The Long Cold Winter

[can't sit still]

Here are some numbers to put things in perspective.
"spent almost $1.8 trillion, or 13% of GDP, in one year to create a miniscule 2.7% increase in GDP. This is reported as a recovery"
"$5.7 trillion from future unborn generations and have increased GDP by $100 billion"
http://www.theburningplatform.com/?p=9053
OK, so GOV claims that there is a recovery. After all, the GDP increased.
The GEAB article that I quoted and posted said that the collapse would come when creditors learned / realized that their investments would never be paid back.
SOME investors are starting to catch on. That is why precious metals are shooting up. There are huge withdrawals from, treasuries, financials, munis and equities. Prechter is predicting the Dow to go to 1,000 in 6 years. He's overly optimistic.

Silver could go "naked" at any time. That would drag down the other etfs like GLD. If PMs go crazy, That would shut off one avenue of escape for hot money. The CFTC has provisional rules for implementing position limits on commodities. That would reduce flows into commodities. Commodities would go crazy anyway.
Some are looking crazy anyway;
http://www.activistpost.com/2011/01/cor ... begin.html

Once investors decide, en masse to get out of instruments and into tangibles, THEN it will all collapse.
The lower level defaults will set off higher level defaults. People will get nervous and try to get money out of the banks. Should be interesting.

[geekster]

We might do well to follow Chile's example:

...
Pinera's proposal began with scrapping the payroll tax on the country's social security system and inviting all workers to take the money they were contributing and move it into a private pension.

Workers would be free to choose the fund, how much to put in, and at what age they would retire, with a minimal safety net built into the design. Past contributions would be refunded to workers by government bond. And anyone who didn't like the idea was free to remain with the system as it was. It was a huge success: 95% of Chile's workers chose the private system.

Pinera told the public to expect a compounded 4% rate of return under the private plan. But as of 2010, the average annual rate of return was 9.23%, far higher than promised.

By contrast, the U.S. social security system, which today accounts for a quarter of the U.S. government budget, is slated to give retiring workers in the next decade a 1% to 2% rate of return. And those entering the system today will see a negative return.

Chile's implicit pension debt fell to just 6% of GNP — compared with 100% in the U.S., 300% in France and 450% in Italy, leaving Chile with no net debt.

Better still, the accumulated savings in the pension funds fueled Chile's spectacular economic ascent, taking real incomes from about $4,000 per capita in the early 1980s to $15,000 today, and GDP to the 6% range most years for nearly 20 years. With that record, is it any surprise that Chile this year earned itself a membership card into the club of rich nations, the OECD?

The U.S. could have similar result if it had started on Chile's path 30 years ago, with no debt and a phenomenal rate of growth.

But U.S. politicians, just like Chile's fascist generals, have insisted the public is too stupid to fend for itself without big government. Given U.S. politicians' fraudulent mismanagement and abuse of Social Security in recent years, such claims are outrageous.

It's time for the U.S. to make up for 30 wasted years. Given the stunning success story of our southern neighbor and our growing fiscal crisis, it's time to privatize all or part of Social Security.

http://www.investors.com/NewsAndAnalysi ... Model.aspx

[can't sit still]

Good article geekster. It shows how much money you can save if you don't pursue empire.

At the risk of stating the obvious, I should explain bonds.
Typically, the proceeds of a private bond sale are used for a big project that will generate, principle, interest and profit. XYZ energy sells $ 1 billion in bonds and creates new energy sources and markets. Typically, GOV bonds were used for wealth-creating infrastructure projects like canals and dams. The additional wealth created in the economy was skimmed off as taxes and used to repay the principle and interest on the bond.
ALL BONDS MUST BE REPAID.
OK, say you sell bonds to China and used the money to hire 50,000 TSA agents,,, let's say that you pay for expensive wars,,,let's say that you initiate the American recovery and reinvestment act.
You've [we] churned the money but you haven't produced increased profitable economic activity. Bonds CAN NOT be used for wages and benefits. Where will the repayment principle and interest come from?
GOV takes in money from taxes and resource sales. The West is declining due to market forces. Taxes and resource sales are declining. They can't possibly repay the bonds.
GOV spent "13% of GDP, in one year to create a minuscule 2.7% increase in GDP"
So, GOV spent $ 4 to get a $1 return. BUT, GOV spent this $ 4 on non-productive segments of the economy. Our bond costs are screaming up but, the results are next to nil.

