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Saturday, March 31, 2012

So Why Are Consumers Now Borrowing Money Again, Instead Of Paying Down Their Debts?


Thursday, March 29, 2012

The View From London!

This article in today's Financial Times explains perfectly clearly what everyone in the world knows, except of course for Barack Obama and his generals.  You need to read it.

Wednesday, March 28, 2012

We Are All Immigrants!


The 12 Most Common Ethnicities In America

The majority of people living in the United States descended from European immigrants who arrived as early as the 17th century.  In fact, nearly 48 million people, or about 15.5 percent of the U.S. population, reported German ancestry, according to the 2010 American Community Survey conducted by the U.S. Census Bureau.
The Census Bureau defines ancestry as a "person’s ethnic origin or descent, 'roots,' or heritage, or the place of birth of the person or the person’s parents or ancestors before their arrival in the United States." 
The ACS data represents the number of people who reported each ancestry as either their first or second response.
The ancestries also include groups covered in the questions on Hispanic or Latino origin, such as Mexican.

Read more:

Monday, March 26, 2012

Actual Facts Are Simply Amazing Things!!

A bona fida member of the 1% describes what is happening to the U.S in today's New York Times.  You will find it fascinating. 

March 25, 2012

The Rich Get Even Richer

NEW statistics show an ever-more-startling divergence between the fortunes of the wealthy and everybody else — and the desperate need to address this wrenching problem. Even in a country that sometimes seems inured to income inequality, these takeaways are truly stunning. 

In 2010, as the nation continued to recover from the recession, a dizzying 93 percent of the additional income created in the country that year, compared to 2009 — $288 billion — went to the top 1 percent of taxpayers, those with at least $352,000 in income. That delivered an average single-year pay increase of 11.6 percent to each of these households. 

Still more astonishing was the extent to which the super rich got rich faster than the merely rich. In 2010, 37 percent of these additional earnings went to just the top 0.01 percent, a teaspoon-size collection of about 15,000 households with average incomes of $23.8 million. These fortunate few saw their incomes rise by 21.5 percent.
The bottom 99 percent received a microscopic $80 increase in pay per person in 2010, after adjusting for inflation. The top 1 percent, whose average income is $1,019,089, had an 11.6 percent increase in income.
This new data, derived by the French economists Thomas Piketty and Emmanuel Saez from American tax returns, also suggests that those at the top were more likely to earn than inherit their riches. That’s not completely surprising: the rapid growth of new American industries — from technology to financial services — has increased the need for highly educated and skilled workers. At the same time, old industries like manufacturing are employing fewer blue-collar workers. 

The result? Pay for college graduates has risen by 15.7 percent over the past 32 years (after adjustment for inflation) while the income of a worker without a high school diploma has plummeted by 25.7 percent over the same period. 

Government has also played a role, particularly the George W. Bush tax cuts, which, among other things, gave the wealthy a 15 percent tax on capital gains and dividends. That’s the provision that caused Warren E. Buffett’s secretary to have a higher tax rate than he does. 

As a result, the top 1 percent has done progressively better in each economic recovery of the past two decades. In the Clinton era expansion, 45 percent of the total income gains went to the top 1 percent; in the Bush recovery, the figure was 65 percent; now it is 93 percent. 

Just as the causes of the growing inequality are becoming better known, so have the contours of solving the problem: better education and training, a fairer tax system, more aid programs for the disadvantaged to encourage the social mobility needed for them escape the bottom rung, and so on. 

Government, of course, can’t fully address some of the challenges, like globalization, but it can help.
By the end of the year, deadlines built into several pieces of complex legislation will force a gridlocked Congress’s hand. Most significantly, all of the Bush tax cuts will expire. If Congress does not act, tax rates will return to the higher, pre-2000, Clinton-era levels. In addition, $1.2 trillion of automatic spending cuts that were set in motion by the failure of the last attempt at a deficit reduction deal will take effect. 

So far, the prospects for progress are at best worrisome, at worst terrifying. Earlier this week, House Republicans unveiled an unsavory stew of highly regressive tax cuts, large but unspecified reductions in discretionary spending (a category that importantly includes education, infrastructure and research and development), and an evisceration of programs devoted to lifting those at the bottom, including unemployment insurance, food stamps, earned income tax credits and many more. 

Policies of this sort would exacerbate the very problem of income inequality that most needs fixing. Next week’s package from House Democrats will almost certainly be more appealing. And to his credit, President Obama has spoken eloquently about the need to address this problem. But with Democrats in the minority in the House and an election looming, passage is unlikely. 

