Category Archives: Crony Capitalism

09.14.13
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Silver Bear Cafe: The Truth of the Federal Reserve System – The biggest financial crime in the history of the United States

In this short article I will discuss the basic mechanics of the biggest financial crime        in the history of the United States and some elements of how this crime, conducted by the        Federal Reserve System, is cheating all Americans every day out of the wages which they        receive for their labor. A future article will discuss how the savings which Americans are        putting aside for their future are being slowly and steadily stolen by this same group.        But there is first a even more important question to ask : While you have recently seen        the media discuss the financial scandal regarding the Enron corporation why haven’t you        heard one word about what I am about to discuss which in size makes Enron look like a ant        compared to Mount Everest?

From the beginnings of our nation there was a great debate and battle over many years        regarding a basic question of how the nation will function : Who shall issue the money of        the nation? The answer to the question of who shall issue ( make ) the money of the nation        boiled down to 2 possibilities –

  1. The government shall use the sovereign powers granted to it via the Constitution to          issue money.
  2. A private corporation, established via legislation, shall take over the function of          issuing money.

While a fuller understanding of the history of the battles over this issue can be found        at the various forums and websites to which we will refer you to for greater information        the quickest summation of the answer to the problem is that :

  1. Government issue of money is constitutionally, monetarily, and financially the soundest          policy for the prosperity of the nation.
  2. The issuance of the money of the nation by a private corporation leads to the draining          of the resources of the nation to the private corporation which controls the issuance of          money.

The summated result of this action is that the private corporation, unaccountable to        the people of the nation, controls the nation as it controls the flow of money within the        nation. As part of a mountain of evidence that the private corporation controls the nation        I refer you now to the following website : http://www.algaoaktree.com/MoneyMenu.htm

You will be taken to a website which has the best explanation of the money situation  that I know of and it is here where you will learn of the total corruption of the Federal  Reserve System, the private corporation which currently controls the issuance of money  within our nation.

Please take your time and read the many extremely well written articles at this site        completely. After reading the articles on this site you may ask one of the questions which        I did upon learning the truth of our monetary system : Even though the subject of money is        a somewhat technical one, why isn’t the information found on this site more well known to        the citizens of our nation?

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Click below for the full article.

http://www.silverbearcafe.com/private/09.13/criminalfed.html

08.25.13
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Reason.com: Delete the Fed

Who should run the Federal Reserve System when chairman Ben Bernanke’s term expires next year: Vice Chair Janet Yellen or former Obama adviser Lawrence Summers?

Neither.

Who then?

No one.

The fact is, we need the Federal Reserve like we need a hole in the head. Contrary to folklore, the Fed is not needed to stabilize the economy or to prevent unemployment. As the Fed heads into its second century, we ought to realize that its record is terrible. Even if we don’t count the interwar period (which some economists call the new Fed’s practice round), America’s central bank is a flop. Monetary economists George A. Selgin, William D. Lastrapes, and Lawrence H. White wrote in “Has the Fed Been a Failure?”:

Drawing on a wide range of recent empirical research, we find the following: (1) The Fed’s full history (1914 to present) has been characterized by more rather than fewer symptoms of monetary and macroeconomic instability than the decades leading to the Fed’s establishment. (2) While the Fed’s performance has undoubtedly improved since World War II, even its postwar performance has not clearly surpassed that of its undoubtedly flawed predecessor, the National Banking system, before World War I.

The authors support that generalization with details. On inflation: “Far from achieving long-run price stability, [the Fed] has allowed the purchasing power of the U.S. dollar, which was hardly different on the eve of the Fed‘s creation from what it had been at the time of the dollar’s establishment as the official U.S. monetary unit, to fall dramatically” — by 95 percent.

Selgin, Lastrapes, and White also show that the central bank has given us longer recessions and slower recoveries.

But without the Fed, who would set interest rates to guide the economy? The first answer is that government policy and Fed manipulations can create the very recessions that the Fed then tries to reverse. If the politicians and their court economists would get over their hubristic belief that they are stewards of the economy, macroeconomic crises would disappear.

Besides, the Fed cannot set interest rates, not even its narrow federal-funds rate for overnight interbank loans. At most, it targets that rate by buying and selling government securities, but it doesn’t always hit its target. The idea that the Fed can even heavily influence mortgage and other interest rates ignores important facts.