Keynesian economics can not survive without an ever-increasing economy. This combined with the Hegelian dialectic allows GOV to incrementally control more and more of the economy. Capitalism fosters efficiency. Keynes and Hegel foster inefficiency so that GOV will absorb more and more voters / taxpayers. These burgeoning numbers will always vote the GOV program because THAT is who fills the feed trough.
So, an ever-increasing proportion of the working sector is employed by an entity that specializes in inefficiency.
Also, Hegel argued that there should be no personal independence or liberty. Like all other ivory tower Marxist idiots, Hegel believed that everybody would be motivated internally to provide for the greater good of his fellow man.

The capitalists tend to be uber efficient. Recently, this has been expressed by eliminating workers and replacing them with robots. Compare an auto assembly line to one from 40 years ago. Also, capitalists prefer to hang on to the fruits of their investment. Decades ago, corporations paid 30% of the tax load. As recent as 10? years ago, it was down to 3 %.

The socialist think that they can eliminate motivation and still get productivity.
The capitalists think that they can eliminate the producer and still get consumption.
A whole lot of people think that they can get a free ride forever.

[can't sit still]

This guy sounds pretty nervous. You should listen.
Of course, it all seems to be contrived;
http://dont-tread-on.me/the-contrived-d ... bt-ceiling

[geekster]

I am really baffled by the spin placed on today's employment numbers. The numbers were NOT good. We had 5x more workers become discouraged and leave the workforce than found new jobs. The only reason why the unemployment rate went down was because of the large numbers of people who gave up looking for work despite seasonal Christmas hiring that many companies do.

And as to the earlier comment about Keynesian economics, most people who call themselves Keynesians don't have the slightest idea what they are talking about. They only consider the deficit spending part. During the Clinton years, Keynes would have paid down debt like a banshee. Those budget surpluses would have been spent on paying down debt from previous deficit spending years and in eliminating many of the spending programs initiated during economic downturns.

Keynes would spend during economic downturns in order to boost the economy but he would also terminate those programs and pay that debt back down during good years. Politicians seem to know only spend spend spend in order to buy the votes of this group or that group.

They call it "Keynesian" during economic hard times but don't have a name for it in other times. I call it "idiotic".


Update: Just heard on the news that the unemployment rate including workers whose benefits have run out is 16.7%

Currently, when your benefits run out, you are no longer considered unemployed.

[can't sit still]

And just WHO do you have in mind when you say "idiotic"?
http://www.cnsnews.com/node/51162
GOV will fudge ANY numbers that it can to keep investors from fleeing the markets. We [non-investors] should be thankful for their lies. This allows us to eat for a few months longer. Once the investors get a serious haircut, they are going to flee paper as much as possible.
As things look worse, an increasing segment of the populace cuts back on discretionary spending. First, it was the $50K a year people,,, then, it was the $75K a year people.,, then, the $125K a year people. The more fear,,, The less spending and the more asset hoarding. The more people on the sidelines, the less money circulating in the economy.
ZIRP is a stopgap. Without it, we would have a deepfreeze.
We won't have to worry about global cooling for decades. Once all the paper starts to burn, there will be an unstoppable conflagration that will warm Terra for decades.
Geekster, would you rather be a Keynesian or a Berliner. LMK if you get it.

[geekster]

I believe corporate paper will fare better than government paper. Once states and cities begin to default on municipal bonds, we are going to see a situation where state and local governments will be forced to live within their means because deficit spending will be impossible. Nobody is going to lend them money unless the federal reserve extends QE to include state and local paper.

