It would be political suicide for a politician to even suggest that we should cut back in any area of the budget. If you suggest cutting the military budget, the right wing will tell you you're un-American and there are terrorists under your bed. If you suggest cutting Social Security, AARP will mobilize their tsunami of voters against you. And if you suggest cutting Medicare and Medicaid, the entire population will rise up against you screaming, "But health care is teh single most important issue of our day."
The problem is that every issue is the single most important issue of our day. That is why the tough choices that need to be made to shore up our economy won't be made.
Whenever a problem arises, the majority always say the same thing. "The government should do something about it." They all seem to think that our government shouldn't be everybody's safety net. When major hedge funds overleverage themselves, thkey think the government should bail them out, and when homeowners overmortgage their homes, they think the government should save them from foreclosure. We don't seem to make the connection that whenever the government "does something about it," it does so at half the efficiency and twice the cost of the private sector. Then it hands the public the bill through either direct taxation, or through inflation taxation. That means, in the end, we all pay.
Guide to Investing in Gold & Silver: Protect Your Financial Future
Matt Taibbi at Rolling Stone magazine tells us why Goldman Sachs is so profitable – with great research and colorful commentary. Journalism is not dead.
After reading the article, I see a superior predator (Goldman Sachs) feeding on naive prey (investors, consumers, banks, regulators, the Federal Reserve) assisted by Goldman Sachs alumni in high positions in government and industry (like Henry Paulson, former Treasury secretary). Goldman Sachs' motto is long-term greed.
If you find the title intriguing – The Great American Bubble Machine: From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression – and they're about to do it again – I recommend that you read the whole article (link below). The next bubble is Cap and Trade.
Thanks to Bill Voegeli for recommending this eye-opening analysis.
What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain — an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.
The bank's unprecedented reach and power have enabled it to turn all of America into a giant pumpanddump scam, manipulating whole economic sectors for years at a time, moving the dice game as this or that market collapses, and all the time gorging itself on the unseen costs that are breaking families everywhere — high gas prices, rising consumercredit rates, halfeaten pension funds, mass layoffs, future taxes to pay off bailouts. All that money that you're losing, it's going somewhere, and in both a literal and a figurative sense, Goldman Sachs is where it's going: The bank is a huge, highly sophisticated engine for converting the useful, deployed wealth of society into the least useful, most wasteful and insoluble substance on Earth — pure profit for rich individuals.
They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased. They've been pulling this same stunt over and over since the 1920s — and now they're preparing to do it again, creating what may be the biggest and most audacious bubble yet.
Cap and Trade…
The new carbon credit market is a virtual repeat of the commodities-market casino that's been kind to Goldman, except it has one delicious new wrinkle: If the plan goes forward as expected, the rise in prices will be government-mandated. Goldman won't even have to rig the game. It will be rigged in advance.
Here's how it works: If the bill passes, there will be limits for coal plants, utilities, natural-gas distributors and numerous other industries on the amount of carbon emissions (a.k.a. greenhouse gases) they can produce per year. If the companies go over their allotment, they will be able to buy "allocations" or credits from other companies that have managed to produce fewer emissions. President Obama conservatively estimates that about $646 billion worth of carbon credits will be auctioned in the first seven years; one of his top economic aides speculates that the real number might be twice or even three times that amount.
The feature of this plan that has special appeal to speculators is that the "cap" on carbon will be continually lowered by the government, which means that carbon credits will become more and more scarce with each passing year. Which means that this is a brand new commodities market where the main commodity to be traded is guaranteed to rise in price over time. The volume of this new market will be upwards of a trillion dollars annually; for comparison's sake, the annual combined revenues of all electricity suppliers in the U.S. total $320 billion.
Goldman wants this bill. The plan is (1) to get in on the ground floor of paradigmshifting legislation, (2) make sure that they're the profitmaking slice of that paradigm and (3) make sure the slice is a big slice. Goldman started pushing hard for cap and trade long ago, but things really ramped up last year when the firm spent $3.5 million to lobby climate issues.
United we stand, divided we fall….
Peggy Noonan at the Wall Street Journal describes a critical flaw in the polarized, media-driven two party system in the United States. Excerpts below.
