A look at the UK’s REAL GDP or Simply Substitute USA for UK

"The following chart is pretty simple to follow. First up the black line is the UK’s GDP going back all the way to 1970. The green line is the amount the government has borrowed as a percent of GDP and the red line is a simple subtraction of the government spending through borrowed money from GDP. So what does this tell us?

The government has no money, it only has what it can tax the people. When it wants to spend more than the revenue it generates it borrows this money. However, that borrowed money has to be repaid and the only way it can do this is by taxing in the future.

So when the government borrows money and pumps it into the economy, it can make the GDP numbers go up and make the economy appear stronger than it actually is. In essence the government is borrowing GDP from future years to make GDP in the here-and-now go up. However, this is all false because eventually that borrowed money has to be repaid through higher taxes (with interest) and all that ‘gained’ GDP will have to be given back."

You can read the full article at Gold News.

Government Motors' Crowning Achievement: Falling Steering Wheels

Who can forget the frenzied all out bashing of Toyota on all government propaganda stations after the brake pedal got stuck just at a time when Government Motors was emerging from bankruptcy, and before it was forced to engage in stuffing dealers with its bloated inventory.  Yet, very little if anything has been said about the curious case of the Chevy Cruze and the falling steering wheel.  (Curious minds would like to know!  Oh, it is Government Motors.  Now, I know why we have not heard about it.)

The WSJ writes: "Imagine turning your car’s steering wheel, or giving it a gentle tug, and having it break away from the steering column.  Now you’re speeding along holding the suddenly useless wheel.  It sounds like a vision from a cartoon, or every driver’s nightmare. And it happened to at least one driver of a 2011 Chevrolet Cruze compact car last month, and General Motors Corp. is recalling 2,100 of the cars as a result."

The $38 Billion Budget Cut FARCE!!!!!!

Folks, we are dealing with close to a $1.6 trillion federal deficit for fiscal 2011.  But, Congress did cut a whopping $38 billion from the budget, which amounts to $3.6 trillion, or slightly more than a 1% cut.  They just don't get it.  Shame on you Democrats and Republicans.  And, where is the outcry from the Tea Party?  Where is the outcry from anyone?

The following graph depicts and illustrates the sorry state of affairs:

Source: Market-Ticker

Seven Things That I Know That Really Make Me Upset

1. Five U.S. banks control over 50% of the entire banking industry.
2. The top 1% of U.S. families have a greater share of the nation’s wealth than any time since 1930.
3. Wall Street profits in 2009 and 2010 totaled approximately $80 billion.  Bonuses over this two-year period totaled $43 billion.  (It is amazing that an industry that had a near-death experience in 2008 has made such a spectacular return to profitability.  I guess it is simple when you not only control the organization, Fed, that prints the money but the accounting firms who do your books, FASB.)
4. The Fed’s balance sheet has increased to $2.2 trillion as it purchased $1.3 trillion of toxic assets that it purchased from Wall Street.  The Fed paid 100% on the dollar for assets worth 50%, more likely 30%.  (What a great business model.  Your assets are only worth thirty cents, but your Sugar Daddy gives you $1 for all those worthless assets.)
5. Auditors are not really independent when it comes to Wall Street firms.
6. Fannie and Freddie will end up costing taxpayers at least $400 billion.
7. The biggest borrowers from the Fed were foreign banks during the so-called financial crisis week in October 2008, accounting for at least 70 percent of the $110.7 billion borrowed.  (Where is the outrage?)

Jobs Report Signals Improving Economy

You have to be kidding me, right?  I can not believe that this was the headline in today's Wall Street Journal online edition.  Shame on you, WSJ.  Take a look at the following chart, and you decide if things are really getting better.

