Why Congress Blocking the Debt Ceiling Increase Will Launch an Economic Boom
Politics / US Debt Aug 26, 2011 - 02:05 AM GMTBy: Submissions
Pieter Schoonheim Samara writes: The general population hasn’t been taught the economics of the private sector free enterprise Capitalism as it relates to Freedom (audio link) in many decades, nor that private sector capitalism is the opposite side of the same coin of Liberty upon which the Constitution is based.
The result from what we saw with the August 1st Obama/Reed/Boehner passage of a $1 Trillion spending increase sham now and $1 trillion cuts after 5 to 10 years is that Progressives have convinced even conservatives and Tea Party Republicans into believing that the driving force of the economy is the government and that private sector capitalism failed, while facetiously calling the Tea Party capitulation a victory (audio file)! Because of lacking education of what private sector capitalism is and how it generates and infuses value into capital, capital that would have been freed from government shackles with a House “Hell No!” vote was again imprisoned.
The Liberal elite have succeeded to hide the fact and effectively put the kibosh on any open discussion that on November 9, 2007 Progressives in Congress (Dodd/Frank) and the Administration (Bush / Paulson) in stealth mode and with the help of crony/predator capitalists eliminated the regulatory basis of private sector capitalism. This stealth regulatory change caused the redirection of capital away from private sector access to credit and towards the government, crushing equity capital values, while requiring the government to constantly increase the debt ceiling to meet its objective to absorb any excess debt and equity capital.
Freeing private sector capital to restore the economic vibrancy:
There is an immediate necessity to void the Obama/Reid/Boehner super committee (audio file). This article explains what’s really happening and why it’s imperative now before Thanksgiving for the House committees to eliminate all counter-productive spending towards the bureaucracy and subsidized businesses that compete with private sector business, and without further delay cap government spending at tax receipts. Capping government spending overreach now, when one has a clear understanding of what such spending really is, will result in over $10 trillion in savings in the next 10 years not just S&P’s $4 Trillion out of $10 Trillion to avoid a ratings downgrade. This article also beseeches the House to couple the spending cut and cap with an elimination of the regulatory shackles to allow all sectors of private enterprise to thrive again.
Anyone reading this article will have an experience of coming out of a protracted amnesia. They will awaken abruptly to a clear perception of exactly what capital is and why the electorate and Congress should have no fear to rein in and cap government spending back to tax receipts.
The cost of the cuts to a balanced budget:
By eliminating counter-productive bureaucracies and subsidized businesses, now competing with private sector business, 1 million people may be let off their toil. Assuming the cost for putting them on the dole for one year is $80,000 per person, i.e., $80 billion per year, $120 billion per month, now being sucked into the Treasury’s Black Hole, (video link) would be redirected into the private sector.
The House must go to work now:
Optimally, even before this next round of group of 12 House and Senate luminaries, the House should move forward aggressively with its committees to source out $1.5 Trillion in spending cuts for this year and concurrently vote on an immediate and final cap to any further spending over the tax receipts, rejecting any debt limit increase. With Obama threatening that he will default on essentials, such as interest on the debt, Social Security, Medicare and Military, if he doesn’t get to continue excess spending on his bureaucratic programs and policies, Congress, while passing a cut and cap Bill that disappropriates all expenditures above the tax receipts, needs to itself invoke the 14th Amendment to force Obama to cover these essentials.
Reversing capital flows back to the private sector:
The excess over tax receipts, now sucking up $120 billion per month private sector capital into Treasury IOUs would become 75% unfunded, eliminating all gov’t subsidized non-businesses, which would fail without the subsidy and bureaucracies. Congress needs to end Obama’s Big Lie. Capping the drain on US wealth now being sucked into the black hole of US Treasuries will allow capital to flow back into private sector investments, i.e., real self-sustainable cash flow values.
Alternatively, forget about spending cuts. If the debt ceiling is plugged there would a de facto disappropriation all expenditures to the level of tax receipts capping the debt at $14 Trillion, and the spill-over of waste sucking up private sector resources like the BP oil spill would end.
Click to watch national debt (video link) to understand the real meaning of just the debt ceiling increase.
The question is:
What will really happen to the economy, if as a result of the non-Congressional support for a Trillion Dollar spending increase, the expansion of investment capital was forced to be redirected into the private sector versus continuing to be sucked up by government debt?
To understand what would happen if Congress fails (is “succeeds” to fail a better word?) to raise the debt ceiling, one needs to understand the difference between debt related to spending and investing in the private sector versus the government Treasury IOU system now displacing the former private sector credits from pre November 2007 at 80%(+) private sector oriented to now at 80%(+) government IOU oriented, for example CNBC in Q4 2008 US banks held $105 billion, in June 2010, they held $270 billion other US savings $1.458 trillion, Federal Reserve $5.351 trillion. You need to comprehend this from Bush43/Obama Progressive perspective.