The only way to redress the income imbalance is by implementing policies that are oriented toward reversing the forces that caused it. That means letting the Bush tax cuts expire for the wealthy and adding money to some of the programs that House Republicans seek to cut. Allowing this disparity to continue is both bad economic policy and bad social policy. We owe those at the bottom a fairer shot at moving up.
Steven Rattner is a contributing writer for Op-Ed and a longtime Wall Street executive.
Simple Explanation For A Complex Problem!
The CSIRO has discovered the heaviest element yet known to science. 

The new element is governmentium (Gv). It has one neutron, 25 assistant neutrons, 88 deputy neutrons and 198 assistant deputy neutrons, giving it an atomic mass of 312.

These 312 particles are held together by forces called morons, which are surrounded by vast quantities of lefton-like particles called peons.
Since governmentium has no electrons or protons, it is inert. However, it can be detected because it impedes every reaction with which it comes into contact. 

A tiny amount of governmentium can cause a reaction that normally takes less than a second to take from four days to four years to complete.
governmentium has a normal half-life of 2–6 years. It does not decay but instead undergoes a reorganisation in which a portion of the assistant neutrons and deputy neutrons exchange places.

In fact, governmentium's mass will actually increase over time, since each reorganisation will cause more morons to become neutrons, forming isodopes.

This characteristic of moron promotion leads some scientists to believe that governmentium is formed whenever morons reach a critical concentration. This hypothetical quantity is referred to as critical morass.

When catalysed with money, governmentium becomes administratium, an element that radiates just as much energy as governmentium since it has half as many peons but twice as many morons.  All of the money is consumed in the exchange, and no other byproducts are produced.


The new element is governmentium (Gv). It has one neutron, 25 assistant neutrons, 88 deputy neutrons and 198 assistant deputy neutrons, giving it an atomic mass of 312.

These 312 particles are held together by forces called morons, which are surrounded by vast quantities of lefton-like particles called peons.
Since governmentium has no electrons or protons, it is inert. However, it can be detected because it impedes every reaction with which it comes into contact. 

A tiny amount of governmentium can cause a reaction that normally takes less than a second to take from four days to four years to complete.
governmentium has a normal half-life of 2–6 years. It does not decay but instead undergoes a reorganisation in which a portion of the assistant neutrons and deputy neutrons exchange places.

In fact, governmentium's mass will actually increase over time, since each reorganisation will cause more morons to become neutrons, forming isodopes.

This characteristic of moron promotion leads some scientists to believe that governmentium is formed whenever morons reach a critical concentration. This hypothetical quantity is referred to as critical morass.

When catalysed with money, governmentium becomes administratium, an element that radiates just as much energy as governmentium since it has half as many peons but twice as many morons.  All of the money is consumed in the exchange, and no other byproducts are produced.


Be Sure To Hold Your Nose When You Read About This Piece Of Corruption (Using Your Money)!!


Now Obama Wants To Build A $5 Billion Bullet Train From Las Vegas To Nowhere

VICTORVILLE, Calif. (AP) -- On a dusty, rock-strewn expanse at the edge of the Mojave Desert, a company linked to Senate Majority Leader Harry Reid wants to build a bullet train that would rocket tourists from the middle of nowhere to the gambling palaces of Las Vegas.

