July 6, 2012

THE PUNCHLINE (AS IN POW!)

I know I will get comments from readers who have worked 40 years and paid into SS and now want it back. I tell those folks in advance that I'm sorry, but they will have to accept a cut in benefits. It will happen it about ten-years. Make your plans accordingly. If you don’t like these conclusions, write a letter to Bernanke. It’s well past time that the true consequences of his monetary policies are understood. He’s not just breaking the backs of small savers; he’s killing Social Security.

Read more: http://brucekrasting.blogspot.com/2012/07/bernanke-my-goal-is-to-destroy-social.html#ixzz1znVUJLns

July 6, 2012

Ben Bernanke Is Bankrupting The Social Security Trust Fund

http://www.businessinsider.com/ben-bernanke-is-bankrupting-the-social-security-trust-fund-2012-7

In June of each year the Social Security Trust Fund (SSTF) reinvests a significant portion of its investment portfolio in newly issued Special Issue Treasury Securities. The interest rates on these bonds is set by a formula that was established in 1960. The formula was designed to insulate the SSTF from transitory changes in interest rates by averaging market based bond yields over a three-year period.

Bernanke’s Fed has set interest rates at zero the past four years. In 2012 the 1960's formula has finally caught up with the SSTF. It got murdered on this year's rollover.

The following is from the SSA (link). It shows what has matured this year and what new investments have been made. I will be breaking down sections of this report, so don’t get eye strain looking at this:



Consider the bonds that matured in 2012:



$135 billion of old bonds matured this year. This money was rolled over into new bonds with a yield of only 1.375%. The average yield on the maturing securities was 5.64%. The drop in yield on the new securities lowers SSA's income by $5.7B annually. Over the fifteen year term of the investments, that comes to a lumpy $86 billion. It gets worse. Bernanke has pledged that he will keep interest at zero for a minimum of another two years. The formula used to set interest rates for SSA looks back over the prior three years. Therefore, SSA will be stuck with a terrible return on its investments until at least 2017.

I anticipate that the formula will result in still lower investment returns for the next five years, but I’ll conservatively use the rates set this year to evaluate the consequences to SSA. The following looks at what is maturing at SSA:



chart

A total of $543 billion of securities with an average yield of 5.6% is coming due in the existing ZIRP window. The reduction in income from the 4.2% drop in yield translates to a nifty $23 billion a year, for fifteen years ($350b). It gets worse.

WE WUZ HAD, LADIES AND GENTS. WE JUST DIDN'T KNOW HOW...UNTIL NOW.

July 5, 2012

Life In Juxtopia

http://www.npr.org/blogs/monkeysee/2012/07/05/156291994/life-in-juxtopia?ft=1&f=1001

For five full days — following Friday night's nasty wind-and-rain flashstorm — you were without electricity in the Washington suburbs. Dodging felled trees and fallen power wires, you made daily forays to nearby cafes and coffee shops, establishments that did have power. There you could recharge the batteries in your laptop and smartphone and take care of various electronic chores, such as banking, sending gifts, ordering necessities and sorting through email. But mostly you stayed home, reading books and actual newspapers, just like in the Olden Days.

Still there were so many weird moments, occasions when you had one foot in the pre-Edisonian 19th century and the other foot in the hyper-electrified 21st century. You couldn't help but notice the bizarre juxtapositions that occurred in this, what should you call it, juxtopia. One afternoon, for instance, you sat in the sweltering heat, drinking iceless water, and watched a movie — on a DVD in your battery-powered computer. By coincidence, you chose The Book of Eli, starring Denzel Washington as Eli. You knew nothing about it beforehand, but as you watched Eli traipse westward through a post-apocalyptic world — a dirty, dusty landscape caused by some natural disaster and subsequent war — you felt a connection to his world. Here was a crumbling brick facade that had once been the storefront of an upscale clothier; there was a hollowed out nuclear cooling tower, now turned into an impromptu campsite. As in your world, there was no electricity. And fresh water was more valuable than just about anything. Along the way, Eli barters for battery power to recharge his digital music player. Other characters, meanwhile, listen to their music on a wind-up Victrola.