Illinois has is going to vote on a 75% income tax increase which isn't really that bad because their income tax rate is low, only 3%. But in any case it is millions of dollars that will be taken out of the circulating economy and used for what are generally the most inefficient way to do anything. I wish states could have two different governments that compete for tax dollars and people could decide which government they want to send their tax dollars to.

[geekster]

Gotta love this, and i believe there is going to be a lot to this, too.

NDIANAPOLIS | Gov. Mitch Daniels thinks Illinois' proposed 75 percent hike in its corporate and personal income tax rates will be great -- for Indiana.

In an exclusive interview Friday with The Times, the Republican governor said he looks forward to welcoming to the Hoosier State any Illinois business or resident that wants to pay less in taxes.

"We already had an edge on Illinois in terms of the cost of doing business, and this is going to make it significantly wider," Daniels said.

Illinois lawmakers are poised to vote next week on a plan that will raise the state's personal income tax rate to 5.25 percent from 3 percent, hike the corporate income and personal property replacement tax rates to a combined 10.9 percent and add an extra tax of $1 per pack of cigarettes. The income tax hikes would be retroactive to Jan. 1 and be reduced after four years.

Hoosiers pay a 3.4 personal income tax rate, while Indiana's corporate income tax rate is 8.5 percent.

The Tax Foundation, a nonpartisan tax research group in Washington, noted if the proposed corporate tax hike becomes law, Illinois businesses will pay the highest combined national-local corporate tax rate in the industrialized world.

That is the wrong course for Illinois to take, Daniels said.

"Folks in Illinois will eventually have to decide: Is this working well enough for us or do we want something different?" he said. "Point one of our anti-recession strategy here is to avoid doing what they've now decided to do."

Daniels has enacted deep budget cuts and eliminated many government programs to keep Indiana's budget balanced without a tax hike during his six years in office.

http://www.nwitimes.com/news/state-and- ... 05f93.html#

[can't sit still]

GB increased taxes and reduced spending. Surprise,,, surprise,,, unemployment increased and they have to pay tons of benefits. The U.S. is pedal-to-the-metal on spending [borrowing] to avoid this. BRILLIANT long-term strategy.
Forgot the link on fudging the numbers. It's interesting;

[can't sit still]

Tiny Tim has this to say. "if we don’t get another $1 trillion or so dollars by March of this year then this country will begin to default "
"All of the trillions spent, all of the laws passed, and all of the manipulations of global asset markets, have done absolutely nothing to resolve the fundamental systemic problems we faced prior to the onset of the crisis."
http://www.shtfplan.com/headline-news/c ... e_01062011

Egon von Greyerz writes, “We now live in a world where governments print worthless pieces of paper to buy other worthless pieces of paper that, combined with worthless derivatives, finance assets whose values are totally dependent on all these worthless debt instruments. Thus most of these assets are also worthless. So the world financial system is a house of cards where each instrument’s false value is artificially supported by another instrument’s false value. The fuse of the world financial market time bomb has been lit. There is no longer a question of IF it will happen but only WHEN and HOW. The world lives in blissful ignorance of this.â€

[Liz Estrada]

[youtube][/youtube]

[geekster]

GB increased taxes and reduced spending. Surprise,,, surprise,,, unemployment increased and they have to pay tons of benefits. The U.S. is pedal-to-the-metal on spending [borrowing] to avoid this. BRILLIANT long-term strategy.

You have to look at what happened going into his administration. The tech bubble burst in March 2000, a few months before the election. The economy was tanking. By the time that Christmas rolled around (and he was still not seated in office) Silicon Valley was imploding. He takes office in January 2001 and *immediately* begins warning about Fannie Mae and Freddie Mac. Legislation is proposed twice to place those agencies under tighter regulation. Both times Senate Democrats shoot it down by refusing cloture on the legislation. The Republicans have a majority but don't have the 60 votes in the Senate that they need.

