Obama’s personal network, ABC, has an interview of Obama in which the president warns that unless we pass his health care reform bill, “the US will go bankrupt”.  Well, then we will go doubly bankrupt if we DO pass it – ’cause Federal spending – and the deficit will indeed mushroom if the communist’s Obamacare becomes law.  What a lowlife threat.  WHEN the US goes bankrupt —we surely do hope Mr. Obama has the lack of a health care bill to blame for it.

Tech Ticker is very cynical on the Obama Administration.  So too is the American public – as evidenced by the recent poll numbers.  The excuse to spend until the world ends was that we need to avoid the end of the world.  So now we have a choice: end of the world? or…end of the world?

ABC News is reporting that on page 432 of Senator Reid’s health care bill, there is a section increasing federal Medicaid subsidies for “certain states recovering from a major disaster.” The section spends two pages defining which “states” would qualify, saying that it would be states that “during the preceding 7 fiscal years” have been declared a “major disaster area.” That language applies to exactly one state: Louisiana.

According to the CBO, those subsidies will cost about $100 million. The bill cannot pass without Senator Landrieu’s support, and Reid is bribing her with $100 million in Federal money to get her vote. This should be ILLEGAL!

Below is the complicated language in the bill. All of it could have been cut down to a few words: “Extra federal funds allocated to the State of Louisiana to BRIBE Senator Mary Landrieu to vote for this bill”.

SEC. 2006. SPECIAL ADJUSTMENT TO FMAP DETERMINATION FOR CERTAIN STATES RECOVERING FROM A MAJOR DISASTER.

Section 1905 of the Social Security Act (42 U.S.C. 1396d), as amended by sections 2001(a)(3) and
2001(b)(2), is amended— (1) in subsection (b), in the first sentence, by striking ‘‘subsection (y)’’ and inserting ‘‘subsections (y) and (aa)’’; and (2) by adding at the end the following new subsection:

‘‘(aa)(1) Notwithstanding subsection (b), beginning January 1, 2011, the Federal medical assistance percentage for a fiscal year for a disaster-recovery FMAP adjustment State shall be equal to the following:
‘(A) In the case of the first fiscal year (or part of a fiscal year) for which this subsection applies to the State, the Federal medical assistance percentage determined for the fiscal year without regard to this subsection and subsection (y), increased by 50 percent of the number of percentage points by which the Federal medical assistance percentage determined for the State for the fiscal year without regard to this subsection and subsection (y), is less than the Federal medical assistance percentage determined for the State for the preceding fiscal year after the application of only subsection (a) of section 5001 of Public Law 111–5 (if applicable to the preceding fiscal year) and without regard to this subsection, subsection (y), and subsections (b) and (c) of section 5001 of Public Law 111–5.

‘‘(B) In the case of the second or any succeeding fiscal year for which this subsection applies to the State, the Federal medical assistance percentage determined for the preceding fiscal year under this subsection for the State, increased by 25 percent of the number of percentage points by which the Federal medical assistance percentage determined for the State for the fiscal year without regard to this subsection and subsection (y), is less than the Federal medical assistance percentage determined for the State for the preceding fiscal year under this subsection.

‘‘(2) In this subsection, the term ‘disaster-recovery FMAP adjustment State’ means a State that is one of
the 50 States or the District of Columbia, for which, at any time during the preceding 7 fiscal years, the President has declared a major disaster under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act and determined as a result of such disaster that every county or parish in the State warrant individual and public assistance or public assistance from the Federal Government under such Act and for which— ‘‘(A) in the case of the first fiscal year (or part of a fiscal year) for which this subsection applies to the State, the Federal medical assistance percentage determined for the State for the fiscal year without regard to this subsection and subsection (y), is less than the Federal medical assistance percentage determined for the State for the preceding fiscal year after the application of only subsection (a) of section 5001 of Public Law 111–5 (if applicable to the preceding fiscal year) and without regard to this subsection, subsection (y), and subsections (b) and (c) of section 5001 of Public Law 111–5, by at least 3 percentage points; and ‘‘(B) in the case of the second or any succeeding fiscal year for which this subsection applies to the State, the Federal medical assistance percentage determined for the State for the fiscal year without regard to this subsection and subsection (y), is less than the Federal medical assistance percentage determined for the State for the preceding fiscal year under this subsection by at least 3 percentage points.