First, the Fed’s operations are small compared to the complex U.S. and world economies. Writes monetary economist Richard Timberlake,

Traditional economics properly teaches that many complex market forces — countless investment and savings decisions not dependent on monetary factors — are essential in determining interest rates. The Fed funds rate that Fed policy can influence through its monopoly over the quantity of money is inconsequential in shaping most short-term and long-term rates in capital markets, unless that moneymaking power subsequently promotes a pervasive price inflation. [Emphasis added.]

Second, the Fed can’t lower rates through monetary inflation beyond the very short run. Why not? Because lenders will respond by raising their rates to avoid being screwed by price inflation –unless the Fed prevents the inflation, as it’s been doing, by effectively borrowing back the new money from the banks at interest.

Moreover, as monetary economist Jeffrey Rogers Hummel points out,

Globalization, with the corresponding relaxation of exchange controls in all major countries, allows [investors] easily to flee to foreign currencies, with the result that changes in central-bank policy are almost immediately priced by exchange rates and interest rates. Add to this the ability to purchase from many governments securities that are indexed to inflation, and it becomes highly unlikely investors will be caught off guard by anything less than sudden, catastrophic hyperinflation (defined as more than 50% per month) — and maybe even not then.

While inflation is not the threat it once was, the Fed is not harmless. “Bernanke has so expanded the Fed’s discretionary actions beyond merely controlling the money stock that it has become a gigantic, financial central planner,” Hummel writes.

No one should have such power.

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Click below for the full article.

http://reason.com/archives/2013/08/25/delete-the-fed

 

07.31.13
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OpenMarket.org: Detroit Bankruptcy Focuses Attention on Public Pensions

For people watching it from afar, the bankruptcy of Detroit — the biggest municipal bankruptcy in American history — may have brought a sense of relief in the fact that they live somewhere else. But it’s also brought needed public attention to the state of city finances around the nation. While Detroit is an egregious case of municipal incompetence, corruption, and mismanagement, its problems are not unique.

In fact, one of the drivers of debt that brought the Motor City to its knees is common among states and cities: defined benefit pension plans, which guarantee payments independently of the level of the plan’s funding. This week’s cover story in The Economist brings some needed attention to the problem:

Most public-sector workers can expect a pension linked to their final salary. Only 20% of private-sector workers benefit from such a promise. Companies have almost entirely stopped offering such benefits, because they have proved too expensive. In the public sector, however, the full cost of final-salary pensions has been disguised by iffy accounting.

Pension accounting is complicated. What is the cost today of a promise to pay a benefit in 2020 or 2030? The states have been allowed to discount that future liability at an annual rate of 7.5%-8% on the assumption that they can earn such returns on their investment portfolios. The higher the discount rate, the lower the liability appears to be and the less the states have to contribute upfront.

Even when this dubious approach is used, the Centre for Retirement Research (CRR) at Boston College reckons that states’ pensions are 27% underfunded. That adds up to a shortfall of $1 trillion. What is more, they are paying only about four-fifths of their required annual contribution.

On a more realistic discount rate of 5%, the CRR reckons the shortfall may be $2.7 trillion. A similar calculation by Moody’s, a ratings agency, reckons that schemes are 52% underfunded.

This is a huge problem. But to effectively address it requires knowing how big it actually is. That is easier said than done, given that much of the underfunding is the result of fuzzy math that has resulted in discount rates based on overly optimistic investment return projections.

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Click below for the full article.

http://www.openmarket.org/2013/07/31/detroit-bankruptcy-focuses-attention-on-public-pensions/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Openmarketorg+%28OpenMarket.org%29

07.26.13
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1787 Network: Is Detroit Our Starnesville?

Detroit reminds me of a quote from the Grail Knight in Indiana Jones and the Last Crusade, “He chose poorly.”  In the movie the evil bastard who “chose poorly” shrivels up and turns to ancient ruins because of his “enlightened” choice, so too has Detroit. Indy who didn’t choose poorly did not suffer the same fate.  Just like in the movie those who “chose wisely” don’t suffer the same fate, nor should they.