House Democrats holding hearings claim the alarm over the mortgage guarantee agencies is a figment of the Republican imagination.

Now Bush's SEC turns to cleaning up what had created some bubbles in our economy and brings down Enron and Worldcom. His administration is starting to get a grip on the conditions that caused some serious economic damage, is raising the alarm on a few more with the same prospect but is being stymied by the Democrats. Then 9/11 happens, 9 months into his administration.

We already had an economy that was languishing in the toilet as a result of the tech dot-bomb. Now comes 9/11 and pretty much a halt to the travel industry. Nobody wants to go anywhere for a while. In fact, nobody CAN go anywhere by plane for a while. The economy once again dives deeper into the toilet but now it looks like we are going to have a war to fight.

Tax reductions were the work of Congress in order to stimulate a tanking economy. Bush signed them. But you also have to remember where the call for those cuts came from. We had been running a surplus in the Clinton years and the Republicans wanted to return that money to the taxpayers. There was already significant pressure for tax cuts before he took office.

So unemployment increased due to the tech industry implosion and then the later hospitality industry implosion due to 9/11. The wars in Afghanistan and Iraq were fought with the equipment on hand, there was no major manufacturing buildup of tanks and planes associated with those actions. The majority of increased defense spending was for ammunition, other ordinance, fuel, and other logistics associated with feeding and equipping an expeditionary force. That spending didn't add a lot to the economy or produce any significant number of jobs.

In the meantime he is STILL warning about the GSEs and the Democrats are still ignoring him. The final attempt at legislation was in 2005. Again the Democrats pooh-pooh the effort. By 2007 the GSEs are starting to fall apart at the seems and it becomes known that they had been "cooking the books" to show profits in order to get bonuses for the executive staff. By 2008 the economy is tanking again.

Bush inherited a tanking economy from Clinton. 9/11 made things worse. They foresaw the GSE problem but Democrats blocked any work on fixing that. The whole thing went kaboom.

[can't sit still]

Geekster,,, my bad. I said GB,, meaning Great Britain. I did use the pronoun "they" but, I guess it still wasn't clear enough. I would have posted the link but, I can't find it now.

[can't sit still]

This is a good writeup about a book by Robert Solomon. He was a Harvard PHD who was a very influential person as the chief international economist at the FED,,, several years ago. Murray Rothbard claims that Solomon was clueless about economics. He was running the FED for years and didn't have a clue what he was doing.
http://mises.org/daily/4494
Bernanke seems to be a re-incarnation of Solomon.

[Liz Estrada]

im just sayin'...



[youtube][/youtube]

[can't sit still]

Liz, you lost me on both of the vids.
I just quote a few articles and do a bit of writing. We obviously don't have the whole picture so, my writing could be incorrect. I can't make a connection with the vids.

[can't sit still]

This is an absolutely fascinating doc on econophysics. It is LONG. It applies Boyle's law and a few others to economics [only a bit loosely] It tries fairly well to apply physical laws to economic realities. It has some brilliant deductions and conclusions.
http://129.3.20.41/eps/mac/papers/0203/0203005.pdf
I didn't say that it wouldn't put you to sleep

[geekster]

Liz, you lost me on both of the vids.
I just quote a few articles and do a bit of writing. We obviously don't have the whole picture so, my writing could be incorrect. I can't make a connection with the vids.

It was a video made by that psychotic Jared Loughner who was pretty much a nihilist anarchist, one of those "sovereign individual" 9/11 truther types who shot and killed several people in Arizona. He was apparently pissed off at U.S. Rep. Gabrielle Giffords when she embarrassed him in an earlier meeting with her at the same sort of venue (Congress on your Corner) when he asked her "how do you know that words mean anything" when she thought for a bit, and then answered him in Spanish, which apparently pissed him off and embarrassed him in front of the others present.

He generally hates all government, both political parties, and thought our government was using "mind control" on him. He thought the program was being accomplished through language and he wanted to develop his own "grammar" and his own currency and was really into what he called something like "cognizant dreaming" which basically boils down to not really making a difference between what is imagined and what is real, hence, psychosis.

