Starve the Economic Beast, Part 3 59 comments
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Starve the Beast
“The budget should be balanced, the treasury should be refilled, the public debt should be reduced and the arrogance of public officials should be controlled.”
-- Ross Perot
As a country we face an extremely difficult challenge. The deceptive scheme instituted by the government bureaucrats, dishonest bankers, corrupt politicians and the Federal Reserve has convinced millions to believe their deceit. The foundations of their scheme are built upon a blizzard of lies. The only way to confront lies is with the truth. They are counting on some givens. Doug Casey describes a large portion of the U.S. population as Boobus Americanus. These are the functionally illiterate who have been pushed through our government run public school system. They don’t know the name of our Vice President. They can’t add, subtract or write a sentence. They will believe anything they are told by Obama. There are also the ultra-liberals who will believe anything their Messiah utters. Lastly, the large banks, Treasury, and Federal Reserve will do anything to maintain their wealth and power. This coalition of greed, sloth, and avarice presents a daunting challenge.
The cards have been stacked against Americans who don’t borrow too much, save for a rainy day, drive 10 year old cars, and didn’t spend all the equity in their houses. But, all is not lost. The large portion of middle class Americans who have lived their lives prudently have more control than they might think. I recently refinanced my mortgage. I’ve had a mortgage with Citadel Federal Credit Union since 1995 and have refinanced to a lower rate three times. Even though I have been banking with them for 25 years, they required an appraisal and shockingly, proof of income before allowing me to refinance. What a concept. While speaking with the mortgage specialist at the Credit Union, I asked how the financial crisis had impacted them. She said their insurance had gone up dramatically to pay for a few big credit unions that had collapsed due to bad lending practices. I asked how many mortgage loans they had to write off. The answer was NONE. Amazingly, if you get a legitimate appraisal, proof of income, and proof of assets, and keep the loans on your books, you can make loans that will be repaid. It is called prudent banking. My question is why are we saving the worst run banks in the history of the world when we have thousands of prudent banks willing and able to step up to the plate?
“Disobedience is the true foundation of liberty. The obedient must be slaves.”
-- Henry David Thoreau
My plan to reinstitute prudence and common sense into our economic system has two parts. The first part is to heap ridicule and scorn upon Congress, the Federal Reserve, the Treasury, and the banking cartel trying to maintain their stranglehold upon the American people. This part is quite easy. Since their entire plan is based upon lies, just telling the truth will weaken the foundations of their plan. The results of their past policy decisions, lack of transparency, proof of insider dealings, covering up of secret deals, and examples of incompetence and fraud makes it easy to undermine the solutions put forth by these people.
Part two of my plan is more difficult, but with a concerted effort by millions of sensible Americans, we can bring the country back from the brink of disaster. The plan is to put the banks responsible for the collapse of our financial system out of business. The Federal Reserve and the Obama administration do not want creative destruction to revive our economy, so we will have to force creative destruction upon them.
The 20 biggest banks in the country control $3.5 trillion of the $7.1 trillion deposits in the country. There are 8,400 banks in the country and 20 banks control 50% of the deposits. The list below reads like a who’s who list of the worst run banks in history that took the greatest risks and lost the most money.
| Bank Holding Company Name | State Headquartered | No. of Offices | Total Deposits June 30, 2008 |
| BANK OF AMERICA CORPORATION (BAC) | North Carolina | 6,146 | 701,485,101 |
| JPMORGAN CHASE & CO. (JPM) | New York | 3,195 | 497,215,362 |
| WACHOVIA CORPORATION | North Carolina | 3,363 | 422,002,374 |
| WELLS FARGO & COMPANY (WFC) | California | 3,378 | 293,406,008 |
| CITIGROUP INC. (C) | New York | 1,079 | 271,290,597 |
| U.S. BANCORP (USB) | Minnesota | 2,597 | 127,849,616 |
| SUNTRUST BANKS, INC. (STI) | Georgia | 1,759 | 115,603,668 |
| NATIONAL CITY CORPORATION (NCC) | Ohio | 1,568 | 97,764,933 |
| ROYAL BANK OF SCOTLAND GROUP PLC, THE (RBS) | Foreign * | 1,654 | 95,255,161 |
| TORONTO-DOMINION BANK, THE (TD) | Foreign * | 1,090 | 89,756,985 |
| CAPITAL ONE FINANCIAL CORPORATION (COF) | Virginia | 740 | 88,916,281 |
| REGIONS FINANCIAL CORPORATION (RF) | Alabama | 1,924 | 86,225,760 |
| BB&T CORPORATION (BBT) | North Carolina | 1,492 | 85,930,565 |
| HSBC HOLDINGS PLC (HBC) | Foreign * | 477 | 83,045,865 |
| PNC FINANCIAL SERVICES GROUP, INC., THE (PNC) | Pennsylvania | 1,200 | 82,424,564 |
| FIFTH THIRD BANCORP(FITB) | Ohio | 1,356 | 74,656,971 |
| KEYCORP (KEY) | Ohio | 997 | 61,023,875 |
| BANK OF NEW YORK MELLON CORPORATION, THE (BK) | New York | 49 | 55,028,475 |
| BANCO SANTANDER, S.A. (SAN) | Foreign * | 806 | 53,824,517 |
| BNP PARIBAS (BNPQY.PK) | Foreign * | 739 | 43,887,185 |
The total credit card debt outstanding in the U.S. at the end of 2008 was $960 billion. The top 15 credit card issuers hold $793 billion of this credit card debt, or 83% of all the debt. They also hold a major portion of auto loans, home equity loans and personal loans. Do any of these banks ring a bell?
