Welcome to the “new normal” under Obamanomics. In Europe, where Keynesian economics and Democratic Socialism has dominated for decades, unemployment rates are in the 20’s. For the younger generation, they’re even higher. Yet, instead of learning from their mistakes, Obama and the Democrats insist on repeating them. Millions of innocent people are being hurt in the process.
After a full year of fruitless job hunting, Natasha Baebler just gave up.
She’d already abandoned hope of getting work in her field, working with the disabled. But she couldn’t land anything else, either — not even a job interview at a telephone call center.
Until she feels confident enough to send out resumes again, she’ll get by on food stamps and disability checks from Social Security and live with her parents in St. Louis.
“I’m not proud of it,” says Baebler, who is in her mid-30s and is blind. “The only way I’m able to sustain any semblance of self-preservation is to rely on government programs that I have no desire to be on.”
Baebler’s frustrating experience has become all too common nearly four years after the Great Recession ended: Many Americans are still so discouraged that they’ve given up on the job market.
Older Americans have retired early. Younger ones have enrolled in school. Others have suspended their job hunt until the employment landscape brightens. Some, like Baebler, are collecting disability checks.
It isn’t supposed to be this way. After a recession, an improving economy is supposed to bring people back into the job market.
Sadly, until we get rid of Obamanomics, the jobs won’t be coming back. Business aren’t hiring because they never know when they’re going to be hit with a costly new regulation or tax. Entrepreneurs aren’t willing to take the risk to start a new business in such a hostile business climate.
President Obama heads into the third month of his second term, still unable to find a cure for a sluggish economy, weak employment numbers and his own slipping job approval scores.
Second terms are usually challenging for presidents who have won re-election without having the slightest idea about what they will do over the next four years. And that’s what we are witnessing now with Obama, whose biggest problem is the anemic, job-challenged economy.
[…] The depressing headlines of the past few days tell a sad tale of what the economy is like under his presidency:
– “Weekly Jobless Claims Get Weaker as Outlook Dims” was the gloomy headline over a Reuters news wire story Thursday morning on the CNBC website.
“The number of Americans filing new claims for unemployment benefits rose to its highest level in four months last week, suggesting the labor market recovery lost some steam in March,” Reuters reported.
– “Hiring Is Weaker at Private Companies,” a Washington Post headline blared Thursday.
“Companies hired at the weakest pace in five months in March as recent strong demand for construction jobs evaporated and growth in the vast services sector slowed, signs that the economic recovery could be hitting a soft patch,” the newspaper reported.
That’s the conclusion of the ADP National Employment Report Wednesday, which showed “that private employers added 158,000 jobs last month.” The ADP job survey said “the gain was the smallest since October.”
A separate report Wednesday on the services industry, the economy’s largest job sector, showed that employment growth “pulled back in March.”
You do not hear any of these reports on the nightly TV news because the networks cherry-pick reports that feed the White House line of a continuing economic recovery.
[…] Thankfully, there are economic reporters who resist touting the White House line that everything is rosier under Obama’s policies.
“We’re approaching the four-year anniversary of the economic recovery, and it still doesn’t feel like much of one, what with the unemployment rate at 7.7 percent and wages stagnant over the past five years,” Neil Irwin, the Post’s veteran economic analyst, recently reported.
Even as the Obama White House prepares for a star-studded White House concert featuring Queen Latifah, Cyndi Lauper, and Justin Timberlake, figures from the U.S. Census Bureau reveal that roughly 50 million Americans—one in six—now live below the poverty line.
Additionally, one in five American children have fallen below the poverty line; the last time poverty levels were this high, Lyndon Baines Johnson was president.
“In the last three years, there’s been a great change in the kinds of people we are serving,” said Director of Community Services at Catholic Charities of Baltimore Mary Anne O’Donnell. “There are increasing numbers of people who owned a home, lost their jobs, end up living in their car and are coming with children to our soup kitchen.”
The U.S. government defines a family of four earning under $23,021 as living in poverty. Income used to compute poverty status does not include non-cash benefits, such as food stamps and housing subsidies.
Welfare program enrollments have exploded under President Barack Obama. Americans on food stamps now outnumber the combined populations of 24 U.S. states, costing taxpayers more than double the amount spent on food stamps five years ago. In January 2009, 31.9 million Americans received food stamps. Today, that figure is 47.79 million.
The foundation for the housing crisis was laid with the Community Reinvestment Act in 1977, where the government took it upon itself to encourage home ownership by pressuring banks to lend to lower-income buyers, often to meet arbitrary racial quotas. Obviously they haven’t learned a thing from where that got us.
Would it surprise anyone to learn that as a lawyer, Obama sued banks to force them to issue subprime loans? He also worked for ACORN, which specialized in using the Community Reinvestment Act to shake down banks and pressure them to loan money to low-income minorities or face “discrimination” charges.
According to the Washington Post, the Obama administration is pushing big banks to make more home loans available to Americans with bad credit – the same kind of government guidance that helped blow up the housing market:
In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.
Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.
Think about this statement. The administration is asking banks – banks that Washington bails out; banks that Washington crafts regulations for — to embrace risky policies that put the institution and its investors (not to mention, all of us) in a precarious position. So precarious, in fact, that banks have to ask government if they can be freed of any legal or financial consequences.
These types of government policies initially emerged the mid-1970s, when “progressive” Democrats in Congress began a campaign to help low-income minorities become homeowners. This led to the passage, in 1977, of theCommunity Reinvestment Act (CRA), a mandate for banks to make special efforts to seek out and lend to borrowers of meager means. Founded on the premise that government intervention is necessary to counteract the fundamentally racist and inequitable nature of American society and the free market, the CRA was eventually transformed from an outreach effort into a strict quota system by the Clinton administration. Under the new arrangement, if a bank failed to meet its quota for loans to low-income minorities, it ran the risk of getting a low CRA rating from the FDIC. This, in turn, could derail the bank’s efforts to expand, relocate, merge, etc. From a practical standpoint, then, banks had no recourse but to drastically lower their standards on down-payments and underwriting, and to approve many loans even to borrowers with weak credit credentials. As Hoover Institution Fellow Thomas Sowell explains, this led to “skyrocketing rates of mortgage delinquencies and defaults,” and the rest is history.
