How bankrupt govt steals your money in 8 steps

As news on the Great Cyprus Bank Robbery keep getting worse, the latest being the country’s corrupt finance minister Michael Sarris saying that as much as 80% of “large” bank deposits can be confiscated, Americans should be on the alert to copycat moves by our feral government and bankers. All the more because the American Left are applauding the theft of Cypriots’ bank savings.

Tyler Durden of ZeroHedge warns us that when bankrupt insolvent governments “run out of fingers to plug the dikes,” history shows that they fall back on a very limited playbook.

Simon Black of Sovereign Man blog has enumerated 8 steps in the playbook of bankrupt governments:

1. Direct confiscation: As Cyprus showed us, bankrupt governments are quite happy to plunder people’s bank accounts, especially if it’s a wealthy minority. Aside from bank levies, though, this also includes things like seizing retirement accounts (Argentina), increases in civil asset forfeiture (United States), and gold criminalization.

2. Taxes: Just another form of confiscation, taxation plunders the hard work and talent of the citizenry. But thanks to decades of brainwashing, it’s more socially acceptable. We’ve come to regard taxes as a ‘necessary evil,’ not realizing that the country existed for decades, even centuries, without an income tax. Yet when bankrupt governments get desperate enough, they begin imposing new taxes… primarily WEALTH taxes (Argentina) or windfall profits taxes (United States in the 1970s).

3. Inflation: This is indirect confiscation– the slow, gradual plundering of people’s savings. Again, governments have been quite successful at inculcating a belief that inflation is also a necessary evil. They’re also adept at fooling people with phony inflation statistics.

4. Capital Controls: Governments can, do, and will restrict the free-flow of capital across borders. They’ll prevent you from moving your own money to a safer jurisdiction, forcing you to keep your hard earned savings at home where it can be plundered and devalued. We’re seeing this everywhere in the developed world… from withdrawal limits in Europe to cash-sniffing dogs at border checkpoints. And it certainly doesn’t help when everyone from the IMF to Nobel laureate Paul Krugman argue in favor of Capital Controls.

5. Wage and Price controls: When even the lowest common denominator in society realizes that prices are getting higher, governments step in and ‘fix’ things by imposing price controls. Occasionally this also includes wage controls… though wage increases tend to be vastly outpaced by price increases. Of course, as any basic economics textbook can illustrate, price controls never work and typically lead to shortages and massive misallocations.

6. Wage and Price controls– on STEROIDS: When the first round of price controls don’t work, the next step is to impose severe penalties for not abiding by the terms. In the days of Diocletian’s Edict on Prices in the 4th century AD, any Roman caught violating the price controls was put to death. In post-revolutionary France, shopkeepers who violated the “Law of Maximum” were fleeced of their private property… and a national spy system was put into place to enforce the measures.

7. Increased regulation: Despite being completely broke, governments will dramatically expand their ranks in a last desperate gasp to envelop the problem in sheer size. In the early 1920s, for example, the number of bureaucratic officials in the German Weimar Republic increased 242%, even though the country was flat broke from its World War I reparation payments and hyperinflation episode. The increase in both regulations and government officials criminalizes and/or controls almost every aspect of our existence… from what we can/cannot put in our bodies to how we are allowed to raise our own children.

8. War and National Emergency: When all else fails, just invade another country. Pick a fight. Keep people distracted by working them into a frenzy over men in caves… or some completely irrelevant island.

~Eowyn

10 things that will happen now that Obama’s reelected

Even before the ink dried on America Conservative 2 Conservative’s sundancecracker’s “10 Guarantees,” one of the guarantees (No. 9) already is fulfilled.

The stock market crashed today. The Dow Jones Industrial Average briefly plunged more than 350 points in its biggest one-day loss in nearly a year.

Here are the Ten Guarantees, brought to us by the 59,971,178 Amerikans who voted the POS to a second term of destroying Amerika:

1.  Obamacare will be 100% implemented.

2. “Card Check” will be passed by fiat.