Top 15 issuers of general purpose credit cards for 2008 based on outstandings
1. Chase - $183. 32 billion
2. Bank of America - $166.32 billion
3. Citicorp - $106.74 billion
4. American Express (AXP) - $88.02 billion
5. Capital One - $60.08 billion
6. Discover (DISCA) - $49.69 billion
7. Wells Fargo - $36.36 billion
8. HSBC - $29.97 billion
9. US Bank - $18.53 billion
10. USAA - $17.48 billion
11. Barclays (BCS) - $11 billion
12. Target (TGT) - $8.65 billion
13. GE Money (GE) - $7.51 billion
14. Advanta - $5.02 billion
15. First Natio nal - $4.93 billion
(Source: Nilson Report, March 2009)
There are currently $15 trillion of mortgage loans outstanding in the U.S. You may be surprised to learn that the biggest banks in the U.S. hold the majority of the mortgages in the country. These banks issued the subprime and Alt-A toxic mortgages that brought the financial system to the brink of collapse. There is no doubt after examining these figures that the mega-banks control the country’s financial system. Ben Bernanke, Hank Paulson, and Tim Geithner have decided that these banks need to be saved at the expense of senior citizens and the American taxpayer.
Top 10 originators of mortgage loans in 2008
- Wells Fargo
- Bank of America
- JPMorgan Chase
- Citigroup Inc.
- SunTrust Bank Inc.
- U.S. Bank Home Mortgage
- Residential Capital LLC
- MetLife
- Flagstar Bank
- PHH Mortgage
Fiscal Sanity Movement
“How does it become a man to behave towards the American government today? I answer, that he cannot without disgrace be associated with it.”
-- Henry David Thoreau
The largest banks in the United States have balance sheets populated by trillions in toxic worthless assets. The lifeblood of any bank is deposits. If a bank is denied its deposits, it will collapse. There are 8,000 other banks and 8,000 credit unions in the country. Thousands of these institutions never made a bad loan. If you have money on deposit with one of these mega-banks withdraw the money and deposit it into a small local bank or credit union. You will have the same FDIC insurance and won’t sacrifice any income, since these mega-banks are paying less than 0.5% on your deposits, while charging you 8% for car loans and 20% on credit card balances.
These banks continue to write-off billions in bad credit card and mortgage debt, quarter after quarter. These banks make billions in late fees and interest income by charging 20% to people who pay their debts over time. If the good credits take their business elsewhere, the mega-banks will be left with only bad credits. Most people have 5 to 10 credit cards. Stop using your mega-bank credit card and use a credit card issued by a local bank or credit union. With mortgage rates near generational lows many people have an opportunity to refinance. If this opportunity arises, choose a local bank or credit union. If you decide to buy a car, don’t buy a General Motors or Chrysler vehicle. The government controls these entities. Don’t finance your car through GMAC. By denying the government beast its revenue stream, it will slowly die.
The average individual tax refund for 2008 was $2,700. This was effectively a $200 billion interest free loan to the U.S. government. If every working American walked into their place of employment on Monday morning and increased their W-4 exemptions by 2, we would deny the politicians in Washington of billions for a year. This is a legal way of starving the beast. The corrupt political machinery in Washington DC is dependent upon Americans to spend money. Our spending accounts for 70% of the U.S. economy. Surprisingly, American citizens have more control over the situation than we know. The mega-banks and our government are rotting from the inside like a diseased Oak tree. A gale force wind provided by the prudent Americans can topple the diseased tree.
“If you would convince a man that he does wrong, do right. Men will believe what they see.”
-- Henry David Thoreau
The current fiscal course of the country is unsustainable. We can choose to let the country drift toward a corporate fascist run government which will collapse under the weight of debt, corruption and mismanagement or we can make a stand today with our own money. If enough Americans choose to put the horribly run mega-banks out of business it can be done. There would be absolutely nothing that Obama or Bernanke could do stop it from happening. It is time to do the right thing. Do you know what’s worth fighting for?
“All endeavor calls for the ability to tramp the last mile, shape the last plan, endure the last hours toil. The fight to the finish spirit is the one... characteristic we must posses if we are to face the future as finishers.”
-- Henry David Thoreau
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This article has 59 comments:
FDR imposed a "bank holiday" soon after taking office. It resulted in the government stealing gold from the American people and giving them useless fiat paper money in return.
“Some US embassies worldwide are being advised to purchase massive amounts of local currencies,” writes Harry Schultz, “enough to last them a year.” Schultz publishes the Harry Schultz Letter, an international investment, financial, economic, and geopolitical newsletter named as “Newsletter of the Year” by Peter Brimelow of Market Watch in 2005 and 2008.
Schultz believes the global elite are in the process of engineering an FDR-style “bank holiday” of undetermined length in order to “sort-out the bank mess” and impose new bank rules.
On March 5, 1933, in the depths of the banker engineered “Great Depression,” newly elected Franklin Roosevelt declared a “bank holiday” that forced banks closed for four days. Roosevelt then rammed the Emergency Banking Act through the legislature. Passed by Congress on March 9, the act granted FDR near dictatorial control over the dealings of banks. It also allowed the Secretary of the Treasury the power to compel every person and business in the country to relinquish their gold and accept paper currency in exchange.
wonderful peaceful ideas. let the bloated tick starve. i have already moved most of my funds to other entities. now that i see the bank i use on one of your lists i will even remove the day to day operations funds. there are plenty of small solvent community banks for me to work from.
i was a little suprised to see bb&t, but will now avoid them. i thought i detected friction between regions and the u.s. gov. a while back. however i will avoid them too.
i have already taken an early retirement to stop paying income tax. with the free time i and my pretty half search for ways to legally reduce all taxes.
i have poured about $25,000 into the efforts to inform the american people of the treachery and cesspool of the government (politicians), the fed, the media, and the socialist (oligarch) movement. my immediate friends have supplied another $10,000. we are not rich but we have been those prudent live within your means savers. our one target has been the restoration of constitutional government.
i would love to go back to work as i enjoy working. it is a monumental task but i always keep a glimmer of hope in the back that the tide will turn and my labors won't feed the beast.
let the parasites starve.
