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Sunday, July 24, 2011

Economic Stories of Relevance in Today's World -- July 24, 2011

Will Republicans Make Congress Superfluous?  
by Paul Craig Roberts    

KINGSTON, NY, 23 July 2011 — The drama of it all! Will Congress refuse to raise the debt ceiling, forcing the US government to default and, thereby, immediately turning the “world’s only superpower” into a Third World country subject to an IMF austerity program? The markets are poised to explode upward in jubilation or collapse in despondency. Only in America could such fantasy dominate the news.

Does anyone really believe that the US government would default on its debt?

The debt ceiling/default “crisis” is nothing but political theater. The Republicans are employing scare tactics in their attempt to destroy the social safety net. The Democrats are playing along with the assault on “entitlements,” because it is what the majority of their large contributors want.

The presstitutes dish out the fantasy as if it were reality.

The US government will never default on its debt, because the government can print an endless stream of money to redeem its bonds. 

The Republicans would love to gut Medicare, Medicaid, Social Security, food stamps, unemployment insurance, education, and any and everything that benefits ordinary people. But do they want to gut their wars?

Do they want to gut American financial hegemony over the world?

Do they want the US dollar replaced as world reserve currency and oil to be priced in a different currency than the US dollar?

Of course they don’t. And if the Republicans are not smart enough to have figured out these consequences of their refusal to raise the debt ceiling, someone will tell them before it is too late.

But in truth it matters not whether the debt ceiling is raised. The Bush regime, with the complicity of the federal courts and Congress, established that the president has essentially unlimited powers not bound by law when the country is at war. The president does not have to follow the Constitution or obey statutory law. He can ignore the laws against spying on Americans without warrants. He can ignore the laws against torture and against indefinite detention without presenting charges in a court. He can even ignore the War Powers Act. Obviously, the president can also ignore the debt ceiling limit.

If banks are too-big-to-fail, so is the US government. All Obama has to do is to declare a national emergency, set aside the debt ceiling limit on national security grounds, and continue to issue debt. If the Federal Reserve were to resist, which it never would, Obama would simply nationalize the institution. If US presidents can take over the steel industry, or bring the industry to heel with the threat, it can take over the Federal Reserve.

If Congress fails to raise the debt ceiling, the only consequence would be the further erosion of Congress’ diminished power. Obama would say, and the public would accept, that Congress was unable to do its share of governing and had left the troops without supplies, the dollar unprotected, and was casting away American power.

The final result would be that Congress, having already lost the power to declare war, would lose the power of the purse. Henceforth budgets would be determined by the executive branch, which would also determine the proportions of expenditures covered by taxes, by borrowing, and by money creation.

The Republicans would have made Congress irrelevant like the Roman senate under the caesars. 

P.S. The Summer Trends Journal will be sent out on Tuesday

©MMX The Trends Research Institute®

A New Surge In Job Layoffs
- Decline of the Empire - July 21, 2011 - Companies are laying off employees at a level not seen in nearly a year, hobbling the job market and intensifying fears about the pace of the economic recovery... Cisco Systems Inc., Lockheed Martin Corp. and troubled bookstore chain Borders Group Inc. are among those that have recently announced hefty cuts, while recent government numbers underscore how companies have shifted toward cutting jobs... The increase in layoffs is a key reason why the U.S. recorded an average of only 21,500 new jobs over the past two months, far below the level needed to bring down unemployment, which now stands at 9.2%... The cuts also reflect the shifting outlook of employers, many of whom had expected the economy to gain speed as the year progressed. Instead, growth has faltered. If the pace continues to disappoint, more companies will feel pressure to pull back. "Layoffs have played a big role [in weak job growth] over the last few months," said Mike Montgomery, an economist at IHS Global Insight. "The soft patch is more layoffs and nothing else to pick up the slack."... In May, U.S. public and private employers shed 1.78 million workers, the highest level since August 2010. Among those layoffs, 1.66 million were from the private sector [graph above].

