Financial Terrorism

When I worry about financial terrorism, I worry about 'legal' manipulation organized by those with supercomputer-managed trading platforms, proprietary software, 'dark pools' of liquidity and insider crony capitalism access. The US speculative markets have never seen a day when they weren't manipulated.

It didn't require 'Islamists' to shatter the monetary systems or create sovereign debt defaults in places like Russia or Argentina or Iceland or Dubai or Mexico in recent history. Nations are targeted and harvested by organizations capable of amassing the gigantic leverage necessary to move and break markets.

I don't know exactly what 'al Qaeda' is ( it seems to have grown out of the CIA's womb ), but I know that al Qaeda can't spark a run on a currency as large as America's. You need 100's of billions to play on that level, and you also need markets that will take your action. If there's a real run on the dollar, it will come from inside the network of high level finance that is already manipulating our markets every day. al Qaeda could at best piggyback on it.

The dollar is in fact built to be destroyed, like all fiat monetary systems, but the power to kill it lies in the hands of those who created it.

Financial Terrorism

>>"It would have taken very little to begin the crisis of trust that froze the markets."

But the origins of the crisis of trust that froze the market for bundled mortgages has been identified- it was a 100% legitimate distrust of the contents of those bundles. The sewage rose to the surface and the stench was inescapable. The credit markets froze up in 2008 because all the risk equations were haywire because of the massive underlying fraud propping them up.

Hypothetically, 'Osama bin Laden' could release a tape stating that the US Fed was holding trillions in toxic loans on its books to protect 'too big to fail' banks and OBL could point out that the Fed was buying back 80% of our own treasury issues in a mad effort to keep interest rates down, and hypothetically, that could start a panic, but only because it would all be true.

Our mirage economy of fictional values backed by phantom collateral is perfectly capable of exploding all on its own without any provocation from al Qaeda. I think it's worth considering the possibility that the actual architects of this ponzi scheme are plotting to pull the plug on it, and they're trotting out Emmanuel bin Laden Goldstein to serve as a scapegoat for a crash that they either can't prevent or intend to exploit.

OTC Derivatives

I'm fully in support of not just regulating OTC derivatives but outlawing most of them entirely, but I don't think a Presidential executive order is the way to do it. These contracts are negotiated outside the exchanges, and I'm not even sure that the President has constitutional authority to sever or freeze contracts made by two private parties. It sounds too abrupt and too dictatorial, like changing the rules mid-game.The threat of a potential executive order would be like a sword hanging over the necks of those writing these contracts.

I don't have sympathy for these gamblers, but if the objective is to dismantle these time bombs of risk, then it should be done with a series of orderly measures. Issuing an executive order would be like pulling the emergency brake in a car going 100mph.

The details of these exotics are not subject to much disclosure currently- before the President could shut this market down, he would first have to see what what was in it. Since the communications related to these contracts would certainly be international ( and encrypted to an extraordinary degree), to shut this market down would first necessitate turning the full weight of the US surveillance/wiretapping apparatus against those writing them. What other tools of discovery does the government have?

al Qaeda And Finance

http://www.huffingtonpost.com/linda-r-monk-jd/did-al-qaeda-trigger-the_b_441825.html

"If legislation continues to prove difficult, the president could issue a temporary freeze on derivatives by executive order. "

How would a US president issue a freeze that would shut down a global derivatives market? These contracts connect parties that lie both inside and outside any jurisdiction he would have. If the President did want to create a worldwide financial panic, an attempt to halt trading in futures and options markets through executive order would probably set one off.

Derivatives

http://www.huffingtonpost.com/linda-r-monk-jd/did-al-qaeda-trigger-the_b_441825.html

The biggest spikes on American and United puts were on 9/6 and 9/7. They really don't belong in the category of 'sophisticated trades', either. They were the most basic of options.

It also makes little sense to interpret these options as something that al Qaeda would have purchased. Basic common sense tells you that huge spikes on airline puts would trigger alarms at every intelligence agency monitoring the markets. They should have ( emphasis on 'should have' ) triggered heightened security at all airports. If al Qaeda was trying to pull off a sneak attack, why would anyone in al Qaeda be foolish enough to send a loud telegraphed warning to the target by loading up on airline put options?

Howard Zinn

I've read complaints elsewhere about the term 'revisionist historian' used in several Zinn obituaries- why do some people flinch when they read that description of Zinn? It should be worn like a badge of honor. Would they rather see him described as an 'establishment historian'?

All history is subject to revision from the moment the dust settles ( or it should be ). Why would anyone even bother tackling history if they didn't intend to revise it/rewrite it in some small or large way? If you aren't a revisionist, you're a copier machine.

