There's No Rule of Law Here - Things Have Changed

At the time of the November 2008 elections someone filmed a pair of armed New Black Panther Party members blocking the entrance of a voting sight. Clearly, the intention was to intimidate voters. The clip was shown repeatedly on national television. Today we learned from one of the prosecutors that the federal government ordered the case dismissed (see story).

Tuesday, Bloomberg ran a story describing how Mexican gangs laundered hundreds of billions in illicit drug dollar with the complicity of  Wachovia and Bank of America (story here). The article describes the damage to the economy and pretty much leaves up to the imagination the amount of monetary gain realized by the banks. No significant official of either bank has been indicted. We know that billions of dollars went unaccounted for in Iraq during the Bush administration and now we know that billions of drug related dollars are currently being shuffled in and out of Afghanistan.

The country is changed. Corporations and interest groups, including the financial industry, have captured Congress. The financial industry basically controls the SEC, the Treasury (first Paulson, now Geithner), and the advisors to the President (Summers, Ruben). Lawyers representing unions draw up much of the incomprehensible legislation voted on by Congress and pushed by President Obama. This would include the Health Care Bill with respect to unions and the Financial Reform Bill with respect to banks.  In a late compromise to the latter, a bank tax will be dropped and surplus TARP money (yes, taxpayer dollars) will be substituted in its place.

Sadly, the dropped charges brought against the New Black Panther thugs shouldn’t surprise anyone. If you’ve paid any attention to the Rod Blagojevich trial, the relationships with shady figures in Chicago such as Tony Revco, Williams Ayers, are the hate-spewing preacher where the President attended church,  you know that Obama is up to his eyeballs in sleaze. In a fair, competitive system, cream rises to the top. In a cesspool, the heaviest turd sinks to the bottom.  Our President is the shit.

On the Cover of the Rolling Stone

 Whatever happened to investigative reporting? Its practically nonexistent.

America has been at war in Afghanistan for almost nine years; the longest war in the history of the country. Despite the length of the campaign and the enormous ongoing expenditures, most Americans don't have a clue what is going on, what the objectives are, or how the war is being fought.

We are now two months into what most likely is the worst environmental catastrophe the United States has ever encountered. Information has been limited and controlled by the two authorities involved; BP and the United States Government. Why can't news companies deliver in depth stories?

JP Morgan-Chase and Goldman Sachs spent the last two decades reshaping the policies that govern our financial system. Even after the financial storm on 2008-2009, these financial behemoths continued to loot the American taxpayer with impunity. There has been relatively little coverage and even less justice served.

Finally, there is one journalistic source doing its job to inform the nation. ABC news? Newsweek? CNN? Hardly. Perhaps the most relevant articles produced by investigative reporting in the past year was done by none other than The Rolling Stone.

Do the articles paint an accurate picture of reality? Is it quality reporting? I think so, but its difficult to assess as they seem to be about the only news entity that practices investigative reporting. If you have not yet read any of Rolling Stone's articles (linked below) you should. That is, if you give a damn about what is happening to your country.

The Runaway General
The Spill, The Scandal, and the President
Jefferson County: Democracy Now
The Great American Bubble Machine

Bailout for the States? Summer Showdown Approaches

President Obama is pushing a $50 billion ‘jobs’ bill that would bail out the states (See Obama Presses for Aid to Cities and States).

Making the economic case for helping the states, Mr. Obama said that if teachers and others are laid off — his education secretary, Arne Duncan, has said that without federal aid, up to 300,000 fewer teachers would be in classrooms this fall — “it will mean more costs helping these Americans look for new work, while their lost paychecks will mean less tax revenues and less demand for the products and services provided by other workers.”

Mr. Obama had supported about $50 billion in aid initially — $25 billion for public employees, $23 billion of which would go for teachers’ salaries, and $25 billion to offset states’ increased costs for their share of Medicaid, the public health program for the poor, people with disabilities and many nursing home residents.

Clearly, the purpose of issuing another $50 billion dollars of debt is not for the purpose of stimulating new jobs, but rather for the purpose of maintaining existing jobs and services which can no longer be paid for from tax revenue at the state and local level. It is starting to become apparent that this is no longer a cyclical downturn, but rather a systemic problem. If the latter is the case, how much longer can the federal government borrow debt to prop up state and local economies and keep services running?

Due to an implosion in the bond market which threatened the existence of the European Union,  austerity programs calling for higher taxes, reduced wages, and decreased spending will be implemented. There will be no more stimulus programs overseas. In America, economic advisers and politicians have yet to change course. The President, treasury secretary Tim Geithner, federal reserve chairman Ben Bernanke, and a majority of Congress continue to push spending programs in order to stem the tide of unemployment and continue delivery of benefits and services.

Thus far, neither the bond market nor the will of the people have forced leadership to reverse course and begin making cuts. When a politician states that he will make the tough choices, it is merely rhetoric. If the decision to reign in spending were made, the result would be a powerful depression, slashing of benefits, and social upheaval. Politically, the fallout would result in massive turnover come election day.

America will likely continue the ponzi scheme until it no longer can. Europe has already reached the tipping point. When the moment of truth arrives, America must either embark on unpopular austerity programs or risk the destruction of the currency. If America chooses austerity, it will mean skyrocketing unemployment, reduced wages, less services, lower home values, and the forfeiture of pension promises. The summer showdown will pit Republicans pretending to hawkishly condemn spending versus Democrats who feign concern for the unemployed and suffering. 

For now, my bet is that the bailout will pass, and most Americans will not miss a beat. The job market will not improve, but neither will it collapse. Unemployment compensation, welfare checks, and medicare payments will continue on. But somewhere down the road, the bond market will force politicians to do something other than pass a bill.  Eventually, the choice must be made to choose austerity and face a depression or to debase the currency through massive printing.

New Trend Underway: From Inflation to Deflation

The latest meeting of the G-20 concluded with the failure to reach consensus. Much to the chagrin of Tim Geithner who continues to push for massive sovereign spending, the European contingent basically said that stimulus is over and debt reduction will be the new game plan. In related news, Germany is having second thought about the bailout and may very well pull out. In China, the government has begun implementing measures to tighten credit in order to contract a huge housing bubble. All of these events taken together clearly point toward a large contraction of the global economy, credit, and money supply. The trend is about to change. Geithner, Bernanke, and the United States leadership remain on board the bandwagon of endless spending and stimulus, but if the threat of insolvency can force Europe to about face, it stands to reason that the United States will eventually follow suit. 

Later this summer, state governments from California to New York will bring their troubled budgets to Congress and the White House looking for billions of dollars which they need to maintain programs and services. With elections just months away, politicians will be hard pressed to deny aid. But with a calamitous oil spill, climbing number of foreclosures, downward pressure on housing prices and commercial real estate, a plunging stock market, and rating agencies downgrading everything in sight due to massive debt, its not a slam dunk that the government will come to the rescue this time; at least not to the extent that would have been possible in the past. 

Should equity markets plunge significantly, pension funds currently projecting insolvency toward the end of the decade would have to face such possibilities within just a few years. The feds simply don't have the money to plug all the holes; and if they create the money by creating more debt, the country risks the very real possibility of seeing the bond market attacked in the way that Greece is experiencing. For the time being, yields on 10-year treasuries are falling and will most likely continue to fall for several months. But if Bernanke and Geithner continue to call the shots, the additional spending will not only fail to ignite a recovery, it will eventually result in bond yields reversing and threaten the stability of the political structure of the United States of America. At some point, it is likely that Geithner and Bernanke will be terminated along with their expansionary policies and austerity will be forced on the country. It is going to be ugly. I hope the nation survives.