Category Archives: Economy and Meltdown

Guest Post: America's Bubble Dependent Economy

Via Global Macro Monitor,

Interesting chart (which we marked up) from the JEC of the U.S. Congress illustrating household net worth as a percent personal income.   If that doesn’t look like a head and shoulders formation in the making, nothing does!

The second chart illustrates why the U.S. economy is so dependent on the wealth effect generated by asset bubbles.   It’s stunning to think that average real earnings in the U.S. are almost 11 percent lower than where they were in 1973.

Policymakers’ focus should be on increasing worker productivity through: 1) reforming the country’s education system;  2) unleashing entrepreneurship;  and 3) in the words of ECB chief, Mario Draghi, “doing whatever it takes” to empower small businesses.

This is tough political business, however, so we take the easy way out.   The political pandering increases budget deficits, forcing the Fed to repress interest rates and print money to drive up asset prices.   The boom side of the cycle is sustained longer than most expect because of the reserve currency status of the dollar.  This temporarily generates artificially inflated demand (i.e, fake) through the wealth effect, which eventually collapses when asset markets crash.

Wash, rinse, repeat.

This is not a good long term economic strategy and sustainable path for permanent wealth creation, folks.  It probably won’t change until it is forced upon us and then the adjustment will be more abrupt and disruptive than if policymakers were more pre-emptive.

America needs Mario Monti!

Jan2_Household Net WorthJan2_Real Wages

(click here if charts are not observable)

Fiscal Cliff (Pork) Notes

The ‘deal’ is done and even the evening news seems perplexed by the market’s excited reaction to three-quarters of the nation paying more taxes. Perhaps, as ABC News highlights below, it is the ‘pork’ that stuffed the bill…

The mix of tax perks covering the next year, but with budget implications for the next two years, includes everything from incentives for employers to hire veterans to incentives for employers to invest in mine safety. But it also includes these:

 

  • $430 million for Hollywood through “special expensing rules” to encourage TV and film production in the United States. Producers can expense up to $15 million of costs for their projects.
  • $331 million for railroads by allowing short-line and regional operators to claim a tax credit up to 50 percent of the cost to maintain tracks that they own or lease.
  • $222 million for Puerto Rico and the Virgin Islands through returned excise taxes collected by the federal government on rum produced in the islands and imported to the mainland.
  • $70 million for NASCAR by extending a “7-year cost recovery period for certain motorsports racing track facilities.”
  • $59 million for algae growers through tax credits to encourage production of “cellulosic biofuel” at up to $1.01 per gallon.
  • $4 million for electric motorcycle makers by expanding an existing green-energy tax credit for buyers of plug-in vehicles to include electric motorbikes.

And the not so Cliff Cliff notes from Bloomberg:

Wind farms, motorsports tracks, global banks and other businesses won revived tax breaks in a $75.3 billion package included in a last-minute budget deal Congress passed yesterday.

 

The tax-break extensions, mostly for companies, made it into the bill past Republican demands for spending cuts and Democratic resistance to benefits for businesses. Both parties have complained for years about some of the special-interest provisions.

 

Most of the tax breaks had expired at the end of 2011 and will be extended through 2013. The companies that benefit say the on-again, off-again breaks are important though the uncertainty makes it almost impossible to use them to plan business investments.

 

Although they are lumped together, the miscellaneous tax breaks are very different.

Some are broad, like the credit for corporate research, which is backed by a coalition of technology companies, manufacturers and lawmakers such as Representative Kevin Brady, a Texas Republican, and Senator Max Baucus, the Montana Democrat who is chairman of the Finance Committee. The two-year extension of the research credit would cost the government $14.3 billion in forgone revenue.

 

Some breaks are specialized, like the $11.2 billion, two- year extension of the active financing exception, which lets GE, Caterpillar Inc. (CAT) and Citigroup Inc. (C), among others, defer taxes on financing income they earn outside the U.S. The congressional supporters of this provision include Pat Tiberi, an Ohio Republican, and Richard Neal, a Massachusetts Democrat, both senior members of the House Ways and Means Committee.

 

Others are narrow and often ridiculed by lawmakers. They include $78 million worth of accelerated depreciation for motorsports tracks, $248 million in special expensing rules for films and television programs, and a $222 million provision that directs excise taxes on imported rum to Puerto Rico and the U.S. Virgin Islands.

 

Alex Brill, a former aide to Republicans on the House Ways and Means Committee, said tax breaks that some consider questionable — such as the motorsports benefit backed by International Speedway Corp. (ISCA) and Senator Debbie Stabenow, a Michigan Democrat — are often made temporary as a compromise.

