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How to Get Rich Investing in Stocks by Riding the Electron Wave

Tossing the U.S. Consumer Under the Bus And Insanely Expecting an Economic Recovery

Economics / US Economy Jan 19, 2011 - 01:47 AM GMT

By: D_Sherman_Okst

Economics

Best Financial Markets Analysis ArticleI’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

Total 109,800,000,000,000.00

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.

Sad.

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.

By D. Sherman Okst

http://UnveilingTheEconomy.blogspot.com/

Bernardston MA USA

davossherman @ gmail.com

I'm an ex-airline captain with about 15,000 hours and am amazed at all the BS we are taught. Most of my friends still in the business were also taught the wrong aerodynamic principles with respect to what makes planes fly. Aviation or economics, Keynes to Austrian - Bernulli to Newton we've been sold bad goods. It's amazing anything works as backwards as we do things.

© 2011 Copyright  D. Sherman Okst - Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Dr Niaz Ahmad Khan
19 Jan 11, 11:09
How to reverse recession in matter of days

SUMMARY

HOW TO REVERSE WORLD RECESSION IN MATTER OF DAYS

A Method to Address Economic Recession, Remove Poverty, Terrorism, Improve Law and Order, Reduce Drug Abuse, Inflation And Taxes in an Interest Free Based Economy.

By: Dr. Niaz Ahmed Khan, FRCS, PhD

ABSTRACT:

I have developed a new financial instrument which will be much more valuable than the bonds or the treasury bills government sells in the open market to raise much needed funds to run the country. These are all interest based instruments and can only be used by institutions. The instrument I am proposing is without interest and will be used by everybody to purchase goods and services in the government and private sector resulting in up to 60% discounts. This is why these will be massively bought up front in large amounts in the shortest period of time of one month to run the country for at least a year and much more by the end of the year.

SUMMARY OF THE BOOK:

The world is facing many challenges with no solution in sight.

The main cause of all these ills is the POVERTY. Float bonds which can be used by everybody rich or poor and are not debt to the state so there is no question of interest.

How: Take the example of USA which is going through a great recession.

USA borrows money by selling treasury bills and the interest based bonds. The suggestion is to sell these bonds on non interest basis.

1. Buy all goods and services under govt control with these bonds and these bonds will replace dollar with bonds.

2.10 million duty waved off.

3.100 million dollars prize draw from the bonds held by the public every day.

EXAMPLE: ONE dollar buys 5 bonds on the condition that the amount should be $100,000 or multiple of it. Fewer amounts will get the rate of four and three. This massive discount period is only for first month at the start of the implementation of this system. In the second month the rate will be 4 but the rate of 3 will apply to subsequent months for the same amount.

WHERE THESE BONDS WILL BE USED?

1. All state controlled services and commodities.

EXAMPLE: A bill of (any service or Commodity) $100 can be paid with 200 bonds and there will be no exception to this rule. A NET DISCOUNT OF 60%.

A simple formula will apply: Total bill in dollars x2 is the number of bonds surrendered. Price in bonds will not be less than the cost price but without the direct indirect taxes and the duties which are added to the present cost to make it very expensive.

It will attract at least 50 million people to take this opportunity as early as possible. And if one is sure of making 100% profit within 30 days there will be many more that will help themselves.

RESULT: Government gets at least $5 trillion within a very short period of time of few days and much more in the rest of the year. THIS IS NOT A DEBT AS STATE HAS SOLD BONDS (Commodity) WHICH IS AN ALTERNATE CURRENCY AND DO NOT CARRY ANY INTEREST. One immediately thinks who will bear the loss and this loss to the state will not be more than total year budget of $2.5 trillion which it collects in one year with all the taxes and the duties but the bond price is simply a cost price without any kind of tax or duty. So there is a net gain of approximately 2.5 trillion within a short period of time. First floodgate of money has been opened.

WHO WILL SELL THESE BONDS?

State will float tenders to select a private agency (USMF) UNITED STATES MONITORY FUND JUST A NAME GIVEN TO THIS ORGANIZATION with the lowest bid WHERE AS second, third and fourth bidders will be auditors of USMF. This agency will employ at least 20 million unemployed on 10% commission basis and without any salary. These agents will have to pay $500 as an annual fee to USMF in order to build the infrastructure for the sale of bonds. Agents’ quota will be $300,000 per month or they will be allowed to sell their whole year quota in one day or in a month. This will only materialize if the agent shares his commission with the buyer. Greater the share of commission quicker the sale. The investor or a buyer will sell these bonds at the same rate of 5 per dollar and his bonds will sell like hot cakes every day as there is no condition of the amount of money to purchase the bonds. In this way even the poorest person will get the same or near the same rate as the investor earns a profit from the commission which he takes from the agent and makes almost 100% profit by only investing $100,000. He will sell these bonds repeatedly and will keep almost 6% profit every day till the demand lasts. NOW THINK HOW MUCH FUNDS STATE HAS ACCUMULATED Much more than few years budget in matter of only one month.

FLOOD GATES OF MONEY AND TURNING POINT

This is the second flood gate of money and there are still four more floodgates of money yet to open. So at the end of 30 days or even much earlier the government declares tax free country for ever. With the removal of all kinds of direct and indirect taxes and duties the price of oil electricity telephone and of all other services under government control is now almost 60% less than before as these are being purchased by bonds (which is the cost price) and not with dollars. The production cost of everything has come down tremendously.

SECOND OPTION

STATE ALSO OFFERS 10 MILLION DUTY FREE IF ONE DEPOSITS $100,000 NON REFUNDABLE. THIS BRINGS OUT ALL THE BLACK AND SPARE MONEY WHICH STATE WAS NOT ABLE TO GET BEFORE AND AS THERE IS NO TAX AND HENCE NO TAX EVASION SO ALL THE MONEY IS WHITE AS IT IS BEING GIVEN TO GOVERNMENT.