Privately held DesertXpress is on the verge of landing a $4.9 billion loan from the Obama administration to build the 150 mph train, which could be a lifeline for a region devastated by the housing crash or a crap shoot for taxpayers weary of Washington spending.
The vast park-and-ride project hinges on the untested idea that car-loving Californians will drive about 100 miles from the Los Angeles area, pull off busy Interstate 15 and board a train for the final leg to the famous Strip.
Planners imagine that millions of travelers a year will one day flock to a station outside down-on-its-luck Victorville, a small city where shuttered storefronts pock the historic downtown.
An alliance of business and political rainmakers from The Strip to Capitol Hill is backing the project that could become the first high-speed system to break ground under President Barack Obama's push to modernize the U.S. rail network - and give the Democratic president's re-election prospects a lift in battleground Nevada.
Transportation Secretary Ray LaHood has publicly blessed the train - it means jobs, he says - and it's cleared several regulatory hurdles in Washington.
Yet even as the Federal Railroad Administration considers awarding what would be, by far, the largest loan of its type, its own research warns it's difficult to predict how many people will ride the train, a critical measure of financial survival, an Associated Press review found.
There are other skeptics, as well.
"It's insanity," says Thomas Finkbiner of the Intermodal Transportation Institute at the University of Denver. "People won't drive to a train to go someplace. If you are going to drive, why not drive all the way and leave when you want?"
Construction cost projections have soared to as much as $6.5 billion, not including interest on the loan. Some fear taxpayer subsidies are inevitable.
Reid and other supporters point to research that shows 80,000 new jobs, but FRA documents show virtually all those would be temporary - no more than 722 would be permanent.
Victorville Mayor Ryan McEachron envisions a bustling transportation oasis with a hotel, restaurants, maybe even homes, on the proposed station site. He believes drivers can be enticed out of their cars, even in a region where the notion of rail travel can seem as distant as a New York subway.
The company is "going to have to market and market hard in order to get the ridership they need to support paying back the loan," the mayor says. "I think you can change the thinking."
Along with Reid, the president's most influential Democratic ally in Congress, the plan is being advanced by casino developer and contractor Anthony Marnell II, whose credits include building the Bellagio and Wynn Las Vegas and who heads Marnell Companies, the majority shareholder in DesertXpress; project consultant Sig Rogich, a Republican adviser to two presidential campaigns who founded Nevada's most influential lobbying and advertising company; and Canadian transportation giant Bombardier, a DesertXpress strategic adviser that wants to supply its rail cars.
A decision on the loan is not expected until mid-year, but the company has spent some $30 million sharpening its plan and refining ridership projections. Rising gas prices and increasing traffic congestion could help ticket sales, and the company is touting reduced air pollution from fewer cars on the road.
DesertXPress Route
The route (black): From Las Vegas to nowhere.
"It's Victorville that makes the project work," says chief executive Andrew Mack.
Far from being a train from nowhere, company planners see the struggling city of 115,000, once a stop on storied Route 66, as a collection point for millions of drivers heading north to Las Vegas. Bringing the line deeper into the populous Los Angeles area would raise formidable challenges, Mack said, from crossing numerous freeways to finding space for track
The lot now stippled with spindly creosote bushes has room for 15,000 parking spaces. Bags would be checked through to hotel rooms. At peak hours, trains would depart every 20 minutes. Mack says an average round-trip fare could be as low as $75, though documents estimate $100.
Mack says the train will deliver convenience - and for a price, luxury - that studies show passengers want.
DesertXpress officials once boasted they would build the line with private dollars, but they now plan to rely on FRA financing to cover the bulk of the cost. Mack didn't directly answer if the company turned to the FRA because private investors were unwilling to take the risk, but said the loan terms are attractive.
"When somebody comes and tells me I will build a system that pays for itself, I'm suspicious," said Hasan Ikhrata, executive director of the Southern California Association of Governments, which questioned ridership potential in a report last year. "There is no high-speed rail system in the world that operates without subsidies."
The company is still arranging as much as $1.6 billion needed to cover its share of the construction bill for the roughly 200-mile line. Investments could hinge on the loan approval, which requires the company to convince the FRA that taxpayers won't get stiffed. In a worst-case scenario, the train would become government property if the company fails.
The low-interest loan would be about three times the combined amount the FRA loaned 32 other projects through the Railroad Rehabilitation & Improvement Financing program since its inception in 2002.
If successful, the train could be a forerunner in a national high-speed rail network, while bringing a rich return for investors and delivering visitors to Vegas. It would also give Nevada residents an option to Southern California, albeit many miles from tourist hotspots like Hollywood or the beaches.
The company is seeking funds at a time when a proposed high-speed train running from San Francisco to Southern California has been questioned because of ballooning costs and fear it will sap taxpayer dollars.
Early company research projected the train would lure away nearly one in four car, bus and airline travelers, initially about 4 million people annually. The company now pegs first-year ridership at about 3 million, but that projection was trimmed to 2.5 million by government analysts who urged more study.
The risks are summarized in a 2007 study commissioned by ACS Infrastructure North America, a division of a global construction company that DesertXpress says is seeking a role in the project, that found most travelers were "broadly happy" going to Las Vegas by car or airline. While most travelers would be open to riding a train, the report warned the company would need to lure riders with pampering.
On clear roads, the 270-mile drive from downtown Los Angeles to Las Vegas takes about four hours. Planners say the train ride from Victorville to Las Vegas would take about 80 minutes, but it's debatable how much time would be saved after parking, boarding the train and reaching a Las Vegas hotel.
Round-trip flights from Los Angeles to Las Vegas can be booked for under $100.
The dream of uniting Southern California and Las Vegas by high-speed rail has been discussed for decades. In the mid-1980s, Las Vegas officials predicted a line would be running by 2000. DesertXpress, which would roughly parallel Interstate-15 on a pair of new tracks, has predicted for several years that it would soon break ground.
Reid initially backed a rival project that planned to use magnetic power to reach Orange County, but he jumped trains shortly after Rogich became co-chair of Republicans for Reid, a Nevada group with ties to the gambling industry that helped Reid win re-election in 2010.
The senator's office disputes any connection between his flip and Rogich's involvement in the campaign. Spokeswoman Kristen Orthman says Reid's decision was based on the viability of DesertXpress, while the magnetically powered project languished.
Marnell, another member of Republicans for Reid, is president of one of several companies under the DesertXpress corporate banner. He and his son, M Resort, Spa and Casino President Anthony Marnell III, are also investors.
Federal records show the elder Marnell has donated at least $15,000 to political committees connected to Reid since 2010, including a $5,000 donation in May to the senator's Searchlight Leadership Fund.
According to federal records, the company has spent at least $270,000 since 2006 lobbying at the House, Senate and federal offices.
Other investors include North Dakota businessman Gary Tharaldson, who donated $10,000 to a Reid committee in March, and transportation expert Tom Stone, who organized DesertXpress with partner Mack in 2005.
Nevada records show DesertXpress HRS Corp., headed by the elder Marnell with his son as a director, was authorized to issue 25,000 shares of stock. DesertXpress declined to say who held those shares, if issued, and in what amounts.
Not everyone in the high desert is on board with the project.
Thirty miles northeast of Victorville on I-15, officials in Barstow fear they'll lose 2,300 jobs. The impact will be "unsustainable," Mayor Joe Gomez wrote to LaHood in October 2010, according to a letter released under a public records request.
To appease those concerns, McEachron said the station's proposed location was moved about halfway to Barstow. The patch of vacant land is so remote the city would have to annex it.
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Ben Bernake Isn't The Only One With Money Elves!

