Third Party & Independents Archives

While I’m no fan of Mitt Romney he had a good piece in the NYT op ed today.

He discusses the big elephant, Union wages and benefits that are crippling Detroit. While I defend a unions right to negotiate, it also works the other way. If the Unions expect Detroit to survive, they’ve got to face reality….as do executives.

Posted by: snert at November 19, 2008 12:28 PM

snert, the UAW has made major concessions recently in order to help save the industry, with some wages dropping from $25/hour to $14. The big lead weight of unions now is health care, pensions, and pink slip payouts.

That said, it makes no sense to bailout the industry if the bailout makes paupers of the workers and retirees. This recession was brought on by the financial and credit debacle, but, it will be deepened and sustained by falling consumer demand. Consumer demand in the issue that has to be addressed going forward, and keeping workers employed and at wages that permit continued consumption is essential to economy’s recovery.

The Unions have contributed to the Big 3’s woes, but, they can’t be relegated to the role of scapegoat for some pretty horrible management decisions and strategies ever since the Japanese wave of competition some 40 years ago.

Posted by: David R. Remer at November 19, 2008 01:07 PM

It depends. What have they done with the Energy Department program established by law last year to encourage production of fuel-efficient cars? Does anyone have any information about this?

Posted by: womanmarine at November 19, 2008 01:27 PM

There will be no easy fix.

Merely giving them tens of billions will make everything worse.

How much does the CEO make?

How much does upper managment make?

Why should tax payers try to prop up a company that has been mismanaged for decades?

Let them file bankruptcy.
Perhaps some one else will buy the remains and run it better?

Posted by: d.a.n at November 19, 2008 02:06 PM

Chevy Volt and a $7500 tax credit. http://en.wikipedia.org/wiki/Chevrolet_Volt

Posted by: Rodney Brown at November 19, 2008 02:22 PM

Globalization marches on. The recession is just one more chapter in breaking the back of middle class American to get us ready for a globalized economy. Facilitating globalization Congress worked to bring the US auto industry down through unfair trade agreements and competing US manufacturing against foreign manufacturing. US automakers are not expected to succeed. There first needs to be a dismantling of current wage scales, pensions, etc. Not to advantage the auto industry but to get more American workers in line with the globalized economy. The auto industry will get their bailout and within five years they will be merged up with foreign manufacturers. From Nafta we have “ alter US immigration laws to allow professionals in sixty-seven categories to take jobs anywhere in the three participating nations and relocate themselves and their families anywhere they wish in the three nations. The 111th Congress will readily gain citizenship for the illegals and the auto industry is a good place to employ some of them. If you don’t like taking a few pay cuts then you are free to relocate yourself and family anywhere you wish.

Posted by: Roy Ellis at November 19, 2008 03:15 PM

Obviously the industry has too much capacity. How does bailing them all out change that in any way? All three should make proposals to congress with their changes and their need for assistance. Congress should pick the best proposal and assist only them.

Posted by: Schwamp at November 19, 2008 03:52 PM

Right. What good does it do to give them money to build more gas guzzlers that few people want to buy?

Posted by: d.a.n at November 19, 2008 04:04 PM

Those who don’t want a bailout, choose the recession worsening and elongating and the deficits to increase as a result of ever greater assistance to the unemployed, and newly destitute of those 1 in 10 American employees be put out of work or scaled back to part time.

Those who do want the bailout, seem to be ignoring the radical increases in deficits and debt which are synonymous with very much higher taxes down the road to service the interest and principal on that debt.

Folks, the cost to tax payers and consumers of not bailing keeping them in business (provided a horizon for profitable self sustainability is probable), is vastly greater than the cost of 25 billion dollars borrowing today for the bailout. That fact on economic terms is indisputable and why Congress will bail them out.

This is one of those recurring themes of modern times, in which, solutions are painful and expensive, and doing nothing is 10 times more so. Welcome to the aftermath of Republican rule and unregulated capitalism at its most vigorous.

Posted by: David R. Remer at November 19, 2008 04:40 PM

Roy,

I’ve heard that argument as well, but have not seen hard numbers to demonstrate it. If it’s true, then I’d be all for lining some people up against a wall as traitors.

David,

I agree with your last post. I do think this needs to be a hard nosed bailout bridge loan with drastic changes in both the benefits deals, and wages to bring them in line with foreign non-union companies. Local tax deals need to be looked at on a even field. As far as fair trade, the US has to make something that is marketable in foreign markets, but foreign markets are just not as large as the US market.

The taxpayers need to be made whole. I do not believe that the US simply cannot compete with the Honda’s and Toyota’s. Union workers still average a much higher wage than foreign workers, particularly in benefits and older less productive workers. These workers have to face the reality that a less highly paid job and lower retirement standards are better than bankruptcy and no jobs, and a collapsed retirement benefit. Some recent articles I’ve read show how Honda and Toyota do not over hire, and use slowdowns to increase training and efficiency. That engenders employee loyalty and rewards all stakeholders.

The US market suffers to some degree from a loss of buyer loyalty in the eighties when they WERE making crap. That isn’t true today, but the perception is still there.

We need a Jesse Jones figure. He required hands on management for companies he bailed out in the thirties. Hank Paulson is not that man.

Posted by: snert at November 19, 2008 05:05 PM

David, can we assume that the Dems are going to axe NAFTA and other trade agreements and seal the border? They to have a big stake in globalization. Let’s not borrow $50B from the Chinese for the automakers. Let them proceed to a starvation workforce and merger up with the foreign guys which is what the free traders want.

Posted by: Roy Ellis at November 19, 2008 05:14 PM

Yes, it’s an easy fix. Don’t bail them out, because they intentionally did this right AFTER the financial bailout seeing the government was willing to do it. Why didn’t they come 6 months ago or a year, projected profits and losses aren’t that off when they predict economic stability or a downturn.

So did the big 3, during the last few years of slumping auto sales really not pay attention and say “Maybe we might be in financial trouble”. No they built the same SUVs, and the same vehicles that nobody bought.

Before the government even THINKS about giving them money they need to give a comprehensive list of what they’re going to use that money for and a strict timetable of how they plan to turn their business around. If it involves anything they’ve been doing the last 6 years, deny them the bailout automatically.

Posted by: Jon at November 19, 2008 05:17 PM

And on a side note, I haven’t heard some key points personally from the CEO’s, which means they take permanent pay cuts, and short term pay SUSPENSIONS, to cover the cost of keeping their employees employed. This is what responsible business does, if you are in trouble and in charge of workers, you suck it up, even at a loss of money to yourself to keep the engine running.

Posted by: Jon at November 19, 2008 05:19 PM

Mitt had it all over John McCain on the Auto industry, remember John wanted to retrain them all to do what work at wall-mart or big lots or Tyson chicken . “U.S. auto companies employ nearly a quarter-million workers, and more than 730,000 other people have jobs producing the materials and parts that go into cars. About 1 million on top of that work in dealerships nationwide. If just one of the auto giants were to go belly up, some estimates put U.S. job losses next year as high as 2.5 million.

“If GM is telling us the truth, they go into bankruptcy and you see a cascade like you have never seen,” said Sen. George V. Voinovich, R-Ohio, who was working on one rescue plan Wednesday. “If people want to go home and not do anything, I think that they’re going to have that on their hands.”

Posted by: Rodney Brown at November 19, 2008 05:24 PM

Here is some of Bill Clinton’s handiwork. NAFTA: “Eliminate US duties on imports of vehicles produced in Mexico and Canada, while allowing those nations to keep their local content laws requiring that a certain percentage of any vehicles sold must be made there.
WTO: “That all trade policies and practices of the US are subject to international review by the WTO. That when the EU communities exercise their right to vote they will have a number of votes equal to the number of member states. That the US will have only one vote in WTO proceedings.”
And, we shouldn’t forget that Clinton is the one who brought China into the WTO in 2000. Rattlings I’ve heard are that 60% of Obama’s officiates are Clintonites. I would sum up by saying that the oligarchy is alive and well with both parties providing the best government money can buy.

Posted by: Roy Ellis at November 19, 2008 05:47 PM

Here is what GM has been doing….

Chevy Equinox fuel cell vehicle Was hoping this would be my next vehicle.

Fuel Economy & Alternative Fuels

Pretty sure if you go to the Ford & Chrysler Sites you can find out what they are doing aswell.

Seems funny to me that most people believe GM is only building Hummers & Ford just has the F150.

GM sells under 13 brand names & also provides fleet & commercial vehicles.

Take a look at these cars that GM makes in which we aren’t able to purchase here….some run on natural gas. These ‘European Style’ cars might sell right here at home.
Opel
Anyone in the mood to convert the mileage from kilometers to miles?

Posted by: Dawn at November 19, 2008 06:20 PM

Jon, The auto industry was promised $25B through the Energy Dept. last year to encourage production of alternative energy vehicles. Now they want to use the $25B for operations and are expecting another $25-50B for retooling for the next generation whatever. I think these auto managers realize they have reached the end of their rope. They plan to take the bailout and make them and their employees well before capitulating and merging with the foreign entities. If I look down the road five years I see 80% of autos being assembled in China/India and delivered to the US via the new Mexican/China seaport. As for the taxpayer. We are about to be 25-75B further in debt. That gets us up there to about $70 trillion with a $4 trillion GDP. Spinning tires in the sands of time.

Posted by: Roy Ellis at November 19, 2008 06:25 PM

David, This time, it may be different, due to numerous pre-existing problems, such as $10.6 Trillion National Debt of already nightmare proportions, $54 Trillion nation-wide debt (or $67 Trillion if the $12.8 Trillion borrowed from Social Security is included, which left Social Security pay-as-you-go, with a 77 Million baby-boomer bubble approaching), rising inflation, and these numerous other deteriorating economic conditions, which have never been worse ever, and/or since the Great Depression.

There is something worse than General Motors (and other companies) filing for bankruptcy, high unemployment, and some failed financial corporations, which is:

• rendering the U.S. currency worthless

… which will make everything much worse, Social Security checks will be worthless, Medicare payments will be worthless, and wages, savings, and pensions will be worthless.

I still don’t understand how we can solve our problem of economic instability caused by massive debt, with more borrowing, creating money out of thin air, debt, and spending.
In fact, that process appears very much like a deteriorating debt pyramid-scheme under severe stress.
And the debt pyramid-scheme appears most likely to collapse when we are unable to borrow or print enough money out of thin air to stop the collapse, since rampant creation of money out of thin air will most likely crash the U.S. Dollar:

www.youtube.com/watch?v=4n3g5lUgkWk&feature=related

With so much pre-existing debt, more borrowing, creating money out of thin air, debt, and rampant spending seems more likely to make things much worse in only a few years (if not sooner), since:

• The interest alone on the near $10 Trillion National Debt in year 2007 was $429 Billion (16% of all $2.7 Trillion in federal tax revenues in year 2007), and the federal government borrowed and created that money (and then some) out of thin air.


• Inflation is actually worse than 5%, if measured by pre-1983 or pre-1998 inflation calculation methods; the calculations were modified to give a larger CPI weighting to items falling in price than items rising in price. As a reslut, there has been a year-over-year error in the reported inflation for decades. This is corroborated when plotting GDP in any previous U.S. Dollar (e.g. whether it is 2005 or 1950 Dollars) adjusted for inflation, which reveals a dip in GDP starting in year 2006 (a dip of that size which has never been seen before since year 1900, if not ever).


• Adequate oversight for all of the massive bail-outs isn’t likely.


• The massive bail-outs treat symptoms without treating the root causes and abuses that have been hammering most Americans for decades (One-Simple-Idea.com/DisparityTrend.htm).


• The National Debt and nation-wide debt ($54-to-$67 Trillion) is possibly so large now, it may be impossible to keep it from growing ever larger. Especially when the federal government is borrowing and creating the money out of thin air to merely pay the $429 Billion in annual interest alone, and the federal government has been deficit spending for 52 consecutive years.


• A few calculations shows that it would take over 150 years to repay the $10.6 Trillion National Debt if we even had the discipline to stop borrowing and createing billions per day, and started paying back enough (about $1.2 Billion per day = $429 Billion interest in year 2007 / 365 days per year) to keep the principal from growing ever larger and out-of-control.


• 9%-to-18% approval ratings for Congress, 95% of which were just re-elected, does not instill much confidence that Congress will now be any less irresponsible, FOR-SALE, corrupt, and incompetent.


• And no one can answer the one simple question:
  Where will the money come from to merely pay the interest on $54-to-$67 Trillion of nation-wide debt (One-Simple-Idea.com/DebtAndMoney.htm#NationWideDebt), much less the money to reduce the current principal debt of $54-to-$67 Trillion (which amounts to about $220K per person) and keep it from growing ever larger, when that money does not yet exist? Especially when now, 80% of the U.S. population owns only 17% (or less; down 20% since year 1976) of all wealth (one-simple-idea.com/DisparityTrend.htm#WealthDistribution), and the wealthies 1% owns 40% of all wealth; a wealth disparity gap that has never been worse since the Great Depression.


• A huge portion of federal revenues are already designated to Social Security and Medicare.

The point is, we may have passed the point in which the debt can ever be serviced without eroding the currency significantly.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at November 19, 2008 06:26 PM

IKE Had a Real Surplus, 1956-1957. http://www.geldpress.com/2008/07/us-budget-reporting-deception/

Posted by: Rodney Brown at November 19, 2008 06:49 PM

I agree with people like Mitt Romney, Let them go into bankruptcy reorganization.

Posted by: KAP at November 19, 2008 06:51 PM

Notice that Ford China is teaming with Chery in producing the Ford Fiesta. The car will be produced in hatch back and sedan versions and expected to hit the US market next year.

SHANGHAI — In July 2007, Tom LaSorda, Chrysler CEO at the time, touted a deal in which Chery Automobile Co. would supply Chrysler LLC with small cars for North America. Today, neither Chrysler nor Chery are commenting on the deal, originally scheduled to start bringing cars to Mexico this year. And a source in China says it looks dead — or at least on the back burner. “I wouldn’t place much hope on it,” says a former Chery executive familiar with the Chrysler deal. “Both companies have their own problems to deal with, and both have run out of money.” —Published:Nov. 19, 2008

GM’s sales rose 18.5 percent last year to over 1 million vehicles in China, the world’s second-largest auto market after the United States. Like other automakers, it is looking to China and other emerging markets to compensate for declining sales in the U.S. and Europe.

GM’s total world sales are up 19 percent in the past decade, with large increases in emerging markets such as China, Russia, India and Brazil. In the third quarter of this year, 61 percent of its sales came from outside North America

Seems they have already conglomerated up. I think Michigan is in their rear view mirror.

Posted by: Roy Ellis at November 19, 2008 06:56 PM

If we have lent $300b to banks to free up the credit why can’t the banks loan the money to the big three. If the banks won’t do it we should quit bailing them out.

Posted by: j2t2 at November 19, 2008 07:47 PM

j2t2, the banks aren’t crazi. They aren’t going to jump into risky ventures in the middle of a recession. They will wait until consumers start spending again. They are using their bail out money to buy their competitors who they find in good shape. The US auto industry is really over a barrel with so much legacy equipment. China might want the Robotics stuff and the rest for scrap iron. I would think China could pop out small alternatives for around $15-16K on the US market. Zip them into the US thru Mexico duty free.

Posted by: Roy Ellis at November 19, 2008 08:10 PM

I received an email that suggest the globalized economy is coming to a town near you. I’ve NO VALIDATION that this information is valid. The idea is to be wary of where you purchase gift cards this Xmas season.

“Stores that informed the Security Exchange of closing plans between October 2008 and January 2009.

Circuit City stores… most recent (? how many)
Ann Taylor- 117 stores nationwide are to be shuttered
Lane Bryant,, Fashion Bug ,and Catherine’s to close 150 stores nationwide
Eddie Bauer to close stores 27 stores and more after January
Cache will close all stores
Talbots closing down all stores
J. Jill closing all stores
GAP closing 85 stores
Footlocker closing 140 stores more to close after January
Wickes Furniture closing down
Levitz closing down remaining stores
Bombay closing remaining stores
Zales closing down 82 stores and 105 after January.
Whitehall closing all stores
Piercing Pagoda closing all stores
Disney closing 98 stores and will close more after January.
Home Depot closing 15 stores 1 in NJ (New Brunswick)
Macys to close 9 stores after January
Linens and Things closing all stores
Movie Galley Closing all stores
Pacific Sunwear closing stores
Pep Boys Closing 33 stores
Sprint/ Nextel closing 133 stores
JC Penney closing a number of stores after January
Ethan Allen closing down 12 stores.
Wilson Leather closing down all stores
Sharper Image closing down all stores
K B Toys closing 356 stores
Loews to close down some stores
Dillard’s to close some stores.
Mervyns to close all stores
Steve & Barry’s will most likely cease operation
Value City to close all stores”

Posted by: Roy Ellis at November 19, 2008 09:10 PM

Circuit city. http://blogs.consumerreports.org/money/2008/11/bankrupt_circui.html?EXTKEY=&EXTKEY=I72RSCB

Posted by: Rodney Brown at November 19, 2008 09:19 PM

“j2t2, the banks aren’t crazi. They aren’t going to jump into risky ventures in the middle of a recession. They will wait until consumers start spending again.”

If the big three’s credit isn’t good enough for the banks that earn their living by extending credit to corporations why would we the taxpayer want to extend money to either party? By buying other banks with taxpayer money it seems to me that would be a signal to stop bailing out the banks. Perhaps the taxpayers via the government should just buy stock in the big three, with the bailout money, while it is so cheap and forget the credit bankers.

Posted by: j2t2 at November 19, 2008 09:26 PM

GM can find plenty of good workers in China. They work 60 hrs per week for $180 per month, no pensions, no healthcare, no perks at all.

Why should we treat UAW workers differently from other workers who have had their jobs shipped overseas.

If all the other outsourcing has been good for our economy, getting rid of the UAW should be fantastic.

Posted by: jlw at November 19, 2008 10:00 PM

So far Paulson has shipped $290B to AIG and five financials. He still has $460B to play with. Congress is afraid when they shut down for the Xmas season Paulson will $pend $pend $pend. Which he is allowed to do if Congress is not in session and he ‘sees’ and emergency. They are trying to get some stop gap legislation passed by Friday, their last day.
The government bailout of Crysler in the 80’s went well and the government made money on the deal, or so they say. This time around is somewhat different. Their business model isn’t working and they seem to have no game plan for Congress. I keep coming back to this; who will buy these new cars? The US consumer is flat on his back. Home equity is gone, credit cards are maxed out, banks afraid to make signature loans. If they can hang on for five years, maybe they could make it. But, in five years the cheap stuff from China will be hitting the shores of Mexico. Dunno!

Posted by: Roy Ellis at November 19, 2008 10:02 PM

So right jlw. Globalization has come to Detroit. We can’t, and should not try to save them. Just another $25B in China’s pocket. We all should take the time to give a fickle finger of fate salute to Regan, Bush 1, Clinton and Bush 2.

Posted by: Roy Ellis at November 19, 2008 10:27 PM

“They are using their bail out money to buy their competitors who they find in good shape.”

The banks that were to big to fail are using the taxpayers borrowed money to grow bigger. Who is worse those that would take the money and buy another bank or those that allow them to do this at the expense of the taxpayer.
Why would we expect the car companies to be any different? Where are the shareholders? Are they not spread around the world? Let them save their investment in the big 3. What would prevent the big 3 from spending this loan in China for new factories and lower wages? These car companies are global companies why can’t they go to China or another country and borrow the money directly? They show no loyalty to this country, why should we bail them out? We as a country are going deeper in debt and only prolonging the agony of this depression we are heading towards.

Posted by: j2t2 at November 20, 2008 12:47 AM

note to d.a.n.:

CPI drops 2.3%, as I read this, we have deflation. Welcome to the next Great Depression.

Posted by: googlumpugus at November 20, 2008 06:49 AM

snert said: “He (Mitt Ronmey) discusses the big elephant, Union wages and benefits that are crippling Detroit.”

Obama is not even sworn in yet and I am already nostalgic for the time when Republicans would call statements like this “class warfare”.

Posted by: RMD at November 20, 2008 09:32 AM

I always thought it would be interesting to base a reality TV show on three generations of unionized, auto maker employees.

You woud have the Grandfather retired living large, the father 30 years in protecting himself, and the son/grandson in and out of jobs at the plant because of layoffs, work stopage, etc.

How would they talk about each other? Would they be angry with each other? Or would they just avoid discussing it.

Posted by: Honest at November 20, 2008 10:19 AM

googlumpugus wrote: note to d.a.n.: CPI drops 2.3%, as I read this, we have deflation. Welcome to the next Great Depression.

False.

We do not have deflation, since we have (overall) positive inflation of 3.7% as of 01-NOV-2008.

Decreasing inflation does not equate to deflation.
Deflation is negative inflation, which has not existed for that last 52 consecutive years.

YEAR ____ INFLATION RATE
02/1/2007__ 3.08%
03/1/2007__ 2.42%
04/1/2007__ 2.78%
05/1/2007__ 2.57%
06/1/2007__ 2.69%
07/1/2007__ 2.69%
08/1/2007__ 2.36%
09/1/2007__ 1.97%
10/1/2007__ 2.76%
11/1/2007__ 3.54%
12/1/2007__ 4.31%
01/1/2007__ 4.08%
02/1/2008__ 4.28%
03/1/2008__ 4.03%
04/1/2008__ 3.98%
05/1/2008__ 3.94%
06/1/2008__ 4.18%
07/1/2008__ 5.02%
08/1/2008__ 5.60%
09/1/2008__ 5.37%
10/1/2008__ 4.94%
11/1/2008__ 3.70% (current positive inflation)

• ____INFLATION RATE_____
• 6.00%|——————————-
• 5.50%|—————————-x-
• 5.00%|—————————x-x
• 4.50%|————————-x—x
• 4.00%|———————xxx—-x
• 3.50%|——————-x———x (3.7% 01-NOV-2008)
• 3.00%|——-x———x————
• 2.50%|—x-x-xxxx x————-
• 2.00%|-x-x———x—————
• 1.50%|x——————————
• 1.00%|——————————-
• 0.50%|——————————-
• 0.00%|_______________________YEAR
• ______2___2___2___2____2
• ______0___0___0___0____0
• ______0___0___0___0____0
• ______6___7___7___8____8
• _____SEP_JAN_JUN_JAN__OCT

There is some deflation of certain things, such as home prices and gasoline prices (which were ridiculously high to begin with) and a few other things, but OVERALL inflation is still positive at 3.7% as of 01-NOV-2008.

Also, the October-2008 CPI-U of 216.6 (1982-84=100) was 3.7% higher than CPI-U of 208.6 in October-2007 (which represents 3.7% postive inflation).
CPI has been increasing every consecutive year for the past 52 years (see below).
Inflation has been positive for every consecutive year for the past 52 years.

YEAR _ JAN ___ FEB __ MAR ___ APR __ MAY ___ JUN __ JUL __ AUG __ SEP __ OCT ___ NOV __ DEC __ AVERAGE
2000 _ 168.8 _ 169.8 _ 171.2 _ 171.3 _ 171.5 _ 172.4 _ 172.8 _ 172.8 _ 173.7 _ 174.0 _ 174.1 _ 174.0 _ 172.2
2001 _ 175.1 _ 175.8 _ 176.2 _ 176.9 _ 177.7 _ 178.0 _ 177.5 _ 177.5 _ 178.3 _ 177.7 _ 177.4 _ 176.7 _ 177.1
2002 _ 177.1 _ 177.8 _ 178.8 _ 179.8 _ 179.8 _ 179.9 _ 180.1 _ 180.7 _ 181.0 _ 181.3 _ 181.3 _ 180.9 _ 179.9
2003 _ 181.7 _ 183.1 _ 184.2 _ 183.8 _ 183.5 _ 183.7 _ 183.9 _ 184.6 _ 185.2 _ 185.0 _ 184.5 _ 184.3 _ 184.0
2004 _ 185.2 _ 186.2 _ 187.4 _ 188.0 _ 189.1 _ 189.7 _ 189.4 _ 189.5 _ 189.9 _ 190.9 _ 191.0 _ 190.3 _ 188.9
2005 _ 190.7 _ 191.8 _ 193.3 _ 194.6 _ 194.4 _ 194.5 _ 195.4 _ 196.4 _ 198.8 _ 199.2 _ 197.6 _ 196.8 _ 195.3
2006 _ 198.3 _ 198.7 _ 199.8 _ 201.5 _ 202.5 _ 202.9 _ 203.5 _ 203.9 _ 202.9 _ 201.8 _ 201.5 _ 201.8 _ 201.6
2007 _ 202.4 _ 203.5 _ 205.5 _ 206.7 _ 207.9 _ 208.4 _ 208.3 _ 207.9 _ 208.5 _ 208.9 _ 210.2 _ 210.0 _ 207.3
2008 _ 211.1 _ 211.7 _ 213.5 _ 214.8 _ 216.6 _ 218.8 _ 220.0 _ 219.1 _ 218.8 _ 216.6

Interestingly, the federal government has also been deficit spending every consecutive year for the past 52 years.

The Inflation Rate percetage is calculated from CPI-U as (216.6% as of 31-OCT-2008 - 208.9% as of 31-OCT-2007) / 208.9% = 3.7% inflation.

• ______________________ CPI _____________________________
• 230 |————————————————————————-
• 220 |————————————————————————x (average about 216 for 2008)
• 210 |———————————————————————-x-
• 200 |——————————————————————-x—-
• 190 |—————————————————————-x——-
• 180 |————————————————————-x———-
• 170 |———————————————————-x————-
• 160 |——————————————————x-:—————
• 150 |————————————————-x——:—————
• 140 |———————————————-x———:—————
• 130 |——————————————-x————:—————
• 120 |—————————————-x—————:—————
• 110 |————————————x——————-:—————
• 100 |———————————x:———————:—————
• 090 |——————————-x-:———————:—————
• 080 |——————————x—:———————:—————
• 070 |—————————x——:———————:—————
• 060 |————————x———:———————:—————
• 050 |——————x—————:———————:—————
• 040 |———-xxx——————-:———————:—————
• 030 |xxx——————————:———————:—————
• 020 |———————————-:———————:—————
• 010 |———————————-:———————:—————
• 000 |———————————-+———————+—————
• ____1——1——1——1——1—1-1——1——1—1-2——2—2
• ____9——9——9——9——9—9-9——9——9—9-0——0—0
• ____6——6——7——7——8—8-8——9——9—9-0——0—0
• ____0——5——0——5——0—3-5——0——5—8-0——5—8

Also, the current measurement of inflation is questionable anyway, since the CPI calculations were modified in year 1983 and 1998 which suspiciously increased the CPI weighting for items falling in price, but decreased the CPI weighting for items increasing in price.

• _____________ INFLATION RATES (as of OCT-2008)___________


• 16.0% |———————————————————-


• 15.5% |——————————————————-3-


• 15.0% |——————————————————-33


• 14.5% |——————————————————-33


• 14.0% |——————————————————-33


• 13.5% |——————————————————3-3


• 13.0% |——————————————————3-3 (13.2%)


• 12.5% |——————————————————3—


• 12.0% |——————————————————3—


• 11.5% |——————————-3——————-3—-


• 11.0% |——————————3-333—————3—-


• 10.5% |—————————-3——-3————-3—-


• 10.0% |3————-3———33———3——-33-3——


• 09.5% |-3———-3 3——3————-3—33—3—-8-


• 09.0% |—3——-3—-3333—————-3-3———88


• 08.5% |—-3—-3——————————3————88


• 08.0% |——333——————————————-8-8 (7.8%)


• 07.5% |——————————-8——————-8—-


• 07.0% |——————————8-888—————8—-


• 06.5% |—————————-8——-8————-8—-


• 06.0% |8————-8———88———8——-88-8——


• 05.5% |-8———-8 8——8————-8—88—8—-c-


• 05.0% |—8——-8—-8888—————-8-8———cc


• 04.5% |—-8—-8——————-c———8————cc


• 04.0% |c—-888——————-c-ccc—————-c-c


• 03.5% |-c————————-c——-c—————c-c (3.7% current method)


• 03.0% |—c———-c———cc———c————-c—-


• 02.5% |—c———c-c——c————-c——cc-c——


• 02.0% |—-c——c—-cccc—————-c-cc—c——-


• 01.5% |——c—c——————————c—————


• 01.0% |——-cc————————————————


• 00.5% |———————————————————-


• 00.0% |———————————————————-


• _______2——2——2——2——2——2——2——2—O


• _______0——0——0——0——0——0——0——0—C


• _______0——0——0——0——0——0——0——0—T


• _______1——2——3——4——5——6——7——8—


• WHERE:


• 3=Pre-1983 Inflation measurement method


• 9=Pre-1998 Inflation measurement method


• c=Current Inflation measurement method

Inflation as of 31-OCT-2008 is 13.2% based on the pre-1983 inflation measurement method (instead of the 3.7% based on the current measurement method).
Inflation as of 31-OCT-2008 is 7.8% based on the pre-1998 inflation measurement method.

Thus, it is erroneous to say there is deflation, because there is still positive inflation (if smaller than the previous month).
More accurately, there is a decrease in the inflation from 4.94% on 1-OCT-2008 to 3.7% on 1-NOV-2008.

• ____INFLATION RATE_____
• 6.00%|——————————-
• 5.50%|x——————————
• 5.00%|x——————————
• 4.50%|x————————-x— (4.28% average for year 2008)
• 4.00%|x————————-x—
• 3.50%|-x————x———-x—
• 3.00%|—xx-xx—x-x——xx—-
• 2.50%|——x—x-x-x-xxx——-
• 2.00%|———-x-x-x-x———-
• 1.50%|————x—-x————
• 1.00%|——————————-
• 0.50%|——————————-
• 0.00%|_______________________YEAR
• ______1111111111222222222
• ______9999999999000000000
• ______9999999999000000000
• ______0123456789012345678

Also, if inflation remains at 3.7% for NOV and DEC-2008, the average inflation for year 2008 will be higher at 4.28% than any of the previous 18 years (since year 1990).
So, that most certainly is NOT deflation.

googlumpugus wrote: note to d.a.n.: Welcome to the next Great Depression.

Depressions are not always deflationary.

There are three types of Depressions:

• (1)Deflationary


• (2) Hyperinflationary


• (3) Extremes of both inflation and deflation for certain goods, services, and resources.

Both deflation and inflationm erode value, and we currently have BOTH on certain things, but overall inflation is still positive at 3.7%.

Deflation is bad, because people can’t the as high a price for the goods they produced as they previously received (i.e. their assets are declining in value).
Deflation is bad, because if bought (or borrowed money) to buy an asset for $100K that can now only be sold for $50K, you are upside-down on that asset (or loan).
Deflation is good if you have a lot of cash, but bad if you have a lot of assets, and very bad if you have a lot of debt.

Inflation is bad, because people can’t get the as much goods at the price they previous paid (i.e. their incomes and savings are shrinking in value).
Inflation is bad, because if you earn $50K and inflation is 15.6% (as it is today, based on the pre-1983 inflation measurement method), that $50K becomes worth only $42.2K in one year.
Inflation is good if you have a lot of debt, but only if you are able to keep-up with the debt payments and interest, which is usually a problem when unemployment rates are high.

Either way, inflation and deflation are economically destabilizing, and lead to more unemployment, foreclosures, homelessness, poverty, starvation, crime, pain, and misery.

The problem is that the federal government and the Federal Reserve have perpetuated incessant positive inflation for every consecutive year for the last 52 years (since year 1956), due to rampant creation of new money out of thin air. To make matters worse, the federal government and nation have been non-stop borrowing for many decades, and as a result, nation-wide debt has been growing many times larger than GDP since year 1956:

• $55.0T |—————————————-D (Debt=$54T)


• $52.5T |—————————————-D


• $50.0T |—————————————-D


• $47.5T |—————————————-D


• $45.0T |—————————————D-


• $42.5T |—————————————D-


• $40.0T |—————————————D-


• $37.5T |————————————-D—


• $35.0T |————————————D—-


• $32.5T |———————————-D——


• $30.0T |———————————D——-


• $27.5T |——————————-D———


• $25.0T |——————————D———-


• $22.5T |—————————-D————


• $20.0T |—————————D————-


• $17.5T |————————-D—————


• $15.0T |————————D—————-


• $12.5T |———————D——————G (GDP=$13.9T year 2007)


• $10.0T |—————-D—————G
——-

• $07.5T |———-D————G
—————-

• $05.0T |-D——-G
——————————

• $02.5T |-G
—————————————

• $00.0T +(1956)————————- (2008)YEAR

And that does not include the $12.8 Trillion borrowed and spent from Social Security, leaving it pay-as-you-go, with a 77 Million baby-boomer bubble starting to draw entitlement benfits (over 13,175 new recipients per day).

And the federal National Debt ($10.6 Trillion as of NOV-2008) is up from 30% of GDP in 1975 to 76% of GDP today (NOV-2008).