From an interview-

Scott Teresi: "What do you say to those who might argue that someone like Howard Zinn is simply throwing a wrench into solid American history with his particular brand of scholarship? That he’s really just trying to rewrite history to reflect a liberal agenda?"

Howard Zinn: " They’re absolutely right. [Laughter] I’m trying to rewrite history to reflect the point of view of those people who have been left out."

Borrowing Costs

>>"More of our bonds are purchased at home now than were before the collapse."

Because people fled the imploding equities markets. They were willing to accept even no yield on 3 month treasuries just to have any place where there was less risk. Having the Federal Reserve sop up all the leftovers from the treasury auctions cannot last forever, and because it can't last forever, it is impossible to make spending projections based on current interest rates. We are monetizing our debt like fiends and it will brew up a storm of exorbitant borrowing costs.

Our borrowing costs will be much higher by 2012, and by 2015 certainly. If I turn out to be wrong, I'll come back here and say so.

If Obama is serious about helping the middle class, he will unwind all the globalization policies that put it on the path to ruin. I don't see that happening.

Anything he does that does not employ protectionism will fail. Anything he does that does not favor purely American industries and American workers to the exclusion of all outside predators will fail. We were suckered into globalization by anti-middle class and anti-working class interests, and it was a collaborative effort by both corporate centrist Democrats and corporate centrist Republicans, two gloves on the financial fist of Wall Street.

We're A Funny Country

The US economy does seem a likely candidate to be torched for the insurance money, so picturing flames seems appropriate. I'm optimistic about the days after, too- a crash as spectacular as our impending crash has got to send a warning as loud as siren to those who follow after us, and teach many valuable lessons. Or at least give them a good laugh. I mean, it is comical when you think about it:

America, incredibly rich in resources, no enemies on our northern and southern borders ( after we beat down Mexico ), and yet somehow, we spend the whole last century embroiled in huge and small wars all over the globe, we give away our monetary system to a private corporation, we give away the lifeblood of our economy, manufacturing, to Asia, and we choose to live off trillions in foreign credit as if we can do it forever.

( And oh yeah- we elected both the son and the grandson of a Nazi financier to the Presidency. )

Yeah, we're a funny country. I hope those watching around the world learn something from our wild ride.

The Path

A path to a new society would probably have to follow a course similar to the last time Americans created a new society, back in 1776. Except now, the monarchy has satellite surveillance, pain rays, bio weapons, and their very best tool: mass media conditioning. So the odds are a little different than they were in 1776.

In 2010, on one side you have a largely brainwashed and drugged out mass of beaten-down corporate drones and wage slaves with severely rusty basic survival skills, and on the other side, you have Big Brother armed to nine sets of teeth with futuristic weapons capable of vaporizing every breathing creature from ocean to ocean in about an afternoon.

US On Monday, Malaysia On Friday

Labor exists in a fixed location. The more that capital is allowed to flow across borders, the greater the disadvantage to labor. Capital can hunt around the world for workers. It can be in the US on Monday and in Malaysia on Friday. Can a laborer do that? Clearly, globalization is not designed to raise wages internationally- it's designed to do the opposite, and it's working spectacularly well.

 Why would globalist financial predators ever promote globalization if they expected it to increase their labor costs? That would go against their entire greedy exploitative nature.

Get Off

We need to break out of the mindset that we need to recover from a market crash. We should ignore the markets. They ride on the backs of a healthy economy- a healthy economy doesn't ride on their success.

Healthy markets don't crash. Phony markets full of fraud and manipulation and media hype tend to crash, though, and when they do, it's a sign that things are out of wack. The stock market we had in March-April of 2009 was probably the most accurately priced market of the past eight years. Pumping up the DOW by intravenously feeding six banks and brokerages may fool some people into thinking that a recovery has begun, but it doesn't fool anyone who knows how we got to this point.

  There are industries that have planned well and developed their market shares through playing by the rules. If we we were going to add more government borrowing to the economy at all, we should have fed the healthy and let the weak starve. Instead, we fed the weak and the crooks and the cheaters and the papershuffling deadweights of the fantasy economy. Damn shame.

Paradigm Shift

http://www.huffingtonpost.com/robert-reich/why-obama-is-finally-taki_b_432841.html

As a nation, we're closer to a much needed paradigm shift than we've been in a long while- probably since 1929-1933. People have escaped both the compromised right and the compromised left in droves, and they're circling the same enemy. This is not a bad thing for the two party system to be on its knees. They're both stale and worn out, and they've both steadily evolved into parties that control the masses rather than control the corporate state.

Yes, the corporate rules are all we've ever known. Oceania is all we've ever known. If some cheap cosmetic shuffling of the deck by Obama succeeds in bottling up all this righteous contempt for Washington and Wall Street, then we're settling for more gestures in place of real change.