Treasuries versus corporate and muni bonds and private sector loans:
Not everyone realizes that government debt is not like municipal bond or corporate bond obligations, where the use of funds oriented towards the private sector creates self-sustainable cash flow generating businesses that themselves support interest and principal payments at some debt service coverage over the cost of jobs (salaries and commissions) and operating expenses, leaving a net operating profit of free cash flow to be taxed, saved or invested. Federal government debt is “spent money” without any possibility of a repayment or a return of principal, let alone a profit for reinvestment and expansion. It sucks up the income producing capital and becomes essentially, what a bank would call, if caused by the private sector borrower, a “non-performing asset” (NPA). So, you have increasing NPAs competing for capital against and from income producing assets. And to add insult to injury, the government requires private sector tax payers to pay the interest on the NPAs (Treasuries) to give them the appearance of value! Private sector credits are self-sustaining, paying interest AND principal without tax-payer taxes to subsidize the interest payment.
Thinking clearly what Obamanomics means:
So, what Obama is threatening is that, if the debt ceiling is not lifted, so that he can continue to fill the coffers of worldwide Central Banks, US and international banks and the Social Security and Medicare Trusts with US taxpayer guaranteed non-performing-assets (“NPA”), then he will refuse to pay this interest subsidy from the tax receipts to cover the Treasury NPAs, thus causing a default on the National NPA debt (video link). In short, he preference is to continue to Hoover(1/2) the private sector’s capital from being invested in self-sustaining private sector credits for non performing government credits, NPAs, the government’s national valueless black hole!
How value is instilled in money: (please read and reread this paragraph)
The value of money/capital comes from self-sustained productivity based on market support and continuous demand for a product or service. Borrowers put up their equity together with demonstration of demand resulting in sustainable cash flows, and the banks (before Nov. 15, 2007) provided credit. As the credit (debt capital) is paid off it converts to equity capital. The value of the equity then depends of the productivity gains, the stronger the productivity output per unit of labor, equipment and materials, the greater the value of the equity and support for market expansion by the banks. To take cash from a company and use it to pay the salary, office space, etc. of a bureaucrat, whose role / job description is inherently to create a further cost burden on the private sector is a double whammy on the company, both depleting its equity, thereby limiting the debt multiple to support expansion of hiring and operations, while converting the hiring of someone in the company that is producing value in money for some bureaucrat, who is detracting from the private sector’s ability to generate value in money. As banks refinance their assets, they improve in value, which value extends to bank capital. This means that the combination of expansion in private sector / borrower’s equity and related increasing value of the bank’s capital will lead to accelerated sustainable growth, provided that government and crony/predator capitalists do not impinge on such market expansion.
US Treasuries – NPAs: (please read and reread this paragraph)
Government debt is much like the Parmalat Milk loan collateral of € 6 billion in a Bermuda Bank account that Arthur Anderson was inadvertently given privy to audit only to discover there was no money in the account. It had been spent and replaced with IOUs in the account of no value, no income producing or operating source of repayment. With the discovery of this, the company nearly collapsed and Calisto Tanzi wound up in jail. (Hmmm. Something the electorate should consider for the Executive and Administration and Congressional cohorts that continue this scam of the American public!) Another good explanation of what a US Treasury represents is a Bernie Madoff investment, i.e., a Ponzi scheme, because the money is spent and replaced with IOUs with no possibility of redeeming the money, except in the case of Treasury IOUs, by taxing the people the money was borrowed from in the first place to repay themselves.
Thinking clearly:
What the government does is to borrow money, spend it entirely, wrap that debt repayment obligation into an IOU, then because of the Treasury’s power to tax, it taxes the people to pay the interest on that IOU, now called a Treasury bond, so that such NPA is deemed to have AAA rated value, a rating that comes from draining the sustainable productive power of the people, NOT the government. To add insult to injury, in order to redeem the face value of the bond, the government taxes the people again to cover the obligation, which in the case of the Social Security (“SS”) and Medicare Trusts and soon to form Obamacare Trust was meant as a “safety net,” a repository of savings not expended IOUs. This means that for any redemption the people have to pay for their own spent savings. That’s like telling an investor with Bernie Madoff that to redeem their investment they have to pay Bernie the amount they invested, so he can pay the investor back, as though that’s ok, which the government seems to have convinced the populous and electorate that it is!
A US Treasury is NOT the same as a municipal or corporate bond:
Despite the government deluding the populous into believing, through doubletalk, misdirection, and funding university and think tank blatherers to obfuscate the truth about debt inherent in US Treasuries, in the private sector, when you spend/invest money on the purchase of a Municipal or Corporate bond, the business production and productivity associated with the use of funds derived from the issue of the bond and securing that the bond generates a self-sustaining cash flow that covers the interest and principal related to the bond’s repayment. A federal government Treasury note on the other hand requires the private sector buyer to essentially themselves pay the interest on the bond purchased for that bond to have any recognized value. In short, Peter pays the interest so Paul can assume a “market” value and vice versa, but the content of the Treasury bond, the IOU has no more real value than the Parmalat Bermuda bank collateral account or an repatriation of ones investment in Bernie Madoff’s fund mentioned above. In both cases, as with the US Treasuries, the cash is spent and gone. Moreover, what government calls an investment is actually a subsidy intended for political vote buying. Consider one example of misappropriation: SS investments (video link) and monthly payments in support of 45 million illegal aliens and welfare recipients taking precedence over SS checks, which Obama says can’t be paid. In fact, Social Security is not a “trust” fund.