 

Whirlpool Corp. (WHR) benefits from a $650 million tax credit for manufacturing energy-efficient appliances. JPMorgan Chase & Co. (JPM) and other financial institutions are aided by the $1.8 billion extension of the New Markets Tax Credit for investments in low- income areas. That is supported by Representative Jim Gerlach, a Pennsylvania Republican, and Senator Jay Rockefeller, a West Virginia Democrat.

 

Restaurants such as Cracker Barrel Old Country Store Inc. (CBRL) and McDonald’s Corp. (MCD) benefit from the $1.9 billion extension of the Work Opportunity Tax Credit for hiring workers from disadvantaged groups.

 

The bill includes a one-year extension through 2013 of the production tax credit for wind power, at a cost of $12.2 billion. That will save as many as 37,000 jobs in an industry that’s expected to stall this year, the American Wind Energy Association said.

Read more on the 2013 Corporate Recovery Act Obama Tax Cuts here.

(h/t nmewn)

Happy New Year Germany: Greece Needs A New Bailout

When it comes to the main sovereign story of 2011 and 2012, namely the endless bailout of Greece, now in its third iteration, the conventional wisdom is that courtesy of the near elimination of the country’s private sovereign debt and the fact that its official foreign debt held by benevolent taxpayer funded globalist powers (IMF, ECB, EFSF) has been mostly converted into a zero-coupon, perpetual piece of paper, the country is fine. After all it has no debt interest expense to finance, and the only shortfall it has to plug is that created by its primary budget deficit (which as we showed earlier is “improving” on a year over year basis not because the economy is improving, but because the Greek government is simply refusing to pay its bills). So there is nothing more to do but sit back and wait while the economy slowly recovers, the unprecedented internal imbalance with Germany is gradually aligned, are the unemployment rate drops, (while hoping that the population does not die out first) right? Wrong.

What everyone is forgetting is that the heart of the Greek problem is not the Greek sovereign debt, and certainly not the rate of interest, but the fact that Greece’s financial system, i.e. its banks, are utterly insolvent: and with the private banking system no longer creating money by handing out loans to a just as insolvent broader population (and the ECB certainly no longer injecting direct liquidity into the Greek economy) there is little that supports any form of economic growth (the Austrians out there will immediately recognize the problem: if money is not being created, the economy is not “growing”, period). After all there is a reason why of the countless billions in Greek bailouts, of which the majority was used primarily to fund interest and maturity payments to other banks such as Deutsche Bank, the biggest portion that remained on the ground in Greece never made it to the actual people, but served to prop up the Greek banks, some €50 billion.

What was this money used for? Simply said, to plug capitalization shortfalls arising from one of two things: i) a gigantic outflow of deposits from the local banking system, as Greek lost all confidence their money was safe in the local banks, which meant Greek banks had to promptly find the money to pay their depositors lest a countrywide bank run developed which would then result in a Europe-wide financial panic, and ii) the soaring notional amount of non-performing “bad” loans, which remained as placeholders on the bank balance sheets, market at whatever mythical number the local accounts let the banks mark them at, but which generated zero inbound cash flows. Which, incidentally, would mean that deposits were undercollaterialized, and the realization that NPL levels are stratospheric and going higher, would lead to i) and the appropriate dire consequences.

Which brings us to the topic of today’s post.

Moments ago Kathimerini reported that in 2012, the amount of non-performing loans has exploded by a laughable amount, rising some 50% from December 2011, when it was “only” 16% and stood at a gargantuan 24% last month (indicatively, in the US this would mean that some $1.7 trillion in loans was nonperforming). And therein lies the rub, because as Kathiermini prudently notes, the “bad loans come to a considerable 55 billion euros. This means that the sum of NPLs already exceeds the total funds set aside for the recapitalization of the local credit system, which amounts to €50 billion.

Oops.

This means that not only every single euro allotted for the bailout of the Greek banking sector has been used up to plug a gaping NPL shortfall, but already Greece is €5 billion short.

Sure enough, the last thing Kathimerini would want to do is give people the impression that, once again, their deposits are effectively impaired with the soothing proclamation that “there has been a notable improvement in economic conditions that is reflected in the significant slowdown in the rate of creation of new bad loans.

So 16% to 24% is a slow down? Maybe the fact that Greek unemployment is rising at “just” 1% of total each month is also a “notable improvement.”

No, we doubt Kathimerini would be so audacious to proclaim the above chart of Greek unemployment as “notably improving”. But that’s a problem, because the level of NPL, the level of unemployment, and the general state of the economy (whose Q3 GDP imploded by 7.2%, the worst quarterly drop following a 6.7% GDP decline in Q1, and 6.3% in Q2) are closely linked, and one can’t improve without the other. And usually the catalyst the drives an overall bounce in the economy is some endo- or exogenous source of money demand and creation (usually for nations in depression it involves war).

Absent that, there can be no improvement.

Which, following the preceding optimism, is precisely what the Kathimerini author admits: “However, unless the growth of new NPLs is contained, banks may need yet another recapitalization process at the end of 2013, the same sources say.