How Your Social Security Money Was Stolen – Where Did the $2.5 Trillion Surplus Go? - - Introduction by David DeGraw, Reports by Dr. Allen Smith - The Social Security surplus revenue should have been saved and invested in public-issue, marketable Treasury bonds. These bonds are “good as gold” and default-proof. They are the kind of U.S. Treasury bonds that are owned by China and Japan, Bill Gates, pension funds, and every other serious investor that owns Treasuries. If the Social Security surplus had been invested in public-issue marketable Treasury bonds, as it could have been, and should have been, Barbara Kennelly would be correct in saying that the Social Security holdings are “as solid as what we owe China and Japan.” Unfortunately not a single dollar of the surplus Social Security revenue was saved or invested in anything. It was all spent, and, once money is spent, there is nothing left to invest... The government cannot, and will not, ever default on any of its public issue, marketable Treasury bonds because of the panic it would create in world markets and the damage it would do to the nation’s worldwide credibility. But Congress has the legal authority to default on its debt to Social Security, and, if it should do so, the outside world would probably view it primarily as an internal matter between the United States Government and its citizens. One of the least known facts about Social Security is that, although the government does have a moral obligation to pay Social Security benefits to those who have earned them, the government does not have a legal obligation to do so... In a 1960 ruling by the United States Supreme Court, the court ruled that nobody has a “contractual earned right“ to Social Security benefits. Section 1104 of the 1935 Social Security Act specifically states, “The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress.” According to the above strong language, Congress could do whatever it wanted to do with regard to changing or even eliminating Social Security.

“Robo-Signing” Fraud Continues–Surprise! - USA Watchdog - Greg Hunter - July 20, 2011 - In April, fourteen of the nation’s biggest banks promised federal regulators they would stop robo-signing documents to foreclose on homes. This was part of a settlement to clean up the foreclosure mess caused by wild lending of the banks... Nearly 8 months ago, the banks were caught red handed fraudulently creating fake documents because they lost track of the originals in the haze of creating mortgaged-backed securities. Why is this still going on? More importantly, why aren't bank executives going to jail instead of letting them off the hook? Many have called this outright organized crime!!! The implications of this, to me, say the mortgage industry and bankers are panicked and desperate. It also signals the real estate market will not recover for many years... The story that follows is a must read from the Associated Press:

Gang of Six Plan Gives Tax Breaks for Wealthy, Social Security Cuts for Ordinary Workers - Truthout - Dean Baker - July 19, 2011 - Washington, D.C.- The budget plan produced by the Senate’s “Gang of Six” offers the promise of huge tax breaks for some of the wealthiest people in the country, while lowering Social Security benefits for retirees and the disabled. Despite claiming that they will "reform" Social Security on a "separate track, isolated from deficit reduction," the plan includes cuts to Social Security that would be felt in less than six months, as the plan calls for a new inflation formula that will reduce benefits by 0.3 percentage points a year compared with currently scheduled benefits. The plan also calls for a process that is likely to reduce benefits further for future retirees... It is striking that the Gang of Six chose to respond to the crisis created by the collapse of the housing bubble by developing a plan that will give even more money to top Wall Street executives and traders. By contrast, the European Union is considering imposing financial speculation taxes to reduce the power of the financial industry and raise more than $40 billion a year in revenue... The plan calls for substantial cuts elsewhere in the budget which are likely to cut into the incomes of large segments of the population, especially the sick and the elderly. The cuts it proposes to the military are just over 1.0 percent of projected spending over the next decade.

Federal Reserve audit highlights possible conflicts of interest - Washington Post - Neil Irwin - July 21, 2011 - For instance, William C. Dudley, the president of the Federal Reserve Bank of New York who was a senior official there in 2008, owned stock of American International Group before the Fed bailed out the giant insurance firm. The GAO report did not mention him by name, but Sen. Bernie Sanders (I-Vt.), who spearheaded the audit, identified Dudley as the unnamed official described in the report... Lawyers at the New York Fed allowed Dudley to continue owning the shares while working on issues relating to the bailout. They concluded that for him to sell the shares immediately after the central bank bailed out the firm would be more ethically problematic than simply holding onto them and selling at a later date... Dudley “held shares in these companies as part of his personal portfolio that predated his service at the New York Fed,” a spokesman for the central bank said. “A waiver was granted allowing him to hold these shares based in part on the judgement that had he sold these shares immediately after the interventions it would have the appearance of a conflict.”