• 085% |———————


• 080% |———————


• 075% |——————x- ($10.6T Debt = 76% of $13.9T GDP)


• 070% |————-x-x—


• 065% |————xx-x—


• 060% |———-x—x—-


• 055% |———x———-


• 050% |——-x————


• 045% |——x————-


• 040% |—-x—————


• 035% |—x—————-


• 030% |xx——————


• 025% |———————


• 020% |———————


• 000% |————————-YEAR


• _____ 1 1 1 1 1 2 2 2


• _____ 9 9 9 9 9 0 0 0


• _____ 7 8 8 9 9 0 0 1


• _____ 5 0 5 0 5 0 5 0

So much debt is crushing when 80% of the U.S. population only owns 17% of all wealth, and 1% of the wealthiest own 40% of all wealth.

Some may call this a recession, and some may call it something else, but either way, we are in a deep hole, and there are dozens of major economic conditions which have never been worse ever, and/or since the Great Depression, and there will be no easy or quick fixes.

What we need now is extraordinary fiscal and moral responsibility, and what are the chances of that when voters give Congress dismal 9%-to-18% approval ratings, but reward Congress with 95% re-election rates?

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at November 20, 2008 10:21 AM

CORRECTION: Deflation is bad, because people can’t the as charge as high of a price for the goods they produced as they previously received (i.e. their assets are declining in value).

Posted by: d.a.n at November 20, 2008 10:25 AM

Rich people,can find great deals.

Posted by: Inewcombe at November 20, 2008 11:02 AM

Roy Ellis,

Your comments contain very valid and important points. But, they all seem to ignore 2 major facts.

1) foreign mfrs. sales have dropped dramatically as well, which means they have abundant under-utilization of capacity. Why would they buy the Big 3’s facilities in this credit crunched market when cash balances on balance sheets are premium when they can take market share by revving up their own capital utilization instead of going into debt to buy the Big 3’s facilities? The fact is, there are no buyers for a bankrupt GM, Ford, or Chrysler, and the research shows, such bankruptcy would destroy as much as 80% of currently anticipated purchases of their vehicles. A buy out by a another corporation is NOT in the cards.

Second. Does America want to trade oil dependency for manufacturing and transportation dependency? Does America want foreigners building our military transportation as well as consumer transportation. That is akin to a monopoly, when your customer has no alternative but to buy a foreign product. America needs to salvage and rebuild its manufacturing base, not give it away for 20 cents on the dollar by allowing the Big 3 to bankrupt and disappear from American manufacturing altogether.

The Steel industry was in this position decades ago. We resolved to keep steel manufacturing in this country even though there was no short term prospect for its profitability. Today, our steel manufacturing is profitable, though small, but, also absolutely reliable in terms of quality for essential aerospace and other vital national security interests.

Posted by: David R. Remer at November 20, 2008 11:02 AM

The world is a big game of Monopoly. China has more hotels than everyone else, so all the money is funneling there as we go around. We get by cause they lend it back so the game can continue.

In Monopoly, there is no way to reverse the tide - although there are no militaries in Monopoly.

Posted by: Schwamp at November 20, 2008 12:12 PM

David, I suggested that the big 3 are already globalized with an international footprint. They are just fishing for a few $bil from the government to help them shut down their legacy plants in Detroit. The Chinese would buy the robotics and the rest for scrap iron. Does America want foreigners building our warfighting materials? Depends of who America is? The oligarchy wants that very much a la the supertanker refueler contract and they do run the show. I think the oligarchy has only turned down one or two of the hundreds of foreign sovereignty purchases done over the last 15 years. And that’s because of public outrage over the selling of seaport management/security and attempts about purchasing airport transportation authority, etc. I’m sure you are aware of the push to grant 35 year leases to foreign entities, Spain and Australia being the latests, for interstate highways to be used as toll roads. One such deal, in Illinois I believe, gives a Spanish firm rights to control the development of properties along a 157 mile long by 20 mile wide stretch of interstate. Australia has a similar deal going in Texas. With a split legislature the public could complain loudly about some issue and have some impact like on immigration and the supertanker contract. Now we can only sit back and watch it happen. With the 111th there is no room for debate or public outcry. The overriding ideology of the oligarchy is that if all the worlds economies are mixed and mingled together then there is little chance of war or collusion to make bad. Give a whit for the US Constitution. From NAFTA we have: “Eliminate sovereign immunity as a defense.” “Create judicial panels that that would consist of trade experts appointed by the governments, work outside each country’s judicial system, operate in secret, and have the authority to impose fines aon any of the three governments, while no appeal of the decisions could be taken to national courts, including the US Supreme Court.”
From WTO we have: “To subject all US federal, state and local laws and practices that affect trade to international review by WTO.” That’s why the WTO shows up in court in your small town when the community protests against a big box store. “To allow any WTO member to challenge any federal, state, or local law as trade-impeding.” That’s why Brazil/WTO is suing the US (taxpayer) for $4B over cotton subsidies to US farmers.” “That the proceedings of WTO judicial panels will be kept secret. All documents used shall remain secret. Opinions in the final report shall be secret. Votes of panelists shall be secret. No appeal procedure exists outside the WTO.” “That the WTO is empowered to enforce its ruling by imposing fines on the US until the nation complies, deny nation trading rights and authorize cross retaliation on any US export, thereby allowing fines to be collected from any industry even those not involved in the trade dispute.” Since the founding of the WTO the US has been named a defendant in far more cases than any other nation. In 2007 Deputy USTR Robert Lighthizer testified before the House Ways and Means Trade Subcommittee that the WTO had rules agains the US in forty of forty-seven cases forcing the US to change its laws and administrative rules. Thank you for all that Bill Clinton and the current batch of Clintonites who are now Obaminites. Secrecy is the archenemy of democracy, but hey, who cares! Got a paycheck, I’m happy!

Otherwise, we have the government we deserve.

Posted by: Roy Ellis at November 20, 2008 12:18 PM

d.a.n.,

I stand corrected. You are right, I read a poorly written article and assumed it to be correct.

I’m still looking for a 5000 DOW by years end and deflation by march.

Posted by: googlumpugus at November 20, 2008 12:55 PM

I get your drift Schwamp, and let’s hope it never comes to that. I assume the oligarchy has factored that into their globalized economy equation. They seem to be willing to walk to the brink with Russia and China. China has over 3000 front agencies collecting intelligence in this country. Likewise, the only way they will do business with a US outfit is with a complete transfer of technology to China as part of the deal. It is known at this time that China has cornered the market on a unique magnetic material used in JDAM bomb targeting. It’s an insidious game they play. For instance they don’t hire lobbyist like most countries. Instead they work through institutions like Goldman Sachs (a special China relationship), Bank of America, Blackstone and Citigroup. Through Goldman Sachs/Bush you have Josh Bolton, Henry Paulson, and Robert Zoellick making China policy. Through Goldman Sachs/Clinton you have Robert Rubin as Sec. Treas.and now chair of Citicorps Exec. Committee and economic adviser to Dem party. The once House majority leader Gephardt worked for Sachs. Council on Foreign Relations Peter Petersen of Blackstone and his Institute for International Economics, the most influential trade policy think tank in the US. These folks help to bring it all to China. Other facilitators include former Sec of State Henry Kissinger and Alex Haig, former Amb. to China James Sasser and former National Sec Advisors Brent Scowcroft and Sandy Berger. The Chinese embassy sends staff to monitor think tank sessions, congressional hearings and public briefings. Just their presence helps people to know what to say and think. Like when the Bush admin was asked to intercede in China’s manipulation of currency scam the largest US corporations operating in China stepped up to swat it down.
Thus China is able to operate behind the scenes to accomplish its goals.
From Pat Choate’s Dangerous Business: “Even if all foreign direct investment were stopped, even if the Chinese currency were adjusted to its real value; even if US and European-type health, safety, and environmental measures were imposed; even if China stopped its direct and tax subsidies; and even if all piracy and counterfeiting were eliminated, China would still have an absolute economic advantage because of the high efficiencies derived from clustering its production, the low cost of its labor, and government subsidies.”
Of course our unfair trade laws with China do not help. US exports are taxed twice when the are exported to China under a value added tax system that unfairly removes VAT taxes when Chinese goods are exported to the US. It is true that this country has never negotiated a favorable trade agreement. Trade has been used to influence foreign policy or used as a tool for foreign aid.
I find it perplexing that China can ship food ingredients tainted with melamine and who knows what else, into this country with lip service by the FDA while the US citizen can’t purchase pharmaceuticals outide the US because they are UNSAFE. Really WOW’s me!

Posted by: Roy Ellis at November 20, 2008 01:40 PM

Roy replied: “The Chinese would buy the robotics and the rest for scrap iron.”

Which would result in 100’s of thousands if not a million Americans suddenly becoming unemployed. Add that cost of unemployment insurance, federal aid to retrain and school those workers, food stamps, and of course the additions to Medicare since they would have no health insurance, and the cost to American tax payers easily surpasses the $25 billion being asked for bridge loan until the economy’s consumerism begins to grow again.

All your references to foreign ownership of American assets refer to Republican and Bush policies enacted these last 8 or so years. That is all about to change. I agree with every word you said on this topic. But, that is not going to be the case going forward by all accounts coming from the Obama camp and Democratic chairs of the Congressional Committees I watch on C-Span.

It is important not to project into the future the actions of the past 8 years of our government. It is a false projection in oh, so many, many ways. These toll roads for example, will be ended by the Democratic Congress and Obama administration for the most part or, at least modified to reflect American ownership and free passage for commuters from home to work, if they survive at all.

Texas won’t be getting any federal highway dollars if they pursue toll roads under the Obama administration. Remember Obama’s 50 state campaign strategy? Texas will be targeted for a Democratic victory in 2012, and that will require halting those toll roads Bush and Perry were so fond of from Mexico to Canada.

You are just flat mistaken to equate the Clinton administration on domestic policy with the coming Obama administration. They will be radically different in many ways, not the least of which will be their approach on trade agreements. Clinton was willing to lower our standards to foreign standards. Obama will be insisting foriegn trade partners elevate their standards to approximate ours. That is a diametrically opposed approach, Roy. One which should not be ignored as readily as you seem to.

Posted by: David R. Remer at November 20, 2008 02:01 PM

goo, I will take a bet the Dow is not even close to 5000, but hovering around 8000 give or take 75 points by year’s end. With recovery in sight by the investors at 2009’s year end, the Dow may drop briefly, for a day or a couple to below 6000, but, will then rapidly recover in as short a time to the 7250 to 8000 range.

What you seem to be missing are two crucial factors going forward. Pent up consumer demand reaching a frustration threshhold and then coming out both at Christmas and in the 2nd quarter of 09. And second, the earnings to price ratio for most American businesses are at lows now, not seen since the 1980’s and early 1990’s.

Yes, there will be deflation next year. No question. But, that in turn is going to create incredible consumer incentives to begin consuming again next Summer, especially if oil prices remain below the $70 to $80 dollar range.

I would add a third, another consumer stimulus package, but, that is premature at this point. It could take many forms, and some would not be nearly as effective as others, so, I will abstain from adding that consideration for the time being.

Posted by: David R. Remer at November 20, 2008 02:10 PM

d.a.n, in the shorter term, interest rates will reflect risk and borrowing capability. Right now and for the short term, the U.S. will remain the low risk place for foreigners to lend. By short term, I mean for at least the next several years.

Therefore, in the short term with falling world wide interest rates, our debt is not the problem it portended to be just 18 months ago. In the longer term, especially after 2017, the debt and interest become vastly more problematic as the U.S. attempts to heap on vastly more debt to pay its Soc. Sec. and Medicare/Medicaid obligations.

Presumably, reforms in these areas will have taken place by then. That is at least the announced intent of Obama administration according to Rahm Emanuel yesterday in a live interview. And given the mandate for reform and change, such reforms will not be the political 3rd rail they have been in the past. We will get reforms. How effective they will be in addressing unfunded mandates remains another question only the passage of time will answer.

Posted by: David R. Remer at November 20, 2008 02:17 PM

David,
What your market prognosticating is missing is that price to earnings ratios may appear low now but when profit numbers for the quarter beginning in October come in it’s all out the window because most of those ratios will be negative.

Posted by: Schwamp at November 20, 2008 03:15 PM

Schwamp, you don’t understand the markets. Investors are pricing those earnings statements in already. The markets are forward looking, not rear view mirror drivers.

But, the markets are down this far primarily because of lack of clarity as to when a turnaround will be forthcoming. Valuations are way below what earnings will be next year if the economy bottom is reached in the first quarter.

Investors responded positively to many of Paulson’s remarks today, the notable exception was to a larger regulatory environment. But, when he explained that the regulatory additions would be aimed at transparency and accountability, the market rebounded.

Which highlights that you have two kinds of investors. Those trading minute to minute, and those trading long term. Those trading long term constitute the vast majority of traders, and they have already capitulated. This volatility is in response to day traders.

The instant some clarity, ie. some consensus is reached that the economy will bottom 6 months out, the longer term traders will come roaring back into the markets. One would be a fool not to be putting money into the markets at today’s closing levels if one is a long term trader.

I just put 82% in stocks, 8% in bonds, and 10% in fixed. Now I can sit back and relax. Doesn’t matter what losses today’s investment incur, they will recoup those small losses and harvest enormous returns when the long term traders come roaring back fearing missing the uptrend. And this will occur around 6 months BEFORE the economy actually sees stabilization or signs of a turnaround.

Whether that is tomorrow, or next month, or the end of the 2009 first quarter, doesn’t matter. I told 401K investors, right here at WB to start paring they allocations in stocks back in the Fall of 2006. Those who followed that advice, and then again got out of stocks back in the Fall of 2007, would be poised to make a killing in the markets by jumping increasingly back in today and on dips in the next month or two.

The markets are only unpredictable if one is intent on day trading. But, the long term trends in the markets give ample signals of what is forthcoming, as my article in 2006 regarding the property values and their consequences, demonstrated.

Posted by: David R. Remer at November 20, 2008 04:09 PM

Sorry to hear you are overweight in stocks David. The long term investors (of which I am unfortunately one of) have been conditioned like pavlovian dogs to believe that markets always go up long term - and they have not capitulated at all. We have been trained this way to provide some cushion for the sharks exiting the market opon the period of reckoning. I always knew this day would come - and I still don’t act, paralyzed by the absence of a financial maturity that would allow cutting ones losses, capitulated in the sense that all optimism has been lost.

When almost everyone believes something, the opposite is probably true.

Posted by: Schwamp at November 20, 2008 04:27 PM

David: Big 3 Auto: Should they be rescued?

No. Unfortunately, some geniuses had the bright idea that the financial industry, at least some of it, deserved to be rescued. So, the administration that professed to be, and was believed by many voters to in fact be, laissez faire and savage free-marketers engineered the biggest and most costly US federal intervention in the history of the universe. It’s not surprising that the auto industry now comes along wanting help. And it’s impossible for the Bush administration to make the case on a basis of consistency that the financial industry deserved a bail-out but the auto industry, or any other industry having hard times now or in the near future, does not.

So, I say “No” in answer to your original question. I’ve already let my elected representatives know, just as I did when I opposed the financial industry bail-out. I doubt it will do any good but at least I tried.

Posted by: EJN at November 20, 2008 04:43 PM

Obama is also going to end the reign of the lobbyist influence peddling in Washington. Obama is not going to pick people with conflicts of interest like Tom Daschle for his cabinet.

Obama is going to do things so much differently that you will think you are living in ANOTHER WORLD.

Roy Ellis: I am not anti-union.

How many UAW members and their supporters have illegal immigrants either working for them or are dependent on services provided by illegal immigrants? Illegal immigration is a major part of the power structures golobalization plans.

How many of the big unions went on strike to try and prevent the government from assisting companies in relocation their manufacturing facilities to China?

With the exception of a few major manufacturing corporations and their union represented workers, much of the damage to our manufacturing base has been accomplished. The time to fight this was 15 years ago, not know when about the only ones left to protect are these big corporations and their big unions.

“We all should take the time to give a fickle finger of fate salute to Reagan, Bush 1, Clinton and Bush 2.”

We will soon be adding another president to that list.

Posted by: jlw at November 20, 2008 04:44 PM

I think your right jlw. I’m archiving David’s post (that the democrats are here to save us) away for reference in about a year. Yes, a president doesn’t drive the oligarchy agenda, it’s the other way around. I’m for true worker’s unions but it irks me that members can’t rid themselves of some of the archaic rules they put up with. Just as it irks me that the voters want change instead of reform.

Posted by: Roy Ellis at November 20, 2008 05:05 PM

Roy, voters do want reform, some want this reform, some want that reform, some want the opposite reform, etc. etc.

That is why the founding fathers created a republic and not a direct democracy, so that order and direction could potentially be followed despite the lack of consensus amongst the electorate. They voted for change as well, and they got it.

Whether it is the change that improves their lot after 4 years or not, remains to be seen. But, I think Obama’s re-election chances are very good if he sticks to the reforms and changes he has promised and alluded to. There simply isn’t a better beginning for a president than a recession, provided that it improves over his term in office. Almost all of our recessions have improved two years out from onset, save for the 1930’s and previous ones.

Posted by: David R. Remer at November 20, 2008 05:42 PM

jlw, putting words into Obama’s mouth and electing yourself spokesperson for the Obama administration, are you? Interesting.

You set expectations so high that a dictator could not fulfill them if they were his own.

Try taking Obama’s actual words and holding him to that standard, instead of your fantasized version of your ideals for what should happen according to jlw.

If after 4 years, the direction of the country has changed, the recession is behind us and we are experiencing modest economic growth again, and terrorism is being fought, and we have but a symbolic compliment stationed in Iraq, and the Afghanistan front has improved, and Iran has no nuclear weapons, and the growth of deficit spending and debt has abated from current levels, —- I trust you will recant your words above as misguided and misspoken, as any objective person would.

Posted by: David R. Remer at November 20, 2008 05:48 PM

EJN, I don’t agree with a lot of your position, but, I hold your action in very high regard reflective of an intelligent and responsible person for having contacted your representatives to make your views known.

It takes a certain amount of moxy to act even though one’s hopes for that act virtually non-existent. That is to be respected as it speaks to a sense of responsibility even in the face of perceived futility.

Our government would work better if all our politicians heard from vastly more of us on the issues they are dealing with.

Contrary to popular belief though, our politicians usually do have a whole lot more pertinent information about the issues they face in legislation than we the voters do, in general.

If the outcome works for the people, the people will instantly forget that the means to achieve those outcomes were opposed to their own convictions on the matter, once upon a time.

If the Congress and Obama succeed in improving the lot of Americans generally, the people will swear they supported their efforts all along. Welcome to sociology 101 and the group think phenomenon which lies at the heart of American politics.

Posted by: David R. Remer at November 20, 2008 05:59 PM

Schwamp said: “When almost everyone believes something, the opposite is probably true.”

That is usually true of investor markets at their turning points.

Posted by: David R. Remer at November 20, 2008 06:01 PM

Roy, I am glad you are archiving my posts, and not your interpretation of them. For there is a chasm between the two as evidenced by your last comment on this topic.

The Democrats are not here to save us. The Democrats are here to recapture and hold power. That is ALWAYS the foremost priority of any political party.

Obama however, has time and again demonstrated in his campaign that he is no traditional Democrat and is not following a Democratically held ideology. His campaign was based on what would work with a pragmatism that proved itself. If he governs in the same manner, Democrats will have lost a president, in part, and the American people will found a great one.

Do not confuse my support for Obama as wholesale support for the Democratic Party. My support for the Democratic Party would have to be earned, and except for Clinton’s and blue dog’s bending to fiscal conservative principles in his second term, there is not much in the Democrat’s past 35 years to recommend their competence at governing for the nation’s future.

Posted by: David R. Remer at November 20, 2008 06:11 PM

David,

I sincerely hope you are right. I suspect, if I’m honest, that 5000 by years end is overly pessimistic, but not unrealistic by the end or middle of 2009. I think this number is more in line with a real bottom. Perhaps 6000. I’ll split the difference and go with 5500. I’m not really convinced of your prognostications for 2009. I’m seeing bad signals worldwide that suggest something deeper than the usual recession.

Unfortunately, I don’t think anyone, including Obama has a handle on this problem, yet.

Posted by: googlumpugus at November 20, 2008 07:58 PM

goo, I agree, no one has a crystal ball on the future that works 100%. That said, all that is happening here is a deleveraging of inflated debt and assets. Nothing more.

The losses incurred to a great degree can’t be more than the irrational over valuation that previously occurred. I say to a great degree, because that is certainly not true of employment numbers, and unemployment numbers in excess of 10% would have other domino effect consequences.

But, given the liklihood that unemployment will not exceed 10%, there is a stop loss at that point, as bankruptcies, mergers, and breakups occur as part of the deleveraging process. Everyone will be a bit poorer or less wealthy, but, those with jobs will still make a living and continue consuming and provide backbone to our economy.

China is likely to continue growing right through all of this at 7 to 8 percent. India at a lesser rate, but growth nonetheless. Europe will be tagging behind us by 6 months to a year in getting their economies stimulated again.

I don’t see any world wide depression scenarios in any of this. If China were to refuse to float our federal deficits, that would be a nightmare scenario. But, there is no evidence of that or similar events occurring in the foreseeable future. And lacking anything like that, it is very likely that in the 3rd quarter of 09 everyone will begin to breath a sigh of relief that worst is behind us.

The key going forward is insuring that we never walk to the edge of this precipice again. Hank Paulson’s speech today, which I know Obama would agree with in terms of prophylactic measures, are spot on. Implementation may be tedious and difficult at times, but, the direction and scope of transparency and accountability Paulson spoke of today, were spot on.

Posted by: David R. Remer at November 20, 2008 08:19 PM

David Remer: Who’s words are these

” I am running to tell the lobbyists in Washington that their days of setting the agenda are over. They have not funded my campaign. They won’t work in my Whitehouse.”

Another campaign promise bites the dust.

Those who have hired the lobbyists paid cold hard cash to get this new Congress elected and they are going to set some of the agenda and they will write much of the policies. If necessary, veto’s will be overridden. I don’t think it will be that necessary. I expect Obama will be a team player.

“If after 4 years…….and debt has abated from current levels”

If the things you listed were to occure, I’m sure many people will be jumping for joy because the statis quo is back on course. But that is a far cry from the fundamental change that Obama alluded to in the campaign. Therefor, I anticipate that there will be no reason for me to recant my words or my opinion of Obama.

It seems to me that you have lowered your expectations from nothing less than a revolutionary presidency to a competent president.

Posted by: jlw at November 21, 2008 01:37 AM

Obama’s transition team is also soliciting donations for the costs associated with the transition and inauguration so the corporate lobbyist won’t be involved in the funding. It is essential that the lobbyist are weaned off the members of Congress and the president. Perhaps a donation would help to start the ball rolling towards a lobbyist negated DC. We can’t just sit by and complain because if we do the void will be filled by the lobbyist and their money. Obama is just 1 man he can’t do it by himself.

Posted by: j2t2 at November 21, 2008 02:48 AM

Lobbying is in pitch fever right now. Folks trying to get their dibs in with the new administration and congresspersons. On the tube last evening was a lobbyist (one of hundreds) attending a fundraiser by John Dingel to help the campaign funds of the newly elected. This lobbyist said he was giving $5k to several of the newbies. Legisltor’s will never divest themselves of lobby money. Moneyed interest has plagued the Republic throughout our history. One way to remove money influence from politics is through a new 3rd party with a different attitude about politics. A party that targets reform of government such as abolishing corporate personhood and money is free speech laws. Reorganizes the Federal Election Commission and mandates that all donations come through the FEC for distribution to candidates. Sounds real easy.
I’ve put up a website that promotes such a party, www.demreps.com

Posted by: Roy Ellis at November 21, 2008 09:38 AM

jlw, your comment is jaundiced. You keep telling us how bad you want things to get, rather than providing facts and patience to see what Obama actually does.

I think it is best to remain hopeful, communicate my expectations to Obama and my representatives, and hold them accountable if they disappoint.

To condemn them before they are even in office is a dead giveaway that one hopes they fail, and therefore, hopes the nation fails as well, simply to satisfy one’s own prejudices. That is hardly rational, nor productive, nor in keeping with the founding principles of striving for a more perfect union.

If enough others act as your comment models, there will be a self-fulfilling prophecy failure for yourself and everyone else in this country. Think about it. That would not be in your own self-interest. Let alone enlightened self interest as Adam Smith indicated would be necessary for a democratic society to work.

Posted by: David R. Remer at November 21, 2008 12:50 PM

Same ole lame argument we’ve been hearing for 40 years David. Just wait, things will get better. This new administration will do it. It’s not Obama, or the demreps or the House or Congress. It’s a broke system, a failed government. We were once a Republic. Today we are governed as a corpocracy or an oligarchy. You shouldn’t believe me. Let me start out with Albert.

“The pursuit of truth and beauty is a sphere of activity in which we are permitted to remain children all of our lives.”—Albert Einstein

And: (Gist) To observe a failed experiment and repeat the same expecting different results is stupid. Albert E.

From Thomas: “If a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be.” Thomas Jefferson

“Thomas Jefferson: The spirit of the times may alter, will alter. Our rulers will become corrupt, our people careless… We must crush in its birth the aristocracy of our moneyed corporations, which dare already to bid defiance to the laws of our country.”

James Madison: We are free today substantially, but the day will come when our Republic will be an impossibility. It will be an impossibility because wealth will be concentrated in the hands of a few. … when the wealth of the nation will be in the hands of a few, then we must rely upon the wisdom of the best elements in the country to readjust the laws of the nation to the changed conditions.”

“President Abraham Lincoln (1864): I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country… corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed.”

Teddy Roosevelt: “To destroy this invisible government, to befoul the unholy alliance between corrupt business and corrupt politics is the first task of the statesmanship of the day.”

“President Franklin Delano Roosevelt: The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That is, in essence, fascism….ownership of government by an individual, by a group, or by any other controlling power. Among us today a concentration of private power without equal in history is growing.”

“Idaho Republican Senator William E. Borah (1926): Money has come to be the moving power in American politics. Some years ago, politicians got into the habit of seeking contributions from men of great wealth…. It was inevitable, if the large sums were to be given, that large sums would have to be returned in some way. Hence, money and politicians joined forces, and money has its say in shaping legislation and in administering the laws of the country. It is a fearful national evil and will in the end, if not controlled, destroy the government of the people and substitute, therefore, a government of the few—-the few who have sufficient money with which to buy the government.”

Of course there are hundreds of others. And these guys weren’t dummies. Robert Kennedy, while not a statesman, was less eloquent but quite succinct in stating that: The Republicans are 95% corrupt and the democrats are 75% corrupt.”

I’ve been keeping score and right now its We the People, 0 and the 35,000 registered lobbyist, 7.62 x 10 to the 6th. We the People need help in the context of reform. Let’s bring back the Jacksonian era, maybe Ted Turner in a duel with Henry Kissinger. Our young folks would have a reason to get involved in politics. Abolish Corporate Personhood and Money is Free Speech, implement a flat tax, have the FEC receive and distribute all campaign donations, limit the campaign period to six months, hold primaries on the same day, and yes, even purchase your pharmaceuticals from foreign markets. Etc. Etc.
Check out REFORM at www.demreps.com

Posted by: Roy Ellis at November 21, 2008 03:02 PM

Roy said: “Same ole lame argument we’ve been hearing for 40 years David. Just wait, things will get better.”

Sorry, your life has not improved. I was born in 1950, and we were poor inner city folks. By the time I was 14, Dad was working at Ford Motor Co. and Mom was raising 7 kids, and we had a car, a home, a backyard, healthy food, and good Christmases.

I struggled through working full time and going to college full and part time. I was REALLY poor after graduating from college and in debt. But, in just 10 years, I was married, had a home, two cars, a travel trailer, and savings.

So, yeah, for a couple hundred million Americans things did get better. Of course not all things got better, but a great many did. Race relations got incredibly better over that time span. Middle Class savings via 401K’s, pensions, etc. grew by leaps and bounds. There were no more world wars, and the threat of nuclear attack upon our nation subsided.

And while an awful lot got mismanaged over the last 8 years, even moreso, than usual, there is absolutely no question that Democrats are going to attempt to get many of the things wrong, right. That is there meal ticket to reelection. If Obama proves to be as competent a president as he was a campaigner, Democrats would do well to follow his lead on most issues. And things just might, on net, actually get better, as they did from 1945 through 2001 for nearly all Americans.

You can’t permit your personal frustrations to blind your comments to real history, Roy. America improved enormously from WWII to the present. We are nowhere near repeating the great Depression in the next 4 years. That will only come if entitlement and tax reforms are not handled appropriately and quickly, before the deficits hit from entitlements around 2017.

There is much reason and rational basis for hope, Roy. And it feels better and allows one to go about one’s life more productively, as well. Which is good for oneself, one’s family, one’s community, and one’s nation. Try a win-win attitude for a while, you might just find optimism also carries self-fulfilling prophecy, as well.

Posted by: David R. Remer at November 21, 2008 03:21 PM

Hello again. We enjoyed our week vacation in Rome and even in the off-season there were a tremendous number of tourist from all over the world spending lots of money. Occasionally I agree with Remer and his note above is one of those times.

Good times and bad times never last and opportunities continue to abound in this country and around the world. We can choose to laugh or cry but the choice still remains ours. American’s remain a good and ambitious people capable of achieving nearly anything they can imagine and believe.

Whenever I travel overseas I always look forward to coming back to the land and people I love.

Posted by: Jim M at November 21, 2008 04:18 PM

David Remer: Your attack of my motives is total hogwash.

The point that I am making is that for a man who porclaimed himself a great agent of change, going to go to Washington and clean out the special interests, offer the American people something akin to a new New Deal, filling your Whitehouse with Washington insiders beholden to special interests is not an audacious start and may not bode well for the future.

If you remember, I am not the one who proclaimed Obama a revolutionary. If his supporters take a wait and see attitude, He will probably be swayed by the inside the beltway power structure.

If those who believed all of Obama’s retorical politicing don’t keep the pressure on him constantly then in four years you will probably be saying, at least he was better than Bush so I am going to vote to reelect him. That’s hardly revolutionary.

I don’t have to defend Obama. I did not vote for him. I voted for change. Everytime he fullfills a campaign promise I will acknowledge it. Every time he violates a campaign promise I will shove it in the face of his supporters. He has already violated a campaign promise, no lobbyists in my Whitehouse.

I abhore the the possibility of a depression but, I will not argue that we as a nation are not deserving of it. We elect the same old politicians, bought by special interests and rather than challange them to do things right, we adopt a wait and see attitude.

Posted by: jlw at November 21, 2008 04:22 PM

David, you make it seem like there is something evil in wanting reform of government. Looking at Wiki I see there has been 61 different political parties in American history. My proposed party would make 62. Thomas said that if we went twenty years without a revolution something was bad wrong with us. I’ve had a pretty good life, certainly not a bitter one. I can now sit back and flog the keyboard and tend the Revolution. In other words, I get a paycheck but I’m still not content with the system. I really like the idea of one person, one vote. I like to strive for fairness in all things. Consider the WTO rule where the US gets one vote and each EU country gets one vote. What is that? Is the EU is or is it not? According to Joel, in Delusional Democracy, the number of lobbyist went from 16342 in 00 to 34785 in 05. While my vote gets counted I’m not sure it counts. Here is a quote from Joel’s book by Jason Miller (2005): “Sadly, the notion of “of the people, by the people, and for the people” is in its final throes. A corrupt, plutocratic government “of the rich, and for the rich” sucks the marrow, leaving the rest of America to hungrily gnaw the bones. Bearing a striking resemblance to the feudal lords of the Middle Ages, America’s plutocrats plunder and hoard the wealth of the land while their serfs fight over the remaining scraps.”
Obviously I am not by myself in harboring such feelings. Now I’m not proposing to throw the money changers out of the Temple or even trying to throw the ivy leaguers out of Wall St. But I do want one person, one vote. In the simplest terms, if I feel like I am being treated fairly I’m happy. I’m not.

Jim M, Welcome back to the war.
jlw, you are so right on!

Posted by: Roy Ellis at November 21, 2008 06:29 PM

Again, Roy, you describe what is and has been, without leaving room for the possibility of improvement.

I support the rise of an independent party, but, without any illusions that such a party will, by definition, become subservient to the same master as all previous parties, power.

The change that must take place has to occur within the voters themselves. Changes in parties will never unseat their master objective. Only the voters can do that. And if they learn to unseat power routinely, those that replace incumbents will have no political career unless they serve the people and voters, as well.

That is the lesson of democracy and the vote, that is the admonition of T. Jefferson, that is the source of hope for the future.

With that many lobbyists, it would be virtually impossible to fill an administration with competent public servants, none of whom have any ties to lobbying. Have a little faith in this candidate whose presidency and reelection rests on his dealing with the lobbying vampire in D.C.

You have nothing to lose in pressing Obama to live up to his promises. You have a lot to lose by condemning his administration before he has even taken office. That self-fulfilling prophecy thing, you know.

Posted by: David R. Remer at November 21, 2008 06:47 PM

jlw, see my comment above to Roy as my reply to your comment.

Posted by: David R. Remer at November 21, 2008 06:48 PM

Jim M, the promise that was America at its founding remains the greatest promise ever made amongst people toward humanity. That promise, with an unyielding effort to realize it, is the greatness of America.

To form a more perfect union in which people may exercise certain unalienable rights, such as living their life at they choose and pursue, provided such pursuits do not threaten that more perfect union of co-existence, states, and nation.