In other words, dear Germans, the country that you, and everyone else, though is now saved and needs no more bailouts, at least according to the current Finance Minister, not the previous one who now it appears was avoiding paying his taxes like the plague (ah yes, the Greek tax collections “issue” – a fun topic for another day), is already down €5 billion and in need of bailout Number 4.

Expect this news to be sprung on a witless Germany in the coming months, but most likely not before the Merkel reelection. After all the last thing Germany needs to understand is that the hundreds of billions “invested” to preserve the Eurozone have achieved precisely nothing, and the gaping black hole is bigger and blacker than ever before.

But at least the hedge funds who bought worthless Greek bonds at 15 cents on the euro and made three times their money in three month, are happy.

Everyone else, i.e. the Greek people, good luck. For the fourth time.

The 96 Charts That Have To Be Seen To Believed For 2013

In many respects, 2012 was a year of waiting: waiting for a path forward on the European debt crisis; waiting for the results of a polarizing U.S. election; waiting for the Chinese leadership transition; waiting for a resolution to the U.S. fiscal cliff issues; waiting for the Middle East to find peace; waiting for a clear path to global growth; and therefore, waiting to invest additional assets in the markets (or not, as the case may be). In this 2013 Outlook, Michael Cembalest, JPMorgan Asset Management’s Chairman of Market and Investment Strategy, provides a comprehensive summary of the global factors at play, with a tone of optimism grounded in realism. Perhaps just what we need after the surreality of the last two days.

 

The Odyssey. As we head into 2013, the global economy is treading water

 

…with better news in the US and China than in Europe, and with leading indicators pointing to more activity in services than in manufacturing.

 

The cover art is meant to convey the conflict between the world’s well-advertised challenges (the Squid), and its offsetting strengths (the Ship). The ship persevered in 2012, as the usual suspects that make up most portfolios (equities, credit and real estate) generated doubledigit returns despite low economic growth. The bar for 2013 is a bit higher since equity and credit valuations have risen. However, equity valuations are by no means stretched, and still demonstrate skepticism about the future. While 2013 may be volatile for political reasons…

Looking ahead to the spring, debt ceiling and continuing budget resolutions may be even more contentious. What will the sticking points be? There’s not much left to fight about on non-defense discretionary spending, scheduled to hit a 50-year low in 2017. As shown below, outlays on things like energy R&D, education, worker retraining and infrastructure are increasingly crowded out by entitlements.

The positions are clear: Democrats either simply do not believe that entitlement math is unsustainable, or search in vain for sufficient tax hikes to pay for them; while Republicans search for the political cover to scale back social programs and still get elected. Of all the advice given by the country’s founders, perhaps none is more forgotten than the admonitions in George Washington’s farewell address: to cherish public credit, preserve it by using it as little as possible, and to “not ungenerously throw upon posterity the burden which we ourselves ought to bear”.

…a portfolio of risky assets should generate modestly positive returns by the time the year is over. In all, 2013 looks to be another year of markets outperforming what economic growth conditions alone would imply.

It’s not an overstatement to say that we are living through the largest policy experiments of the last 300 years.

 

In the US, Europe, Japan and the UK, governments account for 75% of all borrowing that is taking place, and central banks account for 60% of all lending, both multiples higher than anything we have seen (or read about) before. As a sign of the times, monetary policy was the primary issue in the recent election in Japan; voters gave a decisive victory to the party that campaigned on forcing its central bank to provide more of it. Central banks appear determined to reflate financial assets, hoping for whatever spillover they can get to economic growth.

On the following pages, Michael walks through a graphical depiction of the issues on the front cover; an economic review of the US, Europe and the emerging economies; and a summary of investment and market views. At the end, a look beyond 2013 at two litmus tests for America: entitlements and energy independence.

 

Cembalest – Outlook 2013 the Odyssey

 

Source: JPMorgan

Guest Post: Mother, Should I Trust The Government?

Submitted by Jim Quinn of The Burning Platform blog,

Mother, do you think they’ll drop the bomb?
Mother, do you think they’ll like this song?
Mother, do you think they’ll try to break my balls?
Ooh ah,
Mother, should I build the wall?

Mother, should I run for president?
Mother, should I trust the government?
Mother, will they put me in the firing line?
Ooh ah,
Is it just a waste of time?

