This ain't no conspiracy!

[dumdeedoe]

Robin you have to realize that if a city,wants their roads fixed it often is done through a bond issue(debt).It is a way to transfer the cost on to businesses and the public who in turn profit from the (debt). Otherwise the cities would have to shuffle around tax dollars between departments as needs arise.(and that would be a internal mess.)
It has generally been thought of as circular economics.A muni passes the bond,the public buys the bonds, the politician's get the money and it is spread over the community in the form of construction contracts and jobs.. If done properly it would seem to be a good system.
But what is happening is alot of cities(politician's) are hiring out of state contractors and suppliers to do the jobs(kickbacks) and the cities tax money is flowing out of state. I believe its not the debt that is the trouble but what is done with it.
The main problem I see with Keynesian theory is that it holds the human element and their reactions into one mold. I believe culture and changes in human/moral values have a larger effect on the economics of a nation than do supply and demand. That is why certain nations have a very hard time getting any economy going. To much social acceptance of corruption.

[comokate]

It has generally been thought of as circular economics.A muni passes the bond,the public buys the bonds, the politician's get the money and it is spread over the community in the form of construction contracts and jobs.. If done properly it would seem to be a good system.
But what is happening is alot of cities(politician's) are hiring out of state contractors and suppliers to do the jobs(kickbacks) and the cities tax money is flowing out of state. I believe its not the debt that is the trouble but what is done with it.
The main problem I see with Keynesian theory is that it holds the human element and their reactions into one mold. I believe culture and changes in human/moral values have a larger effect on the economics of a nation than do supply and demand. That is why certain nations have a very hard time getting any economy going. To much social acceptance of corruption.

Yes indeed !


"WASHINGTON — The number of poor people in the U.S. is millions higher than previously known, with 1 in 6 Americans — many of them 65 and older — struggling in poverty due to rising medical care and other costs, according to preliminary census figures released Wednesday."

www.toledoblade.com/article/20110105/NEWS14/110109805/-1/rss

[robinking]

Dumdeedoe,

I totally agree. I'm not an economist, but I really believe Keynes would be sick to see how distorted his economic views have become. I've read quite a lot about Austrian economic views via Ludwig Von Mises Institute. I don't believe any camp is totally correct. With Kate's recommendation, I read the Unibomber Manifesto. Granted he was insane to advocate violence, but his analysis of social transformation was pretty accurate and quite scary. I believe there can be no "pure" economic theory implemented as long as we have human nature corrupted by greed, anger and dishonesty.

Until society views corruption was equal disdain regardless of who perpetrates it... we'll never see social change. Me, I'm a Libertarian, but I have Conservative views and Liberal views. I believe compromise is the key to success and we seem to be going further from that. We have 20% of the electorate either far right or far left. This leaves the majority, 60% of us watching a ping pong game. Meanwhile, our society collapses under the weight of unsustainable entitlements (no condemnation), union inefficiency (no condemnation), CEO and Wall Street extravagance (condemnation) and political corruption (CONDEMNATION!).

I do believe debt can and is a good thing if used properly like you said. But, national debt due to printing of fiat currency inevitably requires inflation in order to pay it off and it never ends well as more debt is created than currency. The end is hyperinflation or default. But like I said, I'm no an economist... just a student of history. Each society always believe "this time will be different", will it?

[The Virginian]

Each society always believe "this time will be different", will it?

So far 100% of all great civilizations have fallen - I'm betting on the odds! In Americas case it probably won't be a rapid decline but rather a slow steady decline. Corruption is too prevalent to reverse it now.

[robinking]

Virginian, I agree. I believe political and industrial elites are filling their own lifeboats and it's only a matter of time before the dollar's collapse ushers in a worldwide re-alignment of power.

[robinking]

I had a patient yesterday who works for a credit union. She told me how they have their own insurance (not the FDIC) and how the members own the bank; so when you pay back a loan, you're paying yourself back. Why aren't these types of institutions bigger? Why don't we focus our attention there and put our money with them? I'm wondering if they may be the key to recovery. Seems the big banks keeps getting bigger and are sucking more and more wealth from the American taxpayer. What is it Chase who just posted a 47% increase in income? Wow, sounds great! Must be nice to make so much in a down economy. Can't wait to see their profits when and if the economy ever returns to the robust growth of old.

