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Can't blame economic policy on Osama

When William Shakespeare penned the words, “All the world’s a stage“ in, As you like it, it was centuries before tense photos of tense leaders would show tense concern over tense military operations.

What transpired around the killing, or killing announcement, of Osama bin Laden has been astounding. Whether you believe that bin Laden was “taken out” by this NAVY Seal operation, after nearly a decade, two wars, an over 81% increase in the military budget, and thousands of deaths, following the tragic loss of life on 9/11, or whether you believe he was dead and iced years ago and strategically used as a sign of unflappable leadership, is irrelevant. The surrounding uproar was theatre of the extravagant, no matter how you slice it.

But, theatre was invented for distraction, in culture and in politics. So while all the Osama drama was unfolding, the Treasury Department issued another plea for raising the debt ceiling, aka supporting its pro-bank policy. It went something like this:  We need to borrow more to pay social security obligations and not default on our debt, so other countries won’t question our ability to manage an economy  (as if that hasn’t already happened) and we won’t have to pay more to borrow more. If we don’t – you know what’ll happen – yep, another financial crisis.

The actual quote was: “The debt limit is the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments.”

Though technically correct, omitting the fact that our leaders chose to float the financial system on such an unprecedented scale with no obvious Main Street benefits - hence the massive and quick debt increase - continues to show an aversion to reality.

Flashback five years. George W. Bush’s second Treasury Secretary, John Snow, pled the same thing. (He wasn’t unique, of course, Congress has acted at Treasury Secretary request to raise the debt ceiling 78 times since 1960, 49 times under Republican presidents, 29 times under Democrats.) Snow threatened he was being forced to cut payments to civil servants, among other things, but didn’t mention the real reason for the debt hike requirement, like the Iraq war or the tax cuts that stifled revenue collection. He had used similar arguments at the end of 2004, at a time when the debt ceiling was about half what it is today.

Raising debt ceilings is a bi-partisan institution. The show is always the same. The Treasury Secretary begs Congress. Congress debates than agrees. No one questions the real reasons we pursued the excess borrowing.

Since Snow made his plea, a number of things happened; a continued war, an extra war, a collapse of the financial system, a subsidization of the financial system, a decline in employment, home prices, average wages for most of the population, and an increase in foreclosures, executive bonuses, and personal bankruptcies.

Hitting the debt ceiling isn’t about spending gone haywire because the Social Security and Medicaid buckets are too small for the people that rely on these programs; it’s about the big-ticket items– like recently, bailouts.

Here are some terms and numbers, intentionally blurred by those that control them. Feel free to jump ahead:

The total US debt is a combination of two things: the public debt (the amount of securities the Treasury issues in order to borrow money from international or national investors) and intragovernmental holdings (the amount of borrowing done from funds like the Social Security trust fund.) Public debt is always higher.

As of April 30, 2011 – the public debt stood at $9.63 trillion dollars and intragovernmental debt at $4.6trillion (68% and 32% respectively of the total debt of $14.24 trillion vs. a debt ceiling, or cap, of $14.294 trillion.)

In April 2010, public debt was $8.41 trillion and intragovernmental was $4.48 trillion (65% and 35% respectively of the total debt.) In April 2009, public debt was $6.91 trillion and intragovernmental was $4.27 (62% and 38% of the total debt. The debt cap then, was $12.14 trillion.

In April 2008, just after federal subsidization of the sale (read: hostile takeover) of Bear Stearns to JPM Chase, and before the rest of the big bailout began, public debt was $5.22 trillion, intragovernmental was $4.08 trillion (56% and 44% of the total debt.) The debt cap then, was $9.815 trillion.

In April 2007, public debt was $4.97 trillion, intragovernmental was $3.78 trillion (57% and 43% of the total debt.) The debt cap was $8.965 trillion.

Basically, what all these numbers show is that; public debt has nearly doubled since before the big bailout, while intragovernmental debt has increased just 15%.  Some (like Geithner, Bernanke, etc.) may argue that this balloon in public debt was required to save our economy, though there’s little evidence of it doing anything but cheaply floating our financial system, not least because nearly half of the additional $4.4 trillion of public debt that was created is stashed at the Fed as either excess reserves, QE1, or QE2. 