Both conservative media and liberal media are alike in that they have to keep the ratings up, or the numbers up, or the hits. If they lose audience, they can lose everything from clout to ad revenue. Because they have to keep the numbers up, they have to keep it hot, which actually has some effect on the national conversation. The mainstream media is only too happy to headline it when a radio talker says Sonia Sotomayor is a dope. The radio talker may be doing it to play to his base, but the mainstream media does it to show that Republicans are mean, thick and angry.
On left and right, on cable and radio, political hosts see gain in hyping the story, agitating and exciting their listeners. All of this creates a circular, self-enclosed world in which it gets hotter and hotter and tighter and tighter. (I remember when the liberals of the Democratic Party were like this, in the '80s. They talked only to themselves, and reinforced each other's views. It took them years to recover.)
Must the Obama administration micromanage General Motors, institute a new health-care system, and institute a new energy regime? Must they mow down the opposition, shutting them out of the development of important bills? Well, the base likes this.
Can the radio host or the freelance policy maker calm down, become less polar and more thoughtful (yawn)? That would leave his base turning the dial and maybe going elsewhere. Can the big left-wing and right-wing Web sites commit apostasy, rethink issues? In general, bases don't like that.
Everyone is looking to the base, the sliver, their piece of the pie, their slice of the demo. You wonder sometimes as you watch: Who's looking out for the country?
The End of Small Farms? What you should know about HR 875, HR 759, NAIS and Monsanto
America's small farmers are under attack through a series of bills presented under the guise of "food safety." I don't want to lose my freedom to grow, buy and eat real foods. Let's fight for our small farmers who not only need our protection and support, but actual freeing from government intrusion, control and harm. http://www.breakthematrix.com/node/34734
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Chris Martenson understands what is really going on at the highest levels of government. In this blog post, he describes how that the Obama administration is beholden to Wall Street – like the Bush administration. As he points out, the U.S. Treasury can no longer afford to cover Wall Street's bad bets while letting them make huge profits on their good bets. Excerpts below.
…it is vitally important not just that conflict of interest be absent when big money is involved in policy decisions, but also that the appearance of conflict of interest be absent. Our system of money is based on confidence (after all it is a Ponzi scheme) and therefore it is vital that our checks and balances assure that the public good is not abused by a few at the expense of the many.
In order for the average person to pull hard on the yoke of life, straining to earn their daily wage, that wage has to be worth something. What is money “worth,” if some of us have to work to exhaustion to obtain it while a very small minority can literally conjure trillions out of thin air and distribute it amongst themselves?
Money is a social contract, especially fiat money, and abusing the trust inherent to making that money system work is the gravest of all possible errors. I am not exaggerating here.
This week I found out that, even as Lawrence Summers, in his role as President of Harvard University, was excoriating professor Cornell West for shirking his professorial duties by making a spoken-word audio CD, he was himself moonlighting for a hedge fund and various Wall Street banks earning millions. Here’s Frank Rich in the NYT:
Lawrence Summers, the president’s chief economic adviser, made $5.2 million in 2008 from a hedge fund, D. E. Shaw, for a one-day-a-week job. He also earned $2.7 million in speaking fees from the likes of Citigroup and Goldman Sachs.
Those institutions are not merely the beneficiaries of taxpayers’ bailouts since the crash. They also benefited during the boom from government favors: the Wall Street deregulation that both Summers and Robert Rubin, his mentor and predecessor as Treasury secretary, championed in the Clinton administration.
This goes well beyond “the appearance of” a conflict of interest. If Summers were a judge, he’d have to recuse himself from the case. Nearly $8 million in a few years from Wall Street is a conflict of interest. A massive one.
However, if smoking guns are more your thing, then this next bit of information from the same article will be to your liking:
Summers had done consulting work for another hedge fund, Taconic Capital Advisors, from 2004 to 2006, while still president of Harvard. He tried — and, mercifully, failed — to install the co-founder of Taconic in the job of running the TARP bailouts.
Think of the judgment of a person, long in the public eye, who has apparently learned nothing from his past scrapes with public perception, who attempts to install a past patron in a plum post involving public money being distributed to private, already wealthy recipients.
Think of the character of a person who can rationalize the act of publicly excoriating a professor for doing something that he is secretly doing himself, but on a much grander scale.