Pink Floyd – Mother

The lyrics to Mother had both a literal and figurative meaning for Roger Waters. He was literally describing his overprotective single mother (his father was killed in World War II) building walls to protect him from the outside world. The figurative meaning is Big Mother sending its boys off to war and using fear to control and manipulate the masses. At the time he wrote this song in 1979, the Soviet Union was thought to be at its peak of power and the Berlin Wall represented a boundary between good and evil. Nuclear war was still a looming fear. Waters has always had a dim view of totalitarian states and institutions (English schools). Having seen his Wall Tour performance this past summer at Citizens Bank Park with a diverse crowd of 40,000, ranging in age from senior citizens to teenagers, it seems this song has gained new meaning. He sang a duet with himself from 1980 projected on the Wall and when he sang the lyric, “Mother, should I trust the government?” the entire stadium responded in unison – NO!!! This revealed a truth that is not permitted to be discussed by the corporate mainstream media acting as a mouthpiece for the ruling class. A growing legion of citizens in this country does not trust the government. This is very perceptive on their part.

In part one of this two part series – Hey You – I examined how an invisible government of wealthy, power hungry men have utilized the propaganda techniques of Edward Bernays and lured the American people into a narcissistic, techno-gadget, debt based servitude. Over the last one hundred years they have created a totalitarian state built upon egotism, material goods, and fulfilling our desires through Wall Street peddled debt and mass consumerism. It has been an incredibly effective form of control that has convinced the masses to love their servitude. The ruling oligarchs correctly chose the painless, amusement saturated, soft totalitarianism of Huxley’s Brave New World over the fearful, pain inflicting, surveillance state, house of horrors detailed in Orwell’s 1984.

“A really efficient totalitarian state would be one in which the all-powerful executive of political bosses and their army of managers control a population of slaves who do not have to be coerced, because they love their servitude.” Aldous Huxley – Brave New World

The nefarious establishment of the Federal Reserve in 1913, launch of welfare programs in the 1930s, expansion of the entitlement state in the 1960s, creation of the credit card in 1970, mass media marketing propaganda, and the formation of an empire of debt laid the foundation for a society based on triviality, egotism, irrelevance and mass delusion. The conscious manipulation of the habits and opinions of the masses by an invisible government of powerful men using media propaganda and easy to access consumer credit has reached its mathematical limit. The oligarchs built a society dependent upon exponential growth. This unsustainable prototype began to show signs of strain in the 1990s. The powerful interests have been growing ever more desperate and blatantly obvious in their looting and pillaging of the debt bloated carcass of a country. They used their control of the political system to repeal Glass-Steagall, allowing the Wall Street banking cabal to become Too Big to Control. The oligarch puppets at the Wall Street controlled Federal Reserve did the bidding of their masters by reducing interest rates and expanding the money supply to create two epic bubbles.

The Dot.com bubble was created by Wall Street utilizing hype and misinformation to fleece millions into believing we had entered a new paradigm. The only people who got rich were the Wall Street hucksters, shysters and shills.

When the Dot.com bubble burst, Alan Greenspan came to the rescue, at the urging of Nobel prize winner Paul Krugman, by creating the largest banker made bubble in the history of the world. The combination of excessively low mortgage rates, complete lack of regulatory oversight by the Federal Reserve, control fraud committed by the Wall Street banks, and buying frenzy stirred up by the corporate MSM and NAR, led to the biggest financial collapse since 1929.

The white collared psychopathic criminals on Wall Street reaped billions in profits, paid themselves millions in bonuses, and cost taxpayers trillions when it all blew up in 2008. The ruling elite have added $6 trillion to our national debt and their central banker has added another $2 trillion to our ultimate tab, while providing free money to their Wall Street bank owners. They realize their efforts to restart the exponential growth engine have failed. They gutted our productive manufacturing based economic system by shipping the blue collar jobs overseas to Chinese slave labor facilities, replaced workers with machines, stimulated consumption with unlimited distribution of high interest debt, and allowed conglomerates to drive small business owners out of business with their cheap foreign sourced goods, all in the name of capitalism. The plan worked so well that real wages haven’t risen in 40 years, inflation has destroyed the purchasing power of the middle class, 47.7 million people are dependent on food stamps to survive, and the masses can’t even afford the cheap slave labor produced trinkets anymore. There is too little cash, too few jobs, too much debt, too many takers, too few makers, too many bankers, too much delusion, and too few resources to sustain the unsustainable. We have entered the end stages of a ravenous locust swarm. The fields have been stripped barren.

When the men in smoke filled rooms realized their soft totalitarianism was losing its grip on the oblivious, submissive, egoistical, distracted masses, they began phase two of their effort to retain their wealth, power and control. They began to institute Orwellian measures to strike fear into the populace. Their illusion of control is dissipating and they are resorting to force in order to maintain hegemony. It began with the immediate passage of the Orwellian Patriot Act one month after 9/11. Did the corporate media question how a 363 page all-encompassing expansion of police state power was written in a few weeks after 9/11 and passed by October 26? They did not. The bill was pre-written and ready for instant implementation when the time was right. The Orwellian version of America was launched.

