Thursday, October 28, 2010

US Government Debt is US$ 200 Trillion, Not 13.6 US$ Trillion.





STOP whining about it. STOP The Denial. You can't pay it off, you never will and the sooner you stare this problem in the face, the sooner we all can go on with our lives. But of course not after the US$ has been devalued with 90%. Huh, problems? You had a good life for 40 years, so stop complaining.


Now repeat after me:





my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off my debt can never be paid off....finally..AND WHAT ARE YOU GOING TO DO ABOUT IT??


The Scary Actual U.S. Government Debt

Globe and Mail

Boston University economist Laurence Kotlikoff says U.S. government debt is not $13.5-trillion (U.S.), which is 60 per cent of current gross domestic product, as global investors and American taxpayers think, but rather 14-fold higher: $200-trillion – 840 per cent of current GDP. “Let’s get real,” Prof. Kotlikoff says. “The U.S. is bankrupt.”

Writing in the September issue of Finance and Development, a journal of the International Monetary Fund, Prof. Kotlikoff says the IMF itself has quietly confirmed that the U.S. is in terrible fiscal trouble – far worse than the Washington-based lender of last resort has previously acknowledged. “The U.S. fiscal gap is huge,” the IMF asserted in a June report. “Closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 per cent of U.S. GDP.”

This sum is equal to all current U.S. federal taxes combined. The consequences of the IMF’s fiscal fix, a doubling of federal taxes in perpetuity, would be appalling – and possibly worse than appalling.

Prof. Kotlikoff says: “The IMF is saying that, to close this fiscal gap [by taxation], would require an immediate and permanent doubling of our personal income taxes, our corporate taxes and all other federal taxes.

“America’s fiscal gap is enormous – so massive that closing it appears impossible without immediate and radical reforms to its health care, tax and Social Security systems – as well as military and other discretionary spending cuts.”

He cites earlier calculations by the Congressional Budget Office (CBO) that concluded that the United States would need to increase tax revenue by 12 percentage points of GDP to bring revenue into line with spending commitments. But the CBO calculations assumed that the growth of government programs (including Medicare) would be cut by one-third in the short term and by two-thirds in the long term. This assumption, Prof. Kotlikoff notes, is politically implausible – if not politically impossible.

One way or another, the fiscal gap must be closed. If not, the country’s spending will forever exceed its revenue growth, and no one’s real debt can increase faster than his real income forever.

Prof. Kotlikoff uses “fiscal gap,” not the accumulation of deficits, to define public debt. The fiscal gap is the difference between a government’s projected revenue (expressed in today’s dollar value) and its projected spending (also expressed in today’s dollar value). By this measure, the United States is in worse shape than Greece.

Prof. Kotlikoff is a noted economist. He is a research associate at the U.S. National Bureau of Economic Research. He is a former senior economist with then-president Ronald Reagan’s Council of Economic Advisers. He has served as a consultant with governments around the world. He is the author (or co-author) of 14 books: Jimmy Stewart Is Dead (2010), his most recent book, explains his recommendations for reform.

He says the U.S. cannot end its fiscal crisis by increasing taxes. He opposes further stimulus spending because it will simply increase the debt. But he does suggest reforms that would help – most of which would require a significant withering away of the state. He proposes that the government give every person an annual voucher for health care, provided that the total cost not exceed 10 per cent of GDP. (U.S. health care now consumes 16 per cent of GDP.) He suggests the replacement of all current federal taxes with a single consumption tax of 18 per cent. He calls for government-sponsored personal retirement accounts, with the government making contributions only for the poor, the unemployed and people with disabilities.

Without drastic reform, Prof. Kotlikoff says, the only alternative would be a massive printing of money by the U.S. Treasury – and hyperinflation.

As former president Bill Clinton once prematurely said, the era of big government is over. In the coming years, the U.S. will almost certainly be compelled to deconstruct its welfare state.

Prof. Kotlikoff doesn’t trust government accounting, or government regulation. The official vocabulary (deficit, debt, transfer payment, tax, borrowing), he says, is vulnerable to official manipulation and off-the-books deceit. He calls it “Enron accounting.” He also calls it a lie. Here is an economist who speaks plainly, as the legendary straight-shooting film star Jimmy Stewart did for an earlier generation.

But Prof. Kotlikoff’s economic genre isn’t the Western. It’s the horror story – “and scarier,” one reviewer of his book suggests, than Stephen King.