3.  Amnesty for illegal aliens will be done by executive order.

4.  Two leftist Supreme Court Justices will be appointed → Gay marriage will be affirmed into law.

5.  Taxes will increase ON EVERYONE who pays them, i.e., the 50.5% of Americans who actually pay federal income taxes.

6.  The National Debt will increase beyond $20 Trillion.

7.  The Dollar will further devalue.

8.  Gold prices will skyrocket.

9. Stock Market will tumble beginning tomorrow.

10. Inflation will hit everyone directly; energy costs and food costs will massively jump.

The above 10 Guarantees are just the beginning. You and I both can think of other horrors to come.

~Eowyn

Interest on national debt 3X annual cost of Iraq-Afghan wars

The U.S. National Debt has now increased more during Obama’s 3 years and 2 months squatting in the White House than it did during 8 years of the George W. Bush presidency.

The Debt rose $4.899 trillion during the two terms of the Bush presidency. It has now gone up $4.939 trillion since Obama began squatting. [Source: CBS News]

Our human mind seizes up when we see stratospheric numbers of a billion, or a trillion, or worse still, 15 trillion.

We’ve seen a number of striking ways to put into perspective our morbidly obese national debt of $15+ trillion. Here’s another way, explained by Duquesne University economics professor Antony Davies.

The United States currently pays 3% interest on the federal government’s debt of $15+ trillion — an interest rate that’s the lowest since the 1960s. This means interest payments on America’s national debt is THREE TIMES the annual operating expenses of the Iraq and Afghanistan wars.

But the long-predicted rise in interest rates (and of inflation) is beginning.

If the rate rises to 8%, which is what it was 20 years ago, interest payments on the debt will be larger than the annual cost of every war the United States has ever waged combined. The more money the government is spending on interest, the less money it has available to provide other services and entitlement payments, including Social Security and Medicare.

In other words, paying interest on debt is a really really really stupid way of spending money. That’s why sensible people either don’t get in debt or if they do, try to pay off the debt as quickly as possible. (See how a middle-class family succeeds in being debt-free and accumulating $1.5 million in assets, here!)

So what should be done?

Like the finances of a family household, the federal government should take advantage of today’s low interest rate and pay off as much of the principal as possible now, before interest payments rise to unsustainable levels.

H/t LearnLiberty and ZeroHedge.

~Eowyn

Ron Paul confronts Fed Chairman

At the House Financial Services Committee hearing yesterday, Feb. 29, Ron Paul socked it to Federal Reserve Chairman Ben Bernanke.

At around the 3:50 mark, Paul asks Bernanke if he does his own shopping, if he is aware of what true inflation is, and if he knows that Americans don’t trust the government because they are being lied to about inflation. Then Paul delivers this zinger: “The Fed will self-destruct anyway when the money is gone.”

H/t ZeroHedge

See my post “Steep rise in food and gas prices under Obama” and Sagebrush’s “The Truth About the Federal Reserve.”

~Eowyn

The Cat’s Out of the Bag: Every Province in China is Greece

Chinese Professor of Finance Says Regime is Bankrupt

Larry Lang, chair professor of Finance at the Chinese University of Hong Kong, said in a lecture that he didn’t think was being recorded that the Chinese regime is in a serious economic crisis—on the brink of bankruptcy. In his memorable formulation: every province in China is Greece.  Full Article

Here is the link to professor Lang’s 4 hour talk that’s been posted to Youtube.  It’s in the Chinese language.

http://www.youtube.com/watch?v=comHcv7qSBg

Economist who Predicted Recession Warns of Worse Crash Ahead

Robert Wiedemer is an economist and bestselling author who prophetically predicted both the real estate and stock market collapse in his book, America’s Bubble Economy (2006).

He’s written a follow-up book, Aftershock, which immediately topped Amazon’s bestseller list. Dow Jones said Wiedemer’s work “is your bible, read it, get into action, and be a winner.” Standard and Poor’s says his “track record demands our attention.”

