Martin D. Weiss Ph.D. | Monday, June 27, 2011 at 7:30 am
Do you believe what government officials and experts are saying about the debt crisis?
If so, you’re taking your financial life into your hands.
Just consider how many times they’ve been wrong, issued deliberately misleading statements, or simply lied:
In 2007, they swore on a stack of Bibles that the debt crisis was limited to subprime mortgages.
But the crisis promptly spread to all kinds of mortgages, ripping through giant mortgage lenders like Countrywide, Fannie Mae, and Freddie Mac.
In 2008, they admitted it had spread, but swore that it was strictly contained to the housing and mortgage sector.
But in a few short months, it had enveloped commercial paper, money markets, and nearly all of Wall Street. Nearly every one of America’s largest banks either failed or came within a hair of insolvency.
In late 2009, they rescued the bankrupt banks and mortgage lenders using the $700 billion in emergency capital approved under the Trouble Asset Relief Program (TARP). Then, they ran deliberately lenient “stress tests” on the biggest banks to “prove” to the public that the emergency had passed.
The declassification of official secrets is often seen as either a challenge or a prerequisite for obtaining accurate data on the history of political and economic events. Yet at the same time high government intelligence officials have said that their policy is one of ‘plausible deniability’. Official US government policy for example is never to acknowledge or deny the presence of nuclear weapons anywhere its forces are deployed, especially its naval forces. The British have their ‘Official Secrets’ Act. When the Wikileaks site was launched in 2007 and attained notoriety for publication of infamous actions by US forces in Iraq and Afghanistan, this platform was heralded and condemned for its disclosures and exposures.
Julian Assange is quoted as saying that when he receives documents classified under the UK Official Secrets Act he responds in accordance with the letter of the law – since it is forbidden to withhold or destroy, his only option is to publish. The question remains for historians, investigators, and educated citizens: what is the real value of disclosures or declassification? Given the practice of plausible deniablity, does disclosure or declassification constitute proof, and if so by what criteria? Both facts and non-facts can be concealed or disclosed.
Information is not self-defining Ultimately there remain two questions: does the secret document (now public) really constitute the ‘secret’? What is the ‘secret’ for which we use the document to actually refer? Is secrecy the difference between the known and unknown, or the known and untold?
Some benefit can be found by borrowing theological concepts. We can distinguish between a mystery revealed and a supernatural truth which, by its very nature, lies above the finite intelligence. But a secret is something unknowable either by accident or on account of accessibility. I believe that the popularised form of disclosure embodied in Wikileaks should force us to distinguish between those beliefs we have about the nature of official action and the conduct of people working within those institutions and the data produced. Wikileaks is clearly a platform for publishing data but much of the response to these documents is more based on mystery than on secrecy. That is to say that the disclosures are treated as revelation in the religious sense – and not as discovery in the sense of scientia – knowledge. Why is this so? Wikileaks is described as a continuation of the ethical and social responsibility of journalism as an instrument to educate and inform the public – based on the principle that an informed public is essential to a democracy and self-governance. By collecting, collating and disclosing documents ‘leaked’ to it, Wikileaks also attacks what Assange calls the invisible government, the people and institutions who rule by concealing their activities from the people – and brings to light their wrongdoing.
There are two traditions involved here that partially overlap. In the US the prime examples are the ‘muckraking journalism’ originating in the so-called Progressive Era, spanning from 1890s to 1920s, and more recently the publication of the Pentagon Papers through Daniel Ellsberg. While liberals treat both of these examples favourably, their histories, however, are far more ambivalent than sentimentally presented. To understand this ambivalence, itself a sort of plausible deniability, it is necessary to sketch the history of journalism in the US – the emergence of an unnamed but essential political actor – and some of the goals of US foreign policy since the end of the 19th century. This very brief sketch offers what I call the preponderance of facticity – as opposed to an unimpeachable explanation for the overt and covert actions of the US.
The con of the decade (Part I) involves the transfer of private debt to the public (the marks), who then pays interest forever to the con artists.
I’ve laid out the Con of the Decade (Part I) in outline form:
1. Enable trillions of dollars in mortgages guaranteed to default by packaging unlimited quantities of them into mortgage-backed securities (MBS), creating umlimited demand for fraudulently originated loans.