That person is Lawrence Summers, the man chosen by the Obama team to coordinate the bailout efforts.
Rahm Emanuel, the current White House Chief of Staff, comes similarly burdened:
…the banking industry recently paid Rahm Emanuel $16 million for about two years of work. That investment was recently paid back when, as President Obama's chief of staff, Emanuel led the January campaign to release another $350 billion in bank bailout funds.
But it goes deeper than that. Rahm Emanuel also took what I consider to be a lot of money serving on the board of Freddie Mac, a company that is certain to cost taxpayers hundreds of billions of dollars.
Before its portfolio of bad loans helped trigger the current housing crisis, mortgage giant Freddie Mac was the focus of a major accounting scandal that led to a management shake-up, huge fines and scalding condemnation of passive directors by a top federal regulator.
One of those allegedly asleep-at-the-switch board members was Chicago's Rahm Emanuel—now chief of staff to President Barack Obama—who made at least $320,000 for a 14-month stint at Freddie Mac that required little effort.
Before Timothy Geithner (“Turbo Tax Timmy,” as he’s called in some circles) was appointed to the Treasury position, his career and connections were explored in depth in an excellent article in Portfolio.com by Gary Weiss:
After the Bear deal, the Fed wound up with $30 billion in collateral, mostly in the form of subprime-mortgage securities. Even Paul Volcker, the former Fed chairman who served on the search committee that picked Geithner and who still holds him in high regard, has expressed queasiness about the way the deal was structured. In a speech to the Economic Club of New York, Volcker said the Fed took actions that “extend to the very edge of its lawful and implied powers, transcending certain long-embedded central-banking principles and practices.” Volcker later leavened this harsh assessment a bit, telling me that the Fed’s intervention “was a proper action, but it was extraordinary—something that’s never been done before, in terms of calling upon that emergency power. It tells you how seriously they took it.”
Still, misgivings about the deal are hard to ignore, no matter how catastrophic the consequences of not intervening might have been. It doesn’t help that the deal is teeming with connections that are sure to raise questions. Dimon is one of the three class-A directors of the board of the New York Fed, and its head is Stephen Friedman, a former Goldman Sachs chairman, who still sits on the investment bank’s board. The New York Fed’s board also includes Richard Fuld of Lehman Brothers, a firm that is another oft-rumored potential candidate for a bailout. Fuld is a class-B director, meaning that he is elected by member banks, astoundingly, to represent the public. (Friedman is also supposed to be looking out for you: He was “appointed by the board of governors to represent the public.”) Thus Geithner reports to a board that is composed of people who are not only under his purview but would also benefit from any potential bailouts. The structure of the New York Fed’s board bears more than a passing resemblance to that of the New York Stock Exchange in the bad old days, when member firms, regulated by the N.Y.S.E., were heavily represented on its board.
Even more intriguing is Geithner’s informal brain trust, loaded with Wall Street luminaries. Since coming to the Fed in November 2003—recruited by then-New York Fed chairman Pete Peterson, co-founder of the Blackstone Group—Geithner has learned the ways of the financial industry at the feet of some of its biggest legends. He was almost immediately taken under the wing of Gerald Corrigan, a gregarious former New York Fed chief who is now a managing director of Goldman Sachs. Corrigan describes his relationship with Geithner as close, and it has flourished since Geithner’s first days at the Fed. Another frequent adviser—“you don’t want those things to get too formal,” Corrigan notes—is also a preeminent banker, Merrill Lynch C.E.O. John Thain, a Goldman alumnus and former head of the N.Y.S.E. Over the years, Thain has often talked to Geithner—“sometimes I talk to him multiple times a day,”
Given this extensive set of interconnections, you might think that he’d be careful to project the right image when stepping into the Treasury role – but instead he saw fit to place a Goldman Sachs insider in the position as his top aide last January (before anybody was paying too much attention to all this insider self-dealing):
WASHINGTON — Treasury Secretary Timothy Geithner picked a former Goldman Sachs lobbyist as a top aide Tuesday, the same day he announced rules aimed at reducing the role of lobbyists in agency decisions.
Mark Patterson will serve as Geithner's chief of staff at Treasury, which oversees the government's $700 billion financial bailout program. Goldman Sachs received $10 billion of that money.