In this video, Wiedemer sounds the warning that we’re heading toward even worse times, but the pols in Washington DC are ignoring and not telling us about the true scope of the problem(s). The federal government is doing and will continue to try everything it can to stave off the collapse of the dollar, by buying back U.S. debt. (Don’t ask me to explain that because I sure don’t understand how our government can buy back its own debt.)

Here’s my summary of his main points:

Predictions

1. Government will raise taxes,  no matter who’s in the White House in 2013, beginning with the rich — which Obama just announced — then the middle class. But this won’t solve the debt crisis.

2. By end of 2012, we’ll see 10% inflation, which means a 10-year treasury bond would lose half its value. We could see 100% annual inflation for three consecutive years after.

3. This means many people’s savings will become drastically lower. Some life insurance plans will have big losses. Pensions will become unstable.

4. Two more bubbles will burst probably by 2013– of the dollar and of government debt.

5. By 2016, there’ll be a mass exit of foreign investments from America because of the dollar collapse.

6. The housing market will continue to be depressed. Homeowners may lose 8% of home value in 2012. Home prices can fall more than 20% in the next 5 years, once the inevitable interest rate hike comes in.

7. Retirement age will increase to 73. Many will have no choice but to keep working until dead.

8. The worst case scenario is a 90% drop in the stock market and 50% rate of unemployment. But this won’t last forever. America will recover.

What to do to protect yourselves:

1. Stay away from real estate because it hasn’t hit bottom. Sell your home and rent instead. If you stay in your home, refinance at a fixed rate mortgage, then just pay the monthly minimum, i.e.,  don’t pay at faster rate.

2. Save as much as you can for a rainy day.

3. Pay off your car loan.

4. Credit cards are really adjustable rate loans, so pay off your credit card loans as fast as possible.

5. Once inflation hits 10%, life insurance will be hit with big losses. Take a lump sum payoff now.

6. Safest careers will be in healthcare, education, utilities, basic food, government.

7. Stay away from long-term investments like 10-year bonds. When inflation really hits, put your money in short-term vehicles like CDs.

8. Gold will continue to be a favorite safe haven. Right now, only 10% of the world’s gold has been bought by U.S. The gold run will last at least another decade before the gold bubble bursts. Gold investments can be purchasing physical gold, gold depository, or gold mining stocks.

9. Other precious metals are also good over the long run.

~Eowyn

 

Red Alert! China Dumps 97% of Its U.S. Treasury Holdings

Friends, this is what we’ve been dreading. The killer punch is dealt to the U.S. economy. China — the country that purchased most of America’s debt in the form of U.S. Treasury notes and bonds – has divested 97% of its holdings.

The U.S. government has been operating by borrowing and borrowing and borrowing. Now it is faced with two stark choices:

1. Either raise the artificially low interest rates on those Treasuries so as to entice buyers, which means certain inflation, if not hyperinflation; or
2. Continue to keep interest rates depressed, which will result in even more dumping of those Treasuries by big holders such as China. With no one buying those Treasuries, the U.S. government can no longer function as before.

Some of the implications for ordinary Americans, not the very rich, are:

• If you’ve been frugal and are a saver, you’ll probably be O.K. because as the prices of goods increase, so will the interest rates on your savings — that is, assuming you’ve invested in conservative (vs. speculative and, therefore, unpredictable) financial instruments.
• If you have credit card and other debts, the interest rates on your debts will rise, along with inflation. So, please, pay off those debts ASAP!
• If you are on fixed income, you’ll have less unless you get cost-of-living adjustments commensurate with the rate of inflation.

Why this isn’t headline news in every newspaper and TV channel is beyond my comprehension.

UPDATE (6/5/11): The headline “China Divests 97% of Holdings in US Treasury Bills..." finally made it onto Drudge Report today.

~Eowyn

Terence P. Jeffrey of CNSNews.com reports today, June 3, 2011: 

China has dropped 97 percent of its holdings in U.S. Treasury bills, decreasing its ownership of the short-term U.S. government securities from a peak of $210.4 billion in May 2009 to $5.69 billion in March 2011, the most recent month reported by the U.S. Treasury.