Tuesday, October 26, 2010

The Silver Price Is Bogus




Big New From the Precious Metal Market Front:
Barry Chilton, Commissioner at the US Commodity Future Trading Commission, one of several financial watch dogs, issued a statement in which he claims that it is clear now that the silver market is being manipulated.
Manipulation is difficult to prove and requires proof of intent. However, Chilton is adamant and is sure the CTFC will take on the perpetrators. It is unclear why he says something like this privately and not on behalf of the CTFC. Big chance he has been warned that, if he comes out, the water in the Hudson is cold and cement shoes heavy After all: his remarks go to the the heart of the Ponzi system. And the system does not like criticism. Bravo, Mr. Chilton.



Statement of Commissioner Bart Chilton
U.S. Commodity Futures Trading Commission
Public Hearing on Anti-Manipulation and Disruptive Trading Practices
Washington, D.C.
Tuesday, October 26, 2010

I take this opportunity to comment on the precious metals markets and in particular the silver markets.

More than two years ago the agency began an investigation into silver markets. I have been urging the agency to say something on the matter for months. The public deserves some answers to their concerns that silver markets are being, and have been, manipulated.

The legal definition of manipulation under the law is a high bar to prove. It is a much different test than what the average person might consider as manipulation. Under existing law, to prove manipulation, the government is required to demonstrate not only specific intent; we also need to prove that as a result of the intent and market control, that activity caused an artificial price -- a point that can certainly be debated by economists.

Attempted manipulation is less difficult to prove -- requiring an intent to manipulate and some overt act in furtherance of that intent. There are also other violations of law that could contort markets and distort prices.

I believe that there have been repeated attempts to influence prices in the silver markets. There have been fraudulent efforts to persuade and deviously control that price. Based on what I have been told by members of the public and reviewed in publicly available documents, I believe violations to the Commodity Exchange Act have taken place in silver markets and that any such violation of the law in this regard should be prosecuted.

In saying this, I am fully aware of the prohibition from divulging trader names or information about their positions I am extremely careful not to violate the law in this, or any, regard. I also cannot pre-judge anything the agency may do with regard to our silver investigation, or any other matter.

The Wall Street Reform and Consumer Protection Act, which I strongly supported, contains new manipulation provisions as well as anti-disruptive trading rules. These new authorities, along with the implementation of thoughtful position limits in metals, will go a long way toward ensuring more efficient and effective metals markets devoid of fraud, abuse, and manipulation.

Thoughtful investigations take time. The CFTC staff has worked extremely hard on the silver investigation. That said, there is a point at which it is our responsibility to say something. Within the law, I have done so. I am hopeful that the agency will speak publicly about the investigation in the very near future and when they do so that it will be in a more granular fashion than I am permitted from doing at this time.

Saturday, October 16, 2010

The Rot Within: Our Culture of Financial Fraud and the Anger of the Honest







Please God, Spare hem As They Knew What They Were Doing.....






The Rot Within: Our Culture of Financial Fraud and the Anger of the Honest

Oftwominds.com; Charles Hugh Smith

Misrepresentation, fraud and gaming the system are all heavily incentivized in the U.S. culture and economy, and honesty is punished. This truth is finally being revealed on a grand scale. The coming implosion of the U.S. economy has been richly earned.

Today I am publishing a commentary by an accountant with decades of experience in high-level global consulting firms and Fortune 50 U.S. corporations. What he has observed is unknown to the vast majority of Americans.

I have documented the poisoning of the nation's culture and economy by a "game the system"/exploitation mentality:

The Coming Collapse of the Real Estate Market

Runaway Feedback Loops, Wealth Concentration and Gaming-The-System

Imagining A Middle Class Does Not Create One

With accountability effectively lost, cheating, lying, misrepresention, embezzlement and fraud, both petty and monumental, have all been incentivized. Thus the "little people" game the welfare/entitlement system and the Financial Elites game the mortgage market, and everyone gamed whatever piece of the housing bubble they could grab.

Where does that leave the honest citizenry? At an extreme disadvantage. Lying, sins of omission, misrepresentation and doing the bidding of evil organizations gets you bonuses and career advancement, while refusing to game the system as instructed gets your fired.

How does that make honest people feel? How about righteously angry?

I'd like to provide some context for this commentary from the Survival+ critique. Here is how I would summarize an integrated understanding of our plight:

1. Humans are selected to seek windfalls and exploit them. I call this windfall exploitation. It is neither good nor bad, it is simply a profoundly advantageous strategy in a hunter-gatherer-wanderer environment.

