Category Archives: Economy and Meltdown

Newtown Shooter Had Asperger Syndrome, And Some US Gun Facts

Update: The focus now shifts to the mother, the first casualty of her son’s murderous rampage, who was a “big, big gun fan” as the NYT explains, and who went target shooting with her children, one of whom had Asperger’s.

From the NYT:

She was “a big, big gun fan” who went target shooting with her children, according to friends. She enjoyed craft beers, jazz and landscaping. She was generous to strangers, but also high-strung, as if she were holding herself together.

 

Nancy Lanza was the first victim in a massacre carried out on Friday by her son Adam Lanza, 20, who shot her dead with a gun apparently drawn from her own collection, then drove her car to Sandy Hook Elementary School, where he killed 26 people, 20 of them small children, officials said.

 

At craft beer tastings on Tuesday evenings, he recalled, she liked to talk about her gun collection.

 

“She had several different guns,” he said. “I don’t know how many. She would go target shooting with her kids.”

 

Law enforcement officials said they believed that the guns were acquired lawfully and registered.

 

* * *

 

She was “a big, big gun fan,” he added on his Web site.

Read on here

* * *

As we reported last night, buried inside the NYT biopic of Newtown shooter Adam Lanza was arguably one of the most important missing pieces in the story, at least so far, which could provide clues into partially explaining yesterday’s tragic loss of young life, namely that the 20 year old man suffered from Asperger Syndrome, a high-functioning form of autism (two conditions which are being merged in the upcoming update of the Diagnostic and Statistical Manual (DSM-5) manual of mental disorders), which has been traditionally associated with social communication difficulties, including flat affect, and one which in some clinical studies has been shown to have a causal link to violence. In other words, in addition to the surge in the debate over national gun control and access limitations (ignoring that the perpetrator of the biggest school mass murder in US history – the Bath School disaster – used openly purchased dynamite and no guns, also ignoring that in the US there are roughly 300 million firearms), perhaps there should also be a broad discussion as to the risks of social misadoption of children with autism and other social and behavioral disorders.

From CBS/AP:

He was an honors student who lived in a prosperous neighborhood with his mother, a well-liked woman who enjoyed hosting dice games and decorating the house for the holidays.

 

Now Adam Lanza is suspected of killing his mother and then gunning down more than two dozen people, 20 of them children, at a Connecticut grade school before taking his own life.

 

The 20-year-old may have suffered from a personality disorder, law enforcement officials said.

 

The New York Times reported Saturday morning that several people told the newspaper that Lanza had Asperger’s syndrome, a high-functioning form of autism.

 

The Times reported Lanza did not have a Facebook page and did not pose for a high school yearbook picture.

 

He was described as socially awkward and was known in high school as “intelligent, but nervous and fidgety, spitting his words out, as if having to speak up were painful.”

 

Investigators were trying to learn as much as possible about Lanza and questioned his older brother, who is not believed to have any involvement in the rampage.

 

Lanza killed his mother at their home before driving her car to Sandy Hook Elementary School and — armed with at least two handguns — carried out the massacre, officials said.

 

A third weapon, a .223-caliber rifle, was found in the car, and more guns were found inside the school.

 

So far, authorities have not spoken publicly of any possible motive. Witnesses said the shooter didn’t utter a word.

 

Catherine Urso, who was attending a vigil Friday evening in Newtown, Conn., said her college-age son knew the killer and remembered him for his alternative style.

 

“He just said he was very thin, very remote and was one of the goths,” she said.

 

* * *

 

Adam Lanza’s older brother, 24-year-old Ryan Lanza of Hoboken, N.J., was being questioned, a law enforcement official said. He told authorities that his brother was believed to suffer from a personality disorder, the official said, speaking on condition of anonymity because he was not authorized to speak on the record about the unfolding investigation.

 

The official did not elaborate, and it was unclear exactly what type of disorder he might have had.

 

Ryan Lanza had been extremely cooperative and was not under arrest or in custody, but investigators were still searching his computers and phone records. Ryan Lanza told law enforcement he had not been in touch with his brother since about 2010.

 

* * *

 

Adam Lanza attended Newtown High School, and several local news clippings from recent years mention his name among the school’s honor roll students.

And while much needed insight into the shooter’s abnormal mental state is critical before passing judgment, the reality is that Lanza – who may well have been mentally disturbed – should certainly not have had access to the arsenal of weapons he ultimately used in perpetrating yesterday’s tragedy. The much debated question, of course, that is already emerging is whose responsibility is it to limit such access: that of the individual, that of the closest family members, or that of the state, and if it is the latter, then the question becomes one of practical enforceability in a country where the second amendment is deeply engrained in the popular psychology, and where there are nearly as many guns as people.

 

Some more facts and figures – without opinions – on US weapons from justfacts.com

Introductory Notes

This research is based upon the most recent available data in 2010. Facts from earlier years are cited based upon availability and relevance, not to slant results by singling out specific years that are different from others. Likewise, data associated with the effects of gun control laws in various geographical areas represent random, demographically diverse places in which such data is available.

Many aspects of the gun control issue are best measured and sometimes can only be measured through surveys,[1] but the accuracy of such surveys depends upon respondents providing truthful answers to questions that are sometimes controversial and potentially incriminating.[2] Thus, Just Facts uses such data critically, citing the best-designed surveys we find, detailing their inner workings in our footnotes, and using the most cautious plausible interpretations of the results.

