In ten years, postage stamps will cost $1.34, if you believe Barack Hussein Obama. The hand-written letter, a social grace of bygone years, will be forgotten. Hallmark will fold, as everyone sends e-cards. You will pay all your bills online. And aren’t you glad you have email to keep in touch with your friends?
The Competitive Enterprise Institute obtained internal Treasury Department documents under the Freedom of Information Act (FOIA) discussing the cost of “cap and trade.” These documents, which your own government would have preferred that you did not see, estimate that “cap and trade” will siphon “on the order of $100 to $200 billion annually” from the United States productivity into the federal coffers. The government has blacked out the text describing the actual cost.
If you believe the $100 billion estimate, based on the population at the time of this post, that is $325 per person annually. Even if it does not come out of your pocket directly, it WILL come out of your pocket, as higher utility bills and as increased cost of fabrication for everything made in the United States. (Of course, one of those “unintended consequences” will be to drive more jobs outside our country.)
If you believe the $200 billion estimate, that is $650 per person annually, or $1761 per household at 2.71 persons per household. Government estimates are usually low by a factor of about 300%, but for the sake of argument let’s split the difference between these two on-paper estimates and say that the cost will be $488 per person annually. That comes out to $1.34 per day per person.
Now here’s a clip of Barack Hussein Obama from a June 25, 2009 press conference addressing the Waxman-Markey energy tax, aka “Cap and Trade” bill — Waxman-Markey to cost Americans only “a postage stamp per day”…
Unfortunately, the cost will not be borne by “all Americans.” The ones who are working will pay the bill. As of August 2009, that is 139,649,000 workers. That comes out to $1074 per worker annually, using today’s unemployment rate. And for that hefty price, our hapless worker gets to admire all the new wind farms (decimating the song bird population) and solar panel arrays.
Democrats are making their classic mistake here. They always enact legislation assuming that all the other variables in the mix will stay the same. But they won’t. The higher cost of energy will drive jobs out of the United States, reducing the labor pool and the income tax revenues gleaned from the workers. That will force the government to raise tax rates to pay for their stupidity, and more jobs will be lost, creating a downward spiral in the economy.
If the Democrats’ plans for universal health insurance are enacted, the punitive costs of that socialism will hit simultaneously with the “cap and trade” plan for global redistribution of wealth, further trashing America’s prospects for prosperity. The whole world would be better served by establishing the United States as a model for successful economy, rather than bringing it down to the average level of the globe so that others “don’t resent us.”
Currently, we have a government run by university academics who have no concept of the real world. As some have pointed out, there is no one in Obama’s White House who has run so much as a candy store. And they are trashing the economy of our once great nation.
Clearly, a smart investment would be to stock up on Liberty Bell stamps. The “forever stamps” are currently selling for 41-cents per First-Class one-ounce letter. That would give you a 327% return on investment over a ten-year holding period.
Note that in most of the extant analyses, the $200 billion estimate was used. Therefore all of these results will be higher than our calculations in this post, because we used the average of the two government estimates, a cost of $150 billion per year.
Also, you will see the figure $1,761 per household used consistently. That figure is obtained by spreading the $200 billion cost over an estimated 113,571,834 US households, or by applying the $650 per person figure to a 2.71 average persons per household. These numbers come from projecting the population growth rate forward ten years.
By Max Rugemer | Wednesday, February 11th, 2009 at 11:47 am
I have suspected for a long time and I openly told people in the fall of 2008 that certain entities were trying to harm the economy in order to ensure that Obama would get elected in the November elections. If you watched the stock markets in the months before the election of 2008, you saw these massive declines at the end of the day almost every day. These declines were by entities selling massive amounts of stock in what clearly looked like an attempt to sink the stock markets each day in time for the prime time news each night.
Now we have confirmation that there was a massive “run on the banks” by some unknown entity on September 18, 2008 in an effort to affect the election. Democratic Representative Paul Kanjorski (PA-11), Capital Market Subcommittee Chair in the US House of Representatives, describes this stealth bank panic in the video below (transcript follows).
I suspect there was an economic coup d’état in September of 2008 by extremely wealthy Liberals and Democrats and we simply were not smart enough to see it happen right in front of us. I also suspect that the plan succeeded in getting Obama elected but is now completely out of control.
Transcript
It’s because of the misconceptions out there that things were done that are misunderstood. We did not give the $700 billion dollars for the purpose of lending money. That was never in the program. It was misconstrued initially and put together with the suggestion by the Secretary of the Treasury that we would be buying what we called “dirty assets” — defective mortgages and securities that were held in these banks — that the government would find a way to create a market, buy them in, take them off the balance sheets of the banks so that the banks could continue to function normally…. I supported that, but also part of the bill, we gave the jurisdiction and authority to the Secretary of the Treasury to make investments in banks. He had very wide authority because quite frankly, we’re not the experts on the Hill as to how to solve this problem. And the problem is a multi-faceted problem, so we gave great flexibility to the Secretary of the Treasury to act….
I was there when the Secretary and the Chairman of the Federal Reserve came those days and talked with members of Congress about what was going on…. Here’s the facts, and we don’t even talk about these things. On Thursday [September 18] at about eleven o’clock in the morning, the Federal Reserve noticed a tremendous draw-down of money market accounts in the United States, to the tune of $550 billion dollars was being drawn out in the matter of an hour or two. The Treasury opened up its window to help. They pumped a hundred and five billion dollars in the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account so there wouldn’t be further panic out there, and that’s what actually happened.
If they had not done that, their estimation was that by 2 o’clock that afternoon, five-and-a-half trillion dollars would have been drawn out of the money market system of the United States, would have collapsed the entire economy of the United States, and within 24 hours the world economy would have collapsed. Now we talked at that time about what would happen if that happened. It would have been the end of our economic system and our political system as we know it.
And that’s why, when they made the point we’ve got to act and do things quickly we did. Now Secretary Paulson said, “Let’s buy out these sub-prime mortgages.” That’s when he came to Congress. But he said, “Give us latitude and large authority to do many things as we decide necessary. And give us seven hundred billion dollars to do that.”
