Tax and Spend...nothing new here...

[freddyv]

This really irritates me. Instead of trying to cut spending to balance the budget, let's just tax more to cover the increased spending. We ought to vote each and every one of these people out of office.

The passage that I've made bold really annoys me...

Senate Approves Federal Budget That Would End Bush Tax Cuts
Friday , March 14, 2008

WASHINGTON —

The Senate rejected calls from both parties' presidential candidates to take an election-year break from pork-barrel spending as a Democratic-run Congress passed budget plans that would torpedo hundreds of billions of dollars in tax cuts won by President Bush.

John McCain, the GOP nominee-to-be, couldn't attract even a majority of Senate Republicans to vote with him Thursday night behind the earmark moratorium touted by party conservatives as a way to restore the GOP's credibility with voters.

It failed on a 71-29 vote. Only three Democrats joined with Hillary Rodham Clinton and Barack Obama in voting for it.

The underlying House and Senate Democratic federal budget plans for 2009, though nonbinding, drew blasts from Republicans for allowing some or all of Bush's tax cuts to die in about three years.

The House passed its $3 trillion budget plan by a 212-207 vote. It would provide generous increases to domestic programs but bring the government's ledger back into the black, but only by letting all of Bush's tax cuts expire at the end of 2010 as scheduled.

The Senate passed a companion plan by a 51-44 vote. It endorsed extending $340 billion of Bush's tax cuts but balked at continuing all of them. The competing versions head to talks in which the House is all but certain to accept the Senate's position endorsing tax cuts for the working poor, married couples, people with children and for those inheriting large estates.

All three major presidential candidates interrupted their campaigns for a Senate vote-o-rama that began before noon and included more than 40 roll calls.

Budget plans are nonbinding, but they highlight the difficult choices on taxes and spending facing the next president and Congress. Binding votes on the expiring Bush tax cuts will be left to his successor and the Congress that's elected in November.

The practice of inserting "earmarked" spending into legislation is seen by lawmakers in both parties a birthright power of the purse awarded to Congress by the Founding Fathers.

Earmarks have exploded in number and cost in recent years, accompanied by charges of abuse and public outrage over egregious examples like the proposed "bridge to nowhere" in Alaska, which would have cost more than $200 million to serve an island with a population of about 50.

McCain, who has battled with members of both parties over them for years, blamed pork barrel spending for the Republicans losing control of Congress in the 2006 elections.

"This may be the last bastion in America where they don't get it," he told reporters after Thursday night's vote. "Americans are sick and tired of the way we do business in Washington. As president, I promise the American people ... the first earmarked, pork-barrel bill that comes across my desk, I'll veto it."

However, on taxes, the Arizona Republican voted to extend the full roster of Bush's tax cuts, which he opposed seven years ago as being tilted in favor of the wealthy.

Democratic rivals Clinton of New York and Obama of Illinois both voted to extend only some of Bush's tax cuts while allowing cuts in income tax rates and investments expire. They joined other Democrats in a 52-47 vote against extending $376 billion of them.

Republicans hope to use the votes as fodder for the heated presidential campaign and for congressional races. "Democrats are quietly but very assuredly paving the way for a massive, economy-choking, tax increase," said Rep. Jim McCrery, R-La.

Democrats said the plans would reverse years of deficits that have piled up during Bush's tenure. They said he squandered trillions of dollars in projected surpluses that he inherited in 2001.

"The Democratic budget continues to move our nation in a new direction and to clean up the fiscal train wreck caused by failed Republican economic policies over the last seven years," said House Majority Leader Steny Hoyer, D-Md.

Democrats argued that when the time comes, they'll renew tax cuts aimed at the middle class by closing billions of dollars worth of corporate and other tax loopholes. They also say billions more can be raised by cracking down on tax cheats.

In the House, Democrats defeated a GOP plan that would have extended Bush's reductions. The Republican plan also would have eliminated the alternative minimum tax, which was originally designed years ago to make sure rich people pay at least some tax but now threatens more than 20 million additional taxpayers with increases averaging $2,000.

Some 38 mostly moderate Republicans voted against their party's plan, which would have made cuts in popular programs like Medicare, housing, community development and the Medicaid health care program.

Congress' annual budget debate involves a nonbinding resolution that sets the stage for later bills affecting taxes, benefit programs such as Medicare and the annual appropriations bills. Unless such follow-up legislation is passed, however, the budget debate has little real effect and is mostly about making statements about party priorities.

This is such a year. Congress rarely tackles difficult budget issues as elections loom, and a standoff with Bush means that Democrats may even take a pass on advancing the 12 annual appropriations bills.

The first year of an administration is typically when heavy lifting on the budget is done, but all the candidates' campaign plans seem to promise more than they can deliver. McCain's tax cuts would require applying a meat cleaver to spending, while the Democrats promise spending that would enlarge the deficit or require large tax increases.

The White House forecasts the deficit for the current year at $410 billion, a near record.

Democrats trumpeted their plan for putting the budget back in balance while also making investments in infrastructure, education, community development, clean energy and other programs. It also would avoid $196 billion worth of Bush-proposed cuts to Medicare and the Medicaid health care program for the poor and disabled.