Too Big To Fail?: 10 Banks Own 77 Percent Of All U.S. Banking Assets
- The Economic Collapse - July 18, 2011 - The American people were promised that TARP and all of the other bailouts would enable the big banks to lend out lots of money which would help get the economy going for ordinary Americans again... Well, it turns out that in 2009 (the first full year after Congress passed the bailout legislation) U.S. banks posted their sharpest decline in lending since 1942... Lending has never fully recovered since the crash of 2008. The big financial institutions like Goldman Sachs, Morgan Stanley and JPMorgan Chase have been able to get all the cash that they need, but they have not passed that generosity along to ordinary Americans... In fact, the biggest U.S. banks have actually reduced small business lending by about 50 percent since the crash of 2008... That doesn’t sound like what we were promised... These “too big to fail” banks have been able to borrow gigantic amounts of money from the Fed for next to nothing and yet they still refuse to let credit flow to local communities. Instead, the big banks have found other purposes for all of the super cheap money that they have been getting from the Fed as Ellen Brown recently explained….

Burning Collapse....But Nothing to See Here - Charlie McGrath says it better than I ever could - July 21, 2011


Terry J. Sigmon said...


When asked by one of my blog readers about how long before our congress could become irrelevant, I responded: Time might possibly be running out much faster than we think. If our President is permitted "...By the people..." to anoint himself King of America and by using the 14th Amendment, raises the debt limit and spend us into total oblivion, continue to create Czars (who will write all the details of laws) without the vetting process or requiring Senate Confirmation, issue Executive Orders instead of passing laws by the Legislative Process, and instruct his on personal Department of Justice to enforce his will...where do you think we will find FREEDOM?

Remember, when asked of one of the Founders, "...what have you given us?, he replied, A Republic...if you can keep it!

Silence DoGood said...

Nothing new. We saw much of the same during the previous reign of George II. And while we speak of Freedom, the continued concentration of wealth among the top 1-2% of those in this country speaks more to the concept of monarchy or a new Capitalist/Worker paradigm, whereby the minority is in control of the majority of people, assets, and capital. If you're sitting at the top, I'm sure you don't see a problem with that and if you're sitting anywhere else in that scenario, the view doesn't change. So the concept of Republic today is only applicable if you have the funds to gain access to it. Otherwise, everything else is subserviant to the Corporations and the Wealthy Elite. And no, before being labeled as such, Socialism is simply exchanging one -ism ruler for another. They just sit on the opposite sides of the fence. Alexander Hamilton wrote in "The Federalist Papers" that "when you control the means to a man's subsistence, you control his will." And that is exactly what we have; a nation of many controlled by an elite few and the many allowing it to happen. I'm not talking about politicians either, they are merely the mechanism of the exercise of that power.

James Thomas Shell said...

What we are seeing is the "Greed is Good" paradigm played out where parasitic people in positions of power feed off of anyone they can without thinking about the consequences of sustainability for their host and thus themselves.

We have seen as much of this on the local level as we have seen it on the national or global stage.

That is why the immigrants have been brought into our nation. It lowers the amount of wage that "businessmen" have to pay to the workforce. That is the reason why we have offshored our manufacturing industry, because it too lowers the labor costs devoted to the workforce.

But what these idiots don't understand is that eventually this race to the bottom with destroy the host that they are feeding off of. In the end everything that is of this earth is on this Earth. We have to create the abundance within a reasonable capacity of production. When we devote the abundance to the hands of just a few, which is actually about 1/10th of a percent, then we create a destructive, not a productive force. Just think, that is 300,000 people in the U.S., smaller than our Hickory Metro Area. We are devoting ourselves to what would equate to about 40 people in the City of Hickory. 40 people feeding off of 39,970, does that seem right?

We have lost the balance necessary to keep the machine of a productive and progressing mankind well oiled. You want to talk about a country that has lost it's moral bearings; there you have it.

I believe in capitalism, but what we see today is not capitalism. Profit is great, because it creates incentive. Raping people economically creates a disincentive. It is Hedo-Economics. The idiots at the top are destroying the marketplace. They sit at the top of the pyramid, but they are destroying the foundation below. I know so many people who are clueless and so many who were clueless and didn't realize how vulnerable they were and today they are scrambling. If it is going to be this way, then why should we even care? Why should we support the elite and their system of destruction?

harryhipps said...