"What is money, why do we trust it and has it become too confusing?

A trader watches screens in his office in an investment house Did the global financial crisis undermine people's faith in money?
We dream about it, argue about it, worry about it, celebrate it, spend it, save it - but what exactly is money and why do we put our trust in it?We invest it and gain it, and unfortunately sometimes lose it, and we give it value and worth - or at least we agree to give it a certain value. But what does it represent?
It used to be stones, or shells. It has sometimes been cigarettes, wives and, arguably, sex. Most-famously it has been gold and silver.Now money is pieces of paper around which we have built a consensus in that we agree that it means something.
Central banks like the Bank of England hold the monopoly on producing this paper money - cold, hard cash as we know it.This is known as "fiat currency", from the Latin "it shall be". It derives its value through government backing - but how did we make the shift from pieces of gold to pieces of paper?

Wartime design
The oldest known bank-note, issued by the Bank of England in 1699 The oldest known bank-note issued by the Bank of England in 1699 
Back in 1694, when the Bank of England was founded - to help fund the wars of the time - it would accept gold deposits and give out promissory notes in exchange, in effect promising the depositors that their gold would be safe and that they could come back and reclaim it sometime in the future.
Hence that promise to "pay the bearer on demand" that is still printed on each bank note today.
For a while, up until World War I - and for a brief period afterwards - England was on the Gold Standard.

“Start Quote

Money is a collective act of the imagination, and it's a thing which we have invested our credence in, and it works because we do that”
John Lanchester Author
What that meant was that every note that was printed by the Bank of England had to be backed by a certain amount of gold in its vaults. 

But that is extremely constraining, especially when a country is at war, for example, when money needs to be more "elastic" - basically, when more money is needed to keep the economic wheels turning.
So now our paper money is not backed by anything tangible like gold or silver, other than that promise to pay the bearer - and the actions of the Bank of England.

"The reason the language is there," says Chris Salmon, the Bank of England's chief cashier, whose signature is on the new £50 note, "is to send a signal that we take our responsibility to maintain the value of the money very seriously, to maintain its purchasing power.

"The language is there to build confidence and trust, which are so important."
But recently our confidence in money has been shaken, even if we do not really understand what it is or how it works.

Imaginative act

So, other than those pieces of paper we take to the shops to hand over for goods or services, or even digital bits on a computer which are transferred across the world in a split second, what is this thing we call money?

A brief history...

  • Money first emerged as commodity money. For example, the shekel was a specific weight of barley, which was used as currency
  • It is widely believed the first stamped coins emerged around 650 BC
  • The first bank notes, known as jiaozi, were first used in 10th Century China
  • So-called fiat money also emerged in China in the 11th Century - it is government backed and unrelated to the value of any physical quantity
  • In 1661 the Kingdom of Sweden issued the first official paper money in Europe, through the newly founded Bank of Stockholm
  • During the American Civil War, the Federal Government issued United States Notes, popularly known as "greenbacks"
  • By World War I most nations had a legalised government monopoly on bank notes. To pay for the huge costs of the war, governments printed more and more money. Since they were not immediately responsible for the economic consequences this led to hyper inflation in some countries
  • From 1944 to 1971 the Bretton Woods agreement fixed the value of $35 to one troy ounce of gold. This system collapsed when the US government ended the convertibility of the dollar for gold in 1971, in what became known as the Nixon Shock
"Money is a collective act of the imagination, and it's a thing which we have invested our credence in, and it works because we do that," says the writer John Lanchester, author of Whoops! Why Everybody Owes Everybody and No-One Can Pay. 