Particularly, when statistics are involved, the determination of what constitutes a credible fact (and what does not) can contain elements of personal subjectivity. It is our mission to minimize subjective information and to provide highly factual content. Therefore, we are taking the additional step of providing readers with four examples to illustrate the type of material that was excluded because it did not meet Just Facts’ Standards of Credibility.

 

General Facts

Firearms are generally classified into three broad types: (1) handguns, (2) rifles, and (3) shotguns.[3] Rifles and shotguns are both considered “long guns.”

A semi-automatic firearm fires one bullet each time the trigger is pulled and automatically loads another bullet for the next pull of the trigger. A fully automatic firearm (sometimes called a “machine gun”) fires multiple bullets with the single pull of the trigger.[4]

Ownership

As of 2009, the United States has a population of 307 million people.[5]

Based on production data from firearm manufacturers,[6] there are roughly 300 million firearms owned by civilians in the United States as of 2010. Of these, about 100 million are handguns.[7]

Based upon surveys, the following are estimates of private firearm ownership in the U.S. as of 2010:

   Households With a Gun  Adults Owning a Gun  Adults Owning a Handgun
Percentage  40-45%  30-34%  17-19%
Number  47-53 million  70-80 million  40-45 million

A 2005 nationwide Gallup poll of 1,012 adults found the following levels of firearm ownership:

Category

 Percentage Owning

a Firearm

Households  42%
Individuals  30%
Male  47%
Female  13%
White  33%
Nonwhite  18%
Republican  41%
Independent  27%
Democrat  23%

In the same poll, gun owners stated they own firearms for the following reasons:

Protection Against Crime  67%
Target Shooting  66%
Hunting  41%

 

Crime and Self-Defense

Roughly 16,272 murders were committed in the United States during 2008. Of these, about 10,886 or 67% were committed with firearms.[11]

A 1993 nationwide survey of 4,977 households found that over the previous five years, at least 0.5% of households had members who had used a gun for defense during a situation in which they thought someone “almost certainly would have been killed” if they “had not used a gun for protection.” Applied to the U.S. population, this amounts to 162,000 such incidents per year. This figure excludes all “military service, police work, or work as a security guard.”[12]

Based on survey data from the U.S. Department of Justice, roughly 5,340,000 violent crimes were committed in the United States during 2008. These include simple/aggravated assaults, robberies, sexual assaults, rapes, and murders.[13] [14] [15] Of these, about 436,000 or 8% were committed by offenders visibly armed with a gun.[16]

Based on survey data from a 2000 study published in the Journal of Quantitative Criminology,[17] U.S. civilians use guns to defend themselves and others from crime at least 989,883 times per year.[18]

A 1993 nationwide survey of 4,977 households found that over the previous five years, at least 3.5% of households had members who had used a gun “for self-protection or for the protection of property at home, work, or elsewhere.” Applied to the U.S. population, this amounts to 1,029,615 such incidents per year. This figure excludes all “military service, police work, or work as a security guard.”[19]

A 1994 survey conducted by the U.S. Centers for Disease Control and Prevention found that Americans use guns to frighten away intruders who are breaking into their homes about 498,000 times per year.[20]

A 1982 survey of male felons in 11 state prisons dispersed across the U.S. found:[21]

• 34% had been “scared off, shot at, wounded, or captured by an armed victim”

• 40% had decided not to commit a crime because they “knew or believed that the victim was carrying a gun”

• 69% personally knew other criminals who had been “scared off, shot at, wounded, or captured by an armed victim”[22]

Click here to see why the following commonly cited statistic does not meet Just Facts’ Standards of Credibility: “In homes with guns, the homicide of a household member is almost 3 times more likely to occur than in homes without guns.”

 

Vulnerability to Violent Crime

At the current homicide rate, roughly one in every 240 Americans will be murdered.[23]

A U.S. Justice Department study based on crime data from 1974-1985 found:

• 42% of Americans will be the victim of a completed violent crime (assault, robbery, rape) in the course of their lives

• 83% of Americans will be the victim of an attempted or completed violent crime

• 52% of Americans will be the victim of an attempted or completed violent crime more than once[24]

A 1997 survey of more than 18,000 prison inmates found that among those serving time for a violent crime, “30% of State offenders and 35% of Federal offenders carried a firearm when committing the crime.”[25]

 

Right-to-Carry Laws

Right-to-carry laws permit individuals who meet certain “minimally restrictive” criteria (such as completion of a background check and gun safety course) to carry concealed firearms in most public places.[95] Concealed carry holders must also meet the minimum federal requirements for gun ownership as detailed above.

Each state has its own laws regarding right-to-carry and generally falls into one of three main categories:

1) “shall-issue” states, where concealed carry permits are issued to all qualified applicants

2) “may-issue” states, where applicants must often present a reason for carrying a firearm to an issuing authority, who then decides based on his or her discretion whether the applicant will receive a permit

3) “no-issue” states, where concealed carry is generally forbidden

As of January 2012:

40 states are shall-issue:

 Alaska  Arizona  Arkansas  Colorado
 Florida  Georgia  Idaho  Indiana
 Iowa  Kansas  Kentucky  Louisiana
 Maine  Michigan  Minnesota  Mississippi
 Missouri  Montana  Nebraska  Nevada
 New Hampshire  New Mexico  North Carolina  North Dakota
 Ohio  Oklahoma  Oregon  Pennsylvania
 Rhode Island  South Carolina  South Dakota  Tennessee
 Texas  Utah  Vermont  Virginia
 Washington  West Virginia  Wisconsin  Wyoming

9 states are may-issue:

 Alabama  California  Connecticut  Delaware
 Hawaii  Maryland  Massachusetts  New Jersey
 New York      

 

Accidents

In 2007, there were 613 fatal firearm accidents in the United States, constituting 0.5% of 123,706 fatal accidents that year.[120]

Fatal firearm accidents in 2007 by age groups:

Age Group Fatal Firearm Accidents
Raw number Portion of fatal accidents

from all causes

<1 yrs  1  0.1%
1-4 yrs  18  1.1%
5-9 yrs  20  2.1%
10-14 yrs  26  2.1%
15-24 yrs  155  1.0%
25-34 yrs  94  0.6%
35-44 yrs  91  0.5%
45-54 yrs  82  0.4%
55-64 yrs  57  0.5%
65+ yrs  69  0.2%

 

Non-Fatal

In 2007, there were roughly 15,698 emergency room visits for non-fatal firearm accidents,[123] constituting 0.05% of 27.7 million emergency room visits for non-fatal accidents that year.[124]

These emergency room visits for non-fatal firearm accidents resulted in 5,045 hospitalizations,[125] constituting 0.4% of 1.4 million non-fatal accident hospitalizations that year.[126]

Much more here

I Put a Deal on the Table

 

The lack of anything concrete coming from either side on the cliff debacle is troubling. I don't think the process should be as hard as it is made out to be. I have a plan. I try to address all the hot-button issues. I also try to force significant concessions. I attempt to craft something that has a chance of working.

 

Before the specifics, I have to address the broad topic of "Debts and Deficits". My thoughts on the "big picture" drive some of the details in my proposal(s):

 

A) It is not possible, nor is it desirable, for the USA to have a balanced budget at anytime in the foreseeable future.

 

B) It is possible to reduce the deficits to a more manageable percentage of GDP. Achieving this will result in a lower trajectory of the rate of increase in the national debt.

 

C) All talk of deficits, budgets and taxes is a fools game. There is only one thing that matters. Economic growth will solve the debt problem, or it won't.

It doesn't matter what the tax rate on the top 2% is, or if the retirement age is pushed out a few years. For the next ten-years, it will be grow-or-die. Washington has to focus on that side of the equation. As of today, all the focus is in the wrong direction.

 

It proved difficult for me to solve all of the crushing economic issues facing the country in 300 words or less. My thoughts are presented first in summary, after that, the details.

 

SUMMARY

 

A series of compromise on taxes and spending that results with:

1) Income of $250 – $450 > to 37.5%.

2) Income of $450+ to 39.6%.

3) Income <$250 – Bush tax cuts are made permanent.

4) Long-term Cap. Gains – unchanged.

5) Patch the AMT for one-year.

6) The Payroll tax for Social Security reverts to 6.2% – A 2% increase.

7) Deductions for state and local taxes paid will be capped at $30,000. Deductions for mortgages and charity will be retained.

8) Inheritance tax will be 40% over $4m.

8) The Transaction Account guaranty will be allowed to expire.

9) Emergency unemployment benefits will be extended for one year.

10) The programed cuts in spending (the Sequestered Amounts) will be reduced by 50%.

11) Social Security and Medicare spending will be reduced by $1T from 2014 – 2023. 50% of the savings will come from Medicare, 50% from Social Security. The framework that achieves the savings at Social Security will be applied to both the Military and Federal Workers retirement funds.

12) A four-year, $500b spending program dedicated to infrastructure building will be established. A portion of this program will be funded with new federal excise taxes.

 

Now the long-winded discussion:

 

On Taxes

– The Bush era tax breaks for those under $250k should be made permanent. (Both sides can take credit for this)

– The Bush breaks for those >$250 will be increased as follows:

a) $250-450k goes to 37.5%

b) >$450 goes to the full 39.6%

The change in tax rates would be a substantial concession by Republicans. This is nearly 100% of what Obama has demanded. Note the carve-out for the $250-450 set. That actually is a significant portion of the top 2%, so when you look at the reality, the Republicans don't do so bad.

This increase in taxes would fail to achieve the minimum of $800b of increased revenues that Republicans have offered. To bring the revenue number up to $1trillion (Obama now wants 1.4T, but he previously agreed to 800b) I propose that there be limits put on deductions. This is an issue that Republicans have insisted on. Democrats hate this topic as it hurts homeowners (mortgage deduction) and charitable giving (this is about Religion).

To defuse this very tender topic I propose to limit deductions on only one class of deductions. State income and local property taxes deductions would be subject to a cap. The cap would be around $30,000. ALL other deductions would remain as they are today.

Who would win with this cap on "other taxes paid"? Red states like Texas would win very big (no state income tax). NY, California and Illinois would get crushed (all big Democratic states with big income and property taxes). It would drive a stake into the political "prizes" in the country.

All the big-ticket fund raisers for the Democrats on both coasts would pay for this compromise. If Republicans want some additional revenue, and to set themselves up for 2014, they will push for this. The Democrats won't have a leg to stand up on with any opposition.

 

-AMT would have to be patched over for another year. There simply is not enough time left for this complex topic to be worked out before New Year's Eve.

This is a terrible, stupid, awful, unfair and ill-conceived tax; but some form of it is necessary.

The classic example is Mitt Romney. He made $10m and paid 11% tax. Sorry, there has to be a minimum. The current minimum level for AMT is an absurdly high 28%. I think it should be 20%. A new minimum tax has to be part of a deal; it broadens the base, it raises revenues and insures that fat-cats like Warren Buffett finally pay their "fair share" (I want Warren to get what he's been saying).