The CRA was by no means the only mechanism designed by government to impose lending quotas on financial institutions. For instance, the Department of Housing and Urban Development (HUD) developed rules encouraging lenders to dramatically hike their loan-approval rates for minority applicants and began bringing legal actions against mortgage bankers who failed to do so, regardless of the reason. This, too, caused lenders to lower their down-payment and income requirements.
Moreover, HUD pressured the government-sponsored enterprises Fannie Mae and Freddie Mac, the two largest sources of housing finance in the United States, to earmark a steeply rising number of their own loans for low-income borrowers. Many of these were subprime mortgages—loans characterized by higher interest rates and less favorable terms in order to compensate lenders for the high credit risk they were incurring.
Additional pressure toward this end was applied by community organizations like the pro-socialist ACORN. By accusing banks—however frivolously or unjustly—of having engaged in racially discriminatory lending practices that violated the mandates of the CRA, these groups commonly sued banks toprevent them from expanding or merging as they wished. Barack Obama, ACORN’s staunch ally, was strongly in favor of this practice. Indeed, in a 1994 class-actionlawsuit against Citibank, Obama represented ACORN in demanding more favorable terms for subprime homebuyer mortgages. After four years of being dragged through the mud, a beleaguered Citibank—anxious to put an end to the incessant smears (charging racism) that Obama and his fellow litigators were hurling in its direction (to say nothing of its mounting legal bills)—agreed to settle the case.
Forbes magazine puts it bluntly: “Obama has been a staunch supporter of the CRA throughout his public life.” In other words, he has long advocated the very policies that already have reduced the real-estate market to rubble. And now he is actively pushing those very same practices again.
One of the big differences between the United States and Cyprus is that the U.S. government can simply print more money to get out of a financial crisis. But Cyprus cannot print more euros, which are controlled by international institutions.
Does that mean that Americans’ money is safe in banks? Yes and no.
The U.S. government is very unlikely to just seize money wholesale from people’s bank accounts, as is being done in Cyprus.
But does that mean that your life savings are safe?
No. There are more sophisticated ways for governments to take what you have put aside for yourself and use it for whatever the politicians feel like using it for.
If they do it slowly but steadily, they can take a big chunk of what you have sacrificed for years to save, before you are even aware, much less alarmed.
That is in fact already happening.
When officials of the Federal Reserve System speak in vague and lofty terms about “quantitative easing,” what they are talking about is creating more money out of thin air, as the Federal Reserve is authorized to do — and has been doing in recent years, to the tune of tens of billions of dollars a month.
When the federal government spends far beyond the tax revenues it has, it gets the extra money by selling bonds. The Federal Reserve has become the biggest buyer of these bonds, since it costs them nothing to create more money.
This new money buys just as much as the money you sacrificed to save for years. But more money in circulation, without a corresponding increase in output, means rising prices.
Although the numbers in your bank book may remain the same, part of the purchasing power of your money is transferred to the government. Is that really different from what Cyprus has done?
Through the centuries – in historic cultures like that of Yap Island who used giant, immovable stone disks for commerce, to today’s United States, whose Dollar fiat currency exists primarily in digital form – “money” is able to be exchanged for goods and services because society agrees to accept it (at a certain rate of exchange).
But what happens when a society starts doubting the value of its money?
Fed, the Great & Powerful
The podcast goes into the mind-blowingly simple process by which new money is created in America by the Federal Reserve (or the “Fed”). That is to say:
The Fed holds a meeting
Those in the room decide how many more dollars they think the world needs
Someone walks over to a computer and adds that many dollars to the banks, with a few clicks of the keyboard
The banks then, if they want to, lend this new money out into the economy on a fractional basis, adding even more “thin air” dollars to the nation’s money supply.
This unique ability in America lends the Fed enormous power. The power to create new money from nothing. With no limit.
And with that power, the Fed can control and/or influence economies and markets the world over.
[…] Money is not wealth. It is merely a claim on wealth.
You can’t print your way to prosperity. History is abundantly clear on that.
With the clarity of hindsight, it’s now obvious how the Fed has now painted itself into a corner.
[…] Cyprus has awakened the world to the reality that central planners can appropriate their money with the bang of a gavel. And while we don’t yet know with certainty how things will unfold in Cyprus, we can project that events there have shaken society’s confidence in the soundness of fiat currency in general. If we know it can be confiscated or devalued overnight, we are less likely to unquestioningly accept its stated value. This doubt that strikes at the very foundation of modern monetary systems.
Cyprus is meaningful in the way that it shines a light on both the importance of hard assets and the risk it poses to market stability. It certainly increases the risk of our prediction of a 40%+ stock-market correction by September, as investors begin to realize that current high values are simply the ephemeral effect of too much money, instead of a sign of true value.
At this point, prudence suggests we prepare for the worst (by parking capital on the sidelines, investing in our personal resilience, etc.) and add to our hard asset holdings (like precious metals bullion, productive real estate, etc.) as insurance to protect our purchasing power. The dollar may strengthen for a bit versus other currencies and perhaps the financial markets, but the long-term trend is a safer and surer bet: Dollars will be inflated. There will be more of them in the future than there are today. So, while our dollars still have the purchasing power they do, we should use the window of time we have now to exchange paper money for tangible wealth at today’s prices.
Cypriot President Nicos Anastasiades has struck a deal with the European Union and International Monetary Fund that will seize up to 40% of uninsured funds from wealthier depositors with over 100,000 euros and will not siphon funds from those below that amount.
The 10 billion euros ($13 billion) bailout plan calls for the Cyprus Popular Bank to be dissolved and all its viable assets transferred to the country’s biggest bank, Bank of Cyprus.