My views are known, but they bare repeating. Government handouts are killing us... literally. As the world copes with increasing food prices due to drought, flooding and other, we use up to a third of our corn for ethanol. How long before globalists demand the developed countries "spread the wealth"? How long before riots and famine cause the politicians to rethink ethanol subsidies? Then what happens to the ethanol industry?

www.msnbc.msn.com/id/41062817/ns/business-consumer_news

www.icis.com/Articles/2010/04/26/9352686/us-ethanol-industry-faces-legislative-challenges-to-secure-future.html

My conclusion is that once an industry is created, lobbyists, CEOs and special interests make that industry too big to shut down. So, we'll have a tug of war as market forces collide with social forces. I'm staying away from this sector!

[comokate]

Robin,
I've been a Credit Union member for 28 years. Absolutely love it. Low interest rates, low to non-existent service fees, they handle everything from personal loans to mortgage loans, savings accounts, college funds, etc. However your patient may have been mistaken...my credit union is FDIC insured. I thought they all needed to be?......??
Many years ago I dated CPA/Attorney who was the officer at one of the nation's biggest banks. He was well aware of my stubborn refusal to do business with a "regular bank". He did share that the banking industry was lobbying to make it much harder to credit unions to exist...because they truly want a *total monopoly* in the arena. Not really fair, is it?
My question has always been, are we a culture that truly has adopted a mindset/value system that says it's "ok" with not being fair? If we have adopted the "Life isn't fair, who cares" mentality, why even bother to have a judicial system in place ?
Those who claim it's ok for life to be unfair are the first ones to scream when the "unfairness" affects their own lives.
I'm not a "gloom and doomer". Just the opposite. I have very high expectations of everyone. I truly believe we can do better as a nation and as individuals.
Not only should credit unions exist, they should be recommended for use !

[robinking]

I totally agree Kate. I'm not a true doomer, but as a realist I come off as such. You can look at the glass as half full, but in the end if you see people taking a drop out every day... you know eventually it will only be 1/4 full and so on. It's insane to pretend everything is great when reality says differently. It's insane to see unsustainability and then tell people the same policies that lead to this unsustainable system will ultimately lead us out of it!

As for the banks, I agree. I support capitalism 100%, but not when the Goliaths can crush the Davids of the world without impunity; then turn around and claim to be Too Big To Fail when their recklessness turns bad. If total capitalism went unchecked by ethics, then it would be survival of the fittest. And by "fittest" I mean the company with no ethical constraints. So, capitalism needs to be tempered by ethics and if people refuse to be bound voluntarily by ethics, then laws and regulation become necessary. If people simply had honor, there'd be no need for laws, but we know this isn't the case. "Everyone's doing it, so why not"!

Banks aren't evil, but those who run them without honor are! There needs to be changes in the tax code that allow small credit unions, mom & pop shops and entrepreneurs to gain a foothold without being crushed by the Goliaths who can undercut them at every step. This is what built our country. But, on the Right we have Fascists who want low taxes and regulations so the Goliaths can continue feeding on the Davids... and on the Left we have the Communists who want to destroy the work ethic and human desire to succeed by spreading the wealth to whom they feel deserves it. Both sides are wrong. People need to be free to succeed and to fail.

I say to the Right, what happens when there are no more handouts via unemployment, welfare, subsidies...? Hungry people will riot and intimately steal if forced to. The elites would be trapped in their mansions and the masses would burn them to the ground. There needs to be redistribution of wealth, but via hard work, thrift and morals, not government mandates and crony capitalism. People need to be compensated for their work, but they need to WORK for their compensation!

I say to the Left, what happens when you've destroyed the middle and upper class? You then end up with the poor and the ruling elite. Are you, the ruling elite willing to have your wealth redistributed? You'd have us exchange private jets with government aircraft. Well, we Davids can't ride in either one! So, whether Goliath is a mega corporation or the government, it doesn't matter that much to those who have nothing! Under your system, you're essentially telling us we have ZERO chance of ever being wealthy! What's the difference if a TBTF corporation owns a private jet that some CEO gets to abuse or whether the government owns one that an elite gets to abuse? Walk the walk if you want us to follow! As I see it, Communism has failed every time.

What we're heading for is state socialism-totalitarianism. They will effectively destroy our ability to acquire wealth within the next 100 years. What is wealth? Stripped down, it's simply our labor. The harder you work, the more wealth you acquire. If you no longer have incentive to work, this means less wealth and we become less prosperous as a nation. This is what the elites want as world population is set to become a big issue. Food supplies, raw materials, fresh water, land and fuel are becoming the issues we will ultimately fight over. They've been fought over for all of civilization, but this time the elites of the world control them and will use them to control us.

[texasredneck]

Unless the law has changed in the last two years most credit unions are insured by NCUA(national credit union Administration a U. S. government agency.