Cross Off The Money Candidates- Or Is That Too Difficult?

http://www.huffingtonpost.com/2010/01/21/supreme-court-rolls-back_n_431227.html

Yes, it's stupid to have ever granted corporations the rights of people, but the power is still in your hands, voters. If you don't like corporations heavily funding candidates, here's what you do, every chance you get to vote:

Cross off the candidate with the most corporate financing, and then cross off the candidate with the second-most corporate financing. In 99.9% of the races, you'll be crossing off the Democrat and the Republican, but that's what you have to do.

Corporations fund candidates because it pays them dividends. If the voters don't make it a futile exercise for the corporations to buy politicians, then your democracy is dead meat. Remember, the corporations are not only buying the politicians- they're buying YOU. When you give your vote to any candidate who raked in thousands or millions in corporate money, you just made a sale, too- of yourself, right to the status quo.

Aren't you landing in their cash registers enough all year long? Take a day off every November.

Repeaters

http://www.huffingtonpost.com/janine-r-wedel/shadow-elite-do-you-know_b_430998.html>>" ... with the shadow elite, we don't know how and when we're being maneuvered. "

The when? It's easier to begin with the basic assumption that we're being maneuvered at all times, if there's more than about a $1.35 on the table riding on public opinion being swayed.

The how? Just as you explained. The mass media throws 'experts' with undisclosed ties to the shadow elite in our faces for as long as it takes to bend the zeitgeist and quell skepticism. The goal is to turn the general public into mockingbird 'repeaters'. Once people hear enough 'repeaters', they sense that the tide is rolling in, popular opinion is converging, and, unless they are immune to peer pressure, they fall in line.

That's how scams like 'Iraq WMD's' succeed. Crowd the media with 'experts', grow repeaters, mix in fear and patriotism, and then the shadow elite just have to step out of the way and let nature take its course.

Eight Years Of Clinton Disappear From Democratic History Of The Current Economy

http://www.huffingtonpost.com/mitchell-bard/democracy-worked-in-massa_b_429093.html >>"...even though it took eight years of Republican rule to create these problems"

A lot of people who have examined the current economy have singled out the repeal of Glass-Steagall as one of the largest mistakes in the history of financial deregulation; the repeal of Glass-Steagall was signed into law by Bill Clinton in 1999, and it was pushed through by the Bob Rubin crowd,
( including several folks who found new positions in the Obama administration. )

A lot of people also blame globalization and unfair trade agreements for hollowing out the US economy; NAFTA was signed into law by Bill Clinton in 1993, the US joined the WTO in 1995.

Let's not forget the many mistakes made in the oversight of the GSE's by great Republicans like Barney Frank and Chris Dodd also.

And let's not forget all that war spending and homeland security spending that the Democrats signed off on over and over throughout the Bush presidency. That didn't help the deficits any either.

This economy is the result of decades of looting organized by two parties equally loyal to Wall Street and multinational corporations and both under the control of an unregulated central bank.

Juggling The Averages

The DOW and NASDAQ are easily manipulated, so they're used like hypnotists' watches, swung in front of the public to lull them into misguided complacency and optimism. Since the trading is more heavily driven by insiders than ever ( now that many more small investors have been gutted and ejected to the curb after 2007-2009 ), it will likely require another coordinated attack by insiders to plunge the averages. They're the ones keeping the juggling balls in the air, so it's their call.

If they can't lure enough sheep back into the markets for the next shearing, then it's hardly worth it to them to build more pump and dump bubbles, because they'll just be picking their own pockets. The averages may be left to hum along in a narrow range for quite a while, to serve as a 'stage curtain' of positive economic news that conceals the terrible employment numbers and the federal debt tsunami and the huge fissures appearing in so many state budgets.

Supervision

Without question, government intervention into the credit markets gave rise to distorted risk assessments. How many of these misrepresentations of debt quality resulted from stupidity and how many from intent is another story, but certainly, the government pushing and then backstopping these mortgages created an environment that was fertile territory for a mortgage bundle and derivative con game.

So many people continue to insist that government deregulation caused the credit crisis, when that's false. These securities were all regulated. For those who bought them, the role of the government
-sponsored enterprises was a big part of what made them seem safe.

This was not Wall Street evading government supervision, this was Wall Street buying partners in government who then looked the other way.

Rust On The Chain

 If only one CDO went bust, then the banks wouldn't have extorted TARP money to cover the leftovers from their fraud and crime spree.

The best place to leave those assets was right where they were, on the banks' books, but the sellout politicians chose to buy the rotting remains of their con game.

The banks are the easiest piece of the economic equation to replace if they fail, so their claim to be this giant domino is false, in my opinion. All they do is repackage debt they invent out of thin air  with a computer that adds zeros. They produce nothing. They are a net drain on the economy.

Banks aren't a critical link in the economic chain, they're the rust on the chain.