Shortly after we enacted our bill with those very broad powers. The U.K. came out and said, “No, we don’t have enough money to buy toxic assets. Instead, we’re going to put our money into banks so that their equity grows and they’re not bankrupt.” And so the U.K. started that process and that’s true. It was much cheaper to put more money in banks as equity investment than to start buying their bad assets, because it became early determined that we’d probably have to spend three or four trillion dollars of taxpayer’s money to buy these bad assets. And we didn’t have… we only had seven hundred billion dollars. So Paulson made a complete switch, went in and started putting money in buying securities and reinvesting in the banks of the United States. Why? Because if you don’t have a banking system you don’t have an economy. And although we did that, it wasn’t enough money, and as fast as we did that, the economy has been falling, and the reason last week… We’re really no better off today than we were three months ago because we’v had a decrease in the equity positions of banks because other assets are going sour by the moment….
The market was 500 trades away from Armageddon on Thursday, traders inside two large custodial banks tell The Post.
Had the Treasury and Fed not quickly stepped into the fray that morning with a quick $105 billion injection of liquidity, the Dow could have collapsed to the 8,300-level – a 22 percent decline! – while the clang of the opening bell was still echoing around the cavernous exchange floor.
According to traders, who spoke on the condition of anonymity, money market funds were inundated with $500 billion in sell orders prior to the opening. The total money-market capitalization was roughly $4 trillion that morning.
The panicked selling was directly linked to the seizing up of the credit markets – including a $52 billion constriction in commercial paper – and the rumors of additional money market funds “breaking the buck,” or dropping below $1 net asset value.
The Fed’s dramatic $105 billion liquidity injection on Thursday (pre-market) was just enough to keep key institutional accounts from following through on the sell orders and starting a stampede of cash that could have brought large tracts of the US economy to a halt….
By Keith Kappel | Friday, November 14th, 2008 at 8:25 am
Democrat economic policies are steering us into a collision course with disaster. This raises the question whether they understand or if they are so consumed by the desire for power that they don’t care.
From its peak a little over a year ago, the Dow Jones Industrial Average is down some 42%. This downward spiral coincides with the rise of the Democrats’ political star, now President Elect, pushing a platform of higher individual taxes, higher business taxes, increased capital gains taxes, increased government (deficit) spending and redistribution of wealth. Unfortunately for the Republicans, the voter blames the party in power for the economic problems and that blame was soundly felt at the polls last week. Clearly, the Republicans who are leaderless, unprincipled and lacking articulate spokespersons are not blameless. They pandered to the public as Democrat lite on the premise that they could win Moderates and Independents by moving left. They also failed in oversight with respect to Fannie Mae and Freddie Mac. Yes, the Democrats were in charge of those bloated and corrupt cash cows and yes, the Democrats blocked efforts that might have brought reform. However, a real leader of the opposition party would have gone directly to the public with the facts in evidence of what was occurring. But no; “real leader” and “Republican” has become an oxymoron. Consequently, the voters took the party to the woodshed and thought that by putting the fox in charge of the henhouse we chickens could be saved.
But there is a unique characteristic to financial markets. They don’t look back, they look forward and when they do they see even more economic calamity in the offing evidenced by clearly announced Democrat plans. Plans that will dig a hole so deep that recovery will be decidedly painful if achievable at all. Waiting in the wings to exploit our economic weakness are a host of foreign enemies who are growing their economies and their military capabilities. Health care, college tuition and earned income tax credits will be the least of our concerns given emerging geopolitical issues viz a viz Israel, Iran, Syria, South America, North Korea, China, Russia and Al Qaeda. We are fiddling while our manufacturing base crumbles and the only growth sector for jobs is government. Who will be there to manufacture the military hardware in support of a major defense build up?
At the foundation of our problem is taxation. High corporate tax rates force companies to shift manufacturing to lower taxed countries. If your profits are taxed at 35% in the US and 12% in Ireland, certainly the Chief Financial Officer is going to recommend the Board of Directors shift to Ireland. The same scenario exists for small companies where the majority of private sector jobs originate. Taking money from productive people who make over $250 K and giving it to unproductive people under that threshold stifles and kills growth. Jobs are being lost, not created. At the same time the small business infrastructure necessary for the support of larger companies crumbles.
On top of this, seeds are being sown for a concurrent problem with inflation and/or stagflation. Bailout monies on top of increased entitlements on top of unfunded liabilities for Social Security, Prescription Drugs, Medicare and Medicaid cannot be financed without printing more money. And that is a recipe for disaster. Better buy a wheelbarrow to carry your money to the grocery store. The 20% mortgages under Jimmy Carter will look like a bargain.
The coup de grâce is energy. Instead of incentives to utilize our own resources and get off foreign oil, the plan is to increase that dependence by instituting cap and trade* and continue blocking exploration, utilization of coal, natural gas and nuclear power. Cap and trade alone will dramatically increase the cost of electricity compounding the exporting of jobs and manufacturing caused by high taxes. Energy is critical to growth. Without affordable energy business cannot produce economically. Further compounding matters the consumer has yet another drain on discretionary spending.
This is not complicated. High taxes and energy costs kill jobs. Without jobs there is no consumer and without jobs and consumers there is no tax base. Where will the money come from to fund the entitlements?
Here are some anecdotal references to ponder:
California representative Maxine Waters during a hearing on oil prices said to company executives “…when we socialize you…”
Massachusetts representative Barney Frank, who brought us the Freddie and Fannie debacle, wants to give auto companies a bailout package in exchange for installing a government master to control product development.
New York representative Charley Rangle, himself a tax evader, wants to find more creative ways to tax wealthy people.
Virginia representative Jim Moran thinks it is wrong for people to believe they can hold on to their wealth.
President elect Obama plans to let the Bush tax cuts expire in 2010 creating a substantial tax increase by default thereby exacerbating the recession.
