A Critical Turning Point In American History

We progress, marching forward leaving behind us a trail of yesterdays, filled with events large and small, assembling memories, but some of the more momentous occurrences rise to a superior level which we include in our collective “history.” In that wake of our advance some of those momentous waves swell further, rising to become events that only hindsight can identify as pivotal moments in that shared recollection.

Such hindsight is not always 20/20. We may be aware of the events as they unfold, but their significance and impact on our march forward is not always self evident and years may pass before they become so. Self-serving motivations too often imbue the retrospective lenses with prisms which deliver infinite varieties of perspectives. 

For over four years we have been instructed by those supposedly most knowledgeable and most insightful, occupying positions of leadership advancing society forward beyond the now and into the great unknown, that a new and magically wondrous elixir named “QE” would be the salve to all anxieties. It matters little that QE stands for Quantitative Easing, and may as well conjure up notions of a long-reigning monarch, since its true long-term consequences appear beyond our collective comprehension. Nevertheless, its impact is not as benign as one queen’s influence on ‘her people’. With minimal scrutiny or analysis by most of our media, but with the unrestrained approval of Congress and the Administration, The Federal Reserve proceeds with its unrestrained expansionary monetary policy. It pretends that this is good medicine for a Nation yearning for a return to economic growth, unaware that a printing press, while capable of printing unlimited dollars, cannot print a single job. It also pretends that its expansionary fiscal policy is enabling the hoped-for purchase of homes and cars. It pretends that low interests rates render the escalating debt load inconsequential. The reality is very different.

QE, QE1, QE2, QE3, and QE4 ad infinitum, indulge the Federal government’s insatiable expectations of unrestrained spending. The Fed will continue to buy up billions in Treasuries and Mortgage Backed Securities from member banks well into the future (on your behalf – and remember that those major too-big-to-fail banks are still burdened with toxic debt). The Fed’s actions will also enable Tim Geithner to sustain his schemes for financing friends of the Administration such as he did the unions in the GM bailout, or the brilliantly invested hundreds of millions in Solyndra.

The QE program is to continue until unemployment falls below 6.5%, or inflation rises above 2.5%, and the interest rate of 0% will be held until at least 2015. Other than those who watch their savings shrink each month, does anyone care? Not Congress, certainly. We may have structurally experienced the boiling frog metaphor.

The mandate of The Fed is supposedly to support job creation and to keep inflation in check. It pretends to be concerned with inflation while creating truckloads of debt. How is this not going to produce run-away inflation in the long-term? It can be argued that real inflation has been running at well above the government published 2% – your own cost of all goods will provide some indication. Additionally, 0% interest has not and will not launch a rush to banks for loans. 0% interest is, however, rewarding The Fed’s friends with the cheapest money they’ve ever had access to, enabling them to make money without risk – enabling never before seen executive bonuses. This action by Ben Bernanke in fact works against new or riskier businesses looking for loans from their local B. of A. or Wells Fargo bank managers.

‘Liquidity’ is not the barrier preventing the creation of jobs by corporate America, large or small. What else do we know?

•  We know that larger corporations are refraining from investing in capital goods and are only tepidly bankrolling increased productivity.
•  We know that most of the bank reserve increases since 2008 are sitting idly on the sidelines, as is a vast amount of corporate cash.
•  We know that current unemployment is ‘structural unemployment,’ which could mature into a long-term malignant disorder. 
•  We know that new dollars created without the ‘backing’ of relative increases in economic activity (gold was once used as backing), places excessive downward pressure on the value of all dollars. 
•  We know that one major constraint to job growth is the current lack of confidence, and that uncertainty can be diminished, even eradicated, with energized leadership. 
•  We know that unrestrained government spending stimulates very little confidence, and fear expands to fill that void, stifling ‘job creation’ by companies afraid to stray from the secure status quo. 
•  We know that The Fed’s activities have resulted in relative decreases in the dollar’s purchasing power manifested in our increased prices for staples such as gasoline and food, and for those who can afford to, the purchase of gold. As recently as late 2008 you could purchase an ounce of gold for under $1,000. Today that ounce costs between $1,650 and $1,700. 
•  We know that The Fed actions have aggressively replaced personal ‘interest income’ with ‘dividend income’ since 2008. 
•  We know that rates of inflation have been understated by the Federal Government, just as the rates of unemployment have been understated. 
•  We know that Congress will not cut back on expenditures and we know that the current Administration is steadfast in its advance of more spending. 
•  We know that the unfunded future liabilities of Social Security and Medicare present a financial challenge far greater than the current total National debt. 
•  We know that The Fed has independent control of the printing presses and provided the  Washington Treasury with seemingly unrestrained amounts of magic cash (read ‘ability to spend’) through debt loaded onto the backs of all taxpayers, while at the same time restraining and suppressing the economy. 
•  We know that most of the political establishment in Washington has been unable to resist the temptations driven by self-interest and is willingly, and knowingly acceding to overindulgent debt financing. 
We know, but are we in denial?

Are we pretending and rationalizing those nasty gremlins away by convincing ourselves that the all-knowing elected leaders, their appointees and their friendly neighborhood banking masterminds will solve our worse problems?  Are we convinced that the Washington centers of influence will somehow coalesce supernal erudition into a pathway around the inevitable economic implosion which our love affair with debt has created?  Surely there must be good reason for some experts to be promoting profligate spending.  No?  Are we accepting rationalizations from QE believers that unlike the personal debt borne by consumers, the Federal government can simply, though carefully, arrange to have printed evermore of the world’s favorite currency to nurse its debt affliction?  With other nations also devaluing their currencies such as the Yen or the Euro, almost in lockstep with the U.S., are we clasped together with them in an only-slightly-out-of-phase race to the bottom?

We must be convinced that experts know something we don’t and that they have grasped concepts which eluded Thomas Jefferson when he wrote in 1814, “We are to be ruined now by the deluge of bank paper.” In a world where opinion has transplanted knowledge, authenticity is infused into unworthy illusions.  Does a majority of Society really believe that it cannot accept reductions in deficit spending while it refuses to acknowledge the need for financial diligence over growing government and unaffordable entitlement programs?  Does Washington really reflect the Nation’s wishes?  What is clear, is that personal considerations, personal influence and personal wealth have vanquished the halls of power in the Capital.