The covert purpose of Progressives’ establishment of the SS and Medicare Trusts:
The whole scheme of FDR’s Social Security Trust Fund (the “New Deal”) and later JBL’s Medicare Trust Fund (the “Great Society”) was intended to suck up and hide government waste on the conjured idea perpetrated on the populous that these Federal government IOUs had value. Without the subsidies and handouts to obscure the truth, this scheme could never fly.
These Trusts are nothing more than a “smoke and mirrors” scheme, a sham, a slick and sly con job by Progressives that promulgate the idea that something with no value has a higher value than a bond that produced a cash flow that self-sustaining self-generating without any reliance on the buyer of the bond to also pay the interest on the bond to attribute value. The $2.6 Trillion SS Trust was spent and replaced with Treasury IOUs, where the taxpayer has to fund the interest for these IOUs to be deemed to have any value. They cannot be redeemed meaning that only through the employer contributions, representing a 36% tax on businesses, can SS checks be paid! Same with LBJ’s Medicare Trust, as part of his Great Society scam.
In short, a government Trust is an oxymoron. The so called “safety net” is a Black Hole designed to suck up savings that once spent becomes a perpetual drain on those that stored their savings in the government Trust.The French have an expression for what progressive Republicans and Democrats have perpetrated on a thoroughly duped electorate: “Il fait foutre du mond!”
The counter-productive effect of government spending and its Treasury IOUs:
In fact US Treasury IOUs had/have just the opposite value of private sector IOUs:
- First of all the funds borrowed were spent lavishly on the build-up and sustaining of a bureaucracy, whose primary intent was/is to diminish productivity and drain capital from the private sector reinvestment, expansion, savings and generational wealth accumulation.
- Second, the use of funds derived from Treasury was to subsidize businesses and special interests that, through patronage, were able to compete against the private sector, but without such subsidies would fail, where such failure would have resulted in competitive business production, profitability and expansion of the “free enterprise” private sector.
- Third, the use of funds allocated as IOU Treasuries were to create a welfare state of social political dependents to support and vote for the Progressive causes they become subservient to, thus shifting the ownership and control of capital, property, business, production and related productivity resulting from the innovation, ingenuity and creativity of the private sector to government and patrons.
- Finally, the Treasuries come into the banks as zero % risk weighted assets, meaning that banks in times of pre Nov. 9, 2007 stress, such as caused by government taxes, bureaucracies and preferential subsidies, tend to prefer to purchase Treasury bonds over risk weighted corporate bonds and private sector loans, while giving the capital markets a “flight to safety” of an asset type, where the interest on the national debt (video link) is an apparently very safe currently 14% of tax revenues. Again the buyer of the bond is valuing the bond, not on the basis of its ability to generate income to repay, while providing for employment, return on equity, spinning off profits, but only on the buyer’s own ability to pay the interest, NOT the original seller of the bond itself, as with a corporate or muni. In short, the Treasuries deprive the private sector access to self-sustaining income producing credit.
- See below how post Nov. 9, 2007 banks were forced to divest of private sector credits to avoid falling into a liquidity trap, where a tipping point is breached in regulatory capital compliance that without the radical shift to Treasuries would collapse the bank and banking system. You need to comprehend this from Bush43/Obama Progressive perspective.
Understanding the malevolent intent of government against the private sector:
The Progressive government of the Republican and Democrats for the past 70 years is not a government for the people (1-2). Not satisfied with decades of raising the debt ceiling, as a means to constantly replace cash in the SS and Medicare Trust Funds with IOUs of the cash spent, and desiring to covertly force the shift of all available private sector investment capital to itself, so that, in fact, the government would become the de facto owner of all property, business, production, productivity, the Progressives in government launched a stealth coup of the private sector capital. Such coup, replicating the stealth actions of Hoover in 1929 and FDR until 1938, forced banks to radically shift lending from their 3 private sector risk weight categories to the government’s single zero % risk weight category to achieve with impunity and without compunction, in effect, totally collapse of credit and access to capital, while having the audacity to blame the private sector’s free enterprise capitalism as the cause of the collapse which even Tea Party members conservatives and in the Republican Congress believe. This stealth coup was achieved and executed on the sly by the House, Senate and Administration Nov. 9. 2007.
Private sector lending – bank risk weight categories versus government lending:
The 3 private sector bank lending categories are made up of a mix of (i) business, commercial and consumer loans, i.e., 100% risk weighted assets, where total capital can be leverages 12.5/1, (ii) housing/residential loans 50% risk weighted assets, where capital can be leverages 25/1, and AA to AAA rated private sector securities, where capital can be leverages 62.5/1, with the intent to the average of all such assets at no more than 25x Tier 1 capital.