Posted by: David R. Remer at November 21, 2008 06:58 PM

Jim M wrote: “Good times and bad times never last and opportunities continue to abound in this country and around the world. We can choose to laugh or cry but the choice still remains ours.”
Some truth there but not totally. We have run a negative trade deficit every year since 1973. That is in the past. How does it look looking into the future? I can’t see in the next 50 years where we might have a positive trade figure. Before we could expect a positive figure China would have to be paying 1B low skilled workers an average of $20/hr. And, then there is India with another 1B. Make that 100 years. Your last sentence is spot on; I am laughing and crying. I guess it depends on the benchmark in time you are considering. Someone said the auto union workers should sign on for about $8/hr. When is the last time an autoworker was paid 8 bucks/hr? Probably back in the 50’s. And you recall that a 1950 dollar is now worth 10 cents. So, an $8 wage would be worth something like 75 cents/hr in the 50’s. David, when your dad worked at Ford was he making more than 75 cents an hour? And now we are talking globalization wages!! About what the oligarchy has in mind.

From jlw we have: “David Remer: Who’s words are these
” I am running to tell the lobbyists in Washington that their days of setting the agenda are over. They have not funded my campaign. They won’t work in my Whitehouse.”

Now we hear that Obama is backing off on his primary promise to renegotiate NAFTA.

David you wrote: “To form a more perfect union in which people may exercise certain unalienable rights, such as living their life at they choose and pursue, provided such pursuits do not threaten that more perfect union of co-existence, states, and nation. “
I heard this evening that Obama ‘may’ be amenable to the NorthAmerican Union. In my opinion that tends to threaten the more perfect union. Do you believe that subverting our laws to WTO rules/regulations tends to threaten that more perfect union?

They tell us if we don’t pay attention to history we tend to repeat it. And if you are on a runaway train going 100mph downhill with no brakes, you might want to try and guess what’s around the next curve.

I had just as soon we forget this Obama/Bush crap and get on with the Revolution.

Posted by: Roy Ellis at November 21, 2008 09:51 PM

Though I’m still against a bail-out in any form, it’s encouraging that this time Congress is demanding a plan from the beggars before agreeing to cut them a check, as opposed to the way they acted with the financial system bail-out.

That might have something to do with the way the financial bail-out request was presented by the Bushies: either give us the money or the whole contraption called the US economy goes down in a matter of days if not hours.

Note how a) the whole contraption didn’t go down even though the money wasn’t immediately forthcoming and b) Paulson has abandoned the original plan and is just making things up as he goes along, making no apparent headway against the crisis.

The stupidity and incompetence of the financial system bail-out must not be reprised in any succeeding bail-outs such as that proposed for the Big 3 automakers.

Posted by: EJN at November 22, 2008 09:48 AM

EJN, I agree about taking the time to require a well thought out plan for insuring the taxpayer’s dollars will 1) achieve the intended objective, and 2) be assured at least a reasonable chance of being repaid.

As for the financial bailout, the US and world economy would be vastly worse off today had Congress not come forward with an infusion into the financial sector. The psychological effect of announcing the 700 billion economic stabilization act cannot be overlooked or diminished.

I agree, that money could have been targeted and structured more effectively, but, also remember, that it was a compromise bill in order to get passed.

And it must not be forgotten that the Congressional plan was joined at the hip with the Federal Reserve’s infusions of liquidity and rate adjustments.

I am not disagreeing with you that the $700 billion was not well targeted or structured, but, that could only occur in an authoritarian society where one person decides and avoids the pitfalls of consensus and compromise.

If folks want democracy, they have to accept its weaknesses along with its strengths, and work diligently to improve both.

Posted by: David R. Remer at November 22, 2008 10:25 AM

EJN, I don’t believe for a minute that stupidity and incompetence is driving the train. Highly educated and knowledgeable people are. And every penny of the bailout will find the pigeon hole it was destined for. Looking back, it was Goldman Sachs that served as the financial instrument to bring China on line. Half the Bush admin came from Sachs and will probably return there. I would expect Sachs to end up with at least half of the bailout funds.
Heard this morning that GM is the largest seller of cars in the China market with a plant employing about 20,000 people and looking to expand. I think they want the bailout to shutter their legacy plants, take care of worker pensions, severance and the like. Kind of hard to offer up a plan like that to Congress.

Posted by: Roy Ellis at November 22, 2008 10:29 AM

Can you say Buick in chinese That’s the hot ticket For GM and some other of their Line There.

Posted by: Rodney Brown at November 22, 2008 11:37 AM

googlumpugus wrote: d.a.n., I stand corrected. You are right, I read a poorly written article and assumed it to be correct. I’m still looking for a 5000 DOW by years end and deflation by March [year 2009].

Maybe. The DOW has already closed as low as 7552 on 20-NOV-2008 (the lowest level in 5 years).

However, overall deflation for the next year or so doesn’t seem likely due to several inflationary pressures.
While the debate about approaching inflation and deflation continues, there is also the possibility of BOTH.
Currently, we have a mixture of BOTH inflation (food, electricity, health care, etc.) and deflation (homes, gasoline, etc.).
Demand for many non-essentials are likely to experience deflationary prices (e.g. homes due to 10,000 foreclosures per day, gasoline due to less driving, restaurants, higher-end/higher-quality products for which lower-cost products can subsititute, etc.).
Demand for essentials are likely to experience inflationary prices (e.g. food, electricity, health care, pharmaceuticals, etc.).

Overall inflation is likely to continue to be positive for the next year or so, due to the following:

• (1) The massive $10.7 Trillion National Debt is creating ENORMOUS pressure to continue to borrow, create more money out of thin air, spending, bail-outs, stimulus checks, extend unemployment benefits, pork-barrel, corporate welfare, subsidies, etc., etc., etc. (hence, increasing inflation); after all, what happens when that stops? The $10.7 Trillion National Debt is 76% of the nation’s $13.9 Trillion GDP. Also, 58% ($.146 Trillion) of the $2.5 Trillion in total federal tax revenues (18% of GDP) is already dedicated to:
  • (a) pay-as-you-go Social Security ($596 Billion in 2007). There is no surplus in Social Security Trust Fund. Social Security is a pay-as-you-go system (en.wikipedia.org/wiki/Social_Security_Trust_Fund). The so-called Social Security surpluses are actually I.O.U.s representing more debt and the probability of more borrowing and creation of more money out of thin air.
  
  
  • (b) Medicare ($432 Billion in 2007), which is consuming more of the total federal revenues every year;
    • Year 2007: $432 Billion (17.3% of federal revenues)
    
    
    • Year 2006: $374 Billion (15% of total federal $2.5 Trillion in revenues in 2007)
    
    
    • Year 2005: $333 Billion (13% of total federal budget)
    
    
    • Year 2000: $216 Billion (12% of total federal budget)
    
    
    • Year 1990: $107 Billion ( 9% of total federal budget)
    
    
    • Year 1980: $34 Billion ( 6% of total federal budget)
    
    
    • Year 1970: $7 Billion ( 4% of total federal budget)
  • (c) and the interest ($430 Billion in 2007 which is 17.2% of the $2.5 Trillion in total federal tax revenues) on the $10.7 Trillion National Debt per year;
  … (hence, creating more pressure to borrow and create more money out of thin air);


• (2) The 77 Million baby boomer bubble is approaching, and the ratio of workers paying Social Security taxes-to-Social Security recipients is shrinking, and will create more pressure to borrow and create money out of thin air to meet those obligations.


• (3) The $54-to-$67 Trillion nation-wide debt is 388%-to-482% the size of the nation’s $13.9 Trillion GDP; that is like making the median income of $43K per year, but having $207,260 of debt, which is a lot when and 28% of that $43K of income goes to pay regressive federal taxes (6.2% x 2 for Social Security, 1.45% x 2 for Medicare, and 12.7% for federal income taxes), leaving only $31K of take-home income (a mere 14.9% of the $207,260 debt). That would be especially difficult if the tax payer also has dependents. At any rate, most likely, the massive debt-pyramid will be allowed to grow bigger for a few more years (as long as possible) by creating more and more money out of thin air, by more borrowing, more spending, more stimulus checks, and more bail-outs, because that is the only way to delay the inevitable collapse that will eventually occur when we finally can not borrow enough, or create enough money out of thin air, and/or give away enough money to stop the collapse; that is, incessant inflation year-after-year, will erode the currency to ridiculous levels; already, a 1950 U.S. Dollar is only worth about 11 cents due to positive inflation every consecutive year since year 1956 (hence, increasing inflation);


• (4) There is something fundamentally wrong when no one can tell us where the money will come from to merely pay the interest ($430 Billion) on the $10.7 Trillion National Debt, much less keep the debt from growing ever larger, when the federal government is already borrowing and printing the money to merely pay the interest alone.
  It’s quite a pickle with no easy solutions, and it can only end badly as either:
  • a long and severe recession if we stop growing the debt ever larger;
  
  
  • or a depression if we continue to borrow and create new money out of thin air, allowing the debt to grow to levels that will be impossible to ever deal with (which we may have exceeded already);
  
  
  • or worse;

Schwamp wrote: The world is a big game of Monopoly. China has more hotels than everyone else, so all the money is funneling there as we go around. We get by cause they lend it back so the game can continue. In Monopoly, there is no way to reverse the tide - although there are no militaries in Monopoly.

It’s actually like Monopoly, but one player can print all the money they want.

Before long, that one person owns everything, while everyone else is broke or deep in debt (i.e. the debt pyramid) to that one person … in which case, a painful reset occurs, and the game starts over. This time around, we should rethink the monetary policy that uses incessant inflation (and these other abuses) to gradually separate wealth from most people and route it to a very few.

The problem is massive debt, growing ever larger, resulting from these root causes and abuses.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at November 22, 2008 12:20 PM

d.a.n, inflation is in check only as long as the economy remains in recession. You are right, in the years following the beginning of economic growth again, given the massive infusions of liquidity globally, inflation is going to come roaring back in a very big damn hurry, and could potentially make the 1970’s inflation look like a picnic in the park.

This is one reason Obama may consider removing Bernanke in two years. If Bernanke is still fighting deflation, he will be the absolutely WRONG person to lead the Fed. Reserve, as Greenspan was from 2003 into 2006.

Posted by: David R. Remer at November 22, 2008 03:40 PM

It’s amazing that the inflation rate is currently reported to ONLY be 3.7% (as of 1-NOV-2008), and on schedule to be 4.28% on average for year 2008 (up from 2.85% for year 2007).

• ____INFLATION RATE_____
• 4.75%|———————-
• 4.50%|———————-
• 4.25%|——————xxx (4.28% average for year 2008)
• 4.00%|——————x—
• 3.75%|——————x—
• 3.50%|——————x—
• 3.25%|————xxx-x—
• 3.00%|————x-xxx—
• 2.75%|——xxx-x———
• 2.50%|——x-xxx———
• 2.25%|—xxx—————
• 2.00%|—x——————
• 1.70%|—x——————
• 1.50%|xxx——————
• 1.25%|———————-
• 1.00%|———————-
• 0.75%|———————-
• 0.50%|———————-
• 0.25%|———————-
• 0.00%|__________________YEAR
• _____ 2_2_2_2_2_2_2
• _____ 0_0_0_0_0_0_0
• _____ 0_0_0_0_0_0_0
• _____ 2_3_4_5_6_7_8

Year _ Inflation Rate
2002 __ 1.59%
2003 __ 2.27%
2004 __ 2.68%
2005 __ 3.39%
2006 __ 3.24%
2007 __ 2.85%
2008 __ 4.28% (estimated)

While the inflation rate has been rising since year 2002, it’s amazing it isn’t higher, considering the $4.24 Trillion that has been pumped into the banks and coprations:

Financial Crisis Balance Sheet (as of 13-NOV-2008):
Government Entity ———————————————— Sum of Money Spent Federal Reserve:
• (TAF) Term Auction Facility ————————— $900 Billion
Discount Window Lending:
• Commercial Banks ————————————————- $99.2 Billion
• Investment Banks ————————————————- $56.7 Billion
• Loans to buy ABCP ———————————————— $76.5 Billion
• AIG ——————————————————————— $112.5 Billion
• Bear Stearns ——————————————————- $29.5 Billion
• (TSLF) Term Securities Lending Facility ————— $225 Billion
• Swap Lines ———————————————————- $613 Billion
• (MMIFF) Money Market Investor Funding Facility —- $540 Billion
• Commercial Paper Funding Facility ———————— $257 Billion
• (TARP) Treasury Asset Relief Program ————- $700 Billion
• Automakers —————————————————- $25 Billion
• (FHA) Federal Housing Administration ————- $300 Billion
• Fannie Mae/Freddie Mac ———————————- $350 Billion
Total: $4.2845 Trillion

Compare that to these other big budget events of the past:

• Hoover Dam 1930-to-1935: $49 Million ($782 Million in 2008 dollars)


• Panama Canal 1904-to-1914: $375 Million ($7.9 Billion in 2008 dollars)


• Gulf (Iraq) War # 1 1990-to-1991: 61 Billion ($98 Billion in 2008 dollars)


• Marshall Plan 1948-to-1951: $12.7 Billion ($115.3 Billion in 2008 dollars)


• Louisiana Purchase 1803: $15 Million ($217 Billion in 2008 dollars)


• Race to the Moon 1958-to-1969: $36.4 Billion ($237 Billion in 2008 dollars)


• Savings and Loan Crisis 1986-to-1995: $153 Billion ($256 Billion in 2008 dollars)


• Korean War 1950-to-1953: $54 Billion ($454 Billion in 2008 dollars)


• The New Deal 1933-to-1943: $32 Billion ($500 Billion in 2008 dollars)


• Gulf (Iraq) War # 2 / War on Terror 2003-to-present: $551 Billion ($597 Billion in 2008 dollars)


• Vietnam War 1964-to-1972: $111 Billion ($698 Billion in 2008 dollars)


• NASA (cumularive) 1958-to-2008: $416.7 Billion ($851.2 Billion in 2008 dollars)


• World War II 1941-to-1945: $288 Billion ($3.6 Trillion in 2008 dollars)

___________________________________________________________________________________
TOTAL: $7.12 Trillion in 2008 dollars

Yet, today, we have a $10.7 Trillion National Debt, and $54 Trillion nation-wide debt.

Also, if we just spent 4.2845 Trillion on the banks and corporations (listed above), why has the National Debt only increased by about $1 Trillion (from $9.7 to $10.7 Trillion) since 25-SEP-2008?

YEAR _______ National Debt ________ Increase per year _____ Increase per day
11/22/2008; $10.67 Trillion
9/25/2008 ; $9,790,496,000,000.00 ; $782,842,600,000.00 ; $2,144,774,322.57
9/30/2007 ; $9,007,653,372,262.48 ; $500,679,473,047.25 ; $1,370,785,689.38
9/30/2006 ; $8,506,973,899,215.23 ; $574,264,237,491.73 ; $1,572,249,794.64
9/30/2005 ; $7,932,709,661,723.50 ; $553,656,965,393.18 ; $1,515,830,158.50
9/30/2004 ; $7,379,052,696,330.32 ; $595,821,633,586.70 ; $1,631,270,728.51
9/30/2003 ; $6,783,231,062,743.62 ; $554,995,097,146.46 ; $1,519,493,763.58
9/30/2002 ; $6,228,235,965,597.16 ; $420,772,553,397.10 ; $1,152,012,466.52
9/30/2001 ; $5,807,463,412,200.06 ; $133,285,202,313.20 ; $364,914,996.07
9/30/2000 ; $5,674,178,209,886.86 ; $17,907,308,271.43 ; $49,027,538.05
9/30/1999 ; $5,656,270,901,615.43 ; $130,077,892,717.81 ; $356,133,860.97
9/30/1998 ; $5,526,193,008,897.62 ; $113,046,997,500.28 ; $309,505,811.09
… … … … … … … … … … … … … …
6/30/1960 ; $286,330,760,848.37 ; $1,624,853,770.15 ; $4,448,607.17
6/30/1959 ; $284,705,907,078.22 ; $8,362,689,332.41 ; $22,895,795.57
6/30/1958 ; $276,343,217,745.81 ; $5,816,045,849.38 ; $15,923,465.71
6/30/1957 ; $270,527,171,896.43 ; -$2,223,641,752.89 ; -$6,087,999.32
6/30/1956 ; $272,750,813,649.32 ; -$1,623,409,153.30 ; -$4,444,652.03

Is inflation really only 3.7% ?
Is the National Debt really $10.7 Trillion (or much larger)?
Is unemployment really 6.5% ?

How can $4.24 Trillion dollars be pumped into the banks and corporations and inflation only be 3.7% today?
Something doesn’t seem right.
Injecting that much money into the economy should be producing more inflation.
Perhaps that money isn’t getting circulated into the economy very well?
Or there’s something wrong with the way inflation is being calculated?

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at November 22, 2008 07:49 PM

A chart d.a.n. might like:

http://www.tradingeconomics.com/Economics/Inflation-CPI.aspx?Symbol=USD

Posted by: googlumpugus at November 22, 2008 08:37 PM

B.T.W, Many complained that Bernake fought inflation way too long, paving part of the path into this contraction.

Posted by: googlumpugus at November 22, 2008 08:42 PM

That was his MO.

Posted by: Rodney Brown at November 22, 2008 10:12 PM

Thank you d.a.n for showing 1956-1960 Like a shot of red eye whiskey.

Posted by: Rodney Brown at November 22, 2008 10:19 PM

Buick was our car for our middle class aged 45-80 , 1. For 1st time in its history, Buick sold more cars in China than in US in 2006
2. Buick cut US lineup to 3 vehicles, sells 8 models in China
3. Buick sales in China grew to 303,150 last year from 110,763 just 4 years earlier
4. US sales of Buick shrunk to 240,657 last year from 432,017 4 years earlier
5. China lineup: Excelle; Regal; LaCrosse; 2 minivans; Park Avenue
6. Buicks in China range from as much as $65K for Park Avenue to $13.9K for Excelle

Significant Points
1. Gap likely to widen; Buick 1 of China’s top-selling car brands
2. More models on the way to feed demand from growing Chinese middle class
3. Buick in China already bright and profitable spot for GM
4. Buick sales keeping pace w/ GM’s overall growth in China
5. Future of Buick brand in China bright; likely to become brighter
6. GM China working on hybrid Buick sedan for the China market

Posted by: Rodney Brown at November 23, 2008 09:59 AM

Rodney, great stats.

If you are a dimwit CEO of GM, looking only at the statistics, you would immediately conclude that Buick sales are doing great, and building more Buicks is the wave of the future, never mind that little sag in one product amongst many in U.S. sales. 300% growth in Buick sales overseas with a growing middle class, compared to a 50% cut in sales of Buicks in the U.S. over the same period, equals build more Buicks as far as the eye can see.

And that is why GM is going bankrupt. Dimwit CEO’s looking at the numbers and not the whole picture to include the intangibles like potential recession, heightened concerns over energy dependence and pollution and energy monopolism, not to mention declining median wages in the U.S.

If GM wants 25 billion from American taxpayers, let them show a plan for American GM products for American consumers that take all these issues into account and plan accordingly, helping to insure a growth in future U.S. sales, and high probability of repayment of the taxpayer’s loan.

I have written several times here about the consequences of overspecialization in the vocation markets. The big 3 CEO’s are a perfect example and product of MBA education which focuses on production costs, market share, and return on investment in product lines, primarily.

To be a successful auto manufacturer in these globally competitive and highly fluid times requires far broader knowledge than this specialized number crunching education. History, demographics, political philosophy and history, and economic history, and sociology are all knowledge disciplines that would give an auto manufacturing CEO a tremendous competitive edge if, such generalized education were an integral part of their specialized number crunching education as well.

Specialized education leads directly to the Peter Principle, wherein, an excellent numbers cruncher is promoted to their level of incompetence as a general manager, a position requiring a generalized education to function competently at.

America is seeing this by product of its education system play out with the Peter Principle from President Bush down to the McDonald’s assistant manager level.

Even Wal-Mart got caught in the general education deficit trap of incompetence a few years ago as the sociology of their growth created heated animosity amongst its small town consumers. It is not always about the numbers. And promoting those trained only in numbers or B.S. to executive level management, time and again produces results less than expected at the time of promotion.

The compensatory might makes right approach by the likes of Bill Gates and Microsoft to outspend, outlast, and out maneuver in the courts, their critics and opponents, carries an enormous cost, both for the business and the society as a whole, as they win their battles, while the nation loses its war on ineptitude, incompetence, and collective failures, the likes of which we are living through today.

To Bill Gate’s credit, he woke up one morning and realized the cost of specialization in education to Microsoft and the society, and he became one of the nation’s most prominent spokespersons and philanthropists for improving American education standards and quality.

Posted by: David R. Remer at November 23, 2008 02:03 PM

d.a.n. : However, overall deflation for the next year or so doesn’t seem likely due to several inflationary pressures.

Of course, it depends on what you mean by deflation. If you mean currency deflation, you’re correct in saying that is unlikely to happen anytime soon, especially with “Helicopter Ben” at the helm of the Fed.

On the other hand, price deflation already seems to be underway in some market sectors, such as housing, gasoline and automobiles. It is this price deflation that is more likely than not to cause the most severe recession in recent memory, bordering on depression. In fact, we probably wouldn’t even be discussing the subject “Big 3 Auto: Should they be rescued?” were it not for the unprecedented collapse of new automobile prices that has occurred since 1Q08.

Posted by: EJN at November 23, 2008 02:25 PM

Roy: EJN, I don’t believe for a minute that stupidity and incompetence is driving the train.

LOL, I guess that’s another way to look at it. I was giving Bernanke, Cox and Paulson the benefit of the doubt as to whether they were acting primarily in the best interests of their cronies as opposed to those of the nation as a whole. You’re probably right to chide me for such gullibility.

I was talking about how, for example, Cox was missing in action as the financial institutions began to topple, then decided the best course of action was to outlaw short sales of certain financial institution stocks.

Another example I was thinking of was the way the bail-out was engineered to ensure maximal capital extraction from the taxpayer and minimal regulation of the failing institutions that were failing, in order to prevent a repeat episode. Bernanke and Paulson were both all over that one.

Finally, the stupidity and incompetence of Congress was highlighted by filing to pass the initial legislation because it was too expensive, then turning around and passing it only after larding it down with unrelated pork, pun intended.

You’re probably right about those things being intentionally malignant, rather than incompetence and stupidity.

Posted by: EJN at November 23, 2008 02:49 PM

David: the US and world economy would be vastly worse off today had Congress not come forward with an infusion into the financial sector.

I guess we’ll have to agree to disagree on this one point since there’s no way to know whether you are correct or if I am, or if neither of us are.

My preference would have been for the Fed to have become lender of last resort for any failed money markets, such as commercial paper, instead of guaranteeing transactions between existing (what were then) investment banks. In other words, if say Goldman refused to sell 30 day paper for XYZ Corp, XYZ Corp could have come to the Fed to sell their paper at 30 day Treasury note rate plus 2%.

Eventually, the investment banks would have seen all their business going to the Fed and would get back into the commercial paper market at some rate less than the Fed’s rate.

Net-net, the Fed would have acted as a temporary bridge until confidence returned.

In any case, there were and are many, many other BETTER options to dealing with the credit crisis short of cutting checks for the investment banks. The Bernanke/Paulson taxpayer robbery might have been the safest for Wall Street and might have been the fastest way to loosen up the credit markets but it was far from the best solution.

It really galls me, after Bernanke and Paulson couched the crisis in terms of hours and days rather than weeks and months when they railroaded Congress and the American people, to now hear them say “It’s going to take some time to take effect”.

If that’s true then either they lied about how imminent the meltdown was or their plan wasn’t going to help anyway.

I don’t think it has helped and based on the fact that they’ve completely changed course since, I think they know it won’t help.

Posted by: EJN at November 23, 2008 03:03 PM

By Jeannine Aversa, AP Economics Writer
Bernanke acknowledges mistake in gauging fallout from risky mortgages

WASHINGTON (AP) — Federal Reserve Chairman Ben Bernanke acknowledges he was wrong in believing that there would be limited fallout to financial markets from risky mortgages that soured after the housing market’s collapse.
ADVERTISEMENT


“I and others were mistaken early on in saying that the subprime crisis would be contained,” Bernanke said in an article in the Dec. 1 issue of The New Yorker magazine.

“The causal relationship between the housing problem and the broad financial system was very complex and difficult to predict,” he said in the piece titled “Anatomy of a Meltdown.”

Subprime mortgages made to people with tarnished credit or low incomes were especially hard hit once the housing boom went bust. Foreclosures spiked and financial companies wracked up huge losses as these investments turned bad.

The mortgage meltdown started in the United States in the summer of 2007 and rapidly spread to other countries, as well as to other types of lending, affecting even more creditworthy customers. The problems with risky, subprime mortgages touched off what many call the worst financial crisis to hit the world since the 1930s.

To protect the economy from damage and help ease Wall Street turmoil, Bernanke and his colleagues cut a key interest rate in September 2007 — the first reduction in four years. Some critics at the time thought the Fed should have acted sooner.

Now more than a year into the crisis, Bernanke has taken a flurry of unprecedented — and some controversial — steps to help bolster the banking system and to get banks to lend money more freely again.

The Fed is providing short-term cash loans to banks, is letting financial companies swap shunned mortgage securities for super-safe Treasury securities and is buying mounds of short-term debt from a host of companies. It also expanded its emergency lending facilities to investment firms, provided financial backing in JPMorgan Chase & Co.’s buyout of Bear Stearns and threw a financial lifeline to insurer American International Group.

Critics worry the Fed’s actions could put billions of taxpayers’ dollars in jeopardy and encourage financial companies to take excessive risk on the belief that the Fed will bail them out.

The Fed halted its rate-cutting campaign in late June out of fears it would worsen inflation. But it was forced to do an about-face in early October as economic and financial conditions deteriorated sharply, lessening the threat of inflation. The Fed joined with other central banks on Oct. 8 to slash rates, the first coordinated action of its kind in the Fed’s history. It lowered rates again on Oct. 29 and is expected to cut rates yet again on Dec. 16.

Posted by: Rodney Brown at November 23, 2008 05:20 PM

EJN, when you refer to ‘best’ solution, you have to define ‘best’ in terms of context.

The way I read your use of the word is that it would have been best in purist free market capitalist terms. And I would agree with that narrowly defined context.

However, best in theory, in this case, where the context was a global liquidity and balance sheet failure cascade underway, was not the best answer in terms of stemming this immediate global domino effect. Halting the domino drop where it began, here in the U.S., was absolutely the fastest, most direct way to prevent the global financial system from spiraling out of control. And the only way to have halted those early dominoes was with the direct interdiction by the Federal Reserve, backed by Treasury’s introduction of a commitment to intercede without reservation to halt the global effect.

Instead of a global financial meltdown in which neither nations, nor corporations, nor banks, nor small businesses could, or would, borrow and lend, we now have a pretty orderly deleveraging of balance sheets over a protracted period of time which is permitting nearly all businesses to continue conducting their business around the world, while paring back to meet the recessionary contraction. This very orderly and protracted adjustment period occurred precisely because:

1) the psychological panic around the globe was stemmed quickly at the point that runs on the money market funds began

2) a model for action with which all other central banks were capable of participating in, with unusual cooperation, was offered by the Federal Reserve

and 3) this rapid response prevented market capitalization from falling through the floor.

If, the ‘best’ solution in terms of free market capitalism had been allowed to pursue its own course, the panic would not have been stemmed, dramatically larger numbers of businesses around the world would have succumbed to liquidity forced bankruptcies, and the consequential blow to capital markets would have devastated many other businesses on nothing more than pure panic selling.

The grotesque error that took place was not in what to do once panic hit the money markets, but, in total failure to act preemptively to prevent this colossal calamity from unwinding so rapidly and without mitigating and ameliorating actions taken prior, given that the writing was on the wall and in the public venue from Fall of 2006 forward. I know because I was following writers of this forecast then and wrote about it here back in 2006.

Bernanke is quite right to apologize for not having acted way sooner than he did. And for not allowing himself to see the consequential cascade effect to come. And this from a man whose reputation was achieved in the study of the Great Depression. He screwed up, as did his predecessor, in failing to acknowledge the warnings issued by others with equal economics educational credentials.

But, having waited till the panic of the money markets hit, the emergency nature of acting immediately to prevent overshooting consequential panic driven corrections, was absolutely the right course of action. Implementation after that leaves much to be criticized, but, then, these are uncharted waters we now navigate along the precipice’s edge. We are by no means out of the woods yet, as a misstep during this deleveraging process can still cause global freeze up and panic.

So far, so good, despite a host of errors in secondary actions made along the way. The primary actions have served the global markets very well.

Posted by: David R. Remer at November 23, 2008 06:34 PM

Obama’s ‘change’:

Perhaps the only change he can inspire is in our attitude toward our country.

Vision is a slippery slope, but it is the only way he can assist us to get from point A to point B.

I am not too concerned about his choices for the power pyramid he is selecting to advise and help him achieve his goals. I am only concerned with whether he can sell those folks he’s chosen on his vision. In other words, it is his vision that is important, not necessarily those he asks to share that vision. We can only hope they care enough about the country to push and pull America, kicking and screaming, into a better future. But, to expect the return of the promise of ‘America of old’ is unrealistic and naive. A brighter future than our current condition, perhaps…a return to those halcyon days of yore, unlikely. For one thing, those days never really existed, and for another, our world is too much with us for America to be the separate, richest, most powerful entity on the globe.

We don’t want a ‘one world order’, but Cheney/Bush has guaranteed its emergence.

Posted by: Marysdude at November 24, 2008 02:36 AM

1955 consumerism takes off in a big way with the sale of some 7.9 million cars in the US with 7 out of 10 families now owning a motor car, and new laws were put in place requiring seatbelts to be installed on all new cars. The average wages were now $3,851 per year, and the minimum wage was raised to $1.00 per hour. The first McDonalds was erected in 1955 and more fast foods and TV dinners are appearing including fish fingers. The first cans of Coca-Cola are sold up till then it had only been sold in bottles. Rock and Roll music continues to grow in popularity with more idols including Elvis Presley , Bill Haley and the Comets, Chuck Berry and The Platters, and young mens fashion matches the times with pink shirts and charcoal grey suits.

Cost of Living 1955
How Much things cost in 1955
Yearly Inflation Rate USA 0.28%
Yearly Inflation Rate UK 3.5%
Average Cost of new house $10.950.00
Average Monthly Rent $87.00
Average Yearly Wages $4.130.00
Minimum Hourly Rate $1.00
Average Cost of a new car $1,900.00
Cost of a gallon of Gas 23 cents
Ladies Swim Suits $12.95
Black and White TV $99.95
Below are some Prices for UK guides in Pounds Stirling

Average House Price 2,064

“Look at the inflation Rate for USA.”

Posted by: Rodney Brown at November 24, 2008 09:56 AM

Excuse me, Inflation Rate 1955, -0.28 . source misery index

Posted by: Rodney Brown at November 24, 2008 10:35 AM

googlumpugus wrote: A chart d.a.n. might like: www.tradingeconomics.com/Economics/Inflation-CPI.aspx?Symbol=USD

Yes, that’s a good chart. Thanks.

Something I’m not clear about.
Why is deflation feared more than inflation?
Both are bad.
Both erode wealth.
What is wrong with ZERO inflation (or deflation)?
Who benefits (or loses) most from inflation (or delfation)?

DEFLATION:
• Deflation is bad, because people can’t charge and receive as high a price for the goods they produced as they previously received (i.e. their assets are declining in value).
• Deflation is bad, because if something is bought (or borrowed money) for $100K that can now only be sold for $50K, they are upside-down (or underwater) on that asset (or loan).
• Deflation is good if you have a lot of cash, but bad if you have a lot of assets, and very bad if you have a lot of debt.

INFLATION:
• Inflation is bad, because people can’t buy as much at the price they previously paid (i.e. their incomes, savings, Social Security, and entitltements are shrinking in value).
• Inflation is bad, because if you earn $50K and inflation is 13.2% (as it is today, based on the pre-1983 inflation measurement method), that $50K becomes worth only $43.4K in one year.
• Inflation is good if you have a lot of debt, but only if you are able to keep-up with the debt payments and interest, and can avoid foreclosures or repossessions, which is usually a problem when unemployment rates are high.

It seems to me, inflation hurts most Americans than it does the wealthy.
Esepcially with a regressive tax system also that taxes capital gains and certain types of income at rates lower than most wage earners (who pay 6.2% x 2 for Social Security, 1.45% x 2 for Medicare, and 12% or more for federal income tax: One-Simple-Idea.com/DisparityTrend.htm#Taxes
HHHMMmmmmmmmmmm … who really believes that incessant positive inflation for 52 consecutive years, and these other abuses, are all a mere coincidence?

In the 1930s, was there any shortage of goods? No.
Was there any shortage of manpower? No. Not with 25% unemployment.
What was in short supply? Money.
What do we have an excess of? Debt.
The only way money comes into existence is by way of a loan from a bank (at a 9-to-1 debt-to-reserve ratio).
But when when people are already deep in debt, and can’t take on more debt, what good does it do to increase money supply?
Perhaps that is why inflation is currently not much higher; because the money isn’t reaching enough people, because most people are already deep in debt?
Japan tried to increase money supply by reducing interest rates to ZERO for years, but it didn’t work, since people were unwilling to borrow more money.
Now, the federal government is giving money away in the form of stimulus checks.
And the federal government is likely to give away more money in the form of stimulus checks.