Just a few months later, in March, when questioned about the appearance of conflict of interest, Geithner bristled at the suggestion:
"I am just asking the questions," Waters said, "because the talk is…that this small group of decision makers at the center of it is Goldman Sachs and that's what's causing a lot of the distrust, because people are thinking or believing that Goldman Sachs, because of the connections, have had a lot to do with the decisions that are being made."
Geithner took umbrage.
"I think it's deeply unfair to the people who are part of these decisions to suggest that they were making judgments that in their view were not in the best interest of the American people," Geithner said.
Apparently Mr. Geithner found it completely confusing why anybody would see anything at all wrong with a regular revolving door between positions of extreme financial power over public money and the firms set to benefit from public money.
To me, that is a sure sign that someone is too deeply embedded, too deeply conflicted, too detached from reality to even know where to draw the line. Timothy apparently cannot distinguish between the “best interest of the American people” and Goldman Sachs raking in billions of undeserved public dollars. To him, those are one and the same thing and that's a major reason why I have grave doubts that the bailouts will succeed.
Now let’s cross into the surreal. One of the more grossly mismanaged companies on the face of the planet, the one that will cost taxpayers close to a trillion dollars when all is said and done, is Fannie Mae, the Government Sponsored Enterprise, or GSE. So who is it, do you suppose, that picked the CEO of Fannie Mae to run TARP? Could it be Summers and Geithner and Emanuel?
You bet. That’s the vetting team.
As far as I am concerned, the CEO of Fannie Mae should be defending himself in court, not running a massive wealth redistribution program.
The man who created two phenomenally successful "We The People" YouTube videos urging Americans to stand up against Congress and reclaim their republic now – or perhaps lose it forever – reportedly has been summoned to the White House by President Obama to discuss the subject matter of the short films.
Bob Basso, who posts videos under the name funbobbasso on YouTube, has created videos in which he portrays Thomas Paine, author of the "Common Sense" pamphlet that made the case for independence during the American Revolution.
Basso, whose website offers his services as a motivational speaker, uses the YouTube presentations to condemn "non-representing representatives" and warns, "Only when they feel the almighty wrath of 'We The People' marching in the streets from California to New York shouting 'We're mad as hell and we want our country back' will they get the message they work for you."
In his second video, which has been seen more than 1.1 million times, Basso challenges people to let Congress know their displeasure by sending tea bags.
The top 10…
Dodd, Chris (D-CT) Senate $103,100 Obama, Barack (D-IL) Senate $101,332 McCain, John (R-AZ) Senate $59,499 Clinton, Hillary (D-NY) Senate $35,965 Baucus, Max (D-MT) Senate $24,750 Romney, Mitt (R) Pres $20,850 Biden, Joseph R Jr (D-DE) Senate $19,975 Larson, John B (D-CT) House $19,750 Sununu, John E (R-NH) Senate $18,500
via Mike Swanson
Kollapsnik at ClubOrlov helps us laugh at the institutions that drive our country.
I think TARP should be on the list of major boondoggles.
Humor helps mask the pain of the effects of these boondoggles.
Economic collapse has a way of turning economic negatives into positives. It is not necessary for the United States to embrace the tenets of command economy and central planning to match the Soviet lackluster performance in this area. We have our own methods that are working almost as well. I call them “boondoggles.” They are solutions to problems that result in more severe problems than those they attempt to solve.
Just look around and you will see boondoggles sprouting up everywhere, in every field of endeavor: we have military boondoggles like Iraq, financial boondoggles like the doomed retirement system, medical boondoggles like private health insurance and legal boondoggles like the intellectual property system. At some point, creating another boondoggle becomes the preferred course of action: since the outcome can be predicted with complete accuracy, there is little risk. Proposing a solution that might work runs the risk of it not working.
So why not, as a matter of policy, only propose solutions that are guaranteed to simply create more problems, for which further solutions can then be proposed? At some point, a boondoggle event horizon is reached, like the light event horizon that exists at the surface of a black hole. Beyond that horizon, the only possible course of action is to create more boondoggles.