I am not convinced that the proposed consumer revolution could work, but somebody has to do something before it is too late.
On Jun 25 08:24 AM Ken Fleming wrote:
> Thanks James for your excellent, passionate article. You heap much
> blame on the current administration and Congress, yet spare the previous
> administration from direct criticism. Weren't they the "leaders"
> that launched the two endless wars, swapped a budget deficit for
> a budget surplus, and perpetuated the faleshood that bank self-regulation
> was best?
In 1990, Bush Sr. sold our military to Kuwait so the money he got for this mercenary sale balanced our trade for exactly one year. But from 1971 to today, aside from that singular year, we have run trade deficits!
We can't balance our government budget if we continue to run trade deficits! If we try balancing it by cutting services and spending at home, all we do is strangle ourselves further, if we don't also impose tariffs and barriers on international trade.
The #1 thing to fix is our trade deficit. Once upon a time, long ago, before we had a Federal Reserve and an Income Tax, our entire national government was funded by tariffs! Imagine that.
Now, we get zero funding this way and the entire world flooded us with imports and we offshored many many millions of US jobs. Now, many more millions of US office jobs are being exported and even with a global depression roaring along, we still run a mega-billion dollar trade deficit.
In the past, when we had very bad recessions, our trade deficit nearly vanished. Now, even with a global depression, it barely gets smaller. This is a very dangerous sign!
Fixing things is worthless if you don't fix the most pressing problems. If we balance our budget like we did in 1999, but double our trade deficit, we go bankrupt!
During the Clinton years, due to the GOP Congress fighting with the President, we saw public spending fall rapidly. But we saw trade deficits grow. Clinton signed significant trade bills and supported 'free trade' at every turn and Bush Jr. doubled this business. So here we are: the former creditor nation that was the world's biggest industrial power is now a debtor nation with virtually no native-owned industrial base outside of the very expensive military industrial complex.
Which is one of the reasons why we are going bankrupt! Much of our industry is actually military-related which means, it is funded by public debt! Note how the author of today's stories here ignores the issue of how military spending has warped our industries. We can't fix our deficits while running a global empire that hops from war to war to war.
So: we must end our imperialist wars. We must embrace protectionism. And we must raise taxes, especially taxes on energy imports. Anyone talking about doing this is called a kook or Ron Paul. :)
seekingalpha.com/artic...
On Jun 25 09:37 AM EMS News wrote:
> Not one peep about the trade deficit? When Nixon cut the gold peg,
> our trade deficit, which was still relatively small, took off like
> a rocket. More so than our budget deficit.
>
> In 1990, Bush Sr. sold our military to Kuwait so the money he got
> for this mercenary sale balanced our trade for exactly one year.
> But from 1971 to today, aside from that singular year, we have run
> trade deficits!
>
> We can't balance our government budget if we continue to run trade
> deficits! If we try balancing it by cutting services and spending
> at home, all we do is strangle ourselves further, if we don't also
> impose tariffs and barriers on international trade.
>
> The #1 thing to fix is our trade deficit. Once upon a time, long
> ago, before we had a Federal Reserve and an Income Tax, our entire
> national government was funded by tariffs! Imagine that.
>
> Now, we get zero funding this way and the entire world flooded us
> with imports and we offshored many many millions of US jobs. Now,
> many more millions of US office jobs are being exported and even
> with a global depression roaring along, we still run a mega-billion
> dollar trade deficit.
>
> In the past, when we had very bad recessions, our trade deficit nearly
> vanished. Now, even with a global depression, it barely gets smaller.
> This is a very dangerous sign!
>
> Fixing things is worthless if you don't fix the most pressing problems.
> If we balance our budget like we did in 1999, but double our trade
> deficit, we go bankrupt!
>
> During the Clinton years, due to the GOP Congress fighting with the
> President, we saw public spending fall rapidly. But we saw trade
> deficits grow. Clinton signed significant trade bills and supported
> 'free trade' at every turn and Bush Jr. doubled this business. So
> here we are: the former creditor nation that was the world's biggest
> industrial power is now a debtor nation with virtually no native-owned
> industrial base outside of the very expensive military industrial
> complex.
>
> Which is one of the reasons why we are going bankrupt! Much of our
> industry is actually military-related which means, it is funded by
> public debt! Note how the author of today's stories here ignores
> the issue of how military spending has warped our industries. We
> can't fix our deficits while running a global empire that hops from
> war to war to war.
>
> So: we must end our imperialist wars. We must embrace protectionism.
> And we must raise taxes, especially taxes on energy imports. Anyone
> talking about doing this is called a kook or Ron Paul. :)
On Jun 25 08:19 AM conceptwizard wrote:
> U.S. embassies around the world are selling dollars and stockpiling
> money from respective countries where they operate.
>
> FDR imposed a "bank holiday" soon after taking office. It resulted
> in the government stealing gold from the American people and giving
> them useless fiat paper money in return.
>
> “Some US embassies worldwide are being advised to purchase massive
> amounts of local currencies,” writes Harry Schultz, “enough to last
> them a year.” Schultz publishes the Harry Schultz Letter, an international
> investment, financial, economic, and geopolitical newsletter named
> as “Newsletter of the Year” by Peter Brimelow of Market Watch in
> 2005 and 2008.
>
> Schultz believes the global elite are in the process of engineering
> an FDR-style “bank holiday” of undetermined length in order to “sort-out
> the bank mess” and impose new bank rules.
>
> On March 5, 1933, in the depths of the banker engineered “Great Depression,”
> newly elected Franklin Roosevelt declared a “bank holiday” that forced
> banks closed for four days. Roosevelt then rammed the Emergency Banking
> Act through the legislature. Passed by Congress on March 9, the act
> granted FDR near dictatorial control over the dealings of banks.
> It also allowed the Secretary of the Treasury the power to compel
> every person and business in the country to relinquish their gold
> and accept paper currency in exchange.