However, what is wrong with this picture?
If none of that raises any red flags, then perhaps one should read about the nature and mechanics of a pyramid-scheme.
What we have is a massive debt-pyramid.
Nation-wide debt has steadily grown every year from 100% of GDP (in year 1957) to 500% of GDP (in year 2007)!

Again, what is wrong with this picture?
How can the money supply be increased when money is created by a loan, and too few people can borrow any more money?
Even if the federal government and federal reserve make more low interest loans, the debt pyramid continues to grow ever larger.
Even if the federal government gives away money (i.e. more stimulus checks), it would now take massive amounts to put a dent in a $54-to-$67 Trillion nation-wide debt.
Especially when 80% of all Americans only own 17% of all weatlh.
Especially with rising unemployment (now at 6.5%).
But how can unemployment be reduced without increasing spending (and therefore, increasing inflation)?
Can the production of debt (forever) replace the production of goods and savings? No.
Can we (forever) borrow our way to prosperity? No.

Where will the money come from to merely pay the INTEREST on $54-to-$67 Trillion of of nation-wide debt , much less the money to reduce the current PRINCIPAL debt of $54-to-$67 Trillion, when that money does not already exist?
If increasing the Money Supply is the solution, then why not mail out tens of thousands of dollars to every American?

It’s quite a conundrum.
One that few Americans understand.
There are no painless solutions.
A fiat monetary system allows power and influence to fall into the hands of those who control the creation of new money, and to those who get to use the money or credit early in its circulation.
How was so much wealth extracted, year-after-year, from so many hard working Amerincans, and routed to so few who merely make money by playing with money?
Why don’t more people question the monetary system, which is nothing more than a dishonest, usurious, inflationary pyramid-scheme that legalizes plunder?
The insidious and eventual cost (i.e. the inevitable and mathematically doomed collapse of the debt-pyramid) falls on unidentified victims who are usually oblivious to the cause of their plight.

Many believe everything will be back to normal in a few years.
How can that happen when the $54-to-$67 Trillion nation-wide debt-pyramid is getting ever larger every year?
How many times larger than GDP ($13.86 Trillion) can the nation-wide debt ($54-to-$67 Trillion) grow, before the debt-pyramid becomes unstable?
How long before creating new money out of thin air and giving it away can no longer work, because the currency has been debauched?

What should be more disturbing to more Americans is that fact that no one can adequately answer those questions.
The federal government and the Federal Reserve, and banks have abused the monetary system and many people (usury, inflation, predatory lending, etc.) for almost a century, and the result is a massive nation-wide debt of $54-to-$67 Trillion.

• Total nation-wide debt of $54.53 Trillion has never been larger, both in size and as a percentage of the $13.86 Trillion GDP:
  • Private domestic financial sector debt=$15.8 Trillion;
  • Household debt= $13.88 Trillion;
  • Business debt=$10.16 Trillion;
  • Federal government National Debt = $10.69 Trillion
  • State and local government debt = $2.2 Trillion;
  • Other private sector foreign debt = $1.8 Trillion;
  • ______________________________________________________________
  • Total nation-wide debt = $54.53 Trillion (and that does not even include the $12.8 Trillion borrowed and spent from Social Security, leaving it pay-as-you-go, with a 77 million baby boomer bubble approaching);
  • If the $12.8 Trillion borrowed and spent from Social Security is included:
  • Total nation-wide debt = $67.33 Trillion = $54.53 Trillion + $12.8 Trillion = 4.86 times the nation’s $13.86 Trillion GDP (year 2007) !
  • Total federal debt is = $23.49 Trillion = $10.69 Trillion + $12.8 Trillion = 1.69 times the nation’s $13.86 Trillion GDP (year 2007) !

“There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” — Lord John Maynard Keynes (1883-1946), renowned British economist.

Rodney Brown wrote: Thank you d.a.n for showing 1956-1960 Like a shot of red eye whiskey.

Yes, it is a bit disturbing to see deficit spending and positive inflation every consecutive year for the last 52 years (since 1957).

EJN wrote: Of course, it depends on what you mean by deflation. If you mean currency deflation, you’re correct in saying that is unlikely to happen anytime soon, especially with “Helicopter Ben” at the helm of the Fed.

Right.

While nothing is impossible in such a volatile economy as today, it is difficult to see deflation any time soon, after the federal government and the Federal Reserve recently pumped $4.24 Trillion of new money into the banks, corporations, and other pork-barrel projects: www.cnbc.com:80/id/27719011

Especially when we’ve had positive inflation for 52 consecutive years (since year 1956).

Yes, we currently have a mixture of deflation of some things (e.g. homes, gasoline, etc.), and inflation of other things (e.g. food, health care, electricity, etc.).

But overall inflation is still at 3.7% as of 1-NOV-2008 , and on track to average 4.28% for year 2008; up from 1.59% in year 2002). That’s because housing and gasoline were ridiculously over-priced.

As of 31-MAR-2008, there are approximately 18.6 Million vacant homes.
There were 129.4 Million housing units in the U.S.
Only 110.8 million were occupied (75.1 Million by owners and 35.7 Million by renters).
And as of 31-AUG-2008, there were 10,000 foreclosures per day.

However, massive unemployment could possibly result in overall deflation (negative inflation) due to less consumer spending, since 70% of the U.S. economy is consumer driven.
That is exacerbated by the massive $54-to-$67 Trillion of nation-wide debt: One-Simple-Idea.com/DebtAndMoney.htm#NationWideDebt
That is, most Americans are limited to more borrowing because most are already deep in debt.

• 20% of Americans have negative net worth (i.e. debt).


• 40% of Americans (on average) have zero net worth.


• 80% of Americans own only 17% of all wealth.


• 1% of the wealthiest Americans own 40% of all wealth (up from 20% of all weatlh in year 1975).

We always hear a lot about how rich the U.S. is.
Is that really true?
Or is it merely the illusion of wealth from $54-to$67 Trillion of nation-wide debt: mwhodges.home.att.net/nat-debt/natdebt-vs-natincome.gif

Also, inflation may actually be much higher than what is being reported, since the inflation measurement calculation was modified twice (in 1983 and 1998) such that it reduced the CPI weighting for items rising in price, and increased the CPI weighting for items falling in price, which has resulted in a compounding of the error year after year?

Another bit of evidence that inflation is actually worse than 3.7% is the large dip in GDP (beginning in year 2006) when adjusted for inflation (regardless of whether measured in 2005 dollars or 1950 dollars; anything but inflated 2008 dollars). There has never been such a large dip in GDP since year 1900 (if ever). When adjusted for inflation, GDP has been decreasing sharply since year 2006.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at November 24, 2008 01:09 PM

The only difference between inflation and deflation is in breadth. Inflation hits everyone. Deflation primarily hits only the unemployed and underemployed. Both lead to poverty.

Because inflation hits everyone spending money, it is the more feared policy outcome. Deflation as you say, does not hit the wealthy very much or very hard, therefore it is championed by wealthy free marketeers as opposed to raising taxes or printing money which will later erode the wealth of the wealthy. ‘Let them eat cake’, is an historical reply by the wealthy to the poor in a deflationary period.

Inflation however kills businesses, erodes shareholder earnings and dividends even before they are received, and limits even the moderately wealthy in their purchasing choices if they wish to remain wealthy, which is no easy trick because investment dollars are worth more when invested than when returned in an inflationary environment, making the accumulation of wealthy very more difficult, and very much more risky since the short term investments are where the money is and they are inherently very much more risky.

Posted by: David R. Remer at November 24, 2008 02:45 PM

David R. Remer,

Those are good points.

So, both are bad.
Both destroy wealth.

I would add one point.

Inflation, while ultimately bad, it benefits the wealthy, because the federal government and Federal Reserve purposely maintain the incessant, positive inflation for their own benefit, because the new money created out of thin air is funneled back to the wealthy in the form of these huge and numerous subsidies , pork-barrel, and corporate welfare.

That incessant inflation gradually separates wealth from the average tax payer (most Americans), and funnels it to the wealthy. Especially with a regressive tax system.

The wealthy (i.e. banks and corporations) also use money to take advantage of others, as evidenced by the usury, predatory loan practices, credit cards with 35% interest rates, the predatory Adjustable Rate Mortgages (ARMs), and exotic investment instruments that fleeced investors all over the planet, in which the U.S. financial sector sold debt to foreign investors by making loans to millions of Americans, and then bundling those loans (many bad loans) into complex financial instruments (CDOs, SIVs, ABSs, etc), which were not only reckless, but fraudulently represented as AAA products. They made loans to subprime borrowers (subprime CDOs) and used financial wizardry and smoke and mirrors to create securities out of thin air (synthetic CDOs). Towards the peak of this financial greed and insanity, banks added large amounts of leverage to their exotic investment products (subprime CDOs squared and CPDOs), and built complex, highly leveraged, off-balance sheet vehicles which funded themselves with short term debt (SPVs, VIEs and SiVs). Through financial engineering and the mispricing of risk, the value of derivatives now far, FAR exceeds the amount of real assets and economic resources in the U.S.

So, a case could be made that inflation is a mechanism that (in the short-term) benefits the wealthy, when the government is FOR-SALE, and carries the water for the wealthy, as evidenced by the fact that 99.7% of all 200 Million eligible American voters are vastly out-spent by a tiny 0.3% of the wealthiest voters, who make 83% of all federal campaign donations of $200 or more: One-Simple-Idea.com/OpenSecrets_DonorDemographics.htm

The wealthy can also weather inflation and deflation better, because when inflation is high, they invest their cash in assets that will retain value, and when deflation is high, they can sit on cash that is increasing in value, and they are not under pressure to sell assets at a deflated value.

It is also possible that economic instability is the mechanism (whether it be inflation or deflation) to plunder others’ wealth.

For example, consider the game of Monopoly, in which one player (the bank) can print all the money they want.
Before too long, everyone else is broke, or deep in debt.
Today, who is picking up properties and assets cheap?
Who benefits from economic instability?
It certainly isn’t the average American (on average).

And if all of that weren’t enough, the tax payers are forced to bail-out the banks, corporations, and Wall Street.
With a regressive tax system, most average Americans are being force to reward the banks, corporations, and Wall Street for their failures.
For example, today, the Wall Street Journal reports that Citibank has become the latest recipient of a government bailout - this one to the tune of $300 Billion.

Thus, it appears that the U.S. is becoming a nation that rewards failure and those riding in the wagon, and punishes those that work, compete, and are pushing the wagon.

While the inflation rate has been rising since year 2002, it’s amazing it isn’t higher, considering the $4.24 Trillion that has been pumped into the banks and coprations:

Financial Crisis Balance Sheet (as of 13-NOV-2008):
Government Entity ———————————————— Sum of Money Spent Federal Reserve:
• (TAF) Term Auction Facility ————————— $900 Billion
Discount Window Lending:
• Commercial Banks ————————————————- $99.2 Billion
• Investment Banks ————————————————- $56.7 Billion
• Loans to buy ABCP ———————————————— $76.5 Billion
• AIG ——————————————————————— $112.5 Billion
• Bear Stearns ——————————————————- $29.5 Billion
• (TSLF) Term Securities Lending Facility ————— $225 Billion
• Swap Lines ———————————————————- $613 Billion
• (MMIFF) Money Market Investor Funding Facility —- $540 Billion
• Commercial Paper Funding Facility ———————— $257 Billion
• (TARP) Treasury Asset Relief Program ————- $700 Billion
• Automakers —————————————————- $25 Billion
• (FHA) Federal Housing Administration ————- $300 Billion
• Fannie Mae/Freddie Mac ———————————- $350 Billion
Total: $4.2845 Trillion

Now add the $300 Billion Citibank bail-out of $300 Billion (seekingalpha.com/article/107514-citibank-bailout-300-billion-doesn-t-sound-like-a-lot-anymore), and we’re up to $4.5845 Trillion spent this year.

That $4.5845 Trillion alone is 33% of the $13.86 Trillion GDP for year 2007 !

Obviously, the federal government and the Federal Reserve believe that the production of massive debt can replace the production of goods and savings, and that we can borrow our way to prosperity.

What will be the end result of so much borrowing, debt, and new money printed out of thin air?
Especially when the federal government is already borrowing and creating the money out of thin air to merely pay the $429+ Billion of interest alone on the $10.7 Trillion National Debt.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at November 24, 2008 04:34 PM

David: you have to define ‘best’ in terms of context.

In my book, ‘best’ would have minimized taxpayer exposure and upside for the banks that got in trouble while still doing the very minimum to prevent complete seizure of the money markets.

By the very fact that money is being handed over to the banks to more or less do with as they see fit (i.e. buy other, smaller banks instead of lending it out), the bailout plan is nothing like the best.

By the fact that any bank can apply for any amount of money from the fund and, barring the possibility they are judged to not be able to pay it back, the bailout plan is nothing like the best; the amount they will be given is based not on what they need to survive.

The same reasoning goes with respect to doing the very minimum - Paulson is basically just sloshing around buckets of money without considering if the amounts being doled out are appropriate.

The most damning aspect though is, notwithstanding that the money market crisis has been replaced on the newspaper front pages by the plummeting stock market and worrying signs of consumer pullbacks, the need to bail out Citibank as announced this morning shows that the Paulson plan hasn’t done much if anything to actually solve the problem of overleveraged banks refusing to lend to each other.

Paulson’s plan is the financial crisis equivalent of the surge in Iraq - it didn’t really solve anything except to change the subject. All the original problems are still there, just papered over and waiting like a time bomb to really blow things up.

Posted by: EJN at November 24, 2008 06:13 PM

d.a.n, the federal reserve does not believe in massive debt replacing production.

Voelker, Greenspan, and Bernanke have each repeatedly said publicly that fiscal discipline is ultimately the foundation of both private and public economies. The Federal Reserve’s role is to moderate the cyclical peaks and valleys of the private sector economy.

The fact that the private sector needs rescuing by the Fed is primarily by the Fed’s fault. That is the fault of the private sector and the executive and congressional branches of government abdicating their roles of oversight and enforcement of existing laws and the principles inherent in those laws.

Paulson’s plan was the epitome of idiocy. Paulson’s plan was vastly improved by Congress, but remainedm, due to the limitations of time and the threatened veto of Bush, a flawed plan, from my perspective.

Berating the economic rescue at this point is like a parent apologizing for having spanked their child upon learning their child was not at fault. Damage is done. Their never should have been a need for a rescue. But, now that there is, and in enormous ways and costs, the only thing to do going forward is to accept the cost and build for a day when those debts can be paid and a future generation can be freed from its shackles. There simply is no other rational course of action.

This convergence of credit freeze, deleveraging of balancing sheets globally, a free fall in the valuation of real estate asset debt, and a global recession, is a scenario no economist, or CEO, or financial analyst, or politician has ever witnessed before in their lifetimes. Where immediate action is mandated to stem a domino effect into depression, timely action, even if flawed by being more costly than it had to be in hindsight, is preferable to no action at all.

The fact is, the tax payers can never be repaid for loans and bailouts backed by debt paper whose face value is 10’s of percents higher than the actual value of the real property. That said, to the extent that these loans and bailouts can generate repayment in the future when the economy picks up again, they should be structured that way.

In the mix are the wealthy proponents like Dick Armey saying ‘let these entities fail’, so we can get back to a productive economy all the sooner by way of a deeper but shorter recession. And then there are the unemployed, unions, and consumer advocates in the mix saying the government has a debt obligation to protect jobs, and wages and pensions and savings in return for having helped brought on this economic recession through lack of enforcement and oversight.

Someone must be the decider as to the course we chart between those two very influential camps. The Bush/Paulson solution has been to rescue the wealthy and shareholders, and prevent having to wear the legacy of having triggered a world wide depression.

Obama will soon be the decider, and he has already committed to a course that respects the claims by workers, consumer groups, and the unemployed, without losing sight of horrendous deficits and debt which are being generated. The deficits and debt are the sacrifices our children’s generations will have to make to save the economic well being of the present. That is a bargain the polls indicate the voters/parents of those future generations, are willing to make.

That is a democratic republic in action. One helluva mess and gratuitously unfair to the coming generations. Is there a better system that could chart a better course in the name of freedom of choice and power of government? I have yet to find one in the world today.

The lessons to be learned here are:

laissez faire does not work

government oversight of markets and enforcement of laws on corporate and market activities is paramount to a stable future

trickle down theory is a fantasy

supply side economics is only valid when consumer demand outpaces supply in a robust economy

progressive taxation is needed to pay for excesses of wealthy influence on government and previously required deficit spending

as the pace of economic growth increases so must taxes when there is a national debt, and more so, for the very wealthy. And when the lack of capital is preventing the economy from maintaining stable economic activity, then tax cuts on the wealthy can improve economic growth and stabilization, but only for as long as it takes to stabilize sustainable growth.

conversely, when tax rates on the wealthy pose a threat to economic activity by way of drying up capital formation and expansion, then taxes on the wealthy gave become too high.

Will these lessons be learned by the American people? No. Of course not. Their teachers are the political parties and the political parties will teach the people whatever they must to acquire power. So, many of these lessons will be lost in 30 years, and we can repeat a similar scenario again.

In the meantime, we have much hardship ahead for all of us, for decades to come, but, also reason to hope that we can keep unemployment from rising above 10% and our elderly from being sacrificed to poverty for a considerably lower cost of living for to our children in the areas of health care and energy, war and defense. But these benefits to be hoped for are decades away with much work and sacrifice to made to make them a reality.

We would be wise to choose our leaders with the utmost of care going forward, foregoing the criteria of whether we would enjoy having a beer with them or not. That was the criteria that elected GW Bush and this is what it has wrought.

Posted by: David R. Remer at November 24, 2008 09:21 PM

EJN, Paulson’s plan as modified by Congress did much more than you give credit for. Imperfect and costly as it was, it prevented the credit markets from coming to a screeching halt, causing unemployment to rise a percent a month beginning in October.

Paulson’s plan is subject to Bush’s influence. Bush is intent on keeping wall street in his camp to the best of his ability. Synergistically, Paulson’s background is grounded in Wall St. and therefore favors Wall St. over Main Street. Given the current Republican filibuster capacity in the Senate, I am still a bit surprised the Congress was able to modify Paulson’s/Bush’s plan as much as it has without killing all efforts altogether.

One can no more divorce these economic rescue proceedings from politics than one can divorce hydrogen from oxygen in water. It could be done, but the input energy would be just too prohibitive.

Posted by: David R. Remer at November 24, 2008 09:31 PM

David R. Remer wrote: d.a.n, the federal reserve does not believe in massive debt replacing production. Voelker, Greenspan, and Bernanke have each repeatedly said publicly that fiscal discipline is ultimately the foundation of both private and public economies.

Really?

If so, 52 consecutive years of incessant inflation is a strange way of demonstrating those beliefs.

David R. Remer wrote: Voelker, Greenspan, and Bernanke have each repeatedly said publicly that fiscal discipline is ultimately the foundation of both private and public economies. The Federal Reserve’s role is to moderate the cyclical peaks and valleys of the private sector economy.

Well then, they are certainly going about it in a very strange way, with:

• {01} Greenspan’s promotion of Adjustable Rate Mortgages;
• {02} excessive creation of money out of thin air, causing inflation for every consecutive year for the last 52 years;
• {03} creating debt at a huge ratio of 9-to-1 (for debt-to-reserves);
• {04} appearing before Congress asking for $700 Billion to bail-out banks , corporations , and Wall Street;
• {05} a pyramid scheme that grows the debt ever larger (from 100% of GDP in 1956 to 500% of GDP in year 2007);
• {06} constant toying with interest rates and making credit easier to get for people that can’t afford it, due to pressure to keep the debt-pryamid from collapsing, which is what will happen when everyone else is broke or deep in debt, and can’t borrow any more;
• {07} failing to anticipate what so many economists have been warning us about for many years;
• {08} economic instability, and bubble after bubble, caused by incessant inflation caused by excessive creation of money out of thin air;
• {09} debauching the currency; a 1950 Dollar is now worth only 11 cents;
• {10} suspiciously modifying the inflation measurement calculations by reducing the CPI weightings for items rising in price and increasing the weighting for items falling in price;
• {11} risking hyperinflation and a complete collapse of the currency to delay the inevitabe collapse of the debt-pyramid. When there is X amount of debt, and a smaller amount of money in existence equal to Y, where will the money come from to pay the interest, when the money must come from more borrowing and/or creating more money out of thin air? This is the mark of a pyramid scheme, and all pyramid schemes are doomed to eventual collapse, despite the number of decades it may require for that to happen.

HHHMMMmmmmm … that can’t all be a mere coincidence, can it?

David R. Remer wrote: Berating the economic rescue bail-outs at this point is like a parent apologizing for having spanked their child upon learning their child was not at fault. Damage is done.

Not true, because:

• [1] The so-called rescue is really bail-outs for the banks , corporations , and Wall Street?
• [2] The damage that is already done is not the only issue.
• [3] The danger now is making a bad situation much worse.
• [4] And that danger is quite possible with so much additional borrowing , debt, and creating money out of thin air, which could make the debt so large that we can not keep it from growing ever larger. It may already be out of control, since it would take many decades of extraordinary fiscal discipline to simply stop the debt from growing, much less reduce it!
• [5] When the debt becomes too large, the only option left to avoid defaulting on the interest due is to borrow and create more and more money out of thin air. It’s a vicious circle, that is getting out of control. It’s quite likely that the debt-pyramid is already out of control, because to merely stop the National Debt from growing larger requires $1.18 Billion per day ($35.3 Billion per month = $430 Billion per year for year 2007) for the interest alone.

The danger is that the only option left to stop the debt from growing ever larger is debauching the currency with more debt , borrowing , money-printing , and rampant government spending.
The danger is creating much more pain later by trying to avoid some pain today.

I’m not sure where Lou Dobb’s got his numbers, but he reported $7.7 Trillion in bail-outs this year. CNBC reports $4.24 Trillion.
Either way, that’s a recipe for disaster, because:

• (1) the National Debt is already so large ($10.7 Trillion); 77% of the $13.9 Trillion GDP;


• (2) we may now be unable to keep the debt-pyramid from growing ever larger, and finally collapsing with hyperinflation;


• (3) the federal government is already borrowing and creating the money out of thin air to merely pay the annual $430 Billion for interest alone.


• (4) no one can say where the money will come from to merely pay the interest on the debt, much less the money to keep the principal from growing ever larger (possibly so large, that it can not be stopped from growing larger).


• (5) so much of the federal government’s $2.5 Trillion in total tax revenues are already dedicated to:
  • (a) $596 Billion (for year 2007) for the pay-as-you-go Social Security; there is no surplus in Social Security Trust Fund (en.wikipedia.org/wiki/Social_Security_Trust_Fund);
  
  
  • (b) Medicare ($432 Billion in year 2007); 10 years of that much interest is $4.3 Trillion!
  
  
  • (c) $430 Billion Interest on the $10 Trillion National Debt for 2007
  
  
• (6) What are the real chances for the federal government to suddenly become fiscally and morally responsible enough to deal with this huge debt-problem?

What is the limit of debt before it becomes too much to ever deal with?
Does any one know?
At what point must we stop these bail-outs?
At what point does the only option to avoid defaulting on interest on the debt become rampant creation of so much new money that it debauches the currency?
At what point does the federal National Debt become so large that we can not stop it from growing larger because we are unable to even pay the interest alone?

• $10.7 Trillion National Debt?


• $15 Trillion National Debt?


• $20 Trillion National Debt?


• $40 Trillion National Debt?


• $60 Trillion National Debt?


• $80 Trillion National Debt?


• $100 Trillion National Debt?

It seems insane that the federal government and Federal Reserve are trying to solve a massive debt-pyramid problem with more massive debt , borrowing , money-printing , bail-outs , and rampant spending.

That is, the mechanisms of tinkering with interest rates and the money supply to control inflation (or delfation) are not only worthless when the debt is already out of control, but dangerous too.

Even if Congress had the extraordinary fiscal and moral discipline to deal with the debt responsibly, it will take many decades.
To merely keep the $10.7 Trillion of National Debt to stop growing larger requires an interest payment of $1.3199 Billion per day ($40.13 Billion per month = $482 Billion per year).
If we started today by paying down the $10.7 Trillion National Debt with $1.32 Billion per day, it would take 164 years (until year 2173) to pay off the debt, and the total interest cost would be $79.2 Trillion (i.e. 7.4 times the original $10.7 Trillion National Debt).

David R. Remer wrote: One can no more divorce these economic rescue (sic) proceedings from politics than one can divorce hydrogen from oxygen in water. It could be done, but the input energy would be just too prohibitive.

All the more reason to wonder how we will have the extraordinary fiscal discipline to not turn a huge debt problem into a worse problem which debauches the currency.

David R. Remer wrote: Berating the economic rescue at this point is like a parent apologizing for having spanked their child upon learning their child was not at fault. Damage is done.

Until someone can answer some of the simple questions above, questioning (and even berating) the rampant bail-outs and fiscal irresponsibility is quite justified.

Not only is it very doubtful that these bail-outs will work, but it very possible that it will make things much worse due to hyperinflation.
The U.S. Treasury and the Federal Reserve are broke.
They are borrowing and creating the money out of thin air.
The amount of money required to put a dent into $10.7 Trillion National Debt, $54-to-$67 Trillion nation-wide debt, 10,000 foreclosures per day, rising unemployment, inflation which as already 4.3% (on average) for year 2008, would have to be huge, and any such huge amount will most certainly lead to hyperinflation, in which case, a bad situation will most likely get much worse.

What is the likelihood of hyperinflaton?
• Peter Schiff: rogerhaeske.com/?p=302


• www.cnbc.com/id/15840232?video=937413453&play=1


• www.valueplays.blogspot.com/2008/11/is-hyper-inflation-ahead-of-us.html


• goldnews.bullionvault.com/hyper_inflation_hyperinflation_deflation_base_110320081

Here’s part of what Obama says:

• (1) inject huge stimulus


• (2) increase liquidity (i.e. more money);


• (3) get consumers to borrow more;


• (4) get consumers to spend more;

We need all of that like we need a hole in the head.

That might have worked if we didn’t already have such massive debt.
I thought this melt-down was going to take several more years, but I now think it’s going to happen much sooner since the federal government and Federal Reserve are going to make the problem much worse by trying to solve our huge debt-pyramid with more of the same; with more debt , borrowing , creating money out of thin air , bail-outs , and rampant spending.

To make matters worse, this is not only a U.S. problem. Most other nations have done the same thing (or worse). There is massive volatility in currency exchange rates.
Debt is a world-wide problem, and it is all largely (not completely) due to dishonest , usurious , inflationary fiat monetary systems that continue to grow national debt and nation-wide debt ever larger as a percentage of GDP.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at November 25, 2008 03:52 PM

d.a.n said: “If so, 52 consecutive years of incessant inflation is a strange way of demonstrating those beliefs.”

That is because their economic models stipulate that a modest inflation of rate of 1 to 3% is necessary for economic growth. I am not defending their economic model, I have postulated on several occasions that a homeostatic model would be vastly superior based on stable population and stable economic balance, NOT growth or decline.

But, that is a far cry from your statement that the federal reserve believes in massive debt replacing production. Their model DID NOT produce this massive debt. In 2000, the national debt was 5.65 Trillion accumulated over more than 230 years of borrowing.

You are aiming at the wrong target with the wrong accusation. The Fed DOES NOT believe in massive debt replacing production. The target you should be aiming at is the political parties, both of them, and their elected candidates in the White House and Congress. That is where the massive doubling of the national debt in 8 years came from. NOT THE FED.

Posted by: David R. Remer at November 25, 2008 04:41 PM

And who is complicit in creating the money out of thin air?

Posted by: d.a.n at November 25, 2008 05:17 PM

d.a.n, The U.S. Treasury Dep’t. prints the money. The Treasury falls under the purview of the President and Congress.

The President and Congress sign bills authorizing the printing of money by borrowing beyond the limits of money already circulating in the economy. The FED, as far as I know, has NO authority to authorize the printing of money from the Treasury, with one exception, and that is through its repurchase agreements (overnight loans which create outstanding balances for a few days, and through loans at the discount window which also create outstanding balances in excess of the actual money supply held in reserve. (However, the Discount Window loan balances are governed by the Congress or White House authority.)

Though I confess not to be an expert on the range of authority of the Fed. Reserve, my reviews of its operations don’t reveal any authority to print money without Congressional and or Executive branch authority, except for very, very short term loans, which are colateralized in one way or another, protecting and insuring the loans outstanding.

In the case of what is happening now with the Fed’s actions regarding longer term loans and money access at the Discount Window and Economic Stablilzation Act Repo contracts, these were authoritized by Congress and the Treasury Secretary (i.e. presidential authority), and set by these branches of government at fixed maximum amounts, ($700 Billion in the case of the Stabilization Act, for example).

Posted by: David R. Remer at November 25, 2008 06:17 PM

David R. Remer wrote:

d.a.n said: “If so, 52 consecutive years of incessant inflation is a strange way of demonstrating those beliefs.”

That is because their economic models stipulate that a modest inflation of rate of 1% to 3% is necessary for economic growth.

And 1.0% inflation (or less) would be good.
But inflation has not been 1.0% or less since year 1955.
And inflation has been over 3.0% for 29 (55%) of the last 53 years.
And inflation has been over 4.0% for 21 (40%) of the last 53 years.
And inflation was double digit (10.35% to 13.58%) for 4 of the last 53 years.
And there’s also the issue of whether inflation is really only 3.7% (as of 1-NOV-2008), since the CPI formulas were modified in 1983 and 1998.

• YEAR ___ INFLATION RATE


• 1955 ___ -0.28%


• 1956 ___ 1.52%


• 1957 ___ 3.34%


• 1958 ___ 2.73%


• 1959 ___ 1.01%


• 1960 ___ 1.46%


• 1961 ___ 1.07%


• 1962 ___ 1.20%


• 1963 ___ 1.24%


• 1964 ___ 1.28%


• 1965 ___ 1.59%


• 1966 ___ 3.01%


• 1967 ___ 2.78%


• 1968 ___ 4.27%


• 1969 ___ 5.46%


• 1970 ___ 5.84%


• 1971 ___ 4.30%


• 1972 ___ 3.27%


• 1973 ___ 6.16%


• 1974 ___ 11.03%


• 1975 ___ 9.20%


• 1976 ___ 5.75%


• 1977 ___ 6.50%


• 1978 ___ 7.62%


• 1979 ___ 11.22%


• 1980 ___ 13.58%


• 1981 ___ 10.35%


• 1982 ___ 6.16%


• 1983 ___ 3.22%


• 1984 ___ 4.30%


• 1985 ___ 3.55%


• 1986 ___ 1.91%


• 1987 ___ 5.66%


• 1988 ___ 4.08%


• 1989 ___ 4.83%


• 1990 ___ 5.39%


• 1991 ___ 4.25%


• 1992 ___ 3.03%


• 1993 ___ 2.96%


• 1994 ___ 2.61%


• 1995 ___ 2.81%


• 1996 ___ 2.93%


• 1997 ___ 2.34%


• 1998 ___ 1.55%


• 1999 ___ 2.19%


• 2000 ___ 3.38%


• 2001 ___ 2.83%


• 2002 ___ 1.59%


• 2003 ___ 2.27%


• 2004 ___ 2.68%


• 2005 ___ 2.39%


• 2006 ___ 3.24%


• 2007 ___ 2.85%


• 2008 ___ 4.28% (estimate)

Who plays the most major role in the money supply? The Federal Reserve, which affects the money supply by affecting its most important component: bank deposits.

Who has the most control over interest rates, and the Money Supply? The Federal Reserve.

So, how is the Federal Reserve not complicit?

After all, there must be a powerful temptation for the Federal Reserve to create money out of thin air (at a 9-to-1 ratio) when they can earn interest on 90% of that money created out of thin air.

David R. Remer wrote: I am not defending their economic model, I have postulated on several occasions that a homeostatic model would be vastly superior based on stable population and stable economic balance, NOT growth or decline.

Perhaps, but who is responsible for bubble after bubble due to manipulation of interest rates and money supply? The Federal Reserve.

David R. Remer wrote: But, that is a far cry from your statement that the federal reserve believes in massive debt replacing production.

That is exactly what the Federal Reserve is doing via inflation.

The Federal Reserve has an obvious conflict of interest, since it makes money by loaning money at a 9-to-1 debt-to-reserve ratio, and can earn interest on 90% of the money created out of thin air.

David R. Remer wrote: Their model DID NOT produce this massive debt.

No?

You mean the Federal Reserve doesn’t have control of interest rates and a good portion of the money supply?

David R. Remer wrote: In 2000, the national debt was 5.65 Trillion accumulated over more than 230 years of borrowing.

Yes, but guess who is buying those government securities? The Federal Reserve.

David R. Remer wrote: You are aiming at the wrong target with the wrong accusation.

False.

Who plays the most major role in the money supply? The Federal Reserve, which affects the money supply by affecting its most important component: bank deposits.

Who has the most control over interest rates, and the Money Supply? The Federal Reserve.

So, how is the Federal Reserve not complicit?

David R. Remer wrote: The Fed DOES NOT believe in massive debt replacing production.

False.