But it has become clear that money has stopped working as it used to. The economic machine has seized up largely, it could be argued, because we made money too complicated and even the experts lost sight of what it really is.

John Lanchester argues that the financial whizz-kids thought they could control money and the inherent risk associated with playing about with it.

"The people inside the system were confident they had developed new tools to manage risk - that they had magically engineered away any risk.

"That is never true. Increased risk is just increased risk."

As a result, masses of cheap credit was pumped throughout the global financial system.

"The basic assumption was that the tide would not go out," says John Lanchester, "and the thing that astonished the world of money and caused the credit crunch - in fact it was the credit crunch - was the fact that the tide went out everywhere simultaneously."

Money auctions
Dylan Grice, a global strategist at the French bank Societe Generale, says another basic error that was made was that people confused money and credit.
"Credit requires that you pay someone back. Money does not. Money is yours. Money is just money, and that's the fundamental difference."

Roman coins
So banks can take your money on deposit but then they lend it out to someone else. "That is credit," says Grice. 

"That is not money that they have created. The banking system creates credit and it's the central bank which creates money... and the last few years have seen a very clear case of the damage which has been caused by losing control of credit while trying to control money."

Recently, the UK's central bank, the Bank of England, has been creating billions of pounds of money, through the controversial policy of Quantitative Easing, or QE.

And that is because there is no longer enough money (or should that be credit?) flowing through the system, to oil the wheels of the economy.

Only the Bank of England can create money in the UK; and it can invent it out of thin air. The last time it did that was back in February, when it created another £50bn.

"What we do is expand our balance sheet and on one side we have the cash we're creating and on the other side, we have the gilts essentially that we're purchasing," explains Paul Fisher.

He is one of the nine members of the Monetary Policy Committee which meets to decide on interest rates and QE.

He is also the executive director for markets at the Bank of England, responsible for implementing QE. He argues that the Bank is not spending money, but that it is "giving out money in return for financial assets" - those gilts or treasury bonds which, in fact, are packages of government debt.

It does this through a system of auctions, three times a week, £1.5bn at a time.

The QE theory is that the Bank buys the government bonds from financial institutions like pension funds and insurance firms, the Bank credits their accounts with money which they, in turn, should spend out there in the wider economy.

Money elves
Paul Fisher says the greatest danger to the economy at the moment is not inflation but deflation. Remember, deflation does not just mean falling prices, which makes life difficult for producers, but also falling wages.
The Bank of England The Bank of England has issued £325bn through its quantitative easing programme
And for critics who argue that the Bank is creating an inflation time bomb by pumping billions more pounds into the system (it will be £325bn by May), Mr Fisher says: "We get the money back again at some point in the future, so it's a reversible transaction."

He is confident that without QE the economy would be in an even worse state than it now is, though, he does admit that "nobody pretends we can fine-tune this; the errors you can make on these calculations are very wide".

Other than questions about whether the policy has actually worked or not, there is another interesting little twist to QE.

"There's a slight thing we have to bear in mind," Paul Fisher says, "that it's illegal [under the Maastricht Treaty] for central banks to directly fund government spending, and we would fully support that."
The problem is that governments do fund some spending through the selling of their debt, or bonds. So, to get round the difficulty, Paul Fisher says that the Bank of England does not buy gilts directly from the government.

He explains: "We don't buy anything that the debt management office has issued in the week before or the week after our auctions. So we make sure that what we are buying is directly from the market… to separate it off from the idea of actually funding the government's deficit directly."

Some may see this as another bit of financial trickery.

For John Lanchester, with only a little bit of tongue-in-cheek, the QE policy is an example of the world of finance once again straying from reality and entering the realms of magic.

"It's almost easier if you just say that there are elves who make money and, when the money elves get to work, they sort of magically come up with it and then there's more of it," he says.

"I think that's probably more straightforward and makes just as much sense as explaining the mechanics of quantitative easing. It's elves."

And there you have it!!  The Elves are to blame!!

But never forget the definition of inflation, and ask yourself what is going to happen to prices when $3 Trillion, that the Federal Reserve Elves has created out of thin air, reaches the U.S. market??

Sunday, March 25, 2012

I Bet You Thought I Was The Only Paul Ryan Fan!!


Why Do New York Times Columnists Keep Swooning for Paul Ryan?