[freddyv]

The crumbling U.S. empire

--------------------------------------------------------------------------------
Posted: March 16, 2008
6:57 pm Eastern

© 2008

House Democrats recently adopted a budget with massive tax hikes, many of which are directed at those Americans who can least afford them.

By allowing the Bush tax cuts to expire in 2010, this budget will raise income taxes not only on those in the highest income brackets, but raises the lowest bracket from 10 percent to 15 percent as well. Estates would again be taxed at 55 percent. The child tax credit would drop from $1,000 to $500. Senior citizens relying on investment income would be hurt by increases in dividend and capital gains taxes. It's not just that the Democrats want to raises taxes on the rich; they want to raises taxes on everybody.

The problem is, policing the world is expensive, and if elected officials insist upon continuing to fund our current foreign policy, the money has to come from somewhere. The wars in Iraq and Afghanistan have already cost us more than $1 trillion.

The Democrats' budget gives the president all the funding he needs for his foreign policy, so one wonders how serious they ever were about ending the war. While Democrats propose to tax and spend, many Republicans aim to borrow and spend, which hurts the taxpayer just as much in the long run.

Supporting a welfare state is expensive as well. More than half of our budget goes to mandatory entitlements. The total cost of government now eats up more than half of our national income, as calculated by Americans for Tax Reform, and government is growing at an unprecedented rate. Our current financial situation is completely untenable, and the worst part is, as government is becoming more and more voracious, the economy is shrinking.

The bottom line is that Washington has a serious spending addiction. While both parties debate how to raise the revenue, both parties seem happy to spend more than $3 trillion of your money in various ways.

While some in Washington criticize the war in Iraq, very few are criticizing the interventionist mindset that got us into the war in the first place. Many so-called "Iraq war critics" criticize this administration rather than truly oppose the decades-old policies that led to war. They claim they will eventually get the troops out of Iraq, but the danger is that they simply plan to move them around to other countries, not bring them home. The American people want peace. Minding our own business is the best way to achieve it. Not only is it also a whole lot cheaper, but free trade and friendship with other countries benefits all involved.

This spending spree is exactly the wrong policy for an economy on the brink of recession. History has shown that all empires eventually crumble under a worthless currency and with an exhausted military.

Since too many of our nation's leaders haven't taken the time to learn from history, we are seeing mistakes repeated through recently enacted policies such as the new House budget.

--------------------------------------------------------------------------------

Rep. Ron Paul, R-Texas, has served 10 terms in Congress and is widely regarded as the leading spokesman in Washington for limited constitutional government, low taxes, free markets and a return to sound monetary policies based on commodity-backed currency. Dr. Paul never votes for legislation unless the proposed measure is expressly authorized by the Constitution.

www.wnd.com/index.php?fa=PAGE.view&pageId=59138

[freddyv]

ron paul on the house floor 03.12.2008 speaking on the matter:

www.youtube.com/watch?v=PoxlzPGIPt4

it all comes back to the dollar. remember, the stock market crash of 1929 led to a global economic catastrophe. we're seeing japan and the asian markets struggle due to the dollar's performance, with europe in tow.

[HBGOnline]

Japan has been in trouble since 1989. Europe is on the ropes with their bank UBS. Same liquidity issues like Bear Stearns.

The Fed took some heat over the last few months, but over the weekend made some tough desicions that will shore up our liquidty problems.

Hedge funds are now pouring out of the dollar, oil and gold. Thus the dollar is showing strength (despite a 3/4 point rate cut) and gold and oil is down 6-10% today.

I can't see why or how we can allow these hedge funds that have billions of dollars to play with the markets, thus making things more artifictially priced than they should be. Maybe when Congress is done looking at steriods in baseball, they might want to check out how a very few can fuck with the markets at the degree they do.

[freddyv]

admin said:

Maybe when Congress is done looking at steriods in baseball, they might want to check out how a very few can fuck with the markets at the degree they do.

unfortunately our elected officials are in these people's pockets. they're not going to bite the hand that feeds.

[HBGOnline]

I'm telling you Freddy, you would be shocked how these hedge funds operate.

I'm all for free and open markets, but I heard we are paying 20% more for oil because of hedge funds fucking around with oil options. Based on dollar value, consumption needs, stability in oil producing regions oil should be around $75 - $80 a barrell. As of today we are still above $100.00. These guys are so powerfull they alone can toss the price 10% by their actions.

Once the stock market became a roller coaster the hedge funds went into oil, gold and other commodity markets.

One guy even said, the hedge funds wanted gold over 1000 just to see if they could do it. They did it and made millions within a few weeks.

Something is not right when a select few have so much power over markets.

[freddyv]

admin said:

Something is not right when a select few have so much power over markets.

the points you are making are things that sean and armor are always complaining about in regards to the elite/nwo. this is the state of things right now...and the reason that we need more people to wake up and compel those in power to do the right thing and put this nonsense to an end.

[freddyv]

admin said:

I'm telling you Freddy, you would be shocked how these hedge funds operate.