The federal government and the Federal Reserve are BOTH to blame for the massive debt.
The Federal Reserve has a major conflict of interest (no pun intended) when the Federal Reserve makes money by loaning money at a 9-to-1 debt-to-reserve ratio, and can earn interest on 90% of the money created out of thin air.

David R. Remer wrote: The target you should be aiming at is the political parties, both of them, and their elected candidates in the White House and Congress.

Congress too!

And the Federal Reserve too!

Unless you can somehow show that the Federal Reserve does not have a major role in controlling the Money Supply and Interest Rates?

David R. Remer wrote: That is where the massive doubling of the national debt in 8 years came from. NOT THE FED.

The $10.7 Trillion National Debt is only part of the debt.

The nation-wide debt is $54-to-$67 Trillion!
Where did that debt come from? The Federal Reserve and member banks.

Are you so certain that the Federal Reserve was not complicit?

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at November 25, 2008 09:12 PM

d.a.n, you make claim after claim against the Federal Reserve but provide not one source of evidence to back up your claims of a relationship between the Federal Reserve as the cause of inflation.

Printing money beyond the real value of collateral on loans is one way inflation occurs. The FED has never lost a penny through its discount window nor has it ever lost dollars in seizing collateralized property of a defaulted Repurchase Loan.

target=”blank>Wikipedia has a good summary of the different perspectives on inflation. Check it out.

I think you confuse FED’s charge for controlling inflation with the FED causing inflation. The FED doesn’t create inflation directly, it fights other forces in the government and economy which create inflation. Think of a traffic cop in the intersection waving traffic by and halting it. Their job is to regulate traffic to minimize accidents. But, if an accident occurs, it is not the traffic cop who caused it. The traffic cop failed to prevent it, but, the traffic cop may not have had any potential for preventing the accident in the first place.

Indirectly, the FED can facilitate inflation later on by lowering interest rates and allowing enormous liquidity to flood the economy stimulating rapid growth, mergers and acquisitions, rising wages. And that is now what concerns some inflation hawks about the FED’s infusion of low interest cash into the economy.

But, remember, it was Congress and the White House who authorized the FED the cash to make the loans and cash available to the likes of AIG and CitiGroup. Ideally the FED attempts to maintain between a 2-3% annual inflation rate. Now is one of the exceptions when it is fighting disinflation with massive loans and cash infusions and backup contracts in the event of default, but the authorization for the additional printing or borrowing of the money used by the FED came from Congress and the White House.

There is no getting around this fact of law and legal procedure. The FED does not print money nor can it authorize the printing of money. At worst, it can make overnight loans which default (has never happened) in which case the Treasury would have to print money to make up the default, or a default on its REPO’s occurs (repurchase agreements) which are collateralized and the collateral real market value ends up less than the money lent on the REPO. (To my knowledge, this has never happened either).

Stop blaming the traffic cop for the accidents that occur at or near their intersection. Blame the Congress and White House, the CBO and GAO who continue grant authorization for printing and borrowing money, often on the advice of the Federal Reserve. That is about all the blame I can see you can pin on the FED for printing money and explosive money supply growth.

There are purists who say the FED’s ONLY role should be checking inflation. Had the FED followed that role, our nation would be entering into a deep depression at this very moment. The FED’s steps to halt the run on the Money Markets back in September, prevented a complete collapse of our and many other nation’s economies through a meltdown of their financial institutions and industry wide bankruptcies for a year or more which virtually halted all cash flow for economic activity except for the consumer activity resulting from the depletion of savings and cash reserves by those who had them.

As with every action, there is an opportunity cost. In this case, the FED’s intervention saved the economy from a meltdown so far, but, the opportunity cost is a growing risk of hyperinflation when the economy begins to grow again in 2010 or shortly thereafter.

The money being infused by the Congress and White House borrowing today into the economy won’t begin to circulate in the economy for 6 to 12 months. When it does, the inflationary pressure of that dramatic increase in money supply and flurry of economic activity resulting will likely be intense. And with 2 to 4 trillion infusion in the U.S. alone, not to mention the trillions infused around the globe, it truly poses a hyperinflation risk that can only be fought by reining in that cash through higher interest rates and retiring outstanding loans and guarantees through the FED.

I would prefer trusting the FED to rein in inflation in 2010 to inaction these last couple months which would have threatened my wife’s job and my meager part-time income, not to mention our savings insured by the FDIC should the full faith and credit of the U.S. government fail to be honored by the Chinese and other creditors holding our debt.

Posted by: David R. Remer at November 26, 2008 04:48 AM

David R. Remer wrote: d.a.n, you make claim after claim against the Federal Reserve but provide not one source of evidence to back up your claims of a relationship between the Federal Reserve as the cause of inflation.

Claim after claim?

That’s right. Backed up by irrefutable evidence.
Do you not remember also writing in a previous discussion that the Federal Reserve “is a pyramid scheme” ?

Evidence?
Such as …
Who creates money (as debt) out of thin air at a 9-to-1 ratio?
Who plays the most major role in controlling the money supply?
Who controls interest rates?
Who gets interest on the money created out of thin air at a 9-to-1 ratio of debt-to-reserves?

How can you say the Federal Reserve is not to blame when you have already written about who is providing the advice ? …

David R. Remer wrote: Stop blaming the traffic cop for the accidents that occur at or near their intersection. Blame the Congress and White House, the CBO and GAO who continue grant authorization for printing and borrowing money, often on the advice of the Federal Reserve. That is about all the blame I can see you can pin on the FED for printing money and explosive money supply growth.

Exactly. The federal government and Federal Reserve are complicit.

Also, the federal government does not have complete control over the Federal Reserve, member banks, and loans (made at a 9-to-1 ratio of debt-to-reserves).

David R. Remer wrote: Printing money beyond the real value of collateral on loans is one way inflation occurs. The FED has never lost a penny through its discount window nor has it ever lost dollars in seizing collateralized property of a defaulted Repurchase Loan.

Not true.

A Repurchase Loan is a secured loan (secured with collateral).
However, when the collateral suddenly becomes worth much less (e.g. as occurred with a lot of real estate that was severely over-priced), there is a loss for those making the loans even when the collateral is seized on foreclosure.
When member banks of the Federal Reserve fail, there is a loss to those member banks and the Federal Reserve.
There’s also a loss to the FDIC who has to bail out the depositors.
Therefore, there’s a lot of losses.
We’ve been witnessing massive losses.
The Federal Reserve’s reserves are gone.
Money has essentially evaporated; it’s gone.
How is that not a loss of dollars?

David R. Remer wrote: I think you confuse FED’s charge for controlling inflation with the FED causing inflation.

Not true.

The Federal Reserve does cause inflation by creating money out of thin air at a 9-to-1 ratio of debt-to-reserves.
That is the major cause of inflation.

Yes, the federal government is to blame too, because it created the Federal Reserve (i.e. by Woodrow Wilson in year 1913), and he later said …

• “I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world, no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men. - Woodrow Wilson, President of the U.S. 1913-1921.

David R. Remer wrote: The FED doesn’t create inflation directly, it fights other forces in the government and economy which create inflation.

Yes it does, by creating money out of thin air at a 9-to-1 ratio of debt-to-reserves.

Most (not all) inflation comes from excessive creation of money, and the Federal Reserve creates money out of thin air.
And look where we are now.

The nation-wide debt is 500% of GDP (up from 100% of GDP in year 1956).
It’s a debt pyramid, and it is now quite simply becoming very unstable, as the debt grows ever larger, fewer and fewer people already deep in debt can’t borrow more money because they can’t pay the loans they already have (evidenced by 10,000 foreclosures per day as of AUG-2008). That’s why the federal government now wants to give away money in the form of stimulus checks.

Therefore, how can the Federal Reserve not be responsible (along with the federal government) for creating inflation?

David R. Remer wrote: Think of a traffic cop in the intersection waving traffic by and halting it. Their job is to regulate traffic to minimize accidents. But, if an accident occurs, it is not the traffic cop who caused it. The traffic cop failed to prevent it, but, the traffic cop may not have had any potential for preventing the accident in the first place.

May not?

Again, who creates money out of thin air at a 9-to-1 ratio of debt-to-reserves?
And who buys federal government Treasury Bills?
How can that NOT cause inflation?

The Federal Reserve’s role as a traffic cop has caused a huge traffic jam by injecting massive debt into the system, by creating debt at a 9-to-1 ratio of debt-to-reserves.
It’s a pyramid scheme, which you have also already previously acknowledged in previous discussions by writing “it is a pyramid scheme” when I wrote “the Federal Reserve is little more than a pyramid scheme”, so it’s is odd to now say the Federal Reserve is not to blame for inflation resulting from that pyramid scheme.

David R. Remer wrote: Indirectly, the FED can facilitate inflation later on by lowering interest rates and allowing enormous liquidity to flood the economy stimulating rapid growth, mergers and acquisitions, rising wages. And that is now what concerns some inflation hawks about the FED’s infusion of low interest cash into the economy.

True.

Low interest rates makes loans easier to get.
The Federal Reserve has an obvious conflict of interest, since it makes money from interest on loans.
Thus, it is no wonder that it wants to loan as much money as possible.

However, the Federal Reserve creates not only by lowering interest rates, but it creates inflation via loans by creating money out of thin air at a 9-to-1 ratio of debt-to-reserves.
Unless that fact can be disproven, it’s difficult to understand how anyone can say the Federal Reserve is not responsible for creating inflation.

David R. Remer wrote: But, remember, it was Congress and the White House who authorized the FED the cash to make the loans and cash available to the likes of AIG and CitiGroup.

The federal government and Federal Reserve are in league and both complicit in this entire mess. The federal government spends money, and the Federal Reserve loans the federal government that money. The level of debt is now getting ridiculous. BOTH are to blame.

David R. Remer wrote: Ideally the FED attempts to maintain between a 2-3% annual inflation rate.

But above, you wrote …

David R. Remer wrote: That is because their economic models stipulate that a modest inflation of rate of 1% to 3% is necessary for economic growth.

At any rate, why?

If a lot of inflation (or deflation) is bad, how is a little inflation (or deflation) good?
The theory appears to be flawed, if not completely rooted in something sinister.
Inflation is often justified to create jobs.
However, that can never last for very long, and merely keeps people running all around like chickens with their heads cut off, looking for a place to invest their money so that it won’t be eroded by incessant inflation.

David R. Remer wrote: Now is one of the exceptions when it is fighting disinflation with massive loans and cash infusions and backup contracts in the event of default, but the authorization for the additional printing or borrowing of the money used by the FED came from Congress and the White House.

Again, the Federal Reserve (Bernanke) and the U.S. Treasury (Henry Paulson) are complicit in this massive creation of new money out of thin air.

And we don’t overall “disinflation” (sic ; i.e. deflation) now.
We have rising inflation (see below).
And all of this massive creation of money out of thin air will create more inflation.
And there’s also the possibility that inflation is not being reported accurately.

• ____INFLATION RATE_____


• 4.75%|———————-


• 4.50%|———————-


• 4.25%|——————xxx (4.28% average for year 2008)


• 4.00%|——————x—


• 3.75%|——————x—


• 3.50%|——————x—


• 3.25%|————xxx-x—


• 3.00%|————x-xxx—


• 2.75%|——xxx-x———


• 2.50%|——x-xxx———


• 2.25%|—xxx—————


• 2.00%|—x——————


• 1.70%|—x——————


• 1.50%|xxx——————


• 1.25%|———————-


• 1.00%|———————-


• 0.75%|———————-


• 0.50%|———————-


• 0.25%|———————-


• 0.00%|__________________YEAR


• _____ 2_2_2_2_2_2_2


• _____ 0_0_0_0_0_0_0


• _____ 0_0_0_0_0_0_0


• _____ 2_3_4_5_6_7_8

Year _ Inflation Rate
2002 __ 1.59%
2003 __ 2.27%
2004 __ 2.68%
2005 __ 3.39%
2006 __ 3.24%
2007 __ 2.85%
2008 __ 4.28% (estimated based on sustained 3.7% for NOV and DEC of 2008)

David R. Remer wrote: There is no getting around this fact of law and legal procedure. The FED does not print money nor can it authorize the printing of money.

False.

While the Federal Reserve does not print money, it creates money out of thin air at a 9-to-1 ratio of debt-to-reserves.

David R. Remer wrote: At worst, it can make overnight loans which default (has never happened) in which case the Treasury would have to print money to make up the default, or a default on its REPO’s occurs (repurchase agreements) which are collateralized and the collateral real market value ends up less than the money lent on the REPO. (To my knowledge, this has never happened either).

What? ? ?

Bank failures don’t carry losses?
10,000 foreclosures per day and severely over-priced real-estate has not created losses for many banks?
Only if the losses are made up with more money created out of thin air?

David R. Remer wrote: Stop blaming the traffic cop for the accidents that occur at or near their intersection. Blame the Congress and White House, the CBO and GAO who continue grant authorization for printing and borrowing money, often on the advice of the Federal Reserve. That is about all the blame I can see you can pin on the FED for printing money and explosive money supply growth.

“Stop blaming” ?

Why? The Federal Reserve and the federal government are BOTH to blame, since both are complicit in creating incessant inflation, by the excessive creation of money and debt … a fact that has not yet been disproven by a long shot. Especially when the Federal Reserve uses a fractional banking system and creates money (as debt) at a 9-to-1 ratio.

And of coruse, the glaring flaw in the argument that the federal government and Federal Reserve are not both to blame is a nation that is swimming in debt, the Federal Reserve’s fractional banking syetem that creates debt at a 9-to-1 ratio of debt-to-reserves, the $10.7 Trillion National Debt, the $54-to-$67 Trillion nation-wide debt (and growing fast), and the federal government’s inability to even pay the $430+ Billion per year of interest alone without more borrowing and creating money out of thin air.

That is, the glaring flaw in the agument that the federal government and Federal Reserve are not both to blame is a huge debt-pyramid and a nation swimming in debt; debt that has been growing ever larger (in magnitude and as a percentage of GDP) for over 50 years:

• _)))________ Nation-Wide Debt __________________


• $55.0T |—————————————-D (Debt=$54T)


• $52.5T |—————————————-D


• $50.0T |—————————————-D


• $47.5T |—————————————-D


• $45.0T |—————————————D-


• $42.5T |—————————————D-


• $40.0T |—————————————D-


• $37.5T |————————————-D—


• $35.0T |————————————D—-


• $32.5T |———————————-D——


• $30.0T |———————————D——-


• $27.5T |——————————-D———


• $25.0T |——————————D———-


• $22.5T |—————————-D————


• $20.0T |—————————D————-


• $17.5T |————————-D—————


• $15.0T |————————D—————-


• $12.5T |———————D——————G (GDP=$13.9T year 2007)


• $10.0T |—————-D—————G
——-

• $07.5T |———-D————G
—————-

• $05.0T |-D——-G
——————————

• $02.5T |-G
—————————————

• $00.0T +(1956)————————- (2008)YEAR

David R. Remer wrote: There are purists who say the FED’s ONLY role should be checking inflation. Had the FED followed that role, our nation would be entering into a deep depression at this very moment.

What makes you think the Federal Reserve can prevent it now with more of the same?

In fact, what makes you think there won’t be hyperinflation due to the massive creation of new money out of thin air?

That fact is, I believe what the federal government and Federal Reserve are doing now will make things much worse later by debauching the currency (see chart above; year-to-year inflation is rising, not falling).

David R. Remer wrote: The FED’s steps to halt the run on the Money Markets back in September, prevented a complete collapse of our and many other nation’s economies through a meltdown of their financial institutions and industry wide bankruptcies for a year or more which virtually halted all cash flow for economic activity except for the consumer activity resulting from the depletion of savings and cash reserves by those who had them.

I don’t have a problem with that guarantee to prop up the 1.0 unit -to- $1.0 dollar money market valuations, or the FDIC’s higher limits for depositors, but that’s not the real issue.

The real issue is inflation and the creation of massive amounts of money to rescue bail out the banks , corporations , and Wall Street.

David R. Remer wrote: As with every action, there is an opportunity cost. In this case, the FED’s intervention saved the economy from a meltdown so far, but, the opportunity cost is a growing risk of hyperinflation when the economy begins to grow again in 2010 or shortly thereafter.

I don’t think so.

I think it only delayed some pain now , which will create much more pain and misery later. I wish I were wrong, but only time will tell.

David R. Remer wrote: The money being infused by the Congress and White House borrowing today into the economy won’t begin to circulate in the economy for 6 to 12 months. When it does, the inflationary pressure of that dramatic increase in money supply and flurry of economic activity resulting will likely be intense.

I don’t think it will take 6-to-12 months to see higher inflation, when year-to-year inflation is already increasing now … Year _ Inflation Rate 2002 __ 1.59% 2003 __ 2.27% 2004 __ 2.68% 2005 __ 3.39% 2006 __ 3.24% 2007 __ 2.85% 2008 __ 4.28% (estimated based on sustained 3.7% for NOV and DEC of 2008)

David R. Remer wrote: And with 2 to 4 trillion infusion in the U.S. alone, not to mention the trillions infused around the globe, it truly poses a hyperinflation risk that can only be fought by reining in that cash through higher interest rates and retiring outstanding loans and guarantees through the FED.

That won’t be possible for one very simple reason.

That money is now debt.

And that is why no one can answer this one simple question …

• Where will the money come from to merely pay the INTEREST on $53 Trillion -to- $66 Trillion of nation-wide debt , much less the money to reduce the current PRINCIPAL debt of $53 Trillion to- $66 Trillion , when that money does not already exist? Especially when now, 80% of the U.S. population owns only 17% (or less) of all wealth, and 1% owns 40% of all wealth (up by 20% from 20% in year 1976); a wealth disparity gap that has never been worse since the Great Depression.

David R. Remer wrote: I would prefer trusting the FED …

Trust the FED ! ? ! Yikes! ! !

What makes you think the Federal Reserve can fix what you once acknowledged “is a pyramid scheme” ?

David R. Remer wrote: I would prefer trusting the FED to rein in inflation in 2010 to inaction these last couple months which would have threatened my wife’s job and my meager part-time income, not to mention our savings insured by the FDIC should the full faith and credit of the U.S. government fail to be honored by the Chinese and other creditors holding our debt.

Either way, there will be pain.

What would you prefer?
Some pain now, or a LOT more pain a few years from now for many years due to debauching of the currency?

That’s the choice we have.
The price for delaying a correction now will be MUCH worse later, and another Great Depression is now most likely unavoidable, and it appears that the federal governnment and Federal Reserve will succeed in making a bad situation MUCH worse.

You know something is seriously wrong when the solution to our debt problems is to give away money (which creates more debt).
You know something is seriously wrong when the solution to tell people to go out and spend, spend, spend!
How long can that work without creating hyperinflation and destroying the currency, and making things MUCH worse by destroying savings, pensions, and entitlements?

We have now arrived at a time where common sense is gone.
Since when did the solution to massive debt become more debt , borrowing , creating money out of thin air , bail-outs , and rampant spending?
Since when did we begin to believe that hyperinflation can’t result from more debt , borrowing , creating money out of thin air , bail-outs , and rampant spending?

David, we are just going to have to agree to disagree on this, because (in my opinion), both the federal government and the Federal Reserve are both VERY MUCH to blame for 52 consecutive years of positive inflation, and the hyperinflation that is very likely to result from the massive creation of new money today ($4.24 to $7.7 Trillion this year) out of thin air. It’s out of control. It is not only mathematically doomed, but it is doomed by fiscal and moral bankruptcy.

And the next largest group of people responsible for this mess is the voters, who repeatedly reward Congress with 95% re-election rates, despite dismal 9%-to-18% approval ratings for Congress.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at November 26, 2008 07:09 AM

CORRECTION:

d.a.n wrote: In fact, what makes you think there won’t be hyperinflation due to the massive creation of new money out of thin air?

Let me restate that question, since you are aware of the likelihood of hyperinflation from the excessive creation of new money, as indicated by your statement …

David R. Remer wrote: … it truly poses a hyperinflation risk that can only be fought by reining in that cash through higher interest rates and retiring outstanding loans and guarantees through the FED.

How can the cash be reined in to reduce hyperinflation when most of the new money is created as debt?

How can loans be retired when the government is still deficit spending (as it has been for the past 52 years; since 1957), and very unlikely to stop deficit spending?

That is, it is very unlikely, based on track-record, that the federal government or Federal Reserve have now, nor will have later, sufficient fiscal discipline to stop the fiscal insanity (i.e. more borrowing; creating more money out of thin air at a 9-to-1 debt-to-reserve ratio, if not completely 100% out of thin air as is occurring today; bail-outs; pork-barrel, subsidies for the wealthy and corporate welfare; and rampant spending) until they have destroyed the currency.

Hyperinflation has happened before and it can happen again.
Today, we have the perfect ingredients for hyperinflation.
Hyperinflation has occurred in the following countries in the last 150 years:

• Weimar Republic of Germany 1920 – 1923 (1/466 billionth of starting value),


• Zimbabwe 2003 - present (6 quadrillionth of the starting value and continuing to fall),


• Former Soviet Union 1993 – 2002 (1/14th of starting value),


• Argentina 1975 – 1983 (1/1,000th of starting value),


• Austria 1921 – 1923 (about 1/4 of starting value),


• Bolivia 1984 - 1986 (1/1,000 of starting value);


• Bosnia-Herzegovina 1992 – 1993 (1/100,000th of starting value),


• Brazil 1960 – 1994 (1 trillionth of starting value), Chile 1971 – 1973 (1/3rd of starting value),


• China 1947 – 1955 (1/10,000th of starting value),


• Greece 1943 – 1953 (1/50 trillionth of starting value),


• Hungary 1945 – 1946 (100 quintillionth of the starting value),


• Hungary 1922 – 1923 (1/4 of starting value),


• Israel 1976 – 1986 (1/16th of starting value),


• Japan 1934 – 1951 (1/362nd of starting value),


• Poland 1990 – 94 (1/10,000th of starting value),


• U.S.A. (Confederate States of America) 1861 – 1865 (1/90th of starting value, and then, by the end of the Civil War, the Confederate Dollar depreciated to zero).


• It also happened in the ancient Roman Empire, when the silver and gold coinage of that day was progressively debased with base metals, in order to fund wars, giveaways to the Plebeians, and various other adventures. There are many additional examples that I have not bothered to cover here.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at November 26, 2008 09:56 AM

Actually, with a 1950 U.S. Dollar worth only about 11 cents today (now at about 1/9th the starting value), it could be argued that we already have debased the currency significantly in the past 58 years (far more than the previous 174+ years).

• INFLATION CPI (CPI Index=100 for year 1967):
• 650 |———————————-x (=665 as of JAN-2008)
• 600 |———————————x
• 550 |———————————x
• 500 |——————————-x-
• 450 |——————————-x-
• 400 |——————————-x-
• 350 |——————————x—
• 300 |—————————-x—-
• 250 |—————————-x—-
• 200 |—————————x——
• 150 |—————————x——
• 100 |————————x———
• 050 |x-x-x-x-x-x-x-x————
• 000 |—————————————
YEAR
• _____ 1 1 1 1 1 1 1 1 1 1 22
• _____ 8 8 8 8 8 9 9 9 9 9 00
• _____ 0 2 4 6 8 0 2 4 6 8 01
• _____ 0 0 0 0 0 0 0 0 0 0 00

Inflation Rate for AUG-2007 to AUG-2008 = 100 x (219.086 - 207.917) / 207.917 = 5.37% (an AUG-2007 $1 Dollar is now worth only $0.95 in AUG-2008).
Inflation Rate for AUG-2000 to AUG-2008 = 100 x (219.086 - 172.8) / 172.8 = 26.79% (an AUG-2000 $1 Dollar is now worth only $0.79 in AUG-2008).
Inflation Rate for AUG-1990 to AUG-2008 = 100 x (219.086 - 131.6) / 131.6 = 66.48% (an AUG-1990 $1 Dollar is now worth only $0.60 in AUG-2008).
Inflation Rate for AUG-1978 to AUG-2008 = 100 x (219.086 - 66.0) / 66.0 = 231.95% (an AUG-1978 $1 Dollar is now worth only $0.30 in AUG-2008).
Inflation Rate for AUG-1950 to AUG-2008 = 100 x (219.086 - 24.3) / 24.3 = 801.59% (an AUG-1950 $1 Dollar is now worth only about $0.11 in AUG-2008).

The point is, much (if not most) of our economic instability, inflation, and bubble after bubble, are caused by bad monetary policies and other manifestations of unchecked greed.
Who is responsible for monetary policies? That would be BOTH the federal government and the Federal Reserve.

Also, there’s something very odd today about the GDP too, when measured in any previous U.S. Dollar (adjusted for inflation), which raises questions about the real level of inflation today.
That is, GDP, when measured in 2005 or 1950 inflation adjusted Dollars, has been falling since year 2006, which has never occurred to that degree since year 1900 (or possibly ever). We were told GDP growth was small and only slightly negative lately (-0.5%), but with so much inflation (probably really more than the average of 4.28% for year 2008), is that really an accurate picture. That is, when looking at GDP in past Dollars adjusted for inflation, there is something suspicious about the current claims of only 3.7% inflation as of 1-NOV-2008.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at November 26, 2008 10:24 AM

David R. Remer wrote: Though I confess not to be an expert on the range of authority of the Fed. Reserve, my reviews of its operations don’t reveal any authority to print money without Congressional and or Executive branch authority, except for very, very short term loans, which are colateralized in one way or another, protecting and insuring the loans outstanding.

Yes, I am aware that the U.S. Treasury actually creates paper money, coinage, and other instruments (e.g. Treasury Bills, Savings Bonds, etc.).

The phrases “money-printing” or “printing money” is used a bit loosely, because not all money exists in physical form. Much (if not most) money is created as debt and exists as debt.

When the Federal Reserve loans money, up to 90% of each loan is new money created out of thin air, with a few strokes on a keyboard/computer.

The federal government can also create new money out of thin air, by simply printing it.

Obviously, it is out of control, with nation-wide debt being 5+ times GDP.

Bailing out the Big 3 Auto makers will grow the debt larger, and tax payers’ chances of ever getting all of this debt repaid is a pipe dream.

Before things can start to get better, a whole lot of debt is going to have to go away, one way or another, because it is increasingly unlikely (if not totally) that the debt can be stopped from growing larger … at least, until there is some significant (and most likely, painful) event that essentially amounts to a reset.

Posted by: d.a.n at November 26, 2008 11:55 AM

d.a.n, but I find no evidence anywhere that the FED has ever lost $1 dollar of tax payer’s money or anyone else’s money for that matter, in its operations. If they create debt and recover the principal and interest, it’s a wash in the long run, having no long term inflationary effect as the loans are recovered and money returned to the Treasury for destruction, or spending on Congressional and White House budget items.

You are absolutely correct that there can be no prosperity for the nation’s people in the future while debt is growing the way it is. Obama understands this and has committed to a high priority to halting the deficits and cutting budgets, even though this recession remains a higher priority. This means a trillion dollar deficit next year, and then firm efforts to bring it down to zero in the years following.

Obama is not Bush. Bush intended to double the national debt before leaving office all along as the means to trying to sink the entitlement programs. That is not Obama’s strategy.

Posted by: David R. Remer at November 26, 2008 01:43 PM

d.a.n, The Treasury’s loans at high interest rates encourages repayment of those loans by the corporations it is lending to as early as their economic activity growth will permit. Smart! That recovers some of the money.

Raising interest rates as economic activity increases lowers the overall amount of debt growth outstanding.

The FED’s mechanisms to not replace retired cash paper with new one’s as a means of recovering outstanding debt is a major way of reducing money supply.

Will these mechanisms be sufficient to fend off hyperinflation? I don’t know. A lot depends on what happens globally with inflation and what inflationary period competitive advantage the U.S. can gain, if any. A lot also depends upon how fast the economy comes roaring back with economic activity. Modest 1 to 2% growth would put Americans back to work while making inflationary pressures less threatening. Whether economic growth can be managed in such a fine tuned manner is doubtful.

But the cost of eliminating hyperinflation in a couple years is the onset of a depression in the next 12 months. That is where the Bush Administration and Congress has brought us, and the challenge they present the FED, Obama, and all the rest of Americans.

Posted by: David R. Remer at November 26, 2008 02:01 PM

David R. Remer wrote: d.a.n, but I find no evidence anywhere that the FED has ever lost $1 dollar of tax payer’s money or anyone else’s money for that matter, in its operations.

David, I didn’t say the Federal Reserve lost the tax payers’ money directly … only that they have lost money on bad loans. You wrote …

David R. Remer wrote: David R. Remer wrote: Printing money beyond the real value of collateral on loans is one way inflation occurs. The FED has never lost a penny through its discount window nor has it ever lost dollars in seizing collateralized property of a defaulted Repurchase Loan.

… and I responded the the Federal Reserve and banks do lose money on bad loans.

However, now that you mention it, the Federal Reserve has lost tax payers’ money too, but indirectly by creating incessant inflation by creating excessive money (as debt) at a 9-to-1 ratio, which erodes the currency, savings, pensions, wages, and entitlements.

And the Federal Reserve has lost money on bad loans and failed member banks that couldn’t repay their debts.
And the member banks, although FDIC insured, lose depositors’ money when the bank fails (i.e. for depositors with more than the $100K and $250K insured limits).

Of late, there have been many losses for banks, and some of their depositors.

David R. Remer wrote: If they create debt and recover the principal and interest, it’s a wash in the long run, having no long term inflationary effect as the loans are recovered and money returned to the Treasury for destruction, or spending on Congressional and White House budget items.

Not exactly. Not if it created inflation in the process by creating too much money (as debt), which erodes wealth, and creates economic instability.

David R. Remer wrote: You are absolutely correct that there can be no prosperity for the nation’s people in the future while debt is growing the way it is. Obama understands this and has committed to a high priority to halting the deficits and cutting budgets, even though this recession remains a higher priority.

I certainly hope you’are right about Obama’s understanding of it.

If the government is going to spend money to create jobs (Obama mentioned 2.5 million jobs), it needs to produce real value, and not just worthless busy-work.

That means cutting a lot of unnecessary dead-weight and wasteful spending in the federal government, and redirecting that money to value-producing jobs (e.g. energy alternatives, infrastructure, increased efficiency, etc.), and not propping up poorly managed banks, corporations, and financial corporations; which punishes their successful competitors. We should not be bailing out any corporations with CEOs and upper-management still receiving exorbitent compensation. Goldman-Sachs and Morgan-Stanley lost tens of billions, but plan over $13 billion in bonuses this year, and AIG is funding parties and vacations at the tax-payers’ expense. Also, I’ve heard talk of letting the tax system remain regressive. That’s a mistake. The tax system must be made less regressive, because the middle-class is getting hammered by it, and many of the wealthy are paying much lower percentages of their total income to federal taxes.

David R. Remer wrote: This means a trillion dollar deficit next year, and then firm efforts to bring it down to zero in the years following.

That’s the VERY risky part.

Will the federal government be able to stop deficit spending after doing it for every consecutive year since year 1957?

Also, the debt is so large, merely paying the interest alone ($432 Billion in 2007; much larger next year) on the $10.7+ Trillion National Debt (or what ever nightmarish number it will be by next year) won’t be easy. The federal government’s total tax revenues in 2007 were $2.5 Trillion, but that may be much less next year due to falling GDP and rising unemployment.

David R. Remer wrote: Obama is not Bush.

True. But Obama is only one person, and 95% of Congress was re-elected.

David R. Remer wrote: Bush intended to double the national debt before leaving office all along as the means to trying to sink the entitlement programs.

If so, that’s not only dastardly, but evil to the core.

David R. Remer wrote: That is not Obama’s strategy.

True. At least, it doesn’t even remotely appear so.

There are some things that Obama is suggesting though that sound dangerous.
Primarily, if Obama chooses to continue to bail-out failed banks and corporations, which would cost several trillions, we will have uncontrollable hyperinflation that will make a bad situation worse.
Growing the debt any bigger is very dangerous, when we may have already passed the point of being able to keep the debt from growing ever larger.

David R. Remer wrote: d.a.n, The Treasury’s loans at high interest rates encourages repayment of those loans by the corporations it is lending to as early as their economic activity growth will permit. Smart! That recovers some of the money.

Only if the corporations have the money to repay their loans.

Continuing to throw money at failing banks and corporations, that will continue to fail, isn’t smart.

David R. Remer wrote: Raising interest rates as economic activity increases lowers the overall amount of debt growth outstanding.

True. However, credit was far too easy to get for far too long, which burned the candle at both ends of the debt-pyramid, which can only be sustained for so long, before we have so much debt, we can not even pay the interest on the debt.

Not only has the federal government been growing the National Debt for 52 consecutive years (from $285 Billion to $10.7 Trillion), so has the nation wide debt (from $5 Trillion to $54+ Trillion).
But what is more alarming is the ratio of nation-wide debt -to- GDP, in which nation-wide debt has grown from 100% of GDP (in 1956) to 500% of GDP (in 2008).

David R. Remer wrote: The FED’s mechanisms to not replace retired cash paper with new one’s as a means of recovering outstanding debt is a major way of reducing money supply.

Yes, but it can’t reduce debt that way.