2. Sell these MBS as “safe” to credulous investors, institutions, town councils in Norway, etc., i.e. “the bezzle” on a global scale.
3. Make huge “side bets” against these doomed mortgages so when they default then the short-side bets generate billions in profits.
4. Leverage each $1 of actual capital into $100 of high-risk bets.
5. Hide the utterly fraudulent bets offshore and/or off-balance sheet (not that the regulators you had muzzled would have noticed anyway).
6. When the longside bets go bad, transfer hundreds of billions of dollars in Federal guarantees, bailouts and backstops into the private hands which made the risky bets, either via direct payments or via proxies like AIG. Enable these private Power Elites to borrow hundreds of billions more from the Treasury/Fed at zero interest.
I first published this essay in the Summer of 2009. At that time the whole world believed Obama’s Stimulus Program was working at that the stupid greenshoot recovery was underway. Today I’d like to reprint this essay because the same structural issues that plagued the US in 2009 are still valid and because this piece proved, two years ahead of time, that the US would suffer a massive economic collapse.
The seeds of today’s crisis were first sown in 1971 when the US formally opened up trade with China. In an effort to boost profits, large scale US manufacturers and other multinational firms began outsourcing their manufacturing jobs to the People’s Republic soon after.
Will future gold profits be enjoyed on a tax-free basis because gold has become the new currency and cash isn’t taxed when it is spent? Or will governments around the world use the pretext of financial emergency to continue to take ever greater control of their citizens’ private lives and make cash itself illegal, requiring all financial transactions to be in electronic form with a “cc” to the government?
Last year I wrote an article titled Hidden Gold Taxes: The Secret Weapon Of Bankrupt Governments about the “elephant in the living room” that most precious metals investors are unaware of. In simple, step by step detail, I showed how the government uses taxes on false inflation “profits” to not only effectively confiscate profits from gold investors, but effectively create an asset tax. So that the higher the rate of inflation, and the higher that precious metals prices soar – the more of the precious metal investor’s starting net worth that is confiscated by the government in after-inflation terms.
Among the many responses, nobody has even attempted to disprove the simple but irrefutable math of gold investor wealth confiscation through inflation taxes, but many people dispute the idea that gold profits will be taxable at all. Some are convinced that the future is certain – that after the scoundrels are thrown out, right-thinking people will insist on the use of gold as currency, which means gold investors will reliably be relieved of tax obligations. Others are convinced governmental breakdown and anarchy will make tax considerations irrelevant. As I’ve seen discussed on internet forums, still other gold investors apparently find my concern about taxes to be the very height of naiveté if not downright laughable, and believe that I’m missing the point of discretely spendable gold and silver coins, which is specifically to avoid paying taxes.
In this article about possible future scenarios, we will briefly look at the history of government actions during global financial crisis, as well as what governments are doing now, and we’ll explore whether it is more likely that the future will be tax-free for gold investors, or whether the future may be one of crushing government control on a global scale that makes previous black market strategies obsolete. If we combine history’s repeating itself – but with more advanced technology this time around – many precious metals investors may just be making one of the biggest mistakes of their lives if they are not anticipating paying taxes in full at likely higher future tax rates.
This chart is in fact much worse than it first appears – that break has now taken out critical support from 2008 before everything fell apart!
It’s not alone either:
I have warned of the potential risk in these funds and municipal bonds as an asset class before.
The fact that no realistic action has been taken to address these issues, and that they may rotate into United States credit – that is, Treasuries, forcing big reductions in spending, is a serious problem.
Folks, the States are absolute pikers when it comes to this – The Federal Government is literally borrowing 40% of every dollar it’s spending at the present time. This cannot continue indefinitely, and yet if it is pulled back GDP is going to instantaneous collapse by a double-digit percentage and the stock market will implode as profits go down the toilet immediately.
Is this a “sure things, short the farm” play? No. As we’ve seen the goofballs in our government are hellbent for leather on continuing to play Ponzi, borrowing ever-more in a furious (although ultimately futile) attempt to prevent recognition of the fact that we simply do not have the final demand and cannot manufacture it via borrowing on a durable basis to support our claimed “output” and “profits.”
Bernanke, Obama and Congress think they’re Khan – and invincible.
They’re all wrong – The Market is in fact Captain Kirk.