I've read up on hedge funds, and although I wouldn't claim to completely understand them, it seems fairly obvious what is going on. Basically a select few with a tremendous amount of wealth are able to invest it in an unconventional and virtually unregulated fashion. Due to the sheer size of these investments, they are able to greatly influence the market. hedge funds might invest one way, and the rest of the market sees these investments as a sign of how the market is going and invests accordingly.

it's kind of like when the Fed has a rate increase or decrease. not to go off on a tangent, but this is one of the things that is bad about the Fed. instead of people simply making investments based on how a company or the market is performing, they're trying to figure out what the Fed is going to do next. there would be no business cycle if not for the Fed.

but back to hedge funds...it kind of feeds the whole NWO thing. your average person can't invest in hedge funds...it's a private club reserved for the elite...and these hedge funds can largely determine market activity. definitely not a level playing field.

[HBGOnline]

I doubt hedge funds are part of the NWO/elite type stuff. They do take risk and want people that can lose some money and not sue them.

It was hedge funds calling in their options that put Bear Stearns under.

They and private equity are currently fucking around with the stock market. Thus the triple digit gains and losses in one day, we are seeing of late.

Main network media outlets don't tell you that. It's better news to have a reporter telling the world we are all doomed because the market just fell 400 points.

The Dollar continues to rise today. I wonder if that will even be mentioned.

[seanx]

admin said:

The Dollar continues to rise today. I wonder if that will even be mentioned.

....wooo hooo! nothing like touting a one day wonder......and the day after the Fed dropped interest rates another 3/4 precentage point. wonder what's gonna happen when they run out of points to lower?.............I like how you say that the msm is doom and gloom and then you quote them for other things..........with that last comment, I'm beginning to sound like Mickulz (by the way, what happened to him? I hope he didn't trip over his apron while being hoodwinked)...............

[seanx]

....look this guy was on CNBC, he knows what's going down!:


Top investor Jim Rogers has publicly called for Federal Reserve chaiman Ben Barnanke to resign, blaming him for destroying the dollar and bailing out his friends on Wall Street at the cost of the American taxpayer, in the latest savage attack on the Fed amidst the latest round of economic turmoil.

"I think the Fed should be abolished, we’d all be better off without the Fed….in my view their day is done," said Rogers during an appearance on CNBC yesterday.

Rogers pointed out that concerns over a vacuum of power were trite considering America had successfully lived without a central bank before and the first two central banks had failed.

Asked if Bernanke should resign, Rogers responded, "He should be fired, we can’t fire him unfortunately under the terms of his contract he’s there for another 12 years….I think eventually things are gonna get so bad we’re gonna get rid of him one way or the other he’ll resign."

Rogers said that the Federal Reserve’s mandate was to protect the dollar but that the Fed was "letting the dollar collapse" and "filling the Federal Reserve’s balance sheet with a bunch of garbage."

Despite the fact that Rogers admitted he was still making money due to his heavy investment in commodities, he said that he didn’t approve of what the Fed was doing.

Rogers has been on a crusade over the past few weeks, slamming the Federal Reserve with every opportunity he gets.

On Tuesday he appeared on Bloomberg News and told viewers that the Fed had "given up" on the dollar, advising people to dump the greenback and buy gold as well as currencies like the Chinese Renminbi and the Swiss Franc.

He also slammed Bernanke for bailing out his banking friends on Wall Street so they could keep their bonuses at the expense of American taxpayers and the value of the dollar.

During a CNBC appearance last week, Rogers called for the Fed to abolished outright after Bernanke dumped $280 billion in liquidity into the market, a move that put 400 points on the Dow but contributed to the dollar hitting new lows and inflation continuing to skyrocket. Rogers said the action would only cause "a worse recession in the end".

[seanx]

...three copy and paste articles in one day......anarchy!

this one goes out to Clueless, I mean Gestapo, Jim:


Paulson's Gift to His Bankster Buddies
Winding Up Bear
By MIKE WHITNEY

One picture tells the whole story. It's a photo of five grim looking men in gray suits staring ahead blankly like they were in the dock with Saddam awaiting sentencing. Every one of them looks downcast and dejected; shoulders rounded and jaws set. This is what desperation looks like, which is why the photo was kept off the front pages of the leading newspapers.

The group took no questions and, as far as the media was concerned, the meeting never happened. But it did happen; and it happened on Monday at the White House at 2PM. That's when President Bush convened the Working Group on Financial Markets, also known as the Plunge Protection Team, to explain their strategy for dealing with deteriorating conditions in the financial markets. The details of the meeting remain unknown, but judging by the sudden (and irrational) recovery in the stock market on Tuesday; their plan must have succeeded.

The Plunge Protection Team is a panel that includes Fed Chairman Ben Bernankee, Treasury Secretary Henry Paulson, Securities and Exchange Commission Chairman Christopher Cox, and acting Commodity Futures Trading Commission head Walter Lukken. According to John Crudele of the New York Post, the Plunge Protection Team's (PPT) objective is to redirect the stock market by ""buying market averages in the futures market, thus stabilizing the market as a whole."" In the event of a terrorist attack or a natural disaster, the group's activities could play an extremely positive role in saving the market from an unnecessary meltdown. However, direct intervention into supposedly "free markets" is less defensible when it is merely a matter of saving an over-leveraged banking system from its inevitable Day of Reckoning. And, yet, that appears to be the reason for the White House confab; to buy a little more time before the final explosion.