Let's be clear about the implications of a minimum tax. Yes, it does some good things, but it will also have the effect of reducing charitable giving. Mitt would not have given $4m to the Mormon Church if he'd been faced with a 20% minimum tax. The "tax-efficiency" of his giving would have capped out his charity at only $2m. (It's about the money, after all)

Anyway, we're talking budgets and taxes; hard choices have to be made. Last I heard, there was something about Church and State anyway.

 

-The 2% reduction in payroll taxes will be eliminate. Sorry. Either Social Security (SS) is a self-funded program that doesn't add to the deficit (as so many liberals have claimed), or it is an entitlement program that sucks down $170B a year from the general tax payers. Those who love SS can't have their cake and eat it too.

Note: The 2% increase on payrolls is a very regressive tax increase. Come January, it will be felt by 155m workers. They will all hate that. This is a perfect opportunity for Republicans/Conservatives to swing popular opinion away from SS. This "mind change" of the voters away from SS is the only hope that Republican's have.

 

-The current low tax rates on dividends and capital gains will be retain. However, the establishment of a minimum tax (see above) will raise the effective tax on capital to 20% for those who have incomes/deductions that make them subject to the minimum. Again, this is a compromise that both sides should be willing to accept.

 

-Inheritance taxes will be set at 40%, the threshold for the tax will be set at $4m. (another compromise)

 

 

Okay, that solves all the tax matters that people have been fussing about. Now the rest of the issues:

 

Regulatory

– Do not extend Transaction Account Guaranty (subsidy for banks, TBTF issue – Trust me, the world will not end when this happens).

– Extend unemployment benefits for yet another year.

These trade-offs are on political lines. No one should argue about this horse-trade.

 

Sequestered Spending

IMHO, the cutback amounts that were agreed to as part of lat year's Budget Control Act were draconian. They were more of a "show-pony" to prove to the public that D.C. was serious. Recall that a lot of the maneuvering on this was driven to placate the likes of S&P. The motivations for setting the sequestered amounts were misguided. If there is to be a deal before the end of the year, a very big concession has to be made by both sides on spending.

Time does not permit much finesse in this important area. My simple solution is to cut the sequestered amounts in half.

 

Multi Year Stimulus Program

The problem, and the solution, is staring us in the face every day. The country needs a big investment in infrastructure. All our "stuff" is falling apart. Want construction jobs? Build things. Want high paying jobs? Build complicated things. Want economic growth? Build things that will have a long-term return on the investments. The list of things that need fixing/new is endless. The only question is, "Where does the money come from?"

 

I propose doing something radical. I would like to establish a national sales tax. The tax would be 1/2%; it would be applied to all retail sales EXCLUDING autos. The tax would be collected by the individual states. Washington would put up an additional $5 for every dollar of federal sales tax.

The retail sales number (again- ex-autos) is nearing $4T. A 1/2% national tax would raise only $20b. Such a small amount would not have a significant negative consequence to the economy. D.C.would contribute 5Xs the amount collected; bringing the total in year one to $120B. I would create borrowing authority for up to 75% of the next few years of anticipated revenues (this borrowing is secured by a dedicated source of revenue. This is a different type of debt, it gets paid back.) Borrowing will facilitate/accelerate the timing of the new infrastructure investments. 100% of all of this is spent on infrastructure – no leakage permitted. The states choose the projects.

$120b is a decent sized stimulus (equivalent to the 2% payroll cut). To be effective, there would have to be a commitment to do this for a minimum of four years. Every year, there would be an obligation of Congress to either extend it for an additional year, or let it die in the remaining three.

This would help the broader economy. Jobs would come fairly soon after inception; every month the demand for labor would rise. The results would be visible in a matter of years (new roads, bridges, airports, seaports, water projects etc.)

What I am proposing is very modest. By itself, it will not create a boom. Economically, it is a step in a direction that must be taken. Remember, it's grow or die. There will be opposition to any new tax, especially a federal consumption tax. It will add to the bill at the grocery store, gas pump and Wall-Mart.

Call me a fool, but I believe that everyone should have some skin in the game. Yes, the cost of a quart of milk for a family already living on the poverty line will go up by a penny. And the cost, all in, for those new spiked heels, will be $2.50 extra. But the fact is, the milk is probably being bought with food stamps, and who cares about the cost of those stilettos (or a boat for that matter).

I say to D.C., "Suck it up!" and get this done. If there is no movement on this front in 2013, then you can kiss off any chance for digging out of an economic hole for the rest of the Obama years.

The politics of this are interesting. I would like to hear a Pol say that this (or some/any version) is "off the table". That legislator would get their picture in the paper, for being a fool.

The deficit hawks will not like this. It would add $100b a year onto the deficit ledger. To this, I say that there are two kinds of debt; one is bad, the other is okay. NYC's Triborough Bridge has paid for itself 50Xs over. Same with the Golden Gate,the airports, the interstate, the water clean up/availability investments etc.

Who would love this plan? All fifty Governors would cheer. The states would have a pot load of money to spend. Yes, this will create its own set of problems, but governors can be held accountable a lot easier than some technocrats in D.C. If money has to be spent (it does) then I think it is better spent by the states.

Another group that would cheer, would be the 1,000,000 small business's (and their employees) who would benefit. What needs building requires steel, aluminum, concrete; it needs welders, masons, truck drivers, architects, engineers and designers.

So far I've covered all of the critical variables (including a nifty stimulus idea), save two. What remains are the thorniest of all issues. What to do with the debt limit and what to do about entitlements (Social Security/ Medicare/all other federal retirement plans).