War is ten percent fighting, ten percent waiting, and 80 percent self-improvement according the The Chairman. That formula won't work with Americans, because self-improvement is exactly what they are not interested in any longer. The reason is because it requires patience.
Tell your followers to forget about banks, governments, and the like. Work with young people, and particularly schools. Personally I support the present US government, because I think that Obama is not afraid to work with intelligent people. Of course all of those on his team could not be described as intelligent, but they can be replaced when the time comes.
He cut it because the Vietnam War spending sent a lot of our overspending to Asia. And in turn, we began to run a persistent trade deficit with Japan. Japan has never, ever had an open market and has always used every possible means to prevent foreign domination of domestic Japanese markets. To this day, they do this.
You mention that 50% of our national debt overruns are sold to foreigners. You forgot to mention that the money used to buy these bonds is the result of our trade deficit.
Nixon cut the gold peg because our allies were sucking down Cold War and Vietnam War dollars and using these to raid Fort Knox. Our gold reserves fell by 75% from WWII highs. Nixon had to do something, fast.
Up until the Plaza Accords, the US negotiators at least pretended to be protecting us from trade deficits. After the Plaza Accords, all pretense was dropped and our negotiators actively worked to create a bigger and bigger deficit which ballooned.
We would have no budget deficit if we had tariffs. This is the key issue here.
On Jun 25 10:15 AM EMS News wrote:
> James, you cannot ignore the trade deficit. Even when you replied
> to me, you ignored my main point which is, the real killer here is
> our trade deficit. Nixon cut the gold peg not because of domestic
> overspending.
>
> He cut it because the Vietnam War spending sent a lot of our overspending
> to Asia. And in turn, we began to run a persistent trade deficit
> with Japan. Japan has never, ever had an open market and has always
> used every possible means to prevent foreign domination of domestic
> Japanese markets. To this day, they do this.
>
> You mention that 50% of our national debt overruns are sold to foreigners.
> You forgot to mention that the money used to buy these bonds is the
> result of our trade deficit.
>
> Nixon cut the gold peg because our allies were sucking down Cold
> War and Vietnam War dollars and using these to raid Fort Knox. Our
> gold reserves fell by 75% from WWII highs. Nixon had to do something,
> fast.
>
> Up until the Plaza Accords, the US negotiators at least pretended
> to be protecting us from trade deficits. After the Plaza Accords,
> all pretense was dropped and our negotiators actively worked to create
> a bigger and bigger deficit which ballooned.
>
> We would have no budget deficit if we had tariffs. This is the key
> issue here.
The problem I have with nearly all the commentary on the web concerning this international collapse is, the inability to keep in mind all the international connections that created this disaster. The #1 of which is 'free trade'. Yes, it seemed to make the world grow richer. But this was obviously an illusion. The fact is, it unbalanced the domestic/external factors. The US trade values created by free trade soared. But so did our debts! More of our industry is focused on exports but our industrial imports have utterly overwhelmed our domestic exports. No matter how big we make our exports, if the same sector stuff is imported at double the speed of the exports, we run in the red.
What is worse is, the entire concept of a bottom line seems to have been lost. The bottom line is always 'capital'. Not credit, capital! When a business 'balances the books' at the end of a year, they have to show some 'capital' creation. If they show only how much credit they have left, they end up ignoring the failure to build capital. If trade rivals insist on offering us endless credit, this doesn't mean that we should tap into this and use this 'free' credit.
IT IS A TRAP. The Chinese planned this trap. The Japanese probably did likewise, too. Credit via capitalization from trade imbalances was used to lure us into wanting to turn over our debts at lower and lower interest rates. So we ran all systems in the red. It is no accident that our trade and budget deficits ballooned alongside cheaper and cheaper lending! They are very much connected. The author of the Seeking Alpha article even mentions that he has turned over his own domestic debt, several times. He got to do this because interest rates keep dropping.
He is cynically taking advantage of this bizarre interest rate regime. I learned yesterday that Moody degraded AAA US debt to Aaa. This is very bad. Yet, our creditors have extended cheap loans to us! But note that even Mr. Quinn admits that all this lending is short term. The bank that risked giving him a 4.75% mortgage which runs in the far future. If we have no inflation, his bank will do well. If we have hyperinflation, his bank will go bankrupt. This is due to him paying off his loan with debased dollars.
This is why the credit markets collapsed during the 1970's. For example, I couldn't get a bank loan for a brownstone in Brooklyn. But the owner of the building gave me a loan. At nearly 10%. I paid it down very fast because it was so high. When rates drop to near zero, everyone stops paying off loans. Why bother? The money is basically free. And this is the problem with our government.
Obama just signed the bipartisan war bill of over $100 billion. On top of this, we are giving the IMF $100 billion. This $200 billion has to be borrowed from China. We are trying to reduce the trade deficit with China. China has made it crystal clear, we can't borrow from China and reduce trade with China. Period. And so we are trapped. We didn't tell the IMF, 'Sorry, we have no money to lend, we are too deep in debt.' No, we said, 'Sure, the Chinese need to run a trade deficit with us so they will lend us the money and then we will lend it to you!'
On Jun 25 08:24 AM Ken Fleming wrote:
> Thanks James for your excellent, passionate article. You heap much
> blame on the current administration and Congress, yet spare the previous
> administration from direct criticism. Weren't they the "leaders"
> that launched the two endless wars, swapped a budget deficit for
> a budget surplus, and perpetuated the faleshood that bank self-regulation
> was best?
People sure get pissed when others get into their wallets rather then putting Money in it.
Ethics, rights, liberty! I would not have a liberal facist or conservative capitalist take away my rights and liberty with unethical conduct; we have had this for many years from both sides.
Politics is a distraction to make you believe someone "cares".
If your rights and your money and your children's future are being debased and stolen and sold out you need to act - and politics accomplishes nothing in my experience.