Others in Congress have called for a 25% reduction in defense spending to fund social programs.
New York City Mayor Michael Bloomberg wants to raise taxes and fees to offset budget shortfalls. New York State is facing a massive deficit and the Unions and the legislature do not want to cut spending. The political entities are, in effect, going out of business and the unions and the democrat controlled legislature believe they can continue spending as if nothing is happening!
The market sees where all this is leading and investors are jumping ship.
While Congress plans more and more entitlements to be paid for with money and taxes that are no longer there, the country’s economic base crumbles and melts away. Along with it goes our defense infrastructure and related manufacturing base that forms the foundation of our strength and security. In addition to the markets, the world sees where we are headed and has only to pick the right time and place to deliver a knock-out blow.
Perhaps if we had a truly independent media and taught critical thinking skills in our schools, tough questions would be asked and the voting public would have a better appreciation for why we are on this track and where it is taking us.
So, do the democrats understand or care? Looks like what they care about is power and control but are so blinded that they can’t see the oncoming train.
*Cap and Trade: — A flexible environmental regulation mechanism that sets an overall limit on the emission of a certain pollutant, but allows companies that can easily reduce emissions to sell credits to other companies for which such reduction would be difficult. The cap ensures that emissions will not exceed a desired amount.
Obama associate Bill Ayers had plans to overthrow America and conquer capitalism. He is still a proud communist, and proud of being a terrorist. Obama has gone completely unscarred by this friendship and he still hasn’t disowned that relationship.
Doesn’t it concern people that Obama still remains friends with this terrorist and his terrorist wife? That they shared an office and ideas for three years? That Obama launched his political career at a reception in Ayers’ home? That Ayers still poses for press photos stomping on the American flag?
This video is shocking and America needs to see it.
By Keith Kappel | Tuesday, September 30th, 2008 at 5:36 pm
When Congress declares a crisis and says a bill must be passed or the world will end, it’s time to make sure your wallet is still under your control.
According to the Treasury Department, the number $750B was picked out of the air — no data point of reference. When people like Barney Frank and Chris Dodd, two of the key people who caused the mess, are allowed to write the legislation to clean it up, said bill is a non-starter. Barney Frank, whose lover was made a Fannie Mae director (who eventually quit to pursue a career with Pottery Barn). Chris Dodd, who didn’t realize he got special treatment on his loan from Countrywide.
The government has no business nationalizing this debt and forcing us to pay for it. I submit that yesterday’s down market (big in points but not among the top 10 percentage wise) was more because of fear the bill would pass.
A bill in excess of 100 pages that contained provisions giving the Treasury Secretary unlimited power (not subject to review), allocating 20% of future gains to groups like ACORN, La Raza, et al and facilitating federal takeover of municipal pensions, are cause enough to fear what other provisions are buried to serve liberal self-interests at the expense of the taxpayer and the economy.
A solution that stimulates the free market would have been much more supportable and economically desirable. Such incentives as elimination of capital gains taxes, serious reduction in corporate taxes that would enable business to grow and employ here rather than Ireland and Georgia where tax rates are 12%, revocation of Mark to Market which is causing balance sheet distortions and freeing up our energy resources which would create taxable income. Repeal of the Community Reinvestment Act and the associated governmental extortion perpetrated on banks forcing them to make unsecured loans would not only help, it would keep people like Barack Obama from making hay suing banks for non-compliance and forcing their insolvency.
Government is not the solution — it is the problem. A famous person once said this.
Clearly, availability of cheap energy would not only substantially affect the market but would be tantamount to freeing up consumers from what amounts to a significant foreign tax on disposable income. Off-shore drilling would avail the states of significant royalty income which would easily mitigate the buyout dollars while creating jobs. Similarly, expansion of nuclear utilities would also unburden business, stimulate US-based expansion and jobs as well as free up more consumer disposable income.
Instead of raising the national debt and putting our children in hostage mode, government needs to downsize and dramatically cut spending. Prescription drug entitlement would be a good place to start. Looming in the future are the unfunded liabilities for Medicare and Social Security. The $750B simply defers doomsday for a brief period and sets the scenario for an unrecoverable crash through devaluation of the dollar.
We have many enemies out there against whom we had best have a thriving economy. What do you think would happen if China took advantage and seized Formosa? What if Venezuela, with Russian support, expanded its influence militarily in South America. And what happens when, not if, Iran attempts to destroy Israel?
And the liberals are concerned about national health care? I suppose the two or three rich people who are left standing will pay for it. I wonder if Franklin Raines and Jerry Johnson will be able to handle those taxes or if they’ve so cooked their personal books they qualify for food stamps too.
We can get out of this mess if we enable the free market. Most assuredly, we will collapse if we enable any further empowerment of government and expand the national debt to levels that erode our currency and national security.
The mainstream media outlets just cannot resist hyping the news. Following the failure of the financial bailout legislation in Congress, the stock market declined as expected — by 6.98%. Here are the comparison figures at the Monday close:
It was not spectacular. In the context of history, it was not even in the top ten market downturns. For an excellent review of the top ten, see The Dow’s Worst Days, a slide presentation by Forbes.
The following information compiled by American Funds puts this in perspective, showing the frequency of declines in the Dow Jones Industrial Average since 1900. Clearly, they are regular cyclical occurrences. It is also obvious that, even without the bailout fiasco, we were way overdue for a 20% bear market just in the normal run of things.
A history of declines (1900–December 2007)
Type of decline
Average frequency
Average length
Last occurrence
Routine
(–5% or more)
About 3 times a year
47 days
November 2007
Moderate
(–10% or more)
About once a year
113 days
November 2007
Severe
(–15% or more)
About once every 2 years
216 days
October 2002
Bear Market
(–20% or more)
About once every 3-1/2 years
332 days
October 2002
The operative verb here is DECLINED. Yes, the stock market DECLINED in “paper value.” There are just as many factories, homes, hospitals, oil refineries, roads and bridges, grocery stores, train stations, etc. in the United States now as there were this morning. And all these real assets have just as much real value to the American people as now as they did this morning — to manufacture our goods, shelter our families, provide our health care, produce our fuel, facilitate transportation, broker our food supply, and transport our products.