How government was able to direct the flow of capital from the private sector to itself:
The way that government was able to achieve this stealth shift of capital and credit away from the private sector and redirect it to the government was that Barney Frank and Chris Dodd in their interest of complying with the covert globalization of the US, i.e., to meet Bank of International Settlements (BIS – Central Bank to Central Bankers) Basel II Accord, authorized the Financial Accounting Standards Board (FASB) to change the accounting rules for the private sector only from hold to maturity accounting (HTM), i.e., FASB 115, to mark to market accounting (MTM), i.e., FASB 157, again to impose paper losses, achieved through the manipulation of regulatory and market costs relative to net disposable income and net operating income of private persons and their businesses only to the private sector. Stress models were simulated and “authoritative” papers submitted, paid by government, claptrap purposefully omitting the most important aspects of how the free enterprise capitalist operating mechanism actually works, i.e., the fundamental economics of the bank regulatory mechanism as it pertains to a “free” society, versus scope limited to the nefarious aims of the BIS.
Pre Nov. 9, 2007 private sector bank loans valued by hold to maturity accounting:
After realizing the disastrous effect of Hoover’s 1929 MTM experiment and failing to realize the intended takeover of the private sector wealth, production and productivity as Mussolini and Germany had achieved, FDR was forced to reinstate HTM in 1938. Under HTM / FASB 115, banks lend based a specified ratio of monthly loan payment amount to a defined cash flow, where the resulting asset, the principal value attributed on the date of the loan origination, would be maintained through maturity, i.e., through the term of the loan. This also created a predominant market pricing stability to prevent rampant speculation through market cycles. It also meant that only actual loan losses would be booked against the Tier-1 equity capital of the bank, shifting the loss to Tier-2 capital, thereby establishing a cyclical stability in the value of private sector assets and the incentive to maximize value recovery in the asset to restore to Tier-1 capital. HTM was the foundation for sustaining bank regulatory capital in compliance, where liquidity would remain intact, in effect also preserving the equity and wealth of the private sector through market cycles.
Monetary pressure, the multiplier and the expansion and contraction of the economy:
In terms of monetary pressure, which Fed monetarists might also call the multiplier effect of cash spent, when the cash is spent as a result of the government’s spending, the multiplier is 1 to zero. When it is spent as a result of credit developed in the private sector, where the asset of the bank is a private sector asset versus a government asset, then there is a multiplier.
That multiplier extends to how the money spent continues to support and sustain business production and productivity. The friction that winds down the multiplier momentum is 1/ taxes, bureaucracy, as 2 these take production off the balance sheet and render it not only a zero but a negative, and 2/ subsidies to non performing businesses and able bodied people, who deplete the productivity potential supporting the value of capital. So, when the government spends the money resulting in a zero risk weighted IOU on the balance sheet of a bank, it means that the production and productivity that would result from the bank’s extending the credit to the private sector is voided in favor of a NPA that falls into government’s Black Hole. Once established Treasuries become an permanent parasite on private sector production requiring sustained support through taxation for an endless stream of interest rates, then ultimately to replace the capital spent, when the IOU becomes due, versus conned over to another buyer.
All this becomes clear when one understands the operating mechanism of private sector capitalism, the understanding of which is like coming out of an amnesia into utter clarity.
Post Nov. 9, 2007 mark to market devaluation of private sector bank loans:
A changeover of private sector bank assets from HTM to MTM would mean that, as the net disposable income of individuals and net operating income of companies would decline in ratio relative to the fixed principal value at loan origination, instead of a loss being reduced from capital, when it occurs, a fictitious paper loss for the entire range of bank assets is reduced from capital. Such paper losses result from tax increases (“Read my lips no new taxes” Bush41, video link), Obama’s increased bureaucracy, government competing with the private sector by squeezing its access to credit, denying US oil permits in favor of foreign oil price interests, subsidizing corn at oil prices to drive up food prices, commodities speculation and Federal Reserve QE inflation.
Under FASB 115 HTM in the Private Sector, while the loss results in a curtailment of bank lending, nevertheless, the assets remain predominantly intact, which also protects the value of the depositors’ cash. Under MTM, the loss in asset value results in an across the board reduction in bank capital, creating a potential collapse in liquidity that forces banks to shift all lending from productive private sector loans to non-productive government Treasuries. Under MTM, the reduction of that net income in ratio to the fixed loan amount would mean that ALL assets of the banks, as well as securities, would be devalued and that “paper devaluation” of all assets, not just loans in actual default, would be booked against bank capital. In short, the government by inflicting MTM on the private sector, with a very clear knowledge of what they (Dodd/Frank – Bush43/Paulson) were doing created a non-existent crisis that in effect justified what is clearly a stealth coup of all private sector wealth, as will become clearer below.