I think by posting that, "Liz Estrada" was trying to get a rise out of you.

He seems to be obsessed with the notion that someone could utter a sound or write a pattern of letters that would evoke a thought in his mind. Never mind that evoking that thought is the entire purpose of words, he was convinced that they are using language to control his mind. He was also upset about the people who he could not communicate with (Hispanics, apparently) who were being "controlled" separately from him and who he had no influence over with his own words. Its all weird and twisted and probably pretty crazy.

A bit more here:

http://www.google.com/hostednews/ap/art ... 79cbf6f758

It is all very, very weird.

[can't sit still]

Geekster, thanks for the enlightenment. I don't see anything of any interest connected to the 2 posts.

[geekster]

'cause there is nothing connected. It was just a piece of poop tossed into the thread.

http://motherjones.com/politics/2011/01 ... age?page=1

Read both pages. Particuarly:

Since hearing of the rampage, Tierney has been trying to figure out why Loughner did what he allegedly did. "More chaos, maybe," he says. "I think the reason he did it was mainly to just promote chaos. He wanted the media to freak out about this whole thing. He wanted exactly what's happening. He wants all of that." Tierney thinks that Loughner's mindset was like the Joker in the most recent Batman movie: "He fucks things up to fuck shit up, there's no rhyme or reason, he wants to watch the world burn. He probably wanted to take everyone out of their monotonous lives: 'Another Saturday, going to go get groceries'—to take people out of these norms that he thought society had trapped us in."

[can't sit still]

Big, Bad, Bald, Ben Bernanke says that the FED is a BANK for bankers only. If states or municipalities want $ help, they can all go and pound sand. The law was recently amended so that loans can be made to "a facility with broad based eligibility" . BBBBB says that this does not include states.
http://www.webofdebt.com/articles/nobai ... street.php
Whitney is calling for about 100 defaults in the muni market. So, let's see; Banks created the capital for the muni loans out of thin air. Munis default because they have no access to funds. Munis default and the banks take infrastructure in lieu of payment.
Just to make sure that there are no slip-ups, obummer's new chief of staff is from J. P. Morgan Chase. He wants to undo the predatory-lending law and curb consumer protection. He is Mayor Daley's son, so, that makes him a criminal right there.

So, no bailout for States.

[Rabbi Dali Rick]

"Forclosures are down in 2010."

Wasn't that due to the moratorium the banks put on the filings? And wasn't that due to the fact they had to fix the MERS filing error (the banks were not the registered owners therefore were legally not supposed to file the foreclosures).
Now they are claiming "Happy, Happy, Joy, Joy." the market was not as bad as everyone thought it was. Boy, talk about putting a positive spin on shit. Is the American public that stupid, that they think we believe any turd that falls out of their shithole? I'm just Godsmacked at what these people will say.

the rebbi

[can't sit still]

Rabbi, the cheerleaders are out in force. The Plunge protection team is goosing the stock market. The FED is buying bonds to keep interest down. MSM is finding green shoots everywhere. Precious metals are being held down. Employment isn't so bad. Inflation is NO problem. Your GOV is hard at work to give astute people time to prepare.
Consider what will happen when the music STOPS !!

[can't sit still]

The credit rating agencies were famous for ignoring developing problems in the RE and securitization business. They were also well known for giving warnings after an entity crashed. They were getting paid for giving good ratings.
Now, 2 of the 3 rating agencies say that America is in danger of losing it's good credit rating. Why speak up now ??? What do they gain??? Are they trying to cover their asses???
The Chinese rating agency, Dagong, downrated the U.S. GOV debt because GOV doesn't have much earning power.
Jim Rogers said that "of course, the U.S. is going to default." His kids are learning Chinese.
http://online.wsj.com/article/SB1000142 ... Collection
Hard to say if this means anything or not.