‘‘(3) The Federal medical assistance percentage determined for a disaster-recovery FMAP adjustment State under paragraph (1) shall apply for purposes of this title (other than with respect to disproportionate share hospital payments described in section 1923 and payments under this title that are based on the enhanced FMAP described in 2105(b)) and shall not apply with respect to payments under title IV (other than under part E of title IV) or payments under title XXI.’’.

This is from an email that has been forwarding around (the original has some great copyrighted cartoons of Dennis Cox)…

Curtis & Leroy saw an ad in the Starkville Daily News Newspaper in Starkville, MS. and bought a mule for $100.

The farmer agreed to deliver the mule the next day.

The next morning the farmer drove up and said, “Sorry, fellows, I have some bad news, the mule died last night.”

Curtis & Leroy replied, “Well, then just give us our money back.”

The farmer said, “Can’t do that. I went and spent it already.”

They said, “OK then, just bring us the dead mule.”

The farmer asked, “What in the world ya’ll gonna do with a dead mule?”

Curtis said, “We gonna raffle him off.”

The farmer said, “You can’t raffle off a dead mule!”

Leroy said, “We shore can!  Heck, we don’t hafta tell nobody he’s dead!”

A couple of weeks later, the farmer ran into Curtis & Leroy at the Piggly Wiggly  grocery store and asked.

“What’d you fellers ever do with that dead mule?”

They said,”We raffled him off like we said we wuz gonna do.”

Leroy said,”Shucks, we sold 500 tickets fer two dollars apiece and made a profit of $898.”

The farmer said,”My Lord, didn’t anyone complain?”

Curtis said, “Well, the feller who won got upset. So we gave him his two dollars back.”

Curtis and Leroy now work for the government.

They’re overseeing the Bailout Program.

The banks are insolvent (dead), but the government is pretending they are not.  The stock market is soaring as Goldman and other bankster co-conspirators with the government are “raffling off” a dead system to an unsuspecting public.  But, will there only be one “raffle winner” who ends up disappointed and gets a refund in the end?

A recent article in the WSJ talks of “China Nurtur[ing] Futures Markets in Bid to Sway Commodity Prices“:

Chinese leaders are concerned that their nation’s enormous economic expansion is becoming an excuse for foreign suppliers to inflate commodity costs. So, they hope to use their three futures exchanges to fight back.

Government officials say the country is positioning its futures markets to be major players in setting world prices for metal, energy and farm commodities. By letting the world know how much its companies and investors think goods are worth, China hopes to be less at the mercy of markets elsewhere.

Its easy to see why China would want to protect itself from recent large fluctuations in commodity (mainly oil) prices, when they spent $180 billion importing oil last year. They won’t have a very easy time doing it, however. China is still a communist government and they do not have a legal system in place to support futures contracts. None of them would be enforceable. There is also a huge policy bias towards large state-owned enterprises like China Oil. The Shanghai Futures Exchange won’t be an open, competitive, and effective market until small players in the exchange can get equal rights. The authoritarian Chinese Government policy makers (dictators) only allow the economy cake to grow on the condition that the largest piece is received by their friends in high positions at giant state-owned enterprises.

Unfortunately, just as the Chinese economy is manipulated by a small group of people, the US (and world) economy is manipulated in the same manner by the FED and entities like Goldman Sachs. China should be setting it’s sites on getting rid of Goldman Sachs instead of setting up its own pitiful exchanges. There is not much of a link between the HUGE fluctuations in oil prices and China’s steady increase in demand for oil (and other commodities). The true culprit and beneficiary behind these things is (government sponsored) Goldman Sachs. GS manipulated who would be rescued by with its immense amount of government cronies in Washington, successfully killing off its competitors, and then rode the energy curve up and down gaining huge rewards in the mean time.

If China’s goal is control and manipulate the biggest economy in the world (it is), all it has to do is take a look at the US’s Federal Reserve. We do it much better here in the states! We set up an authoritarian entity, claim that its “private” and separate from any form of oversight, then let it freely give out trillions of tax payer dollars to support whatever manipulative policy it desires! All without any of its skeletons coming back to haunt any elected officials.

It seems that President Obama has the world in the palm of his hand. He has been awarded the Nobel Peace Prize based on his “vision”. Keep in mind that nominations for the award were due only 11 days after his inauguration (Feb 1st). The Nobel committee commented:

[We gave] special importance to Obama’s vision of and work (*12 days of work?!) for a world without nuclear weapons…Of course there will be criticism, because he hasn’t achieved his goals yet. It will take time, but this is a support.