Presently, Cypriot banks have imposed a 100 euros ATM withdraw limit, and Cyprus border officials at air and sea ports have been ordered to confiscate the funds of any traveler attempting to leave with over 10,000 euros.
How dare they try to keep the money they worked so hard for and saved AFTER taxes were already paid on it? Don’t they know that private property is an illusion under Socialism? That the government is free to spend as irresponsibly as it wants, and can steal your money at will to pay the tab? That’s what they’ve been voting for all this time, right? Or didn’t they realize it?
Understandably, Cypriots are desperately trying to get their money out, but it’s too late:
The president of Cyprus assured his people a bailout deal he struck with the European Union was in their best interests, but banks will remain closed until Thursday – and even then subject to capital controls to prevent a run on deposits.
The ruling class insists that stealing money out of their bank accounts is “in their best interests.” Doesn’t that make them feel better? They’ll be patriotic and happy to “share the sacrifice” for the greater good, right? Of course not!
Despite the closed banks and a lock for payments in the past week, more money flowed out of Cyprus than in previous weeks, Frankfurter experts report for payments. Prior to the escalation of the crisis in Cyprus accruing on the payment system Target liabilities of Cypriot central bank to the European Central Bank (ECB) had increased daily at approximately 100 to 200 million euros. In recent days was after Parliament the stabilization program initially had to fail, the daily has risen to more than double. Just in the last week so could cash assets have been withdrawn from Cyprus in the billions, although the Cypriot central bank has actually issued a lock.
How is it possible that cash is leaving the country even with a bank halt? It isn’t, unless of course, the banks aren’t really halted, and some outbound wire transfers, which are permitted, are more equal than other wire transfers which are stuck on the island. Of course, that would imply an “Europe Farm” type of arrangement, which in the bastion of fairness, equality and honesty which is Europe, would be absolutely impossible.
On the other hand, if indeed the drain of the Cypriot banking system has continued despite all the enacted halts during the past week, then it’s game over for Cyprus, which will soon have only the ECB to thank for providing liquidity, an arrangement that may not be the best long-term outcome for a nation whose economy has basically been gutted in the span of one week.
It also means game over for the bailout as envisioned, as the EUR17 billion is history, and much more cash will have to be injected to cover for the stealth outflows.
Savings accounts in Spain, Italy and other European countries will be raided if needed to preserve Europe’s single currency by propping up failing banks, a senior eurozone official has announced.
The new policy will alarm hundreds of thousands of British expatriates who live and have transferred their savings, proceeds from house sales and other assets to eurozone bank accounts in countries such as France, Spain and Italy.
The euro fell on global markets after Jeroen Dijsselbloem, the Dutch chairman of the eurozone, told the FT and Reuters that the heavy losses inflicted on depositors in Cyprus would be the template for future banking crises across Europe.
Translation: it now officially sucks to be an unsecured creditor in Europe. In other words: an uninsured depositor.
Why this ad hoc dramatic shift in the European approach to bank solvency, which if anything makes the link between bank and sovereign closer than ever, and crushes all that Draghi achieved in the summer of 2012?
Simple: because what Cyprus allowed was the effective usurpation of democracy – the only reason the Cypriot bailout “passed” (at least so far) is because it was structured as a bank restructuring, a financial system “resolution”, not a tax,and thus not in need of a parliamentary, democratic vote. Because as Cyprus also showed, votes to deprive depositors of cash, whether insured or uninsured, simply won’t fly.
Hence the shift.
However, there is a problem: it means that depositors are now fair game everywhere, and that the ESM or EFSF, with their unlimited scope but “democratic” impleention pathway, are on the backburner.
And now, the scramble to pull uninsured deposits out of banks everywhere begins. Thanks to the new Eurogroup head.
“You ask for miracles, Theo. I give you Diesel-BOOM”
And now, every European depositor is going to their local financial dictionary to look up the definition of General Unsecured Claims, only to see a picture of… themselves.
To anyone paying attention, reality is now painfully obvious. These bankrupt, insolvent governments have just about run out of fingers to plug the dikes. And history shows that, once this happens, governments fall back on a very limited playbook:
As Cyprus showed us, bankrupt governments are quite happy to plunder people’s bank accounts, especially if it’s a wealthy minority.
Aside from bank levies, though, this also includes things like seizing retirement accounts (Argentina), increases in civil asset forfeiture (United States), and gold criminalization.
Just another form of confiscation, taxation plunders the hard work and talent of the citizenry. But thanks to decades of brainwashing, it’s more socially acceptable. We’ve come to regard taxes as a ‘necessary evil,’ not realizing that the country existed for decades, even centuries, without an income tax.
Yet when bankrupt governments get desperate enough, they begin imposing new taxes… primarily WEALTH taxes (Argentina) or windfall profits taxes (United States in the 1970s).
This is indirect confiscation– the slow, gradual plundering of people’s savings. Again, governments have been quite successful at inculcating a belief that inflation is also a necessary evil. They’re also adept at fooling people with phony inflation statistics.
Governments can, do, and will restrict the free-flow of capital across borders. They’ll prevent you from moving your own money to a safer jurisdiction, forcing you to keep your hard earned savings at home where it can be plundered and devalued.
We’re seeing this everywhere in the developed world… from withdrawal limits in Europe to cash-sniffing dogs at border checkpoints. And it certainly doesn’t help when everyone from the IMF to Nobel laureate Paul Krugman argue in favor of Capital Controls.
Wage and Price controls
When even the lowest common denominator in society realizes that prices are getting higher, governments step in and ‘fix’ things by imposing price controls.
Occasionally this also includes wage controls… though wage increases tend to be vastly outpaced by price increases.
Of course, as any basic economics textbook can illustrate, price controls never work and typically lead to shortages and massive misallocations.
Wage and Price controls– on STEROIDS
When the first round of price controls don’t work, the next step is to impose severe penalties for not abiding by the terms.