Treasury bills are securities that mature in one year or less that are sold by the U.S. Treasury Department to fund the nation’s debt.

Mainland Chinese holdings of U.S. Treasury bills are reported in column 9 of  the Treasury report linked here.

Until October, the Chinese were generally making up for their decreasing holdings in Treasury bills by increasing their holdings of longer-term U.S.  Treasury securities. Thus, until October, China’s overall holdings of U.S. debt  continued to increase.

Since October, however, China has also started to divest from longer-term U.S. Treasury securities. Thus, as reported by the Treasury Department, China’s ownership of the U.S. national debt has decreased in each of the last five months on record, including November, December, January, February and March. [...]

As of March 2011, overall Chinese holdings of U.S. debt had decreased to 1.1449 trillion.

Most of the U.S. national debt is made up of publicly marketable securities sold by the Treasury Department and I.O.U.s called “intragovernmental” bonds that the Treasury has given to so-called government trust funds—such as the Social Security trust funds—when it has spent the trust funds’ money on other government expenses.

The publicly marketable segment of the national debt includes Treasury bills, which (as defined by the Treasury) mature in terms of one-year or less; Treasury notes, which mature in terms of 2 to 10 years; Treasury Inflation-Protected Securities (TIPS), which mature in terms of 5, 10 and 30 years; and Treasury bonds, which mature in terms of 30 years.

At the end of August 2008, before the financial bailout and the stimulus, the publicly marketable segment of the U.S. national debt was 4.88 trillion. Of that, $2.56 trillion was in the intermediate-term Treasury notes, $1.22 trillion was in short-term Treasury bills, $582.8 billion was in long-term Treasury bonds, and $521.3 billion was in TIPS.

At the end of March 2011, by which time the Chinese had dropped their Treasury bill holdings 97 percent from their peak, the publicly marketable segment of the U.S. national debt had almost doubled from August 2008, hitting $9.11 trillion. Of that $9.11 trillion, $5.8 trillion was in intermediate-term Treasury notes, $1.7 trillion was in short-term Treasury bills; $931.5 billion was in long-term Treasury bonds, and $640.7 billion was in TIPS.

Before the end of March 2012, the Treasury must redeem all of the $1.7 trillion in Treasury bills that were extant as of March 2011 and find new or old buyers who will continue to invest in U.S. debt. But, for now, the Chinese at least do not appear to be bullish customers of short-term U.S. debt.

Treasury bills carry lower interest rates than longer-term Treasury notes and bonds, but the longer term notes and bonds are exposed to a greater risk of losing their value to inflation. To the degree that the $1.7 trillion in short-term U.S. Treasury bills extant as of March must be converted into longer-term U.S. Treasury securities, the U.S. government will be forced to pay a higher annual interest rate on the national debt.

As of the close of business on Thursday, the total U.S. debt was $14.34 trillion, according to the Daily Treasury Statement. Of that, approximately $9.74 trillion was debt held by the public and approximately $4.61 trillion was “intragovernmental” debt.

The Curious Case of the Obama Economy

Your humble blogger was distressed by this little ditty from Reuters yesterday:

Thu May 5, 2011 2:18pm

Oil plunged more than 8 percent on Thursday, heading for the third biggest daily drop in dollar terms on record, as concerns about economic growth and monetary tightening spurred a sell-off in commodities.

U.S. crude tumbled below $100 a barrel in heavy trading volume after weak economic data from Europe and the United States fed concerns that have battered commodities all week. German industrial orders fell unexpectedly in March while U.S. weekly jobless claims hit eight-month highs.

…Crude oil is selling off sharply for two primary reasons: QE2 is coming to an end in June and without a QE3 behind it, it will take liquidity out of the market, hurting risky asset classes such as commodities,” said Chris Jarvis, senior analyst, Caprock Risk Management in New Hampshire.

Wow, that sounds pretty bad.