You identified with the film's constant see-sawing between future and past. On your smartphone, you read messages from people kvetching about their lack of electricity – but they still have operative smartphones. You opened your windows to catch the breezes, but instead of silence, you heard the constant roaring of your neighbors' gas-powered generators — like airplanes constantly revving their engines on the tarmac. A friend told you of someone with a generator who had to choose between getting on the Internet and keeping the refrigerator running. The person chose the Internet. You might have made the same choice. You wrote this line by candlelight; you filed it by iPhone.

During one of your cafe outings, you read that sci-fi futurist (and Freddie Mac historian) Newt Gingrich compared the derecho-wracked regions to the way the world will be in the wake of a catastrophic electromagnetic pulse event. You resolved to set aside emergency stores of clean water. To be sure, there were tragic deaths caused by the storm and the heat. But many of the so-called problems brought about by the midsummer loss of electricity were merely first-world annoyances. For instance, you heard people complaining about the paucity of pastries at Starbucks. But you couldn't help but notice what works and what doesn't when the power goes off. That could come in handy in case Gingrich and others are right and you wind up living in just such a juxtopia — somewhere between always-on and never-on — for an even longer period of time.

July 5, 2012

Can Americans Escape the Deception? Paul Craig Roberts

http://www.paulcraigroberts.org/2012/07/04/can-americans-escape-deception/

...Not a single one of these (Fourth of July) speeches will contain one word of truth. No speaker will lament the death of the US Constitution or urge his audience to action to restore the only document that protects their liberty. No speaker will acknowledge that in the 21st century the Bush/Obama Regime, with the complicity of the Department of Justice, federal courts, Congress, presstitute media, law schools, bar associations, and an insouciant public have murdered the Constitution in the name of the “war on terror.”

As in medieval times, American citizens can be thrown into dungeons and never accounted for. No evidence or charges need be presented to a court. No trial is required, and no conviction.

As in tyrannies, US citizens can be executed at the sole discretion of the despot in the Oval Office, who sits there drawing up lists of people to be murdered.

Protestors exercising their constitutionally guaranteed rights to freedom of speech and freedom of association are attacked by armed police, beaten, tasered, tear-gassed, pepper sprayed, and arrested.

Whistleblowers who report the government’s crimes are prosecuted despite the statute that protects them. (US soldier Bradley Manning, who allegedly gave Wikileaks the documents revealing US war crimes, including the video of US soldiers in a helicopter gunship enjoying themselves murdering civilians walking along the street as if the soldiers were playing a video game, has been arrested and held in conditions of torture while the government tries to invent a case against him. According to the US Military Code, US soldiers are required to make war crimes known. However, the law on the books provided no protection to Bradley Manning, and conservative Republicans whom I know are foaming at the mouth for Manning to be executed for letting out the truth. The truth, what is mere truth compared to the “exceptionalism of the great american people”? America has carte blanche to do whatever it wishes to the unexceptional peoples. Manning deserves to die, they say, because he took the side of the oppressed and not the side of the amerikan oppressors.)

After the Swedish prosecutorial office dropped the case against Wikileaks’ Julian Assange, ruling that the charges of rape had no foundation, another prosecutor, many believe at the urging of the US government, demanded Assange be extradited from England in order to be questioned. Normally, extradition only applies to those who have been charged with a crime and for whom a warrant has been issued, which is most certainly not the case with Assange. But, of course, if Washington wants Assange, Washington will be sure every law is broken or bent until they get him. The Swedish puppet will do the exceptional country’s will and be paid well for its service.

Peace activists in several states had their homes invaded by FBI, computers and personal records taken, and a grand jury was convened in an attempt to indict them for supporting terrorism by their protests of Washington’s illegal wars, wars that are war crimes under the Nuremberg standard established by the US government itself.