By James Kwak
After David Brooks last year, now it’s James Stewart who has fallen for Paul Ryan’s rugged good looks. He attempts to defend Ryan’s tax proposals against charges that they favor the rich:
“To me it sounds like a proposal to raise [the wealthy's] taxes by depriving them of cherished ‘loopholes,’ to use the proposal’s word. . . .
“There’s no getting around the fact that a 25 percent rate on the top earners would nearly double Mr. Romney’s effective rate and more than double it for the 101 of the top 400 taxpayers who pay less than 10 percent, assuming the loopholes are indeed closed.”
Stewart is at least smart enough to realize that a 25 percent rate is only a tax increase if you eliminate preferences for investment income (capital gains and dividends, currently taxed at a maximum rate of 15 percent):
“Despite Mr. Ryan’s reluctance to specify which tax preferences might have to be curtailed or eliminated, there’s no mystery as to what they would have to be. Looking only at the returns of the top 400 taxpayers, the biggest loophole they exploit by far is the preferential tax rate on capital gains, carried interest and dividend income.”
So give Stewart credit for knowing the basics of tax policy. But he is basically assuming that Ryan must be proposing to eliminate those preferences: “there’s no mystery as to what they would have to be.”
Only they aren’t. Stewart quotes directly from the FY 2012 budget resolution authored by Ryan’s Budget Committee. But apparently he didn’t notice this passage:
“Raising taxes on capital is another idea that purports to affect the wealthy but actually hurts all participants in the economy. Mainstream economics, not to mention common sense, teaches that raising taxes on any activity generally results in less of it. Economics and common sense also teach that the size of a nation’s capital stock – the pool of saved money available for investment and job creation – has an effect on employment, productivity, and wages. Tax reform should promote savings and investment because more savings and more investment mean a larger stock of capital available for job creation.”
In other words, taxes on capital gains should not be increased, but if anything should be lowered.
Stewart assumes that Ryan wants to raise capital gains taxes because that’s the only way to justify a 25 percent top rate as anything other than a massive giveaway to the rich. But Ryan himself has said he doesn’t want to raise capital gains taxes.* It really is a massive giveaway to the rich. The reason Ryan won’t specify the “loopholes” he wants to close is that he can’t: if he made a list of tax expenditures to eliminate but didn’t touch the preferences for investment income, it would be patently obvious that he is waging class warfare on behalf of the 1%.

Like David Brooks before him, Stewart has fallen into the trap of believing that Paul Ryan is something other than a charlatan and a political hack. There are real tax reform proposals out there, like Domenici-Rivlin, which would cut the top rate to 27% but tax capital gains as ordinary income). I don’t agree with Domenici-Rivlin because I think now, with looming structural deficits ahead, is not the time to cut tax rates. (In White House Burning, we propose to reduce or eliminate preferences for investment income, mortgage interest, sales of homes, employer-provided health care, charitable contributions, state and local taxes, and state and local bonds, among others.)

But Domenici-Rivlin is at least worth discussing. Paul Ryan’s “proposal” is simply a transparent assault on ordinary Americans on behalf of the rich.

* How Stewart missed this is baffling, since the passage I quote is from page 51, and Stewart quotes directly from page 50.
A Post Script To The Mathematics Lesson....

I trust you do understand that the United States Of America will NEVER declare bankruptcy, i.e., default on our debt.  What we will do is deflate it away.  See Section Four of The Great Recession Conspiracy for details.

You do understand that Ben Bernake has printed THREE TRILLION DOLLARS in 100 dollar bills in the past few months.  Most of it is tied up in the banking system for now, but when it starts getting distributed, remember this simple definition of INFLATION.

Too Many Dollars Chasing Too Few Goods And Services.
Some Simple Mathematics!!

Fact One:  In the U.S., we spent 20% of our GNP on Health care last year.
Fact Two: The share of the GNP we spend on healthcare has been growing 8% annually for over fifteen years.
 So here is the simple math that comes out of those two facts.
2013     21.6%
2014     23.2%
2015     25.2% 
2016     27.2%
2017     29.4%
2018     31.7%
2019     34.3%
2020     37.0%

Since we have some other expenses that cannot be escaped, i.e., interest on the national debt, et al., sometime later this decade, we go bankrupt.   Never mind all the money that did not go into education, research and development, infrastructure repair, etc.

O.K., you can see the problem clearly now.

And here is a line from the Opinion section of March 23, 2012 issue of the Los Angeles Times.

"On Thursday, the House voted to eliminate one of the main cost controls in the 2010 law:  The Independent Payments Advisory Board, whose purpose is to keep a lid on the growth of Medicare's budget."

So much for simple math!!
Why Can't Somebody Tell The Truth??

There is no question the price of gasoline is increasing!  I just paid over $60 to fill my own small car.  Every 1 cent increase in the price of gasoline takes $1 Billion out of the economy that could otherwise be spent to bolster the sales of small businesses so they could hire new employees.
So we can agree, the price of gasoline is important, but the question is what are the politicians in Washington doing about it.

First, the Democrats.  Obama has increased the mileage goals that new cars must meet, and that is is a good thing.  But at the same time, he keeps giving money to companies like Solyandra (and another one that never gets mentioned in the news) so $1 BILLION is wasted.  He just doesn't seem capable of learning that governments CANNOT pick winners.