The political leadership has succumbed to the irresistibly seductive ‘Easy Money’ of the incomparably powerful and historically unprecedented Federal Reserve. There is nothing subliminal about the seduction which has taken full and absolute control of Washington. There has been nothing subtle or concealed about the production of new debt, and there has been no subtlety of process in the devaluation of the dollar.  Washington’s addiction is unmistakable, and particularly disturbing is that this addiction has so far had few serious consequences for those holding positions of power.

How did we get here?

Let’s recall some of the more infamous proclamations of just over four years ago. Assertions such as, “this is truly a once-in-a-lifetime economic nightmare,” and “the world’s most cataclysmic financial crisis since the Great Depression,” or how about, “world’s impending financial Armageddon.”  These unnerving and sinister shrieks instilled fear into the consciousness of every resident on Capitol Hill.  The perplexed and readily pliant media ensured that the apprehension blossomed into an epidemic. Admonitions of terror were used by Hank Paulson, then Treasury Secretary and formerly CEO of Goldman Sachs, and Ben Bernanke, currently Chairman of The Fed, who only months earlier in mid 2008 had proclaimed that all was well in the economy and that there was no chance that the subprime market problems would impact the broader economic health of the Nation. And their views on the taxpayer backed Fannie Mae, Freddie Mac and AIG, . . . what, me worry?  And yet, here we were, listening to fear, terror, panic, foreboding and threats. And what were the titans of Wall Street demanding as shivers ran up and down the spines of Washington’s decision makers?  A blank check made out to cash with no conditions.  “Too big to fail” along with, “bailout,” became household terms.

The shivering spines turned into talking heads on every evening news outlet in the Nation, parroting that the once-in-a-lifetime impending armagedon had, “left us no choice.”  The money was borrowed, the checks were cashed by friends of The Treasury and The Fed, and then the declarations evolved.  We heard from politicians with newfound bravery, “whew that was close, but weren’t we great, we saved the Nation from doom,” and the ‘inside’ players changed chairs with Geithner replacing Paulson at Treasury.  Across the country almost everyone with a keyboard and a microphone could repeat the chant, “we were on the edge of a cataclysmic crisis, but The Fed and Treasury saved the day.”  The cry had a rhythm and a plurality accepted this new gospel.  A new Administration moved through 2009 and 2010 with an acceleration of long-term financial commitments and borrowing, along with unrestrained check cashing particularly in favor of friendly ‘contributors’.  The Nation had stepped over a threshold and into a new paradigm.

The Nation had become desensitized.   Its elected officials and the banks had surely known something the rest of us did not comprehend.  On the Hill, the affliction spread as a realization that astronomically huge amounts of money could be created seemingly out of thin air and thrown at, . . . well just thrown at whatever might help re-election, and there would be no consequences – at least none in the near-term, and the future would take care of itself.  Epoch-forming levels of debt were created in the comforting expectation that The Fed would take care of ‘managing’ just the appropriate maximum.  It might even administer the creation of an infinite amount of dollars since, apparently, there would be no cost, no downside.  We were in a new era.  We are in a new era.

A decision made in fear and in panic changed the consciousness of Washington.  The new paradigm of increased spending and debt by trillions of dollars, would have no consequence. At least not to the current Washington. This shift, however, will see the next President step into an Oval Office presiding over an America encumbered with an estimated debt North of $20 trillion.  Whatever the amount, there is no will on Capitol Hill to change the narrative, and to the long-term detriment of a misled Nation, there is a deeply entrenched addiction which refuses to be curbed.  As for the value of the dollar in four years?  You will know by the real cost of living to which you will have been subjected.

The constitutionally mandated separation of powers between the Administration and all of Congress with which the Framers so presciently endowed an eagerly awaiting Nation, has been trampled by effectively maneuvered, yet elected, debt junkies.  IMHO, America has been bowed by, and has capitulated to, egocentric forces which do not hold its best interests to heart.

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• The Obama & Krugman Keynesian Conceit

Paul Krugman, the Keynesian drum-beating economist, was invited by CNN on Sunday to promote the Obama strategy of pumping additional billions into the economy. One of his very telling responses to Fareed Zakaria’s question on significantly more spending and borrowing was “what about now?”

This very self serving response from Krugman was an advocacy of profligate spending very much in keeping with a too popular expectation of immediate gratification. Pushing the debt onto future generations, and “get-me-what-I-want-now,” is the egocentric inclination that delivered the current state of financial devastation. “What about now?” came from the mind of an economist who exudes a distinct arrogance much too indistinguishable from that personified in Obama.

The defiant arrogance, evident in both of these currently influential individuals, is a disconcerting heap of hubris that America’s present and future conscience must reject out of hand. Another prognosticating ego on the talking-head circuit is Nouriel Roubini, the self-proclaimed forecaster of doom, who improves his personal bank account by knocking capitalism and calling for more government intervention. Current and future taxpayers cannot afford to accommodate such egocentric thinking, from egocentric minds. When overwhelming egos audaciously preach anything, we should become very suspicious of the direction they profess to lead.

I am making a statement less on economic theory, than I am making an observation on the message our intuitive natures are very likely receiving, many of us at least - the Obama and Krugman recipe for a utopian Now is false. It is false for the Now, and it is false for the Future. We should be apprehensive and skeptical of all egocentric thinking. We should very much distrust assertions, articulate or otherwise, that emanate from well-understood egotism.

Weary taxpayers should demand leadership that does not ignore the burdens of tax increases, massive stimulus spending, and out-of-control deficit spending. They should also demand of the Krugmans of the world, why they have no solutions to the impossible debt load that will be confronting America in 10 to 12 years. Taxpayers are standing on the sidelines of a progressive parade sweeping the country with an ideology that is expanding government to redistribute wealth rather than enacting measures to stimulate its creation.

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• End Our Intimate Relationship With Debt

American taxpayers are witnessing an unprecedented full-frontal attack on free enterprise, business, innovation, invention, creativity, productivity and entrepreneurialism. This is a misguided strategy from elected officials. At its core it is also an attack on employment.

