the deal would do to the deficit. It’s what the deal wouldn’t do for causes that liberals value. If Politico’s report is correctand, to be fair, there’s no way to know for surethey’ve accepted this deal while getting almost nothing in return.  One of the only tax breaks that the deal will not extend is the wind production credit, which Republicans oppose, but has played an instrumental role in making the production of wind energy more economically viable. That tax break would be phased out over the next few years.

The reported agreement also excludes expansions of the Child Tax Credit and Earned Income Tax Credit. The 2009 reforms to those two credits allowed more low-income Americans to qualify and benefit from them. Those provisions, which aren’t technically part of the tax extenders, expire in 2017. If that happens, the Center for Budget and Policy Priorities projects, 16 million people will fall intoor deeper intopoverty. The extenders deal represented a perfect vehicle to make those provisions permanent.

 

The politics of this are hard to understand, at least for Democrats. Did the midterm elections signal that voters are eager for the government to give $400 billion in tax credits to Big Business? Of course not. And if the deficit picture gets worse, Republicans are sure to cite that as further reason to oppose future Democratic legislation. You can count upon Republicans to deny their own responsibility for the higher deficitsand plenty of media complicity, allowing the GOP to get away with it.

Why, then, has Reid agreed to this deal? Look no further than K Street. As you can tell by their price tag, the tax extenders are very important to Big Business and they spend a lot of money lobbying for them. In March, Americans for Tax Fairness released a report on lobbying of major corporations over tax extenders between January 2011 and September 2013. During that time, General Electric, for instance, employed 48 lobbyists who contacted a member of Congress or their staff about the extenders. Overall, more than 1,300 unique lobbyists were involved in the issue. They spent millions of dollars on them as well.

There is some good news though: The deal still stands a longshot to become law. House Speaker John Boehner likely won’t have trouble passing it but Reid will still have to round up Democratic votes for it to overcome a filibuster. Even if that happens, the president still stands in its way. “The President would veto the proposed deal because it would provide permanent tax breaks to help well-connected corporations while neglecting working families,” Deputy Press Secretary Jen Friedman said. It’s possible that the Senate and House have enough votes to overcome a presidential veto. But that’s hard to imagine.

The White House has plenty of company. Deficit-focused organizations like the Committee for a Responsible Budget are blasting the emerging agreement. So are House Democratic leaders, including Sander Levin(ranking member on Ways and Means) and Chris Van Hollen (ranking member on the House Budget Committee). “The reported deal on so-called ‘tax extenders’ prioritizes corporate interests while doing far too little for struggling American families,” Van Hollen said in a prepared statement.

Van Hollen has a good grasp of reality. This deal was built on K Street and in the backroom offices of Congress. It’s everything that’s wrong with Washington and Democrats, in particular, should want nothing to do with it.

http://www.newrepublic.com/article/120420/tax-extender-deal-handout-big-business

http://www.politico.com/story/2014/11/tax-breaks-corporations-draft-113169.html?hp=r2_3

http://www.vox.com/2014/11/25/7277935/tax-extenders-deal

http://www.politicususa.com/2014/11/25/obama-threatens-veto-congresss-plan-give-corporations-400-billion-tax-cut.html

http://www.nationofchange.org/2014/11/26/congress-poised-eliminate-key-tax-breaks-middle-class-provide-permanent-tax-breaks-corporations/

http://www.politicususa.com/2014/11/28/bernie-sanders-congressional-liberals-team-obama-kill-corporate-tax-cuts.html

The ONLY justification for reducing or eliminating the corporate tax burden on corporations is the stipulation that they are broadly owned, including employees, and pay out fully dividend earnings, which then would be taxed at personal income tax rates. This would effectively abate the use of retained earnings and debt financing, neither of which creates any new owners but instead constantly enriches the value of capital assets owned by the present owners. Instead, new growth should be financed with the issuance of new stock and its purchase by citizens and employees of the corporation. Such purchases can be transacted using insured, interest-free capital credit loans payed for with the FUTURE earnings of the investments in capital asset growth, without taking ownership shares from those who already own. The proposed Capital Homestead Act would accomplish this objective.
The President should support the Capital Homestead Act athttp://www.cesj.org/…/capital-homestead-act-a-plan-for-get…/ andhttp://www.cesj.org/…/capita…/capital-homestead-act-summary/.

Where Are He Headed As A Country?

On November 22, 2014,  John Thompson writes in the Russell County News-Register:

I hardly know anyone who’s happy about the way the country is going at the moment. But before I get started, let me say this first, just to make some people mad, because they hate it when Bush is blamed, especially since Obama’s been in office for the last six years. Know what? I don’t care.