The Myth Of The Profitless FED

The Fed is run for profit. If the banking cartel was operating the monetary system pro bono, I hardly think that Presidents like Jackson, Lincoln, Garfield and Kennedy would have faced such adversity when they challenged the various private central banks.

The banking cartel is not guarding their monopoly over legal tender because they run it as a charity to the taxpayers.

The Rope

We're not close to done, despite what Larry Summers might be telling us.

The normal early indicators of inflation like gold and oil are reacting to the expanding money supply, but there is still much collapsing debt and deleveraging pulling in the opposite direction, creating the impression of stability in the present time. Overall, deflation is still stronger, because the rising unemployment and stagnant wages are slowing the velocity of money, which these retail numbers show.

Either we are headed for a long, long period of Japan-style decay or the rope that connects this tug of war between inflation and deflation will snap, causing rapid inflation or rapid deflation. I would expect rapid inflation. ( The 'rope' is the dollar+our ability to raise new credit ).

Derivatives In Las Vegas

Imagine how much more Vegas could make if they introduced credit default swaps into their casinos, and allowed a whole other second set of gamblers to bet on the chances that the original group of gamblers at the gaming tables would bust out.

The derivatives 'innovations' of Wall St. make the world of Vegas finance look pedestrian and grounded.

Crocodile

>>"Household debt as a percentage of GDP was "just" 46% back in 1983--that was the last time the unemployment rate was 10%. Today household debt is 96% of GDP."

You explained very well why low interest rates in the US will not ignite the economy for anyone but speculators. American households are already pinned down with large debt service commitments.

The path out is narrow and long and slow. Americans need to pay down debt, not take on more. Any recovery is going to be paid for out of individual savings that are then invested in local businesses, and not out of new borrowing. This remedy relies on Americans to be patient and sensible, which they are not known to be.

If you've already mortgaged one of your legs to the debt collectors, you don't make your other leg the collateral for a second line of credit. You better limp along on your one good leg for as long as it take to shake that debt crocodile off your other leg.

Fed 'Profits'?

The Fed does not reduce the deficit. All new money entering the system is born from debt. The Federal Reserve Note is their product, and the FRN is a debt instrument. The reason why the Fed's 'profits' grew is because it generated huge quantities of new debt to bail out banks, etc. Who backs that new debt? You and I. We are the collateral behind the Treasury bonds auctioned to create new money.

When the Fed's returns to the treasury grow, that is actually a signal that America's borrowing is increasing, and the gross public debt is growing. You only have to look at the data to see that.

The United States had a horrible fiscal year. We are in red ink hyperdrive. This news story is not good news. These are not really the Fed's true profits, either, but that's another story. These returns to the treasury are more like a franchise fee, paid by a private corporation for the exclusive monopoly they hold to create new legal tender.

Can't Be Both A Liability And An Asset

The treasury bonds in the social security fund are IOU's that the government has written to itself. They only exist as an accounting trick.

How can a bond be both a liability AND an asset, to the same party? The answer is: it can't.

The government is counting these bonds as assets, but they can't have any value unless they are redeemed. Who has to redeem them? Answer: the US government. Who has to pay off on them? The same US government. They only exist as a lien on future wealth. In their present state, they're like powdered milk. Unless future taxpayers and wage earners add water to them, they can't be distributed as benefits.

Quoting Don Luskin, who writes for SmartMoney: "The existence of those Treasury bonds doesn't really affect the government's wherewithal to pay benefits one way or the other... it would make no difference whatsoever if the Trust Fund simply surrendered them, or for that matter tore them up and threw them in the ocean."

Proper

Congress does not need to set interest rates, it only needs to produce money if the market requests it. If Congress took back its power to originate money, the market would set rates. If there was greater demand for fresh liquidity, then private lenders would pay a higher interest rate to obtain new money, and then they would add their mark-up. If the system was topped off, then private lenders would have fewer customers requesting loans, and that would cause them to seek less money from government. Interest rates would then decline, in response to the falling demand for money.

In a proper, constitutional monetary system, the government never pays to obtain money. The government originates all legal tender, like a wholesaler. Private lenders then fill the role of retailing that new money to the general public. Competition between private lenders would keep a lid on interest rates, although the government would still need to set ceilings on what private lenders could charge, in case banks tried to price fix amongst themselves and set some rates artificially high.

It is the Fed's ridiculous struggle to make the general economy react to the quantity of money that ruins all chance of sustainable growth. The current system has the equation backwards. The size of the money supply and the price paid to rent that money will react to demand from the general economy.

Whip That Donkey

The US government is technically insolvent today, because it relies on new loans to cover every fiscal year. Whether or not those treasury bonds are converted into benefits depends on two factors:

How much can the government extract from future wage earners?

How much credit can it obtain, and at what price?