[can't sit still]

Economics doesn't lend itself to exact parameters. There are lots of different "schools" of economics. One of the best in the world at seeing the big picture clearly is Antal Fekete. Here's a composition that is posted at the Daily Bell. It is an excellent read.
http://www.thedailybell.com/1675/Antal- ... Honey.html

Gold and Honey

Wednesday, January 12, 2011 – by Dr. Antal Fekete

Dr. Antal Fekete

Open letter to Thomas Hoenig, President, Federal Reserve Bank of Kansas City

Dear President Hoenig,

On January 5, 2011, you were quoted on ABC NEWS as saying that "the gold standard is a very legitimate monetary system". The quotation went on: "We are not going to have fewer crises necessarily. You will have a longer period of price stability or price level stability, but I don't know that you will have lower unemployment, and I don't know that you will have fewer bank failures."

As a student of the gold standard for the past 50 years I welcome your statement. I would be happy to open my files and archives if the Research Department of the Federal Reserve Bank of Kansas City (that, as far as one can tell, has so far not been interested in gold standard research) invited me. My files may have the answer to some of your queries.

(1) You are right, the gold standard is a necessary but not a sufficient condition for achieving lower unemployment. A necessary and sufficient condition would assume that Adam Smith's Real Bills doctrine is also rehabilitated along with the gold standard. The bill market is the clearing house, without which the gold standard cannot survive. The explanation why it collapsed in the years 1931-35 is that, when the victorious Entente powers decided to restore the gold standard after World War I, they also decided not to restore real bill financing of world trade or world-wide real bill circulation. Thus the gold standard which Britain reestablished in 1925 lacked a vital organ: a clearing house. The Entente wanted bilateral (to the exclusion of multilateral) trade for fear of German supremacy in exports. This decision was a great setback for world trade. In effect, it meant a return to barter. The consequence was: beggaring-thy-neighbor, trade war, the destruction of the wage fund, and massive unemployment world-wide.

(2) As pointed out by the German economist Heinrich Rittershausen in his 1930 book Arbeitslosigkeit und Kapitalbildung (Unemployment and capital accumulation), before World War I ‘structural unemployment' was unknown. Part of the ‘float' of maturing real bills was earmarked for payment of wages to workers producing consumer goods. This float was what Rittershausen called the "wage fund", out of which wages could be paid up to three months in advance, well before the underlying consumer goods were paid for by the ultimate, gold-paying consumer. This wage fund was destroyed by the "Guns of August" in 1914 at the start of hostilities. The destruction of the wage fund went unnoticed because the production of war materiel absorbed all slack labor. After the war, a great inflation inflicted on the world by the Fed created not only the T-bond bubble (that burst in 1921), the Florida real estate bubble (that burst in 1925), and the stock market bubble (that burst in 1929), but it also financed a hugely bloated production of consumer goods.

* The German word ‘Honig' means ‘honey' in English.

Only after the stock market bubble burst did it become clear that there was no wage fund out of which the workers producing consumer goods could be paid. The workers had to be laid off and the factories had to be closed. Thus did the prohibition on real bills circulation cause the collapse of the gold standard and the Great Depression.

My research suggests that if after World War II both the gold standard and real bill circulation had been rehabilitated, there would have been no serial currency turmoils and no Great Financial Crisis. The gold standard and real bills go together like hand and glove.

(3) The purpose of the gold standard is not to stabilize prices or the price level, which is neither possible nor desirable. Its purpose is to stabilize the interest-rate structure, which it can do very efficiently, as history shows. There was no bond speculation under the gold standard. Speculation was confined to agricultural commodities, the supply of which is governed by nature rather than bureaucrats in the Treasury and the Central Bank. Changes in commodity prices or in the price level under the gold standard were mild. They reflected changes in marginal productivity, not speculative fever. Virtually all crises after the collapse of the gold standard in the 1930's were caused by volatile changes in interest rates due to bond speculation.