The psychology behind the PPT's activities is explained in greater detail by Robert McHugh Ph.D. who provides a description of how it works in his essay ""The Plunge Protection Team Indicator"":

The PPT decides markets need intervention, a decline needs to be stopped, or the risks associated with political events that could be perceived by markets as highly negative and cause a decline, need to be prevented by a rally already in flight. To get that rally, the PPT's key component -- the Fed -- lends money to surrogates who will take that fresh electronically printed cash and buy markets through some large unknown buyer's account. That buying comes out of the blue at a time when short interest is high. The unexpected rally strikes blood, and fear overcomes those who were betting the market would drop. These shorts need to cover, need to buy the very stocks they had agreed to sell (without owning them) at today's prices in anticipation they could buy them in the future at much lower prices and pocket the difference. Seeing those stocks rally above their committed selling price, the shorts are forced to buy -- and buy they do. Thus, those most pessimistic about the equity market end up buying equities like mad, fueling the rally that the PPT started. Bingo, a huge turnaround rally is well underway, and sidelines money from Hedge Funds, Mutual funds and individuals' rushes in to join in the buying madness for several days and weeks as the rally gathers a life of its own. (Robert McHugh Ph.D., "The Plunge Protection Team Indicator")


The powers of the PPT are greatly exaggerated; eventually the liquidity they provide has to be drained from the system. The popular myth that the Fed simply creates as much money as it chooses and spreads it around like confetti; is pure rubbish. The Fed has very definite balance constraints. The system is not quite as rigged as many people imagine. According to Bloomberg News, the Fed has already depleted most of its resources:

The Fed has committed as much as 60 percent of the $709 billion in Treasury securities on its balance sheet to providing liquidity and opened the door to more with yesterday's decision to become a lender of last resort for the biggest Wall Street dealers." ("Bernanke May Run Low on Ammunition for Loans, Rates", Bloomberg)

The troubles in the credit markets and real estate are bigger than the Fed or the PPT; and they know it. The next step is massive government intervention; mortgage-rate freezes, bailouts and fiscal stimulus. Big government is back; Reaganism has gone full-circle. That doesn't mean that the PPT cannot have an important psychological affect in soothing jittery markets or stalling a system-wide collapse. It just means, that markets will eventually correct regardless of what anyone does to stop them. The sharp downturn in the financial markets is the result of unsustainable credit expansion that can't be fixed by the parlor tricks of the PPT. The rate at which financial institutions are deleveraging and destroying capital will inevitably trigger an economic crisis equal to the Great Depression. What is needed is strong leadership and a re-commitment to transparency, not "more of the same" low interest crack and financial hanky-panky. It's time to come clean with the public and admit we have a problem.

"Sucker rallies", like Tuesday's 400 point surge on Wall Street just helps to conceal the deeply rooted problems that need to be addressed before investor confidence can be restored. Blogger Rick Ackerman summed it up succinctly in last night's entry:

These psychotic, 400-point rallies in the Dow do not augur renewed confidence. They are being driven almost entirely by short-covering, and even the otherwise clueless news anchors are starting to dismiss them as meaningless. One of these days, moments after the last surviving bear's short position has been liquidated, stocks are going to fall so steeply that even the Plunge Protection Team will call for back-up. Then, the financial collapse that so many have been expecting will unfold in just a few days, with enough power to leave the global economy in ruins for a generation." (Rik's Piks Rick Ackerman)

Whether Ackerman's dire predictions materialize or not, there's no denying that the situation is getting worse by the day. In the last week alone, two major financial institutions, Carlyle Capital and Bear Stearns have either gone under or been bailed out wiping out tens of billions in market capitalization. These flameouts have increased the rate of the deflation adding to the already-prodigious losses from housing foreclosures, delinquent credit card debt, defaulting car loans, and the deleveraging in the hedge fund industry. Fortress America has sprung a leak, and capital is escaping in a torrent.

"One thing is for certain, we're in challenging times," Bush opined on Monday after meeting with his top economic aides. ""But we are on top of the situation."

That's comforting. Bush is all over it.

Tuesday's 75 basis point rate cut by the Fed is another sign of desperation. The Fed Funds rate is now 2 percentage points below the rate of inflation; a obvious attempt on Bernanke to reflate the equity bubble at the expense of the dollar. Is that why Wall Street was so jubilant; another savage blow to the currency?

The Fed's statement was as bleak as any they have ever released sounding more like passages from the Book of the Dead than minutes of the Federal Open Market Committee:

Recent information indicates that the outlook for economic activity has weakened further. Growth in consumer spending has slowed and labor markets have softened. Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.

Inflation has been elevated, and some indicators of inflation expectations have risen .... uncertainty about the inflation outlook has increased. It will be necessary to continue to monitor inflation developments carefully.

Today's policy action..should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain.

Wall Street rallied on the cheery news.