On Jun 25 09:45 AM American in Paris wrote:
> Please stop the nonsense. Do you really think anyone intelligent
> believes your brand of right wing popularism? Were you worrying about
> the average American before this crisis (median household has stagnated
> since the start of the New Millenium) or were you sipping Vodka and
> blathering about the glories of capitalism?
The TARP was an $800 billion swindle, and I am glad you delve into all these details in your article.
I also like the idea of reducing income tax exposure, albeit risk the scorn of some as taking advantage of “loopholes”. But here again, the government largess would take a while to diminish as long as US and Fed printing press products are considered commodities.
The constitution does allow for our congress to establish the value of foreign currencies and to establish tariffs so it could still receive nourishment from those sources if the flow of tax receipts in the form of federal reserve barter papers from the citizenry were to remain too low for its survival.
As I responded in my post on May 25 (see: seekingalpha.com/user/...) we CAN defeat this corruption by taking away what is more precious to them then their immoral souls; their worthless fiat paper money.
We possess the power and conviction to turn our economic ship away from the disastrous waves of inflation and back towards the calmer seas of fiscal prudence and prosperity. The American people must be awakened and the only way is for authors such as James Quinn to keep hitting the public with the facts about the illusion of 'government knows best'.
Take out that piece of plastic from your wallet and set it down on the kitchen table; look at it. What do you see? Is it a measure of purchasing convenience or is it something more? In reality, it is a monstrous vehicle that has been unleashed upon the public to lure you into the realm of fictitious wealth.
I have eliminated credit card dependence by using cash, pay for online products through EFT (electronic funds transfer) and applying for and receive small, short term loans when needed from my local credit union. I am in control of my fiscal house and you must be as well.
The great journey of economic liberty starts with one step, one proclamation of freedom from debt, one act of defiance. This is war; a just conflict against the tyranny of exploitation by an illegal authority whose sole purpose is to enslave people through financial obligation.
Take that first step my fellow Alpha Mates and be free.
The deceipt that is being perpetrated now will rob the thrifty of their savings through massive inflationery writedowns of real value, and reward the spendthrifts who live on borrowing and debt by writing down that debt to piffling amounts and causing them to carry on until we are all bankrupt.
Being a pragmatist, I will support efforts to stop what is happening now, but also as an investor I will short the banks whenever a profitable opportunity arises. I will also go long on the drops and sell into the rallies: you can't help someone else if you can't help yourself.
"The inconvenient fact that you need a job to pay taxes and corporations need to have profits to pay taxes is brushed aside."
Not so true. Just look at the Philadelphia story- we'll have a Gross Receipts Tax! Then small businesses especially and large corporations (less so due to lobbyist exemptions) will get to pay taxes even if they're in the red. They'll raise prices, and pass it on as a de facto consumer use tax.
You couldn't be more right. Starve the Beast. I would encourage individuals to drastically lower their cash savings to a liquid emergency fund (6 months expenses, or so) and put the rest in tangible assets. Gold, silver, palladium, platinum, farmland (with water, of course), Section 8 housing REITs, you name it. The metals have the additional advantage of tax exemption or un-traceability, in many cases. With negative real interest rates, now and into the distant future, you're killing yourself with bank deposits above a minimum.
Good article but weak "solution." Moving money from 'bad big banks' to 'good small banks' will not solve our systemic financial problems.
I propose that a grass roots effort to end central banking in America would strike at the source of the problem. Hopefully Ron Paul's latest book "End the Fed" will have an impact beyond the libertarian niche. If we eliminate the Federal Reserve System and fractional banking, thereby returning to a pre-1913 banking system, we would experience sounder economic growth (based on fundamentals not credit stimulation) and mild business cycles similar to our 19th century results.
For anyone interested in trying to figure out what the next few years might look like for the U.S. I recommend reading "America's Great Depression" by Murray Rothbard. You will not be dissapointed in the content, analysis or applicability to our current situation.
On Jun 25 11:51 AM user396040 wrote:
> I agree with your advice concerning personal finance but I have reservations
> about the doubling down on W-4 exemptions. You would have to pay
> for the undercollection with interest at the end of the year unless
> you intend to become a tax refuser and ultimatey a tenant of the
> federal correctional system. In discussing the deficit, political
> conservatives have generally been very reluctant to confront the
> necessity for tax increases. It is this reluctance(and intellectual
> dishonesty) that has been a big ingredient in the deficit problem.
> After all, we ran surpluses under Clinton and deficits unde Bush
> and Reagan. It is very, very difficult to do the numbers honestly
> and not come away with the conclusion that balancing the budget without
> tax increases is impossible. This is an unpleasant and unpopular
> truth. Our viability as a society depends largely upon our ability
> to face that truth.
Heaping "plenty" of blame on Bushes and Repubs seems only lip service, as Obama and FDR are the targets of these malpolicy charges.
There are those who say we have no other option.
There are those who say: "We MUST deflate our way back to equilibrium" in order to go on from there."
I say, either way, we'll do it all again if we fail to establish a permanent, honest money system not based on debt-issue by private banks.
Abolish the Fed.
Abolish fractional-reserve (debt-issue) money.
Establish full-reserve banking and a debt-free money system.
The Chicago Plan for Monetary reform.
Milton Friedman's "Framework for Economic Stability".
The American Monetary Act reforms of the American Monetary Institute.
The Debt Money System is Broken. Here's how:
www.financialsense.com...
We need a counter-cyclical, macro-focused, money system that results in more EQUITY in the system than is allowed under the 100 percent debt-money system of the Fed.
Ron Paul is right to abolish the Fed.
But place the people back in charge of money, not another private cartel.
On Jun 25 01:45 PM Think-About-It wrote:
> Mr. Quinn,
>
> Good article but weak "solution." Moving money from 'bad big banks'
> to 'good small banks' will not solve our systemic financial problems.