In the days of Diocletian’s Edict on Prices in the 4th century AD, any Roman caught violating the price controls was put to death.
In post-revolutionary France, shopkeepers who violated the “Law of Maximum” were fleeced of their private property… and a national spy system was put into place to enforce the measures.
Despite being completely broke, governments will dramatically expand their ranks in a last desperate gasp to envelop the problem in sheer size.
In the early 1920s, for example, the number of bureaucratic officials in the Weimar Republic increased 242%, even though the country was flat broke from its Great War reparation payments and hyperinflation episode.
The increase in both regulations and government officials criminalizes and/or controls almost every aspect of our existence… from what we can/cannot put in our bodies to how we are allowed to raise our own children.
War and National Emergency
When all else fails, just invade another country. Pick a fight. Keep people distracted by work them into a frenzy over men in caves… or some completely irrelevant island.
Why do we have such massive deficits? Because if the government actually tried to collect the amount it needs to cover its current spending levels and unfunded liabilities, it would trigger a revolt – and that’s not a metaphor.
The truth is that our politicians have been very careful in their labeling of government receipts and payments so as to keep most of the coming bills associated with ‘Take As You Go’ off the books. Consider, for example, Uncle Sam’s promises to pay me my Social Security and Medicare benefits starting in roughly 10 years. The present value (the value in the present) of these promises is $400,000. How does this differ from my holding a Treasury bond valued at $400,000?
Fundamentally, it differs not at all, which means that the government has a lot more debt than it’s reporting.
How much more?
I’m not sure you want to know. I recently calculated the fiscal gap using the CBO’s AFS forecast. The fiscal gap measures the present value difference between all projected future federal expenditures (including servicing official debt) and all projected future taxes. The fiscal gap is thus the true measure of our government’s total indebtedness and the true measure of fiscal sustainability.
How big is the fiscal gap?
Brace yourself. It’s $222 trillion large! In comparison, official debt in the public’s hands is only $11 trillion.
Here’s one way to wrap your head around our $222 trillion fiscal hole: closing it via tax hikes would require an immediate and permanent 64 percent increase in all federal taxes. Alternatively, the government could cut all transfer payments, e.g., Social Security benefits, and discretionary federal expenditures, e.g., defense expenditures, by 40 percent. Waiting to raise taxes or cut spending makes these figures worse.
In short, our government is totally broke. And it’s not broke in 30 years or in 20 years or in 10 years. It’s broke today.
In other words, in four years, the interest on the debt will consume almost half of all revenue that the government collects, and each year after that it will get progressively worse — until it consumes all revenues.
As the interest on the debt grows, we won’t be able to borrow enough to pay our bills, and the government will have to either simply print more money to pay up or default. It will likely at least try printing money, and this is when inflation will zoom atmospherically. Even Ben Bernanke, the head of the Federal Reserve, acknowledged this scenario last year.
The chance that the United States will avoid this path in our near future is infinitesimal, but there is a chance. An unexpected business boom could spare us — socialist Norway stays solvent via exploiting oil revenues, and the United States has some of the biggest oil reserves in the world — or a massive downsizing of government could spark a boom — as happened during the Harding administration and at the end of WWII— but there’s little chance of either happening.
The great majority of U.S. spending is claimed to promote “fairness,” while critics have argued that it is immoral for Baby Boomers — the group mainly responsible for electing political spendthrifts — to heap devastating debt on their children and grandchildren. Ironically, the imminent demise of the dollar has accelerated to where the dollar will almost certainly crash during most Boomers’ lifetimes, so they will have to suffer along with their offspring.
An 11th-hour deal with the EU, which has saved the Cypriot economy from the brink, will see investors with more than €100,000 in the nation’s largest banks forfeit a large chunk of their deposits.
The punishing deal – which has been approved by the eurozone finance ministers – will allow the country to receive the €10bn (£8.5bn) bailout it needed before the European Central Bank pulled funding and sent the island on the path to bankruptcy and a possible exit from the single currency.
Under the new agreement, all bank deposits under €100,000 will be secured and guaranteed by the state. The country’s second-biggest bank, The Popular Bank of Cyprus – known as Laiki – will be wound down whilst holders of deposits of more than €100,000 face big losses.
An exhausted Senate gave pre-dawn approval Saturday to a Democratic $3.7 trillion budget for next year that embraces nearly $1 trillion in tax increases over the coming decade but shelters domestic programs targeted for cuts by House Republicans.
While their victory was by a razor-thin 50-49 vote, it allowed Democrats to tout their priorities. Yet it doesn’t resolve the deep differences the two parties have over deficits and the size of government.
Joining all Republicans voting no were four Democrats who face re-election next year in potentially difficult races: Sens. Max Baucus of Montana, Mark Begich of Alaska, Kay Hagan of North Carolina and Mark Pryor of Arkansas. Sen. Frank Lautenberg, D-N.J., did not vote.
The impetus for passing a budget for the first time in four years was likely the passage of the “No Budget, No Pay” bill which suspended the current debt limit until May 18th, so the federal government could continue to pay its bills. One of the bill’s provisions prohibits legislators from getting paid if Congress doesn’t pass a budget by April 15. Salaries will either be held in escrow until they do, or resume being paid in January 15, when the current congressional session ends.
Considering the vast differences between this legislation and the House budget passed last Thursday that brings the budget into balance by 2023, but changes the nature of entitlement programs in ways completely anathema to Democrats, it is virtually certain that no budget will be reconciled before the debt ceiling showdown. On Thursday, House Speaker John Boehner (R-OH) revived a rule ignored in January, stating that any increase in the debt ceiling must be accompanied by commensurate spending cuts.
Yet even leaving that rule aside, passing a budget by May 18 is still overly optimistic. Thus, the House also passed a continuing resolution to fund the government for the rest of the fiscal year, which lasts through September. The Senate approved that resolution, and it is expected that the president will sign it once he gets back from his trip to Israel.