Detroit is the manifestation of those who “chose wisely” going Galt. It is precisely the condition and outcome that result from the reality of implementing the utopian ideas of so called progressives.  Detroit mirrors Starnesville, a car-manufacturing city that became a ghost town after experimenting with socialism. You can read about it in Ayn Rand’s 1957 novel “Atlas Shrugged.”

The federal government and tax payers from the other 50 states should under no circumstances bail out Detroit. It should be allowed to go bankrupt.  The citizens of Detroit should be allowed to suffer the consequences of their choices: specifically their voting decisions.  It is the citizens of Detroit who are at fault for Detroit’s demise not the rest of the nation. Every single voter in Detroit who voted for politicians who expanded the government of Detroit is responsible.

Let’s hope Detroit isn’t the indicator that Starnesville was in the novel.  In Atlas Shrugged, the demise and failure of Starnesville was the harbinger of the collapse of the entire society.  Detroit and its current bankrupt condition is the direct result of who the people of Detroit elected.  Those who were disproportionately taxed and had to pay for the utopian ideas of the elected leaders, when it was obvious that their vote for responsible government and free enterprise were ineffective, voted with their feet; they moved.  The auto industry built plants in Kansas, Alabama, Georgia, Kentucky, etc. they quit building and expanding in Detroit. The empty wasteland of factories in Detroit is evidence of the reality of implementing enlightened ideas of the statist leftists.  The voters of these states, who elected people that created laws and an environment more inviting to auto manufactures than Detroit and Michigan did, are not responsible and should not have to bail out the voters who embraced the empty promises of Democrats.

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Click below for the full article.

http://1787network.com/2013/07/is-detroit-our-starnesville/7203

05.19.13
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The Motley Fool: How Much GM Truly Stole From American Taxpayers

General Motors  (NYSE: GM )  figures its re-entry into the S&P 500 club will be quite soon, even though the company is still in the early stages of its turnaround. There’s no denying that the U.S. automotive recovery is going well for Detroit. It’s only been a few years since the ugly recession, financial collapse, and ensuing bailouts for two of Detroit’s Big Three, the exception being Ford  (NYSE: F ) . And all three companies have gained market share this year in the U.S. at the expense of Japanese rivals Toyota  (NYSE: TM )  and Honda  (NYSE: HMC) . GM just recorded its 13th consecutive profitable quarter, so the nearly $50 billion that taxpayers like you and I funded to save GM was a huge success. Right?

Wrong.

Most people don’t realize how much GM actually took from taxpayers, and how little it’s given back. If I told you GM has repaid only $6.7 billion out of the $49.5 billion in loans it was given, would you be surprised? If I told you the expected loss to the U.S. Treasury of roughly $12 billion isn’t even a fraction of the real cost, would you believe me? If not, you might be in for a nasty surprise.

Bailout by the numbers The Treasury plans to exit its entire holdings of GM by next April. By the end of this past March, the government had reclaimed just over $30 billion of its investment, leaving a substantial loss. While the government says it didn’t anticipate making a profit from saving the auto industry, the other $419 billion in TARP funds were 94% recovered — making GM a big loser. At today’s GM stock price, the Treasury looks to lose between $11 billion and $12 billion, unless the stock price changes drastically.

Yet that number doesn’t tell the whole story.

Consider that the only true loan GM received from the U.S. government was for $6.7 billion at 7% interest, which it has since repaid. The majority of the nearly $50 billion was in stock purchases by the U.S. Treasury at a price that GM didn’t lose money when recently rebuying shares.

Also consider that GM was “gifted” tax losses from the “Old GM” corporation in amounts of $45 billion. What that really means is the “New GM” can write off current profits up to that amount and not pay taxes on it. That’s a complete joke, in my opinion.

Think of it like this: GM took our tax dollars to save its company, and then after turning 13 quarters of profit, it still isn’t paying a single income-tax dollar. Are you kidding me? News flash: My recent taxes cost me and my wallet a bundle, and I didn’t turn billions in profit.

Too often, people assume that since GM received nearly $50 billion in taxpayer funding, and when people hear that GM has fully repaid its obligations, we assume that means it repaid the said $50 billion. That couldn’t be further from the truth. GM has merely paid its initial pure loan of $6.7 billion with interest, and rebought some of its own shares from the Treasury — often at a cheaper price. Most of us taxpayers don’t even realize Ford paid an effective tax rate of 26% in 2012, compared with 0% for GM — a complete joke to Ford, which didn’t take any of our taxpayer dollars.