How banks preserved capital after FASB 157 paper losses to private sector assets:
For the banks, this imposition of MTM would mean that the only way to preserve their regulatory capital would be to radically shift all lending away from the 3 categories of MTM private sector assets and over to the one category of HTM zero % risk weighted government assets, including the expanding precedence of any asset guaranteed by the government or any asset generated by a government owned entity, such as AIG, Fannie Mae, Freddie Mac, FHA, HUD, etc., or under the Dodd-Frank Financial Reform Bill, any highly regulated too big to fail bank, deemed to be like a utility, because of the government’s right to take over that bank and make good on all obligations.
So, while we saw Obama and the government repeatedly put on a show of blaming the banks that received TARP for not lending, despite the diversion, nevertheless, the government well understood that their intent was to gradually cause banks to shift from MTM private sector risk weight categories to government HTM zero % risk weight Treasuries and government guarantees through owned and controlled entities also valuing assets under HTM.
How government “mops up” private sector capital into its Black Hole of NPAs:
However, to realize this ultimate objective, despite their rhetoric and demagogy, the government needed to have a way to “mop up” the constant creation of new capital generated by the private sector by providing banks with a constant access to new zero % risk weighted Treasury bonds and government guaranteed credits, thereby, to prevent / block banks from providing credit to the private sector and institutions from investing in corporate and municipal bonds and otherwise fund entrepreneurs, which would expand the economy again in favor of the private sector. The Obama $787 Billion(+) Stimulus with its $256 billion fulfilled promise to voters to pay $400 each spent and need to raise the annual debt ceiling increases by $1 Trillion to $2 Trillion per year was part of an imperative to achieving this “mopping up” objective.
Tax the entrepreneurs! Obama tries to replay a publicly rejected FDR economic theory:
To help orchestrate this deception and even bring credibility to it, Bush43 brought in Bernanke as Fed Chairman, due to his expertise in the 1930’s Depression. Huh? With no recession in sight, this should have been a clue. Bernanke understood that the Depression was directly caused by Hoover’s 1929 stealth shift from HTM valuing of private sector bank asset to MTM, aided by the 1929/30’s Fed sharply raising interest rates, resulting in the abrupt end of the Roaring 20’s. In short, the devaluation of all assets against bank capital created a liquidity trap or tipping point, where all banks fell out of regulatory compliance, wiping out bank lending liquidity for years, except to government Treasury IOUs, where worthless assets retained their HTM value basis.
How the Bush family kept the Progressive faith from generation to generation:
The apparent collapse of private sector capitalism resulting from this stealth accounting change that ended private sector access to capital and credit, made it possible for FDR to use the false premise that private sector capitalism had failed to bring about a similitude to the Mussolini / Socialist Republic of Germany merger of big business under government. This was supported by Prescott Bush at that time. His son Bush41 “Read my lips no new taxes” increased taxes to bring an end to the Reagan Boom in 1989. Then, Bush43 implementing the Hoover MTM strategy again Nov 9, 2007, making it possible for Obama to be elected, same as Hoover did for FDR.
Undermining entrepreneurial society to support big business and big government:
FDR used an economic theory, popularized by Progressives of the time that the middle class entrepreneurial society, for which the word “opportunity” is intended in the Constitution with its innovations, ingenuity, and technology, was competing with big business, thereby undermining the value of bank assets, causing decline in bank capital, collapsed liquidity and economic failure. FDR’s “considered solution” was to lower taxes on big business and raise taxes on small / medium sized businesses and tax their inheritance to cause them to fail, be absorbed by big business or come under the control of a government program. This is the same slithering strategy that Mr. “Let’s all be adults” Obama has been mandated by his political patrons (e.g., big business – GE, big banking – JPM & GS, big hedge funds – Soros, the socialized Unions and Islamic oil interests) to promulgate without the mention this time of the economic theory that the middle class entrepreneurial society of the US rejected in the 30’s. Raising taxes and the regulatory burden is strategic to undermine the value of bank assets relative to their mortgage / loan ratios. This tax raising swindle is the same as “Mr. Plausible Deniability” Obama now, who craftily manipulates words to hide his malevolent actions. It’s like the Eddie Murphy skit, where caught by his wife with another woman in bed, casually dresses and explains that he didn’t, until finally his wife doubts her own eyes and acquiesces. But the real intent now, as under FDR, is the knowledge that under MTM, as middle class taxes on entrepreneurs go up, while reduced for big business, the value of their credits decline, reducing bank capital further, thus forcing banks, again, to shift lending into government’s bottomless pit of worthless zero risk weighted IOUs.
Government’s “bait and switch” from the promise of safety to empty IOUs:
However, then as now, the apparent collapse of the private sector entrepreneurial society and total drain on all bank credit and capital markets investment from the private sector, under the burden to MTM, to the government, retaining solely HTM, meant that then, as now, the assets of banks and investors had to be radically shifted from private sector lending to Treasury IOUs. This enabled the massive FDR Social Security Ponzi scheme to be enacted to allow government to create Keynesian valueless debt in a clandestine way.