 Now for some actual facts:  First, the Republicans continue to blame Obama for the increased prices while they know damn well prices are set in world markets and the current run up is the result of Wall Street speculators.  But here is the real problemPetroleum is a fixed quantity, as in they Ain't Making It Anymore.  But finding what is there is a different question.  For a decade, or more, there has been a controversy in the oil business around a concept called "Peak Oil".  What that means is that all the oil that is going to be discovered has been discovered and all future finds will be smaller and more expensive to achieve.  But the counter argument is that improved technology will let us find petroleum from new sources.  A good example is the new technology that allows for "fracking" which is opening up huge new gas and oil fields.

Second, the Republicans.  Paul Ryan (the mentally challenged, self appointed guru of the Republican party) has just introduced a new bill that would eliminate federal subsidies for alternative energy companies, and that is a good thing.  But he also wants to remove all funding from energy research and that is stupid beyond belief!!  That is killing the golden goose.

Why can't anybody tell the truth anymore?  Is there something in the Water in Washington that makes politicians utterly stupid?  Anybody have any ideas?

Saturday, March 24, 2012

Another Voice Explains The Truth About MacroEconomics!!

Frequently, I think Robert J. Samuelson is off base in his understanding of how the economy works.  But I have been completely wrong as this piece from the Washington Post demonstrates.  He says exactly what I said in The Great Recession Conspiracy.

Long-term understanding of the U.S. economic crisis

By , Published: March 18

Four years after the onset of the financial crisis — in March 2008 Bear Stearns was rescued from failure — we still lack a clear understanding of the underlying causes. Hundreds of studies and books have given us an increasingly detailed picture of what happened without conclusively answering why. Conventional wisdom has advanced competing theories: Wall Street types took too many risks, encouraged by lax government regulation; or pro-homeownership policies eroded mortgage-lending standards and created the housing bubble.

Actually, both theories are correct — and neither is. It’s true that Wall Street took too many risks while government regulators watched passively; it’s also true that the government’s aggressive promotion of homeownership contributed to real estate speculation. But the fact that these theories are not mutually exclusive suggests that both were consequences of some larger cause. Just so. What ultimately explains the financial crisis and Great Recession is an old-fashioned boom and bust, of which the housing collapse was merely a part.

The boom started with the decisive defeat of double-digit inflation in the early 1980s. Consumer price increases dropped from 14 percent in 1980 to 3 percent in 1983. As inflation fell, interest rates gradually followed (from 1982 to 1989, rates on 10-year Treasury bonds fell from 13 percent to 8 percent) when investors realized the decline was lasting. With interest rates falling, stock prices rose (from 1982 to 1989, they nearly tripled), and with a lag, housing prices did too. Consumer spending surged, as Americans skimped on saving and borrowed against swelling home values and stock portfolios.

All the good news (low inflation, high employment, rising stock and real estate prices) drove economic growth. Between 1982 and 2007, there were only two mild recessions. When prosperity was jeopardized — by the 1997 Asian financial crisis, the tech crash in 2000, the 9/11 attacks — the Federal Reserve seemed to defuse the threats. The economy seemed less risky. Economists announced the Great Moderation of business cycles.

Booms become busts because justifiable confidence becomes foolish optimism. So it was. Believing the world less risky, people took more risks. Investment banks and households increased their debt. Lending standards eroded, because borrowers’ repayment prospects were thought to have improved. Regulators relaxed oversight, because markets seemed more stable and self-correcting. On the fringes, ethical standards frayed; criminality increased. The rest, as they say, is history.

Confession: I have written all this before. It is a lonely view. The latest issue of the academic Journal of Economic Literature has two review articles; one summarizes 21 books on the crisis by economists and journalists, and the other analyzes 16 scholarly papers and studies. None — so far as I can tell — suggests this long boom-bust crisis explanation. The only “boom” that matters is the housing boom. There is no sense of history: a recognition that today’s events may ultimately result from events years or decades ago.
Among the public, the press and politicians, the disdain for historical explanations is no mystery. The crash was a crime against society; the public wants culprits. The press pursues wrongdoing. It’s a good story. President Obama blames his predecessor’s policies. It’s good politics. A narrative rooted in mass and bipartisan delusion does not serve these purposes. Everyone wants blood.

The case of economists is more curious. They presumably crave truth; most aren’t hankering for political appointments. But their blind spot is their self-identity. Modern economists portray their discipline as a “science” that can better manage the economy for growth and stability. In particular, this repudiates the fatalism of the 1920s that, as Sylvia Nasar describes in her book “Grand Pursuit: The Story of Economic Genius,” saw business cycles as unavoidable and, in part, desirable:

“Judging by newspaper headlines of the early 1930s, popular wisdom viewed economics through a biblical lens: recessions were the wages of sin. When good times lasted too long, businesses and individuals threw caution to the wind and behaved badly. Recessions . . . occurred when private businesses and households unwound past excesses, wrote off bad investments, and behaved with restraint once again. . . . (Recessions) were regrettable but necessary correctives, like a detox program for a drunk.”