It confounds me that when Democrats abuse power, Republicans squeal. And when Republicans abuse power Democrats squeal. A large government is going to lead to large concentrations of power in both government and business (which is heavily regulated by government). This is natural because of the tendency to get exactly what we've got, crony capitalism where gov't rules get bent to the wishes of private powers that pay their tribute to the gov't officials they need to buy to get favorite treatment. After all, power respects power.
My question is: why, then do we keep turning to the government to mitigate every challenge in life? Housing, education, health, money to live on, retirement, what is beyond government's scope? We have seen over and over that they rig the game, siphon off resources for themselves and whatever relatives they can hire to staff the bureaucracy, cater to the social whims of the day, and have little respect for efficiency or sound economics. Yet, when one of life's challenges or vicissitudes arises, to heck with private initiative or turning to other societal institutions, like civic groups, churches, benevolence groups, even insurance instruments, and cry out for more and more government intervention.
It's not whether a Dem or Rep is in power, it's where we allow the power to be placed. Politics is not the only field to play on and if you lie down with dogs, don't be surprised to get up with fleas.

Silence DoGood said...

Well, for me, I think its a dilution of what the entire two party concept is supposed to be. A system of checks and balances whereby one faction kept an eye on the other to ensure integrity and above board dealings. What we've got, just like James opins, is self serving greed. Special interests, lobbies, and PAC's ask for favor and if that doesn't work, they buy it. So in that regard, Harry is on target. Although conceptually I don't think Government need be large or small to be corrupt. All it takes is someone with power willing to sell it to the highest bidder. Same concept with selling your soul to Satan actually. Actually, I think perhaps it's the same thing, period.

harryhipps said...

Government doesn't have to be small to be corrupt, but it would limit the areas of our lives they have power over. There is nothing that they see as being beyond their control. And when they control all there is only one field to play on, and that is governmental (and maybe spiritual even though that is as big a mess nowdays as gov't). We have atomized society now to about the point that family, friends, business associates, civic and church groups have less and less relevance and support and Leviathan grows.

Silence DoGood said...

Why do people turn to government for everything? I don’t know that I have an answer, but I can tell you what I think. People, the common everyday variety, or about 95% of the population, have been taken advantage of for so long, their only means of redress is to empower government as purveyor of social justice and Lord High Protector. Why Government? Who else is going to stand up for these people against those who prey and take advantage? Be it individual or corporation, the unscrupulous will take advantage of a situation and for the most part, without government intervention, who is going to right that wrong? Well, in the 18th century, in the finest John Wayne tradition, you’d track down the miscreant and make him pay…literally for their transgression. But as we became more and more a civilized nation, the rule of law applied…and Government has the monopoly on law. Making them, at any rate. And when they are intended to protect the people, I think most are well intentioned. Special interests and lobbyists are only interested in whom they are advocating for. They have a very compartmentalized and narrow focus and are able to pay for what they want. They you saw the rise of consumer advocacy groups, watchdog groups, rights’ advocates, and people banded together in groups in order to lobby for what they wanted, since they didn’t have the money to buy it…originally.

Strength in dollars or strength in numbers will get you heard in the legislatures of the United States, be they Federal, State, or Local. And so it is with political parties and whom they are willing to pander to. Republicans typically go with big money, corporate interests, less government. Fewer regulations means more money for their friends and the less they have to pay out in taxes, wages, benefits, or pick a list of things. Democrats typically go with the common folks…or did until the North East Establishment waded into the mix and embraced the Great Society concept as their own and greater Government control was the means to an end. Right or Wrong? I have no idea. I know that today people want instant gratification from whatever occurs or government does and sometimes it takes decades or centuries for the full effect of what is done today to take place; and it should be that way. Government is not instantaneous, or dynamically evolving to meet societal whim. Change comes slow within government or it did, and it should. If Government tried to change with Society, can you imagine the upheaval that would cause? That might also explain what some see as a fundamental error in government today with regard to its size.

You used religion and I find that perplexing at times. Republicans scream for a reduction of Government interference, but yet, insist on the inclusion of religion, sometimes God, in any number of pledges, currencies, carvings, and ideas for Government. I say religion because specifically, you always hear the concept of “Christian Nation” put forth somewhere in that diatribe. When the word God is used and found to be valid according to the Constitution because its use does not respect an establishment of religion; it’s all encompassing. Be you Jew, Gentile, or Muslim. I’m not saying Republicans have a monopoly on stupid. The other side can be equally so. Gun control is the perfect example. Who else but a do gooder idiot would try to regulate an inanimate object rather than the behavior of the person using the object? Using that same logic, we could say that to control drunk driving better, we need to ban certain cars, and then do a survey to see which cars are being driving most often when people are stopped and arrested for DWI. Now we have proof that this car leads to drunk driving. Of course it’s moronic, but it’s empirical and factual, what else do we need, we lost common sense a long time ago.