Individuals can maximize their gain by exploiting windfalls alone, but some windfalls are better exploited by groups. This is the basis of cooperation, which is expressed in both capitalist and socialist systems.

2. The natural resources windfalls have all been exploited. In general, the natural resources are in depletion and there is active competition for them which reduces the windfall.

3. Neoliberal Capitalism developed a solution for this paucity of natural windfalls: the partnership of the Financial Elites and the Central State. The Central State gathered powers of taxation and control which enable it to "enforce" the collection of the national income which can be channeled to its cronies in wealthy (and hence politically powerful) cartels.

The investment banking/mortgage banking industries are the example of this dynamic par excellence. (Please see The Coming Collapse of the Real Estate Market for more.)

4. The last significant windfall available to advanced global Capitalism was the financialization of the global economy. In the U.S., we see this clearly in the financial share of corporate profits; from a pittance in the "real growth" decades of the 1950s and 60s, finance-derived profits came to dominate Corporate America's profits.

5. This financialization effected a net transfer of public and private income streams and wealth from the citizenry and State to the coffers of the financial Elites. As actual productivity and wealth-creation declined, so did wages and incomes when priced in purchasing power.

To offset that decline, people, companies and governments replaced income with debt: they borrowed to fill the gap between their desires/commitments/spending and their net income.

The financial Elites were happy to supply the debt and capture the income streams of servicing that debt. By securitizing those debts and writing derivatives against them, the Elites created a stupendously profitable windfall to exploit. The Central State and its central bank were happy to comply, as they are in partnership with the Elites which enrich and empower them.

6. The net result of this expansion of credit is asset bubbles. When the asset bubbles pop, the debts remain, impoverishing the over-indebted holders of the busted assets.

7. Unfortunately for the Financial Elites, this destruction of assets and debt feeds runaway feedback loops which threaten the entire foundation of their wealth and control.

8. The strategy of both the Financial Elites and the Central State (its willing partner in exploitation of the citizenry) is to conjure up simulacra to replace the truth, which is fatally dangerous to the status quo that is now completely dependent on maintaining a culture of financial untruths.

The order of the day is thus necessarily propaganda, bogus balance sheets, toothless facsimiles of "reform" presented as "real reform," and endless frauds, embezzlements, lies, misrepresentations, omissions, etc., all of which have come to full flower in the credit-housing bubble/mortgage-forclosure debacle.

This is why the Financial Power Elites and the Federal Government are both wedded to lies, half-truths, misrepresentation, omissions, fraud, corruption and the full panoply of propaganda. To tell the truth is to bring down the entire status quo.

Here is our accountant's commentary:

I belong to a large number of finance organizations and sometimes I even assist clients with hiring a finance person. Since I have a lot of experience with finance and accounting, when I am interviewing these people I know when I am getting a BS answer and unlike most BS recruiters I do not steer away from controversy since I am truly looking for the most qualified for my clients and not who is just most marketable to them. After I start drilling down you would be amazed (or maybe you wouldn’t) how many of these CFO’s and Controller types were basically dismissed because they would not cook the books in some manner.

Now maybe I have told you that I was asked to resign from one of the nations largest companies (a company that I worked hard for and saved from bankruptcy and due to my actions had created) in the US because I refused to book a revenue entry for over a million dollars which was unsupported and the CFO (I had been the CFO up until a merger) blew up with me when I asked him to send a memo telling me to record it. Funny, a few years and one acquisition later it melted down as one of the biggest accounting frauds in US history.

My next gig as the CFO for a NYSE company I basically walked in and found what I would consider a $60 million dollar accounting fraud in one day (once again a mark to market issue draining cash flow and sucking the company into a dark hole). Corrected that accounting problem and the company began to prosper but since I thought the board and upper management was so corrupt I left (Chairman of the Audit Committee was found guilty at another large company for back dating options).

The next public company where not only was I the CFO but prior to that a board member, I was basically asked to resign for BS reasons a couple of weeks later after I pointed out what the board was asking me to do was basically wire fraud and of course they backed off quickly and said they would get a legal opinion from our law firm (one of the top 10 in the US) to cover me. In the same meeting our outside legal counsel said he had a problem giving such an opinion and I pointed out that a legal opinion did not keep me from being both civil and criminally liable. It should be noted that this was another company that 2 years before I came in and took the reins as CFO/COO and pulled the company out of black hole of looming bankruptcy and made it profitable in the first time in its history since it went public and then refinanced the company. In summary a year after I left the company had burned through the money I raised and the Board sold the company for nothing.