>
>
> I propose that a grass roots effort to end central banking in America
> would strike at the source of the problem. Hopefully Ron Paul's latest
> book "End the Fed" will have an impact beyond the libertarian niche.
> If we eliminate the Federal Reserve System and fractional banking,
> thereby returning to a pre-1913 banking system, we would experience
> sounder economic growth (based on fundamentals not credit stimulation)
> and mild business cycles similar to our 19th century results. <br/>
>
> For anyone interested in trying to figure out what the next few years
> might look like for the U.S. I recommend reading "America's Great
> Depression" by Murray Rothbard. You will not be dissapointed in the
> content, analysis or applicability to our current situation.
On Jun 25 01:52 PM James Quinn wrote:
> The average refund was $2,700. If you got a refund this year, you
> can afford to up your W-4 exemptions. Increasing from 2 to 4 would
> not risk interest and penalties.
On Jun 25 02:23 PM user396040 wrote:
> Agreed. If you are overpaying, this makes all the sense in the world.
> Where do you stand on the question of tax increases (combined with
> spending reductions) to balance the budget?
Additionally, if you have debt, pay it off as fast as you can. If you don’t have debt, keep it that way, and don’t lend money to the Federal Government (either through owning bonds or by over payment of you taxes through the year).
Not to be flippant, but we should also to keep things in perspective . . . this problem is as old as civilization:
6 "Will not all of them taunt him with ridicule and scorn, saying,
" 'Woe to him who piles up stolen goods
and makes himself wealthy by extortion!
How long must this go on?'
7 Will not your debtors suddenly arise?
Will they not wake up and make you tremble?
Then you will become their victim.
Habakkuk 2:6-7
The point you make about corporate accounts is quite cogent- this is where the majority of deposits are located. And since a lot of these monies are not FDIC-insured, there is a compelling reason to flee insolvency. I would say one kind of debt is a good idea, especially right now- and that's a RESPONSIBLE mortgage (no more than 80% of a home's "stress test" minimum value.) If you can return better than 4% YOY in your investments, there's no reason not to take the money. It's also a tremendous inflation hedge. But do it with a responsible bank. Mine was sold to WFC, so I guess I'm helping shore up their books...
On Jun 25 02:52 PM Craig W wrote:
> Boycott of financial institutions and auto makers owned in whole
> or in part by the Federal Government is a great way to protest; however,
> for the boycott to have more bite, a more activist element should
> be considered. Consumers should consider lobbying the companies
> they do business with to move their accounts, and if possible, their
> debts to solvent banks as well.
>
> Additionally, if you have debt, pay it off as fast as you can. If
> you don’t have debt, keep it that way, and don’t lend money to the
> Federal Government (either through owning bonds or by over payment
> of you taxes through the year).
>
> Not to be flippant, but we should also to keep things in perspective
> . . . this problem is as old as civilization:
>
> 6 "Will not all of them taunt him with ridicule and scorn, saying,
>
> " 'Woe to him who piles up stolen goods
> and makes himself wealthy by extortion!
> How long must this go on?'
> 7 Will not your debtors suddenly arise?
> Will they not wake up and make you tremble?
> Then you will become their victim.
>
> Habakkuk 2:6-7
It has taken generations for the American dream to turn into this nightmare. If the country survives this crises as a complete entity, then it will take generations more to return the dream.
What is required is nothing short of a complete re-birth from the foundation up. Can this be done without violence becoming part of the equation? Odds are it can not.
I fear for the future generations that will inherit what is left behind. We have badly failed them. The only saving grace will our peaceful (if possible) transition from this present rotten mess to one of which the founding Fathers envisioned in the first place.
Somehow I doubt it.
On Jun 25 02:45 PM James Quinn wrote:
> I think 80% of the work needs to be on the spending side. I think
> the tax code needs to be dramatically adjusted. Take away all the
> credits and exemptions and reduce rates. Personally, I'd prefer eliminating
> the income tax and replacing it with a consumption tax. That would
> encourage saving and investing versus spending.
I thought I would contribute by adding some easy to use resources to the thoughts and facts you have provided. These focus only on the banking and central banking aspects of the problem, since to fix a problem the cause must be first identified.
Although the *core* problem is the nature of man, that can be fixed only by instituting morality. And that falls to the family and community as the primary source of morality.
One step removed from that are the formal institutions of men. That is where I feel we can make effective headway.
If we, as a nation, had honored the sacrifices of our founding fathers and those who conducted the revolutionary war, and *many* other individual heroes subsequent, we would have adhered to the constitution *strictly* and would not be in this mess.
This first one has not only a discussion of central banks, but several links to videos near the end. I wanted to include it as videos often carry pertinent information more effectively to those more visually/aurally oriented and also folks with shorter attention spans.
As with any of the types of articles such as that below, there *will* be assertions that seem unbelievable, exaggerated, radical, etc. It goes with the territory and one *must* do more research to verify/disprove some of those assertions.
Remember that to move their audience, some of these authors feel they must inspire a fervency in the breast of the audience through inflammatory rhetoric. I accept that as part of the filtering I must do so that *rational* conclusions are achieved and *appropriate* action/responses are undertaken. After all, I am stingy of my time and energy and *hate* wasting them in pursuit of that which gives me and others no pleasure and no gain.
publiccentralbank.com/
I've viewed *some* of the following and believe they have value. Others I've not yet viewed.
www.youtube.com/result...
View one each day, week or month. Forward links to them to others that may be swayed, especially younger persons who may have passed thus far in their life with no education other than that provided by government and its institutions (or controlled by the purse-strings of the government).
Ask each of these recipients to likewise forward to others.
Just of the oligarchy and their minions use the tools of technology to exploit the weaknesses of the spawn of government education, we can likewise use these tools to overcome those weaknesses by empowering the victims with truth.
To have hope of accomplishing this, we must engage them. We must hold their attention. We must provide the seeds of rational analysis and thinking to grow within them. We must imbue them with skepticism of those "who know what's best" and are not of their immediate family, friends and community.