The SS system and Trust was sold to the public then as now as a “safety net” that would shift the burden of taking care of retirees from the private sector care givers, insurers, pensions and charities over to the government, in effect to divert investment capital and access to credit from the productive private sector businesses into the government’s sewer of waste, fraud and corruption. In reality, it made it possible for the government to send in IOUs of spent, wasted counter-productive money derived from people paying into the SS Trust, with the value of those IOU/NPAs sustained, not by the productivity derived and generated by the invested funds as with Muni’s and corporates or bank loans, but by the SS recipients continuously paying the government to cover the interest requirements of these NPAs. Prior to the SS Trust, private sector pensioners’ savings were made up of bonds generating both interest and principal. With the government’s SS Trust scam, Peter is forced to pay taxes to support and sustain interest on government’s IOUs for Paul to accept them as having value. Then, to redeem the empty shell of Treasuries they thought they had capitalized through their lifetime of SS Trust, Peter and Paul together have to pay taxes to instill recoverable value. Thus, instead of a real pension invested in a way that generated wealth and opportunity throughout the strata of upward mobile citizens, moving by work and experience from lower income quintiles to higher based on their drive, capability, innovations and ingenuity, the government spread the SS contributions to political cronies and patrons to the disadvantage and increased life burden of the private sector.
The financial terrorism, plundering and treason of Dodd/Frank – Bush43/Paulson:
On November 9, 2007, Bush 43/Paulson replicated Hoover’s stealth initiative and directed the SEC to approve the Dodd Frank stealth initiative to acquiesce to the BIS Basel II Accord to implement FASB 157 – mark to market accounting (“MTM”) only in the Private Sector. Because oil prices had been manipulated upwards by proprietary bank funds and hedge funds, having historical knowledge of the real impact of the ensuing MTM, and cooperating foreign oil interests for their own nefarious purposes, driving oil prices up from $60/brl. in May 2007 to $95/brl. by Nov. 2007, the net disposable income of private persons and net operating income of companies declined relative to the fixed loan amounts, causing a paper loss for banks.
This meant that all banks had to book the paper loss against their capital resulting in a single month shift from a booming economy in every market sector to the radical withdrawal of consumer and business access to credit in the big Christmas buying month of November / December 2007. This became the official start of the Bush43 Recession that made Al Gore’s “hockey stick” chart look benign by comparison. The Progressive’s objective? To establish finally within a few short years a New Normal in which the government will have transferred to itself the total ownership and control of all property, capital production and productivity, innovation, ingenuity and productivity. Once MTM removed predominant market pricing, financial terrorists manipulated oil prices with impunity to further devalued bank assets and the underwriting basis for the rating of securities tranches under government’s resolute blind eye.
MTM and rampant speculation allowed too big to fail banks to plunder competitors:
Without the predominant market pricing stability maintained by 70% of bank assets in HTM, risk to depositors’ savings became the same as the bank’s collapsing liquidity. This allowed speculators to manipulate commodity values with impunity affecting a direct collapse in bank assets, while running massive blind shorts on the same banks, then pulling the plug on deposits, in what became the biggest transfer of competition’s business interests on the cheap in history. In the process, they achieved the government’s objectives wiping out $14 Trillion in private sector equity. The result was Regime Change from within: a total coup of the private sector by the government and crony/predator big business capitalists. Meanwhile, the government has the audacity to go around the world sighting slight cases of corruption and financial terrorism, to divert attention from its own corruption, rampant political cronyism and predatory financial terrorism perpetrated by government Progressives on a shock and awe scale so mind boggling that people are unable to mentally scale what has happened to them, let alone grasp why.
As Hoover’s 1929 MTM made FDR possible, Bush43’s MTM made Obama possible:
As with the 30’s, the apparent collapse of private sector capitalism, caused by Hoover’s 1929 shifting all private sector bank assets from HTM to MTM, gave rise to FDR, the November 2007 HTM to MTM stealth shift by the Dodd-Frank / Bush43-Paulson connivers hoodwinked the misdirected electorate into voting for Obama. Obama’s continued Progressive mandate was to force a health care act that would allow another massive Trust to be formed to drain all funds from insurers’ investment capital to another government Trust to allow the government to continue to hide spent money in the form of IOUs in yet another hollow Trust, to repeat FDRs SS Trust and LBJ’s Medicare Trust with the intention to convert the populous into no more than mindless consumers manipulated by media and enslaved government regulation, much the same as the movie The Matrix, where people are no more than soulless fodder for the State.
Nixing the debt ceiling to end the Obama blank check and reverse capital flows:
Understanding the difference of real self-sustainable value of private sector muni’s and corporate bonds in collocation to the nebulous non-value / negative value of Treasury IOUs, we can now address what would happen, if Congress not only succeeds block any further debt ceiling increase on the national debt (video link), but denies any further funding to the recipients of the $120 billion per month over tax receipts spending. Such resolute action would effectively defund 75% of the relentless growth of the government bureaucracy and subsidies to cronies.