Miss America’s vision of the world is much more Utopian than President Obama’s. On the grounds of her excellent “vision” for the future, and the fact that she definitely needs some “support” in achieving it, she should have received the Peace Prize (and the money) instead.

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Timid Tim said yesterday (ht Mish) that the Treasury would wait until next year to make any suggestions about a change to bank capital requirements:

“We’re not going to set the number now because the world is a little fragile; people aren’t willing to take enough risk now, and we don’t want to do anything that would push people to delever,” Geithner said to Fox News Sunday anchor Chris Wallace at an event in Washington hosted by the Atlantic magazine in partnership with the Aspen Institute and the Newseum. “We’ll have the agreement on the numbers, but it won’t happen until next year; in the absence of fragility.”

“we don’t want to do anything that would push people to delever”… that is the greatest fear of the government: that the aggregate level of debt will fall and with it, the general price level. They will do anything to prevent it.  Should we believe they have such power? For example, can government helicopters raining money from the sky really prevent it?  What-if the recipients of this “manna from heaven” pay their existing debts off with their new-found windfall? Will offsetting a shrinking private debt level with government debt prevent it? Or, just raise the probability of default of one obligor or the other (or both)? Somehow, we have come to place way too much faith in the ability of the same government institutions that got us into this mess…

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In a review of Richard A. Posner’s book, A Failure of Capitalism, the following “facts and causes” of the current financial crisis and recession/depression are cited:

… excess savings flowing in from Asia and the reckless lowering of interest rates by the Federal Reserve Board; the relation between executive compensation, short-term profit goals, and risky lending; the housing bubble fuelled by low interest rates, aggressive mortgage marketing, and loose regulations; the low savings rate of American people; and the highly leveraged balance sheets of large financial institutions.

The idea contained in the title of this book is that because these conditions arose, capitalism failed.  So, many people argue, since Capitalism can fail, then perhaps we should try something else: perhaps bigger government and more control, directly or indirectly, of the means of production. Posner’s conclusion is that:

… the pendulum swung too far and that our financial markets need to be more heavily regulated.

But the NYT’s review says Posner goes even further:

We are learning,” Posner writes, “that we need a more active and intelligent government to keep our model of a capitalist economy from running off the rails… Posner thinks laissez-faire economics has nothing relevant to say.

To those who accept Posner’s conclusions, the possibility that government interference in the market economy was the original cause of, rather than the cure of, the current crisis is never mentioned.  The possibility that the current government interference is aggravating the current downturn is also dismissed.  The Wikipedia post on Capitalism asserts that there is “little controversy that private ownership of the means of production, creation of goods or services for profit in a market, and paid employment are elements of capitalism.”

Ok, since there’s “little disagreement” for these elements, let’s start with them.  Based on these, it appears that the idea of Capitalism is really not much more than an ideal similar to the free, non-monopolized, yet, non-regulated markets theorized by economists when they talk about the concept of “pure, or perfect competition”. Thus, for example, Wikipedia’s definition of perfect competition indicates that the economy’s markets, if they were “ideal” and fit the definition of “perfectly competitive”, they would be characterized by:

  • Many buyers/Many Sellers – Many consumers with the willingness and ability to buy the product at a certain price, Many producers with the willingness and ability to supply the product at a certain price.
  • Low-Entry/Exit Barriers – It is relatively easy to enter or exit as a business in a perfectly competitive market.
  • Perfect Information – Prices are assumed to be known to all consumers and producers.
  • Transactions are Costless – Buyers and sellers incur no costs in making an exchange.
  • Firms Aim to Maximize Profits – Firms aim to sell where marginal costs meet marginal revenue, where they generate the most profit.
  • Homogeneous Products – The characteristics of any given market good or service do not vary across suppliers

Of course, no economy has perfect competition and… no economy represents the ideal Capitalism.  For example, let’s take “private ownership of the means of production”. If a few individuals, or a few private groups own (or control) all the means of production, we have monopolies or oligopolies. Technically, we might have some vague form of “capitalism”.  But most of us would agree (except the lucky owners) that this kind of “capitalism” is far from the ideal. Also, this version dominated by monopolies and oligopolies, will ultimately, fail.