Now that the Osama drama has died down a bit, and Congress returns to economic discourse with Tim Geithner over not whether, but by how much, the debt ceiling will be raised, the partisan bickering will resume its thunderous levels of inanity.

No one on the Hill will question the true why behind the debt – because it would lead back to that mammoth fuchsia elephant - we, the elected and appointed, screwed the country to support the power banks, and we’d do it again, in fact, we already are.

With respect to bin Laden, conflicting stories will go on forever – when did he die?, whose body is in the ocean?why didn’t Obama release a photo? But with respect to the economy, it’s super clear -  our debt ballooned and our economy deflated, to subsidize banks and their practices, period. We can’t blame that on Osama bin Laden.


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Reader Comments (14)

"... the partisan bickering will resume its thunderous levels of inanity."


You know, I remember reading once that when Rome was in decline and bickering fiercely within itself. Rather than inspire unity, external shocks tended to increase division.

It simply boggles the mind that while we sit on the precipice of a crisis... people can think of nothing better to direct their energies to than who should or should not be given credit for Bin Laden's death.

I am solidly entrenched in the belief that things are going to get much worse by simple virtue of the fact that the vast majority of people can't even be bothered to give a damn about the things that are actually important. One can reasonably assume that the economy will stay broken when there is no one trying to fix it.

May 4, 2011 | Unregistered CommenterPapi

While I wouldn't blame want went on in the past on President Obama, (although I would lay the blame on him of appointing, and reappointing, those involved with the dismantling of the American economy!!) I would present this timeline:

The Devil's Timeline

1993: The Group of Thirty confers with JP Morgan and several other banks on policies as regards credit derivatives. The G30 then distributes a favorable report on the expanded adoption of credit derivatives but with the caveat that “legal risk” should be removed. (Please recall this was after the S&L debacle, when slightly over 1,000 banksters were convicted and jailed.)

1994: Next, a group is formed of the major Wall Street investment firms: Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Bros., Salomon Bros., Credit Suisse FB, called the Derivatives Policy Group, which will begin to lobby congress.

1996: After conferring with the Group of Thirty, JPMorgan Chase issues the report, Glass-Steagall: Overdue for repeal, which is distributed to members of congress.

1999: After several failed attempts, the Gramm-Leach-Bliley Financial Services Modernization Act is finally signed into law. This effectively repeals Glass-Steagall, and allows for the establishment of financial ultra-monopolies (although it is a bit after the fact, given Citigroup’s merger with Travellers).

2000: The Commodity Futures Modernization Act is signed into law, killing oversight and financial anti-fraud potential which allows for ultra-leveraging by financial ultra-monopolies.

(Taken together, the Gramm-Leach-Bliley Act and the Commodity Futures Modernization Act removes all "legal risk" in response to the Group of Thirty's dictate.)

Of course, the usual congressional yard sale occurs, as detailed within the excellent report below:

As far as what went down over near Islamabad, I believe I have a reliable source and will relay his story below: (usual apologies for any vulgarities, but it's pertinent to the story)

Geez, those highly paid clowns in D.C. can never get anything correct!

Now, here's how it really went down. The SEAL commandos stealthily made their entrance into a room packed with hostiles, then quickly shot a path through five prostitutes, two oddly attired sheep, and finally reached the Jacuzzi where bin Laden was being attended to by his private nurse -- who really put Gaddahfi's nurse to shame (and we know what a real looker she was!).

She made a sudden move, so they waxed her, and finally in sight of bin Laden, noted his making a sudden movement, shoving both his hands under the water. They were uncertain whether he was grabbing for his balls, or a weapon, so they plugged him.

Because he expired in a water-filled Jacuzzi, following proper Islamic doctrine they buried him at sea.

Now, as far as any photos are concerned, if they have any of Alexis Texas or Jada Fire laying around, sure, I'd go ahead and release them!

(I'd ask Trump for his opinion, though. I mean, as to how he thinks those two sheep were attired?)

May 4, 2011 | Unregistered CommenterJamesW

But we can blame entitlements. There are no free lunches.

When your house is on fire, do you throw gasoline on it? Then why did she?