The government has to whip a tired donkey with one hand and go begging to China with the other. The success of those two endeavors decides the future of Social Security.

Re Fi

In the real world, someone can't sell one bond to two different parties. That's what the government has done. They have taken taxes, declared that they are holding a bond in return for those taxes, but then loaned those taxes right back out to themselves- in one door and out the door. The bond's current value is zero. The government has already violated the sanctity of those bonds by returning their purchase price to current retirees and to the general funds.

In the mortgage analogy, the government would extend the life of the system by stretching the same lump sum of benefits over a longer series of installments, just like a homeowner would when faced by near term costs he could not meet. In this case, the retirees are the creditors- if they do not renegotiate with the debtor ( future wage earners ), the debtor may default and miss payments.

Tax Cuts A Loan??

"So those billions to the rich were a loan"

How do you figure? Do you have a signed contract calling those tax cuts a loan? What if the rich people who took those tax cuts move all their fortunes off shore out of the hands of US tax collectors? What if they leave the country entirely? How do you plan to force them to pay all these tax cuts back with interest?

I'll let you in on a secret- the rich are experts at reducing their tax burden. If it was so easy to recover previous tax cuts from today's rich, we wouldn't have these deficits.

Counterfeits

"Now they can sell those bonds in the open market - which is what should be allowed for the Social Security Trust fund bonds"

Social Security trust fund bonds cannot be sold in the open market. They have no value in their present state.

 The open market does not want them, because their future value has already been promised to future retirees ( even though the money required for that redemption has not been taxed yet ). The purchase price has already been redistributed to current retirees.

You can't take ONE bond and promise to redeem it in full to two parties. Those bonds could only enter the open market as counterfeits.

Empty Gas Can

"One calls a US Government bond, sold around the world every day, a worthless IOU. It is a worthless IOU only if the full faith and credit of the US is somehow good for bonds issued to China but worthless for bonds issued to the Social Security Trust Fund."

The bonds held in the social security trust fund are in a distinct category, and those particular bonds cannot be sold around the world in their present state because they have already been depleted. Their purchase price has already been redistributed to current retirees and to general funds. They only represent a lien on future wealth in their present state- they are, truly, IOU's, and not containers of savings. They are not identical in status to the bonds held by our foreign creditors. They are loans the government has written to itself.

It's another fractional reserve scam. They have cloned the bonds, put the real value into the hands of current retirees, and put a facsimile in the trust fund.

To put it simply, they're empty gasoline cans. They say 'Five Gallons' on the side, but they're empty. The gasoline is in the tanks of present retirees, all five gallons of it. The government is pointing at those gas cans and telling those approaching retirees, "Look, you have gas waiting for you!", but no- those cans will not be filled until future workers are tapped to pay for future benefits.

Pilings Continue To Rot

Congressional foolishness rotted out the pilings of Social Security. They took those annual surpluses and poured them into holes all around the world fighting wars for the wrong reasons against the wrong countries.

Q: Where's the Social Security surplus?

A: In the pockets of defense contractors.

Looks like the people who planned the best for retirement are those who bought stocks in oil and military industries.

Trust Fund Of Emptiness

Responding to: http://www.huffingtonpost.com/dean-baker/does-congress-want-to-def_b_419243.html

The treasury bonds in the social security fund are IOU's that the government has written to itself. They only exist as an accounting trick.

How can a bond be both a liability AND an asset, to the same party? The answer is: it can't.

The government is counting these bonds as assets, but they can't have any value unless they are redeemed. Who has to redeem them? Answer: the US government. Who has to pay off on them? The same US government. They only exist as a lien on future wealth. In their present state, they're like powdered milk. Unless future taxpayers and wage earners add water to them, they can't be distributed as benefits.

Quoting Don Luskin, who writes for SmartMoney: "The existence of those Treasury bonds doesn't really affect the government's wherewithal to pay benefits one way or the other... it would make no difference whatsoever if the Trust Fund simply surrendered them, or for that matter tore them up and threw them in the ocean."

Is The Tea Party Movement To Blame For Everything? Democrats Insist 'Yes'

http://www.huffingtonpost.com/les-leopold/geithnergate-follow-the-m_b_418203.html

Good column, but I'm having trouble following this line of reasoning:

Leopold: "If the surging Tea Party really believed in its anti-bailout rhetoric, they'd be screaming for a windfall profits tax. But instead they so hate government and taxes that they'd rather let the biggest bankers in the world take our money and laugh all the way to the bank"

Wait a minute... 'they'd rather let the biggest bankers in the world take our money'?? How does the Tea Party movement 'let the bankers' do anything?

Why does the Tea Party movement deserve any blame if Obama and the Democratic majority in Congress fail to implement a windfall profits tax? The Tea Party isn't in power, Obama is. The ball is entirely in the court of the majority party..