Money is created as the Principal portion of a Loan.
The Federal Reserve creates new money in which up to 90% of each loan is new money (i.e. only the Principal portion of the Loan).
Loan = Interest + Principal
Where will the money for the Interest come from when only the Principal portion of the Loan is created by the Federal Reserve?
This is “the flaw” (inherent in all pyramid schemes) that makes the monetary system a pyramid scheme that is doomed to collapse (again).
It creates more and more debt while everyone is chasing money to pay the interest (interest which can often exceed the amount of the original Principal).
Thus, we all get deeper and deeper and deeper into debt.
As a result, the National Debt has grown larger for 52 consecutive years (from $285 Billion to $10.7 Trillion); the nation-wide debt has growng from $5 Trillion to $54+ Trillion; and
nation-wide debt -to- GDP has grown from 100% of GDP (in 1956) to 500% of GDP (in 2008).

PRINCIPAL OWED
|——————|
|——————|
|——————|
|——————|
|——————|
|——————|
|——————|
|——————| ALL MONEY IN
|——————| CIRCULATION
|——————|——————|
|——————|——————|

Nation-wide debt is $54-to-$67 TRillion.
M3 Money Supply in year 1950 was $135 Billion, and by year 2005, it was $10.15 Trillion (75.2 time larger).
That means many tens of trillions of new money must be created to merely pay the Principal portion, much less the Interest portion of that debt.
I wonder if Congress or Obama truly understand the nature and severity of the debt-pyramid problem, because they didn’t see the melt-down approaching, and still don’t appear to understand the mathematical flaw inherent in the fractional-banking monetary system that allows dangerously large amounts of debt to be created with such small reserves (i.e. at 9-to-1 ratio)?
Do they know that so much massive debt is really unlikely to ever be repaid, or do they merely refrain from telling us what they know?
They seem to know the debt-pyramid will collapse the instant the borrowing and creation of money out of thin air stops.
They seem to know the debt-pyramid will collapse if consumers don’t have money to spend, since we have a 70% consumer spending based economy, and they are planning next to give away money, since too few consumers have the capacity to carry any more debt.

Regarding the debt-pyramid, only 5% of all U.S. money in existence is in circulation (as paper and coinage).
95% of all U.S. money in existence is the Principal portion of all Loans.
And what does not yet exist is the Interest portion of the Loans, which will have to come from somewhere.

• QUESTION #1: Where will the money come from to pay the Interest portion of the Loan?
  
• ANSWER #1: From more Loans or more foreclosures and repossessions.

• QUESTION #2: How long can that last?


• ANSWER #2: It depends on how fast and large the loans are. From start to finish, it could last many decades; perhaps a century. But eventually, the debt-pyramid finally collapses when too few people have the capacity for more debt, or the currency is destroyed by hyperinflaton. And we’ve been burning the candle at both ends. You know this all true when the federal government and Federal Reserve start giving money away in the form of stimulous checks.

David R. Remer wrote: Will these mechanisms be sufficient to fend off hyperinflation? I don’t know.

No.

That’s the problem.
The debt-pyramid is too big now.
We have already gone this route before, and we have also already witnessed numerous nations that have gone this route before.
And the numbers and trends of the past 52 years (e.g. fast growing federal and nation-wide debt as a percentage of GDP) are telling us something very important.
Many economists are now warning of hyperinflation, because year-to-year overall inflation is already rising now (since year 2002), despite the claims of deflation.
Only some things are deflating, such as homes and gasoline, which were both ridiculously over-priced and needed a correction.
Corrections are painful, but necessary.

• ____INFLATION RATE_____
• 4.50%|———————-
• 4.25%|——————xxx (4.28% average for year 2008)
• 4.00%|——————x—
• 3.75%|——————x—
• 3.50%|——————x—
• 3.25%|————xxx-x—
• 3.00%|————x-xxx—
• 2.75%|——xxx-x———
• 2.50%|——x-xxx———
• 2.25%|—xxx—————
• 2.00%|—x——————
• 1.75%|—x——————
• 1.50%|xxx——————
• 1.25%|__________________YEAR
• _____ 2_2_2_2_2_2_2
• _____ 0_0_0_0_0_0_0
• _____ 0_0_0_0_0_0_0
• _____ 2_3_4_5_6_7_8

David R. Remer wrote: A lot depends on what happens globally with inflation and what inflationary period competitive advantage the U.S. can gain, if any.

China’s GDP is falling now, and so China created a $586 Billion economic stimulus, instead of loaning it to the U.S. (which is probably a good thing since the U.S. is a black hole debtor nation sucking up money from wherever it can).

The entire world has the same growing debt-pyramid problem, since they all went to fiat-money systems.

David R. Remer wrote: A lot also depends upon how fast the economy comes roaring back with economic activity.

That will be very difficult, without literally giving money away, since most Americans are already tapped-out, deep in debt, and unable to carry more debt.

Regardless, there will be hyperinflation caused by the infusion of trillions of dollars, regardless of whether the money was borrowed and/or created out of thin air.

David R. Remer wrote: Modest 1 to 2% growth would put Americans back to work while making inflationary pressures less threatening. Whether economic growth can be managed in such a fine tuned manner is doubtful.

Yes, I agree that it is very doubtful, since the federal government has not displayed such discipline to date, and in fact, created this huge debt-pyramid.

David R. Remer wrote: But the cost of eliminating hyperinflation in a couple years is the onset of a depression in the next 12 months.

I think the risk of uncontrollable hyperinflation is great, if we try to save too many failing banks, corporations, and Wall Street institutions.

Especially since inflation today is really probably higher than what is being reported.

David R. Remer wrote: That is where the Bush Administration and Congress has brought us, and the challenge they present the FED, Obama, and all the rest of Americans.

Well, I still believe the Federal Reserve was complicit with the Bush Administration and Congress.

If Obama can pull this off (which won’t be painless), avoid both a depression, or a deep and decades-long recession, it will be truly amazing.
Especially when 95% of the same incumbents in Congress were re-elected.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at November 26, 2008 08:37 PM

Not sure I am on the right thread. Howsumever; David you seem to believe that Obama, as a one man band, can bring reform, abolish the NAU and generally walk on water. Can you imagine being in a room where half the people have more experience than you, have served in previous administrations and would like nothing better than to tell you how to do it, or how it must be? The oligarchy will cooperate with Obama where they can and go around him where they must. You suggest the NAU is dead on arrival with Obama. You might want to consider how long Monnet worked on cementing the EU in place. And this guy Pastor. A left wing policy advisor whose first job was ExDir Linowitz Commission on Latin Am. affairs. The Commission took it’s name from a registered foreign agent of the communist regime of Salvadore Allende. Prior to that he wrote an article for the Institute for Policy Studies (IPS), Americas oldest left wing think tank that has long supported communist and anti-american causes around the world. He served as director of Latin Affairs in the Carter White House and advised him to relinquish the Canal. His name has been on the short list of valued advisors to most every major Democratic leader and presidential hopeful since Carter. What I’m getting at is this guy ain’t goin away. And the NAU fer shure is not owned by the Republicans.
I fear your man is swimming with the sharks David.

Posted by: Roy Ellis at November 26, 2008 10:20 PM

Roy:

The view that this is all Bush and the Republican’s fault is extremely simplistic. It also misses the point the Britain is going through almost exactly the same issues we are.
Bush is responsible for Great Britain as well.

I actually have more hope for Obama than before. The hard turn to the left has turned out at the beginning at least to be a moderate turn to the left as judged by letting Lieberman keep his chairmanship, keeping Gates on at Dept of Defense and the financial team Obama has put together.

The Markets had a huge drop off when obama was elected. Depending on if you start measuring when he went ahead in the polls or when he was elected either way the markets dropped like a rock. On election day the dow stood at 9500 and dropped passed 8000 to 7500. Since Obama has actually done something (as in naming his economic team) the markets have been reassured and have regained about 1000 points.

It is way to early to figure this out, but Obama’s choices so far have been a departure from his liberal past, and are much more moderate.

I.E. it’s hard to claim Obama is still going to cut and run when he is keeping Gates on for the time being. Actually that looks very responsible in a time of war with trendlines in the correct correction.

As a McCain supporter, Obama looks like he is off to an initial good start in that he is not as left wing as feared.

Posted by: Craig Holmes at November 27, 2008 02:36 PM

>Not sure I am on the right thread. Howsumever; David you seem to believe that Obama, as a one man band, can bring reform, abolish the NAU and generally walk on water.
I fear your man is swimming with the sharks David.
Posted by: Roy Ellis at November 26, 2008 10:20 PM

Roy E,

Your are right. Obama cannot accomplish these things by himself, for the very reason you outlined…we are not asking him to do that. We are asking him to change the attitude of those sharks. It won’t be easy, and he may fail, but what are our alternatives? He is a good man, he is intelligent and possesses an intellectual curiosity. He is gathering the best and the brightest around him and they have agreed with his ideas, policies, and political philosophies. Perhaps it won’t be enough,..but, perhaps it will…

Posted by: Marysdude at November 28, 2008 04:30 AM

>The view that this is all Bush and the Republican’s fault is extremely simplistic.

I actually have more hope for Obama than before. The hard turn to the left has turned out at the beginning at least to be a moderate turn to the left as judged by letting Lieberman keep his chairmanship, keeping Gates on at Dept of Defense and the financial team Obama has put together.
Posted by: Craig Holmes at November 27, 2008 02:36 PM

Craig,

You are right about the first thing, i e, I’d place the blame at about 85% Cheney/Bush, and 15% on Democratic non-action, but on the second issue…Obama’s far left leanings are and were figments of imagination, i e, Rushie, Seanie, Annie, Billie et al, sold ya’ll a bill-o’-goods.

Posted by: Marysdude at November 28, 2008 04:41 AM

Craig wrote: The view that this is all Bush and the Republican’s fault is extremely simplistic.

I am at once a blogger and a pore communicator. My intent was to convey that it’s not a Bush or Obama thing. Our government is controlled by moneyed interest outside government. These people will cooperate with Bush and Obama where possible and go around them where they must. I think many don’t realize how tenacious, greedy and arrogant these folks are. Let me try an analogy.
Here is an excerpt from Pine Magazine by Vince Gawronski Posted: 02/12/2008 discussing violence in Guatamala.

“Unlike the Italian Mafia, which usually refrains from targeting a rival’s family members, the maras sometimes first rape, mutilate, and murder the girlfriend, sister, or mother of a rival before he is killed. And the victims are sometimes killed in broad daylight in front of their own family members. Decapitation and dismemberment are classic gang signatures. According to newspaper accounts, at least three severed heads were found in plastic bags while were in Guatemala, and someone sent a human leg to one person’s workplace. Seven young men were killed in one January evening in the community of Chinautla, and at least one woman has been killed everyday so far this year. Rivaling the murder of women along the US-Mexico border, there have been approximately 2,500 femicides in Guatemala since 2004.”

“Guatemala is certainly not the most dangerous country in the Western Hemisphere. The odds of being killed in Colombia or Venezuela are much higher…”

“…hard-line, anti-gang policies in El Salvador and Honduras have pushed Mara Salvatrucha and Mara 18 into Guatemala. Now entire neighborhoods are controlled by maras who kidnap, run guns, deal drugs, and extort money.”

“Guatemala is definitely one of the more corrupt countries in the Western Hemisphere. Only Haiti, Venezuela, Ecuador, Honduras, and Nicaragua are ranked by Transparency International (www.transparency.org) as being more corrupt than Guatemala.”

665 women were heinous killed in Guatamala last year and not a single murder was solved. Along the US/Mex border there have been 2500 murders over the last year.

From the above excerpt I am making the point that South and Central Am. is suffering from a lot of bad people. And when the heat is on where is the best possible place to hang out? The US Southern border. When you cross the border you are like “home free.” Nobody is going to ask you any questions, no one knows who you are, where you came from. Your not on any police roster, nobody is looking for you. You are “home free.” Free to deal drugs, kill and rape, etc.

You only need to look over some of Dan’s posts to get a feel for the magnitude of crime occurring within the border states. US citizens are terrified, and rightly so, from the level of violence.

Well, where should we put the blame? On the poor, huddled masses seeking to find a new life in this country or on a political system that ignores the plight of the citizen, refuses to enforce immigration laws, solicits the vote of the illegal alien, panders to the Latino immigrant (if you will just vote for me I will give you amnesty and lift you out of your pitiful plight). Where do you want to place the blame? On the immigrants or on the government?

Well, it’s neither. The oligarchy gets the blame. Those that want the world divided according to commercial enterprise regions. Those who seek to toss national sovereignty aside and change borders to facilitate their commercial activities. Those who see people as units of labor to be obtained at the lowest price possible. Those who see people as grapes to be squeezed when they need a bailout or look to start a new project by placing the risk on the taxpayer.

It is the oligarcy who want the border to remain open (removed) and are simply ignoring the violence and drugs. What Bush and Obama thinks or does about the NAU is not of major concern. The Oligarchy will be there way after Bush and Obama have left the scene.

Posted by: Roy Ellis at November 28, 2008 11:04 AM

Marysdude:

Sure can tell this is a political forum!!

Ok I will bite.

Watch this:

http://www.youtube.com/watch?v=_MGT_cSi7Rs

It is 85% Bush’s fault after all.

THAT view is part of the problem.

Posted by: Craig Holmes at November 28, 2008 12:07 PM

Roy:

I think you are closer to the truth than many here.

The top 1% that the left talks about pay 40% of federal income taxes. The top 5% over 50%. So when the left decides to take their gloves off and “hand them the bill”, they are talking the the funding source for all of their social spending ideals. The thought that there will not be a substantial unintended consequence is crazy.

What is good is that even though Obama ran a campaign stating promising to tax the rich and give that money to the rest of us, the left has failed to talk about the inevitable push back that harms the middle class again.

These people will be there long after Bush and long after Obama as you say.

Just for fun you might want to google “luxury tax”.

What a huge mistake that was!!

What is heartening to me is that many on Obama’s economic team can explain this to him now that the campaign is over. He is really quite a different person now that he is elected.

Posted by: Craig Holmes at November 28, 2008 12:56 PM

The current tax system is regressive, and allows the wealthy to pay a smaller percentage of their income to federal taxes.

________ Total Federal Tax on Gross Income ______________
35.0% |——————————————————— … ——-
32.5% |——————————————————— … ——- Buffet’s Secretary
30.0% |—————————-x—x———————- … ——- 30% on $60K
27.5% |————————x————-x—————- … ——-
25.0% |——————-x———————-x———— … ——-
22.5% |—————-x——————————-x—— … ——-
20.0% |————-x—————————————-x … ——-
17.5% |————x——————————————- … -x—x 17.7% on
15.0% |———-x——————————————— … ——- Warren Buffet’s
12.5% |———x———————————————- … ——- $46 Million in
10.0% |——-x———————————————— … ——- year 2006
07.5% |——x————————————————- … ——-
05.0% |—-x————————————————— … ——-
02.5% |—x—————————————————- … ——-
00.0% |xxx—————————————————- … ———-
_____$0K $20K $40K $60K $80K 100K 120K 140K … …$46Million …(GROSS INCOME)

That needs to change. If Obama fails to keep that promise, he may lose re-election. Seems to me the best thing to do is set a flat percentage of about 17% on all types of personal income above the poverty level (including wages, interest, dividends, capital gains, etc.), eliminate all caps, tax loop holes, and reduce (or eliminate) corporate taxes, which merely get passed onto consumers as hidden regressive sales taxes, and motivate corporations to move offshore. If Warren Buffet paid 17.7% in total federal taxes on $46 Million in year 2006, what’s wrong with 17% for the rest of us?

Most Americans polled believe a flat percentage is most fair. Perhaps if they did that, there would be less tax evasion and complaining, and more compliance?

While the current income tax tables are progressive, those currently do not apply to capital gains and dividends that are taxed at 5%-to-15% , and capital gains, dividends, and interest income are currently not subject to Social Security and Medicare taxes, and currently, income over $102K (for 2008) is exempt from Social Security and Medicare taxes. Tax payers need to look at all taxes and rates and understand that the current tax system is very regressive, and benefits the wealthy with lower overall percentages of their total income being paid to taxes.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at November 28, 2008 01:19 PM

>It is 85% Bush’s fault after all.
THAT view is part of the problem.
Posted by: Craig Holmes at November 28, 2008 12:07 PM

Craig,

I did not need to watch the video…I just dropped down and scanned a few of the comments…Jeez, you guys need to give your minds some fresh air…

Posted by: Marysdude at November 28, 2008 01:42 PM

Marysdude:

It is just House Democrats shooting down regulators for telling the truth about our lending issues several years ago. And it destroys your myth that all is Bush’s and the Republicans fault.

The truth is that the Democratic Congress and the Republican congress along with Bill Clinton and George Bush created this mess.

Let me give you an example. Remember Robert Rubin, Clinton’s Treasury secretary and given great praise for helping create the economy of the 1990’s? Guess where he works now?

http://money.cnn.com/2008/01/31/news/economy/rubin_benner.fortune/

That is because your side helped our side create this mess. Rubin credited with being so smart form the 90’s is in fact clueless.

Of course his ties to power might help Citigroup get their hand out.

It’s Bush’s fault that Rubin went to Citigroup and didn’t know all the facts, it’s some cover up.

My point isn’t to jump on Rubin or Clinton. My point is that the WHOLE government is responsible for this mess. And to solve the issue will take the WHOLE government.

Do you want a list of bills Clinton signed that contributed? Or do you just want a list of bills that Bush signed? Want to see some Republicans do some dumb things that contributed? Or do you want democrats? No you turn away from Democrats I forgot.

This is a national crisis. Your party and side was an equal partner in this mess.

Posted by: Craig Holmes at November 28, 2008 05:10 PM

Craig,

I still cringe that Clinton signed NAFTA into law. I know he probably would not have if he could have broken a veto override, but he did not even try, he just signed.

No administration is perfect, but Gramm is what brought us here. It has allowed financial institutions to grow too big, spread too thin and hide unscrupulous activity. That is what brought us down and that is NOT a Democratic effort.

My side is not pure in this matter, and in thirty to sixty years, may very well be the cause of something just as bad…but this time, in this place and under these circumstances…it’s your side what done it.

Posted by: Marysdude at November 28, 2008 05:58 PM

Roy E,

It is not hard to come up with qualified people in the Northeast or the far west, Maybe even the Northern Midwest, But then there is N & S Dakota, Oklahoma, New Mexico, etc. While it is easy to find quality folks there, if they have to be replaced regularly…maybe not so easy. Qualified people don’t tend to congregate in sparsely populated areas.

Posted by: Marysdude at November 28, 2008 06:13 PM

Roy Ellis said: “David you seem to believe that Obama, as a one man band, can bring reform, abolish the NAU and generally walk on water.”

No. That is what you seem to wish I believe. My beliefs are in my writings, and as I have written, Obama is just one man, and will have to do battle with elements in his own party as well as Republicans, in order to pursue the course he knows will be best for the country.

It is not hard to set the goals. More than 90% of Americans agree on the goals. The implementation to reach for those goals is the daunting task. Obama provides America an opportunity to correct itself and its excesses. Whether America elects to seize that opportunity or not is up to Americans. Obama will make a convincing case, but, Americans will choose whether to pursue this opportunity or not.

Lincoln did not free the slaves. They remained slaves long after the Civil War. Lincoln gave this nation an opportunity to end slavery. It was up to Americans to remove slavery from their minds and hearts as a rationale for superiority and as a means to prosperity. Lincoln did much to end slavery as a means to prosperity, but that was only an opportunity to truly shed the slavery mindset. That of course, took Americans another 143 years, and the mindset is still not entirely eliminated from our society.

Obama brings a pragmatic and non-ideological approach to our nation’s problems and their solutions. But whether American avail themselves of this opportunity or allow themselves to become mired in petty partisan special interest squabbles and excuses for not moving forward on the big issues, remains the province of the American people. Whether Obama succeeds as a president or not, depends in very large part on the American people, the rival political parties, and the effect the wealthy special interests have on the majority of American’s impressions and assessments.

That is always what American politics is about, in part.

Posted by: David R. Remer at November 28, 2008 07:29 PM

Craig, the past four administrations have worked to set us up for globalization. This recession is just one of the last phases of breaking the back of the middle class getting them ready for a globalized economy. Question is when the people really realize what it’s all about will they tolerate it. Will they give up US sovereignty and accept a $6/hr wage for cheap goods from China? I personally think they will. Also, think they will change their minds when China starts to squeeze the grapes, and they will.

David, you wrote: “More than 90% of Americans agree on the goals.” I am way glad to count myself in the low ten percentile. David, surely in light of the trillions of dollars spent by governments and private enterprise in making ready for a NAU and globalization you can’t believe that Obama will do anything other than support. To think otherwise is incredulous. I’ve not heard Obama rail against the NAU and China as a Congressperson. All I’ve heard from the government is silencio.

Posted by: Roy Ellis at November 28, 2008 08:31 PM

> I’ve not heard Obama rail against the NAU and China as a Congressperson. All I’ve heard from the government is silencio.
Posted by: Roy Ellis at November 28, 2008 08:31 PM

Roy E,

It’s all in the attitude, Roy. Obama cannot do any of the things he’s talked about…at the very best, he can sell some of it to all of us and a little of it to some of us. He has the Bully Pulpit, and all that is is a salesman’s platform. I hope he NEVER rails against ANYTHING. If he begins to sell like Billie Mays or the local used car salesman, we are lost. Obama must be way better than that…and much more subtle.

Posted by: Marysdude at November 28, 2008 09:22 PM

Well, I thought Obama ran on a platform of change. Shouldn’t your aspirations for him be more than bully pulpit? Unfortunately, I have made the same comment about the position of President. Man, Bush is more pitbull than bully pulpit. While old hickory is my hero I do prefer a statesman like quality in politicians. Not so much the white wig and snuff but more like Al Gore. I think he speaks from knowledge, with confidence and force. If he were an IP I’d vote for him. I think we could use a tough minded technocrat, somebody like David Walker, the ex-GAO Chief. He knows where all the bodies are buried, etc.

Posted by: Roy Ellis at November 28, 2008 11:12 PM

Two of the last four presidents were salesmen:

Reagan
Bush I
Clinton
Bush II

Guess which they were, and tell me how much more effective they were than the other two…we’d better hope Obama is even better than Reagan and Clinton.

Kennedy/Nixon…which the salesman? Of course with Nixon being a crook, that might be a loaded question…and poor LBJ got stuck in the middle.

Hoover/Roosevelt?

Intelligence alone doesn’t cut it…knowledge alone can’t hack it…Intellectual curiosity and salesmanship get it done.

Posted by: Marysdude at November 29, 2008 08:15 AM

Of course having good people around you helps, i. e., General George Marshall helped Truman become a great one. I’m pretty sure Obama is surrounding himself with some good ones…it remains to be seen if any of them can become another Marshall…

Posted by: Marysdude at November 29, 2008 08:20 AM

“and poor LBJ got stuck in the middle” Horse laugh.
Reagan
Bush I
Clinton
Bush II, Eisenhower was better than the five listed .

Posted by: Rodney Brown at November 29, 2008 10:02 AM

Rodney Brown,

Ike was okay…but, he was not inspirational. He was respected because of his war record. He did get us into the cold war, and establish the military industrial complex, which has kept us from becoming the nation we could have become.

The Interstate Highway Commission, was his greatest contribution, but it was also part of the military industrial complex that helped put us in the hole we are in now.

It took high finance to support our military defense mechanism, and with high finance comes hi-jinx. Our government, which should be watching over that hi-jinx, is too busy kow-towing to the financiers to pay attention to the huge build up of corporations beyond our means of control…we lost control…we may lose our nation…Ike was the beginning.

The USSR was not much of a threat to us after WWII, in fact, we were allied with it for much of that war, but it was a huge threat to Europe. We did not join the cold war to defend ourselves, as is mandated by our Constitution, but to defend Europe, which is NOT mandated by our Constitution.

Ike was okay…but, he was not inspirational. He was respected because of his war record. I don’t think his war record stood us in good stead…

Posted by: Marysdude at November 29, 2008 12:33 PM

I guess will just have to agree to disagree, One thing I’m very proud of Though is that the historians decide the rankings.

Posted by: Rodney Brown at November 29, 2008 01:22 PM

>historians decide the rankings.
Posted by: Rodney Brown at November 29, 2008 01:22 PM

RB,

Yeah, but history takes longer to unfold than I have left to wait for the unfolding…I have to dream up my own version. Damn! Getting old is the pits…;)

Posted by: Marysdude at November 29, 2008 02:16 PM

Craig Holmes wrote: This is a national crisis. Your party and side was an equal partner in this mess.

True.

And voting records exist to prove it.

Especially when a majority of politicians in BOTH parties contributed to many failed policies.
Most in Congress voted for and/or contributed to the following problems:

• regressive taxation;


• corruption; deregulation; less transparency and accountability; lawlessness; constiutional violations;


• war in Iraq;


• illegal immigration;


• unfair trade practices;


• massive $10.7-to-17.7+ TrillionTrillion national debt;


• election problems;


• poor monetary policy; excessive creation of money out of thin air or as debt, creating incessant positive inflation every consecutive year for the past 52 years;


• declining quality and rising cost of education;


• declining quality and rising cost of health care;


• … more …

Many (if not most) politicians in BOTH parties contributed to our economic instability, but unfortunately, it is easier to blame the OTHER party than ever admit one’s own party is little (if any) better.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at November 29, 2008 03:36 PM

d.a.n.,

We only have two parties…the rest are just in the way. Until or unless a third party can be founded that makes sense to at least a third of the country, it will remain a two party nation. A solution to the current third party problem is quite simple…all that is needed is for Greens, who are generally liberal leaning, and anarchists, who are generally right leaning, to agree on enough policy to form a platform that a third of the country can sink their teeth into…how hard can that be?

As far as replacing every Congressman, every four or six years…it is not feasible…it is not necessary, and it is unlikely to ever be done. We’d better figure out how to get the ones in office to do their jobs, or we are sunk, and that pain you forever speak of will visit us all.

It all has to do with attitude. We need a strong figure, with strong beliefs, and enough charisma to change the attitude in Congress. If enough Congressman adjust their attitudes…turn on the ones who are too greedy or too stubborn to adjust theirs, and good times will be had by all. We must remember though that Jesus wasn’t accepted or popular until after he was dead. We can’t wait for him, we’ll have to support the ones we can elect. Obama is the man right now. If we ask of him that he approach his policies with openness and honesty, and he complies, all that is left is the selling. He just has to convince five hundred plus corrupt, egotistic, opinionated jerks to go along with us…how hard can that be?

Posted by: Marysdude at November 29, 2008 10:34 PM

Marysdude:

Ok you want to play the blame game. This is all the Republican sides problem.

How about this one? Is this ourside’s fault as well?

http://mortgageblues.us/news/398

Here is a partial list of those that Freddie Mae and Fannie Mac campaign contributions.

http://www.opensecrets.org/news/2008/07/top-senate-recipients-of-fanni.html

This crisis is both party’s issue. At least we are bipartisan on this issue.

Sorry this was a democratic/republican screw up.

Posted by: Craig Holmes at November 29, 2008 10:48 PM

Marysdude:

Here is another good one

http://www.wsws.org/articles/1999/nov1999/bank-n01.shtml

Here is how we worked together to create a part of this crisis:

The banking industry had been seeking the repeal of the 1933 Glass-Steagall Act since the 1980s, if not earlier. In 1987 the Congressional Research Service prepared a report which explored the case for preserving Glass-Steagall and the case against preserving the act.[1]

The bills were introduced in the U.S. Senate by Phil Gramm (R-Texas) and in the U.S. House of Representatives by Jim Leach (R-Iowa). The third lawmaker associated with the bill was Rep. Thomas J. Bliley, Jr. (R-Va), Chairman of the House Commerce Committee from 1995 to 2001. [2] On May 6, 1999, the Senate passed the bills by a 54-44 vote along party lines (53 Republicans and one Democrat in favor; 44 Democrats opposed).[3] On July 20, the House passed a different version of the bill on an uncontested and uncounted voice vote. When the two chambers could not agree on a joint version of the bill, the House voted on July 30 by a vote of 241-132 (R 58-131; D 182-1) to instruct its negotiators to work for a law that ensured that consumers enjoyed medical and financial privacy and also “robust competition and equal and non-discriminatory access to financial services and economic opportunities in their communities” (i.e. protection against exclusionary redlining) [4] [5] The bill then moved to a conference committee to work out the differences between the Senate and House versions. Democrats agreed to support the bill after Republicans agreed to strengthen provisions of the anti-redlining Community Reinvestment Act and address certain privacy concerns; the conference committee then finished its work by the beginning of November.[4] [6] On November 4, the final bill resolving the differences was passed by the Senate 90-8 [7] and by the House 362-57.[8] This legislation was signed into law by Democratic President Bill Clinton on November 12, 1999.[9]

http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act

Of course it is still Bush’s fault. All deregulation done during Clinton’s term doesn’t count. Actually this is a very very big one!!

Notice in the article above that Citibank is listed as having already started it’s merger before the legislation was approved. Of course Clinton’s Treasury Secretary later moved to Citibank. (Robert Rubin).

And now Citibank is getting a bit handout and Obama is putting in some of Rubin’s friends back into office.

This is a huge bipartisan mess.

Posted by: Craig Holmes at November 29, 2008 11:23 PM

Craig,

Okay

Posted by: Marysdude at November 29, 2008 11:35 PM

never cared for Rubin, I kind of Liked R. Reich

Posted by: Rodney Brown at November 29, 2008 11:44 PM

Marysdude, voting out incumbents as a response to government that fails voter’s expectations is PRECISELY how you get the remaining incumbents to do their jobs better and more responsibly. That is why democracy was invented, to hold politicians accountable for poor governance. Do you believe democracy is a failed form of government? What would you replace it with?

Posted by: David R. Remer at November 30, 2008 01:31 AM

David,

In many of the areas that strong incumbents are ensconced, there are no opponents running against them. In several areas there is a limited population of qualified seekers. Changing a qualified office holder with an unqualified office seeker seems a bit drastic.

The problem is in the attitudes and philosophies of the ‘ins’ of the moment…if the attitudes of enough ‘ins’ can be changed that it puts pressures on those ‘ins’ that cannot be changed, it will accomplish the same thing you want, without all the turmoil. There are some great people out there, but many would have two left feet as candidates, and some would carry their lack of qualification right on into office if elected.

I agree with you about there having to be changes in Congress if America is to survive, but throwing the baby out with the bath water seems a trifle extreme…remember how easy it would be for a couple hundred Palins to get into Congress if we started electing replacements every term…:)

Posted by: Marysdude at November 30, 2008 06:48 AM

Marysdude, if an incumbent has been part of why the public holds such low opinion ratings of their government, then the incumbent is not qualified either. Ergo, electing a replacement improves one’s chances of getting a responsible person in office, not diminishing those chances.

Your argument presumes incumbency dictates qualified status. It doesn’t, and most Americans now agree.

Posted by: David R. Remer at November 30, 2008 12:33 PM

Marysdude wrote: d.a.n., We only have two parties…the rest are just in the way.

Not true.

Most third parties and independents help to shape the political landscape by raising awareness to issues that the two main parties would otherwise ignore.
The outcome of several elections have probably been changed by votes for the candidates of third and independent parties.

Marysdude wrote: Until or unless a third party can be founded that makes sense to at least a third of the country, it will remain a two party nation.

That’s fine by me, because I don’t put much reliance on any parties, because parties are made up of people.

When things get bad enough, most people in all of those parties will most likely do what most voters did in 1933, and vote as hundreds of incumbent politicians.

Parties are not the solution.
People are.
Just like pencilz dont mispel wordz, and spoons don’t make people fat, parties do not make people vote one way or another.
The key to real change is to encourage voters to change, via education, history, human psychology, logic, and common-sense.
In a voting nation, an educated electorate is paramount, but either way, most voters will get their education one way or another.

Marysdude wrote: A solution to the current third party problem is quite simple…all that is needed is for Greens, who are generally liberal leaning, and anarchists, who are generally right leaning, to agree on enough policy to form a platform that a third of the country can sink their teeth into…how hard can that be?

No, it’s not that simple, because:

• (1) organizing a third party is a gargantuan and costly effort that isn’t necessary anyway.
• (2) while there’s nothing wrong with creating another party, a third party is not necessary, as demonstrated by the unhappy voters of year 1933 who ousted a whopping 206 members of Congress (59 Democrats, 147 Republicans).
• (3) while there’s nothing wrong with creating another party, a third party is not necessary, because parties consist of voters, and the voters must change before voters can ever hope to change their own government, and government won’t become more transparent, accountable, and responsible until enough voters become more responsible, and stop repeatedly rewarding bad incumbent politicians with 85%-to-90% re-election rates (which will most likely happen when failing to do so finally becomes too painful), despite dismal 9%-to-18% approval ratings for Congress.
• (4) in the end, the true self-correction mechanism is not the motivation provided by any party, but the pain and misery resulting from the voters’ own bad voting habits and negligence (as it should be). Repeatedly rewarding bad politicians with re-election will create the corruption and oppression that will create the pain and misery that will finally provide the motivation for enough voters to finally stop repeatedly rewarding bad politicians with re-election. That does not require another party.
• (5) education is what is truly needed to reduce the severity of the ever-present cycle of corruption. Perhaps much civil unrest, pain, and misery of the past could have been prevented had there been better education and understanding of the abuses and root causes?
• (6) the never-ending struggle for all political parties is trying to avoid being the cause of their own demise. Power corrupts, and the IN-PARTY always becomes the OUT-PARTY, and vice-versa, and all of the third and independent parties are forever nipping at their heels. The irony of the paradox is that if one main party was truly better than the other main party in any significan way or period of time, it would probably remain the IN-PARTY indefinitely. But, power corrupts. That’s one thing about human nature that we can rely on. Thus, our path is probablistic and somewhat predictable. Perhaps enough voters will be less apathetic, complacent, and blindly partisan when enough of the voters are deep in debt , jobless , homeless , and hungry as a result of decades of numerous abuses and deteriorating economic conditions (One-Simple-Idea.com/NeverWorse.htm)?
• (7) what you are suggesting has already been thought of, and it won’t work because most third and independent parties have little (or no) interest in combinining the efforts, and fear the dilution of their own platforms, regardless of limited numbers of voters that support their platforms.