[robinking]

That's what my patient called it. Same $250,000 insurance.

[robinking]

www.msnbc.msn.com/id/41086473/ns/politics-the_new_york_times

Borrowing money to pay down on borrowed money???

"What is a Ponzi scheme?
A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity."

"Why do Ponzi schemes collapse?
With little or no legitimate earnings, the schemes require a consistent flow of money from new investors to continue. Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out."

[texasredneck]

You can play kick the can only so long. Eventually you have to settle up and the longer you wait the harder it is to do. There are only two solutions to the problem. Cut benefits and services or raise taxes, and I am not going to pay more taxes. I am all in so the government can just deal with it.

[djrick]

www.bloomberg.com/news/2011-01-13/traders-smaller-bonuses-still-top-pay-for-brain-surgeons-4-star-generals.html

Jan. 13 (Bloomberg) -- Wall Street traders discouraged by declining bonuses this month can take solace: They still earn much more than brain surgeons and top U.S. generals.

An oil trader with 10 years in the business is likely to earn at least $1 million this year, while a neurosurgeon with similar time on the job makes less than $600,000, recruiters estimated. After a decade of deal-making, merger bankers take home about $2 million, more than 10 times what a similarly seasoned cancer researcher gets (see table below).

__________________________________________

$1 Million Bonuses

Even for 2008, the year the financial industry received unprecedented support from taxpayers, many Wall Street professionals got bonuses exceeding $1 million, according to data compiled by then-New York Attorney General Andrew Cuomo. At nine U.S. banks, 4,793 employees got such payouts, 311 were granted $5 million or more and 47 people got bonuses of $10 million or more.

At Citigroup, the U.S. lender that received the biggest government bailout, 738 employees of the New York-based company got at least $1 million, according to a report by Cuomo, who is now the state’s governor. At Merrill Lynch, which sold itself at the height of the crisis to Charlotte, North Carolina-based Bank of America, 696 workers collected such amounts.

_____________________________________________

“I don’t think it’s healthy for the economy to be this skewed,” said Stephen Rose, a 63-year-old professor at Georgetown University’s Center on Education and the Workforce. “I believe there’s some sort of connection between value added to the economy and pay. Everyone is losing sight of any fundamentals.

[traelin0]

I used to wonder for years why on Earth anyone would do biz with a major bank when there are myriad credit unions that could serve them. I think it's the existence and common knowledge that the FDIC will allegedly protect them from losing up to 100k (now 250k) of their deposits. What they don't understand is that the FDIC really exists to protect the banks from bank runs; and in a crisis like right now, the FDIC is dead broke.

The FDIC has been in the red for at least a year now. The FDIC is, effectively, protection for the banks, and an inflationary one at that. After all, who is extending the FDIC up to a $500 billion LOC right now?

[traelin0]

Jan 15, 2011 12:16:58 GMT -5 texasredneck said:

You can play kick the can only so long. Eventually you have to settle up and the longer you wait the harder it is to do. There are only two solutions to the problem. Cut benefits and services or raise taxes, and I am not going to pay more taxes. I am all in so the government can just deal with it.

I agree. It's otherwise known as squeezing blood from a turnip; or, in the case of those with a little bit left over, capital flight to friendlier political and economic environments.

[djrick]

Progressive taxes, like those in the pre-Reagan era, are a good way to lower salaries for the grossly overpaid and make sure their investments stay inside the US. The problem is everyone wants taxes to increase as long as it isn't their taxes or doesn't hurt their agenda, and everyone wants spending cuts as long as it isn't their government pork.

Has anyone heard anything about Congress wanting to introduce a law to suspend healthcare benefits for congressmen or drop the outrageous pension plans for them? /silence, can you hear those crickets?

[traelin0]

I agree with your ire toward Congressmen. I disagree with your support of a Progressive tax system. It is destroying us. Asia has been implementing flat tax systems, including Russia's 13% flat tax, and it is paying dividends. Meanwhile, the West continues to embrace 100-year old tax systems that allow govt. to grow unchecked. International capital flows tell the whole story and no sane entrepreneur would invest heavily in America when there are better opportunities abroad.

[djrick]

The Rise of the New Global Elite
www.theatlantic.com/magazine/archive/2011/01/the-rise-of-the-new-global-elite/8343/5/

"The good news—and the bad news—for America is that the nation’s own super-elite is rapidly adjusting to this more global perspective. The U.S.-based CEO of one of the world’s largest hedge funds told me that his firm’s investment committee often discusses the question of who wins and who loses in today’s economy. In a recent internal debate, he said, one of his senior colleagues had argued that the hollowing-out of the American middle class didn’t really matter.