I also suggest that all do more searching of the web for related, reliable and engaging literature. One person can not do all the searching and filtering needed to produce a comprehensive "library" of pertinent information. But as it is with "cluster computing", the power of thousands of individuals sharing the effort and results can produce amazing results.
If you doubt the power of this one person tells two, who tells two, who tells two ...
Consider the old puzzle of the checkerboard. A penny on the first square, 2 on the second, 4 on the third, ... when the last square is filled, you have 2^64-1 (that is 2 to the 64th power - 1 penny) pennies, which is a very large number. Whip out your spreadsheet if you don't believe. I'll save you the trouble:
$184,467,440,737,095,0...
HardToLove
On Jun 25 02:45 PM James Quinn wrote:
> I think 80% of the work needs to be on the spending side. I think
> the tax code needs to be dramatically adjusted. Take away all the
> credits and exemptions and reduce rates. Personally, I'd prefer eliminating
> the income tax and replacing it with a consumption tax. That would
> encourage saving and investing versus spending.
HardToLove
EMS News said: "Mr. Quinn, nearly all of our trade rivals have a VAT (value added tax) system. The US has a state and local sales tax system which is totally different. The US MUST imitate our trade rivals if we wish to survive."
I was reading an article by Murray N Rothbard that provides us with a major reason not to have a 'value added tax (VAT)'. We should stay away from a VAT because it doesn't reduce the size or intrusiveness of government; it just shifts the reporting burden from individuals to businesses while keeping a large government bureaucracy (IRS) in place.
A national sales tax would effectively eliminate the need for 90% of the IRS and would significantly reduce the intrusion into individuals and businesses lives. If a national sales tax was required to be added on each bill as state and local sales taxes are the consumer would be reminded of the cost of government every time he bought something. However a national sales tax would have to replace ALL Federal taxes.
> I think 80% of the work needs to be on the spending side. I think
> the tax code needs to be dramatically adjusted. Take away all the
> credits and exemptions and reduce rates. Personally, I'd prefer eliminating
> the income tax and replacing it with a consumption tax. That would
> encourage saving and investing versus spending.
I had a thought on this I commented on a short while ago. It seems that we might add this to the repertoire of things to consider. With combined power of thousands of minds offering suggestions, maybe a solution that is viable is found.
HardToLove
seekingalpha.com/autho...
HardToLove
Unfortunately, it still leaves in place the *direct* taxation of our wealth and, effectively, a potentially unlimited budget. Thus, it provides no real long-term solution to the problem.
One of my other replies contains a link to a suggestion I had made some time back. It may not be the best solution, but it offers an alternative that does *not* allow the federal government any *direct* access to the fruits of the individual's labor.
It does bring the funding of the federal government "closer to home", so that some "reminder" to the individual is provided. It also promotes a government closer in form to the "federalism" espoused by our founders.
HardToLove
On Jun 25 05:57 PM Paul in Texas wrote:
> User396040 said: "I strongly agree that we should move to a Value
> Added Tax."
>
> EMS News said: "Mr. Quinn, nearly all of our trade rivals have a
> VAT (value added tax) system. The US has a state and local sales
> tax system which is totally different. The US MUST imitate our trade
> rivals if we wish to survive."
>
> I was reading an article by Murray N Rothbard that provides us with
> a major reason not to have a 'value added tax (seekingalpha.com/symbo...)'.
> We should stay away from a VAT because it doesn't reduce the size
> or intrusiveness of government; it just shifts the reporting burden
> from individuals to businesses while keeping a large government bureaucracy
> (seekingalpha.com/symbo...) in place.
>
> A national sales tax would effectively eliminate the need for 90%
> of the IRS and would significantly reduce the intrusion into individuals
> and businesses lives. If a national sales tax was required to be
> added on each bill as state and local sales taxes are the consumer
> would be reminded of the cost of government every time he bought
> something. However a national sales tax would have to replace ALL
> Federal taxes.
www.bloomberg.com/apps...
On Jun 25 09:55 AM Ferdinand E. Banks wrote:
> I'm impressed by your knowledge and writing ability, James, but you
> have gone too far.
>
> War is ten percent fighting, ten percent waiting, and 80 percent
> self-improvement according the The Chairman. That formula won't work
> with Americans, because self-improvement is exactly what they are
> not interested in any longer. The reason is because it requires patience.
>
>
> Tell your followers to forget about banks, governments, and the like.
> Work with young people, and particularly schools. Personally I support
> the present US government, because I think that Obama is not afraid
> to work with intelligent people. Of course all of those on his team
> could not be described as intelligent, but they can be replaced when
> the time comes.
Things would change in a hurry.
><snip>
> A national sales tax would effectively eliminate the need for 90%
> of the IRS and would significantly reduce the intrusion into individuals
> and businesses lives. If a national sales tax was required to be
> added on each bill as state and local sales taxes are the consumer
> would be reminded of the cost of government every time he bought
> something. However a national sales tax would have to replace ALL
> Federal taxes.
It's better than what we have now, although I still have a problem with it. Regardless, similar to your thoughts,
seekingalpha.com/autho...
HardToLove
On Jun 25 09:45 AM American in Paris wrote:
> Please stop the nonsense. Do you really think anyone intelligent
> believes your brand of right wing popularism? Were you worrying about
> the average American before this crisis (median household has stagnated
> since the start of the New Millenium) or were you sipping Vodka and
> blathering about the glories of capitalism?
You're certainly right about the last part:
"Of course, this is unlikely to ever be enacted because congress loses all its leverage over business, industry, etc. because favorable tax treatment would no longer be as easy to implement."
> Great stuff, but let's not ridicule funding for wildlife underpasses,
> okay? A little less roadkill would be just fine.