The combined weight of all these boondoggles is slowly but surely pushing us all down. If it pushes us down far enough, then economic collapse, when it arrives, will be like falling out of a ground-floor window. We just have to help this process along, or at least not interfere with it. So if somebody comes to you and says, “I want to make a boondoggle that runs on hydrogen” — by all means encourage him! It’s not as good as a boondoggle that burns money directly, but it’s a step in the right direction.
Based on a article by Stacy Kronquest, here's a look at how Georgia's Governor Sonny Perdue rewards his political allies. The transfer of wealth to politically-connected people continues.
In November 2008 Georgia Governor Sonny Purdue awarded a 50-year development contract of Jekyll Island to real-estate developer Mercer Reynolds. Jekyll Island is called “Georgia’s Jewel” because of its miles of priceless beachfront land and breathtaking natural surroundings.
The barrier island was purchased by the state in 1949 as a place for Georgians to enjoy as a state park. It is the state's land, but it was signed over for the next 50 years to a developer with deep political connections.
Mercer Reynolds is known in Republican circles as a fundraising guru. In 2004, as George W. Bush’s campaign finance director, Reynolds raised several hundred million dollars for the President’s reelection campaign. His development in north Georgia, Reynolds Plantation, includes a Ritz Carlton and multi-million dollar vacation homes.
“There’s something wrong here,” says former Jekyll Island Authority (JIA) board member Senator Boshears, who recently was removed from the Governor-appointed JIA board. “Do we allow a fat cat developer to make millions of dollars for no other reason than to enrich themselves and their political cronies?”
State Senator Jeff Chapman of District 3, says that the other developers who bid on the contract worth hundreds of millions of dollars offered better deals for the state. “It was a rigged process right from the start,” says Chapman. Boshears, who is the former senator of District 3, says that once Reynolds was awarded the contract and negotiations began, he was discouraged from asking questions, describing a veil of secrecy. “It was completely the Governor’s decision,” says Boshears.
Senators Chapman and Boshears say separately, but with equal conviction, that the Jekyll Island contract is a rotten deal for the people of Georgia.
Frank Mirasola, former president of the Jekyll Island Citizens Association, tells reporters “I can only conclude that there are conditions in the agreement that are so heinous as to require total secrecy."
The 50-year contract gives Reynolds beachfront property to build a 160-unit timeshare with profits estimated to be $100 million from sales totaling $137 million.
James Quinn, a senior director of strategic planning at The Wharton School of University of Pennsylvania, describes the roots of the financial crisis in America. Excerpts below.
As a Baby Boomer, this is bitter medicine, but I can't dispute his reasoning and evidence.
The Baby Boom Generation will never be mistaken for the Greatest Generation that survived the Great Depression and defeated evil in a World War that killed 72 million people. I hate to tell you Boomers, but putting a yellow ribbon on the back of your $50,000 SUV is not sacrifice. Our claim to fame is living way beyond our means for the last three decades, to the point where we have virtually bankrupted our capitalist system. Baby Boomers have been occupying the White House for the last sixteen years. The majority of Congress is Baby Boomers. The CEOs and top executives of Wall Street firms are Baby Boomers. The media is dominated by Baby Boom executives and on-air stars. We have no one to blame but ourselves for the current predicament. Blaming Franklin Roosevelt or Lyndon Johnson for our dire situation is a cop out. Baby Boomers had the time, power, and ability to change our course. We have chosen to leave the heavy lifting to future generations in order to live the good life today.
Of course, not all Baby Boomers are shallow, greedy, and corrupt. Mostly Boomers with power and wealth fall into this category. There were 76 million Baby Boomers born between 1946 and 1963. They now make up 28% of the U.S. population. Their impact on America is undeniable. The defining events of their generation have been the Kennedy assassination, Vietnam, Kent State, Woodstock, the 1st man on the moon, and now the collapse of our Ponzi scheme financial system. They rebelled against their parents, protested the Vietnam War, and settled down in 2,300 square foot cookie cutter McMansions with perfectly manicured lawns, in mall infested suburbia. They have raised overscheduled spoiled children, moved up the corporate ladder by pushing paper rather than making things, lived above their means in order to keep up with their neighbors, bought whatever they wanted using debt, and never worried about the future. Over optimism, unrealistic assumptions, selfishness and conspicuous consumption have been their defining characteristics.