We are provided a daily dose of news from Washington and from Wall Street’s experts that the economy is now in a phase of recovery, however we are told that this is a jobless recovery. "Jobless recovery" must be a new mantra concocted to perpetuate feel-good perceptions. There is little point in wasting anyone’s time analyzing this non-sense. For the millions of unemployed, and all the workers who will lose their jobs over the coming months, the economy is, and for the foreseeable future, will continue to be in a recession. This is not a glass-half-full attitude, but a lucid perception of the reality facing the road ahead for taxpayers, so let’s not sit and wait for answers from government. The actual number of unemployed is over 26 million. Where are we going?

As a result of this drawn out recession, and out of the undiminished American perseverance, a whole new wave of entrepreneurial ventures will spring up over the next five years. Washington has not been able to kill the entrepreneurial energy that created the millions of jobs in the first place, regardless how much it has tried. This remains enough of a "free" country that from the housewives in the suburbs struggling to feed their families, to the laid off office managers in the cities, individuals across America will rise to the challenge, and do something for themselves. They will take back whatever control over their own lives they might have relinquished to carelessness. Such is the nature of the human condition, as long as it does not allow itself to succumb to oppression, but holds the door open to fulfilling inspiration. America continues to be an environment where fulfillment at all levels is possible.

Out of the current stress and anxiety, will sprout a new collaborative entrepreneurship flowering through mutual inspiration and encouragement. The population’s negative reaction to “bigger, more expensive government,” that we have seen this past year, has not been an accident. While there will always be those who want to be “taken care of,” the vast majority of America has a natural desire to flourish and succeed without “big brother.” America also wants to see its government implement its laws with more diligence than has been demonstrated over the past twenty years.

Over the coming decade, the biggest change in perception that Americans will have to make will be in their relationship to debt. Debt has been very effectively promoted by banks and government, to the point where consumption of the conspicuous kind became a necessity for happiness.

Our general perception has been that debt is not only right, it is a right. Evermore lavish homes with equally lavish mortgages have become expectations, without which we have not achieved the unanimously accepted “dream.” How has such a perception translated to the national stage? It has become nationally acceptable that the U.S. government reach a state where it owes $13 trillion or a little under $120,000 per taxpayer. With an ever-increasing Federal budget deficit nearing $1.5 trillion, and no one seriously yelling stop, politicians have every right to think they have free reign to do as they please.

Washington knows and understands that perception is everything. Until the taxpayers decide otherwise, the White House and Congress will not implement restraints on the out-of-control spending.

The 110 million Americans paying income tax should lock out the grating noise of the propaganda machines lathering up their conscious minds with idiocies, and do what is right - Change perception on debt. Debt should be used when absolutely needed, rather than when desires have been stimulated into “wants.” Much of the national budget has been bloated by special interests, and by satisfying the personal wants of elected officials. A fraction of all government spending is needed. Demand a drastic cutback on that spending.

Debt has inflicted enough damage on the American landscape, and come very close to injuring the American psyche beyond recognition.

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• Obama & Middle Class Income Tax Increases

The recession is dealing a hard blow to government revenues with tax receipts expected to drop 18 percent this year. The big question being lathered across the Nation, but not being answered honorably by the Administration, revolves around tax increases. The double-speak and denials are only adding annoyance to the feelings surging around the stress already felt by the taxpayers. Not only will the “middle class” be saddled with fresh tax increases, but so will you and your neighbor if you live in America.

The strategy of repeatedly pretending that only the wealthy are going to pay for the massive spending increases is quickly getting old and not believable. From the mansions in Beverly Hills to the park benches of Central Park, all residents will be sending more dollars to the government in one way or another. This is not about new tobacco or alcohol consumptions taxes, or even about the massive tax-grab that will come from Cap And Trade, this is about new tax measures, and new taxes on everything that can be squeezed for cash starting with your income. Forget the campaign promises you almost believed about middle-class tax cuts, and forget Sunday meet-the-press equivocations by well-trained emissaries like Geithner and Summers. Your taxes are about to increase dramatically.

The Administration is very demonstrably building a government well beyond anything that national revenues will be able to support either in the mid-term, or the long-term. With the Nation stuck in a long-term economic quagmire hurting all taxpayers who are already feeling the weight of chronic tax-creeping, the imposition of obvious and visible new income taxes is politically dangerous. The sophistication of the speciousness will find new levels of creativity during the coming weeks.

The White House will no doubt launch a campaign to “talk-up” the economy in the hope that positive proclamations will make them so. Reality is that unemployment, well above the claimed 10%, is somewhere around 16% when you include “marginally attached workers” as well as those employed “part time for economic reasons,” calculated as the “U-6 rate” by the Bureau of Labor Statistics. Unemployment increasing is neither a turn around, nor a bottom to the recession, and is a far different reality from the “8% or less” predicted by the Administration when it launched its stimulus program. So much for rose-colored forecasting by economists.

Tax receipts are apparently down by 22 percent on individual incomes, and are down 57 percent on the corporate front. When you blend that with a deficit that will surge to almost $2 trillion this year, and a National debt accelerating past $11.6 trillion, your options are limited. We can assume that cutting federal spending is an ideological impossibility, leaving the government with two principal choices, and neither induces positive tingles up your spine. You can be asked to sacrifice and have your income taxes increased massively, or the dollar’s value can be allowed to drop significantly as more of them get printed. The likely path will be a less harmful blend of both of these alternatives. The key will be to allow the dollar’s value to slide gradually so that there are no sudden shocks striking at the heart of national and international markets. International creditors like China will be irritated, but will accede to the gradual process of easing down the dollar. Forget the doomsday scenarios, however, America will take years to work its way out of this recession, then pay off past and current government spending sprees, on its way to growing through the new financial demands on its treasury that will surface over the next decade from baby boomers, social security and healthcare.

In order to initiate an advance on the lengthy economic turnaround, the joy ride of debt-spending-with-wanton-abandon mindset enjoyed by Bush and continued by Obama must be brought to a close. Deficit growth cannot continue on a path exceeding the rate of economic growth. The Administration should surface out of its decision closet, and become resolutely emphatic on a course of action that will reverse the deficit's current trend. Obama’s next address to the Nation should be, “I know I promised that if you made under $250,000 per year, you would not see your taxes increased a single dime. Not your income tax. Not your payroll tax. Not your capital gains tax. No tax. I was wrong. I was hasty in forming that covenant with the electorate. We are a government living beyond its means, with currently no end in sight to the discrepancy. Here is my plan for an overhaul of the tax code, and what it will mean to every single one of you. You can expect your income taxes to increase an average of ten percent, for starters. Now, about a national sales tax, …”

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• Obama’s Squandering Of More Than Capital

With a straight face, Obama has announced that just as Americans are tightening their belts, so too he is taking fiscal responsibility seriously. He magniloquently claims he has “charged” the OMB to go through the budget line by line taking action to save Americans tax dollars. He assures that he is taking “aggressive” action, and result? $17 billion in Savings “next year alone.” America is not laughing, and while the MSM is reporting this presentation with languidly deferential support, some of the reporting appears to be betraying some signs of embarrassment with the absurdity of its task.