“His point was that if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile means one American drops out of the middle class, that’s not such a bad trade,” the CEO recalled. "

These Self-Made Men will come running to the State if they need a bailout.

Wall Street and Detroit ran running to the US government in 2008; Bill Gates goes to the US Congress to complain about Chinese IP theft, and lobbies the US government to enforce his side of the story. US Big Ag subsidies block the Doha agreement.

US businessmen are dependent on the State and they would be foolish to think otherwise. Talk about an international order is just code for dodging taxes and screwing workers. The military is just another part of it.

As Little Tommy Friedman once said:

"The hidden hand of the market will never work without a hidden fist. McDonald’s cannot flourish without McDonnell Douglas, the designer of the U.S. Air Force F-15. And the hidden fist that keeps the world safe for Silicon Valley’s technologies to flourish is called the U.S. Army, Air Force, Navy and Marine Corps.”

<snip - The Rise of the New Global Elite
"So if you’re going to demand 10 times the paycheck, you need to deliver 10 times the value. It sounds harsh, but maybe people in the middle class need to decide to take a pay cut. "

[robinking]

www.msnbc.msn.com/id/41188877/ns/business-the_new_york_times

Doesn't this bother anyone? What was previously called impossible by the bulls is now openly talked about. But, it doesn't even mildly rattle the market. Why? How could a bankruptcy in a few blue states not cause an exodus of money from 401ks? More evidence of market manipulation by the FED. Sure, we on MT are making lots of money in the market, but not because the "fundamentals" of the economy are good. We're feeding on a dead cat bounce and as soon as inflation can't be hidden anymore, all bets are off.

[robinking]

Jan 21, 2011 10:57:06 GMT -5 @wxyz said:

We are making money off of the fundamentals of the stocks and businesses that we are invested in. At least I am.

If you want to make money off of bouncing dead cats than more power to you. Personally I don't invest that way.

My whole point is that the fundamentals are not what they're made out to be. Housing is still problematic. Deficit spending is bad, and when corrected will cause a recession. Personal incomes are declining. REAL inflation is increasing. REAL unemployment is 17-20%. I believe the fundamentals of our economy are poor. But, the market doesn't reflect it mostly due to FED injection of money. Something that isn't being disputed anymore.

[decoy409]

And it will not be Robin. This time around things are different, period.

[robinking]

I do agree with your analogy, but I'm having a difficult time seeing how the problems in the economy won't effect the market as a whole. I'm looking for sectors that may do fine; such as metals, oil, food... But, I'm very concerned about the big picture and the powerful Left and Right using crisis to take my wealth either by redistribution, confiscation or inflation. I see no other alternatives. Stocks may be a great hedge, but they have a tendency to be manipulated for the elites gain... I don't know. But I'm very concerned about them using a crisis to confiscate 401ks. Sounds crazy, but it has been done elsewhere and is being discussed in "think tanks".

[midwesterner (banned)]

Robin

This thread is like one where Mid and I are having a similar discussion. Your focus is on the BIG PICTURE.

To me stock and fund investing is the "small picture".

You are a physician. I am sure you have seen young Dr's miss a simple diagnosis because they are so caught up in some differential that might have thousands of choices that they fail to see what is right in front of them.

I do not understand people that are considering buying MMM and they get all caught up in housing, spending, personal income, real inflation, unemployment, the fed, the general economy.

I might consider those snapshot conditions of the moment if I was a day trader, but not much as a long term fundamental investor.

It all ties together though. Look at it this way, best example I can think of off top of head. You are going to race track, and betting on horses. You read the stats, the number or wins, races, condition of horse is in and place your bets all ahead of time.

Then you forgot to check the weather, it's raining today, some horses don't do well in rain. You lose a bet. Then a few are scratched from the list, too bad, you placed your bets already. Then your lucky horse is not doing so well, probably having a bad day, so you lose that one.

Now obviously not best example, but economics and politics decide the conditions of your investments, the climate and playing grounds your playing on. They are not separate. If your playing chess and the game changes to domino's, well your going to lose. Shifting assets from one class to another, into paper, out of paper is why people follow economics. If economics were not a factor, then there would never be any reason to choose a stock except based purely on performance, management, and finanicals.

[midwesterner (banned)]

I don't know. But I'm very concerned about them using a crisis to confiscate 401ks. Sounds crazy, but it has been done elsewhere and is being discussed in "think tanks".

Funny you should mention this Robin, cause it's beginning in some places as we speak.