A very centrist, populist party might do quite well, but in the end, that won’t be necessary, because pain and misery eventually trumps all of them.

Marysdude wrote: As far as replacing every Congressman, every four or six years…it is not feasible…it is not necessary, and it is unlikely to ever be done.

No one here ever said replacing “every Congressman” was necessary, nor likely.

After all, obviously, only one-third of the Senators are up for re-election in any given election year.

But you need to study history better, because as shown below, in year 1933, most unhappy voters ousted a whopping 206 members of Congress (which is 44% (206/467) of all Congress persons up for re-election that year). And most voters also ousted huge numbers in the elections preceding year 1933.

• Start __ End __ Congress _ Re-Election ___ Party Seat-Retention
• Year ___ Year ___ # _____ Rate ________ Rate
• 1927 ___ 1929 ___ 070st ___ 68.9% ________ 96.4%
• 1929 ___ 1931 ___ 071st ___ 79.7% ________ 92.5%
• 1931 ___ 1933 ___ 072nd ___ 76.8% ________ 88.5%
• 1933 ___ 1935 ___ 073rd ___ 61.2% ________ 78.7% (206 of 531 incumbents ousted; 59 Dems, 147 Repubs)
• … … … … … … … …
• 1989 ___ 1991 ___ 101st ___ 90.1% ________ 99.6%
• 1991 ___ 1993 ___ 102nd ___ 87.7% ________ 98.3%
• 1993 ___ 1995 ___ 103rd ___ 73.5% ________ 98.1% (142 of 535 incumbents ousted)
• … … … … … … … …
• 1999 ___ 2001 ___ 106th ___ 89.2% ________ 99.3%
• 2001 ___ 2003 ___ 107th ___ 89.2% ________ 98.7%
• 2003 ___ 2005 ___ 108th ___ 87.9% ________ 98.1%
• 2005 ___ 2007 ___ 109th ___ 88.6% ________ 98.7%
• 2007 ___ 2009 ___ 110th ___ 84.9% ________ 93.1% (61 of 535 incumbents ousted)
• 2009 ___ 2011 ___ 111th ___ 86.7% ________ 93.3% about (464 of 535 incumbents re-elected; 71 not re-elected)

Therefore, if you are asserting that it is impossible to oust hundreds of members of Congress in one election, you are clearly wrong.

Marysdude wrote: We’d better figure out how to get the ones in office to do their jobs, or we are sunk, and that pain you forever speak of will visit us all.

Exactly.

How?
By repeatedly rewarding them with re-election?
That is what you written many times, but have offerred no credible logic whatsoever that proves that is making anything better.

Marysdude wrote: … and that pain you forever speak of will visit us all.

Yes, Pain and misery is the final built-in, self-correction mechanism.

Human history shows this to be true time and time again.
Pain and misery is too often the lesson we get, because, too often, we fail to learn from hisory.
Pain and misery may be the only thing that may provide the much-needed motivation for enough voters to question their voting habits.

Marysdude, perhaps you would be so kind as to explain how repeatedly rewarding corrupt, FOR-SALE, and/or irresponsible politicians with re-election will elect better politicians, and/or make anything better ? But, before you do, please see this list of Pros and Cons.

Because, what is quite clear to me, is that repeatedly rewarding bad politicians with re-election is not only NOT working, but is precisely why many incumbent politicians continue to grow more corrupt, FOR-SALE, and/or irresponsible.

But why shouldn’t they?
Do you have children?
If so, then try this little experiment, and afterward, you may finally understand the flaw in your strategy.

(1) Repeatedly reward your children for bad behavior,

(2) and then get back with us later on the final results.

Undoubtedly, those children will be so spoiled rotten, selfish, and worthless, they will be unfit to live with.
There’s no difference; Congress is the same way.
Congress is so corrupt (One-Simple-Idea.com/Links1.htm), it even gives itself a raise 9 times between 1997 and 2007 (among numerous other cu$hy perks: One-Simple-Idea.com/FAQ.htm#UnfairAdvantages), while our troops go without armor, adequate medical care, promised benefits, and have to do 2, 3, 4, or more tours in Iraq and Afghanistan.

To assert, and defend the idea that repeatedly rewarding bad incumbent politicians with re-election will not make the incumbent politicians worse is truly ludicrous.

Marysdude wrote: It all has to do with attitude. We need a strong figure, with strong beliefs, and enough charisma to change the attitude in Congress.

That is a very simpleton conclusion, and ignores numerous realities of human nature, history, and commonsense.

It also ignores the fact that changing Congress is also the voters’ responsibility (not only the President’s).

To expect that one person (i.e. the President), alone, can change Congress, is unrealistic, if not delusional.

While it is possible for one person to do great harm, it is less common for one person to singlehandedly create much good.

That is because it is much more difficult to tap-into, cultivate, and nuture virtue, transparency, education, and accountability, than it is to tap-into weaknesses, greed, and selfishness.

Marysdude wrote: If enough Congressman adjust their attitudes…turn on the ones who are too greedy or too stubborn to adjust theirs, and good times will be had by all.

How is repeatedly rewarding bad politicians with re-election going to help any Congress persons adjust their attitude?

The U.S. has numerous pressing problems today that have been growing in number and severity for decades.
How is that going to change by rewarding those most responsible for it with re-election?

Marysdude wrote: We must remember though that Jesus wasn’t accepted or popular until after he was dead. We can’t wait for him, we’ll have to support the ones we can elect. Obama is the man right now.

What about Congress?

Again, the expectation that one person (i.e. Obama), alone, can change Congress, is unrealistic, if not delusional.

Marysdude wrote: If we ask of him that he approach his policies with openness and honesty, and he complies, all that is left is the selling. He just has to convince five hundred plus corrupt, egotistic, opinionated jerks to go along with us…how hard can that be?

Your last comment appears contrary to your defense of repeatedly rewarding bad politicians with re-election and the likelihood that Obama can control 535 members of Congress.

So which is it?

Still, the voters are not only culpable too, but most voters will also feel the painful consequences of repeatedly rewarding Congress with 85%-to-90% re-election rates, despite completely contradictory and dismal 9%-to-18% approval ratings for Congress.

Marysdude wrote: David, In many of the areas that strong incumbents are ensconced, there are no opponents running against them. In several areas there is a limited population of qualified seekers.

False. Very few politicians run completely unopposed by any challengers.

The problem is a very clever mechanism that incumbent politicians in BOTH parties are very well aware of.
There are rarely challengers from an incumbent’s own party, and since most voters will never voter for challenger in the OTHER party, the incumbents enjoy very high re-election rates.

Marysdude wrote: Changing a qualified office holder with an unqualified office seeker seems a bit drastic.

Who are these unqualified challengers?

How do you know they are worse and/or unqualified?
How is repeatedly rewarding bad politicians with re-election better?
How is blindly pulling the party lever better?
Can you name 20, 30, 50, 100, 150, 200, or even 268 (half of 535) in Congress that are not corrupt, FOR-SALE, and/or irresponsible?
Unless you’ve actually looked at voting records, how do you really know which are corrupt, and which aren’t?
If most incumbents in Congress are so wonderful, why have the nation’s pressing problems been growing in number and severity for many decades (in which BOTH main parties have been the IN/OUT-PARTY)?
What is behind the powerful reluctance to hold those accountable that are truly accountable?
Does it possibly have anything to do with which party is currently the IN/OUT PARTY?
Do most voters really believe incumbent politicians are doing a wonderful job?
If so, then why do most voters give Congress dismal 9%-to-18% approval ratings?
Here’s why.
Voters are fed up with Congress.
Those dismal 9%-to-18% approval ratings are deserved.
The problem is very powerful partisan loyalties, that are extremely effective (by design) at maintaining high re-election rates, because of the:

• (01) No-Same-Party-Challenger(s) mechanism which works wonderfully to keep re-election rates high.


• (02) fueling of the circular partisan warfare, which helps prevent voters from ever considering candidates in the OTHER party.


• (03) fueling the circular partisan warfare to distract voters from the truth, more important issues, the incumbent politicians’ own malfeasance, and keep voters partisan-centric instead of principle-centric.


• (04) fueling the circular partisan warfare to pit voters against each other on moral and unresolvable issues (abortion, gay marriage) that may never be resolved, while ignoring the more important and solvable issues.


• (05) fueling the circular partisan warfare to pit voters against each other so that a majority can never exist to oust incumbent politicians from office.


• (06) straight-party-ticket button/lever which makes it easy for the lazy and blindly-partisan voters, which also works wonderfully to keep re-election rates high.


• (07) pandering and bribing voters with their own tax dollars, tax breaks (which turns out to make taxes more regressive), more cradle-to-grave entitlements, lies and more empty promises that can’t possibly be fulfilled with such massive debt of nightmare proportions, and pressing problems growing dangerously in number and severity.


• (08) despicable pitting of voters against each other for votes and profits, disguised as compassion for illegal aliens costing tax payers an estimated $70 Billion to $327 Billion per year in net losses ( One-Simple-Idea.com/BorderSecurity.htm#Burdens )


• (09) numerous unfair incumbent advantages: One-Simple-Idea.com/FAQ.htm#UnfairAdvantages


• (10) 99.7% of voters are vastly out-spent by a very tiny 0.3% of all eligible voters who make 83% of all federal campaign donations of $200 or more ( One-Simple-Idea.com/OpenSecrets_DonorDemographics.htm )


• (11) resistance to any campaign finance reform.


• (12) Gerrymandering.


• (13) over-complication to hide malfeasance, reduce transparency, and increase opportunities for self-gain (HHmmmm … about time for another raise, eh (like the 9 raises for Congress between 1997 and 2007, while U.S. troops went without armor, adequate medical care, and are forced into 2, 3, 4 or more tours in Iraq and Afghanistan)?).


• (14) selective enforcement/violation of the U.S. Constitution (e.g. ignore Article V of the U.S. Constitution so that Term-Limits, Campaign Finance, and other amendments can never be considered by the states).


• (15) hiding and distorting information (e.g. understate inflation to reduce the Social Security cost-of-living increases (One-Simple-Idea.com/DebtAndMoney.htm#Measurement) to either paint a picture that is either rosier or worse than reality, to make THEIR party look good, or to fuel the partisan warfare, all of which helps to increase incumbents’ re-election rates.

The deck is so stacked, the only possibility for fixing it is either:

• (a) voters become more responsible and peacefully force government to be responsible and accountable too (by not repeatedly rewarding THEIR incumbent politicians with re-election)


• (b) or waiting for things to deteriorate into civil unrest, civil war, or worse.

Marysdude wrote: The problem is in the attitudes and philosophies of the ‘ins’ of the moment…if the attitudes of enough ‘ins’ can be changed that it puts pressures on those ‘ins’ that cannot be changed, it will accomplish the same thing you want, without all the turmoil.

How?

How are those bad attitudes going to change by repeatedly rewarding the incumbent politicians with re-election?

Marysdude wrote: There are some great people out there, but many would have two left feet as candidates, and some would carry their lack of qualification right on into office if elected.

Maybe.

But honesty and integrity is more important, and that is what has been destroyed by repeatedly rewarding corrupt, FOR-SALE, and irresponsible politicians with re-election.
Besides, if they do a bad job, don’t reward them with re-election either!
If you were doing your job badly, would you expect your employer to keep you on indefinitely?
It’s up to the voters.
If most voters believe repeatedly rewarding bad politicians with re-election will make things better, then that is their right to find out the hard way.
Either way, most voters will get their education one way or another.

Marysdude wrote: I agree with you about there having to be changes in Congress if America is to survive, but throwing the baby out with the bath water seems a trifle extreme . .

How?

Marysdude wrote: …remember how easy it would be for a couple hundred Palins to get into Congress if we started electing replacements every term…:)

Lame. Sarah Palin was not an incumbent in Congress or the executive branch. There were no incumbents running for the President/Vice President.

How will we get positive change by repeatedly rewarding incumbent politicians with re-election, when most voters polled gave Congress dismal 9%-to18% approval ratings?
Can anyone name 20, 30, 50, 100, 150, 200, or even 268 (half of 535) in Congress that are not corrupt, FOR-SALE, and/or irresponsible?
If Congress is doing so well, why are things getting worse?

Sorry, but asserting that no good challengers exist and justifies the perpetual re-election of incumbent politicians is false, and the key to real change is to encourage voters to change, via education, history, human psychology, logic, common-sense, and not lazily wallowing in the blind partisan loyalties and repeatedly rewarding bad politicians with perpetual re-election.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at November 30, 2008 05:19 PM

CORRECTION:

• 2005 ___ 2007 ___ 109th ___ 88.6% ________ 98.7%
• 2007 ___ 2009 ___ 110th ___ 84.9% ________ 93.1% (6181 of 535 incumbents ousted)
• 2009 ___ 2011 ___ 111th ___ 86.7% ________ 93.3% about (464 of 535 incumbents re-elected; 71 not re-elected)

Posted by: d.a.n at November 30, 2008 05:27 PM

David wrote: “That is why democracy was invented, to hold politicians accountable for poor governance. Do you believe democracy is a failed form of government? What would you replace it with?”

We all tend to talk of our government as being a Democracy whereas we all know our government was founded as a Republic. Here are some sticky WIKI excerpts that delineates between Democracy and Republicanism. I sense that many of our problems stem from the fact that we have evolved towards Democracy. It is through political parties and Democracy that allowed the moneyed interest to overtake the Republic. In many ways we have a failed government. We don’t need a different government, we desperately need to restore our Republic and that can only be done through a third party targeted at reform of government and providing citizens’ oversight for elected and appointed officials. Kind of like a small Republic in that certain laws/rules can only be overturned by a super-majority.

From WIKI: “The Founding Fathers of the United States rarely praised and often criticized democracy, which in their time tended to specifically mean direct democracy; James Madison argued, especially in The Federalist No. 10, that what distinguished a democracy from a republic was that the former became weaker as it got larger and suffered more violently from the effects of faction, whereas a republic could get stronger as it got larger and combats faction by its very structure. What was critical to American values, John Adams insisted,[65] was that the government be “bound by fixed laws, which the people have a voice in making, and a right to defend.” Also, as Benjamin Franklin was exiting after writing the U.S. constitution, a woman asked him Sir, what have you given us?. He replied A republic ma’am, if you can keep it[66]

The Founding Fathers wanted republicanism because its principles guaranteed liberty, with opposing, limited powers offsetting one another. They thought change should occur slowly, as many were afraid that a “democracy”- by which they meant a direct democracy- would allow a majority of voters at any time to trample rights and liberties in the “heat of a moment”. They believed the most formidable of these potential majorities was that of the poor against the rich. They thought democracy could take the form of mob rule that could be shaped on the spot by a demagogue. Therefore they devised a written Constitution which could only be amended by a super majority, preserved competing sovereignties in the constituent states,[14] gave the control of the upper house (Senate) to the states, and created an Electoral College, comprising a small number of elites, to select the president. They set up a House of Representative to represent the people. In practice the electoral college soon gave way to control by political parties. In 1776 most states required property ownership to vote, but most citizens owned farms in the 90% rural nation, so it was not a severe restriction. As the country urbanized and people took on different work, the property ownership requirement was gradually dropped by many states.[15] Property requirements were gradually dismantled in state after state, so that all had been eliminated by 1850. By 1855, the tax-paying requirements had also been abandoned, so that few if any economic barriers remained to prevent white adult males from voting.
In the West, there was a convergence towards representative democracy, for republics as well as monarchies, from the Enlightenment on. In particular, the fear of mob rule concerned many, like Benjamin Franklin and Thomas Jefferson, who supported representative democracies. A direct democracy instrument like a referendum is still basically mistrusted in many of the countries that adopted representative democracy. ((as is an Article V Convention in this country – to democratic I would assume))
The Founding Fathers discoursed endlessly on the meaning of “republicanism.” John Adams in 1787 defined it as “a government, in which all men, rich and poor, magistrates and subjects, officers and people, masters and servants, the first citizen and the last, are equally subject to the laws.”

There are two principles that any definition of democracy includes. The first principle is that all members of the society have equal access to power and the second that all members enjoy universally recognized freedoms and liberties.[5][6][7]
If any democracy is not carefully legislated to avoid an uneven distribution of political power with balances such as the separation of powers, then a branch of the system of rule is able to accumulate power in a way that is harmful to democracy itself.
The “majority rule” is often described as a characteristic feature of democracy, but without responsible government it is possible for the rights of a minority to be abused by the “tyranny of the majority”. An essential process in representative democracies are competitive elections, that are fair both substantively[13] and procedurally[14]. Furthermore, freedom of political expression, freedom of speech and freedom of the press are essential so that citizens are informed and able to vote in their personal interests.[15][16]
United States: the Founding Fathers, seeing that no single religion would do for all Americans, adopted the principle that the federal government would neither support nor prohibit any established religion (as had Connecticut and Rhode Island).”

Otherwise, we have the government we deserve.

Posted by: Roy Ellis at December 1, 2008 09:57 AM

I agree, Marysdude. Your reasoning for retaining incumbents is way lame. It’s like asking the Mafia to reorganize themselves along the lines of some church group. Not the way you do it. You run them out and run in some church like folks to do the job. As far as qualified seekers I’ll use another analogy. Unemployed figures may reflect 5% job seekers. Yet, if plenty of jobs became available there might be 10-15% job seekers. Like that field of dreams thing. Build it and they will come.

Posted by: Roy Ellis at December 1, 2008 10:10 AM

Roy, wonderful dodge of my entire statement and question. The Founding Fathers employed democratic elections of the House of Representatives. The fact that our Constitution has been amended to make the Senate and President also democratically elected, makes it part of our Constitutional Democratic Republic. The principle remains as it was when the Founders rendered Representatives subject to popular vote. That vote was to be a referendum on the policies and effectiveness of governance under those elected. THAT principle has not changed.

Now back to question you so artfully dodged: “Do you believe democracy is a failed form of government? What would you replace it with?””

And NO, you are WRONG! We were not founded as a Republic which evolved into a Democratic Republic. We were founded as a Democratic Republic with white, male, land owners of the populace given the vote to elect their Representatives in the House and unelect incumbents who disappointed in that role. Democracy was a vital and important component of the structure of our newly formed government.

The very act of State legislators voting to elect Senators was also democracy in action. The fact that there wasn’t universal suffrage takes nothing away from the democratic vote structure employed in the very beginnings of our new government after the overthrow of the King whose power was NOT subject to any legal democratic elective process.

Posted by: David R. Remer at December 1, 2008 02:00 PM

Marysdude, I have never advocated term limits for the reasons you cite among others. But, your comments get a bit hysterical when you imply that a voting out incumbents movement could end up replacing all the representatives, good and bad, and opening the door to their all being replaced by incompetents. That scenario has less chance of occurring from an organized anti-incumbent movement than being hit by lightning in the morning, again en route to the hospital, and again in the treatment room upon arriving.

Sociological principles dictate that such a scenario as you elude to is not even remotely possible. The replacing of all representatives by new faces and personages only comes about through revolution, not an anti-incumbent grass roots sentiment in which perhaps, at most, 60% of the populace would seek new representatives as opposed to incumbents. And do not forget that only 1/3 of the Senate is up for election every 2 years, insuring a minimum of 2/3 of the Senate is immune from anti-incumbent sentiment or movements in any given election cycle.

Your fears of the anti-incumbent concept have no basis in potential reality. Is it perhaps possible that the Party you champion is now the incumbent Party. Is that perhaps what now motivates such opposition to anti-incumbent sentiment and organization? If so, you are the safeguard against anti-incumbent sentiment ever filling the halls of government with inexperienced incompetent freshman in one fell swoop.

But, there is no greater sign of growing anti-incumbent thinking than the rise of the Independent registered voter’s numbers to exceed either Democratic or Republican registered voters. That reality is not going away, Marysdude, as long as political parties exist to serve power for their party primarily, over the needs of the people and nation, both present and future.

Posted by: David R. Remer at December 1, 2008 02:16 PM

David wrote: But, there is no greater sign of growing anti-incumbent thinking than the rise of the Independent registered voter’s numbers to exceed either Democratic or Republican registered voters.

True.

The preliminary data (there are still some results pending for about 8 offices) shows that the anti-incumbent percentage remained about the same (84.9% for 2007-2008 (81 voted out), 86.7% for 2008-2010 (about 71 voted out)).

That’s good. I initially thought the re-election rate had increased drastically to 95%, but it didn’t (i.e. re-election rate increased only 1.8% from 84.9% to 86.7%).
There were 71 members ousted from Congress: (57=13(D)+44(R) in the House) + (14=3(D)+11(R) in the Senate), which is down 10 from 81 in the 7-NOV-2006 election.
NOTE: There are 5 of 6 seats still To Be Determined in the Senate, and 4 of 4 seats still To Be Determined in the House.
464 members (464 / 535 = 86.7%) of Congress were re-elected ( 378=(223(D)+155(R)+0(I) in the House) + 86=(46(D)+38(R)+2(I) in the Senate) ).

Of course, much more than 71 must be ousted to ever send a loud and clear message to Congress, and help the typically severely out-numbered newcomers to overcome the status quo perpetuated by the long-time incumbents in Congress.

Unfortunately, I fear that the majority of voters have sabotaged their choice for president by re-electing the majority of incumbents in Congress again, most of which (if not all) are still FOR-SALE, still irresponsible, fiscally bankrupt, incompetent, and/or corrupt (if not more corrupt after being rewared for all of it again with re-election). Things are likely to get worse even if Congress does a few things right, but Congress’ track-record isn’t very encouraging, and there are still too many extremists in the left and right that will most likely create more grid-lock.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at December 1, 2008 03:12 PM

David, I wouldn’t argue on the points you made as I know practically nothing about the Constitution and it’s history. But, I do know it when I see it and right now the two parties are big problems for us. They have facilitated the takeover of government by big business giving us a klepto-plutocracy vs a Republic. Government cannot reform itself. There has to be a countervailing force to the duopoly. A new third party can do the job, reform government and keep it that way.

Otherwise, we have the government we deserve.

I don’t think Andrew Jackson was a banker per se but he didn’t like what was going down and he chose to act. We should do that.

Posted by: Roy Ellis at December 1, 2008 03:29 PM

Back in 1977, When Jimmy Carter became President in January 1977 he appointed Schlesinger, a Republican, as his special adviser on energy and subsequently as the first Secretary of Energy in October 1977. He launched the Department of Energy’s Carbon Dioxide Effects and Assessment Program shortly after the creation of that department in 1977. In July 1979, Carter replaced him as part of a broader Cabinet shakeup.”He “Schlesinger “launched the Department of Energy’s Carbon Dioxide Effects and Assessment”
I never Knew that can’t find anything on it.

Posted by: Rodney Brown at December 1, 2008 05:45 PM

David,

I recognize your points about replacing incumbents. It will be effective once…maybe twice, but there are limits as to how many qualified folks are interested enough and dedicated enough to allow it to continue. Frankly, I wish it were otherwise, but my personal belief is that soon qualifieds will lose interest and dedication and you will be left with the Palins.

Posted by: Marysdude at December 1, 2008 06:25 PM

Marysdude wrote: David, I recognize your points about replacing incumbents. It will be effective once…maybe twice, …

Voting out the worst incumbent politicians is always effective. Especially the most irresponsible, FOR-SALE, and corrupt incumbent politicians. To assert otherwise defies commonsense.

Marysdude wrote: … but there are limits as to how many qualified folks are interested enough and dedicated enough to allow it to continue.

False.

Not in a nation of 305 Million people, and 50 states, all with a state Congress and legislature.
There’s never been a shortage of challengers.
The problem is not a lack of challengers.
The problem is what happens to incumbents when incumbents are repeatedly rewarded for being irresponsible, FOR-SALE, and/or corrupt.

Marysdude wrote: Frankly, I wish it were otherwise, …

It is otherwise.

Your statement is invalidated by history and commonsense.
Arguing for the re-election of bad incumbent politicians makes no sense whatsoever.
The reasons for not repeatedly rewarding irresponsible, FOR-SALE, and/or corrupt politicians with re-election are numerous.

Marysdude wrote: … but my personal belief is that soon qualifieds will lose interest and dedication and you will be left with the Palins.

You’re entitled to believe as you wish, but history has already disproven your statement.

What causes corruption is being repeatedly rewarded for it, and insufficient transparency, accountability, education, and virtue.
Why are you so intent on defending the re-election of irresponsible, FOR-SALE, and/or corrupt incumbent politicians?
Is it because you believe they are doing a good job?
If so, then perhaps you could name 20, 30, 50, 100, 200, or even 268 (half of 535) in Congress that are not irresponsible, FOR-SALE, and/or corrupt?
Is it because you believe there are not enough qualifed Americans capable and willing to do the job (as a member of Congress) that pays $186,600 to $215,700 per year?
That’s laughable.
Even if only a mere 1 tenth of 1% of all 305 Million Americans were capable and willing, that’s 305,000 Americans (570 times the number of 535 members of Congress).
Why do you refuse to admit that repeatedly rewarding irresponsible, FOR-SALE, and/or corrupt politicians makes them more irresponsible, FOR-SALE, and/or corrupt?

During the Great Depression, after most unhappy voters ousted one-to-two hundred incumbents per election, things finally started getting better after about 1933:

• Start __ End __ Congress _ Re-Election ___ Party Seat-Retention


• Year ___ Year ___ # _____ Rate ________ Rate


• 1927 ___ 1929 ___ 070st ___ 68.9% ________ 96.4% (165 incumbents ousted)


• 1929 ___ 1931 ___ 071st ___ 79.7% ________ 92.5% (108 incumbents ousted)


• 1931 ___ 1933 ___ 072nd ___ 76.8% ________ 88.5% (123 incumbents ousted)


• 1933 ___ 1935 ___ 073rd ___ 61.2% ________ 78.7% (206 of 531 incumbents ousted; 59 Dems, 147 Repubs)


• … … … … … … … …


• 1989 ___ 1991 ___ 101st ___ 90.1% ________ 99.6%


• 1991 ___ 1993 ___ 102nd ___ 87.7% ________ 98.3%


• 1993 ___ 1995 ___ 103rd ___ 73.5% ________ 98.1% (142 of 535 incumbents ousted)


• … … … … … … … …


• 1999 ___ 2001 ___ 106th ___ 89.2% ________ 99.3%


• 2001 ___ 2003 ___ 107th ___ 89.2% ________ 98.7%


• 2003 ___ 2005 ___ 108th ___ 87.9% ________ 98.1% (65 of 535 incumbents ousted)


• 2005 ___ 2007 ___ 109th ___ 88.6% ________ 98.7% (61 of 535 incumbents ousted)


• 2007 ___ 2009 ___ 110th ___ 84.9% ________ 93.1% (81 of 535 incumbents ousted)


• 2009 ___ 2011 ___ 111th ___ 86.7% ________ 93.3% about (464 of 535 incumbents re-elected; 71 not re-elected)

It will happen again, when the voters failure to vote more responsibly finally becomes too painful.
And in a nation of 305 Million people, there are plenty of people that are qualified.
If not, where did all of the challengers come from in years 1927, 1929, 1931, and 1933?

Again, finding qualified challengers is not the problem.
The problem is that too many voters repeatedly reward irresponsible, FOR-SALE, and/or corrupt incumbent politicians with perpetual re-election, because:

• (01) of very powerful, blind, partisan loyalties, and mechanisms that are extremely effective (by design) at maintaining high re-election rates;


• (02) too many unfair advantages for incumbent politicians;


• (03) the No-Same-Party-Challenger(s) mechanism which works wonderfully to keep re-election rates high, since most voters will never vote for anyone in another party, and parties cleverly never have any challengers in their own party;


• (04) the fueling of the circular partisan warfare helps prevent voters from ever considering candidates in the OTHER party.


• (05) the fueling of the circular partisan warfare distracts voters from the truth, more important issues, the incumbent politicians’ own malfeasance, and keep voters partisan-centric instead of principle-centric.


• (06) the fueling of the circular partisan warfare pits voters against each other on moral and unresolvable issues (abortion, gay marriage) that may never be resolved, while ignoring the more important and solvable issues.


• (07) the fueling of the circular partisan warfare pits voters against each other so that a majority can never exist to oust incumbent politicians from office.


• (08) of the straight-party-ticket button/lever, which makes it easy for the lazy and blindly-partisan voters, which also works wonderfully to keep re-election rates high.


• (09) too many voters are too easily bribe with their own tax dollars, tax breaks (which turn out to actually make taxes more regressive), more cradle-to-grave entitlements, lies and more empty promises that can’t possibly be fulfilled with such massive debt of nightmare proportions, and pressing problems growing dangerously in number and severity.


• (10) too many voters fail to recognize how despicable politicians pit voters and illegal aliens against each other for votes and profits, disguised as compassion for illegal aliens; costing tax payers an estimated $70 Billion to $327 Billion per year in net losses ( One-Simple-Idea.com/BorderSecurity.htm#Burdens )


• (11) 99.7% of voters are vastly out-spent by a very tiny 0.3% of all eligible voters who make 83% of all federal campaign donations of $200 or more ( One-Simple-Idea.com/OpenSecrets_DonorDemographics.htm )


• (12) of resistance by Congress to any campaign finance reform, term-limits, and a number of other common-sense reforms.


• (13) of over-complication to hide malfeasance, reduce transparency, and increase opportunities for self-gain (HHmmmm … about time for another raise, eh (like the 9 raises for Congress between 1997 and 2007, while U.S. troops went without armor, adequate medical care, and are forced into 2, 3, 4 or more tours in Iraq and Afghanistan)?).


• (14) of selective enforcement/violation of the U.S. Constitution (e.g. ignore Article V of the U.S. Constitution so that Term-Limits, Campaign Finance, and other amendments can never be considered by the states).


• (15) of the hiding and distorting of information (e.g. understate inflation to reduce the Social Security cost-of-living increases (One-Simple-Idea.com/DebtAndMoney.htm#Measurement) to either paint a picture that is either rosier or worse than reality, to make THEIR party look good, or to fuel the partisan warfare, all of which helps to increase incumbents’ re-election rates.

There are also other periods in American history when unhappy voters ousted huge numbers of incumbent politicians.

Marysdude, you can say large-scale anti-incumbent voting will never work or happen, but it has already worked and happened, and it will most likely happen again when the voters’ failure to do it sooner and more often finally becomes too painful, because repeatedly rewarding bad politicians with perpetual re-election is the pathway to more pain and misery.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at December 1, 2008 10:13 PM

d.a.n, wouldn’t you have to calculate the Senate incumbency rate as a running six year statistic since only 1/3 is up for reelection in any given election cycle? The percentage of 100, seems to me, can only be calculated across the last 3 election cycles, not in one 2 year election cycle.

Unless of course, you calculate the percentage of 33 or 34 which are reelected in a given election year. But, that would not seem to be as representative or telling as a running 6 year, 3 election cycle, statistic.

Thanks for the update on the stats by the way. I appreciate those being made available.

Posted by: David R. Remer at December 2, 2008 02:14 AM

Roy, you are absolutely correct in saying the political parties have been the ice berg sinking our ship of state. Until there is a divorce between elected politicians and wealthy special interests in command of their time, audience, and campaign funding, the nation’s and people’s troubles will continue to receive second class citizenship in the minds of incumbent politicians.

Obama is intent on making progress on that front, which is why he did not build his campaign as as a Democratic Party leader, but, as a leader for the nation’s challenges and the woes which beset the American people regardless of political party, economic status, or other divisive characteristics. He insured no one in the future could attack him as a traitor for taking on the special interest influence within his own party.

No one can say how effective Obama will be in this pursuit, nor even if he will get to it in a first term given the severity of the economic and foreign policy issues he cannot subjugate to other priorities like political, campaign, and election reforms.

But, they are on his agenda and he will delegate capable people to deal with those issues, if he is who he has said he is. So far, he has lived up his word, and we should give him the benefit of the doubt until he doesn’t, is my opinion.