Government Motors (GM) Hits Record: 574,000 Cars In Dealer Inventory, Despite No Interest Loans, Highest Car Discounts

Government Motors is offering buyers interest-free financing on some 2011 models after the company increased discounts and incentives to lead all major automakers’ U.S. sales gains last month."  Isn't that great. Now, desperate car buyers who can't rub two dimes together, can drive to the local unemployment office in the luxury of their brand new Chevy, which are now offered at either 72 or 60 months of interest-free loans. And get this: GM raised discounts 12% from a year earlier to an estimated $3,732 per vehicle last month, the most among major automakers and 45% more than the average, according to researcher Autodata Corporation.  


You got to love our federal government for giving all your "hard-earned money" to GM so those that can not afford a car can now drive one to the unemployment office.  Bless you, my brother!

Bureau of Lies and Scams (BLS)

March’s Non-Farm Payroll (NFP at 216,000), which came in above expectations of 190,000.  The main source of the improvement was the infamous “Birth Death” that added 117,000 jobs. (Fiction, Fiction, and more Fiction)  The unemployment rate came in at 8.8%.  Manufacturing payrolls were below expectations at 17,000 on expectations of 30,000.  But the real kicker, as usual, continues to be the Labor Force Participation rate, which continues to be at a 25 year low of 64.2%.  Once again, it is all about job creation, which we do not have.  Without “real job creation,” we do not have revenue to tax.  It is really that simple

When Does This Insanity Stop?

WSJ: "If you want to understand better why so many states—from New York to Wisconsin to California—are teetering on the brink of bankruptcy, consider this depressing statistic: Today in America there are nearly twice as many people working for the government (22.5 million) than in all of manufacturing (11.5 million). This is an almost exact reversal of the situation in 1960, when there were 15 million workers in manufacturing and 8.7 million collecting a paycheck from the government.  It gets worse.  More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined. We have moved decisively from a nation of makers to a nation of takers. Nearly half of the $2.2 trillion cost of state and local governments is the $1 trillion-a-year tab for pay and benefits of state and local employees."

Is it any wonder that so many states and cities cannot pay their bills?  We, as a nation, have completely lost our sanity and way. 

Are You the Hostage or Donkey?

Something remarkable happened to property taxes in America while housing lost 31% of its value from 2006 to 2009: they went up by $100 billion (27%).  Equally remarkably, as we can see from this U.S. Census Bureau data on state and local tax revenues, property taxes went up even when housing slumped in the early 1990s.

So though U.S. housing continues losing value, U.S. home prices declined in January, continuing a downward trend that began in August, with average U.S. home prices retreating to summer 2003 levels, according to the S&P Case-Shiller Home-Price Indexes, while property tax revenues continue their inexorable rise. 

See, the ultimate tax hostage is you, the property owner.  You county that you live in know it, probably better than you do.  The business owner can pull up stakes and leave, the wage earner can transfer or get another job elsewhere, and the consumer can restrict his/her consumption (or buy online) to lower the burden of sales taxes.  However, you, the property owner, are the perfect tax donkey, because the transaction costs of selling are so prohibitive.

With approximately 11 million homeowners in America owing more on their mortgage than their house is worth, then selling is no longer an option unless the bank accepts a short-sale, which lenders are not that eager to do.  Now, given that there are about 48 million mortgaged homes in America, then those 11 million represent about 23% of all homeowners, who are probably paying the same property taxes today that they did in 2009.  The difference, of course, is that property is only worth 69% of its 2009 value.  Where is your tax relief?  Imagine, if your income taxes rose by 27% even as your income declined by 30%, what would you do?

Ok, what should one do?  I recommend you visit your local county assessor and ask for the following data:

1. What are the assessed valuations for residential properties since 1997?
2.  What is the real property assessment rate?  (In my county, real property is assessed at 19% of the assessed value in #1.)
3. What are the real property tax rates since 1997?  (In my county, the real property tax rate is 4.03% for 2010.  For example, let’s assume the assessed residential valuation is $56 million.  Take the $56 million and multiplier it by .19, which equals $10.6 million.  Now, take the $10.6 million and multiplier it by the tax rate of 4.03%, which is $427,000.  That is the real property tax amount generated.  The objective is to trend the dollar amount for each year since 1997.)
4. What are the market values of residential properties since 1997?  You assessor may not have this information.  If not, contact a local realtor for assistance these valuations.