Also, on Tuesday, the battered investment banks began posting first quarter earnings which turned out to be better than expected. Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. beat estimates which added to the stock market giddiness. Unfortunately, a careful reading of the reports, shows that things are not quite as they seem. The jubilation is unwarranted; it's just more smoke and mirrors.

"Lehman Brothers Holdings Inc. reported a 57% drop in fiscal first-quarter net income amid weakness in its fixed-income business, though results topped analysts' expectations." (Wall Street Journal)

The same was true of financial giant Goldman Sachs:

"Goldman Sachs Group Inc.'s fiscal first-quarter net income dropped 53% on $2 billion in losses on residential mortgages, credit products and investments ...The biggest Wall Street investment bank by market value reported net income of $1.51 billion, or $3.23 a share, for the quarter ended Feb. 29, compared to $3.2 billion, or $6.67 a share, a year earlier....Results included $1 billion in losses on residential mortgage loans and securities, and nearly $1 billion in losses on credit products and investment losses ..." (Wall Street Journal)

The bottom line is that both companies first quarter earnings dropped by more than a half in just one year alone while, at the same time, they booked heavy losses. That's hardly a reason for celebration. The major investment banks remain on the critical list because of the billions of dollars of toxic debt they still carry on their balance sheets. Consider industry leader Goldman Sachs, for example, which is sitting on a backlog of bad paper from the subprime/securitization debacle as well as an unknown amount of LBOs (Leveraged buyouts) and commercial real estate deals (CREs) that are heading south fast. Market analyst, Mark Gongloff, sheds a bit of light on the real condition of the big financials in his article ""Crunch Proves A Test of Faith For Street Strong"":

"All of the brokerage houses are highly leveraged, with a high ratio of assets to shareholders' equity, a sign they have used debt heavily to build up positions in hope of greater returns. Morgan Stanley, which will report Wednesday, had a leverage ratio of 32.6-to-1 at the end of last year, nearly as high as Bear's 32.8-to-1. Lehman was leveraged 30.7-to-1, and Merrill Lynch 27.8-to-1. And the would-be rock, Goldman? It was leveraged 26.2-to-1.""(""Crunch Proves A Test of Faith For Street Strong", WSJ)

Remember, Carlyle Capital was leveraged 32 to 1 ($22 billion equity) and went ""poof"" in a matter of days when it couldn't scrape together a measly $400 million for a margin call. How vulnerable are these other maxed-out players now that the credit bubble has popped and the whole system is quickly unwinding?

Not very safe, at all. As Gongloff points out:

"Based in part on numbers reported at the end of Bear's fourth quarter, estimated that Bear Stearns had $35 billion in liquid assets and borrowing capacity, enough to operate for 20 months. Turns out it had enough for three days.""

That's right; three days and it was over. Why would anyone think it will be different with these other equally-exposed banks? These institutions are basically insolvent now. The Federal Reserve is just trying to prop them up to maintain appearences. But it's a hopeless cause. As hyper-inflated assets are downgraded; structured investments and arcane hedges against default will continue to disintegrate and these profligate institutions will be crushed by a stampede of panicking investors. The flight to safety has already begun. Cash is king.

Look what has transpired just since Monday.

"Crude oil, copper and coffee led the biggest decline ever in commodities on speculation that a U.S. recession will stall demand for raw materials." (Bloomberg) All asset classes fall in a deflationary spiral, even commodities which many people thought would be spared. Not so. In fact, even gold has begun to retreat as hedge funds and other market participants are forced to relinquish their positions.

In other news, Reuters reports:

"The yield on U.S. 3-month Treasury bills fell below 1 percent on Monday to levels not seen in 50 years prompted by intense safety bids for cash spurred by the ongoing global credit crunch...Investors were pulling money out of stocks and even the booming commodity market even after the Federal Reserve conducted a fresh round of measures over the weekend to alleviate the credit crisis."

Here's another example of the "flight to safety" as investors recognize the warning signs of deflation. This trend is likely to intensify even though the Fed will continue to cut rates and real earnings on Treasuries will go negative. In another report from Reuters:

""The Chicago Board Options Exchange Volatility Index or VIX on Monday surged to its highest level in nearly two months as a fire sale of Bear Stearns and an emergency Federal Reserve cut in the discount rate reignited credit fears."

Fear is higher now than it has been in a long time. Option traders are loading up on index puts in the Standard & Poor's 500 index. The "Fear Gage, as it is called, is soaring to new heights as credit problems continue to mount and business begins to slow to a crawl.

And, perhaps most important of all:

"The cost of borrowing in dollars overnight rose by the most in at least seven years after the Federal Reserve's emergency cut in the discount interest rate stoked concern that credit losses are deepening....The London interbank offered rate, or Libor climbed 81 basis points to 3.86 percent, the British Bankers' Association said today. It was the biggest increase since at least January 2001. The comparable pound rate rose 28 basis points to 5.59 percent, the largest gain since Dec. 31, 2007." (Bloomberg)

This may sound like technical gibberish geared for market junkies, but it is critical for understanding the gravity of what is really going on. The Fed's rate cuts are not normalizing the lending between banks. In fact, the situation is actually deteriorating quite quickly. When banks don't lend to each other (because they are worried about getting their money back) the wheels of capitalism grind to a halt. The banks are the essential conduit for providing credit to the broader economy. If there's a slowdown in traffic, economic growth begins to slow immediatly. Presently, the banks are hoarding cash to cover the losses on their mortgage-backed investments and to shore up their skimpy capital reserves. As a result, consumer spending is sluggish and GDP is beginning to shrink.