There is lots of bitterness out there with the straight shooting finance people. Many of them find themselves unemployable. This stretches from banks, Private Equity, Investment Banking, through the large accounting firms (the average partner in the large accounting firms any more is a pathological liar) to senior finance people in organizations. Right before Enron and MCI blew-up, I actually had a BS HR person tell me I was not flexible enough. I wanted to tell this idiot that I knew where flexibility got me and it was an orange jumpsuit. Bankers and Companies only hire the weakest and most pliable senior finance executives they can find.

One other short story. A while back I was at a networking meeting with a large group of CFO and ex-CFO’s. I asked this group how many thought that most CEO’s wanted a weak CFO working for them. Approximately 70% of the attendees raised their hand! You have to remember that the only person who had steady access to the Board is the CFO.

The point, the middle class is becoming torn and frayed and there is real anger out there. The common belief is that only the liars and thieves are moving ahead in this country.

The anger of the honest will soon know no bounds, and the guilt of the complicit will settle like a silent pall over the nation: guilty as charged. Who will raise their hands to plead the guilt we all see and know?

Saturday, October 9, 2010

Ben Bernanke Warns of Looming Economic Crisis








"....if government spending is not curbed...
"

Now what are the chance of fiscal austerity in Alice in Wonderland?












Ben Bernanke Warns of Looming Economic Crisis

Truthout

In a surprisingly candid speech at the annual Rhode Island Public Expenditure Council meeting Monday, Federal Reserve Chair Ben Bernanke warned of a potentially dangerous economic future for the country if government spending is not curbed within a few years.

"It is crucially important that we put US fiscal policy on a sustainable path," Bernanke said. "We should not underestimate these fiscal challenges. Failing to respond to them would endanger our economic future."

If budget deficits continue to rise at their current pace, Bernanke said, higher interest rates could slow formation of businesses, productivity and economic growth, while a large federal debt could hurt the amount of government funds available for future emergencies, from war to natural disasters.

"The threat to our economy is real and growing," Bernanke said.

Bernanke outlined a number of "fiscal rules" for Congress to consider implementing through legislation, including constraints on total government expenditure, deficits or debt. Today, Congress operates under a "pay-as-you-go" (PAYGO ) approach that requires tax cuts and spending increases to be offset within a ten-year budget time span, but may not be strong enough for the current economy. "The key question is whether the traditional PAYGO approach is sufficiently ambitious," Bernanke said. "At its best, PAYGO prevents new tax cuts and mandatory spending increases from making projected budget deficits worse; by construction, PAYGO does not require the Congress to reduce the ever-increasing deficits that are already built into current law."

Countries like Canada, Switzerland, Finland and the Netherlands have all seen marked improvements in their budgets since adopting fiscal rules that cap government spending. According to the International Monetary Fund, approximately 80 countries have implemented similar fiscal rules. "The weight of the evidence suggests that well-designed rules can help promote improved fiscal performance," Bernanke said.

If the nation's economic challenges are not addressed in the near future, Bernanke said, "projections by the CBO (Congressional Budget Office) and others show future budget deficits and debts rising indefinitely and at increasing rates ... unsustainable trajectories of deficits and debts will never actually transpire, because creditors would never be willing to lend to a country in which the fiscal debt relative to the national income is rising without limit."

According to the World Bank's "Finding the Tipping Point - When Sovereign Debt Turns Bad," the level at which a country is no longer viable to receive lending is a 77 percent public debt-to-GDP ratio. "If the debt is above this threshold, each percentage point costs 0.017 percentage points of annual real growth."

Tuesday, October 5, 2010

Ponzi likes easy solutions everybody wants to hear.





In below video of 2002, GW Bush promotes home ownership for everyone. He is just another politician, promising money he does not have, promoting to look the other way in case of legal stuff, preparing the ground work for "moral hazard" and laying the foundation for the biggest depression the world will ever know.











He says:

  1. Down payments are too high: we will subsidize buyers with tax payer money via the new "American Dream Down Payment Fund."
  2. House prices are too high in inner cities: We will give tax cut, courtesy the American tax payer
  3. Fine print on the forms to buy a house makes people nervous: We can change the print!
  4. The goals is 5,5 million more minority home owners
  5. There is a commitment from all big lenders with 440 billion US$ (o,44 Trillion US$)
  6. Freddie Mac will start an initiative to eliminate 25 home ownership barriers
  7. So people with poor credit can get a loan to purchase a house
  8. I am serious about this. This is about empowering people
And no, Republican or Democrat: it will not make a difference.