American Exploits

The American dream was always an unreachable and unworkable myth. Yet some Americans still cling to the idea and other Western nations still attempt to emulate that mythos.

For fuck’s sake, why?

The dream could never become reality without exploitation. It needs an underdog to be trampled on, robbed and taken out of the picture. From the overt exploitation of slavery, through the continued exploitation of segregation, on to the current period of stagnation where desperation has reached the point that, even by exploiting (stealing) the wealth of other nations over recent decades and making deals with evil forces, the dream has already faded. As Umair Haigue explains: back in 1971 – “…without a group of people to exploit, the American economy simply began to fail, because it was predicated still on that exploitation to begin with.”

Read the full article here: Did America Ever Really Work?

When is the world going to wake up?  Ever?  I personally fail to see the ‘hope’ for better things that Umair always seems to need to add to the end of his fine writings.  There is no ‘hope’.  So, on to eventual ‘collapse’.  Now that’s something you can really believe in.  It happens every time a society reaches the stage modern society is already experiencing.  I can smell it in the air.  A ‘reboot’ is in order  …and it will have to be achieved without the fillip of the considerable ‘one shot only’, irreplaceable earth resources that we have so assiduously and profligately consumed over the past century or more to get to where we are today.

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“Between the Loathsome and the Unspeakable”

Sometimes life just gets so busy, even for someone who has nowhere to go or be at any particular time (that would be me of course).  So busy that important things get missed sometimes.

And so it was, that I came to miss this week’s fine word picture weekly episode from Jim Kunstler’s Clusterfuck Nation blog, which as usual came out on Tuesday (Australian time), and which carries the title Between the Loathsome and the Unspeakable that I have borrowed (as a quote) to head this post.  Kunstler’s post is recommended reading.

It all centres around the 2016 US General Election which will determine who is to be the next US President.  The so-called leader of the free world (chortle-chortle).

It is not clear to me just whether it is Hillary who is the ‘Loathesome’ and Donald who is the ‘Unspeakable’, or whether it is the other way around.  But I suspect, I honestly suspect, that it doesn’t really matter a single iota either way.

Jim (JHK), lays out reasons as to why the result of said proceedings, what he refers to as – “the stupidest election contest in American history”, may be short lived (some sort of termination event perhaps, emanating from “the apparatus of the runaway Deep State (NSA and the military)”), or the whole thing may never happen, being overtaken (preceded) by overarching, unstoppable and grossly destabilising external events of an entirely different nature, centred around banking and financial collapse and which should provide “reason to worry that America will be too disorderly later this year to even hold the 2016 general election”.  If you have been keeping up with the sort of news that could topple our already unstable global economy, you will have no problem in recognising the organisation referred to as ‘DB’ in Jim’s post.  It is not an American entity.

I hope I haven’t given away too many spoilers.  Just read the damn thing for yourself.  Here is the link again: Between the Loathsome and the Unspeakable.

 

 

Third World Nation

The US will be a third world nation within the next nine years.

This is the prediction of Paul Craig Roberts in the article which inspired this post: US On Road To Third World — Paul Craig Roberts

I am going to break down this article into point format to make it easy to see why that is so, although the article is already well written and researched in itself.  As Roberts explains, he predicted back in early 2004 that this would come about within 20 years. This, his latest article shows how the prediction is progressing, with just nine years to go.  I think I have faithfully extracted all of the salient points made, but you could also give the original a read for yourself, if you want to know more.