“If the ideology had been a lie, then they are not heroes and gods on earth, but monsters and criminals, and their life has been self-serving and meaningless, without significance and honor. And that is the credibility trap. It is the impulse for the leaders to keep doubling down in the hope of a win, until exhaustion and collapse.” – Jesse       

Obedience to Authority

“Ordinary people, simply doing their jobs, and without any particular hostility on their part, can become agents in a terrible destructive process. Moreover, even when the destructive effects of their work become patently clear and they are asked to carry out actions incompatible with fundamental standards of morality, relatively few people have the resources needed to resist authority.”  – Stanley Milgram – Obediance to Authority

  

Just as Edward Bernays knew the unruly masses could be manipulated by propaganda and molded to believe whatever the small group of intellectually superior men wanted them to believe, conditioning using fear and authoritarian methods have also been perfected by the ruling class. Doctor Stanley Milgram unwittingly provided the oligarchs with confirmation the average citizen could be ordered to do anything by invoking expertise and authority over their subjects. Milgram started his experiments in 1961, shortly after the trial of the World War II criminal Adolph Eichmann had begun. Eichmann’s defense that he was simply following orders when he exterminated millions of Jews roused Milgram’s interest. How could millions of Germans participate and condone such genocide? Milgram’s testing suggested that it could have been that the millions of accomplices were merely following orders, despite violating their deepest moral beliefs.

Writer Kendra Cherry describes the experiment:

The participants in the Milgram experiment were 40 men recruited using newspaper ads. Milgram developed an intimidating shock generator, with shock levels starting at 30 volts and increasing in 15-volt increments all the way up to 450 volts. The many switches were labeled with terms including “slight shock,” “moderate shock” and “danger: severe shock.” The final two switches were labeled simply with an ominous “XXX.”

Each participant took the role of a “teacher” who would then deliver a shock to the “student” every time an incorrect answer was produced. While the participant believed that he was delivering real shocks to the student, the student was actually a confederate in the experiment who was simply pretending to be shocked.

As the experiment progressed, the participant would hear the learner plead to be released or even complain about a heart condition. Once the 300-volt level had been reached, the learner banged on the wall and demanded to be released. Beyond this point, the learner became completely silent and refused to answer any more questions. The experimenter then instructed the participant to treat this silence as an incorrect response and deliver a further shock.

Most participants asked the experimenter whether they should continue. The experimenter issued a series of commands to prod the participant along:

    • “Please continue.”
    • “The experiment requires that you continue.”
    • “It is absolutely essential that you continue.”
    • “You have no other choice, you must go on.”

The level of shock that the participant was willing to deliver was used as the measure of obedience. How far do you think that most participants were willing to go? When Milgram posed this question to a group of Yale University students, it was predicted that no more than 3 out of 100 participants would deliver the maximum shock. In reality, 65% of the participants in Milgram’s study delivered the maximum shocks.

Of the 40 participants in the study, 26 delivered the maximum shocks while 14 stopped before reaching the highest levels. It is important to note that many of the subjects became extremely agitated, distraught and angry at the experimenter. Yet they continued to follow orders all the way to the end. Why did so many of the participants in this experiment perform a seemingly sadistic act on the instruction of an authority figure? According to Milgram, there are a number of situational factors that can explain such high levels of obedience:

    • The physical presence of an authority figure dramatically increased compliance.
    • The fact that the study was sponsored by Yale (a trusted and authoritative academic institution) led many participants to believe that the experiment must be safe.
    • The selection of teacher and learner status seemed random.
    • Participants assumed that the experimenter was a competent expert.
    • The shocks were said to be painful, not dangerous.

The American people have been participants in their very own Milgram experiment being conducted by their government since 9/11. Since the passage of the Patriot Act, the government continues to demand that its citizens increase the voltage in the name of security. Since 2001, the Orwellian measures have included:

  • Warrantless domestic surveillance.
  • The ability to search telephone calls, emails, financial matters especially involving foreign individuals, and medical records for people who are “suspected” of endangering the country.
  • Color coded risk levels designed to keep citizens fearful of non-existent terrorists.
  • Pre-emptive invasion of foreign countries.
  • Committing U.S. forces to war without a declaration of war by Congress as mandated in the U.S. Constitution.
  • Assassination of people on presidential kill lists.
  • Extermination of “suspected” enemies by predator drones.
  • Camera systems monitoring the movements of Americans in cites and streets across the United States.
  • Torture of detainees in camps outside of the United States.
  • The authority to indefinitely detain America citizens without trial.
  • Executive orders giving the President the ability to unilaterally disregard the U.S. Constitution and take control of private industries.
  • Use of drones to monitor the activities of American citizens.
  • Allowing the very bankers that destroyed the worldwide economic system to blackmail the American taxpayers into handing them $700 billion.
  • Not prosecuting one Wall Street criminal after the largest Ponzi control fraud in the history of the world.
  • Cameras and listening devices on public transit and other public locations.
  • Military exercises conducted in U.S. cities in order to condition the masses.
  • Attempts to control and censor the internet through the introduction of the SOPA bill.
  • The use of tragic mass murders by mentally defective young men on psychotropic drugs to disregard the 2nd Amendment and disarm American citizens.
  • TSA thugs molesting little old ladies and young children to desensitize citizens to gestapo like tactics and treat them like criminals.
  • Government partnering with Facebook, Apple and other corporate entities to monitor, censor, and report the activities of citizens to the authorities.
  • The use of public schools to teach children what to think rather than how to think. Thought control is vital to an agenda of keeping the masses fearful and pliable.
  • Government agencies (FBI, ATF) creating terrorist plots, luring young dupes into the plots, providing fake explosives, and then announcing with great fanfare they have foiled a terrorist plot.
  • “See something, Say something” government media campaign designed to make citizens paranoid and fearful.