It’s Bush’s fault.

It’s Bush’s fault.

It’s Bush’s fault.

Bush isn’t only to blame. Actually we all are, but man did he ever push this increasingspiral downward.

I sit and listen on the radio, or read on the internet or newspaper and it gets rather depressing. Actually it gets quite depressing sometimes. Especially when you hear stories of 2.5 million homeless children in the U.S. butted up against a story of a $325 million contract to a single baseball player, butted up against a story of an electric company who wants to shut down in upper Michigan since a major customer of the power plant moved and now customers actually face an increase of hundreds of dollars a month in costs.

This morning it was that Kentucky will lose $129 million for road funding with the cut in gas tax which will result in the cost of gas being about four cents a gallon cheaper. That is really going to cut road funds in Russell County, and the magistrates are going to have a hard go of it. Guess they’ll get a little taste of what the purpose of taxes are.

McConnell is pushing Republicans to be silent on the NSA reform bill, not allowing it to be discussed for much needed reform, so we can further devolve into the spying police state we’re becoming as well.

Also, congress just passed a measure which seeks to forbid scientists from advising the Environmental Protection Agency on their own research, but allows corporations to advise, of course. I can’t imagine the measure will get past the House, but if it does, as the director for the Union of Concerned Scientists said, “In other words, academic scientists who know the most about a subject can’t weigh in, but experts paid by corporations who want to block regulations can.”

Being ruled by corporations is fascism. It is corporate fascism, and that is what our country has become.

Yes, the rule of unintended consequences. Republican politicians hate the EPA and would like to dismantle it, returning us to the glory days of smog and heck, why not throw lead in the air again?

Nothing makes any sense to me. We are in an economic crisis. The crisis isn’t that there isn’t a strong economy, it’s that only a very few OWN the economy. The “people” have always had to fight the wealthy to try to have some kind of life beyond forced servitude, but somewhere back when, the wealthy learned how to fool half the population into fighting for them and against themselves.

Here we are in an age of amazing technological advances which has increased productivity hundreds of times, yet unlike the 50’s, where one person in the household could work and provide well for the family, now it takes both heads of household working to make ends meet.

We’re at a time where the poor work hard but are blasted for being lazy. Where it’s believed if you aren’t doing well it’s your own fault only, or the belief that everyone has the same capabilities if they’d just apply themselves.

One problem is absolutely the confusion people have, and I’m certain it’s because of the amount of propaganda that’s thrown at them. It leaves them confused and fighting against what they actually want.

Take the issue of net neutrality, for example.

In a nutshell, net neutrality is the concept that internet providers MUST treat all data equally. They are not allowed to pick and choose who can transmit data faster so it can be received faster. It’s the way the internet has been run up until now.

The devil is in the details, as they say, and I’ll give you a few examples of how bad it could be if ISP’s are given this control, but first let’s finish the explaining of net neutrality.

Recently President Obama declared a strong support for net neutrality, and feels it’s the governments place to insure that everyone has free and equal access to whatever site they would like to visit.

Of course what the corporations have done, well specifically the ISP (Internet ServiceProvider) corporations, is put out propaganda that the government wants to regulate the internet. Well we all know that “government” and “regulate” are bad words, so of course those who aren’t paying attention are up in arms, believing the government is wanting to control the internet.

But it’s the opposite; the government is trying to insure that the internet remains free and open. Of course it’s the government, and independent agencies need to insure that the government doesn’t try to control the internet itself. But to be against net neutrality is to say we need to privatize the internet, and if that’s done, well I’m sorry if you’ve bought into this idea of “freedom” because it will absolutely no longer be free and easy access.

How so? You might ask.

First of all, and it’s happening now, a company can pay a provider for faster data delivery. This is helpful to a company like Netflix or others who stream video. Well, those who stream video for a profit that’s paid by the customer. But if this becomes a permanent business model, I would say it’s safe to assume you’ll no longer have a free Youtube, or at least not one that’s worth watching because the load time would be ridiculous. Personally I think I’ve already noticed it’s getting slower and buffering more.

What else could it mean? Well one company could outbid another in the same market and be given faster data speeds, or restrict viewing of the competition. You know, kind of like cable.

You could even possibly have to pay for access to sites, not by the site, but by the internet provider. Let’s say you wanted to get the Wall Street Journal and the New York Times via the computer. Well what if one pays to have there’s load 10 times or 100 times faster? With the speeding up of some sites you’ll have the slowing down of others.