The way it's going we made need roadkill for sustenance. So "more" roadkill might be prudent planning for the (un)expected! ;-)
> Same goes for research
> on wind machine impacts on endangered Sage Grouse. It's okay with
> me for my tax money to be used on these projects.
What about "snipes"? We should study them too. 50 years ago they were apparently found at every Boy Scout camp in the country!
HardToLove
Isn't it time to look past democrat and republican?! The truth is, both parties are equally to blame, as the article explains.
Stop drinking the kool aid.
Obama is not the second coming.
Get over it.
On Jun 25 08:24 AM Ken Fleming wrote:
> Thanks James for your excellent, passionate article. You heap much
> blame on the current administration and Congress, yet spare the previous
> administration from direct criticism. Weren't they the "leaders"
> that launched the two endless wars, swapped a budget deficit for
> a budget surplus, and perpetuated the faleshood that bank self-regulation
> was best?
On Jun 25 08:58 PM Snakeyes wrote:
> Great stuff, but let's not ridicule funding for wildlife underpasses,
> okay? A little less roadkill would be just fine. Same goes for research
> on wind machine impacts on endangered Sage Grouse. It's okay with
> me for my tax money to be used on these projects.
I calculated the interest and penalties for paying your tax on a yearly basis instead of weekly, and it's like taking out a 10% APR loan from the government. If you have a credit card to pay off with this, DO IT, and you'll be starving the beast. Pay on April 15, and no sooner.
Additionally, if you can handle an investment property, DO IT. With the fixed rates artificially low due to the inflationary tactics of the Federal Reserve (a private bank), I recommend that everyone leverage up as much as they are comfortable with, and do business with the local and regional banks. These rates are MADNESS. 4.75% is ridiculous, and I only hope the bad banks go under.
Citibank is even shunned by its employees. The only benefactors of that company are the fat cats on the board. SHUN IT.
The people in charge are like deer in your headlights. They have no clue, haven't studied history, and turn to the government for answers. Yet, the people in the government are the least paid/qualified and wouldn't survive in business. It's up to the wise and the common to logically maneuver and take the place of our 'leaders'.
Thanks again for lecturing the to the choir, and great job done. Again,and repeatedly, all the incumbents have to do, is convince 50+% of the incompetent electorate (becoming larger daily with illegal amnesty) to vote for them.
All they have to do, as have the silent majority, is to remain silent.
Pogo; ''We have seen the enemy, and he is US!"
we have seen the enemy
I refuse to support failed car makers, failed banks, or any other failed commercial enterprise. GM and Chrysler have utterly failed to compete in a global market. They've had three decades - an eternity in the brutally competitive business world - to adapt to and compete with foreign car makers. Three decades, and they've failed to produce a viable product that can sustain their business model. I do not intend to denigrate the many thousands of competent, hard working Americans employed by the car makers, but face it: their companies have failed them. Management has failed them with a combination of arrogance and ineptitude, incompetent marketing, and typical B-school attention on short-term success that guarantees CEO performance bonuses, but to the detriment of long-term viability and the subsequent loss of thousands of jobs.
Japanese car makers rose to success through uncompromising attention to quality, marvelous engineering, and brilliant marketing. The car I drive is seventeen years old, with nearly 200,000 miles, and never had any major problem. It has a sticker on the door pillar that says "Made in USA". It's a Honda. If I ever need to buy another car, I assure you it won't be a Mexican or Canadian built "American car". Today, China, Korea, and even India are diligently developing cars to compete with Japan. Their engineers are brilliant and their marketing efforts are energetic. Like Japan, their initial products have been almost laughable in execution. Like Japan, that will change in time. What is motivating Detroit to compete with them, when they're gorging themselves at the public trough?
In the history of the United States, literally millions of businesses have failed for one reason or another. Unlike GM or Chrysler, they didn't come crying to the US taxpayer for a handout. Their recourse was found in the bankruptcy code. It enables businesses with a successful plan to either emerge leaner and more competitive, or to be liquidated with the proceeds distributed among various creditors. Please tell me, when GM and Chrysler could no longer find a bank anywhere in the world to lend them any more money to remain viable, why was Congress then so eager to take BILLIONS out of my pocket and yours, completely short-circuiting the centuries-old bankruptcy code, only to have GM seek that route anyway? What does Congress know about building cars that no one else seems to know? What has our society gained, other than for the inept CEOs of large, obsolete, failed companies to realize that there is no risk in continuing their failed business plans. None at all, if the lender of last resort becomes the taxpayer, just as it has been with commercial banks since the creation of the Federal Reserve.
Yes, starve the failed businesses, starve the inept lenders, but you're attacking the wrong target: the real villain here is Congress. If no one buys GM or Chrysler, if no more qualified borrowers seek loans from commercial banks, Congress will simply give them more and more of your money to prop up businesses whose needs can't be sustained by the market. If no one buys the 40 mile range Chevy Volt or whatever insane product they develop, Congress will pass legislation that will effectively force you to, through trade barriers, incredibly punitive gas taxes, crushing regulations, or all of these.
Starve Congress. In November, 2010, fire the bastards. Fire all those who voted for the bank bailouts, the car bailouts, the porkulus, socialized medicine, cap-and-tax, "climate change", all of which are effectively selling your children and grandchildren into economic slavery and misery. The beast taking your freedom is Congress. Kill it.
Please: Let the market work. Let failed banks die. Let failed businesses restructure, become acquired by others, or disappear from the landscape so that successful ones can prosper. Our economy is very, very sick. It needs to purge itself of the toxins within it. Instead, Congress and the President are prescribing more and more painkillers that will only prolong the misery and do nothing to cure the disease.
Capitalism works - if you let it. Economic FREEDOM will ensure that we recover from this insane mess. Congress, by ensuring the general public is the final guarantor of credit to failed businesses, has removed an essential pillar of economic freedom - the element of risk that balances the rewards of capitalism. Without it, failure of the United States as a going concern becomes likely.