When I see “poor” people appearing to live a more luxurious life than myself, I don’t feel jealous. The thought that goes through my head is: Which banks or finance companies were foolish enough to loan these people the money to live this lifestyle? These foolish financial institutions will never get their loans repaid. What does bother me is that the Bush-Paulson-Pelosi Bailout of Stupid Banks will use my taxes to buy these bad loans from the foolish banks. So, who is the fool in this scenario? The “poor” person got to drive a Cadillac Escalade for a period of time, the foolish banks got bailed out, the bank CEOs took home $30 million, and I lived within my means and footed the bill for the reckless actions of others. It appears that the fools are the Americans who lived their lives according to the rules. The anger is building. I don’t think the politicians running this country realize what true anger looks like. They are used to Americans being herded along like passive sheep.
I’ve heard many Republican ideologues blame the current crisis on the people who took the subprime loans for home purchases. I’ve also heard many Democratic ideologues blame the crisis on the regulators. The ideologues are wrong, as usual. If a poor person has no home, no vehicle, and no prospects; then a bank tells them that they can buy a $300,000 home, drive a $55,000 Mercedes SUV, and live like people on TV; why wouldn’t they say yes? What is their downside? If you have nothing and “The Man” offers you the American dream, you’d actually be foolish to say no. Now that they have lost the home in foreclosure and the repo man has taken the Mercedes, they are exactly where they were a few years ago with no home, no vehicle and no prospects.
The regulators were certainly asleep at the wheel. They did not enforce existing rules, foolishly waived leverage rules for the biggest investment banks, and believed that the banks would regulate themselves. They were wrong, but they never made a single loan. The commercial banks, investment banks, auto finance companies, and credit card companies made the ridiculous loans to people who could never pay them back in the search for short term profits. Greedy Wall Street executives created an artificial market for the loans in order to generate billions in fees so they could enrich themselves through stock options and obscene bonuses. They spent their false riches on $2 million NYC penthouses, $100,000 Porsche 911s, and $5 million beachfront estates in the Hamptons. Based on the estimated $2 trillion of losses that our banks have generated, the CEOs certainly deserved annual pay 500 times as high as the average worker. There is no way an “average” worker could possibly be talented enough to lose $2 trillion. You would need to be truly extraordinary to lose that much.
The brutal necessary lesson that should have been learned is that if you loan money to people who can’t pay you back, your bank will go bankrupt. The “poor” people who made a bad decision in buying homes and cars they couldn’t afford have lost those homes and cars. The banks made a bad business decision in making those loans. The taxpayer was not involved in these business transactions. This is where Hank Paulson, Ben Bernanke and George Bush, formerly free market capitalists, decided to commit our grandchildren’s money to bailing out the horribly run financial institutions. Our government has chosen to allow these banks off the hook for their bad business decisions at the expense of taxpayers. Rewarding bad decisions and bad behavior will lead to more bad decisions and more bad behavior. The government has made a dreadful decision that will haunt our country for generations. Now the Federal Reserve has lowered interest rates to 1% again. This is where this horrible nightmare started. The massive printing of currency throughout the world will ultimately lead to a hyperinflationary bust. The law of unintended consequences can be devastating.
…Boomer … spend more eating out than we give to charity. We spend as much on big screen TVs and stereos as we do on education. This may explain why 37 million (12.5%) of all Americans live in poverty and our high school students trail the students of 25 other countries (including Latvia) in science and math knowledge. Our school system processes many more clueless morons who don’t know the candidates for President, versus intelligent, thoughtful, hard working, driven young people. The $160 billion spent on gambling is indicative of the get rich quick without hard work attitude of the Boomer generation. Even worse, households with income under $13,000 spend, on average, $645 a year on lottery tickets, about 9 percent of all their income. Our government feeds this addiction by siphoning off billions in taxes from these gambling revenues to redistribute as they see fit.