This was the third floodgate of money which is even bigger than the first one and the exact amount is impossible to asses unless the system is implemented.

In order to provide cheap bonds throughout the year government offers three types of registration fees.

1. Pay $100,000 in the start of the year and get the rate of 5 for the rest of the year and this will suit the professional's and salaried person'

2. Pay $10,000 yearly and get 20,000 new bonds at the rate 5 every month but one has to collect 10,000 bonds (equal to fee) to get this cheap rate throughout the year. Higher the registration fee more the entitlement of cheap bonds. This registration will suit any small time business who will sell his product cheaper provided 15% bonds are also paid with rest of cash money by the customer SEE THE NEXT REGISTRATION FOR FURTHER EXPLANATION OF15%BONDS. This will apply to all goods in private sector and does not apply to the government sector. This is a big incentive to accept bonds in the private sector as the business accepting more bonds will have more business than the trader not accepting the bonds so the bonds market will multiply and there will be a constant need for bonds in the open market.

3. Third type of registration will be of $100,000 which will entitle the business to sell its products through USMF. The value of merchandise sold through this source will help the business to get the 5 bond per dollar rate or opt for the duty free option equal the amount sold. But with one condition of surrendering 15% bonds at each sale in dollars.

EXAMPLE:

MERCHANDISED SOLD THROUGH USMF $1000. BONDS SURRENDERED 150 ARE DEPOSITED IN STATE ACCOUNT TO BE SOLD AGAIN SO THE CYCLE OF BONDS IS ESTABLISHED .A receipt of bonds surrendered is obtained from USMF for evidence of sale of merchandise and this receipt will entitle the traders to get cheap bonds or the duty free option throughout the year BUT THE SAME RECEIPT CAN BE USED ONCE ONLY.

WHAT IS THE BENEFIT TO BUSINESS?

1. CHEAP BONDS THROUGH OUT THE YEAR

2. DUTY FREE OPTION WILL HELP INDUSTRY.

3. The quota which can be sold is ten times the amount of Registration but not more unless the registration fee is increased. Now all the business will opt for this registration in order to reduce the cost of production. These 15% bonds the business will get back through a chain of dealers sub dealers and ultimately the customer will pay this bond portion as he will get the end product very cheap because of tremendous cut in the cost of production by the factors already mentioned. This will replace the GST or the VAT or the two price system seen all over USA. Almost everybody will sell their product through this channel as it will be much costlier to sell the product outside this system as cheap bonds are not available otherwise.

According to rough estimate at least $10 trillion transactions are carried out every day in US and at each transaction 15% bonds are being surrendered, the price 15 bonds is $3. So 3% of 10 trillion will be $300 billion which goes into government account without any compulsion every day (UNBELIEVABLE). This is the fourth floodgate of money AND IS CALLED THE GOLD MINE. Now the state is sitting in the driving seat and all the money in banks of private sector has been transferred into government account and banks are no more the lenders but are borrower from the state which is the only source left and will invest in business with sound feasibility study checked by the state bank. The state will offer to invest 80% and the bank will bring investor who is willing to pool rest 20%. This 20% will be deposited in the bank and the bank will oversee the running the business, running expenses will be given to the investor from its share of 20%. There will be no collateral and share of the profit and loss will be shared in the ratio of 60 and 40. The bank will share the 60% with the investor and 40% will go to state funds and the state will provide everything under its control below cost which will farther reduce the cost of production and at the same time will MARKEDLY improve the profit margins OF ALL THE BUSINESSES. No major business can refuse this offer. Any bank showing repeated loss will go out of business as there will be no more funds available from the government source and all other interest based sources are not available any more. Interest based banking is gone forever or it may be at a very small scale and the state will not offer loans on interest as these are not any more profitable and risk free as there is no collateral. The amount of profit government will share will be unimaginable and this is the 5th flood gate opened.

THEN WHY NOT INVEST ON PROFIT AND LOSS SHARING BASIS

Last but not the least government will acquire all the land on lease without any force and will provide all the needs to the formers THROUGH CORPORATE FARMING SECTOR HIRED BY THE STATE below cost and will become the shareholder according to the mutual contract with the land owner this is the 6th flood gate of money opened.

DRUG ABUSE ELIMINATED

When all the possible land is being cultivated by best agriculture engineers there will be much better yield and much more profit to land owner then who will not join hands with the government.

THE OBVIOUS BENEFIT WILL BE NO MORE POPPY CULTIVATION IN COUNTRIES WHICH ARE POOR AND LARGELY DEPEND ON THE POPPY CROP. NOW THERE IS NO MORE POPPY AND NO MORE DRUGS.

All the above claims have been proved to be true except the terrorism.

HOW TERRORISM WILL BE ELIMINATED?

We have to look at root cause and it is POVERTY and NOT the religion which is being falsely blamed. The going rate for a suicide bomber is $1,000 in Pakistan, Iraq and in Afghanistan. Can one believe that anyone having at least two meals a day will blow himself? Never the areas of the countries where these attacks are happening are extremely poor and the extremist elements who themselves are or were poor exploit these very poor people to carry out attacks for money to save their families dying from hunger and this is an open secret. Extreme elements has large force that is recruited from poor areas as there in no job anywhere and they provide these raw recruits with only food and shelter and at same time brainwash them and train some of them to carry out these attacks by giving them enough money in their lives to support their dependents. You might mention few isolated cases of being well to do and still carried out these attacks. Once the poverty is removed in these areas by implementing this system these attacks will come to an end immediately. This system is not only meant for USA but will be easily applicable to every country.


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