How can the majority of the MSM not feel queasy when reporting on the Administration’s new aggressive savings claims? After emphatic campaign promises, and consistent affectations since the election that Obama would bring change to Washington’s addictions to spending, a $3.55 trillion dollar budget can only yield $17 billion in cuts?

Evidently the Administration believes that this one half of one percent scrubbing of the budget will be easily “bought” by the public if it is presented with “we can no longer afford to spend as if deficits do not matter and waste is not our problem.” At least that’s how it’s sold to the media since even the NYT and the Washington Post couldn’t find a term in their dictionaries to call this perversion of the truth for what it is, ... a lie.

The MSM must have accepted that Obama’s cutting of a $35 million long-range radio navigation system had taken superhuman effort, and been convinced by Obama's refrained, “we cannot accept business as usual.” Repeated often, with a frown, and earnest conviction, this affirmation apparently becomes convincing. Evidence that it works rests in the fact that a majority (though a shrinking one) of the nation is buying into the brilliant salesmanship committing taxpayers to almost $15 trillion in debt in four years.

Perception is everything, it seems, and the Obama White House has mastered the art of affecting consciousness. It can make absurd statements with seemingly no serious challenges from the Fourth Estate. The repercussions from this complete lack of fiscal acumen will bring an electorate far beyond the change it was seeking after eight years of Bush.

Bush believed it was his right as President to run helter-skelter and without discernment through the corridors of debt. He was clearly apathetic to the consequences. Obama, a little more than a hundred days in office, is making the object of his blame look like a miser.

Obama’s determination to grow government, plus the bailout / stimulus funds he is being manipulated into providing, will bring America’s national debt to a level approximately equal to the nation’s GDP. His supportive Congress will ensure that his programs win the day, however, the nation will become weary of the reality behind the presentation well before the First Term is over, and a popular President will have squandered an opportunity to bring positive change to Washington.

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• A Nation Changing First 100 Days

Marking the First Hundred Days of a Presidency is a benchmark, a reflective moment of sorts, and more importantly it is a point at which a nation assesses the job done by its new leader. In an environment where the vast majority of the national media has demonstrated no objectivity in its reporting on the Obama White House, America is being aggressively rushed into potentially destructive economic adventures.

Two social objectives of the new Presidency that should be commended are Obama’s goal to extend the availability of education and the provision of universal health care. That he plans to achieve both in a time of economic crisis is difficult to comprehend, nevertheless, these should be long term objectives worthy of a modern nation since superior education of a country’s youth ensures its stability for the foreseeable future. Even the much maligned George Bush initially set out to bolster educational spending when he stepped into the Oval office.

Obama came to the White House an ideologue, with experience very distant from the world of economics, business and entrepreneurship. He has been energized by a voting public seeking renewal, promises of a better tomorrow, end to the war in Iraq, and deliverance from the weight of the recession.

The President’s principal focus and attention through the First Hundred Days should have been the economy, and should have remained the economy. His shotgun approach to administration has exposed his weakness on the economic front which allowed Bernanke, Geithner and Summers to wreak havoc over the taxpayers’ futures with commitments of trillions of dollars to the banking community. Obama’s lack of knowledge, experience and interest in all things economic, have left individuals who were responsible for the mess, in charge of directing the grand Wall Street bailout program, the stimulus package, and the restructure of corporate America.

Seemingly stuck in silent stupor, the MSM uncritically observes an administration already heading to almost $2 trillion dollars of deficit, and planning the spending of $4 trillion in the 2010 fiscal year. It almost appears as if the numbers have numbed taxpayers. "The size of such spending is incomprehensible, so why worry about it?" “The Administration and Congress aren’t worried, so why should we be?” “Wall Street seems to be in agreement, so that must be good? No?” Bankers on Wall Street are in fact ecstatic with the Administration’s profuse distribution of taxpayer dollars.

Somewhere floating through the ether is the assumption that all this bailout and stimulus spending of trillions by the government will magically create a vibrant surging economy that will enable repayment of the trillions borrowed. Preventing failures of major financial institutions has been sold to taxpayers as “a must do or we all starve,” concept with absolutely no valid presentation of the facts underlying either the size or nature of the bailouts or the assets being bailed or even where the cash really went. All the while Obama promised transparency, … well, actually he pretended he wanted transparency. There is no transparency, but this is a minor footnote on the real agenda.

The escalation of government presence, government interference and government corporate welfare is an ideologically launched imperative that has very effectively used fear to restrain objection. The public has acquiesced. This government expansion will not only never be reversed, as is the tendency with most government expansions, but it will create a fundamental shift in the core of the American psyche, the American business landscape and in the American social system.

We can expect that the commitment of such unprecedented government intervention, expansion and spending will lead the nation into double digit inflation since the economy will not generate the surge in tax payments necessary to cover the debt, the interest on that debt, and the total government committed funds over the coming twenty years.

As noted here previously, this President’s First Hundred Days should have been spent understanding the complexities permeating the economy of the great nation he was taking charge of, and most of all he should have established for himself a thorough grasp on the nature of this peculiar economic ingredient we call inflation. Inflation is a destructive force that destroys the wealth of a nation, of companies and of individuals.

With all the brain power available to the largest media outlets, it would be enlightening to occasionally hear a perceptive question, or a contrarian article of substance objectively assessing the measures being implemented by Washington. All Presidents obfuscate when selling themselves, however, after One Hundred Days, it is about time the media presented taxpayers with some analysis that might bring about some restraint on the abuse being escalated on them and the next generation by the Obama White House and its suppliant Congress.

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• Myths Of Debt To Be Corrected For 2009

The year 2008 brought a rude awakening to a population enthralled by a bottomless availability of cash. Mesmerized into debt accumulation we now wonder how we could possibly have overdone it.