Now let’s combine the next two items in the list of accepted elements relating to Capitalism: “creation of goods or services for profit in a market” and “paid employment”.  When we combine these two elements, we are merely lumping the return to capital and the return to labor together, for simplicity. Although one might be traditional and include “raw land”, too; both labor and capital are, in fact the main “means of production”.  So the essential elements of capitalism include a return or remuneration to the owners, or controllers of the means of production.  Ok, our ideal Capitalism now involves private owners, or controllers of the means of production (labor and capital) AND, from the previous paragraph, we don’t want monopolies or oligopolies to be the owners or controllers.

To the extent that monopolies and oligopolies control the means of production and to the extent that our government directly owns the means of production (communism), or indirectly controls it, through taxation and regulation (socialism), we don’t have the Capitalism ideal.  Indeed, a growing special interest group that includes the current President of the United States, despises and opposes the very idea of private ownership or private control of the means of production, even by monopolies or oligopolies – unless, of course those oligopolies are subject to the control of the government elites.  To the extent that these groups are in control in our country, we cannot say that Capitalism has failed, since we don’t have Capitalism.

So when our markets lock up, prices go extreme (up or down), and unemployment rises, does that mean that Capitalism, or perfect competition failed?  Duh! We don’t have those things! They are ideals – theoretical concepts – that did not exist to begin with, and cannot logically be said to have failed.

What did fail? Well…how about government? Is it not government that is supposed to prevent special interests from gaining “unfair” monopolistic advantage? Is it not our government that is “supposed” to avoid favoritism between special interest groups? And who are the special interests who have recently obtained so much control that they now effectively control the government itself?  Well…for one, the banks control the Federal Reserve and the Federal Reserve says it must remain free from “government oversight”, meaning it wants to remain a creature of the banks. Recall that Posner said the easy money policy of the Federal Reserve was a major cause of our current predicament. Further, Simon Johnson (among many) argues the banks have captured the government in a “Quiet Coup”. So, government has failed us miserably in fostering Capitalism.  But Capitalism hasn’t failed; it’s government that failed!  Our government has been taken over by the special interests.

One of the best analysts on Wall Street, Josh Rosner muses on the question of recent potentially illegal or unethical activities by financial institutions:

…in a time of national crisis we had institutions that were unwilling to put aside their lobbying, put aside their will to power, and recognize they had a greater obligation to the country. This is part of why I said capitalism in its purest form doesn’t work because they would assert their primary duty is their fiduciary obligation to their investors. However, I would say part of fulfilling your fiduciary obligation to your investors is to make sure there is a playing field on which to bring your ball and bat every week.  Do I think they tried to maximize their returns in this crisis and minimize the losses they would have to recognize? Absolutely, no question. Is that wrong? I’m not an ethicist, so this is one man’s opinion: Yeah, I think in some sense it is wrong. How do we square that circle? That’s for the government to determine. But I do question whether our Founding Fathers intended for corporations to have the same rights as citizens.

Indeed, the government must create a level playing field without bias and payoff…and it has failed miserably to do so with respect to the financial institutions.  But the banks and the ideologues are not the only special interests that control our government and direct it to allow the subversion of practical Capitalism.  Not hardly.  Besides the banks, other large corporations, notably the oil companies, as well as labor unions and political action groups, all have gained so much sway over our government that – until we eliminate that sway – Capitalism will never flourish in the United States.  Indeed, the failure of government to remain free from the special interests is a central argument in favor of laissez-faire economic policies. The Wikipedia post on laissez-faire economics says that the laissez-faire champion, the Chicago School of Economics and other advocates:

…claim to favor a state that is neutral between the various competing interest groups that vie for privileges and political power in a country. They are critical of mixed economies on the grounds that it leads to an interest-group politics where each group is seeking to benefit itself at the expense of another and the consumer… any government intervention such as regulation, protectionism, creating legal monopolies, competition laws, or taxes, interfere with the [market’s judgment] being reflected accurately in the [market] price and the maximization of economic utility.

Laissez-faire assumes the existence of a vigilant, but unbiased government.  The collusion between government and the special interests is possibly many things, but conducive to Capitalism is not one of them. Washington’s blog has a good post which suggests that the partnership of the special interests and the government that is preventing Capitalism in the United States is not really communism, or even socialism, it’s fascism:

Some, however, argue that the economy is more like fascism than socialism. For example, leading journalist Robert Scheer writes:

What is proposed is not the nationalization of private corporations but rather a corporate takeover of government. The marriage of highly concentrated corporate power with an authoritarian state that services the politico-economic elite at the expense of the people is more accurately referred to as “financial fascism” [than socialism]. After all, even Hitler never nationalized the Mercedes-Benz company but rather entered into a very profitable partnership with the current car company’s corporate ancestor, which made out quite well until Hitler’s bubble burst.