Just as Milgram pondered how the German people could follow the orders of those in authority to slaughter millions, one must ponder how the American people have allowed those in power to strip us of our Constitutional freedoms and liberties in the name of safety and security. They have conditioned the masses to passively accept their fate by utilizing fear, authoritarian measures, thought control, and propaganda. Human beings never change. They have been driven by emotions throughout history – fear, greed, love and hate. There will always be psychopathic men who seek wealth, power, glory and control. It happened during the decline of the Roman Empire and it is happening today during the decline of the American Empire.

“A shocking crime was committed on the unscrupulous initiative of few individuals, with the blessing of more, and amid the passive acquiescence of all.”Tacitus

Big Brother is Watching You

“Now I will tell you the answer to my question. It is this. The Party seeks power entirely for its own sake. We are not interested in the good of others; we are interested solely in power, pure power. What pure power means you will understand presently. We are different from the oligarchies of the past in that we know what we are doing. All the others, even those who resembled ourselves, were cowards and hypocrites. The German Nazis and the Russian Communists came very close to us in their methods, but they never had the courage to recognize their own motives. They pretended, perhaps they even believed, that they had seized power unwillingly and for a limited time, and that just around the corner there lay a paradise where human beings would be free and equal. We are not like that. We know what no one ever seizes power with the intention of relinquishing it. Power is not a means; it is an end. One does not establish a dictatorship in order to safeguard a revolution; one makes the revolution in order to establish the dictatorship. The object of persecution is persecution. The object of torture is torture. The object of power is power. Now you begin to understand me.”George Orwell – 1984

  

What the average person can’t seem to process through their government public school educated non-critical thinking brains is that there are actually a small group of bankers, politicians, corporate executives, media magnets, and shadowy billionaires who call the shots in this country. They constitute Bernays’ invisible government, run the show, mold the minds, form the opinions, suggest the ideas, and create the reality for the masses because they believe they are intellectually superior. The left/right and Democrat/Republican discord is a planned diversion for the masses. The country has devolved into a corporate fascist warfare/welfare state. We are clearly moving in the direction of Orwell’s state in which government monitors and controls every aspect of human life to the extent that even having a disloyal thought will be against the law. The longer this is allowed to progress the more likely any effort to resist like Winston Smith will be met with brutal measures.

The parallels to Orwell dystopian nightmare state grow by the day. Those in control use technology to bombard Americans with psychological inducements designed to overwhelm the mind’s capability for autonomous thought. In Orwell’s 1984 the giant telescreen in every citizen’s room blasts a constant stream of propaganda designed to make the failures and shortcomings of the Party appear to be triumphant successes. In Obama’s 2013 the 72 inch Chinese made HDTVs in every McMansion blasts a constant stream of propaganda designed to make the zombie-like occupants buy trinkets and gadgets with a thin piece of plastic and makes the failures in Iraq, Afghanistan, Egypt and Libya appear to be triumphant successes. Our corporate/fascist party uses their control over the media message to indoctrinate and control the public mind through propaganda and repetitive messaging. In Orwell’s world, the Party undermines family structure by inducting children into an organization called the Junior Spies, which brainwashes and encourages them to spy on their parents and report any instance of disloyalty to the Party. In our world children are indoctrinated in government run public schools that fill their brains with government manufactured history, social engineering claptrap and what they should think, rather than how to think. The Orwellian Department of Homeland Security (Thought Police) instructs them to report anyone they think is suspicious with their “See something, Say something” campaign. Children are “encouraged” to re-educate their parents about green energy and global warming. Corporations fund schools to advertise their products within the hallways of learning. The outputs of this corporate/fascist partnership are non-critical thinking, functionally illiterate, willfully ignorant Proles who obey the Party and consume products as instructed.