Bottom line You’ll see in my disclosure that I own stock in both Ford and GM. But I own stock in both for completely different reasons. I believe Ford has excellent management and is way ahead of GM in operating efficiency and global consolidation of platforms — helping it create net income off lower revenue. It’s also way ahead in creating value and quality in segment trends dominated by fuel efficiency — not to mention that its F-Series has been the best-selling truck for 36 years.

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Click below for the full article.

http://www.fool.com/investing/general/2013/05/19/how-much-gm-truly-stole-from-american-taxpayers.aspx

05.14.13
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Reason.com: Free Markets Are More Important Than Safety Regulations

California and Texas officials have been having an ongoing tit-for-tat over which of the nation’s two mega-states is the better place to live and do business – something that has become a proxy issue for the broader philosophical debate over the proper size and scope of government.

In California, Democrats control every state constitutional office and have an iron grip on the Legislature, where they always propose new regulations and seek new ways to secure additional tax revenues.  In Texas, Republicans are dominant and Gov. Rick Perry has spent time in San Diego and other California cities luring businesses to the Lone Star State, which prides itself on a low tax burden and more manageable level of regulation.

The rhetoric often has gotten silly, especially given that both states are part of a nation that is highly taxed and highly regulated. Most of the differences are around the margins. Nevertheless, Democrats here pretend that businesses aren’t leaving and that the common critiques of $150,000 pension deals for public employees, sky-high tax rates and punitive bureaucracies are a right-wing, Koch-funded plot to turn the Golden State into Bangladesh.

The latest flare-up centers on a Sacramento Bee cartoon in which Perry says “Business is booming in Texas.” It then shows the recent, tragic fertilizer plant explosion in West Texas. Cartoons are rarely subtle, and the message here is that Texas’lower-regulation climate is responsible for a blast that killed 14 people and injured 200. Gov. Perry penned an angry letter to the editor.

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Click below for the full article.

http://reason.com/archives/2013/05/10/free-markets-are-more-important-than-saf

05.06.13
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Business 2 Community: U.S. Dollar to Become the Next Yen?

In its latest meeting minutes, the Federal Reserve said it will continue with quantitative easing, creating $85.0 billion in new money monthly, in order to bring economic growth to the U.S. economy. (Source: Federal Reserve, May 1, 2013.)

The Federal Reserve, once again, didn’t provide any clear indication as to when it will end the quantitative easing; rather, the central bank stated it will continue to do the same “until the outlook for the labor market has improved substantially in context of price stability.” (Source: Ibid.)

The Federal Reserve has already increased its balance sheet to over $3.0 trillion, and if it continues its quantitative easing at this pace, its balance sheet will balloon even more, possibly even reaching $4.0 trillion—or even $5.0 trillion—in a very short period of time.

This is troublesome news, dear reader. The more money created out of thin air via quantitative easing, the more the fundamentals of the reserve currency, the U.S. dollar, deteriorate.

As I have mentioned in these pages before, we only need to look at the Japanese economy to see quantitative easing is not a viable option for us.

The Japanese currency has plummeted since the Bank of Japan revved up its quantitative easing. Just look at the chart below of the Japanese yen compared to other major currencies in the global economy; it seems as if the currency has fallen off a cliff. If we keep up with all this money printing, the U.S. dollar may eventually look the same!

U.S. Dollar to Become the Next Yen? image xjy japanese yen philadelphia index1

Chart courtesy of www.StockCharts.com

A falling U.S. dollar will drag down the buying power of Americans even further, as they are already struggling to keep up with their expenses. What we could purchase for $1.00 in the year 2000 now costs us $1.35. (Source: Bureau of Labor Statistics, last accessed May 3, 2013.)

I have yet to see any real economic growth in the U.S. economy as it was promised when quantitative easing was first introduced after the financial crisis. Quantitative easing is working to make big bank balance sheets strong and to create inflation, but I don’t see any economic growth being created by it.

I am looking at the Japanese economy as the best example of a country failing with long-term quantitative easing and what might be next for the U.S. economy and the dollar due to all this newly created money.

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Click below for the full article.

http://www.business2community.com/finance/u-s-dollar-to-become-the-next-yen-0486009