"We know we're in a sharp (decline), and there's no doubt that the American people know that the economy has turned down sharply"," said Henry Paulson on NBC television on Sunday. "There's turbulence in our capital markets and it's been going on since August. We're looking for ways to work our way through it."

No kidding. But Paulson is clearly out of his depth. He's simply not the man to deal with a crisis of this magnitude. His only concern is bailing out his rich friends in the banking industry. The interests of workers and consumers are just brushed aside. Has anyone from the Dept of the Treasury (or the Fed) suggested a bailout for the 14,000 Bear Stearns employees who just lost not only their jobs but the entire retirement when the company was purchased by JP Morgan?

Of course, not. Because both Paulson and Bernanke take a class oriented approach to the problem that narrows their range of vision and limits their ability to pose viable remedies. They are unable to see the whole playing field. For example, Bernanke assumes that if he keeps cutting rates, he can reflate the equity bubble by stimulating consumer spending. But that is not going happen. First of all, the banks are not passing on the savings to customers. And, second, the banks are only lending to applicants with a flawless credit history. In other words, the Fed's cuts may be good for Bernanke and Paulson's buddies, but they do nothing for either the consumer or the broader economy. Also, as Michael Hudson notes in his latest article "Save the Economy, Dismantle the Empire" (counterpunch.org) the banks are taking the money they borrow from the Fed and investing it elsewhere:

"This week the Fed tried to reverse the plunge in asset prices by flooding the banking system with $200 billion of credit. Banks were allowed to turn their bad mortgage loans and other loans over to the Federal Reserve at par value (rather at just 20% "mark to market" prices). The Fed's cover story is that this infusion will enable the banks to resume lending to "get the economy moving again." But the banks are using the money to bet against the dollar. They are borrowing from the Fed at a low interest rate, and buying foreign euro-denominated bonds yielding a higher interest rate--and in the process, making a currency gain as the euro rises against dollar-denominated assets. The Fed thus is subsidizing capital flight, exacerbating inflation by making the price of imports (headed by oil and other raw materials) more expensive. These commodities are not more expensive to European buyers, but only to buyers paying in depreciated dollars.""

The banksters are "buying foreign euro-denominated bonds" during an economic crisis in America? Whoa. Now there's an interesting take on patriotism.

The Fed's strategy has even failed to lower mortgage rates which are pinned to the 30-year Treasury and which has actually gone up since Bernanke began slashing rates. This inability to pass on the Fed's rate cuts to potential mortgage applicants ensures that the housing meltdown will continue unabated well into 2009 and, perhaps, 2010.

In the last few days, the Fed has provided $30 billion to buy up the least-liquid speculative debts of a privately-owned investment bank, Bear Stearns, which was leveraged at 32 to 1 and which will remain unsupervised by federal regulators. How does that address the underlying issues of the credit crunch? Are Bernanke and Paulson really trying to put the financial markets back on solid footing again or are they merely expressing their bank-centered bias?

That question was answered in an article on Tuesday in the Wall Street Journal which explained the real reasons behind the Bear bailout:

"The illusion was shattered Saturday morning, when Mr. Paulson was deluged by calls to his home from bank chief executives. They told him they worried the run on Bear would spread to other financial institutions. After several such calls, Mr. Paulson realized the Fed and Treasury had to get the J.P. Morgan deal done before the markets in Asia opened on late Sunday, New York time.

"It was just clear that this franchise was going to unravel if the deal wasn't done by the end of the weekend," Mr. Paulson said in an interview yesterday.'" ("The Week that Shook Wall Street", Wall Street Journal)

So all it took was a little nudge from his banking cohorts for Paulson to swing into action and firm up the deal. That says it all. The interests of the American people were never even considered. It was all choreographed to bail out the financial industry. No wonder so many people believe that the Federal Reserve and the US Treasury are merely an extension of the banking establishment. The Bear bailout proves it.

[freddyv]

I think it's absurd that you can sell a stock that you don't physically own with the assumption that you will simply just buy it later (hopefully at a lower price than for what you've sold it). Can you imagine what it would be like if people on the street tried to do this to you? Usually you are presented with the goods upon receipt of payment.

The stock market is funny. It's kind of a big scam really.

[freddyv]

it's nice that these social programs have become slush funds. even when we've had a balanced budget, it's been hard to keep the goverment's hands out of the cookie jar.

Government Benefit Programs in Trouble

Mar 25 02:07 PM US/Eastern
By MARTIN CRUTSINGER
AP Economics Writer Write a Comment


WASHINGTON (AP) - Trustees for the government's two biggest benefit programs warned Tuesday that Social Security and Medicare are facing enormous financial challenges, with the threats to Medicare far more severe.

The trustees, issuing a once-a-year analysis of the government's two biggest benefit programs, said the resources in the Social Security trust fund will be depleted by 2041. The reserves in the Medicare trust fund that pays hospital benefits were projected to be wiped out by 2019.