May 4, 2011 | Unregistered CommenterKeith

May 5, 2011 | Unregistered Commenterwilliambanzai7

No, we cannot blame "entitlements". There is no such thing as "entitlements". Social Security is an employee paid insurance fund; Medicare is not an "entitlement" since seniors pay for services.
We did not have a deficit until Republican rule beginning w/Reagan.
But we can blame "Corporate Welfare/Entitlements" (erroneously called "subsidies")
corporate tax cuts which results in 2/3 of corps paying Zero taxes;
privatization of government functions, i.e. Defense contractors which raise costs 100 percents vs. a government entity performing the same function much cheaper.
Yes, we can blame the top 1 percenters for paying the lowest taxes in 100 yrs.
Yes, we can blame illegal wars fought for oil companies and corporations
Solutions? Raise taxes to Eisenhower levels, tax hedge funds 35%, tax capital gains 35 percent
Tax corporations residing in U.S. regardless of tax havens; eliminate tax havens
Tax oil companies and multinationals a 50% military tax since they are the only beneficiaries.

May 6, 2011 | Unregistered CommenterS. Williams

Totally. Social Security is not an entitlement, but a pre-paid benefit stored in a trust-fund that has been pillaged (since Reagan, but not just under his administration), and is now used as a scape-goat. To the extent, there may be far in the future shortages, it's because funds have been used for other items, and even funds that may be lacking accounting for that, could be filled with a progressive social security tax.

As for corporations, they pay less than 10% of our overall tax revenues. Individuals pay more than 40% on social security and related taxes, and another 40% on income tax, as I wrote in some previous blogs, without the use of off-shore loopholes, etc, while hedges fund partners, as you mention, pay 15%.

A fairer tax system and a retiring of even just the Treasury debt that resides on the Fed's balance sheet back to the Treasury, would create a healthier, more sustainable, and more honestly laid out, budget.

May 6, 2011 | Registered CommenterNomi Prins

Yup, I always love those lackeys for the super-rich who prattle on about "entitlements".....

Now all those super-rich hedge fund managers who defer their tax forever and ever, although somehow still managing to pull down "super-salaries" --- all those who forego ever paying taxes --- now those are truly they who enjoy "entitlements" --- but the rest of us, who have actually paid into the tax base of the US over our lives, haven't enjoyed any of those real entitlements.

Therefore, the mentally deficient such as Keith should take a reputable course in econ or finance, or buy Ms. Prins' Other People's Money and It Takes a Pillage, to eradicate their profound ignorance.

May 6, 2011 | Unregistered Commentersgt_doom

Social Security is an entitlement and a ponzi scheme also. There are plenty of slackers on SSDI who didn't contribute. There are many more who never paid nearly into the system what they have or will take out. You want to know who pillaged it, take a look at LBJ and his "unified budget". Then take a look at Carter for expanding the program to losers and crack heads in the inner city.

Then take a look at the EMTALA edict by congress which states hospitals must treat people in the emergency room for free, to which hundreds of hospitals around the country have gone broke and closed.

While you're at it, you can throw a little ire at Mr. Obama for suggesting the FICA payroll deduction be lowered from 6.5% to 4.5% for witholding. After all, SS and Medicare are Trust Funds, right? So how did he do that? And you can be doubly upset with Obama for stealing 500 Billion from Medicare and giving it to the new Obamacare, which no one has EARNED. Oh I know, it's just a minor little detail.

Yep, these are financial ponzi schemes and ENTITLEMENTS and they're causing us to go broke. Don't blame hedge funds. Blame democrats and their funny money Rob Peter to pay Paul schemes. The left will do ANYTHING for votes. BTW, we haven't been running a deficit since Reagan, it's been since the late 30's.

May your day be wonderful and may all your gardens bloom.

May 6, 2011 | Unregistered CommenterKeith

Actually, my roses are doing really well this year - seriously, I added a few new types to the mix, including a type called Jacob's Ladder which are gorgeous and make great Mother's Day arrangements. (I know that comment wasn't for me directly, but I really am kind of happy with the roses this year.)

But, another thought on SS - both Dem and Republican presidents have borrowed from the funds for reasons other than their intended use, Neither party was immune to that notion, and I'm sure both Dem and Rep. voters count as recipients of SS payments. But, as inequality rose and the cost of living (I'm talking basic needs, not flat screens) increased more quickly than the buying power of saved or contributed wages, there were also external factors weighing on people's financial conditions, as they became disabled, survivors of dead partners, or plain elderly, many of whom worked hard all their lives and contributed to social safety net plans, proportionately dispersed.