 

The Debt Limit

The debt limit is one of the dumbest things ever created. It is an issue that, at the extreme , could send the country into a depression in a matter of months. (We came fairly close a year ago.) The debt limit creates the opportunity for a self inflicted wound that could lead to a systemic implosion. With these things in mind, it's easy to say "Fix this!".

But, sadly, the debt limit is a speed bump that must exist in some form. The US debt trajectory is simply unsustainable. Something has to exist that acts as a "check" in the system. That check is not coming from the White House, Congress or the Federal Reserve. The only thing left holding back exponential growth of red ink is the debt limit. So, as flawed as it is, the concept of a debt limit has to be retained.

This would be a big concession by Obama. In exchange for giving in on this, the Republicans would be forced to set a new debt limit that would cover the country through the 2014 elections. The debt limit agreement would be held hostage to a resolution of the final, and most difficult of all issues, entitlement reform. There is not a chance in a million that there can be any agreement on entitlements in the next 17 days; the issue is too complicated and too emotive.

 

Entitlements

There would be a framework for reforms as part of a deal to get over the cliff. In order for all of the tax fixes and other compromises I've described to get inked before the lights go out, there would have to be a deal that outlined the scope of the cuts in entitlements. Both sides would know what has to be accomplished, and be committed to the process.

Legislators would have a short window to complete a final agreement. If there is no deal on what gets cut to achieve the agreed target by April, then everything falls apart in a very big way. The debt ceiling extension (required in April) will be contingent on a final agreement on entitlements. The targets for entitlement cuts that will be agreed to in December and made into law by springtime:

2014 – 2023 Cuts in Social Security and Medicare = $1,000,000,000,000.(The Big T)

The cuts will come 50% from Medicare, 50% from Social Security.

 

I can hear the screams already. Obama wins the election, then turns on his base and guts America's favorite social programs? Not a chance! Hear me out.

– Over the ten-year period, Medicare (Does not include Medicaid and CHIPS) will pay out 4% of GDP. In real dollars that comes to $9T. $500B (5.5%) of savings/cuts has to be found as part of the final deal.

– Social Security will pay out $11 Trillion. Both sides of the aisle will have to find ways to cut $500b (4.5%).

What I'm proposing is by no means "gutting" these programs. If the folks in D.C can't agree on cutting $1T out of $20+T over ten-years, the country would deserve the consequences (Shutdown, default, downgrade). To get the complete package of a cliff saving deal, all of the parties would have to agree to the $1t, and sort out the details in 90 short days.

Obama has said that he would have a discussion on entitlements, "sometime next year". That doesn't work, it's not what most Americans want. It's asking for a fight. Obama, a number of Democrats, and the House Republicans, have to do what the have already promised.

I'm certain there is a political consensus to take a walk in this direction. No "new thinking" is required. The tools to achieve this have been discussed to death. Age and COLA adjustments, means testing, more taxes on benefits, higher fees. A beat down on the providers, blah, blah blah.

It would not be difficult to suck $1t out of these two very big pieces of the pie. To a significant extent, this would have to be born by those with both means and/or income. We are headed in the direction where medical benefits will be priced at 100% of the Social Security checks for those who have done well for themselves. Sorry.

Liberals will hate this. Their opposition is ideological, not economics. I think they have no argument at all. The objective of the changes in entitlements is to strengthen these programs so that they can achieve what they were intended for. An insurance safety net, not a retirement program will free medical.

70+% of the people who get these benefits are heavily dependent on them for basic necessities. The goal is to ensure that the 70% get what they need, the 30% who are less dependent (or don't really need it at all) have to pay a price.

One can't take a more liberal position than this. So folks like Krugman, Pelosi and all of the other defenders of "the safety net" will have to stand by and watch this happen.

Conservatives won't be pleased either, by and large, this is money out of their pockets. What they (and the country) get in return is an economic plan that has a chance, and a very important directional change for entitlements. That result would be worth the cost.

 

If Obama wants a legacy he will have to solve the fiscal cliff in a way that addresses the real problems the country faces. That means he has to take on entitlements. If Obama chooses to extend the Roosevelt Dream, there will be no fiscal cliff deal, and he will have no legacy at all.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US Sends 400 Troops, Patriot Missiles To Turkey In Preparation Of Syrian Hostilities Escalation

Update: the logical response did not take long. From moments ago: Iranian Army chief says Patriot missiles in Turkey would set stage for “world war” – ISNA News Agency. We now await a response from Russia, China and other regional powers who may not be quite as comfortable as Turkey with having yet another branch of US liberating forces (especially when it has implications on Russian and Qatari gas pipeline plans) operating in their back yard.

* * *

Even as the Nobel peace prize award-winning administration has been vocally partially withdrawing, but never fully, US troops from various middle eastern nations over the past several years, it appears that it has decided to open up a brand new military front, and position US soldiers in yet another hotspot, which is sure to escalate in the future, namely Syria, where yesterday, quietly in the media blanket coverage of the Newtown tragedy, the Pentagon said that some 400 US troops and several Patriot missile batteries would be stationed as part of a NATO force to protect Turkey from “potential Syrian missile attack.”