The objectives of this exercise are two-fold: (1) to trend the property market value to the actual real property taxes collected, and (2) to imply to the assessor’s office that you, and hopefully your friends in the community, are going to be the "Real Estate Watchdog” overseeing property taxes.

Washington, We Have a Problem!

The Bureau of Economic Analysis (BEA) just reported the following: "The January change in personal contributions for government social insurance reflected the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, which temporarily decreased the social security contribution rate for employees and self-employed workers by 2.0 percentage points for 2011, or $105 billion in January."  In other words, our federal deficit has just increased by $105 billion dollars.  And, Washington can not even come to grips with cutting a lousy $60 billion from a budget that neither Democrats or Republicans can agree upon.  That $60 billion figure is just 4% of what the total federal deficit will be for this fiscal year, which is a complete joke.  If Washington really wants to get serious, both parties must be willing to cut $500 billion this year, $500 billion next year, and cut whatever it takes the following year to balance the budget.  However, what do you thing the chances are that it will happen?  You are correct, ZERO PERCENT! 

The "Answer" to Yesterday's Question

Since 1997, one economic measure has rocketed up an incredible 800%.  It's not home prices. Not government pensions.  No, not medical costs, and not even higher education tuition. It is student loan debt.  (By the way, I did get some very interesting and well thought out answers, but no one came up with my correct answer.)  It's not just the growth rate of student debt that’s breathtaking.  It is also its absolute size, approximately $900 billion. (See the Student Loan Debt Clock.)  For example, would you be startled to learn that total U.S. education loans recently surpassed total U.S. credit card debt?  It did, for the first time in history.

And get this: Total education debt now amounts to 93% of total U.S. defense spending.

Now, why is all this important?  Four years of college can take decades to pay off.  The average student loan takes on average 10 to 25 years to repay.  Ouch!!  This is a bubble just waiting to burst.  

Student loan debt exhibits all the requisite characteristics of a true bubble: one that is credit-fueled, government-supported, and widely popular.  In other words, we have some striking similarities between the housing bubble and the education bubble.  And, we all know what happen to that bubble.  Also, the not-amusing part of this picture is that student loans have been rendered non-dischargeable (except in extraordinary circumstances) in bankruptcy.  What does that mean? Students can not simply walk away from student loans, like those mortgages they may have.  

I firmly believe that all this student debt outstanding will not end very good.  I look for massive defaults just like occurred with the housing bubble.  

Enforcement of Swing Set Building Codes

Rules regarding swing sets and play sets in Westport, CT will go under the microscope tonight at the Planning and Zoning Commission public hearing.  Currently, swing sets and play sets must by placed at least 50 feet from property lines.  These set-back provisions have been strictly enforced.  

Westport, CT leaders have nothing better to do than to harass individuals about what, again?  Crime? Absolutely not....swing sets, of course!

 

Silver above $38 as Gold Hits New All Time Highs

On March 3, 2011, I delineated six immediate action steps that must occur in order for the U.S. to survive.  That blog was entitled, "Economic Prescription for Growth and U.S. Survival."  Today, I reiterate #6 in which I stated, "An immediate dismissal of the Federal Reserve Chairman, Ben Bernanke.  Why?  The Fed is required to promote both price stability and full employment (economic growth).  Enough said, because we have neither.  Therefore, since he is the individual responsible for monetary policy, he must be accountable and take full responsibility for his disastrous monetary polices that he has implemented."  

The dollar is in a free-fall.  Silver and gold are in a parabolic rise.  Why?  Read #6 again.  The Fed's monetary policy is destroying the basic core ad fabric of not only our economy but our currency.  We need fiscal and monetary polices that will strengthen the dollar!  Therefore, Bernanke must go, now! 