So how do the news outlets describe what happened?
You have got to love this. Can’t you just see all the financial reporters frantically searching through their thesauruses for new and different ways to say DECLINE? Their challenge is to inject a gripping emotional narrative into the facts of the day, so as to compete for ratings with their competitor news outlets.
Unfortunately, they do not serve the public well in doing this. Thank goodness for Lou Dobbs! He got it exactly right on his television programLou Dobbs Tonight this evening. He asked:
Do you believe today’s Congressional vote against the Wall Street bailout is a victory for the American people and a rejection of the attempted extortion by corporate and political elites?
At latest reading, over 80% of the American people see it that way. Lou went on to say that it would be better to lose money than to sacrifice our principles. But let’s put the losses in perspective. Today the market lost $1.2 Trillion dollars in “paper value.” The numbers went down, and eventually they will go back up, and the so-called “loss” will just be a statistic, a memory.
The alternative would have taken more than half that amount in real productivity — $700 Billion dollars — out of the pockets of ordinary Americans and given it to the power brokers, real value robbed from the people that they would never see again. And for what? To buy a bailout that nobody was sure would work, and that House Republican Minority Leader John Boehner described as a “mud sandwich.”
The $700 Billion bailout of the US financial markets — Emergency Economic Stabilization Act of 2008 — has just failed in the House of Representatives, with 133 Republicans and some intelligent Democrats holding the line against financial socialism. The bill needed a simple majority of the 435 members to pass — 218 votes. The final vote was 228 to 205 against passage, thirteen votes short.
The Dow Jones Industrial Index is dropping steadily, but it is not in free fall. It is experiencing a sell-off, but not a panic. There may be as much as a 20% drop, but then the market will correct itself, as investors holding a large cash allocation in their portfolios begin to see buying opportunities.
And that is the way that the free market system is supposed to work. Assets should be valued based on a market consensus of their utility to the American enterprise, and should not be artificially propped up by government interference. The misguided social engineering practiced by successive Democratic regimes with our tax money got us into this mess. Mercifully, enough of our congressmen decided that throwing another $700 Billion of our good money after the untold trillions of bad investments was not a solution.
The difference between the Great Depression and the present situation is the increased financial sophistication of the American public as a whole. In 1929 investment in the stock market was the province of the very wealthy. Today, almost every American has a stake, in their college savings and retirement accounts. While many do this investing through funds with companies like T. Rowe Price, Equitable, Fidelity, and Templeton, many also purchase stock in companies they like or buy municipal and corporate bonds. They understand that the market will fluctuate.
In comparing the present crisis to the Great Depression as a rationale for the proposed bailout, Fed Chairman Ben Bernanke and United States Treasury Secretary Henry Paulson failed to take into account the difference in the collective financial intelligence of the citizenry between then and now. They only looked at mathematical models for asset pricing. But the free market is driven as much by ideas and expectations as it is by monetary data. That is its strength.
Most Americans understand this. The savvy electorate screamed in outrage at the prospect of being soaked another $700 Billion to pay for the past mistakes of Congress under the duress of a phoney manufactured crisis. And a majority of their congressmen, every single one of them facing elections in just five short weeks, did the sensible thing and defeated this outrageous scam.
Thaddeus McCotter, R-Mich., said the bill posed a choice between the loss of prosperity in the short term or economic freedom in the long term. He said once the federal government enters the financial market place, it will not leave. “The choice is stark,” he said.
Malicious mental manipulation of the American public has created a climate of fear in which power brokers can destroy the legacy of our founding fathers without fear of reprisal from the electorate. Thoughout the last several presidential election cycles, with the complicity of both political parties, our government deliberately mandated disasterous fiscal policy that brought us to the brink of ruin, and is now using that looming danger as an excuse to implement what amounts to a fiscal dictatorship.
And a bi-partisan mess it is. Thinking citizens in both major political parties stand aghast at the spectacle. Writing at a moderate Democratic weblog, The Confluence, life-long Democrat “Lady Boomer” writes in astonishment at the parties’ role reversal:
Senator McCain and the Republicans are still rallying to prevent another blank check without accountability being foisted on US citizens. And Frank is still telling us to write the check. Me to Democratic Party leadership: Trust you? I don’t even know you anymore.
Speaking from a different part of the political spectrum, Representative Thaddeus McCotter (R-MI) expressed his dismay in an official press release:
…the public will be outraged a month before the election; principled House Republicans will view any internal whip count as a political dead pool…
There is a H.L. Mencken quotation that captures the essence of this year’s politics: “The whole aim of practical politics is to keep the populace alarmed, and hence clamorous to be led to safety, by menacing it with an endless series of hobgoblins, all of them imaginary.” ….
The Barton Bulletin notes the irony — The Financial Arsonists: Now They Want You To Believe They Are Putting Out The Fire…That They Started.
Mathematical Model of Our Economy
Ben Shalom Bernanke is the incumbent Chairman of the Board of Governors of the United States Federal Reserve. While he was a Professor of Economics at Princeton University, his academic research focused on the economic and political causes of the Great Depression. Together with New York University Professor of Economics Mark Gertler, he developed a mathematical model of the financial flow in a free market economy called the “Accelerator Model.” This work was first published in a 1989 peer review journal article — Agency Costs, Net Worth and Business Fluctuations, American Economic Review, 79, March 1989, 14-31. Senior economist John Mason offers a very understandable explanation:
The situation we are in now is related to what economists call “the accelerator model”…. On the up-side, the accelerator model helps explain … the “mania” portion of a bubble…. The problem with manias…and panics…is that they are cumulative. That is, they build on themselves.
The “accelerator model” in modern terms has a feedback mechanism in it that can create cumulative movements in asset prices. The particular channel this feedback mechanism works through is individual wealth. As the economy expands, asset prices rise. As asset prices rise, the wealth of individuals increases and they spend more out of this increased wealth. This additional spending raises asset prices further, credit grows to support this increase, and this leads to another round in which wealth grows further…an so on and so on….