Disassembly

China is the jewel of the City of London banker-funded communist empire. It represents the vanguard of corporate/state totalitarianism, and I see no reason to believe that the globalists will back a different horse. What country can fill China's shoes? The globalists don't knock out the champ unless they have a successor ready.

Countries don't 'crash' under the globalist system. They are targeted, penetrated, and harvested, but significant power center countries never spin out of control independently. For example, the Soviet Union did not crash. It completed its usefulness as what it was, was then targeted, penetrated, and harvested, and then reassembled and dedicated to a new role. China has already passed through the primary disassembly phase.

Gallows Of Globalization

Alarm bells should have been sounding from the Democratic party leadership the first year this country transitioned from an annual export surplus to an annual import surplus, but for the past three decades, protectionism was a dirty word that you never heard from the leaders of either bought-and-paid-for major party. The Democrats marched labor to the gallows and hung them from the myth of globalization.

Perhaps there will be equilibrium between the US and its trading partners again someday - but that day will arrive when the destruction of the dollar's buying power starves our appetite for imports and when there is equilibrium between the wages earned inside America and those earned in the countries that have captured our manufacturing capacity.

Alliance

"The Tea Party also has a very clear message - the problem is big government, big business, and corrupt politicians. Sure, when you push on their program, it's full of contradictions, like how to control big business without a government that can match Wall Street's strength."

A Big Government is not necessary to control Big Business. The reason why the Federal Government has grown and grown and grown no matter which corporate party is in control is because the biggest campaign contributors are hiring politicians who give them Big Government. Big Government pays off for Big Business. It polices markets in favor of the heavyweights, conduits contracts and corporate welfare to them, and subsidizes the overseas expansion of the multinationals.

Until the Left comes to grips with the fact that the financial elite and the big government have prospered because of their alliance and not because they are adversaries, the Left is not going to produce any mass movements of their own, other than superficial 'rock star' mass movements like the Obama campaign ( which was obviously a Big Business construct at the time, and even more obviously so in hindsight ).

Clinging To Fantasy Finance

The so-called 'crisis' of 2008 ( which I think was largely engineered ) was when we should have called Wall Street's bluff. They were crying 'The sky is falling, the sky is falling, save us or we'll take you all down with us!', and we should have ignored them. The public did try and send this message to Congress. Calls and e-mails to politicians were 10-1 against the bailout, but then too many of the reps who voted against TARP on the first try caved in.

2008 was a window of opportunity to redress 95 years of unconstitutional money and corrupt crony capitalism finance, but the government completely squandered it. If Wall Street genuinely was on their knees, we should have kicked them right out the door, Federal Reserve included. Sure, they would have retaliated against the insolent serfs, but I do believe that if we kept our heads about us during the storm, we would have re-established citizen power over our monetary system eventually. Clinging to fantasy finance like we have no other option will be the death of this country.

Average American's Stake In The Bailout

"Will someone please explain to me what exactly would have happened to the average American if those huge thieving banks had gone under?"

It's hard to define the category of 'average American', but I'll try and work with it.

If the FDIC fulfilled its mission and protected depositors, no one who had savings on the commercial side of those banks would have been wiped out.

If the 'average American' had mutual funds or 401K's that were loaded with banking stocks and financial stocks, he would have lost money near term.

If the 'average American' bought banking or financial shares directly, he would have lost more, depending on how many of the banks were allowed to fail and how many were merged into other institutions. There is a risk involved in investing. The bailout was geared to protect the shareholders of the banks and insulate them from the consequences of the bank's fraudulent mortgage con and derivatives plays, and I don't think 'shareholder danger' warrants government rescue.

Were the shares of some of the largest banks allowed to go belly up, the markets would have reacted horribly, and international capital would have fled the country. The banking cartel would have been furious if they failed to extort the taxpayer bailout, and they would have thrown a fit of pique that would have thrown the markets into turmoil. Everything that is rigged can be un-rigged. They hold the levers.

.

Debtonation II

...those much loathed and much hated Bail-outs taking with them the [...] Mortgages, of tens of thousands of Americans.

No one holding a mortgage would have cared if it was washed away by the collapse of the bank holding the paper. The bailouts DID protect mortgages- but for the creditors, not for the debtors

Debtonation

"The US Banks were loaned money (indeed, most accepted it reluctantly), and the major banks have now repaid it and the US government made a profit".

Interesting. 'made a profit'? So... if it's possible for the private lenders to borrow from the treasury and then return more money later ( even during a recession ), why isn't the US government originating the credit supply at all times? Obviously, if there is a potential profit to be made from issuing credit to private lenders, the government should jealously guard its power to issue money, and use the profits to pay the costs of government.