And yet a mere 18 hours later, Reuters published this:

Fri May 6, 2011 10:15am

U.S. private employers shrugged off high energy prices to add jobs at the fastest pace in five years in April, pointing to underlying strength in the economy, even as the jobless rate rose to 9.0 percent.

…U.S. stock index futures extended gains, while U.S. bond prices extended losses. The dollar rose further against the euro and yen.

The unemployment rate has dropped a full percentage point since November and the latest rise will strengthen the Federal Reserve’s resolve to stick to its ultra-easy monetary policy stance.

The Fed last month signaled it was in no hurry to start withdrawing its massive stimulus for the economy, even as other major central banks around the world have begun to raise interest rates.

I consider myself well versed in finance, but there are some things about this I cannot figure out. How did Ben Bernanke change his mind overnight? Is oil going down because of a strong dollar or a troubled dollar? And if Wall Street finance gurus are the ones who messed up everything in 2008, then why do we keep taking their opinions as gospel?

Can someone help me out here?

-Candance

The Gas Price Blues

a likely specimen found in Richmond, Virginia

To readers on the west coast this might look cheap, but keep in mind Virginia is a comparatively poor state. Many people in this particular neighborhood get by on minimum wage to the tune of 7 bucks an hour.

The other day I was in a hair salon, and one of the clerks (who wasn’t even waiting on me) started complaining about how bad business was in their building. She then blurted out that her personal finances were stretched to the limit, she was in talks to start staying with her mother, and she wished President Obama would get fired.

Shocked by her casual honesty with total strangers, I could simply stammer in reply that everyone in Washington ought to be fired.

When that kind of conversation happens in a place of business on a Friday night that used to be busy – it’s a sign that Washington has lost the rest of the country. And for me, it’s a sad reflection on the plight of many hardworking people in my community.

That’s what it’s like to live in Virginia in 2011.

-Candance

Why the Fed is ‘Rigging’ the Stock Market

While the Dow Jones average continues to defy impossibility with its astronomical highs, Americans are starting to wonder why the mood on Wall Street is so far removed from real life everywhere else.

Two things must be understood.

Number one: ask any reporter on the stock market beat and they’ll tell you the mood in New York is really no different from yours. Brokers are edgy, cautious, and living one day at a time. Many of them are quick to admit “equity markets have been artificially stimulated by ‘so much tape and glue from the Fed, Treasury, White House, and Congress.’”

In other words, they are watching the market get artificially pumped up before their very eyes and they are powerless to stop it.

Number two: this is being caused mostly by low interest rates.

Reuters explains:

The driving force behind the rally is the money that poured into riskier assets like stocks in the last quarter of 2010 after the U.S. Federal Reserve pledged to keep interest rates low.

Low interest rates are typically thought of as way to encourage affordable borrowing. That’s the line most often used by liberal economists – less oppressive interest means more people will borrow and banks will gladly extend the “cheap” credit.

And yet that hasn’t happened. Mortgages remain stagnant, companies are not borrowing for growth, and no new jobs are being created. The Miami Herald reported Sunday that small businesses are still only getting loans through government programs.

So if easy borrowing is not the real goal, then what is? Propping up the stock market.

Bernanke hinted at this in November 2010:

Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.

While low interest rates mean less interest on your mortgage, they also mean lower interest you earn on bonds or savings accounts. And there is the rub; who would stockpile money in the bank if it earned zero interest? Who would feel rushed to pay off a mortgage or car loan if the payments are minimal?

The economic laws of gravity kick in, and money naturally flows wherever it can profit the most. Consumers ditch the savings account for greener grass elsewhere. And thanks to a little prodding from the Fed, the most appealing place to store your money these days is corporate equity.

The market looks hot, the media say Wall Street is booming, consumer confidence goes up, and people start spending more. Investment accounts are full of expensive shares. Household wealth appears to overcome debt, maybe even an underwater mortgage. Economic crisis solved.

Six months after QE2, this is finally starting to become mainstream knowledge. And sites like The Economist are worried whether it will work.

As for the Fellowship, we have our doubts as well.

-Candance