But, the “accelerator model” works on the downside as well. The downside result has often been referred to as “deleveraging” or as a period of “debt deflation.” Here, as the economy slows or asset prices dip, the wealth of individuals declines. People reduce their spending and asset prices fall further. As asset prices decline, credit is tightened and this exacerbates the drop. This, obviously, is cumulative in behavior….
A recent program on National Public Radio documented how well this model predicted the inevitable results of our government’s fiscal policy — Bernanke’s 1980s Computer Model Predicts Crisis:
After the recent two weeks of tumult in the American economy, consumers couldn’t be blamed for wishing they had a crystal ball that could help them see into the uncertain future….
The closest alternative to a crystal ball, in the real world, is a computer model of the economy. Back in the 1980s, one such model was created by none other than Ben Bernanke, who’s now at the center of the crisis as the chairman of the Federal Reserve.
Bernanke’s computer model is called the “financial accelerator.” It’s now in the office of Mark Gertler, an economics professor at New York University, who worked on it with Bernanke decades ago….
An economy is never static. However, in the absence of malicious interference with the free market, the unavoidable acceleration and deceleration can be manifest like the gentle wave cycles of the ocean under calm skies, with each rolling crest followed by a shallow trough, gently rocking the boats of enterprise that sail thereon. What violent storm roiled this economy into a turbulent maelstrom that sank the crafts of commerce?
The Community Reinvestment Act … is a United States federal law that requires banks and savings and loan associations to offer credit throughout their entire market area…. The purpose of the CRA is to provide credit, including home ownership opportunities to under-served populations and commercial loans to small businesses….
For those looking for a real start to today’s financial meltdown and government rescue, you need to go back — way back — to 1977, and the Jimmy Carter presidency.
It was then, for the best and purest of reasons, that well-meaning Democratic members of Congress brought the Community Reinvestment Act into being.
The main idea, as the late Democratic Sen. William Proxmire said on the Senate floor in 1977, was “to eliminate the practice of redlining by lending institutions.”….
“Redlining” meant denying a mortgage to those who did not qualify under normal financial guidlines, and had the overall effect of lower home ownership rates among blacks and minorities. This legislation effectively forced financial institutions to give credit to folk who were poor risks.
2. Roughly forty percent of all US mortgages are funded by two finance firms chartered by Congress, privately owned by shareholders but exempt from state and local taxes to motivate investment. These are The Federal Home Loan Mortgage Corporation (Freddie Mac) and The Federal National Mortgage Association (Fannie Mae). They were placed under the regulation of the U.S. Department of Housing and Urban Development (HUD) in 1992, with a mandate to buy a percentage of mortgages from “underserved markets.”
During his eight years as president, beginning in January 1993, Bill Clinton aggressively pushed the subprime loans by relaxing the rules to qualify for a mortgage and forcing banks to compete in this riskier environment — How A Clinton-Era Rule Rewrite Made Subprime Crisis Inevitable:
While President Carter in 1977 signed the Community Reinvestment Act, which pushed Fannie and Freddie to aggressively lend to minority communities, it was Clinton who supercharged the process. After entering office in 1993, he extensively rewrote Fannie’s and Freddie’s rules.
In so doing, he turned the two quasi-private, mortgage-funding firms into a semi-nationalized monopoly that dispensed cash to markets, made loans to large Democratic voting blocs and handed favors, jobs and money to political allies. This potent mix led inevitably to corruption and the Fannie-Freddie collapse.
Despite warnings of trouble at Fannie and Freddie, in 1994 Clinton unveiled his National Homeownership Strategy, which broadened the CRA in ways Congress never intended….
In 1995, President Bill Clinton’s HUD agreed to let Fannie and Freddie get affordable-housing credit for buying subprime securities that included loans to low-income borrowers. The idea was that subprime lending benefited many borrowers who did not qualify for conventional loans….
Banks typically back prime loans with customers’ deposits. But subprime lenders often rely on money from Wall Street investors , who buy packages of loans as investments called mortgage-backed securities….
So at this point the speculation is really triggered, as Wall Street risk-takers pour money into junk mortgage bonds. Was this altruism toward “underserved markets” or a cynical attempt by Democrats to buy the minority vote with taxpayer money?
3. In the wake of the Great Depression, and based on “lessons learned,” Congress enacted legislation to control speculation. In particular, the Glass-Steagall Act of 1933
provided for regulation of interest rates in savings accounts, and
prohibited a bank holding company from owning other financial companies
Eventually, two of these safeguards were removed. The regulation of savings account interest was repealed in 1980. The restrictions on speculation by bank holding companies were removed in 1999 by a bi-partisan Congressional effort supported by President Bill Clinton. So now the bank holding companies, the underpinning of our economy, could invest heavily in other financial ventures that were exposed to the junk mortgage bonds, a recipe for disaster.
4. Despite urgent warnings from Republicans, Congressional Democrats escalated the funding of subprime loans in the 2004-2005 timeframe — Subprime Loans Labeled ‘Affordable’:
In 2004, as regulators warned that subprime lenders were saddling borrowers with mortgages they could not afford, the U.S. Department of Housing and Urban Development helped fuel more of that risky lending.
Eager to put more low-income and minority families into their own homes, the agency required that two government-chartered mortgage finance firms purchase far more “affordable” loans made to these borrowers. HUD stuck with an outdated policy that allowed Freddie Mac and Fannie Mae to count billions of dollars they invested in subprime loans as a public good that would foster affordable housing….
The agency neglected to examine whether borrowers could make the payments on the loans that Freddie and Fannie classified as affordable. From 2004 to 2006, the two purchased $434 billion in securities backed by subprime loans, creating a market for more such lending….
In November 2000, Clinton’s HUD hailed “new regulations to provide $2.4 trillion in mortgages for affordable housing for 28.1 million families.” It made Fannie and Freddie take part in the biggest federal expansion of housing aid ever.