In other words, the more things seemingly change, the more they remain the same: barring a miraculous spasm of bipartisanship, government will likely be funded piecemeal–and our unsustainable fiscal trajectory will remain unaltered.
The Cyprus central bank decided to keep the banks closed until next Tuesday. The panic is building. This will build it even more.
The British media say the government is looking for Plan B. There is no Plan B.
There will be no tax on bank accounts, says the parliament.
Will there still be a bailout? The European Central Bank has said it will remove the life support tube on Monday. The head of the EuroGroup, which is a no-name committee of the eurozone’s finance ministers, said this: “I’m not sure that this package is completely gone and failed, because I don’t see many alternatives.” In short, “the Parliament had better reconsider.” Or else.
Or else what? Default? Cyprus’ departure from the eurozone? Do the Eurocrats want that? Do they want to risk a poster child for the PIIGS to imitate?
Meanwhile, panic builds. When the banks open their doors next week, they will face a true bank run. People now know: they cannot get their money. They never thought this could happen.
The central bank is playing kick the can. It is buying time. Maybe there will be a Plan B. Problem: if there is a Plan B, maybe the parliament will reject it. Then what?
A nation shuts down economically if its banks shut down. The banks can shut down in two ways: because of bank runs or by decree from the central bank. Today, the banking system has been shut down by decree.
The central bank cannot kick the can much longer. The economy will collapse without banks.
The British media are covering the story.
“We don’t have days or weeks, we have only hours to save our country,” Averof Neophytou, deputy leader of the ruling Democratic Rally party, told reporters as crisis talks in Nicosia dragged on into the evening.
The country’s two main banks – Laiki and the Bank of Cyprus – face potential failure if a bailout is not secured. One official told the Associated Press that Europe and the IMF were pressing for the two banks to be wound down. The Cypriot government was said to be considering the possibility of imposing capital controls amid fears that money would flood out of the country once its banks were reopened.
But if depositors cannot send their digital money out of the country, they can still demand currency. The effect is the same: bankrupt banks.
The central bank cannot print euros. It can bail out the system only if Cyprus pulls out of the eurozone. If it does, this will send a message to the PIIGS: “Get out. We did. Save yourselves. We did.”
The people of Cyprus care more about their life savings than propping up financial institutions that lost billions on poor investments in socialist governments’ debts. The idea that somehow they, and not the banks that made those decisions, should bear the brunt of those losses was always disconnected from reality.
Yet that is precisely the presumption the establishment has made — that rather than banks raising substantially more capital to address systemic risk, you and I should pay for bank bailouts — in response to the ongoing financial crisis that began in 2007, and has actually become the basis for such proposals considered all over the world, including the U.S.
In 2009, the G20 asked the International Monetary Fund (IMF) to come up with ways the financial sector might supposedly contribute to its own bailouts.
Interestingly, what the IMF came up with as a suggestion had already been implemented a few months earlier by the U.S. Congress in passing the Dodd-Frank so-called financial reform legislation.
Under Dodd-Frank, the Federal Deposit Insurance Corporation (FDIC) is allowed to charge assessments to about 60 bank-holding and insurance companies with $50 billion or more in assets to fund what is called an “orderly liquidation fund.” Really, it’s just a bailout fund allowing the government to take over systemically risky institutions, recapitalize them, and allow them to reenter the market under new management.
[…] At least in Cyprus the people’s representatives there actually had an opportunity to vote against such a levy. Whereas here, those fees are and will continue to be imposed by the banks with the blessing of government agencies — all without any vote in Congress.
It may happen sooner than anyone realizes. U.S. financial institutions are said to have as much $641 billion of exposure to financial institutions in Portugal, Ireland, Italy, Greece and Spain (PIIGS) according to the Congressional Research Service.
Should the Eurozone really break apart, and U.S. banks are caught in the crossfire, with the American people suddenly paying exorbitant fees for the “privilege” of conducting business electronically, they can decide for themselves whether this was a good idea.
That is, for Congress to outsource and give unlimited grant of its taxing authority to faceless bureaucrats acting in concert with an international banking cartel with the goal of bailing itself out of its own foolishness.
In 1913, the 16th Amendment gave the federal government the power to tax American’s earnings for the very first time. Originally a 1% tax to pay for the war, it has ballooned into a confiscatory predator which continually siphons away your hard-earned money to feed the appetite of a government spending addiction that is never satisfied.
Since the immoral premise that government has a right to confiscate your earnings has gone unchallenged for the last 100 years, they now claim the right to steal your assets as well – property that you’ve acquired and invested in with after-tax dollars, through your own hard work an initiative. Nowhere is this more apparent than the recently instituted 3.8% Obamacare tax on home sales.
Think what is happening in Cyprus can’t happen here? It already is.
Cypriot lawmakers on Tuesday rejected a critical draft bill that would have seized part of people’s bank deposits in order to qualify for a vital international bailout, with not a single vote in favor.
The rejection leaves Cyprus’s bailout in question. Without external funds, the country’s banks face collapse and the government could go bankrupt. Nicosia will now have to come up with an alternative plan to raise the money: the government could try to offer a compromise bill that would be more palatable to lawmakers.
The bill, which had been amended Tuesday morning to shield small deposit holders from the deposit tax, was rejected with 36 votes against and 19 abstentions. One deputy was absent.
Too late. The threat has already been made. They have officially declared that they believe that the hard-earned money in private citizens’ bank accounts are fair game for the taking, and property rights are easily dispensed with when governments overspend. I wouldn’t trust them as far as I could throw them, and neither will most Cypriots!
The smart people will get their money out before they have another chance to try a scheme like this.