Incoming Speaker of the House, John Boehner, fresh off of ridding Congress of those out-of-control, tax and spend Democrats announced his first big plan to cut the budget today and he started close to home – in his and other congressman and senator budgets.
He stated:
“I’m gonna cut my budget — my leadership budget — 5 percent,” he said, in video released by CBS. ”I’m gonna cut all the leadership budgets by 5 percent. I’m going to cut every committee’s budget by 5 percent. And every member is going to see a 5 percent reduction in their allowance. All together. that’s 25, 30 million dollars that likely would be one of the first votes we cast. We can start with ourselves.”
Wow! $30 million out of a $3.9 trillion budget. That’s 0.000007%!
Just out of curiosity, I went to the US Debt Clock website and timed how long it took for the US national debt to increase by $30 million. The amount of time? 13 minutes.
Therefore, if the amount of time spent enacting this budget cut takes up more than 13 minutes it will, literally, be a waste of time.
To be fair to John Boehner, we’re sure he has other big plans to cut the budget. But, here is the problem, even if he cut the US government discretionary spending by 100%, it still isn’t enough. Just take a look at the numbers:
Here is the 2010 tax receipts for the US federal government:
$1.061 trillion – Individual income taxes
$940 billion – Social Security and other payroll tax
$222 billion – Corporation income taxes
$77 billion – Excise taxes
$23 billion – Customs duties
$20 billion – Estate and gift taxes
$22 billion – Deposits of earnings
$16 billion – Other
Now, notice how the US government includes Social Security tax, taken off of paychecks as being INCOME?? No company could ever do that. But the US government can. Why? Because they’ve got all the guns and can do what they want.
But the money taken in from payments into Social Security is obviously not real income of the government. That money, theoretically, is supposed to be set aside to pay for Social Security in the future.
So, if you exclude Social Security receipts, the total “income” (tax/theft) of the federal government for 2010 was $1.44 trillion.
The numbers are pretty simple. The US government had total real tax receipts of $1.44 trillion in 2010. This only pays for 66% of the Mandatory Spending, even if you got rid of 100% of the discretionary spending.
In other words, in order to balance the budget the government would have to cut 100% of Discretionary Spending and 34% of Mandatory Spending. What would that look like?
To do this, they would have to close every military base and lay-off every serviceman in the Armed Forces, close every public school and fire every teacher, shut down the Department of Homeland Security and every other government agency and, as well, cut all Social Security, Medicare and Medicaid spending by 34%.
John Boehner’s got quite a bit further to go!
But whether he does the cutting himself or not, these cuts will have to be made. They will either be made by choice or by force as the rest of the world is about to take away the US’ credit card. When they do, and that time is very near, the USSA will collapse just as the USSR did, and for the same reasons: Because they both were or became centrally planned, socialist/communist economies.
The King of Saudi Arabia privately urged the United States to attack Iran to destroy its nuclear weapons programme, according to diplomatic cables leaked by the whistle-blowing website, WikiLeaks.
The first tranche of more than 250,000 classified cables released by the WikiLeaks site says American officials were also told to spy on the United Nations’ leadership and get biometric information on its secretary general Ban Ki-moon.
The cables detail claims of inappropriate behaviour by a member of the Royal family and criticism of Britain’s military operations in Afghanistan and David Cameron.
The cables include requests for “specific intelligence” about British MPs. The communiques last night threatened a global diplomatic crisis and put America’s relations with Europe and the Middle East under a cloud.
JP: Catherine, we’ve seen a lot of information and a lot of concern on Wall St. about the Mortgage markets. We’ve seen consumers take on more debt when it comes to taking on bigger mortgages, refinance. But this story gets much bigger than just the credit itself.
CA: Sure. Where would you like to start?
JP: (Laughter) Well, let’s talk about black budgets and how the manipulation takes place in the mortgage and financial markets.
CA: OK. Let me start off with a story. When I became Assistant Secretary of Housing, I left Wall St. and went to Washington in 1989, and I walked into the FHA Jim, which at the time was a $300 billion portfolio of mortgage insurance, about 80% of that was single family. So it’s homes, homes that Americans buy, and it’s sort of broad middle class/lower middle class. And I walked in and I said to the guy who was supposed to be the Controller, and I said I’d like to see our financial statements.
(July 8, 2010)