1. US real household income has declined ranging from 17.1% for the lowest level to 4.8% for the highest level, since 2006.
2. Only the top 1% of income earners have seen an increase in that same period.
3. Those income declines are based on official figures. More realistic figures suggest that real incomes are now below what they were in the late 1960s – early 1970s.
4. During the so-called economic recovery since 2009 the US labour force has shrunk due to a sustained decline in participation rate.
5. In March 2015, more than 93 million Americans of working age were not in the labour force, a historical record.
6. The true US unemployment rate is currently 23%, not the 5.2% reported figure.
7. In 2014, 38% of all American workers made less than $20,000
8. In 2014, 51% of all American workers made less than $30,000
9. In 2014, 63% of all American workers made less than $40,000
10. In 2014, 72% of all American workers made less than $50,000.
11. The scarcity of jobs and the low pay are direct consequences of jobs offshoring.
12. The US economy is only creating lowly-paid part-time jobs, such as waitresses, bartenders, retail clerks, and ambulatory health care services.
13. Full-time jobs with benefits continue to shrink as a percentage of total jobs.
14. Half of all 25-year-olds cannot afford to form households and are living with parents.
15. The Finance industry is the only sector of the US economy that is growing.
16. Finance is not a productive activity. It is a looting activity.
17. The financial sector is a grave threat to the economy.
18. The absence of growth in consumer income means there is no demand growth to drive the economy.
19. Consumer indebtedness limits the ability to increase spending.
20. Lower consumer spending means limited appeal for new investment by businesses.
21. The economy simply cannot go anywhere, except down.
22. An economy that doesn’t make things does not innovate.
23. The economic and social infrastructure is collapsing
24. The family itself is collapsing.
25. The rule of law is collapsing.
26. The accountability of government is collapsing.
27. (Roberts doesn’t mention this but I am adding it anyway) The national physical infrastructure is also collapsing.
28. The prospect of no jobs means the demand for college education declines.
29. Becoming indebted by study only to find available employment cannot service student loans becomes a bad economic decision.
30. University administrations spend 75% of the university’s budget on themselves.
31. The prospects for good full time university teaching faculty with a career before them has collapsed.
32. The demand for university education will collapse and with it science and technology.
33. The rise of the neoconservative hubris of US world hegemony has resulted in 14 years of wars that have cost $6 trillion (and not a single positive outcome).

As Roberts says: “It is a reasonable conclusion that a social-political-economic system so incompetently run, already is a Third World country.”

I predict that the US has a lot further to sink into becoming a failed state, at war with and within itself, yet, and nine years seems to me to be a generous estimate for all this to come to pass.

…and the US is, of course, just the tip of the iceberg, under which floats all of western civilisation.

Where Has All The Money Gone? The QE Money, That Is.

US $2.2Trillion Post GFC Stimulus

That is a lot of money and most of it went straight to the US banks as Quantitive Easing stimulus.  Have the American people seen any of that stimulus money?  Have American businesses seen any of that stimulus money?  I doubt you could find any that could answer those questions in the affirmative.  So where did it go?

Well, thanks to this article (please read it afterwards) by Ilargi published yesterday on The Automatic Earth website, I now understand a little better what has occurred.

The article contains some very revealing graphs on the results of US govt QE policy over the last few years since the GFC and why the injection of over $2 Trillion into the economy of that nation has made little or no difference. Ilargi provides some insightful deliberations on these matters.

Most of the graphs accompanying the article are interesting in their own right and could be usefully considered at some length for their informative nature.  However, the purpose of my post is simply to show just what is revealed in answer to my initial question of where that money went.  At least, answered to my own satisfaction.

Just Where Did That Money Go, And Why?

Thanks to Illargi’s work and also to the graph provided in the first comment on the article, I now have a fair understanding as to just where that $2T has gone.

The short answer is: Nowhere.  At the very most it has only journeyed (electronically of course since it doesn’t actually or physically exist):

a)  from the Fed (US Federal Bank) to the coffers, sorry, I meant computers, of the US commercial banks

and then

b)  from those banks back to the Fed, in the form of banking reserves, as interest earning deposits.

From the following graph, used in the article, it can be seen that the Monetary Base (the sum of currency circulating in the public plus the commercial banks’ reserves with the central bank, the Fed) was tracking along nicely for many years until the GFC in 2008.  From that time it has jumped dramatically by several trillion dollars in a number of stepped leaps that coincide with the Fed’s QE releases of stimulus.

M2MonetaryBaseThe QE steps are more pronounced in the graph below, also extracted from the article, since it covers a much smaller period and in fact only goes as far as early 2012:

GoldAndUSMonetaryBaseSo, that answers where the ‘money’ went.  From the Fed, back to the Fed.  A fitting situation really since it, the money, never really existed in the first place. All of the ballyhoo about Helicopter Ben Bernanke running the government printing presses to get more dollars into the economy, was just that, ballyhoo.