In Nigel Farage’s first TV appearance since the Cypriot wealth tax was announced, the Englishman pulls no punches. In all his years and all his experience of the desperation of the European Union’s leadership “never did [he] think they would resort to stealing money from people’s savings accounts.” The simple fact is that they know they cannot let any country leave, no matter how small, for “once one country goes, the whole deck of cards will come tumbling down.” There is now “clear irreconcilable differences” between the North and the South of Europe and now that they have done this in one country, “they are quite capable of doing it in Italy, Spain and anywhere.” The message that sends to people is “get your money out while you can.” As far as his British constituents, he strongly recommends George Osborne (UK Chancellor) urge ex-pats to remove all their money and do monthly transfers from home. “Do Not Invest In The Euro-Zone,” he concludes,“you have to be mad to do so – as it is now run by people who do not respect democracy, the rule of law, or the basic principles upon which Western civilization is based.”
“They are propping up a Eurozone that, in the end, will collapse in disastrous failure and they are prepared to do anything to do so.”
As a reminder, the United States government has been eying and researching how Americans use their 401k plans for quite some time now. Recently we saw the U.S. Consumer Financial Protection Bureau suggest the government help “manage” retirement plans.
[…] In February, the Washington Times went so far as to ask “is your 401k about to be nationalized?”
The $19.4 trillion sitting in personal retirement accounts like the 401K may be too tempting an apple for a government that is quite broke, both monetarily and morally. The U.S. Consumer Financial Protection Bureau director Richard Cordray recently mentioned these accounts in a recent interview, stating “That’s one of the things we’ve been exploring and are interested in, in terms of whether and what authority we have.”
This agency, created by the 2010 Dodd-Frank-Act, is very concerned about how safe your retirement savings are. They are apparently concerned that retiring baby boomers may become victims of financial scams.
If the government takes control of retirement accounts, it will not be called “nationalization.” There will most likely be an indecipherable document that provides an opt-out option (initially), but why would you want to do that? The US government only wants to ensure the safety of your retirement funds; they did after all create a new bureaucracy for that specific purpose. And what could be a safer investment than US bonds?
Karl Denninger…cites some reasons for being concerned that this express train intends to flatten the US in the coming years. He lays out whywe may need recourse to something like this.
In two years federal medical spending along with Social Security and interest will, on current paths, reach the total of all tax receipts. At the outside the market will realize that Congress will never address the underlying issue with medical care because they have steadfastly refused to do so…. There is about $20 trillion in US Retirement “assets.” A “small” 10% “one time” tax levy on those assets would fund the US Deficit a couple of years from now, and I will go out on a limb now and predict that exactly that will be done. Of course the “one time” aspect will be a lie too…
He goes on to explain how the test case for this has already been successful. And how the American People have already allowed the legal precedents to allow this to happen to be codified in case histories all the way up to the USSC.
the precedent has already been set, and you, the common American, sat for it.
You allowed the GM bailout to take place where the seniority of bondholders was ignored and they were screwed while the UAW was made whole. You allowed Obamacare to be passed with the Congress denoting it was a “fine” rather than a Tax, because Congress knew that a direct, unapportioned tax was unconstitutional — and then you sat again when Judge Roberts of the USSC rewrote Obamacare to be that very same unconstitutional direct Tax.
Mark my words, Obamacare has very little to do with Health Insurance. This is why nobody in government feels any particular concern over the fact that it screws health insurance up so badly. If you are in government and you want the power to run things by fiat, this law just gave you the keys to a Barchetta with a full tank of petrol.
The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.
No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.
Not to worry Komerade Amerikan. There are apps for this as well. Kelo v. New London is a landmark case that helps put the subjects in their proper place. As long as your bank account can be construed as conferring a public benefit through public use, this lovely piece of jurisprudence would justify its seizure down to the last penny.
Bottom line: The state can steal your property, your wealth and your sustinence at any time they get pissed off enough or desperate enough to do so. You have no recourse to the law against this. The law is pathetically bastardized. Remember how that Arch-Conservative Supreme Court was poised to heroically strike down The AACA? Forget it Jake, we are all Cypriots now.
People with bank accounts in Cyprus were shocked Saturday to learn that as part of an agreement reached with international creditors, the government has imposed a tax on all deposits to help bail out the nation and its banks.
While the island nation may be small, it’s an international favorite for offshore banking– particularly for wealthy Russians. The tax will range from 6.75% to 9.9%, depending on how much is in the account.
“This is a clear-cut robbery,” Andreas Moyseos, a former electrician who is now a pensioner in Nicosia, told the New York Times. Iliana Andreadakis, a book critic, further added: “This issue doesn’t only affect the people’s deposits, but also the prospect of the Cyprus economy. The E.U. has diminished its credibility.”
And indeed, following the massive run on banks in Cyprus, many are concerned that a minor panic could spread to the rest of the Eurozone. After all, it has just set a precedent for taxing private bank accounts at exorbitant rates without warning.
In a move that could set off new fears of contagion across the eurozone, anxious depositors drained cash from ATMs in Cyprus on Saturday, hours after European officials in Brussels required that part of a new €10 billion ($12.6 billion) bailout must be paid for directly from the bank accounts of savers.
The move – a first in the three-year-old European financial crisis – raised questions over whether bank runs could be set off elsewhere.
Jeroen Dijsselbloem, president of the group of euro-area ministers, on Saturday declined to rule out taxes on depositors in countries beyond Cyprus, although he said such a measure was not currently being considered. Although banks placed withdrawal limits of €400 on ATMs, most of them had run out of cash by early evening. People around the country reacted with disbelief and anger.
Someone with €8,000 of life savings in the bank can ill afford to lose an arbitrary €540, but that’s exactly what is going to happen. The Cypriot parliament is probably not going to revolt this weekend, but any politician who votes for this bill is going to have a very, very hard time getting re-elected. This decision is important not only because of the precedent it sets with regard to bank depositors, but also because of the way in which it points up just how powerless all the Mediterranean countries (plus Ireland) have become. More than ever before, it’s Germany’s Europe. That’s bad for Cyprus — and it’s not even particularly good for Germany.
It is difficult to describe the weekend bailout package to Cyprus in any other way. The confiscation of 6.75 percent of small depositors’ money and 9.9 percent of big depositors’ funds is without precedence that I can think of in a supposedly civilised and democratic society. But maybe the European Union (EU) is no longer a civilised democracy?