As we launch into a new year, it might bode well to be reminded of some of the myths we enjoyed so much these past two decades.

• Debt is your key to achieving the lifestyle you deserve.
This well-oiled refrain was repeated ad nauseum throughout the past quarter century, to the point where the affirmation morphed into an accepted assertion. I borrow, I spend, and therefore I am. The Fed, Congress and the White House have historically presented a united front to convince taxpayers that they should seize all opportunities to consume. It has been the patriotic duty of all citizens to consume impulsively and with abandon, taking absolute custody of the title Consumer.
• Spend yourself into economic recovery.
It appears that all media has bought into this myth. Abundance of noise from economists and pundits has been particularly effective for too long on this one. The economy needs you. Business needs you. There are bonuses to be paid out at the top that will trickle down and stimulate all corners of your economy. Your guilt will get you if you don’t spend everything you can borrow. Forget saving for a rainy day. Forget budgeting, and absolutely reject the concept of finding balance between funding your needs and setting aside money for your future unanticipated emergencies. You don’t want this recession to devolve into a depression, do you?
• The Debt you are drowning in is not your fault.
How could you possibly have known that buying your first home for $500,000 with nothing down and a variable rate mortgage would launch a perfect storm through your future, ravaging your state of mind?
• Wall Street, The Fed, and the World Bank know what they’re doing and they know best what is good for you.
This one requires little delineation here. Dissecting it might even be a little too depressing, and might dissipate the joy of a brand new year. We'll save it for a future article.
• Becoming highly leveraged is a right of passage into nether regions of society.
Leverage’s modern redefinition is imbued with notions of achievement beyond simple debt. It embodies an ultra-modern conversion of water to wine. Wall Street was able to stretch the boundaries of debt with the creation of derivatives, those unfathomable, little understood but outrageously leveraged vehicles that were so effective in creating billion dollar bonuses. With government advocacy, the banking industry distended debt to the extreme boundaries of leverage, inventing unfathomably creative debt instruments hiding behind ambiguous terms such as "derivatives." The beauty of this myth rests in its apparent ability to have magically enchanted the top of the economic intellectual food-chain.
• You should not wait until tomorrow to acquire what you can get today through debt.
Instant gratification has become a firmly entrenched affliction. Capricious satisfaction of wants has transplanted patient and planned fulfillment of needs or considerations for the future. It is almost as if there has been a very deep shift across a broad swath of consciousness, and now the thrill of the chase no longer provides the joy it once did. Have indulgence and consumption become the voyage?

Intuitively we have all known for over a generation that we were living a great paradox. Lifestyles were better than ever, yet in the core of our beings, we all felt an unmistakable angst. Since the mid eighties, each one of us sensed that very conflicting dichotomy between what we were doing, and what we knew was right. We were over-borrowing ourselves into the highest standard of living known to any society in history. Political leadership cynically applauded.

2008 slapped us into acknowledging that our intuitions were right, and that long-term health of an economy requires savings and also requires investments. It has been years since it made any sense to leave money in a savings account to collect interest. Inflation deducted from the interest left a shrunk balance at year-end. Bernanke’s interest rate cut to a half percent, will have little impact on borrowers’ access to loans. Panic set-in, and attitude shift will be slow process. Congress and The Fed should revisit the government's interest rate policies. Taxpayers should be looking forward to making money on their "savings," … in the bank.

We are thinkers, inventors, creators, producers, nurturers, and spiritual beings, who can enjoy a material abundance we ourselves define and frame. We decide the nature and scope of our intellectual and spiritual sufficiency. Rather than giving in to external strafing of our decision making, it is high time each of us gave a little more room to our own individual Intuitive Knowers, abating the consequences of our overwhelming egos and intellects. Human satisfaction and progress should not be measured in GNP growth, or intoxicating accumulation of possessions. The voyage has become exhausting. It is time to sweep aside the myths. It is time for living with less anguish, and acquiescing to the truly profound joys life offers far from the sirens of debt.

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• A New And Different Shattering Of Assumptions

You have done your share. You work exhausting hours, sometimes at two jobs, and you have succeeded by any definition in fashioning a good life for yourself and your family. You accepted that while you were taking care of your part, others, some perhaps with more knowledge, power, influence and wealth, were taking care of theirs. Good for you, and well, … not so much.

Assumptions are a foundation of society’s functioning processes. As you travel at 55 miles an hour down a busy highway, you assume. You assume your automobile’s wheels will not suddenly part ways and decide to retire in a roadside ditch. You assume others driving in the opposite direction will continue enjoyment of life long enough to pass by your left window at a relative 110 miles an hour, with no sudden change of heart that might cause your abrupt transition into a hood ornament.

You assume that those you have elected to office will ardently carry their impassioned campaign trail promises to Washington or The White House. You assume that all knowing sages who have been given the keys to the National Safe will be diligent in the management of its contents. You assume that the Harvard educated captains of industry will manage the corporate world in testament to their prodigious capacities. You assume that others must have special insights far exceeding your own on the big picture.

We all assume. We have to. The faculties of human endeavor expect it. Without assumptions, the evolving ritual dances of the social, political and other conventions would disjunct into paralysis. Our behavior holds certain expectations of its ambience. In the event that those expectations are violated, we have enacted laws that will impose a collective retribution.

Current economic, political, corporate and social events are shattering our assumptions with impudent and invasive intrusion into the core of our lives. Our centers of gravity are undergoing some dislocation somewhat similar to that experienced three generations back during the Great Depression. The global interconnection and interdependence allows for a more pervasive impact on the earth’s population by the current version of high anxiety.

Do you remember the day when that parent you thought archaic told you, “Things are rarely as they seem?” This assertion pertained to perceptions. You were convinced that government bailouts were foreign concepts too far down the politically impossible spectrum to warrant serious thought. Now you listen to unwavering shouts from experts telling you that bailing out banks and financial institutions is not only good for you, it is mandatory for your future well-being and peace of mind.

Will the best-connected voices, the CEOs cap-in-hand, be the most rewarded in the bailout line-up? The taxpayer will continue to borrow trillions of dollars to enable these bailouts of Wall Street, and it will be left to our children and grandchildren to figure out how these debts will be repaid. Can’t we just assume that they will? That would be easier. The dogmatic nudging of our perceptions is disquieting. We are perhaps observing, and financing, the dawning of a new capitalistic system and a metamorphosis of the corporate entity.