In Orwell’s 1984 the Party keeps the population in a general state of exhaustion by making them work long grueling hours at government run agencies. This was designed to keep them from thinking or having the energy to resist. About one in six workers work for the government in the United States, with a substantial portion of private jobs dependent upon government largesse. The true distinction in our society can be seen in the income levels over decades of our own Inner Party, Outer Party and Proles.

income percentile

The government educated masses were purposely not taught about the impact of Federal Reserve created inflation on their lives. Even using the government manipulated CPI, the real household incomes of the masses have barely risen in the last forty five years. Using a true measure of inflation, the real household incomes of the average family have fallen. In addition, prior to the 1980s those household incomes were predominantly provided with one parent working and the other raising the children. Today the vast majority of households require both parents to work in order to just tread water. Child rearing was delegated to the state and parents have been kept in a constant state of exhaustion, like hamsters in a cage on a spinning wheel. Household income was replaced by credit card debt, mortgage debt, auto debt, and student loan debt peddled by our very own Inner Party (Wall Street bankers). The Inner Party members have seen their incomes soar over the last four decades. This was not an accident.

As those at the top accumulate an ever increasing percentage of the national wealth, while consolidating their power through ever more sophisticated use of technology for surveillance, warfare, and financial theft; urban decay and blight spreads across the land. Totalitarian regimes are ferociously effective at augmenting their own power and wretchedly incompetent at providing for their citizens. Just as the London in Orwell’s dystopian world was a decrepit, rundown city in which buildings were crumbling, amenities such as elevators never worked, and basics such as electricity and plumbing were exceedingly undependable, the urban killing fields that are home to tens of millions in the United States are dangerous, disintegrating, hallowed out carcasses of once thriving metropolises. Hunger, poverty, crumbling infrastructure, and violence are the earmarks of society for the Proles. True unemployment exceeds 20%, with youth and minority unemployment exceeding 40%. There are 47.7 million Americans subsisting on food stamps (program administered by JP Morgan), accounting for 20% of all the households in the country.

The incompetency and mismanagement by our totalitarian governing body is evident for all to see, as bridges collapse, water mains burst, gas lines explode, mass transit shuts down and structures deteriorate due to decades of neglect. The priorities of those in power are clearly visible as they spend trillions on weapons used to attack sovereign countries, distribute billions in “aid” to foreign dictators, provide trillions to the criminal banking cabal on Wall Street, and devote billions to technology designed to monitor and control their citizens. Our entire rotting, fetid, bloated, corrupt society has about reached its limits. It is only a matter of time until it implodes like the former Soviet Union.

Diminishing returns of ever-increasing complexity addressed with ever-more layers of complexity, larded with systematic lying based on mystifying, opaque jargon, sanctioned statistical misreporting, felonious cronyism, and scuttling of the rule of law. In short, the markets have been taken over in effect by a criminal racketeering syndicate. In doing this, so much resilience has been removed from these market structures that they are riddled with rot, like a mansion infested with carpenter ants.” – Jim Kunstler

We Have Always Been at War with Eastasia

Hush now baby, baby, don’t you cry.
Mamma’s gonna make all of your nightmares come true,
Mamma’s gonna put all of her fears into you,
Mamma’s gonna keep you right here, under her wing.

  She won’t let you fly, but she might let you sing,
Mamma’s gonna keep baby cozy and warm.
Oooh babe, Oooh babe, Oooh babe,
Of course Mamma’s gonna help build the wall.

Pink Floyd – Mother

The concepts of Doublethink and Newspeak are alive and well in our increasingly Orwellian society. The massive long-term campaign of large-scale psychological manipulation, described in detail by Edward Bernays in 1928, has succeeded in breaking down the capacity for independent thought by the masses. Those in control of the media have molded the minds of millions to believe anything the government tells them, even while possessing information that runs counter to what they are being told. On the eve of the invasion of Iraq, the government and their media propaganda mouthpieces had convinced 69% of the American public that Saddam Hussein was involved in the 9/11 attacks, even though there wasn’t a shred of evidence to support that claim. The storyline of Iraqi soldiers murdering Kuwaiti babies in their incubators during the first Gulf War was another example of propaganda designed to manipulate public opinion. By controlling the media message, those in power control the present and can manipulate the past. The government controls the curriculum in public schools and writes our history to conform to whatever storyline that supports their agenda. With 20% of the adult population in this country functionally illiterate, the formulation of ideas or critical thought is virtually impossible for these people. This is exactly what is desired by the ruling class.