Soon after taking office, Bush … proposed what the New York Times called “the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.”
The plan included a new regulator for Fannie and Freddie, one that could boost capital mandates and look at how they managed risk.
Even after regulators in 2003 uncovered a scheme by Fannie and Freddie executives to overstate earnings by $10.6 billion to boost bonuses, Democrats killed reform.
“Fannie Mae and Freddie Mac are not facing any kind of financial crisis,” said Rep. Frank, then-ranking Democrat on the Financial Services Committee….
In 2005, then-Fed Chairman Alan Greenspan told Congress: “We are placing the total financial system of the future at substantial risk.”
That year, Sen. John McCain, one of three sponsors of a Fannie-Freddie reform bill, said: “If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole.”
Sen. Harry Reid — now Majority Leader — accused the GOP of trying to “cripple the ability of Fannie Mae and Freddie Mac to carry out their mission of expanding homeownership.”
The bill went nowhere….
Overstepping the Constitution
Using the threat of financial disaster for ordinary Americans as leverage, the government has pushed the limits of authority. Writing for Bloomberg Markets, Steve Matthews says:
Bernanke, a longtime scholar of the 1929-to-1933 panic, now has the unwelcome task of trying to keep a new financial calamity from turning into a full-blown depression. What started as a meltdown in the market for subprime mortgages has turned into a worldwide credit and economic crisis. Bernanke, now the Fed chairman, has responded with the most-aggressive expansion of the Fed’s power in its 95-year history. Since last August, Bernanke, 54, has twice cut interest rates by 75 basis points, made Federal Reserve loans available to investment firms for the first time since the 1930s, lowered the rates at which banks can borrow from the Fed and launched an unprecedented rescue of Bear Stearns Cos., the struggling investment bank. …. To prevent a wider crisis, the Fed risked the U.S. government’s money by lending $29 billion backed by Bear’s risky mortgage-backed securities. The loan was an incentive to JPMorgan Chase & Co. to buy the 85-year-old bank….
Bernanke’s rate cuts were followed by the release on March 31 of a sweeping proposal by U.S. Treasury Secretary Henry Paulson to revamp government supervision and regulation of the financial system. Paulson endorsed the Fed’s moves to stabilize the economy and proposed the central bank be given a permanently expanded role as watchdog over the entire financial system, including commercial and investment banks, insurance companies, hedge funds and mutual funds. “The Fed would have the authority to go wherever in the system it thinks it needs to go for a deeper look to preserve stability,” Paulson told the press.
At a press briefing in Miami on April 7, Paulson said the plan–which would abolish the Securities and Exchange Commission–may take several years to implement, and the Democrats, who control Congress, say no quick action is likely. Even so, Bernanke’s Fed has already grabbed some of the power the Treasury proposes to give it by inserting itself into the back offices of the investment banks….
The Bernanke Fed may have already seized too much power and has abandoned historical principles, says Paul Volcker, who was Fed chairman from 1979 to ’87. “The Federal Reserve has judged it necessary to take actions that extend to the very edge of its lawful and implied powers,” Volcker, 80, told the Economic Club of New York… “A direct transfer of mortgage and mortgage-backed securities of questionable pedigree from an investment bank to the Federal Reserve seems to test the time-honored central bank mantra….”
The Power To Destroy
“The power to tax is the power to destroy.” The money to buy all this worthless paper is coming from the productive members of society. Very few of you, dear readers, would take your hard-earned money — your children’s college fund or your retirement savings — and buy these junk bonds. But the government is going to forcibly take it from your pocket and buy them for you. They will either do this by taxing you, or by printing more money. The net result is the same — to rob you of your productivity and reward the irresponsible and the unscrupulous. The question is why?
Cloward-Piven Strategy
The Cloward-Piven Strategy is detailed in two excellent articles by Jim Simpson.
The Cloward-Piven Strategy — When things go bad all the time, despite the best efforts of all involved, I suggest to you something else is at work — something deeper, more malevolent.
I submit to you that it is not a mistake, the failure is deliberate!
There is a method to the madness, and the method even has a name: the Cloward-Piven Strategy. It was first elucidated in the 1960s by a pair of radical leftist Columbia University professors, Richard Andrew Cloward and Frances Fox Piven:
The strategy of forcing political change through orchestrated crisis…. …the “Cloward-Piven Strategy” seeks to hasten the fall of capitalism by overloading the government bureaucracy with a flood of impossible demands, thus pushing society into crisis and economic collapse.
Barack Obama and the Strategy of Manufactured Crisis — This article irrefutably ties Barack Obama to the most odious leftist movements in the United States today. Furthermore, it presents conclusive evidence that Obama not only knows of, but has participated in promotion of the Left’s apocalyptic strategy: that of manufactured crisis. Jim Simpson has prepared a definitive flow chart showing the organizations with which Obama was involved and their contribution to the socialization of America.
The Delphi Technique
The method used for the mental manipulation of the US citizenry to implement the downfall of liberty is called the Delphi Technique. An alert lady named Lynn M Stuter wrote a very good description of the Delphi Technique in 1996. In her article she is discussing the liberal takeover of the American education system, but her generic words apply equally to the present situation:
The Delphi Technique — What Is It?
The Delphi Technique was originally conceived as a way to obtain the opinion of experts without necessarily bringing them together face to face. In recent times, however, it has taken on an all new meaning and purpose. In Educating for the New World Order by B. Eakman, the reader finds reference upon reference for the need to preserve the illusion that there is “…lay, or community, participation (in the decision-making process), while lay citizens were, in fact, being squeezed out.” The Delphi Technique is the method being used to squeeze citizens out of the process, effecting a left-wing take over of the schools.
A specialized use of this technique was developed for teachers, the “Alinsky Method” (ibid, p.123). The setting or group is, however, immaterial; the point is that people in groups tend to share a certain knowledge base and display certain identifiable characteristics (known as group dynamics). This allows for a special application of a basic technique.