Surely somebody knows what he or she is doing. The assumptions return. This new Obama administration with its dozens of experts must know something we don’t. It will make things better with a stimulus package on top of the bailout packages. This stimulus package will be the biggest in history, setting new incomprehensible levels of national debt. Shall we assume once again that for that singular reason, this package will work?

The cycles of our presence on this Earth are not all within our control, and these times are an experience along our journey for which our spirits will draw a learning. New assumptions will advance on our percepts, reframing our outlooks and expectations, and your parent was right, things will rarely ever be quite as they seem.

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• Bernanke And The Perpetuating Credit Card Swindle

Banks, and whomever else we blissfully accepted a credit card from, have been charging us, all of us, grossly usurious fees. Even those diligent observers faithfully sending off payments before they were due, have long been abused by capricious credit card issuers.

When the Head of The Fed, Ben Bernanke, gets involved because Congress has been asleep, you know the pressure of discontent from tens of millions of Americans is building beyond a sustainable level of annoyance. Ben Bernanke's comment that the rules, “will establish a new baseline for fairness,” is so fraught with meaning one doesn’t know where to begin its appreciation, … well almost.

This is what he might be saying, “We have been exhorting so much out of your pockets for so long through slight of hand, guilt, ... no, make that fear, that we are led to enact a few rules that will do nothing for you. If we present these new rules with enough jaw-dropping appearance of boldness and empathy for your well-being, you will remain oblivious to the vulgarity with which you have been and will continue to be fouled.

“Don’t get yourselves in a knot over this one-half-of-one-percent-rate thing on the sub-slime, I mean sub-prime interest rate the Fed charges its friends, and quit wondering why you can’t get in on that good stuff. It doesn’t concern you, and has nothing to do with you. Never has, never will. That rate has no correlation to the 14% to 36% interest you pay on your credit cards. Such rates are because you are all really terrible at keeping your books in order, and making all your debt payments on time. If you knew what you were doing, you’d never agree to pay such insane rates. You are so oblivious, you could be getting better rates on your street corner. Idiots. Oh, sorry. I didn’t mean that, although, why are there almost three quarters of a trillion credits cards holding a trillion dollars in debt when there are only 300 million men, women and children in this wonderful country of ours? And, NO, I will not go into an explanation of why our friends, the banks, get almost no interest charged on money we lend them, while their credit stinks, and you have to bail them out. It is much too Byzantine a system to be explained. Even my bosses have no clue.

“Ladies and gentlemen the rules regulating credit are complex, though a little feudal. You’ve understood all along that we, umm, I mean the banks and credit card issuers, could set interest rates and fees at whatever levels they wished. Why so much surprise? We are nevertheless pleased to announce that we will reduce re-pricing, a little, well, we won’t reduce it but we want you to be notified when it will happen. Will we check if lenders tell you ahead of time? No. Will you? Not much, no. We are absolutely certain most of you never pay attention to notices or fine print. How many of you can tell me, right now, how much interest you pay on those ubiquitous and so colorful pieces of plastic? … Clueless.

"Let me make something perfectly clear. We do not owe you debt. Debt is not your right. It is a privilege. You should be grateful we even allow you to borrow from us to lever your lavish lifestyles against your future incomes. Right now we’re not so comfortable with your prospects for continuing those incomes, so we are simply making some adjustments. Tweaking the system a little. We also don’t need to see any demonstration parades coming down Avenue of The Americas whining about how you’re hard-done-by, or chanting ‘ban the fed’ or shaking signs with ‘help we’re broke.’

"We are gleefully aware of your lack of familiarity with the term, Saving. It is a term in the English language that refers to economizing or conserving money for the future. Who do you think keeps count? I do. Why? Because tracking details of your habits with microscopic attention enables us to accurately time adjustments in the system. I don’t mean adjustment in prime rates, I mean the establishment of regulations that will instill in your minds an impression of our all-knowing prescriptions for everything financial that ails you.

"This is why we will allow companies to raise interest rates only on new cards and purchases, not on existing balances. I know that you think the interest on the old stuff’s already been jacked through the roof, so what difference can this possibly make? True, but when you add to this the restriction on allocation of payments to account balances with lower interest rates, and reducing cross-card-credit-contamination, now we’re talking vast implications on the credit system. Huge. This is big for you guys. Really. Well, maybe. Hey, we’re doing the best we can here at the Fed, and things are tough everywhere. No one wants to give an inch. That is why we won’t be putting caps on interest rate levels charged by card issuers. Sorry. Oh, and by the way, because we just cannot upset our friends, these new rules will not go into effect for at least a year and half. You know how things are. Congress is so laborious. Each one of those crapulous crackpots wants a piece of the pie before agreeing to anything. They think pork-barreling is their right, … things like that.

“In conclusion, I know deep down in my heart that all of you feel a very strong and emotional commitment to repaying your obligations. We are thrilled to know that you will be making your payments on time and that you will atone for your sins, … umm, that you will extinguish your debt, the principal and the interest. Every penny. Particularly the interest. Yes, make sure you repay the interest. Perhaps I shouldn’t harp on the principal so much.

“We will lend you more as you need it, and the presses, the paper, the ink are churning 24/7 to keep up. Now I must go have lunch with your new leader and explain what I’m doing, again. I wish these guys would just leave me alone, their eyes just glaze over when I talk to them. Merry Christmas, and happy spending. It’s good for the economy.”

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• Obama - The Second Tell

As follow-up to a November 21, ’08 article on this post regarding signs that may reveal the direction that an Obama Presidency might take, the following presents another “tell.” This one is less innocuous, but may prove to be more expensive to America.

Perceptions inside the current White House, when Bush and Cheney took office, were that incurring debt was its right and was its political capital to spend with Cheney supposedly claiming “deficits don’t matter.” Hindsight was temporarily kind to them with support from William Niskanen, a member of Reagan’s Council of Economic Advisors also claiming, “The lesson we should have learned is that deficits have little or no short-term economic impacts.”