None of this will be mentioned in July 4 patriotic speeches. The inebriated masses will be wrapped in the flag and return home full of the hubris that despises lesser foreigners, such as Muslims, Arabs, Chinese, and the French. And no dignitary will mention that those that “we are killing over there” are mainly women, children, village elders, and aid workers. The US troops seem to specialize in soft targets like weddings, funerals, kids’ soccer games, farm houses, and schools. Recently Washington reduced the “collateral damage” count by declaring every murdered male of military age to have been a Taliban fighter or terrorist. Obviously, Washington has no way of knowing whether they were or not, but Washington’s declaration is intended as a green light to murder Afghan males of military age.

Currently, Washington has wars underway, or occupations, or is violating the sovereignty of countries with drones and/or troops in seven Muslim countries, and is arming rebels in Syria. All of this is being done without the constitutionally-required authorization by Congress, allegedly the people’s representatives. What a joke!

In short, in “freedom and democracy” america, the people have no voice and no rights and no representatives.

Yet, this huge deficit of democracy and liberty will pass unmentioned by July 4th orators.

THE REASON WHY FOLLOWS: SEE LINK

July 5, 2012

Obamacare as Regressive Taxation By Christopher Petrella

http://www.nationofchange.org/obamacare-regressive-taxation-1341327776

Last Thursday the Supreme Court upheld President Obama’s signature domestic policy –the Affordable Health Care Act –by arguing that its individual mandate falls under Congress’s jurisdiction to levy taxes. Chief Justice Roberts wrote in his majority opinion that the Affordable Care Act’s mandate to purchase health insurance may “reasonably be characterized as a tax [and because] the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.” Meanwhile, the Obama administration has long asserted that the mandate—the bill’s fulcrum, really—is necessary to ensure that other provisions of the law function smoothly. That is, supporters view the mandate as essential to market based reform; without it, they argue, many healthy people would remain without insurance coverage, premiums for individuals and employers would accelerate, and insurance markets could become unstable. When the uninsured who can afford premiums do become ill, unaffordable health care costs are often absorbed by the rest of the population.

Unfortunately, the penalty-tax that the individual mandate imposes will soon constitute one of the most regressive taxes in the United States. (The terms “penalty” and “tax” here are effectively fungible. Whatever the nomenclature, it’s the functional equivalent of a tax.) The penalty-tax structure authorized by this law inherently disadvantages low income earners who, in effect, pay proportionally more on fewer dollars. Taxes imposed here are uncannily akin to the regression rates of sales and social security taxes. Take a look at the scatter chart below:



The penalty-tax will be phased in incrementally from 2014 to 2016. The minimum penalty-tax in 2016 will be $695 per person and up to 300 percent of that per family. After 2016, these amounts will automatically increase at the rate of inflation. (This constitutes yet another reason the minimum wage must immediately be indexed to inflation.) The $695 per-person penalty-tax only applies to those making between $9,500 and ~$37,000 per year. Individuals making less than ~$9,500 are exempted and those earning more than ~$37,000 will pay a penalty-tax calculated by the following formula: 2.5 percent of any household income above the level at which one is required to file a tax return. That level is currently set at $9,500 per person and $19,000 per couple. The penalty on any income above this threshold is 2.5 percent. The IRS will collect the “fine” here, a fact that no doubt proves this is a tax, not a penalty. (The IRS isn’t in the business of levying “penalties,” right?)

Although the Affordable Health Care Act creates a number of exemptions for low-income earners making less than $9,500/year, members of Native American tribes, certain religious groups currently exempt from Social Security taxes, and hardship cases determined by the department of health and human services, the Congressional Budget Office (CBO) nonetheless estimates that about 26 million Americans will still be left uncovered in 2016. The Affordable Health Care Act not only constructs a captive consumer market redounding unilaterally to the benefit private insurers, but it also manages surreptitiously to levy a disproportionately burdensome tax on individuals making $9500-$37,000 annually. Whereas the politicians lie, the numbers here certainly do not.