Why are we allowing the Federal Reserve to occupy this privileged role? Clearly, if there is profit to be made from originating the credit supply, it is not being returned to the government by the Fed. The government is in a pit of red ink.

No IF

"If the fund was left alone for it's intended use instead of constantly raided by Congress and other agencies, it would remain solvent indefinitely."

There is no 'if'. There is no fund. There is a box of Treasuries, which are being counted as assets even though they are obviously government liabilities, not assets. You're counting on money entering the benefit system which has been diverted out of the benefit system for decades. Where are you going to make the spending cuts so you can dedicate all the social security taxes to SS?

I can also guarantee you that population growth HAS been calculated into the predictions of Medicare and SS insolvency. As far as the increase in the size of the workforce that you're depending on, just have a look at this:

http://www.huffingtonpost.com/2010/01/02/the-lost-decade-zero-net_n_409294.html

The headline is 'The Lost Decade: Zero Net Job Creation From 2000-2009'.

The percent change in payroll employment for this entire past decade?

ZERO.

The Bulge

I'm afraid that the funding crisis facing both Social Security and Medicare is very real, no matter who supplies news to the Washington Post. The problem has three dimensions:

A huge bulge of baby boomers are becoming eligible for benefits

A huge bulge of baby boomers are leaving their peak earning years, which takes their contributions out of the cash flow

Interest charges on all our debt are compounding fast, and since we are now adding new borrowing to pay old interest charges ( failing to pare down the principal at all ), that is an irreversible trend.

We have a tidal wave of retirees exiting the workforce and entering a world where the ground beneath them is supplied by the contributions of much lower paid workers, thanks to the destruction of globalization. The prescription drug bill added new promises to Medicare that don't seem deliverable, given our fiscal outlook.

IOU

>>"If our government would leave the fund alone and only use it for it's intended purpose then there is no way the fund could ever become insolvent"

What is in this fund you mention? To my understanding, the Social Security trust fund is a myth. It's full of IOU's. The government has already committed Social Security taxes to current spending and has for decades, so the fund has run dry already. Everything that comes in the front door goes right out the back door, immediately. The fund has not been replenished.

>>"there is no way the fund could ever become insolvent unless more than 50% of the working population was out of work and not contributing."

Your math is all wrong. The idea that only 50% of the population needs to be employed in order to cover promised benefits is wrong. Even if 100% of the population was employed and paying taxes, there is not enough cash flow to fund military, social security, medicare, interest on the debt, and everything else.

Even if Americans had their entire incomes seized in taxes, the government would still need to auction more Treasuries ( add debt ) to cover current spending and promised benefits.

Bone Dry

The fund is bone dry today. You're basing your argument on the idea that these current Social Security taxes can simply be redirected into the retirees' checks and everything will be fine and dandy. Money can't be spent twice in two different places at the same time. All the SS taxes coming in have already been committed to other parts of the budget. They can't be reallocated without causing a shortfall elsewhere.

Even a total cut of all military will not solve this problem. If defense spending was zero ( an impossibility ), the US would still need to add new borrowing to cover the gap between taxes and promised benefits. You could add another 50 million low paid service workers to the population and their social security taxes would not close this gap.

Cleaning Out The Markets

It appears to be a misunderstanding of our current budget that is causing some people to make impossible projections about future budgets.

Other things people should think about:

When boomers retiree, they are going to stop making as many contributions to their stock market investments, since those are based on salaries. That cuts into the buy money supporting the market.

If government benefits can't be delivered to these people as promised, they will be forced to cash out of the markets faster than they expected, to keep up their standard of living. More price support for the market leaves. This will negatively impact the markets in a big way, and that will in turn impact pension funds negatively. This will rebound right back against the boomers' own pension funds.

The probability that the boomers' retirement will also generate a long slump in the stock markets is good, in my opinion.

Ledger

Cooper: "The bailout has cost U. S. taxpayers and the Federal Reserve over 2 trillion (out of a theoretical maximum of over 23 trillion in grants, capital injections, loans, and guarantees comprising all the programs devised to deal with the crisis)."

The US taxpayers and the Federal Reserve are on opposite sides of the ledger. The money that the US government borrowed is a liability on the books of the taxpayer but counts as an asset on the books of the private lenders who own the Federal Reserve.

The TARP and other spending are loans that create revenue streams. These streams transfer interest payments from citizens to those who purchased Treasuries auctioned by the Fed. Many of the purchasers of these bonds and notes are among the owners of the banking consortium known as the Federal Reserve. It is a lucrative business for the Fed to broker loans between the US and private lenders, because the community of private lenders holds all the shares in the Fed, and these shareholders are in business partnerships with hedge funds and foreign central banks and other large buyers of US Treasuries.

If these trillions actually were liabilities for the Fed, they would have never been loaned into existence. They were loaned into existence because they create income for lenders and add to the debt service of taxpayers.

