Category Archives: Debt

Some Economic Fundamentals

Barack Obama, Business, Debt, Economy, Inflation

Against the backdrop of the White House’s budget, a “$3.778 trillion spending plan for the year that begins in October, which called for about $1 trillion in tax increases over 10 years and higher spending on programs such as education, transportation and mental-health services” (WSJ), consider the following:

* “The top 1 percent of Americans in income pays 37 percent of all income taxes. The top half of wage earners pays 98 percent of all income taxes” (Pat Buchanan).

* “9 million Americans ages 20 to 64 years old – nearly 5 percent of the working-age population – is receiving disability pay (Pat Buchanan). 81,000 Americans went on disability just last month. The government is spending $260 billion a year on disability programs, more than it spends on food stamps and welfare combined (Lou Dobbs).

* 47.8 million Americans receive food stamps, “at a cost of $80 billion” (Pat Buchanan). The percentage of Americans on food stamps has risen by 70 percent since 2008.

* 90 million Americans have dropped out of the labor force (Here).

* 50 million Americans are living below the poverty line (Lou Dobbs).

* And who can forget the national debt? It’s $16.8 trillion.

A Beautiful Neoconservative Mind

Debt, Economy, Federal Reserve Bank, Free Markets, Media, Neoconservatism, Republicans

The question, I guess, is rhetorical. Still, why does Frontpage Magazine describe Steve Moore, of the War Street Journal, as “One of the country’s sharpest economic minds,” who can “explains how conservatives can save America from left-wing destruction”? This introductory blurb is on the front page of FPM, today, April 2.

Here’s how I introduced this beautiful neoconservative mind on BAB, starting in 09.30.08:

Stephen Moore authored a book paradoxically titled Bullish on Bush: How the Ownership Society Is Making America Richer.

Yes, Bush was a bailout bandit”: “Bush’s ownership society, built as it was on quicksand, quickly metamorphosed into the bailout society.”

Bush lobbed his financial WMD first by nationalizing the heavily socialized Fannie Mae and Freddie Mac, another formality. …
Buried in Bush’s blather was a tacit acknowledgment that government’s deep infiltration of the mortgage and homeownership markets encouraged a laissez faire attitude toward lending and borrowing.
“Because [Fannie and Freddie] were chartered by Congress,” confessed Bush, “many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk.”
Fannie and Freddie’s “charter” partners Bush exonerated.
Moreover, nowhere did Bush come clean about the continual expansion of credit by the Central and commercial banks. Loose monetary policy has caused interest rates to fall below the natural market rate, and had precipitated an artificial stimulation of economic activity reflected in the colossal malinvestment and misallocation of resources witnessed in the housing market.
The Bush government—and previous administrations—had eliminated the risks of mortgage lending. The subprime fiasco, in a nutshell, was a consequence of extending credit to the un-creditworthy, chief of who were minorities. “The Diversity Recession” is how VDARE.com commentator Steve Sailer has aptly dubbed the mortgage misadventure.
You had the Federal Housing Administration (FHA) colluding with the U.S. Department of Housing and Urban Development (HUD) to provide taxpayer-subsidized home loans to illegal immigrants, no questions asked.
You had the 1974 Equal Credit Opportunity Act, the 1975 Home Mortgage Disclosure Act, and the US Fair Housing Act are—all arrows in the quiver of the federal government and the Department of Justice, aimed at forcing banks to throw good money after bad by lending it to those with low credit ranking. Mainly minorities.
Under the guise of remedying (alleged endemic) root-and-branch racism, the State [under Bush] had legislatively removed the risks of mortgage lending, thus precipitating the housing bubble.

Magnificent mind Steve Moore wrote an entire book in praise of Bush’s role in that kind of “ownership.” Will anyone ever make Moore own that?

Being Establishment means never having to say you’re sorry (or atone for your mistakes).

Savers: You’re The Bank’s Bitch

Business, Constitution, Debt, Economy, Federal Reserve Bank, Political Economy, Private Property, The State

Lawrence E. Rafferty, guest blogger on Professor Jonathan Turley’s blog, confirms what those of us who cleave to the Austrian school of economics already know: The workings of fractional reserve banking guarantee one thing only: Your deposits are not your own.

Booster to the banks Stuart Varney, of Fox Business, stressed today that he believes with all his heart that the US Congress [the same intemperate group that has helped accrue the US government’s 17 trillion dollar debt] will protect the private property of American depositors from the state-sanctioned theft suffered by Cypriot savers.

Rafferty sunders the Varney pie-in-the-sky, revealing that,

“A joint paper by the US Federal Deposit Insurance Corporation and the Bank of England dated December 10, 2012, shows that these plans have been long in the making; that they originated with the G20 Financial Stability Board in Basel, Switzerland (discussed earlier here); and that the result will be to deliver clear title to the banks of depositor funds. ” NationofChange
The above article explains that most of us do not realize that when you deposit money in a bank, that it becomes the property of the bank and we become unsecured creditors of the bank! “Although few depositors realize it, legally the bank owns the depositor’s funds as soon as they are put in the bank. Our money becomes the bank’s, and we become unsecured creditors holding IOUs or promises to pay. (See here and here.) But until now the bank has been obligated to pay the money back on demand in the form of cash. Under the FDIC-BOE plan, our IOUs will be converted into “bank equity.” The bank will get the money and we will get stock in the bank. With any luck we may be able to sell the stock to someone else, but when and at what price?” NationofChange
If I deposit $1,000 dollars in my local bank, I trust that the funds are safe and protected by FDIC insurance and that even if the bank fails, I will get my money back. Under the plan listed above, we may not even be able to fall back on the FDIC insurance coverage. The FDIC-Bank of England plan would supersede our FDIC coverage and we would be relegated to become a “shareholder” in the failing bank or its successor entity. Let me see if I understand this scheme. The bank who is failing due to mismanagement or due to risky investments could steal my funds and force me to accept stock in a company led by poor businessmen with an even poorer business record! If you are brave enough, check out the full FDIC-Bank of England plan here.
Cyprus wasn’t the only place where a bankster grab of deposits was put into place or is being discussed. It is being discussed in New Zealand as well. “New Zealand has a similar directive, discussed in my last article here, indicating that this isn’t just an emergency measure for troubled Eurozone countries. New Zealand’s Voxy reported on March 19th:

Read Rafferty’s complete report.

Yippee! For your “hard earned deposits,” you’ll receive shares in a bankrupt, banking institution.

As Lew Rockwell put it recently, the most patriotic thing one can do is to partake in a run on the bank.

Before the fact, of course.

Moreover, and as I’ve long argued, thanks in no small part to Congress, various global agreements, mediated by a global bureaucracy—these embroil individual Americans absent their consent—have usurped the US Constitution and the power of Congress.

International treaties are often nothing more treason tarted up.

Happy Days Are Here Again In … La-La Land

Britain, Debt, Economy, Government, Inflation

Across the pond, U.K. Chancellor of the Exchequer George Osborne is singing from the Bush and Obama hymn sheet. A neo- Keynesian naturally, Osborne is intent on excessive spending as a model of economic growth. What better way than a housing bubble to bring about that brief burst of spending before the bust?

Tightening credit conditions and foreclosures signal to this man (counter-intuitively, of course) that it is time for the debt-laden borrower to borrow more money he can’t repay; that it is time for those who do not spend money they don’t have, to subsidize those who do.

It’s all good, promises Bloomberg.com:

Osborne yesterday pledged 3.5 billion pounds ($5.3 billion) to help buyers of new homes with loans of as much as 20 percent of the property’s value, broadening an existing program beyond first-time purchasers. He also announced a plan to guarantee as much as 130 billion pounds of new mortgages to fuel demand from purchasers with limited cash for a deposit.

At least the chancellor delivered a 2013 budget. At a glance, here are “the key points of Chancellor George Osborne’s Budget,” via BBC News (a doff of the hat to our friend in the UK):

FUEL, ALCOHOL AND CIGARETTES
September’s 3p fuel duty rise scrapped
April’s 3p rise in beer duty scrapped. Instead, beer duty to be cut by 1p
Annual inflation +2% rise in beer duty to be ended but “duty escalator” to remain in place for wine, cider and spirits
Cigarette duties unchanged – continuing to rise by inflation +5%

INCOME TAX
Limit at which people start paying tax to be raised to £10,000 in 2014 – a year earlier than planned

HOUSING
Shared equity schemes extended, with interest-free loans for homebuyers up to 20% of value of new-build properties
Bank guarantees to underpin £130bn of new mortgage lending for three years from 2014

STATE OF THE ECONOMY
Growth forecast for 2013 halved to 0.6% from 1.2% in December
Office for Budget Responsibility watchdog predicts UK will escape recession this year
Growth predicted to be 1.8% in 2014; 2.3% in 2015; 2.7% in 2016 and 2.8% in 2017.

BORROWING
Borrowing of £114bn this year, up from previous £108bn forecast
Borrowing set to fall to £108bn, £97bn and £87bn, £61bn and £42bn in subsequent years
Borrowing as share of GDP to fall from 7.4% in 2013-14 to 5% in 2015-16
Debt as a share of GDP to increase from 75.9% in 2012-13 to 85.6% in 2016-17

SPENDING AND PAY
Most government departments to see budgets cut by 1% in each of next two years
Schools and NHS will be protected
£11.5bn in further cuts earmarked in 2015-16 Spending Review, up from £10bn
1% cap on public sector pay extended to 2015-16 and limits on “progression” pay rises in the sector
Military to be exempt from “progression” pay limits.
Proceeds of Libor banking fines to be given to good military causes, including Combat Stress charity

JOBS
600,000 more jobs expected this year than at same time last year
Claimant count to fall by 60,000

TRANSPORT AND INFRASTRUCTURE
An extra £15bn for new road, rail and construction projects by 2020, starting with £3bn in 2015-16

HELP FOR BUSINESS
Corporation tax to be cut by 1% to 20% in 2015
New employment allowance to cut National Insurance bills cut by £2,000 for every firm
450,000 small firms will pay no employer National Insurance
Government procurement from small firms to rise fivefold
Tax relief for investment in social enterprises
Stamp duty axed on shares traded on growth markets like Aim.
Tax avoidance and evasion measures, including agreements with Isle of Man, Guernsey and Jersey, aimed at recouping £3bn in unpaid taxes

ENERGY AND THE ENVIRONMENT
Tax incentives for ultra low-emission cars
Pottery industry in Midlands to be exempt from climate change levy
Tax allowances for investment in shale gas

INFLATION
2% Bank of England inflation target to stay in place
Bank remit to be changed to focus on growth as well as inflation

PENSIONERS
Single flat-rate pension of £144 a week brought forward a year to 2016
Cap on social care costs confirmed

FAMILIES
20% tax relief on childcare up to £6,000 per child from 2015
£5,000 payments for those who lost money on Equitable Life policies bought before 1992. Extra money for those on low incomes