The change agent or facilitator goes through the motions of acting as an organizer, getting each person in the target group to elicit expression of their concerns about a program, project, or policy in question. The facilitator listens attentively, forms “task forces,” “urges everyone to make lists,” and so on. While s/he is doing this, the facilitator learns something about each member of the target group. S/He identifies the “leaders,” the “loud mouths,” as well as those who frequently turn sides during the argument — the “weak or noncommittal”.
Suddenly, the amiable facilitator becomes “devil’s advocate.” S/He dons his professional agitator hat. Using the “divide and conquer” technique, s/he manipulates one group opinion against the other. This is accomplished by manipulating those who are out of step to appear “ridiculous, unknowledgeable, inarticulate, or dogmatic.” S/He wants certain members of the group to become angry, thereby forcing tensions to accelerate. The facilitator is well trained in psychological manipulation. S/He is able to predict the reactions of each group member. Individuals in opposition to the policy or program will be shut out of the group.
The method works. It is very effective with parents, teachers, school children, and any community group. The “targets” rarely, if ever, know that they are being manipulated. Or, if they suspect this is happening, do not know how to end the process.
The desired result is for group polarization, and for the facilitator to become accepted as a member of the group and group process. S/He will then throw the desired idea on the table and ask for opinions during discussion. Very soon his/her associates from the divided group begin to adopt the idea as if it were their own, and pressure the entire group to accept the proposition.
This technique is a very unethical method of achieving consensus on a controversial topic in group settings. It requires well-trained professionals who deliberately escalate tension among group members, pitting one faction against the other, so as to make one viewpoint appear ridiculous so the other becomes “sensible” whether such is warranted or not….
Does any of this sound familiar? It is no accident that this manufactured financial crisis was thrust upon us in the run-up to the presidential election, when the citizenry is ideologically divided. And who is the most famous organizer in the United States today? Why, as it happens, Barack Obama. He is, in fact, a sincere student of Saul Alinsky’s Book Rules for Radicals.
The Last Word
Lest any of our readers think that this makes me a Republican sympathizer, I believe that the only way our country could possibly be saved now would be for every voter to write in the name of Ron Paul for President. He is the only person who still seems to understand what the American political experiment was all about.
That is not a practical solution, however. In a last-ditch effort to keep the decline and fall of the late United States as slow as possible, we shall have to vote for the McCain/Palin ticket. And that is for one reason, and one reason only. He is the better choice of the two for preserving our right to keep and bear arms. And the Second Amendment is that part of the Bill of Rights that gives us the means to keep all the others.
The practitioners of mental manipulation depend on a divide-and-conquer strategy. To that end, they have carefully conditioned the American public to think of themselves as Democratic or Republican, and to invest their free franchise, financial support, and effort into one or the other of the two major political parties.
But there is absolutely nothing in our Constitution about political parties. Political parties and political influence are the factors that created this mess. What is needed to save our country is for all of our citizens to stop thinking of themselves as Democrats or Republicans, and to think of themselves as Americans — as Americans who would, if necessary, be willing to take the family hunting gun down from its pegs over the fireplace mantle, and go risk their lives on the village green at Lexington or by the rude bridge at Concord.
By Allan Erickson | Wednesday, September 24th, 2008 at 5:32 pm
Sen. McCain has suspended his presidential campaign to go to Washington to focus on the economic crisis Americans face thanks to greed on Wall Street, and corruption in government.
From what we can gather here on main street, the big money boys got in too deep because they got piggish and borrowed money to speculate, and lost, and now the bill comes due, and they are so broke they must turn to the taxpayers for bailouts.
The President and the Treasury Secretary and the Chairman of the Federal Reserve Bank all agree the government should write a blank check to the banks to the tune of $700 Billion to save the day. True conservatives say no: people who got in over their heads should suffer the consequences and not be rescued by placing even more outrageous debt on the backs of the people.
Congress is hamstrung again, waffling, debating, pointing fingers, playing politics and generally acting like the clowns they are: another locked grid, such as the gridlock surrounding calls for regulatory reform of the financial markets years ago, some of those calls coming from this President and McCain, reform stymied by Democrats like Dodd and Frank, while Obama and many of his closest associates were profiting from the mismanagement of Freddie Mac and Fannie Mae, two quasi-government sub-prime housing lenders “credited” with starting this financial mess in the first place.
Calls for bipartisanship in approaching a solution to our financial problems fall on deaf ears here on main street for two reasons:
We don’t trust the politicians or the bureaucrats or the big money boys. They always act in their best interests, not ours, and so, they broke faith long ago, and cannot be trusted. Their moral depravity is clear for all to see.
This financial collapse is precisely what the far Left has been hoping for, working toward, and assisting for many years. Why?
Understand, the far Left did not go out of business simply because we defeated the Communist Party at home and abroad. The far Left, i.e., the contemporary Democrat Party, did not go out of business when the Vietnam War was ended by the U.S. Senate. The ‘Euro-Socialist Government is God’ far Left Democrat Party did not stop working against traditional Americanism when the hippies moved to the hills. In reality, the hippies got haircuts and donned pinstripes and moved to Wall Street, to the universities and to the halls of political power, copies of “Rules for Radicals” neatly tucked under their arms.
People on main street have been scratching their heads for quite some time. Why does Hollywood hate traditional American values, and family life? Why do the elites on the Coasts sneer at home town? Why do the Democrats hope we lose in Iraq? Why is everything we love about America under attack, including old fashioned faith and religion?
It’s war folks. Not just a culture war. It’s a war for the soul of America. This is why there is no possibility of bipartisanship. One or the other side will win.
The Far Left Dem Media (FLDM) cabal wants America to change. Change! To what? Take a look at Cuba, enlarge it, and you get an idea of what the FLDM wants.
Government control of everything, including the economy (this crisis is the door of opportunity!)