Shark Food

The DOW and NASDAQ are not good barometers of the overall health of the economy. They actually measure pools of capital that are absent from the real economy, involved in speculation rather than moving the gears of supply and demand.

The reasons why the DJIA and NASD are placed front and center of every mass media business report released for the consumption of laymen are obvious:

They can be and are manipulated, so they can be used to put a happy face on an economy with systemic rot ( or, like last year, they can be used to panic people into handing trillions over to the banks when they plunge )..

They entice people into the markets. Look how much money the brokerage industry spends on ads- the focus on the averages is like free advertising for them, because they sell the tickets to get into the action. When every business report dwells on their isolated world of speculative frenzy, the general public is conditioned to want in. It looks exciting to them. It makes them feel like losers if they stay on the sidelines. That lures in new money, which the sharks love.

Locomotive

The financial industry thrives off the exaggerated emphasis the press gives to the market averages, because it conditions the public to believe that Wall Street is the locomotive. The public is the locomotive. Wall Street is the club car, being propelled under the power of others.

Wall Street would suffer instant death if the public exiled them from the economy. They are not self-supporting and they have few job skills ( if you don't count gambling and charging a markup on any transaction they can get their hands on ). On the other hand, if Wall Street abandoned the public, the public would rapidly dust themselves off and rebuild a genuine economy, because they would have lost nothing- they'd still have themselves, the land, the real estate and the tools.

Economies existed for centuries without speculative markets. If they were to disappear again, new less costly and less socially destructive sources of money and credit would evolve quickly ( the 'new' money would hopefully be a return to an older style of money that pre-dates debt backed fiat paper ), and people would wonder why we ever supported Wall St. for as long as we did..

Planning

Any economy, whether on a personal scale or on a national scale, is a combination of planned events and events beyond your control. You plan how to obtain income and you plan how to spend income and you acquire assets on a schedule. It's all very conscious and planned out, whether you are an individual or a nation. At least it should be. We, as individuals and as a nation, have botched much of this simple equation.

The interaction between individuals in an economy should not be planned out to a great degree. It should exist inside a set of fair laws and regulations, but beyond that, economic interactions should be on circumstances mutually agreeable to all participants, without government intervention.

What has warped our abilities to plan our economic direction has been the steady encroachment of debt and credit into our lives. By allowing people to 'have now, pay over time' we have predictably created a nation where people choose 'have now, pay later' over 'work today, buy tomorrow', because the first path is easier. Now, as a nation, we're a soft, bloated, debt-ridden international beggar. Very embarrassing. I'm glad our Founding Fathers can't see us.

Big Government Business

It's the responsibility of individual citizens to turn down employment with capitalists who abuse the system and to reject their goods and services. It always starts with us. No matter what the government does, good or bad, if we won't give our labor or money to bad capitalists, they will fall.

Depending on government to restrain the capitalists is risky, as we've seen. Big Business is very comfortable with our Big Government, because they own it.

Big Government is an essential conduit of contracts to them, rigs markets in their favor, subsidizes their overseas expansions, and protects their foreign investments with our military.

Big Government absorbs many costs of business that would ordinarily fall on business. Big Government enables the flat tax of the Federal Reserve- government funds operations on borrowed money, creating a uniform depreciation of the currency ( a flat tax ), rather than increasing the tax burden on corporate profits.

Big Government does not scare Big Business. Big Business created Big Government with their campaign contributions. Big Government provides another power structure to be used against the people, and also serves as scapegoat when Big Business creates a designed economic contraction.

Whose Assets?

Good column http://www.huffingtonpost.com/charlie-cooper/stimulus-schmimulus----we_b_408445.html, but I don't agree with this:

Cooper: "The bailout has cost U. S. taxpayers and the Federal Reserve over 2 trillion (out of a theoretical maximum of over 23 trillion in grants, capital injections, loans, and guarantees comprising all the programs devised to deal with the crisis)."

The US taxpayers and the Federal Reserve are on opposite sides of the ledger. The money that the US government borrowed is a liability on the books of the taxpayer but counts as an asset on the books of the private lenders who own the Federal Reserve.

The TARP and other spending are loans that create revenue streams. These streams transfer interest payments from citizens to those who purchased Treasuries auctioned by the Fed. Many of the purchasers of these bonds and notes are among the owners of the banking consortium known as the Federal Reserve. It is a lucrative business for the Fed to broker loans between the US and private lenders, because the community of private lenders holds all the shares in the Fed, and these shareholders are in business partnerships with hedge funds and foreign central banks and other large buyers of US Treasuries.

If these trillions actually were liabilities for the Fed, they would have never been loaned into existence. They were loaned into existence because they create income for lenders and add to the debt service of taxpayers.