There was no printing of money.  Just electronic signals running from the Fed’s computers to the banks computers and from the banks computers back to the Fed’s computers.

Maybe Helicopter Ben is not as dumb as he is made out to be.  Or maybe he (and others) are much more devious than anyone has given him/them credit for.

OK, the ‘where’ question has been taken care of.  What about the ‘why’ question?

For me, the explanation by Dave Fairtex (who he is I do not know, but he regularly comments on TAE and other financial websites) cannot be bettered, so I repeat it here in full, giving him the credit and also credit to The Automatic Earth blog.

“So BASE includes EXCRESNS – Excess reserves deposited at the Fed.

This is essentially cash deposited at the Fed in excess of the reserve requirements. Why do banks deposit anything at the Fed if they don’t have to? The Fed currently pays 0.25%. Currently, a one-year treasury bill pays 0.14%, and short-term bank repos pay about 0.09%. In other words, the Fed is giving Banks a good deal, so guess what – the banks take it.

People aren’t borrowing – enough anyway – so the banks need to make money in order to pay their depositors that 0.01% they get from their savings account. So, banks take deposits, pay 0.01%, and get 0.25% from the Fed. It won’t make them rich, but its better than nothing, that’s for sure.

Anyone – how much does your money market fund pay you? How much does your savings account pay you? If you could get 0.25% for ultimately safe deposits, would you take it? I sure would. The Fed is the bank that will never go under!

The Fed started paying for excess reserves in October 2008. Short term treasury bond yields plummeted at that moment as money fled to safe havens, and it was at that moment that excess reserves category took off.

To me EXCRESNS is the place where a big chunk of QE money goes to…well if not die, then sleep. If the Fed decided to stop paying 0.25%, the excess reserves would flee from there into somewhere else that provided yield. Perhaps the 1 year treasury yield would fall even further.

QE does construct a bubble in the bond market, by propping up bond prices, and then most of the cash goes to park at the Fed, back where it started from.”

base-excresns.png

It should be obvious even to ‘Blind Freddy’, to use an old Aussie colloquialism, that there is a very strong correlation between the EXCRESNS – Excess Reserves Deposited at the Fed (red line) in the above graph and the now obvious leaps in the Money Base (black line) following third quarter 2008 which represent the QE1, QE2 and QE3 stimulus payments to those same banks.

The commentary explanation from Dave Fairtex gives the reason for this process.  Not only do the ‘Too Big To Fail’ banks gain the security of the additional federal reserves that they now hold, courtesy of the Fed, but they are also gaining interest of 0.25% from the Fed on those deposits.  That may not sound very much gain, but interest on $2 Trillion is not a small amount and again it can clearly be seen that around $1.8T has been deposited with the Fed in the last five years but the Base has grown by around $2.4T.  Since the US economy has been at a standstill over this period, a lot of the extra Base Money can only have come from interest earned by the banks from the Fed.  Very nice work, if you can get it.  The banks are secured, even making some profit without doing anything.  Even the profit they are making is much more than they have to give out to their own depositors with interest rates so low.  And all this without the government having to print a single dollar.

So, What’s The Plan?

Meanwhile, as Ilargi points out, the money supply, the movement of actual currency floating in the economy, is rapidly declining.  The economy is going nowhere in spite of the current buoyancy of the equities market and being talked up by just about everyone.

Something has to give.

If the Federal Bank actually planned for what we are now seeing, what was their objective?  Did they mis-calculate how things would turn out?  Or is there some more devious plan afoot?

Whatever the case, it does not bode well for the future of the people of the United States and ultimately for much of the rest of the world.

I am, in my various writings, often warning of impending collapse of our social structures at some point in the future.  We are heading in the right direction for such events to ultimately overtake us and the US may well be a leader or instigator in triggering something of that nature.

My advice?  Always keep one eye firmly on that possibility.