Through the early years of this decade, everyone accepted the premise that debt was a normal, perhaps integral conveyance of a modern society, possibly even an applauded one. From economists to taxpayers on assembly lines, everyone dwelled in the comfort that deficits and borrowing could bring unfathomable respect from acquisition of material possessions. Second mortgages were objects of desire and their procurements were cause for boasting. And didn’t second cars and gigantic cinema sized TV screens provide jobs for people in foreign lands anyway? Who could possibly argue with success?

Debt administered through spinal shunts delivered energy into the U.S. economy. The amphetamine rush sent economic experts into undiluted delusions of grandeur, and the exploiters into creative overdrive on derivative concoctions too complex for their corruption and decomposition to be diagnosed. Somewhere along the delivery track, the drug magically transformed into analgesic and the rest of society, including government, slid into either acceptance or compliance. Some sectors of government abdicated responsibility, when their persuasion to appear oblivious was finessed with financial seduction.

Debt is seductive. Its power is evidently overpowering. America is anxious to move on beyond the current administration and is anticipating a new President with promises of change. We listen for signs of that impending change, and so here is the Second Tell. During this past weekend President Elect Obama, while making promises of unprecedented public works projects, stated, “We've got to provide a blood infusion. And that means we can't worry short-term about the deficit." At least Obama’s delivery of attitude toward economic probity was less arrogant than Bush and Cheney’s, but identical in its bearing. He seems more genuine, even if misguided. The legal debt ceiling has already been increased to $11.3 trillion and more increases will be requested.

Evidently not so much has changed or will change, and deficits be damned, full steam ahead with borrowing and government intervention. An additionally disconcerting sense is felt when accepting the reality of the notion that even bigger government may not be just an enigmatic abstraction over the coming four years.

A preceding article on this post discussed the need of the 44th President to urgently obtain an intensive and thorough education on inflation. With the coming boom in currency creation, not doing so would be tantamount to an abdication of responsibility.

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• Revising Government Relationship To Money

In the search for solutions to the global economic turmoil, there is a disconnect between the objective of bankers and financial institutions, and the objective of government (read: people). The global crisis presents an evolving pathology beyond the reach of Paulson, Bernanke or any other imposition. That is the great mystery and abstruse nature of money.

If current examples of frenetic activity on the levers of the financial system are any indication, no one really understands money. The actions have been more akin to transgressions against taxpayers, although where would any forensic audits hope to begin on a course to discover root causes for the overwhelming market, currency or resource price gyrations. Some well enough appreciate how to use or manipulate money, but who really understands its complexities and flux? We all make some use of it, need it, work for it, fight for it, even beg for it, but understanding it is an altogether different exercise. We leave that to the wisdom of economists and Wall Street addressed expertise.

In the past year, banks all over the world have lost billions, and many have slid into bankruptcy. Paulson’s decision to hand billions to bankers, in the hope they would loosen their grip was just that, hope. J.P. Morgan for example acquired depressed financial entities for pennies on the dollar, expanding its presence and reach over the economy. But lend? Not so much. Why should it take risks, when it is still standing after having been more diligent, or gifted with higher levels of awareness than others?

Banks will not lend in this climate of uncertainty when the term rescue has morphed from verb, or name, into an adjective of economy. Paulson did not structure his deals with effective strings attached to ensure the function of providing liquidity to businesses. If the Secretary of the Treasury’s purpose was to stimulate the wheels of commerce on behalf of taxpayers, he is failing. Europe has also taken the bank bailout route in earnest, with each country dispersing enormous percentages of its GDP hoping to diffuse uncertainty and minimize the collapse of banks.

Did anyone listening to the concept of the government acquiring toxic assets from banks not have an intuitive flutter? And with all the talk of mortgages, are we forgetting the careless lending practices that were also applied to car loans and credit cards? Without disputing the overall concept, who could possibly be chosen as the arbiter of moral behavior on such elemental questions as the application of “valuation” on these noxious and nebulous inhabitants at the far reaches of the derivative universe? Walking on water would prove a more plausible expectation. This is not a smear on Paulson. He is human. He will no doubt do what he believes to be right. Paulson’s view is that of a banker. We will not change human nature, nor eliminate greed through regulation. Although perspective can be limiting, and in the existing financial situation may act to further exacerbate the damage, perspective can be modified. This can in turn alter behavior. The banking system may be in crisis, but much of the rest of the economy is not. At least not yet. Is a very different approach worth consideration?

There are endless suggestions floating through the political maelstrom girding an out of control financial implosion that will not be corralled. We are now heading to the $2 Trillion dollar bailout mark with no end in sight, and little substantive ignition of financing activity. On the personal front, taxpayers and workers are on average currently paying interest of 6.95% on car loans, 11.43% on credit cards, with $2.6 Trillion of consumer credit outstanding.

Taking counsel from Abraham Lincoln and Theodore Roosevelt, in the hope that we might prevent reprimand from Thomas Jefferson, may we be so bold as to proffer on the Secretary a few additional suggestions on dealing with the vicious cycle of credit contraction?

Mr. Paulson,

- Send out the whole army of economists and accountants at your disposal, add more as needed, to meet with the critical cogs in the economy, businesses, not the banks.
- Disperse these troops across the country, adding administrative support from state level when needed or appropriate, to meet with companies large and small.
- Don’t ask what they need, that would be insulting since you already know, just ask, “How much and for how long.”
- Assess the reasonableness of the demands based on current audited financial statements of each corporate entity and make a decision on the urgency of the need.
- Cut the check within two weeks, and here’s the key, No Interest. None. Why should banks be the only ones with access to borderline negative interest rates?
- Prorate repayment schedules over a five year window, preferably, but remain flexible and susceptible to the capacity to repay.
- The taxpayers (read: government) aren’t in need of interest on their money. Whether entrepreneurs or employees, they require an economy that continues to thrive, provides them jobs, a roof over their heads and nourishment for their kids. They’ve already been slapped into awareness on the traps of endless credit, they will be more astute from now on. Furthermore, the national currency is not backed by anything other that the strength of the economy, ergo, until there is a change to something like gold, silver or microchips backing the currency, the economy is it. It needs bolstering and we will trust that its resurgence will provide enough gain for us to deal with the cost of escalating debt.
- Take care to ensure that proper documents are signed with equitable collateral.
- Establish very tough regulations and repercussions in order to limit abuse, kick-backs or graft.
- Nationalize the Federal Reserve if you have time, before deploying the distributors. The Fed will be less cantankerous in good time, but you must give it the good news. It will be really good news, since there will be no leveraging with 30+ multipliers on capital to asset ratios, as we have seen over the past two decades in the financial derivative escalations.
- Government will actually have accurate measurements on the money supply, and there will be no concern for where the interest owed will come from, since none will be required. 
In other words, no one needs to fry at the bottom of the financial pyramid. This will also reduce the need to infinitely create new debt.

