I’ve been pouring through the Fed Reserve’s recent release of circa 2005 FOMC meeting transcripts. The most striking observation that one can make is that the consumer - the very lifeblood that determines whether our economy will live or die - has been discarded.
Discarded --- as in tossed under the bus.
Ninety-nine percent of our “economists” today have it entirely ass backwards: They believe that the economy supports the consumer. In reality, it really is the other way around. Proof: You can put two or more consumers together and create an economy but remove the consumers from an economy and you are left with nothing.
“Jobless recoveries” are Cable News media spin.
The following excerpts will leave you thinking that you are watching some bizarro episode of the “Twilight Zone.”
Toss the consumer under the housing wheel of the bus and laugh about it:
"–I offer one more piece of evidence that I think almost surely suggests that the end is near in this sector. While channel surfing the other night, to the annoyance of my otherwise very patient wife, I came across a new television series on the Discovery Channel entitled “Flip That House.” [Laughter] As far as I could tell, the gist of the show was that with some spackling, a few strategically placed azaleas, and access to a bank, you too could tap into the great real estate wealth machine. It was enough to put even the most ardent believer in market efficiency into existential crisis. [Laughter]~David Stockton, Dec. 13, 2005, economist and Fed comedian.
So while publicly denying the existence or even the possibility of a housing bubble --- the Fed was privately laughing about its imminent and apocalyptic end. Jokes on us. The result of this meltdown is 22% unemployment, 43 million people on Food Stamps, 1 in 5 kids going to bed hungry at night, millions of homeless people resulting from foreclosures, millions of Americans watching as their largest investment (their home) tanks, local governments who rely on property taxes left struggling and a few failed bond auctions away from shutting down or being “bailed out”.
We are left holding the bag, as this past weeks Financial Sense News with G. Edward Griffin noted, WE - not the Fed - are the lenders of last resort.
The other day I saw Alan Greenspan say ‘Prove it’ (that he created the housing meltdown). The reporter gave him a free pass, all he had to do is ask Greenspan who created the years of cheap money, who muzzled Brookley Born (the CFTC Commissioner who wanted to regulate Derivatives) and who helped get rid of the Glass Steagall Act with a 3-2 Fed vote, and who failed to regulate the banks.
They knew, from the September 20, 2005 meeting:
“I’ll close with one other thing, the central banker’s anxiety, which is: “Good times are bad because they could turn out to be bad. Bad times are bad for obvious reasons.” [Laughter] I think you’ve given us a lesson in why these extremely good times are unlikely to be good for us in the long run.~ Ferguson.
Toss the consumer under the deficit wheel of the bus and laugh about it:
“Tell me, Sam, is there really any difference between Republicans and Democrats when it comes to spending?” And Cohen said, “I want to think about it, do some research, and give you a serious answer.” He called back the next morning and said, “Yes, George, there is. Democrats enjoy it more.” [Laughter] “But otherwise there doesn’t appear to be any difference.”~Fisher.
As ZeroHedge pointed out, “...that ratio is already roughly 1 to 2, meaning for every dollar in revenue the US government issues more than one dollar of debt just to fund the deficit.”
While our public debt is about 14 trillion our unfunded liabilities are much larger.
Unfunded (read: looted) Liabilities
Social Security 14.6 trillion
Prescription Drugs 19.2 trillion
Medicare 76 trillion
109.8 trillion + 18 trillion (18 trillion includes GSE off balance sheet debt) = 127.8 trillion dollars.
Perhaps the simplest way to look at it is this: 55%-65% of our income goes to taxes and fees, we work 8.5 months of the year to pay for this insane mess. The consumer has then 3.5 months of income with circa 1970s wages to consume.
How anyone can joke about being the enabler, the debt pusher to a body of almost 535 fiscally insane debt binging lunatics when their kids are going to be going through debt detox hell is anything but something to laugh at. (Ron Paul, Rand Paul, Paul Ryan and a few fiscally responsible leaders excluded). If the Fed wasn’t monetizing debt the US would be where it should be - in bankruptcy reorganization.
Overdosing the user only tosses the consumer under the bus, for it is the consumer who pays this tab 8.5 months of the year.
Rob the consumer and then toss them under the currency tire and laugh about it:
“Absent a dollar depreciation that’s now probably on the order of 8, 9, or 10 percent, the deficit is going to steadily worsen. If the dollar were to start depreciating, that would slow the rate of deterioration. If the dollar depreciation that we put into the forecast were to get as high as 8 or 9 percent, that might plateau the deficit”.~Johnson
“One thing we can be sure of is that the value of the dollar will be worth 100 cents.” [Laughter]~Greenspan
There was also discussion where Bernanke talks about a chart showing the dollar depreciating by 10% per year.
All of this is insane robbery. Since the inception of the Fed our dollar has been robbed 96% of its purchasing power, 80% since Nixon declared force majeure in 1971 and took us off the quasi-gold standard. Wages have been flat since the 1970s, the consumer is saddled with 8.5 months of governmental debt, to steal 10% per year from the .04 cents he calls a dollar won’t make him/her a strong consumer.
Think about that the next time you hand over a dollar, look at that dollar and picture .04 cents, next year it’ll be closer to .03 cents. Or worse.
They can only toss people under the bus like this because most people don’t understand why prices go up. If money was grain they’d (consumers/people) would get this the first year they transitioned from a drought where their grain was in high demand to a year there was a bumper crop and no one wanted the stuff.
Rob the consumer of good wages then toss them under the globalization tire and laugh about it:
“Everyone I’ve talked to continues to try to figure out ways to exploit globalization. Each of them, from the IT [information technology] guys to the big box retailers to the specialty chemical firms to the service firms, wants to have offshore supply. One of the CEOs said, “We have a long way to go in exploiting China.” We’ve heard that forever. And one of my favorites was the comment, “China, India, and Indonesia can make Italian ceramics better than Italians can now or could 200 years ago.” [Laughter]
Globalization was an unmitigated disaster. Low wages, high oil prices and trade deficits all resulted from Globalization. China runs a surplus because it sells more stuff it makes than it consumes. The year Globalization kicked into high gear was the last year we saw a surplus. Now we borrow. We can’t borrow our way to prosperity, we just borrowed our way to insolvency. We can’t compete against someone making 2 dollars a day. We can’t expect low oil prices when we just sent our best jobs to China so they can afford more cars. China now sells more cars than the US does, as a result, Asia now imports more oil than we do.
The wheels are coming off the economic bus and the drivers are laughing at us as we get tossed under it and run down.
The solution is simple, we are broke since we take in with taxes and borrowing less then we owe. Our deficit alone ensures default or Quantitative Easing from now until the wheels come entirely off.
It is time we reissue the currency, tie it temporarily and loosely to gold, get our manufacturing jobs back and move on.