July 3, 2012

A WEE Independence Celebration July 4, 2012

The US Markets are closed, the coals are hot (even if they aren't lit yet) so let's make a party of this day that lives in history...for a few more years, at least. I'm not predicting the demise of the USA, but frankly, when George "W" Bush managed to first steal the election, then show that the US government was incapable of protecting either its people or their wealth (through the 9/11 attack and the financial scandals) the continuing days of US democracy were numbered.

Major US accounting scandals (courtesy of Wikipedia):

ENRON (2001)
Adelphia (2002)
AOL (2002)
Bristol-Myers Squibb (2002)
CMS Energy (2002)
Duke Energy (2002)
Dynegy (2002)
El Paso Corporation (2002)
Freddie Mac (2002)
Global Crossing (2002)
Halliburton (2002)
Homestore.com (2002 )
ImClone Systems (2002)
Kmart (2002)
Merck & Co. (2002)
Merrill Lynch (2002)
Mirant (2002)
Nicor (2002)
Peregrine Systems (2002)
Qwest Communications (2002)
Reliant Energy (2002)
Sunbeam (2002)
Tyco International (2002)
WorldCom (2002)
South Corporation (2003)
Chiquita Brands International (2004)
AIG (2004)
Bernard L. Madoff Investment Securities LLC (2008)

and of course,

Lehman Bros (2010)

Then there are the scandals that DIDN'T just involve accounting irregularities...The most depressing thought is that a lot of the schemes that blew up in 2002 probably got their start under Clinton....it's a sytemic problem.

Well, we are here to document the birth and potential death of a nation through its scandals. Have at it!

July 2, 2012

10 Reasons Countries Fall Apart

http://www.foreignpolicy.com/articles/2012/06/18/10_reasons_countries_fall_apart?page=full


States don't fail overnight. The seeds of of their destruction are sown deep within their political institutions...I'M SURE SOME DO, THEY JUST DON'T LAST LONG ENOUGH TO COUNT...Some countries fail spectacularly, with a total collapse of all state institutions, as in Afghanistan after the Soviet withdrawal and the hanging of President Mohammad Najibullah from a lamppost, or during the decade-long civil war in Sierra Leone, where the government ceased to exist altogether. Most countries that fall apart, however, do so not with a bang but with a whimper. They fail not in an explosion of war and violence but by being utterly unable to take advantage of their society's huge potential for growth, condemning their citizens to a lifetime of poverty. This type of slow, grinding failure leaves many countries in sub-Saharan Africa, Asia, and Latin America with living standards far, far below those in the West....AND THEN, THERE ARE COUNTRIES LIKE OURS, RAPIDLY APPROACHING THOSE SAME CONDITIONS...

What's tragic is that this failure is by design. These states collapse because they are ruled by what we call "extractive" economic institutions, which destroy incentives, discourage innovation, and sap the talent of their citizens by creating a tilted playing field and robbing them of opportunities. These institutions are not in place by mistake but on purpose. They're there for the benefit of elites who gain much from the extraction -- whether in the form of valuable minerals, forced labor, or protected monopolies -- at the expense of society. Of course, such elites benefit from rigged political institutions too, wielding their power to tilt the system for their benefit. But states built on exploitation inevitably fail, taking an entire corrupt system down with them and often leading to immense suffering. Each year the Failed States Index charts the tragic stats of state failure. Here's our guide to 10 ways it happens:

1. North Korea: Lack of property rights

2. Uzbekistan: Forced labor

3. South Africa: A tilted playing field

4. Egypt: The big men get greedy

5. Austria and Russia: Elites block new technologies

6. Somalia: No law and order

7. Colombia: A weak central government

8. Peru: Bad public services

9. Bolivia: Political exploitation

10. Sierra Leone: Fighting over the spoils


11. USA: ALL OF THE ABOVE, PLUS A SLEEPING CITIZENRY