As the AP reports, “Defense Secretary Leon Panetta signed a deployment order en route to Turkey from Afghanistan calling for 400 U.S. soldiers to operate two batteries of Patriots at undisclosed locations in Turkey, Pentagon press secretary George Little told reporters flying with Panetta.” As is well known to those who follow the local conflict, the traditional narrative is that the US is supporting the oppressed Syrian rebellion, which has been fighting the Assad regime as glorious guerrilla freedom fighters. What is less known is that parts if not all of the Syrian rebellion have an “explicit stamp of approval” from Al Qaeda, the same Al Qaeda, which when useful, is carted out to justify US foreign, and at times very domestic, interventions, and the trampling of all civil liberties (see U.S. Terrorism Agency to Tap a Vast Database of Citizens) , in various other parts of the world.

From AP:

During a brief stop at Incirlik Air Base, Panetta told U.S. troops that Turkey might need the Patriots, which are capable of shooting down shorter-range ballistic missiles as well as aircraft.

 

He said he approved the deployment “so that we can help Turkey have the kind of missile defense it may very well need to deal with the threats coming out of Syria,” he said.

 

The U.S., Germany and the Netherlands are the only NATO members who have the upgraded PAC-3 missiles, capable of missile interception. Each battery has an average of 12 missile launchers, a NATO official said, speaking on condition of anonymity because alliance regulations do not allow him to speak on the record.

 

In a statement issued Friday NATO spokeswoman Oana Lungescu said “the deployment will be defensive only.”

 

“It will not support a no-fly zone or any offensive operation. Its aim is to deter any threats to Turkey, to defend Turkey’s population and territory and to de-escalate the crisis on NATO’s south-eastern border,” Lungescu said.

 

Panetta did not mention how soon the two Patriot batteries will head to Turkey or how long they might stay.

 

Earlier this week in Berlin, German Deputy Foreign Minister Michael Link told lawmakers that current plans call for the missile sites to be stationed at Kahramanmaras, about 60 miles north of Turkey’s border with Syria. Dutch Prime Minister Mark Rutte said Thursday that the Netherlands, Germany and the U.S. are working closely with Turkey “to ensure that the Patriots are deployed as soon as possible.” But he predicted they would not become operational before the end of January. Turkey joined NATO in 1952, three years after the alliance was formed.

 

At Incirlik Air Base, about 60 miles north of the Syrian border, an Air Force member asked Panetta what the US would do if Syria used chemical or biological weapons against the rebels. Panetta said he could not be specific in a public setting, but added, “we have drawn up plans” that give President Barack Obama a set of options in the event that U.S. intelligence shows that Syria intends to use such weapons.

What was not asked is how NATO and the US would react if instead of the Assad regime, a false flag “attack” was launched by the Al Qaeda controlled Syrian rebels, always willing to escalate the conflict. From the NYT:

The lone Syrian rebel group with an explicit stamp of approval from Al Qaeda has become one of the uprising’s most effective fighting forces, posing a stark challenge to the United States and other countries that want to support the rebels but not Islamic extremists. 

 

Money flows to the group, the Nusra Front, from like-minded donors abroad. Its fighters, a small minority of the rebels, have the boldness and skill to storm fortified positions and lead other battalions to capture military bases and oil fields. As their successes mount, they gather more weapons and attract more fighters.

 

The group is a direct offshoot of Al Qaeda in Iraq, Iraqi officials and former Iraqi insurgents say, which has contributed veteran fighters and weapons.

 

“This is just a simple way of returning the favor to our Syrian brothers that fought with us on the lands of Iraq,” said a veteran of Al Qaeda in Iraq, who said he helped lead the Nusra Front’s efforts in Syria.

Basically, the US is implicitly supporting Al-Qaeda, even as it dispatches of its leader in a quiet burial at sea, witnessed by what appears to be absolutely nobody.

Unexpectedly, someone did ask Panetta the right question: i.e., how Syria would respond to what is obviously an offensive escalation by NATO (and US) forces. The answer confirmed that when it comes to playing its now obsolete role of Globocop, it’s fire “defensive” missiles first, ask questions later:

Asked by another Air Force member whether he thought Syria would “react negatively” to the Patriot deployments, Panetta said, “I don’t think they have the damn time to worry” about the Patriots since the regime’s leaders are struggling to stay in power.

 

He indicated that Syria’s reaction to the Patriots was not a major concern to him.

 

Separately, NATO will deploy its Airborne Warning and Control System aircraft, or AWACS, to Turkey on a training exercise this month, the NATO said.

 

He said the exercise was not connected to the deployment of the Patriots.

 

The aircraft, which can detect launches of ground-to-ground missiles, will exercise command and control procedures as well as test the connectivity of various NATO and Turkish communications and data sharing systems, the official said.

Clearly, the US military is finally preparing for a major push in hostilities against the Assad regime, and as a result we expect the amount of false flag developments will surge. We don’t expect the mainstream media to dare to ask why the US is – openly – supporting an Al Qaeda funded and organized resistance. 

What certainly will not be asked by anyone is how Russia and China will respond to what is a clear escalation in the redrawing of geopolitical balance of power vis-a-vis what has become the most divisive military hotspot currently in the world.