Is Scheer right? I don’t know. But Italian historian Gaetano Salvemini argued in 1936 that fascism makes taxpayers responsible to private enterprise, because “the State pays for the blunders of private enterprise… Profit is private and individual. Loss is public and social” (page 416). This perfectly mirrors Roubini’s statement about the American government’s bailout plan….Remember that one of the best definitions of fascism – the one used by Mussolini – is the “merger of state and corporate power“.

Demonstrators from both the left and the right want to make a shocking point and gain attention by portraying both the previous president and the current one as fascist, but underneath there appears to be instinctive recognition by society of this trend toward fascism .  One can hope so…before it’s too late:

bushhitlerobamahitler

Whatever the name of this demon: Socialism, Communism, or Fascism… it needs exorcism. However, just electing a new party that promises “change” is obviously not good enough. In the recent election, we merely swapped one set of special interests (like oil companies and oil service companies) for another (like unions and socialists).  New laws ARE necessary – perhaps even a change or two in our constitution – to eliminate the control of our government by “partnering” special interests. In general, the sway that special interests now have over our election cycle is pitiful.

Making all campaign contributions from any entity (other than $2500 per individual) illegal would be an awesome step in the right direction. In addition, we need to stop all special interest advertising for six months prior to congressional and presidential elections. Ten year term limits on all congressional seats would also be an excellent way to make the influence that any special interest may gain over any particular congressman or woman to die a natural death when their term expires.

More specifically, the Ponzi scheme that is the Federal Reserve needs to be eliminated.  Our new special interest-free government should be able to take over supervision of the Federal Reserve from the banks that now perform that function.  Indeed, banks regulating themselves just won’t cut it! Further, NO bank or any other firm should be allowed to get large enough to control 5% or 10% of an industry.  We have laws that preclude this sort of thing (i.e. Sherman Antitrust Act and other banking laws) that are already on the books!  But our government has failed to enforce them.  Why? It’s simple: SPECIAL INTERESTS OWN OUR GOVERNMENT.

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There’s a great review of Ron Paul’s book and his efforts to audit the FED at the Ludwig von Mises site.  Worth the read…

Dr. Paul’s fight for freedom has not been confined to the issue of sound money. He has also led the struggle against interventionist and imperialist foreign policy. But the fight for liberty is seamless, and he shows that an aggressive foreign policy depends on government control of the money supply:

It is no coincidence that the century of total war coincided with the century of central banking. When governments had to fund their own wars without a paper money machine to rely upon, they economized on resources. They found diplomatic solutions to prevent war, and after they started a war they ended it as soon as possible. (p. 63)

The book contains an abundance of other arguments against our current monetary system, e.g., that it violates the Constitution. Readers will discover Thomas Paine’s poor opinion of paper money, and even how monetary debasement helped bring the Byzantine Empire to ruin. Those who have absorbed the book’s message will come to a clear conclusion: End the Fed.

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(ht Zero Hedge and Washington’s Blog) In an interview with Wall St. Cheat Sheet‘s Damien Hoffman, Congressman Alan Grayson offers such stunning information as:

Just a few weeks ago, while Chairman Bernanke was testifying to Congress, we examined the Fed balance sheet and P&L statement only to find what looked like the Fed handing over half a trillion dollars to foreigners. This was very surprising! When I asked Chairman Bernanke if this was true, he said, “Yes.” When I asked him who got the money, he said, “Fourteen foreign Central Banks.” And when I asked to who did they give the money, he said, “I don’t know.” “I don’t know” is not good enough when you’re talking about $500 billion. That’s $1700 for every man, woman, and child in this country…In the case of another $230 billion, it has been tracked as a secret bailout to Citicorp in the US. The fact is the Federal Reserve continuously puts all of us on the hook for decisions they make to play favorites with private interests to the tune of trillions of dollars…

HR 1207 passage is now guaranteed in the House because there are plenty of co-sponsors. But, there are only 25 senators co-sponsoring the senate’s version (Bernie Sander’s bill) of the Audit the FED bill.  If they are not on the list, please ask your senators why they are not supporting the bill. Remember… if your senator responds something like: “It’s important to maintain Federal Reserve Independence…”   Tell them, the FED must answer to SOMEBODY.  Congress authorized the FED- Congress should do its job and oversee the FED – and not let the banks do it for them.  These crooks need to go to jail…

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