Posted by: David R. Remer at December 2, 2008 02:31 AM

David, I wish Obama well and I hope he has a successful run. As we observe how he takes the reins of power I do see him taking actions that may serve to be divisive. For instance, he just announced that Arizona Gov. Janet Napolitano will be his new Director of Homeland Security. Napolitano has been a
vocal opponent of the border fence.
This came on the heels of Obama’s appointment of Cecelia Munoz, a high-ranking La Raza executive, to a key post. Munoz has been in charge of La Raza’s legislative and lobbying efforts.
She will now be Obama’s Director of Intergovernmental Affairs and will serve as the chief administration liaison with state and local governments.
My interest is not with Bush or Obama or the duopoly. The two parties have long proven to me they are a detriment to the Republic. I am working for, not change, but reform of government. What can you say about a party that tolerates torture, facilitates an invasion of 12-20M illegal people, arrogantly refuses to enforce federal immigration laws, etc. So much evil and corruption has been done under the guise of trade and crude oil. We no longer have a government of We The People. We have a klepto-plutocracy.
We need a force that can counter a klepto-plutocracy, restore our Republic and sovereign nation to something closer to what the Founder’s put in place. We need a third party with a different attitude about politics, ‘they do work for us’, etc. I want bore you with the rest as I’m sure you’re tired of hearing it.
In summation, I have little interest in the duopoly. I am way down revolutionary road from there.

Otherwise, we have the government we deserve.

Posted by: Roy Ellis at December 2, 2008 10:05 AM

David R. Remer wrote: d.a.n, wouldn’t you have to calculate the Senate incumbency rate as a running six year statistic since only 1/3 is up for reelection in any given election cycle? The percentage of 100, seems to me, can only be calculated across the last 3 election cycles, not in one 2 year election cycle.

Yes, you are right.

The percentages I gave above are the most simple way of looking at it (based on all 535 in Congress), and did not take into account that 67 (two-thirds) of the 100 Senators are not even up for re-election for each election (i.e. only 33 of 100 Senators are up for re-election every 6 years).

If the 67 senators that are not up for re-election are excluded, the re-election rates are actually slightly smaller (typically by only a few percentage points; see below).

For example, above, the total of 535 was used, which produces:

• Start __ End __ Congress _ Re-Election


• Year ___ Year ___ # _____ Rate


• 2003 ___ 2005 ___ 108th ___ 87.9% (65 of 535 incumbents ousted)


• 2005 ___ 2007 ___ 109th ___ 88.6% (61 of 535 incumbents ousted)


• 2007 ___ 2009 ___ 110th ___ 84.9% (81 of 535 incumbents ousted)


• 2009 ___ 2011 ___ 111th ___ 86.7% (about 71 of 535 incumbents ousted)

… which essentially considers the 67 Senators not up for re-election as being re-elected.

However, if the percentage is only based on the 468 (535 - 67) instead of all 535 in Congress, the percentages are slightly lower by a few percentage points:

• Start __ End __ Congress _ Re-Election


• Year ___ Year ___ # _____ Rate


• 2003 ___ 2005 ___ 108th ___ 86.1% (65 of 468 incumbents ousted); 1.8% lower than above


• 2005 ___ 2007 ___ 109th ___ 87.0% (61 of 468 incumbents ousted); 1.6% lower


• 2007 ___ 2009 ___ 110th ___ 82.7% (81 of 468 incumbents ousted); 2.2% lower


• 2009 ___ 2011 ___ 111th ___ 84.8% (about 71 of 468 incumbents ousted); 1.9% lower

David R. Remer wrote: Unless of course, you calculate the percentage of 33 or 34 which are re-elected in a given election year. But, that would not seem to be as representative or telling as a running 6 year, 3 election cycle, statistic.

True.

David R. Remer wrote: Thanks for the update on the stats by the way. I appreciate those being made available.

You’re welcome.

Here’s the current table of the 111th Congress. There are still a few seats that have not yet been determined. I’ll be updating it as time goes on.

Here’s the table for the previous 110th Congress (for comparison).

I have not calculated averages over a 6 year periods, but that may be interesting to see too.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at December 2, 2008 12:18 PM

Roy, I don’t think your concern of Napolitano are warranted. A mistake many are making in this transition is to confuse Obama’s appointees past agendas with Obama’s agenda. Obama will be person setting the goals and proposing objectives to reach those goals to Congress, NOT his appointees.

Obama very clearly understands that his appointees are to administer the law and pursue the President’s agenda and I am absolutely convinced he has made this abundantly clear to his potential appointees. Obama will be the decider, not his appointees, when it comes to objectives.

On the border, Obama will very likely approach it like he is the economy, inquiring what options will work and deciding on the best option that will solve more problems than the solution creates.

Whether that results in a physical fence, or patrols, or surveillance and interdiction tactics, the open borders as a national security threat will be addressed.

And don’t forget that there is a budget and consequences for indebted expenditures, and that reality will also impinge on border solution and how soon it can be effectively implemented given the risks an open border poses.

I think many Americans are going to have a tough time grasping Obama’s holistic approaches and prioritization. Everything cannot be accomplished at once, nor to a maximum potential within any measure of a disciplined fiscal approach that seeks to strengthen America going forward.

You have heard the old addage, Don’t judge a book by its cover. Where Obama is concerned, I would convert it to, Don’t judge the Obama administration by his appointee’s previous policy positions. His appointees will be charged with administering his and Congress’ agenda’s, NOT THEIR OWN as was the case under GW Bush for so many years.

Posted by: David R. Remer at December 2, 2008 01:08 PM

d.a.n, thanks very much for the updated stats. I have bookmarked these stats for future reference and appreciate the time spent putting these stats together.

Posted by: David R. Remer at December 2, 2008 01:16 PM

David, I can’t not be aware of Obama as time goes by. He will be front and center in the media, etc. Any perceived foible will be posted here as well. I think you are overstating the lack of discipline in the Bush admin. I fully believe that every deed done, every word uttered came directly from the mouthpiece of the klepto-plutocracy. The Katrina event ‘how’s it goin Brownie’, squeezing the DOJ while he was hospitalized, to Rumsfelds folly with the surge. Every dit-dah was executed exactly as the leaders wanted it.

Posted by: Roy Ellis at December 2, 2008 03:13 PM

Roy, I think that is what I said about the Bush administration. His appointees had their own agenda and they enacted it with a Bush rubber stamp, the complexities and consequences of such agendas being way over his head.

That will not be the case with Obama, agendas being too complex, or consequences obscure, for his understanding and rational decision making capacity.

Posted by: David R. Remer at December 2, 2008 04:17 PM

U.S. Sen. Charles Schumer wants banks to stop lending money to investors who buy up rent-regulated housing and replace the working-class tenants. No Charles , wrong not all investors are bad why not have the state of new york quit handing out so many approvals for low income housing or least provide some damn oversight. we need a upstate senator..

Posted by: Rodney Brown at December 2, 2008 04:23 PM

>the complexities and consequences of such agendas being way over his head.
Posted by: David R. Remer at December 2, 2008 04:17 PM

DRR,

I used to think the little jerk was not enough with it to pull off some of the things he’s accused of too. In fact I’ve renamed him, Cheney/Bush, because I thought Cheney was pulling his strings…but, not long ago, I read a piece on how he made seventeen million dollars on a two million dollar investment, that was actually two million of taxpayer monies, when he bought into the Rangers baseball stadium. I can’t remember where I read it, so I can’t cite a link, but it was an impressive scam, and no mean feat…perhaps the chimpster has more in him than we have supposed?

I know one thing…that deal probably turned him on to how to best use tax monies to further the agenda he’s promoting right now. He’s no stranger to corporate welfare…or the misuse of tax dollars.

Posted by: Marysdude at December 3, 2008 06:19 AM

Also, eminent domain laws were abused for the Rangers’ baseball stadium.

Posted by: d.a.n at December 3, 2008 12:03 PM

Rodney B,

I thought Rent Controls were invoked in NYC, by the city government, is it actually a statewide law in New York?

Posted by: Marysdude at December 3, 2008 01:24 PM

d.a.n.,

Thanks, I knew that, but had forgotten. I think every stadium built since then has used the Ranger model. Tax-payers…shafted again…home owners…shafted again…it never seems to stop. I’m about ready to get my combat gear and join EJN’s revolution…

Posted by: Marysdude at December 3, 2008 01:28 PM

Marysdude, Bush had his own agenda, but it was very narrow in scope, having to do with his belief in the marriage between religion/corporations and federal government. Everything else he lacked the education and intellect to do anything but rubber stamp his cabinet’s agendas.

His marriage of religion and government cost his party the elections in part. And his marriage of convenience between corporations and government has cost this nation a productive economy.

GW Bush has to be the nation’s most notorious mental midget to ever hold the office of President.

Posted by: David R. Remer at December 3, 2008 04:11 PM

Not sure about upstate MD, but what is going on upstate and down state is many Big houses have been turned into apartments it started in the Late 1960s and 1970s lost Industry and railroads and business,many working folks rent because they can’t afford to buy and the Slumlord’s come in and kick them out and turn it into a HUD House I guess they get more money I know the state is involved because some people here told me so and how to get in it , places where my great grand father got his break and started from the bottom and became a railroad president Are bad seedy drug infested areas,I do have a few apartments and the rent is low the area dictates that there all working class nice folks and a few retired people they take good care of it and i have managers living in them I’d never turn them into a HUD. Some day maybe they will own one Regardless we do need a upstate Senator who can work to balance business industry and labor.

Posted by: Rodney Brown at December 3, 2008 04:26 PM

Rodney Brown,

Sorry…I thought you were referring to rent controls, and being willing to jump to conclusions, figured you were talking about New York, the city with the most referred to rent controls on the planet…mea culpa.

Now you speak of Maryland, and I just read about San Francisco…damn, there’s a bunch of places that subscribe to rent control that I never heard of.

Posted by: Marysdude at December 4, 2008 02:59 PM

GM, Chrysler say could reconsider merger.
http://www.reuters.com/article/businessNews/idUSTRE4B37J720081204?feedType=RSS&feedName=businessNews

Posted by: Rodney Brown at December 4, 2008 05:46 PM

The automakers now say they need $34 billion. Mark Zandi, the chief economist at Moody’s, testified that it was going to take $75 to $125 billion to save these corporations. The government can buy all three for $16 billion.

Posted by: jlw at December 5, 2008 08:09 PM

John Stewart had a funny (sort of) take on this.

He said: OK, so Congress gave $7.5 Trillion to banks, Wall Street, and financial institutions that produce … What?

The auto-makers build automobiles and sell them at a $2000 loss per vehicle.

And you don’t want to save the auto-makers? ! ?

Posted by: d.a.n at December 5, 2008 10:20 PM

Congress has reached an agreement on a bill to provide bridge loans (loans to tie them over for a short period) that is expected to pass next week.

I think if Bush and Paulson were even remotely as careful about giving tax dollars to corporations as the Congress has been to the Auto industry, we would all be very much better served as tax payers.

I would like to see Congress rescind the balance of the $700 billion given to the Treasurer, until the new administration comes in, at which time far greater accountability and responsibility could be built into the funds disbursements, primarily through means that give assurance of being paid back.

Posted by: David R. Remer at December 6, 2008 05:40 AM

“$700 Billion”?

Financial Crisis Balance Sheet (as of 13-NOV-2008) was $4.2845 Trillion:
Government Entity / Amount Allocated:
• Federal Reserve:
• (TAF) Term Auction Facility / $900 Billion
• Discount Window Lending:
• Commercial Banks / $99.2 Billion
• Investment Banks / $56.7 Billion
• Loans to buy ABCP / $76.5 Billion
• AIG / $112.5 Billion
• Bear Stearns / $29.5 Billion
• (TSLF) Term Securities Lending Facility / $225 Billion
• Swap Lines / $613 Billion
• (MMIFF) Money Market Investor Funding Facility / $540 Billion
• Commercial Paper Funding Facility / $257 Billion
• (TARP) Treasury Asset Relief Program / $700 Billion
• Automakers / $25 Billion
• (FHA) Federal Housing Administration / $300 Billion
• Fannie Mae/Freddie Mac / $350 Billion
• __________________________________________________________
• TOTAL = $4.2845 Trillion

But, as of 28-NOV-2008, it’s reported to be $7.361917 Trillion …

Financial Crisis Balance Sheet:
Government Entity / Amount Allocated / Amount Spent/Lent:
• Federal Reserve:
• (TAF) Term Auction Credit (allocated) / $900B / $415.302B
• Discount Window Lending / $139.256B
• Banks (other loans primary credit) / $92.645B
• Investment Banks (other loans Primary dealer and other broker-dealer credit) / $46.611B
• Loans to buy ABCP (other loans Asset-backed commercial paper money market mutual fund liquidity facility) / $661.923B
• AIG (allocated minus Treasury 40B) / $112.5B / $87.397B
• Bear Stearns (initial loan to JPMorgan) / $29.5B / $26.919B
• (TSLF) Term Securities Lending Facility / $225B / $200.524B
• Swap Lines (other federal reserve assets) / $601.963B
• (MMIFF) Money Market Investor Funding Facility (allocated) / $540B
• (CPFF) Commercial Paper Funding Facility *upper limit from Reuters / $1,800B / $270.879B
• (TALF) Term Asset-Backed Securities Loan Facility / $200B / $200B
• GSE MBS NO NAME Program / $600B / $600B
Treasury:
• (TARP) Treasury Asset Relief Program / $700B / $330B
• Exchange Stabilization Fund to guarantee principal in money market mutual funds / $50.000B
• Treasury direct purchases of MBS since Sept. / $26.57B
• Citigroup (Treasury+FDIC guarantees) ————— $238.5B
FDIC:
• Guarantees for Banks / $1,900B
Other:
• Automakers / $25B
• (FHA) Federal Housing Administration / $300B
• Fannie Mae/Freddie Mac / $350B
• ____________________________________________
• TOTAL Allocated = $7.361917 Trillion / TOTAL Spent/Lent = $2.131017 Trillion

But now, as of as of 30-NOV-2008, Lou Dobbs and Los Angeles Times recently reported the scheduled bail-outs may cost $8.5 Trillion, and the amount spent/lent already is now $3.2 Trillion!
Here is the break-down …

• for the $8.5 Trillion: Sources: Federal Reserve, Bloomberg News, FDIC, FHA, U.S. Treasury).

There’s so much money being created out of thin air and thrown all about, it’s changing by the trillions per week!

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at December 6, 2008 10:44 PM

d.a.n, getting control of it has to begin somewhere. Why not rescinding the unspent portion of the $700 billion given to Paulson to stabilize the credit industry. We now know those recipients are NOT using the money received to make loans, which was the intended purpose. Responsibility has to begin with insuring funds are used for allocated purposes or rescinded.

Corporate America ABSOLUTELY MUST get this message from the people, or they will continue to tighten their grip on our government, bleeding us all dry like vampires.

The numbers you cite, no doubt fairly accurate, are so large as to be entirely out of reach in terms of a solution. Begin with basic principles. Allocated funds are to be used as intended or given back to the taxpayers. It is a good first principle stand for Congress and the people to take. Having taken that step, they can take a another. No mountain is climbed without the plodding of one small step after another, beginning with the first at the base of the mountain.

Our economy needs to be rescued from depression, that requires deficit spending. But, there is smart deficit spending with a high probability of a return on those investments, and then there is throwing money willy nilly at a failing economy without accountability, responsibility, transparency, and success at achieving the stated objectives of that deficit spending.

Let’s being with the first step and make it a well planned and carefully placed step. Likewise, with the second and third and so on, each in its turn.

A lot of the money handed out so far carries strings and assurances of repayment to tax payers. Other portions of the money handed out were not so carefully deliberated and planned. It is not too late correct our mistakes and insure both that this recession is short lived and the bulk of the deficit spending/loans investments are returned when the economy is on a growth path again.

Many voters are calling in on talk shows and writing their representatives indicating they get it and want this done far better than it has been to date, rescuing Wall Street fat cats instead of Main Street unemployed and bankrupt.

Democrats are poised to take on the credit card industry early next year which will help many, and Congress is repositioning to provide assistance to defaulting homeowners and foreclosed homeowners to insure they remain in their homes for affordable monthly principal and interest payments.

These are positive steps, and to the extent they stabilize home valuations, government will not have to reach as deep into tax payers pockets going forward to rescue 100’s of thousands more homeowners.

There has been a fair amount of good news on this front last week. New mortgages have suddenly spiked, people are buying homes again. This also indicates credit markets are unfreezing a bit. The unemployment picture is getting rapidly worse, but, for those still working, real wages actually rose last month thanks to falling consumer prices. This is tentative good news to be sure, but, all recoveries must begin with such news breaking. The sky has not yet fallen, and therefore the need to run away from the problems has yet arrived.

Posted by: David R. Remer at December 6, 2008 11:24 PM

David R. Remer wrote: d.a.n, getting control of it has to begin somewhere.

Yes. The sooner, the better, despite numerous opportunities repeatedly missed (especially this last election).

David R. Remer wrote: Why not rescinding the unspent portion of the $700 billion given to Paulson to stabilize the credit industry.

Absolutely, rescind it and get it back, if any of it is left.

But the question is: how much of the money is left, when (as of as of 30-NOV-2008), Lou Dobbs and Los Angeles Times recently reported the scheduled bail-outs may cost $8.5 Trillion, and the amount spent/lent already is now $3.2 Trillion ?

David R. Remer wrote: We now know those recipients are NOT using the money received to make loans, which was the intended purpose. Responsibility has to begin with insuring funds are used for allocated purposes or rescinded.

HHHMMMMMMMMMMMmmmmmmmmmmmm … true, but what are the chances any of that money will be retreived?

And is more debt the solution for a nation already swimming in $67 Trillion of nation-wide debt?
People also are not borrowing because they are already tapped out.

It’s like the game of Monopoly, where one player (banks in league with the Federal Reserve and the federal govenment) can create all the money they want out of thin air.
Before too long, the banks own everything, and everyone else is broke, deep in debt, homeless, jobless, and hungry.
Americans can never win that game, so why play any longer?

No, something more fundamental and drastic is needed, or will will most likely have another Great Depression worse than that of the 1920s-to-1940s.

David R. Remer wrote: Corporate America ABSOLUTELY MUST get this message from the people, or they will continue to tighten their grip on our government, bleeding us all dry like vampires.

I agree 100% about that. It’s already begun.

What has transpired in the last 3 months is truly ridiculous.
$3.2 Trillion of the allocated $8.5 Trillion is most likely already gone (spent/lent).

David R. Remer wrote: The numbers you cite, no doubt fairly accurate, are so large as to be entirely out of reach in terms of a solution.

True. It is clearly getting (if not already, most likely) way, way, way out of control.

David R. Remer wrote: Begin with basic principles. Allocated funds are to be used as intended or given back to the taxpayers.

How? That money was mostly used to cover debts, and 95% of all U.S. money in existence is Principal debt?

The math is very disturbing.

There is so, so, so much debt, the amount of money required to even put a tiny dent in so much debt is as you say:

David R. Remer wrote: … are so large as to be entirely out of reach in terms of a solution.

I fear Congress is going to try to continue with more borrowing , creating money out of thin air , bail-outs , pork-barrel , and rampant spending , which will make a bad situation worse.

David R. Remer wrote: It is a good first principle stand for Congress and the people to take.

That doesn’t seem likely to happen, because the Federal Reserve, Treasury, and Federal government have made it very clear that they are going to attack our massive debt problem with more debt , borrowing , creating money out of thin air , bail-outs , pork-barrel , and rampant spending , which will make a bad situation worse.

It’s very likely that the Auto-Makers will get bailed out again and again, and will be followed by several other bail-outs for other corporations , banks , and insurance companies.
It appears increasingly likely that the rampant spending ($3.2 Trillion already spent/lent) in the last 3 months) will continue until it is too late.

David R. Remer wrote: Having taken that step, they can take a another.

Well, I’m not sure that step to rescind those allocations has occurred yet.

How much of that original $700 Billion is really left when $3.2 Trillion of $8.5 Trillion allocated has already be spend/lent?

David R. Remer wrote: No mountain is climbed without the plodding of one small step after another, beginning with the first at the base of the mountain.

Agreed. But I don’t see any of those plodding steps.

In fact, the level of borrowing , creating money out of thin air , and rampant spending has even exceeded what I thought possible.
$700 Billion has somehow grown to $3.2 Trillion and $8.5 Trillion in allocations?
That $3.2 Trillion is too large to come from anywhere but out of thin air (i.e. the majority of it).
The FDIC , Federal Reserve , and U.S. Treasury did not have that much surplus money.
That means they are borrowing and creating that money out of thin air.
I do not believe the tax payers will ever get paid back.
The math does not work, because their is too much debt, 95% of all money is Principal debt, and there is also interest on all of that debt.
What you said above about the debt is more true than most Americans understand …

David R. Remer wrote: … so large as to be entirely out of reach in terms of a solution.

In my opinion, the federal goverment and Federal Reserve are going to make a bad situation MUCH worse, by trying to solve massive debt with more massive debt that is many times larger than the debt we started with. That can’t and won’t work with a debt-pyramid of $54-to-$67 Trillion of nation-wide debt, and 95% of all U.S. money in existence is Principal debt.

David R. Remer wrote: Our economy needs to be rescued from depression, that requires deficit spending.

True … the government should do what it can, such as stopping these 10 abuses.

Not by making a bad situation worse, by trying to solve massive debt with more debt, and debauching the currency, which will make things worse by destroying savings , pensions , and entitlements and benefits to millions of senior citizens.

David R. Remer wrote: But, there is smart deficit spending with a high probability of a return on those investments, and then there is throwing money willy nilly at a failing economy without accountability, responsibility, transparency, and success at achieving the stated objectives of that deficit spending.

True. And how would you categorize giving $3.2 Trillion to $8.5 Trillion to banks , corporations , insurance companies , and Wall Street?

That alone may have sealed our fate, but growing the debt just beyond the ability to ever get control of it.
How can more spending help when 95% of all money in existence is Principal debt?
I have not heard of any plan that makes any sense, because none of them include:

• drastically down-sizing the severely bloated federal government;


• stopping pork-barrel spending; in fact, the $700 Billion bail-out had $100 Billion of pork-barrel too!


• stopping the subsidies for the wealthy: farm.ewg.org/sites/farmbill2007/top_recips1614.php?fips=00000&progcode=farmprog&enttype=indv&enttype=entity


• stopping the welfare for the wealthy;


• stopping the tax breaks for the wealthy;


• flattening a significantly regressive tax curve;


• stopping illegal immigrations bilking an estimated $70 Billion to $327 Billion per year from tax payers;


• stopping the unfair trade practices;


• reducing the incessant inflation for the past 52 consecutive years due to a flawed (putting it mildly) monetary system that has grown the nation-wide debt from 100% of GDP in year 1956 to 483% of GDP in year 2008;


• stopping the usury and fraud that is driving people out of their homes and/or into bankruptcy;


• stopping the incessant deficit spending for the past 52 consecutive years;


• stopping the lying about economic statistics (e.g. inflation, unemployment, GDP, taxation, illegal immigration, trade, debt, etc.);


• addressing the excessive corruption in Congress, while it rewards itself for its incompetence and malfeasance with 9 riases between 1997 and 2007;


• addressing the election problems; barriers to independent and 3rd party candidates, Gerrymandering, numerous unfair incumbent advantages, and 99.7% of 200 Million eligible voters vastly out-spent by a tiny 0.3% of the wealthiest voters who make 83% of all federal campaign donations of $200 or more, etc.;


• addressing the mathematically flawed 9-to-1 fractional banking system that only requires 10% in reserves, which is not nearly enough to weather a bad recession, much less a depression;


• or eliminating the 10 major abuses (e.g. One-Simple-Idea.com/DisparityTrend.htm) that have been hammering most Americans for 30+ years;

David R. Remer wrote: Let’s being with the first step and make it a well planned and carefully placed step.

Agreed. But what is the first step? Rescinding the remainder of $700 Billion. OK, if any of it is left.

David R. Remer wrote: Likewise, with the second and third and so on, each in its turn.

Agreed. The sooner the better.

But the fact is, there are now so many things that must be done exactly right as soon as possible; otherwise, it won’t matter. It is that serious.

David R. Remer wrote: A lot of the money handed out so far carries strings and assurances of repayment to tax payers.

Based on track records, I have very little faith that any significant portion of all of that money ($3.2 Trillion already lent/spent; $8.5 Trillion allocated) will ever be recovered.

And even if it was, it may be worthless with 30%, 40%, or 50%+ inflation.
Especially when 95% of all U.S. money in existence is Principal debt by banks; conjured from thin air at a dangerous 9-to-1 debt-to-reserves ratio; creating new money as debt and leveraging reserves to greedily earn as much interest as possible, while also preying upon millions of Americans foolish enough to get an Adjustable Rate Mortgage and/or credit cards with upto 35% interest rates.
QUESTTION: Where will the money come from to merely pay the interest on all of the debt, much less the money to reduce the Principal debt, when that money does not yet exist, and 95% of all money in existence is Principal debt?

You know it’s serious when no one can answer such a simple question.
You know it’s serious when the federal government and the Federal Reserve avoid that question like the Black Plague.
You know it’s serious when the federal government is planning to give away money in the form of stimulus checks, which won’t even put a dent into $54-to-$67 Trillion of nation-wide debt.
That is, even if the federal government sent out stimulus checks that totaled an additional $5 Trillion, over half of it ($2.68 Trillion) would go to merely pay interest on the $67 Trillion nation-wide debt at ONLY 4.0% interest in only the 1st year: One-Simple-Idea.com/67Trillion.gif

IF today, we started paying $7.337641222 Billion per day ($223.33334 Billion per month = $2.68 Trillion per year = the amount required to prevent the total debt from growing ever larger) against the nation-wide debt, it would take 443 years and the total interest cost (at ONLY 4.0%) would be: $1.162 QUADRILLION !

IF today, we started paying $1.32 Billion per day ($40.15 Billion per month = $481.2 Billion per year = amount required to prevent the total debt from growing ever larger) against the $10.7 Trillion National Debt, it would take 164 years and the total interest cost (at only 4.5%) would be: $79.179 TRILLION !

Again, where will the money come from, when 95% of all U.S. money in existence is Principal debt?
The only place to get so much money is to borrow it and create it out of thin air.
That magnitude of money required to even put a tiny dent into a $67 Trillion nation-wide debt problem is untenable.
The steps needed to deal with this crisis are so drastic, they are unlikely to occur in time.
The choice many Americans will soon have are:

• OPTION # 1: Government somehow drastically reduces the nation-wide debt, or somehow wipes the nation-wide debt-pyramid slate clean for many Americans, and the monetary system is drastically reformed such that banks can not continue to dangerously create another massive 9-to-1 debt-to-reserve debt-pyramid that is mathematically doomed to collapse as nation-wide debt grows ever larger; that is, we have to stop the Monopoly game in which one player (e.g. banks) can create all the money they want out of thin air, until the banks own everything and everyone else is broke or deep in debt;


• OPTION # 2: or we continue to try to create money out of thin air to battle the $67 Trillion nation-wide debt-pyramid, which will crash the currency and make a bad situation worse, and rampant nation-wide foreclosures and defaults, unemployment, and economic deterioation runs its course; in which case, the debt-pyramid slate will be wiped clean anyway, but much more painfully.

Thus, what you said above is more true than even perhaps you know …

David R. Remer wrote: … are so large as to be entirely out of reach in terms of a solution.

Yes, it is out of control.

It is unrealistic to believe the tax payers are going to be repaid for the $3.2-to-$8.5 Trillion (as of 30-NOV-2008) spent/lent in the last 3 months, because no one can say where the money will come from, except that we are going to borrow and create that money out of thin air (which won’t work, despite many that seem to want to ignore that lesson which has already been demonstrated by many nations over the past 150 years, who tried to create money out of thin air).

The reason why no one can provide a solution is because few want to realistically consider what is truly needed, which is a very drastic reform (see two options above).
If that does not happen, then we will see 10,000 foreclosures turn into 100,000 foreclosures per day, until 80% of Americans are homeless (80% of Americans only own 17% of all wealth).
More banks will fail (not in the hundreds, but in the thousands).
More corporations (also heavily in debt) will fail.
And any attempt to create more debt and money out of thin air will turn a bad problem into a worse problem, but also destroying all savings, pensions, wages, and entitlements.

David R. Remer wrote: Other portions of the money handed out were not so carefully deliberated and planned. It is not too late correct our mistakes and insure both that this recession is short lived and the bulk of the deficit spending/loans investments are returned when the economy is on a growth path again.

No. Perhaps not.

But who is acknowledging the debt-pyramid even exists, how it happened, and how to collapse it in the most orderly fashion possible.
Who is suggesting option (1) above?
To make matters worse, there are nusome constitutional hurdles that would have to be cleared to allow OPTION # 1 above.
The irony is, OPTION # 1 is what we will end up with in the end anyway.
We merely need to decide how we are going to get there:

• (a) the smart, least painful way


• (b) or the worst, most painful way (again)

David R. Remer wrote: Many voters are calling in on talk shows and writing their representatives indicating they get it and want this done far better than it has been to date, rescuing Wall Street fat cats instead of Main Street unemployed and bankrupt.

Yes, but what good has it done?

I will be absolutely amazed if Congress and the next administration have the guts to turn their back on their big money donors, and finally pay any attention to the majority of voters.

Why? Just look at the federal government’s track record. That alone is enough.

David R. Remer wrote: Democrats are poised to take on the credit card industry early next year which will help many, and Congress is repositioning to provide assistance to defaulting homeowners and foreclosed homeowners to insure they remain in their homes for affordable monthly principal and interest payments.

They’d better, because that sort of rampant greed is disgusting. The credit card companies are pulling a lot of fast ones.

Just the other day, my Credit Card company starting charging a monthyly fee without giving me advance warning.
Needless to say, I will be canceling that greedy %~@#ing Credit Card company.

David R. Remer wrote: These are positive steps, and to the extent they stabilize home valuations, government will not have to reach as deep into tax payers pockets going forward to rescue 100’s of thousands more homeowners.

HHHHHHMMMMMMMMmmmmmmmmmmmmmmmmmm … yes they will, if they continue to solve a massive debt problem with more borrowing, debt, spending, bail-outs, and pork-barrel for the wealthy. Do you really think Congress will stop that after 52 consecutive years of deficit spending? Not likely. Not even remotely likely.

David R. Remer wrote: There has been a fair amount of good news on this front last week. New mortgages have suddenly spiked, people are buying homes again.

Only the wealthy, picking up good deals, as expected, and trying to protect their money from the incessant erosion due to inflation.

Home ownership for middle-to-lower-class Americans has been falling for many years.
Foreclosures are still around a quarter million per month (303,000 in AUG-2008).
Unemployment for NOV-2008 was 533,000 (a 34 year record).
Much more unemployment is expected.

David R. Remer wrote: This also indicates credit markets are unfreezing a bit.

Great. So the debt pyramid can grow a little bigger? ! ?

Again, only the wealthy are getting the majority of those loans.
And others getting more loans are only getting deeper in debt.
The debt-pyramid is merely growing larger.
That’s all.
And that’s not a good thing.

David R. Remer wrote: The unemployment picture is getting rapidly worse, but, for those still working, real wages actually rose last month thanks to falling consumer prices.

Well, that’s debatable, since we are not getting accurate reporting an a myriad of economic statistics.

For example, why are we only finding out now (DEC-2008) that we’ve been in a recession since (supposedly) DEC-2007?
The fact is, GDP has actually been falling since DEC-2006 or JAN-2007, but was masked by inflation.
And do you really believe inflation is really only 3.7% (as of 1-NOV-2008)?
After all, there are many reasons and motives for misreporting economic statistics.

David R. Remer wrote: This is tentative good news to be sure, but, all recoveries must begin with such news breaking.

Well, I don’t good news of any significance yet.

In fact, I see melt-down getting much worse if they continue to throw trillions more at banks , corporations , insurance companies , and Wall Street.

David R. Remer wrote: The sky has not yet fallen, and therefore the need to run away from the problems has yet arrived.

True. It can get much worse.

Americans haven’t seen anything yet.
Especially if the currency is debauched.
Pumping $3.2-to-$8.5 Trillion of new money (whether from borrowing, or creating new money, or both), is not helping in the long run, but is making the debt-pyramid larger.

Those that say we can worry about inflation later won’t mean much when double digit inflation is already out-of-control, and we are unable to remove money from the money supply, since 95% of all U.S. money in existence is in the form of Principal debt.

Besides, based on the pre-1983 inflation measurement method, inflation is already double-digit (13.2%).
Based on the pre-1998 inflation measurement method, inflation is already 7.8%.
Even when gasoline was at $4.00 per gallon, the federal government was only reporting inflation to be 5.37%, which is not credible.
What else are we being lied to about?:

• www.shadowstats.com/article/56


• www.inflationdata.com/inflation/Inflation_Articles/M3_Money_supply_2.asp

In my opinion, there simply are not any convincing reasons (yet) for much optimism, since it is very likely that our massive $67 Trillion nation-wide-debt problem will most likely be exacerbated with more debt , creating money out of thin air , pork-barrel , waste , bail-outs , which will very likely crash the U.S. currency, which will succeed in making a bad situation much worse. Much more drastic measures are needed, or we will repeat (as in the Great Depression) a long and painful decade (or more) of foreclosures , bankruptcies , unemployment , inflation , and poverty. Simply creating money out of thin air will not only not solve the massive debt problem, but will make it worse, because 95% of all money in existence is Principal debt; the M3 Money Supply in year 2005 was $10.15 Trillion which is 7520% higher than the $135 Billion M3 Money Supply in year 1950; and M3 Money Supply as of NOV-2008 is estimated to be $14.1 Trillion, which is 39% higher than year 2005 (in only 3 years! Yet, average inflation for year 2008 is only about 4.28% ?)

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at December 7, 2008 03:59 PM