The problem for economists is that the crisis has, to some extent, reaffirmed this dour and previously discredited view. Prolonged prosperity from 1983 to 2007 bred bad habits and overconfidence. This does not mean that we know nothing or that we have no tools to combat savage recessions; after all, we did avoid a second Great Depression. But it does mean that one promise of modern economics — to extend economic expansions and shorten slumps — can create the conditions for its own failure. Although the conclusion is obvious, economists ignore it. The most likely reason is that it undermines their self-appointed role as agents of social progress.

Tuesday, March 20, 2012

It Turns Out That It Is Just That Bad!!


Bam’s angry adviser

Last Updated: 12:21 AM, March 20, 2012
Posted: 10:55 PM, March 19, 2012
Back when he agreed to advise the Obama administration on economics, General Electric CEO Jeff Immelt told friends that he thought it would be good for GE and good for the country. A life-long Republican, Immelt said he believed he could at the very least moderate the president’s distinctly anti-business instincts.
That was three years ago; these days Immelt is telling friends something quite different.

Sure, GE has managed to feast on federal subsidies, particularly the “green-energy” giveaways that are Obamanomics’ hallmark.

But Immelt doesn’t think he’s had anywhere near as much luck moderating the president’s fat-cat-bashing, left-leaning economic agenda of taxing businesses and entrepreneurs to pay for government bloat.
Friends describe Immelt as privately dismayed that, even after three years on the job, President Obama hasn’t moved to the center, but instead further left. The GE CEO, I’m told, is appalled by everything from the president’s class-warfare rhetoric to his continued belief that big government is the key to economic salvation.

Or, as one friend recently put it to me, “Jeff thought he could make a difference, and now realizes he couldn’t.”

Immelt’s conversion from public Obama supporter to a private detractor is important: It shows how even businessmen who feast off his subsidies worry about his overall economic agenda and its long-term impact on the economy.

Don’t expect Immelt to say anything publicly about the downside of president’s economic agenda anytime soon: He’s still serving as what is considered the top outside economic adviser to the White House. (A GE spokesman insists that the reports I’m sharing here about Immelt’s private criticism of Obama are “ludicrous.”)

GE has too much to lose for Immelt to publicly ’fess up to his disdain. The president now routinely talks up his desire to tax businesses that create jobs overseas, and GE overseas expansion is well-documented. Nor does the company want to put all its green subsidies at risk.

And of course the last thing Immelt or his shareholders need is for the president to turn his class-warfare fire on them, as he did to his erstwhile pals in the banking business.

Yet friends report that Immelt’s displeasure with the president’s economic policies is real and palpable in private settings.

Back in 2008, the GE boss gave both to GOP presidential nominee John McCain and, in the Democratic primaries, to Hillary Clinton; he’s said that he voted for McCain. But GE as a whole was one of candidate Obama’s top donors. As noted, Immelt joined the new president’s team, first as a member of Obama’s Economic Advisory Recovery Board and later as head of his Council on Jobs and Competitiveness.
Yet even as Immelt continues to dispense advice to the president, friends tell me, he’s privately rooting for Mitt Romney to win the Republican nomination and defeat Obama in the fall.

A GE spokesman says simply, “Mr. Immelt has not decided to support Gov. Romney.” OK — but the GE “community” sure has. In 2008, GE execs (who often take their giving cues from the guy at the top) gave over five times more to Obama than to McCain. This time around, GE executives have raised nearly twice as much for Romney as for Obama, and Romney isn’t even the nominee yet.

I’m told a clue to Immelt’s disenchantment with the president can be found in GE’s annual letter to shareholders, in which the CEO laments, “We live in a tough era in which the public discourse, in general, is negative . . . American companies, particularly big companies, are vilified,” when “we need to work together to find a better way.”

Sure doesn’t sound like an Obama booster to me.
Charles Gasparino is a Fox Business Network senior correspondent.

Monday, March 19, 2012

Is This Sad, Ironic, Funny, Or What??

Jeff Immelt, the CEO of GE, has been Obama's right hand man on jobs for awhile now.  If you have been reading this rant, you know I think that is outrageous because Jeff doesn't know a damn thing about how small businesses create jobs, and small businesses create about 70% of all new jobs and have done so for 60 or 70 years.

Now here is the kicker!!  Jeff Immelt has just announced he is backing Mitt Romney for President!!

Is there a message here?  If so, is it what I suspect?| 
This Says It All!!