I heard rumours about this when I visited Limassol last week, but dismissed them as completely outlandish. And yet, here we are. The consequences are unpredictable, but we are clearly looking at a significant paradigm shift.
This is a breach of fundamental property rights, dictated to a small country by foreign powers and it must make every bank depositor in Europe shiver. Although the representatives at the bailout press conference tried to present this as a one-off, they were not willing to rule out similar measures elsewhere – not that it would have mattered much as the trust is gone anyway. It is now difficult to expect any kind of limitation to what measures the Troika and EU might take when the crisis really starts to bite.
If you can do this once, you can do it again. if you can confiscate 10 percent of a bank customer’s money, you can confiscate 25, 50 or even 100 percent. I now believe we will see worse as the panic increases, with politicians desperately trying to keep the EUR alive.
Depositors in other prospective bailout countries must be running scared – is it safe to keep money in an Italian, Spanish or Greek bank any more? I dont know, must be the answer. Is it prudent to take the risk? You decide. I fear this will lead to massive capital outflows from weak Eurozone countries, just about the last thing they need right now. Even from the EU as a whole, I suspect, as the banking union is in place in most countries already.
If initially Europe came out as utterly deranged in its Cyprus deposit-confiscation scheme, at least it was consistent. Now, it appears that Europe is desperate to appear not only completely incompetent but also unable to even make a simple decision and stick with it, following news from both the WSJ and the FT that the original confiscation thresholds of 6.75% and 9.9% for deposits below and over €100,000 is about to be revised.
From the FT: “a revised deal being discussed in Nicosia, with the blessing of the European Commission, would shift more of the burden on to deposits larger than €100,000, according to officials involved in the talks. Under a controversial deal struck with international bailout lenders in the early hours on Saturday, a 6.75 per cent levy would be imposed on all deposits under €100,000 while accounts over that threshold would be hit with a 9.9 per cent levy. The depositor levy was demanded by a German-led group of creditor countries to bring down the bailout’s price tag from €17bn…. Officials involved in last night’s talks said the changes in the levy’s rates were in flux, but they could see the higher rate increase to as much as 12.5 per cent while the smaller deposits could be about 3.5 per cent.”
Elsewhere, according to the WSJ, the deposit “tax” would be under 5% for deposits under €100K, under 10% for deposits between €100 and €500K, and over 13% for deposits greater than half a million.
While this idiotic last minute revision will only infuriate Russian oligarchs even more, it will achieve absolutely nothing to streamline the passage of the bill through Cyprus parliament where it appears to have hung without enough support: the damage has already been done, and it is a virtual guarantee that Cyprus banks will suffer a full blown bank run the second banks reopen, which may be Tuesday, Wednesday, or never, at the current pace. That line around the block at your local neighborhood Nicosia ATM: that is not, and will not, be for people seeking to make a deposit, that much we can guarantee, no matter what the final confiscation percentage is.
What is worse, however, is the painful demonstration of the absolutely and completely arbitrary decision-making process out of Europe. Sure: the ECB and the European Commission may decide to fully unwind the deposit confiscation scheme before all is said and done, but the genie is now out of the bottle, and it is very clear that in the European Disunion, a few unelected oligarchs will now determine until such time as the Eurozone finally implodes, just whose wealth and deposits are ripe for the taking. That not even Germany can make a decision and stick with it is just icing on the cake of the European Titanic.
This is the end result of the “Utopia” known as Democratic Socialism: large, powerful bureaucracies, out-of-control spending, runaway debt, forced redistribution, no respect for private property, and eventual collapse.
Europeans thought they could enjoy the unsustainable promises of Marxism without going full-blown communist. They chose a deceptive “third way” alternative, but it turns out the new boss is equally as destructive as the old one.
This is the path that Obama insists we follow, even as Europe’s warning signs glaringly flash “turn back now!”
Senator Patty Murray, the Democratic chair of the Senate Budget Committee, finally released a budget today. Year over year, in this proposed budget, spending jumps dramatically.
For instance, from this year’s budget to next year’s proposed budget, spending would increase by $162 billion. This year, the federal government will spend $3.599 trillion; under Murray’s budget, the federal government would be on track to spend even more.
Over the next decade, spending under Murray’s budget would increase by 62 percent.
The 10-year budget plan drafted by Senate Democrats includes a $1.5 trillion tax-hike, according to GOP staffers who combed through the long document as soon as it was released.
The “budget would raise taxes on Americans by $1.5 trillion to pay for increased spending … on top of the $1.7 trillion in tax increases already signed into law during the Obama administration,” said a statement from Sen. John Thune, the chairman of the Senate Republican Conference.
“The policies of big spending and big government have led to a dismal average economic growth rate of just 0.8 percent over the past four years. It’s time to grow the economy, not the government,” he added.
President Barack Obama quickly endorsed the plan, which will help him continue an aggressive public-relations campaign against GOP budget maven, Rep. Paul Ryan, and his budget plan, in the long run-up to the 2014 mid-term election.
It’s all working according to plan in Obama’s mind….the Cloward-Piven plan. Sooner or later we will become Greece, our bills will catch up with us, an economic crisis will be triggered, and Obama’s Communist pals will be able to exploit it to try and usher in a Socialist revolution. That’s why they’re intentionally driving us into bankruptcy.
President Obama met Wednesday with House Republicans in an apparent bid to find consensus on fiscal policy, even as he seemed to antagonize the other side by claiming there’s no “immediate crisis in terms of debt.”
His statement would be sharply at odds with a core Republican principle that the debt must be addressed soon — and which underpinned the cost-cutting GOP budget released Tuesday. The president also acknowledged, in an interview aired earlier in the day, that differences with the GOP might be “too wide” to bridge.
For ten years it’s going to be a sustainable place — in eleven years it’ll be Greece.