You might think that’s all good and fine. I mean this is capitalism after all. But you know what? I’m sorry, but sometimes not everything is about money and profit. The idea of the free spread of information and ideas goes beyond money. In fact money KILLS the free spread of information and ideas. It’s part of why our society is so dumbed down. We can’t even get an honest assessment or comparison of say, the economic philosophy of capitalism versus some other way. Sorry, yes you can…over the internet. Why? Because right now it’s free and equal to everyone.

If we are not careful,and equate “freedom” with allowing the internet to be owned in the hands of a few corporations, then we are going to lose what is possibly the most important social experiment in generations: the internet.

Another subject. The Keystone XL Pipeline. This is another prime example of how misinformation and pure propaganda has people fighting for this to happen.

In case you don’t know what it is is an oil pipeline that will run from Canada through the U.S. down to the Gulf of Mexico into awaiting ships to be shipped to other parts of the world. Where the difficulty comes in is, well there’s many, many difficulties. Environmentalists aren’t happy with it because it puts the oil pipeline over important, I mean life important, water aquifers which puts them at risk for contamination. Pipelines rupture more than you might think.

Another great difficulty is, and this one amazes me, because on the right, the conservatives are clamoring for this pipeline, claiming it will create massive numbers of jobs and also, well FREEDOM! But the fact is, the government is having to take land from many people through the use of imminent domain, in order to give the rights to the companies to put the pipe through the land. So sorry for anyone who just happens to have their land split by a pipeline.

Seriously, I thought FREEDOM! … but freedom is just a word to the brainwashed masses of conservatives. Like it’s been said, you shouldn’t be a conservative or a Republican unless you’re rich.

But what about the jobs? Well I pointed out to someone the other day that the pipeline will create a few thousand temporary jobs but in the end only like 50 permanent jobs… 50 permanent jobs!

I was rebuked by being asked if I got that from some liberal television or website. I had to happily inform them that no, I got that figure from none other than the CEO of TransCanada, the company that constructs and maintains the oil pipelines.

50 jobs. Willing to confiscate peoples land, risk untold miles of environment, land and water, and for what? So that oil companies can ship the oil somewhere else. In fact studies show that the pipeline will likely INCREASE gas costs in parts of the United States.

But you know what? What is right, or what is good, or what is just… well these things mean nothing if it just means beating a liberal on some issue. So no matter what harm it would do, the right will cheer, because hey, we beat the liberals! And FREEDOM!

Lastly, I get accused of being anti-gun sometimes. I’m not, but again it doesn’t matter. It’s like agreeing with an Obama policy. If someone believes in an Obama policy, well to some then I must think he’s the Messiah. Yeah, it’s silly, it’s childish, and it’s a rampant thought process; or lack thereof.

I’ll tell you I am not against guns or gun ownership, but what I am against, what really gives me concern is this gun fetishism and fear. Why is it that it seems so often that it’s the ones who insist on carrying a gun that seems the most fearful? Shouldn’t they be less afraid? Well I’ll tell you what I think it does is it always keeps in the front of their mind that they have a weapon, and if they have a weapon it must be because of a perceived threat or possibility of threat.

As Atticus Finch said in To Kill a Mockingbird, “I wanted you to see what real courage is. Instead of getting the idea that courage is a man with a gun in his hand.”

Personally, I kind of like not thinking about carrying around a gun. I’d rather spend my time griping about too many darn people in my way while I’m trying to shop instead of the anxiety of carrying a gun or knowing that I’m carrying it because I’ve become scared of everything.

There’s a second part to that quote from To Kill a Mockingbird: “It’s when you know you’re licked before you begin, but you begin anyway and see it through no matter what.”

I know I’m licked. There’s no way it seems to get people to see things from a different perspective. There seems to be no way to get people to realize there’s plenty for everyone if some didn’t need a million times more than they need while others have to work themselves to death just to survive. There seems to be no way to get people to understand that WE helped give the government to the rich. They didn’t just take it, WE gave it to them, and we keep giving it to them because of our ignorance, our fear, our meanness. I’ll leave you with a very fine quote from a Facebook friend:

“One day you’ll all wake up and realize that government restraints are all that are protecting you from unscrupulous, conscienceless, greedy, profiteering corporations that have no allegiances to you, the country or their employees. They’ll deny your insurances, steal your pensions, outsource your jobs, and let you die all on the name of profit.”

https://www.facebook.com/notes/10152976616862224/

Great summation of the plight of America today.

Excerpt:

“Nothing makes any sense to me. We are in an economic crisis. The crisis isn’t that there isn’t a strong economy, it’s that only a very few OWN the economy. The “people” have always had to fight the wealthy to try to have some kind of life beyond forced servitude, but somewhere back when, the wealthy learned how to fool half the population into fighting for them and against themselves.”