Do You Know?

Since 1997, one economic measure has increased an incredible 800%.  It's not home prices.  Not  government pensions. No, not medical costs, and not even higher education tuition.  What is it?  Let me know.  If you get it right, I will identify you as the winner in my post tomorrow. 

Who Owns All That Municipal Debt?

If there is a muni-bond collapse, as some people expect, who gets slammed?  You!  I have been negative on municipal securities along with state bonds for quite some time.  Municipal and states are bankrupt.  End of story.  They can not print money like the Fed. 

Due the "Zero Interest Rate Policy" of the Fed, investors have been reaching for yield (higher rate of return).  However, there is a consequence of reaching for that extra basis point, and that is increased risk.  Today's investors in municipal bonds will lose and lose big.  Just look at the following chart and you decide who is at risk.  Just because we have not had major defaults, yet, does not mean that it will not happen.

Weekly Update for S&P 500

Thoughts on the Future of Egypt (Mitsrayim) and Northern Africa

In America, the result events in Northern Africa, especially Egypt, have been reported in a mostly positive manner.  President Obama described the scenes of jubilation this way: "We saw mothers and fathers carrying their children to show them what true democracy might look like.  We heard a young Egypt say that my voice is heard.  We saw people of faith praying together and chanting Muslims, Christians, We are one."

The mainstream perception would have you believe that Egypt is a country hungry for freedom and peace after a generation of rule by Hosni Mubarak.  But, this perception ignores the current reality of what is really going on Egypt.  It is definitely not the wonderful, feel-good story that is being put forth in the media.  Maybe it is just the way that we Americans want to believe the world should be, like those wonderful fairy-tales with happy endings that we were told growing up.

Ok, what is reality in Egypt?  Is it, as President Obama claimed, positive for the Middle East and America because the Egyptians truly want freedom and a Western-style democracy? Or, do they want an Islamic theocracy as put forth by the Muslim Brotherhood, which claims to be the true guardian of Islam?

I believe the answer to the above two questions can be ascertained by a survey done by the Pew Research Center last year  that showed that Egyptians do not want a Western-style democracy but a strict Islamic rule.  This survey (Pew Global Attitudes Project, December 2, 2010) had the following results:

1. 85% of Muslims in Egypt want a strong Islamic influence in the nation's politics. (That would mean the Muslim Brotherhood.)
2. Approximately 85% say those who leave the Muslim faith should be killed for it.
3. 82% support stoning adulterers.
4. 77% believe thieves should have their hands cut off.
5. Over 50% support segregating women from men in the workplace.
6. 54% believe suicide bombings that murder civilians can be justified.
7. Among the 18 Muslim nations Pew surveyed, Egypt had the highest unfavorable rating toward American (82% dislike the U.S.).

The results of this survey indicates that the media and Administration have it exactly backward.  Egyptians are not seeking an American-style democracy, just the opposite.  They want a true Islamic theocracy.

I am very concerned about the Northern Africa countries, Morocco, Algeria, Libya, Egypt and Tunisia.  I have always believed that a Western-style democracy would never work in a culture where the main influence is Sharia (Islamic) Law.  I see the aforementioned countries definitely moving to an Islamic theocracy.  The next country to do such, in my opinion, is Ethiopia.  We have not heard much about the unrest there, but it is.  Therefore, what is happening in Northern Africa and the Middle East is not good for America.

Enigma -- Why?

"Why" seems to be the question of the hour and day.  Why did this happen to Japan?  Why all the financial turmoil?  Why all thehatred in Northern Africa and within the Persian Gulf countries?  Why does the world seem totally out of control?  Isn't anyone in charge?  For me, I take solace as a Natsarim.  Enjoy the video.