The outrageous example of Doublethink in Orwell’s 1984 occurs during the Hate Week rally.  The Party shifts its diplomatic allegiance, so the nation it has been at war with suddenly becomes its ally (Eurasia), and its former ally becomes its new enemy (Eastasia). When the Party speaker suddenly changes the nation he refers to as an enemy in the middle of his speech, the crowd accepts his words immediately, and is ashamed to find that it has made the wrong signs for the event. The American people have been programmed to accept the same logic from our leaders. Saddam Hussein was our ally when he was fighting our enemy Iran, who had been our ally ever since we had overthrown their democratically elected leader in the 1950s. Then he became our enemy for using weapons of mass destruction, provided to him by the U.S., on his own people and threatening our control over Middle Eastern oil. Osama bin Laden was our ally when he was fighting our mortal enemy, the Soviet Union. Then he became our mortal enemy because we refused to leave Saudi Arabia after the first Gulf War. Ghadafi was our sworn enemy after blowing up an airliner filled with Americans, until he helped us after 9/11 and became an ally. Then he became an enemy again for fighting to maintain his dictatorship. Mubarak was an ally for decades as we provided him billions in military hardware so he could brutally maintain control. Then he became an enemy when we decided he was no longer of use. Do you get the picture?

Do you see any parallels between Orwell’s Ministry of Plenty (oversees economic shortages); the Ministry of Peace (wages war); the Ministry of Truth (conducts propaganda and historical revisionism); and the Ministry of Love (the center of the Party’s operations of torture and punishment) and our Department of Agriculture, Department of Defense, Department of Education, and Department of Homeland Security?  

“In our age there is no such thing as ‘keeping out of politics.’ All issues are political issues, and politics itself is a mass of lies, evasions, folly, hatred and schizophrenia. The very concept of objective truth is fading out of the world. Lies will pass into history.”George Orwell

Should I Trust the Government?

So the oligarchs have utilized all the plays in Huxley’s playbook and are half way through Orwell’s playbook, but they are rapidly losing their credibility as a small minority of critical thinking people is using the internet to spread the truth and form phyles with like-minded citizens with similar values based on liberty and freedom. The political system is broken beyond repair as $2 billion was spent during this last “election” to maintain the status quo. The looting and pillaging of the middle class continues, while the poor are kept controlled, sedated and enslaved by entitlements, debt, drugs and prisons. The financial system is succumbing to the mountains of debt that have been accumulated trying to keep the game going. In the last ten years worldwide total credit market debt, on balance sheets, sovereign obligations, corporate debt, household debt – has grown from $80 trillion to just over $200 trillion. U.S. unfunded liabilities committed to by the politician parasites that pass for our representatives surpass $200 trillion. There are $1.2 quadrillion of interconnected derivatives outstanding in the world today, 20 times the size of the worldwide economy. The accumulation of worldwide debt, aging developed country populations, depletion of resources, perpetual war, financial fraud and rampant corruption are going to lead to a collapse of epic proportions. It may not happen in 2013, but it will happen within the next five years. Jesse explains why the status quo will never relinquish their power, illegally acquired wealth and control without a fight:

“A credibility trap is a condition wherein the financial, political and informational functions of a society have been compromised by corruption and fraud, so that the leadership cannot effectively reform, or even honestly address, the problems of that system without impairing and implicating, at least incidentally, a broad swath of the power structure, including them. The status quo tolerates the corruption and the fraud because they have profited at least indirectly from it, and would like to continue to do so. Even the impulse to reform within the power structure is susceptible to various forms of soft blackmail and coercion by the system that maintains and rewards.

And so a failed policy and its support system become self-sustaining, long after it is seen by objective observers to have failed. In its failure it is counterproductive, and an impediment to recovery in the real economy. Admitting failure is not an option for the thought leaders who receive their power from that system.  The continuity of the structural hierarchy must therefore be maintained at all costs, even to the point of becoming a painfully obvious hypocrisy.”

The people of this country must regain a sense of responsibility for their lives and the lives of future generations. Enough people need to perceive they are being manipulated, controlled and used by the thought leaders and awaken from their narcissistic materialistic debt financed lives. Our culture has failed. The animosity and anger in the country is beginning to bubble over. The masses are beginning to realize they have been screwed. They haven’t figured out who to blame because they are still trapped in the Republican/Democrat false dogma. There is one Party putting on a show, as displayed this week with the fiscal cliff farce, as the government controlled media proclaimed victory because the status quo was maintained, nothing was cut, and $4 trillion was added to the National Debt. More people need to question and challenge the authorities. We must cast aside our willful ignorance of facts and accept the consequences of decades of bad decisions and delusions of grandeur. More government is not the answer. We must break free of the conditioning and mind control used to make us love our servitude and trust those in power.

Kyle Bass recently revealed a fact about our government leaders:

“They’re not going to tell you that a collapse is coming. You’re going to have to see it for yourself. The government’s never going to tell you that it’s going to happen. These guys are never going to tell you the truth, because they can’t tell you the truth. Their job is to promote confidence, not to tell you the truth.”

We need more people to respond to Roger Waters’ question, “Mother, should I trust the government?” with this answer before we can begin to tear down the wall that seemed too high.

“During times of universal deceit, telling the truth becomes a revolutionary act.”George Orwell