(4) Gold is the ultimate extinguisher of debt. The reason is that gold enters the asset column in the balance sheet of banks but, unlike every other asset, it has no corresponding entry in the liability column of the balance sheet of someone else. Gold survives any consolidation of balance sheets. Other assets are wiped out when the balance sheets of debtor and creditor are consolidated, as in default and repossession.

(5) No runaway debt or derivatives tower can develop under a gold standard. Such cancerous growths have occurred in the 21st century because, in the absence of a gold standard, the economy is lacking an ultimate extinguisher of debt. Total debt can only grow. It can never contract through normal debt retirement.

(6) Bank failures are a consequence of unbridled escalation of debt. The gold standard acts as a restraining force on banks with a propensity to expand credit even after further expansion becomes detrimental to their capital. Widespread bank failures that presently hit the economy are an indication of destruction of bank capital. Banks were happy to put their capital in jeopardy during the boom as their cash flow from fees was plentiful. However, cash flow is no substitute for capital. When the boom was over, cash flow stopped, but bank capital was gone.

Under the gold standard banks know better. They cannot expand credit with impunity beyond safe capital ratios. If a bank does, it deserves to fail and should not be bailed out.

We can indeed return to a gold standard by going back to Constitutional money. This means opening the U.S. Mint to unlimited free coinage of gold and silver. We can return to financing production and trade in goods demanded most urgently by the consumer through real bills, if the Federal Reserve Banks go back to the legal provisions of the F.R. Act of 1913. That Act confined F.R. credit to real bills arising out of the production and distribution of consumer goods, to the exclusion of anticipation and accommodation bills as well as government debt. The solution to the present crisis will be found in the strict observance of the monetary provisions of the Constitution, and enforcement of the law governing Federal Reserve credit.

[can't sit still]

This is an interesting article where the author explains and proves why all democracies go bankrupt. He makes good arguments. I can't say if they're completely valid. Machines are taking over more and more of production. The standard of living is far above what it was 100 years ago. It may be possible that the 'uber-productivity" of the machine age can stay a step ahead of the demands of the consumers.
In the comments, the Swedes make a good claim to show that their democracy is stable.
I suppose that the combination of the machine age + moderate demands from non-productive consumers might bring things into balance........ until peak-oil.
http://gonzalolira.blogspot.com/2011/01 ... krupt.html

[geekster]

Was that comment made by a Swede or someone commenting on Sweden because Sweden has changed drastically in the last 5 years. They are dismantling their welfare state and have elected center-right governments ... two in a row. The "social democrats" have been thrown out on their ears.

[can't sit still]

Here's the comment. BTW, he says that all the parties came together. I don't see that on the horizon.

"I agree with your article, but disagree with your thesis that ALL democracies will go bankrupt.

I live in Sweden, and we had a crisis about 1990 and a few years forward. Then all political parties came together and decided that we must have a balanced budget and a fiscal ceiling every year. And then our democracie made tuff haircuts and got the fiscal situation in order. And now we are running a balanced budget, and Swedens fiscal balance is the best in EU besides Luxembourg.

For example we have had cuts in public pension benefits from 2009 three years in a row, without riots in the streets, although our fiscal balance was much better than in other european nations.

So, i do not agree with you that ALL democracies will fail and go bankrupt.

KH Sweden "

[geekster]

I think the commenter is correct. Democracy in and of itself is not the factor that decides, it is the attitude of the people involved. In Sweden, the people recognized that the current system was unsustainable and enacted changes. In the US, I am not convinced that people will accept changes.

Public employee unions seem unwilling to accept the fact that there is really no money with which to pay them these exorbitant pensions they have been promised. Brown, when he was government last time, created an unholy alliance between government employee unions and the Democratic Party by allowing political fund raising by the public unions. So whichever party promised growth in government employees, salaries, and pensions gets what amounts to a kickback of union members dues in the form of campaign donations. So it becomes in their financial interest to increase those dues through expansion of the number of people paying them in order to reap their cut.