Troubled Asset Relief Program (TARP) Watchdog: Big Banks Got Unfair Advantage

Does anyone out there remember TARP?  The first of the mega-bailouts to Wall Street, which started with President Bush.  Boy, that sames like eons ago, but it was just three years ago (2008) and approximately two-trillion dollars if we include QE1 and QE2. (I believe that we will definitely have a OE2, no later than the end of 2011.) 

Neil M. Barofsky, the special inspector general for the Troubled Asset Relief Program, said in testimony before the Senate Banking Committee, that federal rescue of the financial system in 2008 has provided large financial institutions with an unfair advantage in the form of cheaper access to credit.  Also, he stated, "For executives at such institutions, the government safety net provides the motivation to take greater risks than they otherwise would in search of ever-greater profits."  He, also, stated that effective government subsidy enables big profits and allows the largest institutions to become even larger relative to the economy while materially disadvantaging smaller banks.  (So much for a market economy.  This is why I have always opposed mega-mergers and/or special government bail-outs, because it simply reduces competition.)

Thank you, Mr. Barofsky, for your candor at speaking the truth.  Now, let's see what Congress will do with it.  Of course, I already know the answer.  They will do absolutely nothing! 

For the full article, read it here.

Freedom and Truth

I firmly believe that the ruling elite must keep the people in the dark, especially when it comes to economics as well as in politics.  However, the rise of the Internet, and in particular outlets such as YouTube, are making that task far more difficult, as witnessed by the recent events in Northern Africa, especially Tunisia, Egypt, Libya, and Bahrain.  The genie is out of the bottle, and it is not going back in it.  Let freedom and truth rein.  That is one of the main reasons I teach is to do my small part in making  students more economic literate.

Earthquake Map of America

Read the full article here.

Why North Dakota Is Booming

"Listen up America.  "Unemployment is 3.8% in North Dakota, and according to a Gallup survey last month, North Dakota has the best job market in the country. Its economy "sticks out like a diamond in a bowl of cherry pits," says Ron Wirtz, editor of the Minneapolis Fed's newspaper. The state's population, slightly more than 672,000, is up nearly 5% since 2000. The biggest impetus for the good times lies with energy development. Around 650 wells were drilled last year in North Dakota, and the state Department of Mineral Resources envisions another 5,500 new wells over the next two decades. Between 2005 and 2009, oil industry revenues have tripled to $12.7 billion from $4.2 billion, creating more than 13,000 jobs. (Yes, that is correct. Real jobs are being created.) Oil also is the principal reason North Dakota enjoys arguably the best fiscal situation in all the fifty states. (Wow!) Perhaps more surprising, North Dakota is also attracting high-tech.

What accounts for the state's success? Dakotans didn't bet the farm, so to speak, on solar cells, high-density housing or high-speed rail. Taxes are moderate—the state ranks near the middle in terms of tax per capita, according to the Tax Foundation—and North Dakota is a right-to-work state, which makes it attractive to new employers, especially in manufacturing. But the state's real key to success is doing the first things first—such as producing energy, food and specialized manufactured goods for which there is a growing, world-wide market. This is what creates the employment and wealth that can support environmental protection and higher education."  Well done Dakotans!!!!! 

Read the full article, which is in today's Wall Street Journal.

Al Jazeera Explains What A Fukushima Meltdown Would Look Like

S&P 500 "EMA Strategy" Update

Exponential moving average strategy, 15-week EMA > 40-week EMA, is still bullish,  However, RSI and Wm%R have signaled a correction should take the S&P 500 to its 40-week EMA at the 1200 level.

Operation Empire State Rebellion

The Anonymous manifesto:

1.     We are a decentralized non-violent resistance movement, which seeks to restore the rule of law and fight back against the organized criminal class.

2.     One-tenth of one percent of the population has consolidated wealth in unprecedented fashion and launched an all-out economic war against 99.9% of the population.

3.     We are not affiliated with either wing of the two-party oligarchy. We seek an end to the corrupted two-party system by ending the campaign finance and lobbying racket.