Both those dates were the same as in last year's report. But the trustees warned that financial pressures will begin much sooner when the programs begin paying out more in benefits each year than they collect in payroll taxes. For Medicare, that threshhold is projected to be reached this year and for Social Security it is projected to occur in 2017.

[freddyv]

more good news on medicaid and social security.

The $53 trillion asteroid
By Glenn Beck
CNN

Editor's note: "Glenn Beck" is on Headline News nightly at 7 and 9 p.m. ET.

NEW YORK (CNN) -- Let's say a giant asteroid was headed toward Earth right now and experts say it has a good chance of ending civilization as we know it. Let's also say that we've known about this asteroid for years but even as it gets closer and closer our leaders do nothing.

"Don't worry," they tell us, "The next administration will figure something out."

With the future of our country at stake, would Americans really sit back and tolerate that kind of inaction? Of course not -- we'd be sharpening our pitchforks and demanding answers.

Well there may not be a space asteroid heading toward us, but there is an economic one -- and the threat to our future is just as severe.

You might think that I'm talking about the recession (sorry: potential recession) or credit crisis, but I'm thinking bigger. Much, much bigger.

Let me give you three numbers that will put this economic asteroid into perspective: $200 billion, $14.1 trillion, and $53 trillion.


$200 billion is the approximate total amount of write-downs announced so far as a result of the current credit crisis.

$14.1 trillion is the size of the entire U.S. economy

And $53 trillion is (drum roll please) the approximate size of this country's bill for the Social Security and Medicare promises we've made.
While no one will ever mistake me for Alan Greenspan, it seems to me that the third number is quite a bit larger than the other two. It also seems very few people care.

According to the latest Social Security and Medicare Trustees report (and I use that term loosely since it has the word "trust" in it) released earlier this week, the economic asteroid will first make impact in the year 2019 when the Medicaid trust fund becomes insolvent.

Only an immediate 122 percent increase in Medicaid taxes and a 26 percent increase in Social Security taxes can prevent (or more likely, delay) its impact.

Realizing that Americans have become pretty much numb to these kinds of ridiculous sounding proposals, U.S. Treasury Secretary Henry Paulson tried to up the ante this week. "Without change," he said, "Rising costs will drive government spending to unprecedented levels, consume nearly all projected federal revenues, and threaten America's future prosperity."

Now, I know we're all worried about important sounding things that none of us understand, like CDO's, SIV's, and Credit Default Swaps, but did you hear what our Treasury Secretary just said?

"Rising costs will ... consume nearly all projected federal revenues ..."

Translation: Every single tax dollar that is sent to Washington will be used to pay for just these two programs.

That means no money is left for anything else. Nothing. No Department of Defense or Homeland Security, no Department of Energy, no Department of Justice, no Environmental Protection Agency, no Internal Revenue Service. Actually, knowing our government, they'd probably keep the IRS going somehow.

Of course, none of this is exactly breaking news. Our leaders have known about this rapidly approaching asteroid for years now and they've done nothing but debate it. At the same time, I'm a realist. I understand that this stuff is "the third rail of politics," but our leaders' negligence on this issue is damn near criminal. No, correction, it is criminal.

Americans aren't afraid of the truth. In fact, we crave the truth only slightly more than we crave a leader who will actually give it to us. But part of the problem with this issue is that numbers followed by 12 zeroes aren't very relatable to the average American. Instead, try this on for size.

A million seconds is 12 days. A billion seconds is 32 years. A trillion seconds is 32,000 years. And 53 trillion seconds? 1.7 million years.

In an article that will appear in an upcoming issue of my magazine, Fusion, former Comptroller General of the United States David Walker tries a different tactic. He writes that our unfunded promises translate into "an IOU of around $455,000 per American household."

Wow. Does the size of our debt hit home now?

The America that I know doesn't sit around waiting for someone to rescue it from disaster. Besides, who do we expect to swoop in and save the day? Congress? The president? Please -- they're not only the ones who put the asteroid into space, they've also been making it bigger with irresponsible spending on everything from prescription drugs to billions in rebate checks and bailouts.

Bruce Willis and Tommy Lee Jones? They're more likely to be on Social Security than to save it.

And that leaves only us: We the People. Like every other crisis we face, it's up to us to save ourselves.

But how?

Be honest, no matter what side of the political aisle you're on, it's obvious that our financial deficit is dwarfed only by the deficit of trust we have in our leaders.

I'm willing to do the right thing for our future, I'm willing to sacrifice, but not when I believe that our leaders will do nothing but make the asteroid even larger.

[freddyv]

Give corporations a tax break
By Glenn Beck
CNN

NEW YORK (CNN) -- Ah, tax day. The day that we all get together to give our money to an organization that none of us believe actually deserves it.

It's the day we all fund thousands of services that don't really work and that most of us will never use -- like we're overpaying for a mediocre meal at a restaurant where we don't even get to eat it.

It's the day we hope and pray to regain ownership of a small percentage of our own money that was taken from us, and that somehow makes us happy. Not surprisingly, only the threat of prison convinces us to continue to participate.