European Nations Start Confiscating Private Retirement Plans!

simpledebtfreefinance.com/european-nations-start-confiscating-private-retirement-plans/

What happens when the welfare state begins to collapse, and the government can no longer print its way out of fiscal irresponsibility? Well, in the case of five European nations, you start confiscating the citizens’ savings!

Apparently, the politicians in Hungary, Poland, Bulgaria, Ireland and France view private savings accounts as their own personal piggy banks. I can’t begin to express how disgusting (and frightening) I think this is.

Could this happen in the United States?
It probably won’t reach the level of depravity of the Hungarian and Bulgarian governments, but the current administration and the 111th Congress racked up record deficits and created the largest new entitlement (heathcare) in generations.. And some have already hinted at back door methods of the kind of confiscation seen in Bulgarian (see how George Miller, Teresa Ghilarducci and the End of Your 401k. ) . And the Social Security “trust fund” has long since been raided, resulting in the system we have today – people paying into the program are essentially supporting those collecting from it today.

I would argue that this is no different than forcing people to pay into the system even though they are not going to benefit from it when they retire. This is likely true for younger generations of worker, though no public official would dare to state this.

[decoy409]

All I hear from wxyz is how they don't care about this and they don't care about that. Yet the lips are a flapping away as to commenting on what they say they don't care about.
So if you don't care, then keep your lips from flapping where they need not be. Remember, YOU DON'T CARE.

[robinking]

Great find Mid. This is what I fear. But, they'll do it through back door confiscation either via increased redemption taxes or increased fees. The powers that be are looking at OUR wealth with lust in their hearts. This is why I have invested heavily into physical gold and silver. I want something in 30-40 years that they can't change the rules on. Sure, they can outlaw gold again or try to tax it's sale... but there's always the black market if they do that. Your 401k is right there for them to see and tax as they please. What's better, making 10% a year in the market for 30 years, but paying taxes on those gains when used or making 9% on metals and paying no taxes? These politicians view YOUR wealth as belonging to them! They'll take your hard earned wealth and redistribute it to the people they deem deserve it... not you or your family and friends. The laws and tax code can ALWAYS be changed. What happens if the Republicans make a mess of things and then lose horribly in 2012? Then we'll have an unchecked liberal agenda. This is one of the main reasons I'm a "doomer". Not because I hate capitalism. Not because I hate Wall Street. Not even because I hate bankers. We need all three, but with ethics guiding them. There are no ethics in DC or the UN and they could easily confiscate our wealth... for the "greater good".

[robinking]

I appreciate your optimism wxyz, I simply don't share it. I don't see how we can ever return to prosperity or anything like the last 30 years. I see population growth causing conflict due to food, oil and other resource constraints. I see the US declining in our standard of living and many simply won't accept it. So, politicians being what they are... they'll take from the productive and give to the non-producers.

[robinking]

I'm making incredible money, but it won't last. I'm working much harder now than past doctors. We require a lot more staff to deal with insurance and compliance issues. I do a lot of free care because some long time patients are down on their luck, which adds to my workload. I'm not complaining, just explaining. Mathematically, I'll never generate the ROI that a doctor entering the field could expect back in 1980. They had much less debt, overhead and regulation. It will only get worse. People see healthcare as a right and not a privilege. Someone must provide this "right"... and as of now, it's the taxpayer or the employer based insurance. This will end soon.

As for the statement, this has been done before... we've heard the argument that this time is different every recession... I hear you. I didn't work during the 1970, 80 or 90s recessions. But, each successive recovery has been more and more jobless. Each one has required more and more national debt and funky accounting tricks to get officially out of. The idiots in DC have spent our SS and Medicare surpluses. This WILL have a negative consequence to our wealth as a nation. The cost of living continues to rise higher than real wages. We're reaching a boiling point. The Left wants to blame the savers and the Right wants to blame the entitlement class. Political divisions are widening and people are taking sides. This won't end well unless people are told the truth and taught to use hard work, ethical approaches and thrift to rebuild America. But, we're continually being lied to and the can is further kicked down the road... making the problem worse and the solution that much more difficult to swallow.

[decoy409]

Morning Robin! Say, I hate that dirty 'C' word used in the title, but you may have something. The latest is the pumpers working OT at night to eliminate threads talking about things.

[robinking]

This is really eye opening! Sad.

www.zerohedge.com/article/entitlement-america-head-household-making-minimum-wage-has-more-disposable-income-family-mak

How long will this be sustainable? Great speech last night, but where's the beef? Oh, I forgot... the Dow's 12,000 again so all's well in America!