4.     Above all, we aim to break up the global banking cartel centered at the Federal Reserve, International Monetary Fund, Bank of International Settlement and World Bank.

5.     We demand that the primary dealers within the Federal Reserve banking system be broken up and held accountable for rigging markets and destroying the global economy, effective immediately.

6.     As a first sign of good faith we demand Ben Bernanke step down as Federal Reserve chairman.

      

       Incidentally, this group, which goes by Anonymous, have a history of being able to hack into pretty much any system they want to.  This could get pretty interesting.  Ben Bernanke, you better change your email address.

Le Roi est mort, vive le Roi!

Mortgage Electronic Registration Systems (MERS)

If you have a mortgage on your home, you better read this article from Saturday's New York Times.  Never heard of MERS?  But you will very shortly, because it could turn out to be a very public problem for the mortgage industry.  Just in case you forgot what has transpired over the past three years, think sub-prime mortgage debacle. 

This little corporation by staff size, approximately fifty people, claims to hold title to roughly half of all the home mortgages in the nation, approximately astonishing 60 million loans.  That is the problem.  In many cases, they simply do not.  Please read the article.

Hypocrisy

Remember how President Barack Obama and Secretary of State Hillary Clinton said that people had a right to peaceful protest in Egypt and other nations?  How Libya's government had "lost legitimacy" by banning protests, shooting and locking up those who dared to speak? 

Does anyone want to take a wager on how long it will take Obama and Clinton to say the same thing here?
 
"DAMMAM, Saudi Arabia (Dow Jones) --Top oil exporter Saudi Arabia has banned all protests, marches and strikes in the kingdom after small protests continued over the weekend in the oil-rich Eastern province towns of al-Ahsa and Qatif, interior ministry said Saturday, according to state-owned channel al Ekhbariyah.  These activities don't conform with the Islamic laws and harm the interests of the nation and the society, the Saudi channel quoted the ministry as saying.  Any attempt to cause public disorder will be prevented by security forces, it said."

Free speech, or is that something we, as a nation, use only when it suits our financial interests?  I would wager that this story will not be picked-up by the main-stream media. 

183,000 Number Question

BLS is expected to report Friday that the U.S. added a net 183,000 jobs in February, which is the most since last May. However, the unemployment rate is seen ticking up 0.1 point to 9.1% as more people entered the labor force.

Tomorrow should prove very interesting, since the market "today" definitely believes those BLS job numbers are for real.  We will see.

Economic Prescription for Growth and U.S. Survival

The following list delineates my prescription for what must be done, IMHO, for America to once again become fiscally sound:

1. Enact the Fair Tax immediately.  (If you don’t know what it is, check it out at Fair Tax.)
2. Limit government spending to 17% of GDP.  (Why 17% of GDP?  That is the long-term average.)  With the current GDP at $14.6 Trillion, this means that government spending would currently be limited to $2.5 Trillion.  At present, government spending is  $3.5 Trillion, or 24% of GDP.  And, the projected deficit is $1.6 Trillion.  (Congress cannot even agree on cutting $100 Billion from the federal budget.  If we cut $100 Billion, it is not a great victory, not a even a moral victory, because we would still have a federal deficit of $1.5 Trillion to finance.)
3. An immediate 20% cut in government spending is necessary to start the alignment of limiting government spending to 17% of GDP. 
4. Immediately open up the ANWR (Arctic National Wildlife Refuge) for oil drilling and resume offshore oil drilling.  With oil above $104 a barrel and gasoline closely in at $3.50/gallon and on its way to $4, we must increase the supply in order to bring down the price.  (I know if we open up ANWR today that we would not get a drop of oil tomorrow.  However, the reason why price of oil will come down is due to the fact that all markets are forward looking.  That is the expectation of the future supply of oil coming unto the market will drive the price down.)
5. No more bail outs to Wall Street, Main Street, or any other Street.
6. An immediate dismissal of the Federal Reserve Chairman, Ben Bernanke.  Why?  The Fed is required to promote both price stability and full employment (economic growth).  Enough said, because we have neither.  Therefore, since he is the individual responsible for monetary policy, he must be accountable and take full responsibility for his disastrous monetary polices that he has implemented.  Just look at the following to two charts on employment and retail gas prices:

Now, after examining the above two charts, do you still believe he should be employed?  If you want to give him the benefit of the doubt, just take a look at the following chart:

The answer to the above question in the chart is that I don’t know who is going to buy those Treasury securities when QE2 ends.  The Fed already is purchasing 70%.  What will happen to interest rates when the Fed ceases to be the main demand factor?  I think you know the answer.  And, we will still have to finance the $1.6 to $2 trillion federal deficits for this year along with refinancing all that other Federal Debt maturing.

The world economies need the United States to get its fiscal and monetary houses in order.  It must be done today, not tomorrow.  We must face economic reality.  We can no longer “kick-the-can” down the road, because we have definitely come to the end of the road. 

Home Sales!

New home sales for January 2011 were down 12.6% from December 2010, but even worse, the raw numbers were 284,000, which compares to monthly sales of 800,000 to 1 million before 2007.  That is an approximate 70% decline and suggests the recession continues on despite what the Administration, Fed, and Wall Street want you to believe.  And, mortgage applications are near the lowest levels in 15 years. 

Is the Bull Dead, Yet????

STATES!

 Karl Denninger over at the "Market Ticker" had some insightful words to say about that thing we refer to as States.  My "two cents" are in italics.

"You know, that thing that has all of the powers of government not explicitly delegated in The Constitution to the Federal government.  (Yes, we still have a Constitution, but I am beginning to wonder if those in Washington realize it.)  There are 50 of them in my last count referred to “The United States.”  Notice, that we don't call the nation "The United Federal Government."  We call it "The United STATES."  (That's because States should have supremacy, but more and more our Federal Government has forgotten about that.)  They originally joined together under a promise of a limited Federal government, which was mostly about the common defense and little more."


I am very glad to see that some States are starting to realize and wake up to the real reason why this country is referred to as THE UNITED STATES and not The United Federal Government.

What is Going on in Wisconsin with its Governor, State Employees and Teachers?

First, I am from Wisconsin and love visiting the state, especially Door County in the summer time, not in winter.  Second, I have been an educator most of my life and have a true passion for it.  Simply put, that is why I went into the teaching profession.  And, I would say the majority of individuals chose teaching as a profession, because they share the same passion.  However, we live in a period of time when everything appears to be "upside down, downside up."  In other words, nothing makes sense anymore.  What is going on in Wisconsin is just a microcosm of what is going on in each of the other fifty states.  We as a nation have become so self-centered and selfish that it will ultimately be our doom.  The handwriting is on the wall.  I hope you can see it.  

Ok, enough said about my Wisconsin interest and diatribe.  What is going on there? Wisconsin’s Governor Walker is facing a $3.6 billion budget deficit, and he wants state workers to pay one-half of their pension costs and 12.6% of their health benefits.  Currently, most state employees pay nothing for their pensions and virtually nothing for their health insurance.  (Think private sector where pensions or defined benefit plans are outdated and replaced with 401 (K) Plans or defined contribution plans.  In other words, these state employees and teachers have a good thing going and are about to blow it big time.)

What else does he want?  He would end collective bargaining for everyone except police, fire, and state troopers.  Unions could still represent workers, but they could not get pay increases above the CPI.  Also, they could not force employees to pay union dues.  And in exchange for all this, Governor Walker promises no furloughs or layoffs. 