Imagine you’re in an airplane plagued with mechanical problems, the last working engine has flamed out, and the pilot comes on the intercom and says “don’t worry, we’ve got about 20,000 feet before this really becomes a problem so we’re in a sustainable place right now.” Something like that just happened.
In 2008, when the national debt was just over $9 trillion, that was an“irresponsible” and “unpatriotic” amount of red ink with which to be saddling future generations. Now almost $17 trillion and rising is totally sustainable?
Every year, the federal government spends well over a trillion dollars more than it takes in. As a result, it has racked up seventeen trillion dollars in debt, most of it in the last decade. In seven years at current rates, the U.S. will need almost a fifth of the GDP from the rest of the world just to finance our national debt.
Just two of our federal entitlements, Medicare and Social Security, have “unfunded future liabilities” of $46.2 trillion. Total liabilities are $86.8 trillion or more. Entitlements and other mandatory spending will burden more and more of the federal budget in the coming years. At today’s burn rate, before long no realistic amount of tax revenue will be able to service the debt and fund the government’s basic functions.
We need not worry about the federal government defaulting, since, unlike U.S. states or private citizens, it can print the money it needs to pay the bills. It can and will do so if we don’t make a course correction fast. Massive monetary expansion will ultimately devalue every dollar in circulation and trigger the sort of hyperinflation that flattens entire societies in short order. That’s bad enough, but when government borrows and spends for our supposed benefit, somebody else will have to foot some or all of the bill. If our faith applies to every aspect of life, then it must have something to say about this moral outrage.
[…] In the twentieth century, more than a hundred million people were murdered by their own governments. And that was just in communist countries. History and scripture agree: because of sin, governments with too much power become propagators of evil and destruction.
This speaks directly to government debt, since deficit spending is a symptom of government doing more than it can or should. The federal government now borrows and spends with such reckless abandon that it is careening toward a global economic catastrophe. If Christians can’t muster the courage to speak out against what Rep. Paul Ryan has called “the most predictable debt crisis in history,” we won’t deserve to be taken seriously after the collapse.
Sadly, many Christians don’t know how to disciple our nation to turn the tide because they’ve never studied God’s design for economics or the Biblical role of government. They can’t teach what they don’t know. The key to real reformation, says R.C. Sproul, Jr., is for Christians to understand and work to implement Biblical economic principles:
Christian author and teacher R.C. Sproul, Jr. told CBN News Anchor Lee Webb that he believes it’s time to return to the basics when it comes to economics.
“When we’re left arguing about whether or not we should have a marginal tax rate of 45 percent or 48 percent, and the conservative is stuck arguing for the 45 percent we’ve had an insufficient reformation in our thinking,” Sproul said.
Sproul believes that reformation will happen only when we return to scripture to see what God has to say about economics. That’s why he produced a video series called “Economics for Everybody.” It’s a compelling, even entertaining approach to a topic many find boring.
[…] Sproul provides historical evidence that nations most influenced by biblical Christianity are nations that, by and large, have prospered. They are nations marked by decentralized governments and free markets.
But nations that reject God are marked by centralized power, tyranny, and no free markets. Unfortunately, he said he has observed some of those troubling trends in America now.
“The United States is not a free market. It’s an interventionist economy that’s been moving closer to socialism for over a century now,” he said. “I am not optimistic about our nation’s future economically.”
“We live in a country in which the state forbids me to hire a man unless I promise to pay him X number of dollars,” Sproul explained. “We now live in a country where I can’t hire 50 men unless I promise to buy them all health insurance, including access to abortion.”
“This is not economic liberty. This is not free markets,” he said. “We’re missing the fact that we’re the frog and the water is boiling.”
“It’s my conviction that education is always and everywhere religious,” he said.
“And it’s not a surprise that when 80 percent of evangelical parents have their children in the government’s schools that they’re going to embrace the religion of the government which is the worship of the state,” he said.
Sproul cautioned Christians to avoid despair. One way to do that is by returning to the beginning, to the Creation Mandate and begin to see that our work is part of worship.
With budget sequestration looming and no deal to avert it in sight, Senate Republicans, eager to avoid blame for any cuts, have devised a strategy that is as unconstitutional as it is ill-advised: Let the president decide what to cut.
According to Politico, Senators Pat Toomey (R-Pa.) and Jim Inhofe (R-Okla.), with “the tacit support of Senate GOP leaders,” have been circulating a draft bill that would suspend the $85 billion in spending cuts required by the sequester. Instead, it would give President Barack Obama until March 8 to come up with an alternative that achieves the same level of savings in the same proportions: Fifty percent from domestic discretionary spending and 50 percent from defense spending. Once Obama laid out his plan, Congress could either allow the plan to become law or pass a resolution of disapproval, by simple majority vote of both houses, by March 22.
Congressional disapproval would not, however, be the end of the story. The president could sign the resolution, thereby deep-sixing his own plan in favor of the sequestration. On the other hand, he could veto the resolution, and then the usual two-thirds vote of both houses of Congress would be required to override his veto, restoring the sequestration.
The plan, which Politico aptly describes as an “elaborate, almost Rube Goldberg construct,” is supported by Senate Minority Leader Mitch McConnell, who said, “The goal isn’t to hand over congressional authority. It’s to make sure these cuts actually happen.”
Of course, if McConnell really wants to ensure that the cuts take place, there is a much simpler way of going about it. All Republicans have to do is not offer a plan of their own and then filibuster any bills the Democrats advance. Voila! The sequester takes effect.
Clearly, then, there is more to this move than simply ensuring that budget cuts occur. If Congress does nothing, or if it puts forth its own plan to avoid sequestration, Congress will get the blame for whatever cuts take place. But if the president is given carte blanche to decide what will be cut, he will become the scapegoat.
“It’s a game,” Sen. Bernie Sanders (I-Vt.) told MSNBC’s Jansing & Co. “The president himself becomes the bad guy; he owns the sequestration. He’s the guy who’s blamed for cutting defense or Head Start.”