That’s it, Mr. Paulson. Good luck.
Sincerely,
Your Taxpayers.

While issuing legal tender is in the government’s purview, it does so through creation of bank debt. Banks distribute currency as they see fit. Even The Fed operates under the aegis of the government though it operates privately. Increasing the efficiency of the money creation system, allowing capital to flow and infusing it directly where it will most straightforwardly impact the nation’s engines will ignite recovery. Efficiency is not the primary objective, though under current circumstances, it would appear a necessary one in the mix of considerations. The current monetary and banking infrastructures claim efficiency, while the outcome is evidence otherwise.

The American economy rests on the back of the American worker and consumer. Taxpayers own the government and currency is only a tool enabling commerce. Get it working for you, not against you. With the computing power available and the internet’s ubiquity, the possibilities to become creative on the currency front within economic, political, or other boundaries are endless even to include a large role for banks.

The government just wants its tax. On the next trillion dollars, don’t waste it on the black hole of bad debt. Get this economy thriving again and get it paying its taxes. There will then be hope on the horizon that the principal on trillions of dollars of debt will gradually get paid down.

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• AMERICA’S OBAMA CAPITAL

The American electorate has placed a bet. It is betting: That Obama will burnish the image of America in the eyes of the world, that he will pull America out of its economic crisis, and that the President Elect will lead the nation into a new era of change. Peering through the Obama enigma, there is a very real ray of light that may bring energy to the turn-around, however temporarily. A majority of taxpayers await with hope the revelation of the “change” definition in the Obama encyclopedia, although fear continues to permeate the country, and bad news persists in dominating the news.

The world witnessed an international reaction to the U.S. election of its first African American President. Most Americans, including many who voted for McCain, could not help but be touched by the event, and most were inevitably moved by the possibility that “hope” might find traction, though much of that hope rose from weariness and disappointment rooted in a failed 43rd Presidency.

Populations in Asia, Europe, Africa and even in the Middle East, genuinely applauded the event, and demonstrated a new support for possibilities available in the American society, polity and economy. Most countries around the world envy such freedoms, and many were stirred with a refreshed affirmation of America’s glassless ceiling. Obviously many of those countries also look to America as a source of capital coming from purchase of their products and resources. A few also procure loans for America’s expenditures.

The “goodwill” generated from the Obama election presents America with a window of time during which it will be able to further extend its borrowing practice from countries holding significant dollar reserves. America remains the only safe haven for cash. The Obama Presidency will find that extending the portent of “hope” beyond the borders of the United States could provide the Treasury an additional trillion dollars in borrowed funds with which to structure a turn-around for the world’s largest economy. The care, diligence, boldness and intelligence with which Obama allocates the country’s newfound capital will dictate the length and depth of the current recession. The window provided by this goodwill may be opened only temporarily. We will watch as he attempts to deliver on his promises, but the real “hope” is that he will use this window to dramatically energize the economic engine much of the world depends on.

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• 44th. PRESIDENT - YOUR FIRST CHALLENGE

The 44th. President of The United States will inherit a financial house in state of disarray. Upon assuming the Office, the new President will have to be furnished an unobstructed perspective on a slowing economy clouded with surging inflation baring its indignant and unprejudiced fangs. Add, to the context of this vista, the enormous interest on the national debt, along with the long term consequences of sustained budget deficits of the size America has been consistently incurring, and you have potential for serious adverse impact on the social fabric of the country. First and foremost, this troubled and uncertain economic scene has to be effectively addressed.

The recent rate of commodity price advances, particularly oil, and the resulting hikes in the costs of goods is unsettling all forecasting based on economic indicators and cycles. Price escalation on certain products will simply reduce their consumption, however strong price increases in all staple goods are placing hard upward pressure on inflation, and demand continues unabated. These price pressures are coming in significant measure from a large number of developing countries that have created a demand that was not present in the pressures responsible for the wild inflation swings of the mid 70’s to early 80’s.

There is debate as to how inflation should be calculated, however, Inflation rates are currently fundamental measurements dependent on the contents of the basket of prices used for the calculations. Such calculations can be manipulated. Accurately defining current inflation toward the higher levels might not be advantageous if it were shown to be at a rate of 8%, for example, instead of the 3.9%, while ten year treasuries are at 4%. A central bank may enjoy the current understatement of inflation, and such understatement might also serve to minimize government liabilities which are indexed to the floating rate, like Social Security. Furthermore, a high level of inflation would suggest stagnant, if not contracting GDP. Then if this isn't enough to unscramble, we will likely see a reduction in total lending which will incite the winds of deflation. Amidst the confusion of reporting, the new President will have to provide some guidance and leadership to the Federal Reserve, rather than humbly await its decisions, and doing so will require accurate, untainted information. Altering the course on the Fed’s current strategy to continue dropping interest rates would affect inflation and the current slowdown inversely, making any decision difficult.

From the perspective of any conventional analysis and whatever the published inflation rate might be, the reality is that purchasing power of the dollar, meaning the purchasing power of the taxpayer, is dropping. That is the critical element that all taxpayers can feel without being fed convoluted or distracting statistics. Their real income is shrinking.

The medicine, which may well include higher government revenues coupled with reductions in spending, while initially having a bitter taste, would satisfy one critical leg of managing any government, that of paying current bills without laying off staggering debt onto future generations of taxpayers.

The current economic climate and feelings of uncertainty affecting North America differ from those of previous downturns in relative breadth and depth, and require unique solutions. Even a decision to overtly confront the challenge would be reason for applause since it would present a sign of impending responsible governance.

The 44th. President with have to rapidly re-establish a long lost sense of confidence, that perennial footing upon which national and international leadership, as well as economic progress, are built. The new White House will have to assertively confront the fiscal challenge, sell it to the taxpayers, and energize Congress to support the required major budget overhaul toward sound fiscal policy.

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