There Go Apple's Margins: iPhone 5 To Sell At Wal-Mart For A Third Off Original Price

Remember when less than brisk sales of the iPhone 5 after it was first unveiled (to the usual fawning media Borg collective ooh-ing and aah-ing) were blamed on “supply issues” even as “reputable” Wall Street analysts conducted channel checks which foretold of epic holiday sales and massive pent up demand. As it turns out the only commodity in short supply was, well, demand, particularly that coming from consumers, very much as we predicted during the last earnings report (which was merely the latest consecutive earnings miss in a row). And, as Reuters reports with its Friday night bombshell report, Apple has finally thrown in the towel on pretending there is a supply shortage and admitted there is simply not enough demand at the given price point, by proceeding to sell the margin flagship iPhone 5 at a third off the original price, at the bargain basement commodity expert Wal-Mart of all places. And not only the iPhone, but the Ipad too (we have no idea which generation is the latest one: the iPad 3, the New iPad, the iPad 4s, the iPad Mini, the MAXiPad, etc…) And just like that, the “niche premium” magic of the once uber-cool gizmo is gone, not to mention AAPL’s profit margins, very much as the stock price has been sensing over the past two months, during which time it lobbed off some $150 billion in market cap. And with the reflexivity of fad-ness, as long as the price of the stock is soaring for whatever reason, interest and demand in the product remains at virtually any cost. Sadly for AAPL bulls, the opposite is also true, as is being witnessed right about now.

Alas – as with every fad, the time has once again come to find the new latest and greatest distraction, one with just as ridiculously unsustainable a growth curve.

From Reuters:

Wal-Mart said it is selling the 16 GB Apple iPhone 5 for $127, versus an original price of $189.97. The price is valid with a two-year contract from wireless carriers Verizon, Sprint and AT&T, the retailer added.

 

Wal-Mart said it is also selling the 16 GB iPhone 4S and the 16 GB iPad with Retina display and WiFi at discounts.

 

The offers will be available for 30 days in about 3,000 of Wal-Mart’s stores, which were not identified. They are not available online, according to the retailer.

 

Apple has focused on high-priced, premium gadgets for many years and has strictly enforced its prices with retailers and other distributors. However, a Wal-Mart spokeswoman said on Friday that the discounts were arranged with Apple.

 

“We worked together with them on this,” the spokeswoman, Sarah Spencer, said. “They are a great partner.”

 

Wal-Mart is pricing the iPad starting at $399, down from $499. Beginning December 17 the retailer said it will throw in a $30 iTunes card.

 

Wal-Mart is selling the 16 GB iPhone 4S for $47, versus an original price of $89.97, it said.

 

Apple did not respond to a request for comment.

We wouldn’t either.

QE 4: Folks, This Ain't Normal – What You Need To Know About The Fed's Latest Move

Submitted by Chris Martenson of Peak Prosperity

QE 4: Folks, This Ain’t Normal

What you need to know about the Fed’s latest move

Okay, the Fed’s recent decision to boost its monetary stimulus (a.k.a. “money printing,” “quantitative easing,” or simply “QE”) by another $45 billion a month to a combined $85 billion per month demonstrates an almost complete departure from what a normal person might consider sensible.

To borrow a phrase from Joel Salatin: Folks, this ain’t normal.  To this I will add …and it will end badly.

If you had stopped me on the street a few years ago and asked me what I thought would have happened in the stock, bond, foreign currency, and commodity markets on the day the Fed announced an $85 billion per month thin-air money printing program directed at government bonds, I never would have predicted what has actually come to pass.

I would have predicted soaring stock prices on the expectation that all this money would have to end up in the stock market eventually.  I would have predicted the dollar to fall because who in their right mind would want to hold the currency of a country that is borrowing 46 cents (!) out of every dollar that it is spending while its central bank monetizes 100% of that craziness?  

Further, I would have expected additional strength in the government bond market, because $85 billion pretty much covers all of the expected new issuance going forward, plus many entities still need to buy U.S. bonds for a variety of fiduciary reasons.  With little product for sale and lots of bids by various players, one of which – the Fed – has a magic printing press and is not just price insensitive but actually seeking to drive prices higher (and yields lower), that’s a recipe for rising prices.

Then I would have called for sharply rising commodity markets because nothing correlates quite so well with thin-air money printing as commodities.

That’s what should have happened.  But it’s not what we’re seeing.

Instead, stocks initially climbed but then closed red.  Gold was mysteriously sold in the thinly-traded overnight markets and again right after the announcement in large, rapid HFT blocks that swamped the bids. U.S. Treasury bonds actually sold off on the news.  The dollar hardly budged. Commodities were mixed across the board but more or less flat on the day, with the exception of the metals, and especially the precious metals, which were sold vigorously.

The markets are now well and truly broken.  Not because they don’t conform to my predictions, but because they are no longer sending useful price signals.  Instead, my hypothesis here is that the markets are now just a giant and rigged casino, where a relative handful of big firms and other tightly coupled players are gaming their orders to take advantage of this flood of money.

When your central bank badly misprices money and then bids up everything related to bonds, nothing can be reasonably priced.  Risk is mispriced; the few remaining investors (as distinct from speculators, which are now the majority) are forced to accept both poor yields and higher risk – so we know the price of everything, but the value of nothing.

QE4

So what exactly is this new thin-air money printing program all about?  Well, unlike any prior Quantitative Easing (QE) announcement, this one was tied to a fuzzy and quirky government statistic: the unemployment rate.

QE4 is Just-In-Time Fed Policy to Avoid Calamity

Dec 13, 2012

 

We got the most thunderous Just-In-Time monetary policy today that is a substitute for the absence of any degree of stimulative fiscal policy.

 

You might say that QE4 is now going to act as both monetary and fiscal stimulus– another $85 billion worth of Fed accumulations of Treasury bonds and mortgages- that is meant to keep stock prices moving higher and residential home sales climbing briskly.

 

The goal is to drive economic activity, especially residential home building, so that unemployment drops from 7.7% to 6.5%. The surprise move is meant to signal the Fed’s awareness of the softening economy; it sees the gritty numbers before we do.