It's a process so unpopular that even politicians, who want nothing more than to spend your money, will all act like they feel your pain.

Republicans say they will cut taxes for everyone and occasionally they do it. Of course, they don't combine that with a cut in spending, so it's like they stop punching you with their left hand and continue with their right.

Democrats don't even bother to hide their love for spending -- at least not well. They just say all those lucky rich people and evil companies will pay the bills. Being lucky, rich, evil and a company, I really hate tax day.

However, I'm a little unsure which approach is better. Democrats burst through the front door of our convenience store with a gun and tell us to empty the contents of our cash register into their little bag with the dollar signs on it.

Republicans walk through the store and smile at us while shoplifting furiously when we turn our backs. When we catch them on surveillance cameras, they just claim they learned their lesson and won't do it next time. Either way I'm being ripped off, and both parties seem to have the attitude that we should be lucky they graced the store with their presence.

Tax day is truly the lone bipartisan day of the year. We all hate it equally. It's a day that liberals can agree with Ronald Reagan, who said, "High taxes and excess spending growth created our present economic mess. More of the same will not cure the hardship, anxiety and discouragement it has imposed on the American people."

It is also a day when conservatives can agree with John F. Kennedy, who said, "I see no magic in tax dollars which are sent to Washington and then returned. I abhor the waste and incompetence of large-scale federal bureaucracies...."

So, in the spirit of bipartisanship, let me attempt one simple tax policy argument. Lower the corporate income tax.

It's something -- and probably the only thing -- that former GOP presidential candidate Mitt Romney and Rep. Charlie Rangel, D-New York, actually agree on. But what makes it so important is the rest of the world agrees on it, too. In a global economy, companies can locate themselves wherever they want. They will set up shop wherever it's easiest to do business. That's also where they will pay most of their taxes and hire thousands of workers.

If you have to make the decision on where to do business, would you choose the country that, according to the Tax Foundation, features the highest corporate state and federal tax in the developed world? I doubt it.

The World Bank and PricewaterhouseCoopers just finished their report studying the burden that businesses face by various tax systems. In what it calls the "ease" of paying taxes, we ranked 76th out of 178 countries overall. That's not good.

Unless, of course, you happen to think "good" is being significantly behind the Sudan and Rwanda. We're also three slots behind Palau, which is apparently a country. Who knew? In fact, we're close to 40 slots behind the two countries we're in the middle of trying to free: Iraq and Afghanistan.

Our total tax rate, which includes all taxes paid by a company -- federal, state, property taxes, etc. -- is a literally insane 46.2 percent, ranking us behind 101 countries overall. How do we possibly expect to compete on the global scale when Borat's home country is 44 slots ahead of us?

Certainly, corporate tax code isn't the only thing attracting business. I doubt there will be a rush of corporate activity in the Sudan after this column. But it's important enough that around the world, the study found 65 countries have improved their tax system in the last three years alone, with the lowering of corporate income tax being the most popular improvement.

I am aware that arguing for a tax cut for companies may seem counterintuitive to some, with all the economic problems "Main Street" is feeling at the moment. But that's exactly why we need it so badly. Now is not the time to chase away the companies that employ us.

Whether you agree or not with the corporate tax cut, you probably at least think you're paying too much. For everyone else, the U.S. Government has created a solution. In 1843, an account was set up to accept additional money, to be considered an unconditional gift to the government. Here is their address:

Gifts to the United States
U.S. Department of the Treasury
Credit Accounting Branch
3700 East-West Highway, Room 6D17
Hyattsville, Maryland 20782

I'm sure the checks will be pouring in.

The opinions expressed in this commentary are solely those of the writer.

[BT]

Here's the sad thing that most don't know: Not one red cent of your federal income tax goes for ANY service for Americans. It all goes to the international bankers that own the federal reserve to pay back only the INTEREST on the money they loan our government.

[freddyv]

a quick search resulted in this:

Total Outlays (Federal Funds): $2,650 billion
MILITARY: 54% and $1,449 billion
NON-MILITARY: 46% and $1,210 billion

www.warresisters.org/pages/piechart.htm

[HBGOnline]

I'm not sure I'd trust your source Freddy.

Can't remember were I heard it, might have been Beck, but Military spending as a % of budget is actually less then the 70's and 80's. I'm to tired to search for the source.

Here is something I heard about a few months ago. See below. I stumbled on this when looking for total welfare payments made by the Federal Government. It's a FUCKIN SHAME!!! That and the interest on National debt, combined with the military spending is a god damn crime.



www.federalbudget.com/

[freddyv]

you have to read the page that I took the pie chart from. the government likes to skew the stats by including trust funds (i.e. social security, etc.) in their statistical analyses. I say skew because the funding for these things do not come from the income tax...if you look at your pay stub, they are separate deductions. basically by including these items it makes it look like they are spending less on the military than they actually are spending.

again, see the page that my chart came from. they get their statistics from an official government source: www.whitehouse.gov/omb/budget/fy2009/index.html

[freddyv]

ron paul on neil cavuto yesterday talking about the IRS

www.youtube.com/watch?v=vK5TMMsWIDE