Why is the state employee union dead set against any of this?  I believe it is all about the potential of losing its annual cash flow of millions!  Let’s look at the cash flow.  (These are estimates, because when President Obama came into office, he shielded government unions from transparency by ending their reporting requirements to the Department of Labor.  As a result it is impossible for the American people to know for sure how much of their taxpayer revenue is being diverted into union coffers.)  However, we can estimate the cash flow by looking at the most recent numbers available from the National Center for Education Statistics and U.S. Census Bureau.  The number of teachers and state workers in Wisconsin are approximately 60,000 and 57,000, respectively.  And, if we assume that each one pays approximately $750 annually in dues, that means the government union industry in Wisconsin is worth at least $88 million a year.  The question I would be asking, if I was one of these involuntary members, is what is my union doing with an annual cash flow of $88 million.  Inquiring minds would like to know! 

Debt Now Equals Total U.S. Economy as Measured by GDP

President Obama projects that the gross federal debt will top $15 trillion this year, officially equaling the size of the entire U.S. economy, and will jump to nearly than $21 trillion in five years' time, according to the Washington Times. 

Does anyone really know what the ramifications of this massive debt means to us as a free society?  I am beginning to wonder what the masses of humanity really know.  When it comes to economics, not much! If you want to get a clue you just might pick up your Scriptures and read Proverbs 22:7.  If you don't have your Scriptures readily available.  Proverbs 22:7 states, "The rich rules over the poor, and the borrower is servant to the lender."  Let's see now.  Simply substitute United States for borrower and China for lender.  Do you comprehend the picture?  I hope you do!

Who Owns What?

In the 2nd quarter of 2009, the Fed's purchases of Treasury debt amounted to 48% of the new debt issued in that period by the Treasury.  The following chart illustrates that the Fed is currently the world's largest single holder of Treasury securities, surpassing China.  And, that is what is meant by monetizing the federal deficits!

Employment Rate of the U.S. Population

On February 8, 2011, Richard Fisher, President and Chief Executive Officer of the Federal Reserve Bank of Dallas made the following statement: "U.S. nonfarm payrolls fell by 8.75 million jobs from their peak in January 2008 to their trough in February 2010. Estimates are that the population of Americans of working age increased by 4.4 million during the same period, creating a shortfall of over 13 million jobs. Since February 2010, the shortfall has only gotten worse: Although employers have added approximately 1 million new jobs, the working-age population has increased by an additional 1.7 million. All in all, we have approximately 6 million more people of working age than we did when the recession began—and a net loss of 7.7 million jobs. Divining policies that will encourage the private sector to increase hiring by enough to make up some of this lost ground is both an urgent and a daunting task."

The above statements by a Fed President should have everyone "pause, take notice and mediate" on his words that depict a very dire economic situation if we do not create jobs. (Look at the following graph that illustrates the negative trend of our employment rate.) Yes, it is definitely all about creating jobs.  That is, no jobs, no income, no spending, no tax revenue for Uncle Sam, no GDP growth, no nothing. Governments do not create jobs, only the private sector.  If our government is serious about job creation, it must get out of the way and implement user-friendly business polices.  Will it happen? In all sincere honesty, I don't believe it will. I, for one, am losing hope that America has the intestinal fortitude to win this battle.  It has entered that "slippery slope" of no return.

Maturing Commercial Mortgage Loans A Big Headache For Business Owners

Major problem with commercial real estate.  Fitch Rating reports that 30% of commercial mortgage-backed securities loans set to mature in 2011 do not pass their refinance test.  Say it is not true.  Can we not just forget about it and bury these problem loans in the same way that we did with sub-prime residential loans?  That is, not "mark-to-market" the true value of the loan, simply carry the loans at their face value of 100%, which once again protects the Mega-money Center Banks and Wall Street at the expense, once again. of the American taxpayers.

Food for Thought (No Pun Intended)

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Dylan Ratigan gets it right!  Thank you, Dylan

Visualization of Obama's Budget Cuts

A very simple video but yet so very powerful and profound.  Thanks to one of my Macroeconomics students for bringing it to my attention.