In 1921, Warren G. Harding dramatically cut Woodrow Wilson’s federal spending, resulting in a redirection of private sector cash flow and wealth back from “investment” in the government (another oxymoron) to investment in the initiative of people. Calvin Coolidge kept the faith through 1929. The result was the “Roaring 20’s.” The Congressional nixing of the increase in the budget ceiling would have the same effect now, as then.
Congress must force priorities on Obama to prevent his promises to default:
Provided that Congress enacts a bill that forces Obama to prioritize tax receipt payments towards of the interest (14% of tax receipts), as required, nevertheless, under the Constitutional Amendment 14, sections 4 and 5, then they can prevent the fulfilling of Obama’s persistent sociopathic threat to force a default in interest payments, then SS (32% of tax receipts), then the Military (32% of tax receipts), if he doesn’t get his debt ceiling increase.
Then Congress should disappropriate the balance $120 billion per month excess, so that the Federal Government is limited to the debt ceiling of tax receipts. Again, this must be accompanied by Legislation enacted to otherwise prevent Obama end-a round’s suggested by Jack M. Balkin’s article 3 ways Obama could bypass Congress. The result, even if not passed, will put Obama on notice that he cannot undermine the private sector to prioritize political cronies. Failure to obtain Congressional approval to raise the debt ceiling, i.e., just a resolute “NO!” from the House, will mean that the excess capital from the private sector, estimated at $120 billion per month, now being soaked up by the expansion of IOU Treasuries, would revert back to the private sector corporate bonds, state bonds and municipal bonds resulting in a boom.
Need to reverse government siphoning of productive capital into Treasury NPAs:
The government is trying to soak up this private sector flow of production based capital through regulatory inducement of the banks and capital markets to buy Treasury IOUs in its intended quest to create a total subservience of capital and private sector access to credit by creating for itself the sole depository of all capital savings and investment into Treasury IOUs. Provided government can continue to reorient cash deposits from investment in private sector credits to zero risk weighted Treasury by duping the public to continue to raise the national debt ceiling, the private sector will have no option to access capital and credit, but to go through government bank lending programs or government entities for the approval of any credits, as only these government guaranteed loans will allow banks to book them under HTM valuations. The intent of this imperious government ploy is the de facto transfer of all capital, property, production and productivity from the private sector to the government. Moreover, once FASB returns private sector valuations from FASB 157e to FASB 157 between 2014 & 2017, adding Municipalities and States, States will collapse into government subservience. The governments’ trap will be irreversible, a ruse to end for all time the private sector’s re-emergence to free enterprise, individual opportunity and ascent to excellence. No need to wait for 2012, which may be too late, the House must say “NO!” or “Hell No!” now, and the economy will boom.
Disappropriation of all government expenditures over tax receipts:
If the House understands this and succeeds between now and November to cap the debt ceiling, thereby disappropriating further funding of the bureaucracies over the tax receipts, while it goes through its Balanced Budget Amendment to prevent spending over 18% of the GDP, then immediately $120 billion that the government is no longer able to soak up will be redirected to corporate and municipal bonds and direct equity investments in every market sector.
Any unlikely ratings agency downgrade resulting from the wiping out of $10 Trillion(+++) in debt ceiling increases over the next 10 years will also be a plus, as it will, again, divert investment that by regulation has to go to AAA Treasuries to AAA and AA corporate and municipal bonds. The combined effect will be to keep corporate, municipal, state and federal interest rates low. A radical cut in spending and redirection of capital back to the private sector will result in an AAA economic boom.
A cap on the debt ceiling now, will result in increased private sector access to bank loans:
The flow of such US $120 billion per month in private sector capital into the private sector instead of government Treasuries will drive the value of bank assets back up again. As main stream banks coffers fill with cash but no further access to Treasuries, they will begin to lend again to the private sector businesses. Businesses with access to credit will begin to expand.
Understand this: As banks, flush with cash and no new Treasuries available, expand private sector lending, the cap rates on cash flows, typically based on a formula of averaging debt rates plus equity rates, will naturally decline, driving the value of private sector assets upwards. As the value of bank capital is based on the formula Assets = capital plus deposits, with bank assets and company equity values increasing, bank capital on a MTM basis will begin to expand suddenly and exponentially, in the same way that it was caused to collapse November 9, 2007, because value increases on an MTM basis are booked immediately versus only when loans refinance as under HTM, which was established to maintain predominant market pricing stability. There are untold Trillions of dollars sitting in the coffers of US companies in the US and around the world. With capital seeking higher returns cash will flood the nation’s businesses.
As bank real estate assets rise and banks under a House “Hell No!” scenario having cash no longer sucked up by the sale of US Treasury IOUs, credit will start to flow back into the 3 MTM private sector bank risk weights based on the April 2nd 2010 Obama approval of FASB 157e.