If you look closely at Brown's cuts, the only things being cut for government employees is salaries and pensions for employees not covered by "collective bargaining agreements". In other words, only non-union government employees have their salaries and pensions cut. Those employees aren't the problem. Our current state government is running around cutting everything EXCEPT the portions that are causing the problem.

We are cutting all the things that one normally expects to be a function of government while expending the majority of the budget on things NOT traditionally considered the role of government because the politicians are protecting their own gravy train.

Now, why is protecting campaign contributions so important? It is because a great percentage of campaign contributions go directly into the politician's own pocket. Here's how:

Politician "lends" their own campaign a large sum of money at a very high interest rate. Say a million dollars at 15%. Campaign donations are used to pay the 15% interest back to the politician among other things. As time goes by, other debts are paid off but the campaign ensures that the loan to the politician himself is the last one paid back. Some campaigns continue raising funds to pay off campaign debts for years after the election. Hillary Clinton loaned her campaign $5 million dollars and is STILL raising funds to pay off campaign debt. The master at this is Maxine Waters of California.

So, "campaign contributions" convert to direct payments to politicians who loan their campaigns money. So if they construct a system where increased government employees results in increased campaign donations, they can construct a perpetual income stream for as long as they run political campaigns. The politician above would collect $12,500 per month from their campaign in interest payments for as long as that debt remains. Hillary at 15% would be collecting 5x that amount or $62,500 per month from her campaign. And if the campaign never actually pays the debt principal and eventually goes bankrupt, the politician can write off the entire amount of the loan as a loss. So they can have their cake and eat it, too.

Now look at the horsecrap the people are fed:

"Late last month Senator Clinton loaned her campaign $5 million.The loan illustrates Sen. Clinton's commitment to this effort and to ensuring that our campaign has the resources it needs to compete and win across this nation. We have had one of our best fundraising efforts ever on the web today and our Super Tuesday victories will only help in bringing more support for her candidacy."

Horse crap. It demonstrates her commitment to using a political campaign to generate an income stream for a very long time by charging the campaign a much higher interest rate than she can get from any other investment. THAT is how these politicians get rich off a government salary that is quite modest. THAT is why politicians can keep campaign "war chests" for decades.

If you go to Clinton's website (and I am not picking on her, she is just a handy example, they all do this) http://www.hillaryclinton.com/ you will see that the first thing that meets your eyeballs is a big red "donate" button and a decent portion of anything you donate is going directly into Hillary's pocket via interest payment in that $5 million loan which will be on the books for as long as there is a campaign fund.

Being a politician can be very lucrative IF you have the seed money to lend money to your campaign.

Now, this is why we will not have real pension reform as long as we have a Democrat in office in California and a Democrat legislature. They have a personal vested financial interest in keeping the system the way it is. They aren't going to change it because it means money out of their own pockets so yeah, they will fly the entire government into the ground taking the state economy with it in order to preserve their gravy train.

My guess is that the politicians in Sweden had no such gravy train. Political contributions and bundling by employee unions should be eliminated.

[can't sit still]

Jim Willie has been one of the most accurate writers for years,,, as far as the economy goes. He's pretty negative also. He has predicted the many steps along the way to our up-coming insolvency,,, or bankruptcy,,, or illiquidity,, or what ever it is finally going to be called.
I'll post a link to his latest prognostications. Do not read this if you have trouble sleeping. He cites the work of Davidowitz extensively. He covers a lot of ground. He also cites Tainter,,," The Collapse of Complex Societies"
One point that he makes is that the FED will fail if interest rates rise by even one percent. The guy is a lot more informed than I am. He may be a lot smarter too. He has been accurate so, it wouldn't be smart to ignore him.
Y'all have undoubtedly noticed that I tend to concentrate on the negative side of things. The eventualities that are predicted are so dire that it would be stupid to ignore them. I'm not saying that everyone should go crazy at preparations. I'm saying that ,in view of trends, it would be smart to be somewhat prepared.
That's why they put nets under trapezes.

http://www.financialsense.com/contribut ... us-economy