Government control of religion, or better, the abolition of religion, and the incarceration of Christians in particular
Government mandates: education, curriculum, library content, movies, the arts, all assembly and speech—unless it promotes the State, it is forbidden
Government provision of all health care services
Government dictates in the areas of family, reproduction, morality, structure and civil codes of conduct
Government confiscation of all private property including guns
Government legislated hate crimes and enforcement to stamp down all dissent
Government executive domination of puppet legislative and judicial branches, i.e., despotism.
All this of course is transitional. This complete dictatorship of the proletariat, once the corrupt bourgeoisie are destroyed, is temporary, a stepping stone to the communist paradise beyond.
Trouble is, no one has ever seen the communist paradise. Things always seem to get eternally stuck in the ‘dictatorship of the proletariat stage,’ right after the blood-letting around the destruction of the bourgeoisie.
The financial mess we experience today is the bloodless destruction of the bourgeoisie the FLDM is thrilled about. It provides entre’ to the ‘regretful but required’ dictatorship of the proletariat.
We understand this much on main street: we are the proletariat, you know, the little folks. The FLDM says it is our champion. Funny how the little folk are either marginalized or exploited or downright hammered every time a new FLDM posse rides to the rescue. (But remember: it’s for our own good.)
Today we see a government willing to intervene in capital markets and essentially take over. Little guys stop and say, hey wait, didn’t they do that with Freddie/Fannie, and take over, and offer housing loans to people unqualified for loans, and didn’t the Fannie/Freddie managers raid the treasury while giving out taxpayer funds to unworthy borrowers, and didn’t that start our tail spin, and aren’t they saying they want to do it again only this time on a much grander scale, and isn’t that simply a bad idea, akin to giving whiskey and car keys to teenage boys?
What did we hear from Europe this week: it’s the end of American capitalism (worse than Satan in many quarters)?
What did we hear from China this week: time for a world financial system (run by whom you ask: the UN)?
What did we hear from the president of Iran this week: it’s the end of the American empire?
What we will never hear from the private backrooms of the FLDM is the glee they express watching this economic train wreck unfold. They agree with Europe, and China and Ahmadinejad — time for a new America, time for Change!
If main street America is to survive, and if traditional America is to prevail, we will have to get behind McCain’s effort to wage war on our behalf, to save this republic from being overrun by the FLDM, to prevent our becoming another Cuba, and to preserve the very idea of liberty.
McCain is going to Washington not simply to address the economic woes of this nation. He is going to fight the real war, the war for the soul of the country. Pray he prevails.
On the evening of September 18th 2008, the American democratic system was replaced by a financial dictatorship.
What was billed as a “Federal Bailout” was nothing less than a bloodless coup. The Wall Street Gang had taken over the White House and control of Washington. Congress promised not to resist, and pledged to pass legislation as demanded.
Warning that America’s financial system was perilously close to collapse unless immediate action was taken, economic martial law was declared.
The American people were told that from this day forward, they would be responsible for paying off the bad debt from any failing private financial enterprise deemed “too big to fail.”
Treasury Secretary Henry Paulson, spearheading the coup, sought unrestricted authority to spend the nation’s money as he saw fit. The first order of business by the Economic Czar was to take trillions of dollars of bad debt from crumbling investment banks and insurance companies and transfer it to the backs of already debt-burdened citizens….
While the transfer of “toxic instruments” from private firms to the national debt will enrich those companies that once had owned them, the measures taken will do nothing to keep the sinking US economy from going under.
The biggest casualty, besides indentured American servants held responsible for paying off the debt, is the US dollar. The greenback’s getting slaughtered on the foreign exchanges and gold prices, the safe-haven commodity, are once again soaring….
In order to assess the credibility of Celente’s current article, you may consider two articles from the Winter Issue 2008 of his organization’s journal. The full articles are available by paid subscription only, so we offer the synopses.
Economic 9/11
Just as the Twin Towers collapsed from the top down, so too will the US economy from an Economic 9/11. When the high-stake speculators, banks, brokerages, and buyout firms that leveraged billions with millions get hit … everything underneath them will turn to rubble…..
and
The Panic of 08
Failing banks, busted brokerages, toppled corporate giants, bankrupt cities, states in default, foreign creditors cashing out of US securities … whatever the spark, the stage is set for panic in the streets. When the giant firms fall, they’ll crush the man on the street…..
For additional information, you should also read this commentary by Ron Paul, a United States Congressman and one of the most trusted libertarian/Republican spokespersons for the American public:
Commentary: Bailouts will lead to rough economic ride
By Ron Paul
(CNN) — Many Americans today are asking themselves how the economy got to be in such a bad spot.
For years they thought the economy was booming, growth was up, job numbers and productivity were increasing. Yet now we find ourselves in what is shaping up to be one of the most severe economic downturns since the Great Depression.
Unfortunately, the government’s preferred solution to the crisis is the very thing that got us into this mess in the first place: government intervention….
Instead of looking at a recession, we might very well be looking at a complete economic meltdown more global in nature rather than national, something that most of us never have seen.
The problems include a very weak American dollar; a trade deficit that will come to roughly $700 billion at year-end; the cost of foreign oil that has literally tripled over the past two years; possible trade wars with countries like China, which own sizable portions of our bond markets; a ballooning Federal budget that has gone from $2.1 trillion to $3.6 trillion in just eight years – a whopping growth of 75% (!); a national debt of $9.6 trillion, closing fast on $10 trillion with a debt ceiling placed at $10.6 trillion and which cost the American taxpayer $230 billion in interest alone last year; untold numbers of jobs that are being outsourced to foreign nations through Free Trade acts adding long-term pressure to unemployment; a nation which has maxed out on credit-card debt; millions of Americans losing their homes due to the subprime lending debacle; and last but not least tens of millions of baby-boomers now coming close to retirement, which will dry-up America’s tax base while adding huge amounts to Social Security and Medicare outlays….
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Fabulous Franking
Currently, we have a government run by university academics who have no concept of the real world. As some have pointed out, there is no one in Obama’s White House who has run so much as a candy store. And they are trashing the economy of our once great nation.