The government’s real objective:
The government considers the populous to be no more than consumers and orients itself to finding ways for consumers to spend, with the idea that government subsidy of consumer spending will expand the economy and that, by merging with big business and big banking patrons, it could regulate and control production output for consumers, i.e., the same concept as Hitler’s Socialist Germany and Mussolini’s Italy, and Hoover/FDR’s America from 1928 to 1938, i.e., the Bush43/Obama approach today, always focused on the consumer. However, under the private sector capitalist system, producers are the focus. Once producers gain access to credit, bank asset values increase as a result of production. Under the Bush41-43/Obama scheme, government’s use of political patrons of big business and banking to control of production winds up creating a class of elites, i.e. the regulated producers forming the evolved Communist State to rule by regulation a class of regulated consumers, ever oppressed, suppressed, duped consumer happy proletariat.
However, with the liberation of capital back to the main stream banks and private sector equity capital increasing, investment capital retained for savings flows back to support the expansion of production and higher values ensue. Once this happens, the entire Bush/Obama vision for America is revealed to be no more a power grab, forcing upon the populous an endless striving to a meaningless downward spiral. Obama’s rejoinders, “Buck up!” “Bad Luck!”
Obama’s Time Bomb, the reason for foisting increase spending and taxes:
FASB 157e, approved April 2nd, 2009, was originally intended by the government to be a Time Bomb, where a preponderance of foreclosed housing loans and defaulted business and commercial loans coupled with a sharp tax increase urged by Obama, would further cause bank asset devaluations triggering a tipping point in bank capital to asset ratios, unable to remain in regulatory compliance, that would implode bank capital all at once per the Das Kapital blueprint of Marx. FASB 157e set the stage to enabling Geithner under an Obama Executive Order of July 2009, similar to the Chancellor of Germany to the Ministry of Finance in 1935, reinforced by the Dodd/Frank Financial Reform Act, to convert all TARP preferred shares to Common shares and otherwise take over the banking system, as Hitler did after 1935. So, we’re on the verge.
US Treasuries causing the current contraction in banking and economies of Europe:
As long as the US keeps expanding US Treasuries, European capital markets and US sock markets will continue to slide into the US Treasury abyss of underlying valueless debt.
Put another way, as long as Congress does not put a spending cap to prevent further debt ceiling increases, government stimulus spending and Federal Reserve printing of zero real value Treasuries, where the focus is on consumption versus production, consumers versus entrepreneurial producers, capital originating from private sector self-sustaining credits and investments syphoned off into US government Treasuries, there remains the threat that European banks and central banks taking on US Treasuries zero risk weighted HTM assets will continue to crowd out credit to European companies and governments.
Remember US Treasuries are spent money with no means of paying their own interest or repaying principal. As long as Congress allows their expansion, capital flows from the private sector will veer away from MTM valued private sector credit and even credit for governments in Europe which, unlike US States and Municipalities, are valued on a MTM basis.
Thus, the effect of this increasing transfer of private sector capital into the abyss of US Treasuries will be to put the capital of US banks invested in Europe further risk.
This means that US banks and US bank capital, which represent a 30% of the S&P 500 will continue to drive the S&P 500 downwards, which in turn further drives down the equity capital investments in the private sector, as bank capital continues to contract squeezing out the last vestige of the 3 private sector MTM valued risk weighted assets, including, as mentioned European government MTM valued assets, over to HTM valued US Treasuries, US guaranteed debt and debt held and originated by government owned and controlled entities.
The government’s objective is that with their having the only right to value assets on an HTM basis despite Treasuries having no production based sustainable value, to eventually trigger the FASB 157e Time Bomb, through which government can impose on banks that took TARP money in return for preference shares that their TARP preference shares investments in over 700 US banks be converted common shares, a strategy through which all TARP banks, owned by the government, will be able to revalue all assets on the government’s HTM value basis, same as with AIG and other banks that were able to retain HTM valuations once government was able to assign HTM valuations after taking over ownership or control of that entity.
However inexorable and imminent, Congress can prevent this. Once Congress blocks the government from any further spending cap increase, any further stimulus, any “back door” Fed spending increase, which will require private sector capital to be redirected to the private sector and away from government, bank capital will begin to expand and the US and European economies will begin to boom.
Flooding the banks with zero risk weighted assets:
Throughout this period, as with Hoover/FDR in the 30’s, government has given the public the false premise that private sector free enterprise capitalism was flawed and itself the cause of the systemic collapse that actually resulted from the November 9, 2007 stealth shift to FASB 157 MTM to only the private sector’s bank assets. Government’s scheme depends on massive increases of Treasuries to soak up private sector capital, such as TARP, the Obama Stimulus and annual debt ceiling increases to ultimately achieve the Progressives’ Trotskyite objective.
Want an economic boom now? Tell Obama “Hell No!” and cap the debt ceiling now:
Debt ceiling cap: With $120 billion per month of freed up capital flowing (now) into the private sector instead of disappearing into the black hole of expended government debt, the refinancing of loans from this
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