What the data proves is that Boomers love to shop and eat, whether they have the money or not. The top 100 retailers in the U.S. have 250,000 stores that generated $1.7 trillion of sales last year. How could America function without 31,000 McDonalds, 35,000 KFCs, Taco Bells, & Pizza Huts, 15,000 Starbucks, 7,000 Wal-Marts, 2,000 Home Depots, 4,000 K-Marts/Sears, and 8,000 Blockbusters? There are 91,000 shopping centers in the United States. The Advertising industry spends $275 billion per year to convince you to spend money you don’t have for things you don’t need. This generation lacks self control, morals, a work ethic, and savings ethic. Based on the recent actions of our government and corporate leaders, we seem to lack any ethics at all. It is immoral for the boomer generation to run up $53 trillion in unfunded future liabilities in Social Security, Medicare and Medicaid to leave as our gift to future generations, while we live it up today. Optimists like to point out that Europe and Japan have much worse unfunded liability problems than the U.S. That is like taking pride in being the best looking horse at the glue factory. In the end, we’ll all still be glue.
The 25 year Boomer borrowing and spending binge is coming to an end. The hangover will be really bad. The Federal Reserve and Treasury are trying to keep the frat party going, but everyone is passed out on the floor. The Case Shiller housing data shows that the 20 largest cities have experienced an average 20% decline in price from their peaks. The futures index predicts a further 10% to 15% loss in value. There are 75 million owned homes in the U.S. One in six, or 12 million homeowners, owe more than the house is worth. With further expected losses, 20 million homeowners will eventually be underwater on their mortgage. In California, where home price declines will be 40% to 50%, half the homeowners in the State will owe more than the house is worth. If you are one of these homeowners and can afford the mortgage payment, time will eventually bail you out. If you can’t afford the mortgage payment, you should lose the house to someone who can make the payment. This is the failure side of the creative destruction that is true capitalism. If the government steps in to subsidize and eliminate failure, the system will ultimately collapse.
The last six months have been a perfect example of laggardship. Our leaders have floundered from crisis to crisis, overreacting and blustering rather than leading. True leaders are proactive, not reactive. After not addressing our energy policy for decades, as soon as oil reached $140 a barrel, Congress lurched into action so their constituents would think they were leading. As our financial system has imploded, government “leaders” have flailed about with one rescue package after another and Congress looks for scapegoats. Meddling, tinkering, and non-enforcement of rules by Congress and other government bureaucracies caused the crisis that they are reacting to. Government creates the problems and then assumes even more power over our lives with their ridiculous “solutions”.
No one in Washington has shown an ounce of leadership in decades. True leadership requires strength of character, clear vision to see the future as it is, the bravery to make unpopular decisions, and the honesty to tell the public the unvarnished truth based on the facts.
David Walker lays out our dilemma:
“The regular order in Washington is broken. We must move beyond crisis management approaches and start to address some of the key fiscal and other challenges facing this country if we want our future to be better than our past. Our fiscal time bomb is ticking, and the time for action is now!”
Ultimately, it is up to the Baby Boom generation to change our country’s course. The oldest Boomer is 62 years old and the youngest 45 years old. It is time for Boomers to take a hard look in the mirror and rethink their priorities. It is time to cast aside the $88,000 Range Rovers, $1,200 Jimmy Choo boots, $5,000 Rolex watches and daily double lattes at Starbucks. It is time to live within your means, distinguish between needs and wants, reduce debt, save 10% of your income, make sure your kids get a good education, not try and keep up with the Jones’, show compassion for your fellow man, and possibly pay more taxes and get less benefits, for the good of the country. We must support true leaders like David Walker and get rid of the old time corrupted politicians who want to keep the status quo. Texas Congressman Ron Paul gives the blunt truth that a true leader is willing to give:
“Our government has lived beyond its means for decades. We now face a crucial juncture, at which we determine whether to continue down the path of debt, inflation, and government intervention or choose to return to the economics of the free market, which have been ignored for almost a century. Increased debt leads to higher taxes on future generations, while increased inflation diminishes the purchasing power of American families and destroys the dollar. No society has ever been achieved prosperity through indebtedness or inflation, and the United States is no exception. We cannot afford to continue our current policies of monetary expansion and unending bailouts. Unless we return to sound monetary policy, sharply reduce government expenditures, and realize that the government cannot act as a lender of last resort, we will drive our economy to ruin.”
The Baby Boom generation has one last chance to change the course of U.S. history, keep us from wrecking in a storm of debt on the approaching jagged reef and shed the title of “Shallowest Generation”.