 

Getting unemployment down to 6.5% without inflation rising to a level higher than 2.5% is not expected to happen until 2014 at the earliest. And it could go longer if there is no deal and we go over the cliff.

 

But, you should know that the only reason unemployment is 7.7% is because hundreds of thousands of males have dropped out of the search for regular work. A very depressing tale.

The key point here is that the Fed is now actively running both monetary and fiscal policy because it will now be in the business of funding nearly 100% of all the new government deficit spending in 2013.  And it is pumping a bit more than $1 trillion of hot, thin-air money into the economy as it does so.

The odd thing here is that by tying their policy to the unemployment rate, we could be in for a very long wait for the stimulus to end.  The reason is that the unemployment rate has a couple of moving pieces, one being the number of people who are unemployed, and the second consisting of people who have given up looking for work, which is tracked in something called the ‘participation rate.’ 

As more people leave the labor force and the participation rate goes down, the unemployment rate goes down, too.  Somewhat confusingly, as more jobs are created, the unemployment rate goes down, too.  As you can see, these numbers work in opposition to each other because as more jobs become available, more people re-enter the work force.

Before the crisis struck, the participation rate was around 66.5%. But now it sits at just 63.6%, meaning that, at roughly 1.4 million jobs for each percent, a bit more than 4 million jobs would have to be created just to absorb the folks who left the labor force but presumably would like to work again. As those 4 million folks come back to work, the unemployment rate will not budge at all.

It will require two full years of 150,000 jobs per month just to absorb the 4 million missing workers, which means that this QE effort will be with us for a very long time.  Three to four years is my best guess, and that’s only if the economy magically recovers.  And I have very strong doubts about that.

This means that the Fed is most likely on track to increase its balance sheet by another $3-4 trillion.  Ugh.  That’s 300% to 400% more money created in the next year than was created than during the entire 200 years following the signing of the Declaration of Independence.

The other part of this new QE policy is that they will continue this as long as inflation remains below 2.5%.  Again, this is a very fuzzy government statistic subject compared to the usual massaging and political biases, but it has top billing as the one that is most likely to force an early termination of the thin-air money printing efforts.

However, I remain convinced that the Fed will change any rules and move any goalposts it needs to in order to continue its mad money printing experiment.  Because there really isn’t any other alternative at this point.

Secretly in the Open

Once upon a time, it would have been considered in bad taste to suggest that the world was being centrally managed in secret by a small-ish cabal of bankers whose actions served to either prop up the excessive spending habits of the very governments that conferred upon them the power to print money, or to bolster the health and profits of the banks they mainly serve.

That was then. Today you can just read about it in the Wall Street Journal:

Inside the Risky Bets of Central Banks

Dec 12, 2012

BASEL, Switzerland—Every two months, more than a dozen bankers meet here on Sunday evenings to talk and dine on the 18th floor of a cylindrical building looking out on the Rhine.

 

The dinner discussions on money and economics are more than academic. At the table are the chiefs of the world’s biggest central banks, representing countries that annually produce more than $51 trillion of gross domestic product, three-quarters of the world’s economic output.

 

Of late, these secret talks have focused on global economic troubles and the aggressive measures by central banks to manage their national economies. Since 2007, central banks have flooded the world financial system with more than $11 trillion. Faced with weak recoveries and Europe’s churning economic problems, the effort has accelerated. The biggest central banks plan to pump billions more into government bonds, mortgages and business loans.

 

Their monetary strategy isn’t found in standard textbooks. The central bankers are, in effect, conducting a high-stakes experiment, drawing in part on academic work by some of the men who studied and taught at the Massachusetts Institute of Technology in the 1970s and 1980s.

 

While many national governments, including the U.S., have failed to agree on fiscal policy—how best to balance tax revenues with spending during slow growth—the central bankers have forged their own path, independent of voters and politicians, bound by frequent conversations and relationships stretching back to university days.

 

If the central bankers are correct, they will help the world economy avoid prolonged stagnation and a repeat of central banking mistakes in the 1930s. If they are wrong, they could kindle inflation or sow the seeds of another financial crisis.

If it feels like you are part of a very grand, high-stakes experiment, congratulations!  You’re exactly right. We are all collectively prisoner to whatever outcomes are in store.

The rather politely ignored truth right now, at least by most news outlets and politicians, is that the world’s central banks have wandered very far off the reservation and are running an experiment that really has only two possible outcomes.  One is a return to what we all might call ‘normal and stable’ economic growth.  The second is the complete collapse of the fiat money and their attendant financial systems and markets.

While it is technically possible to achieve some other middling outcome, that possibility has been receding to ever more remote territory with every passing month and new round of money printing. 

The basic predicament here is that more and more money is being printed while the world economy, predictably for those who follow the net energy story, has been entirely stagnant and constantly threatening to slip back into economic retreat. Of course, more money + the same amount of (or even less) hard assets = the perfect recipe for inflation.

So the rise of inflation will signal the beginning of the end of this slow-motion tragedy.  I use the term ‘tragedy’ here because it doesn’t have to end this way.  We have other options; we could make other choices and use our time and resources to try and do something other than maintain a broken financial system that desperately needs to be changed.

In Part II: It’s Better to Be a Year Early Than a Day Late, I explain the facts behind why I am more convinced than ever that this all ends in one of the most disruptive financial and currency events ever seen on this planet.  And while the repercussions will be felt by all, taking prudent action while there is still time can greatly improve our individual odds of weathering them safely.