This is from the original 1935 act (I know it was amended over the years, but as the intent):

"It was Title II that was the new social insurance program we now think of as Social Security. In the original Act benefits were to be paid only to the primary worker when he/she retired at age 65. Benefits were to be based on payroll tax contributions that the worker made during his/her working life. Taxes would first be collected in 1937 and monthly benefits would begin in 1942. (Under amendments passed in 1939, payments were advanced to 1940.)

The significance of the new social insurance program was that it sought to address the long-range problem of economic security for the aged through a contributory system in which the workers themselves contributed to their own future retirement benefit by making regular payments into a joint fund."

At any rate, it is still the case that public debt ballooned as I indicated, and that debt didn't go towards the SS payments or trusts, because it's the intra-governmental monies that didn't balloon, that are used for that. Again, not a Dem or Rep. thing, just a Treasury Department delineation.

May 7, 2011 | Registered CommenterNomi Prins

The quote below from the man who was responsible for ramming the Federal Reserve Act through Congress right before Christmas in 1913 highlights the base problem with Social Security.

"Very soon every American will be required to register their biological property in a national system designed to keep track of the people and that will operate under the ancient system of pledging. By such methodology, we can compel people to submit to our agenda, which will affect our security as a charge back for our fiat paper currency.

Every American will be forced to register or suffer being able to work and earn a living. They will be our chattels (property) and we will hold the security interest over them forever, by operation of the law merchant under the scheme of secured transactions. Americans, by unknowingly or unwittingly delivering the bills of lading (Birth Certificate) to us will be rendered bankrupt and insolvent, secured by their pledges.

They will be stripped of their rights and given a commercial value designed to make us a profit and they will be none the wiser, for not one man in a million could ever figure our plans and, if by accident one or two should figure it out, we have in our arsenal plausible deniability. After all, this is the only logical way to fund government, by floating liens and debts to the registrants in the form of benefits and privileges.

This will inevitably reap us huge profit beyond our wildest expectations and leave every American a contributor to this fraud, which we will call 'Social Insurance'. Without realising it, every American will unknowingly be our servant, however begrudgingly. The people will become helpless and without any hope for their redemption and we will employ the high office (presidency) of our dummy corporation (USA) to foment this plot against America."

- Colonel Edward Mandel House


As to Osama and our economy:

May 9, 2011 | Unregistered CommenterLarryP

For a more simpler, (hopefully) easier to understand thought picture:

We have a bunch of debt-financed multibillionaires, who derived their fortunes from selling securitized debt, and if the debt ceiling isn't raised, some, or much, of those fortunes may evaporate.

During the same proces or scam leading up to the Great Crash and Great Depression, securitization was done in share form (as I believe you pointed out to me some time back) while today it is done in bond form. The securitization back at the time of the Great Depression, of which Bernanke, Geithner and a bunch of other so-called "experts" appear entirely ignorant of, was ended in 1933.

While today, most unfortunately, it has been not only extended, but most woefully extended, by the Dodd-Frank Act, which now makes it legal for the clearinghouse to be bailed out by the Federal Reserve, without having to resort to that pesky process of going to the US Congress.

Since said credit default swaps' clearinghouse, ICE US Trust, is owned and operated by the InterContinental Exchange (ICE), Goldman Sachs, Morgan Stanley, UBS AG, and the Markit Group (originally financed by JPMorgan Chase, Goldman Sachs, Citigroup and Bank of America, and now supposedly an independent entity without any financial linkage back to its originators -- something I definitely would NEVER bet on), it truly appears to me that they have simply moved from using AIG as a swaps conduit, to utilizing ICE US Trust as the present swaps conduit, which can now be easily and "legally" bailed out thanks to the Dodd-Frank Act, truly a Trojan Horse of epic historic proportions!

May 10, 2011 | Unregistered CommenterJamesW

Oops! Forgot to mention that the ICE, of ICE US Trust (InterContinental Exchange) was financed and owned by, Goldman Sachs, Morgan Stanley, Deutsche Bank, BP and Royal Dutch/Shell --- how's that for nicely tying EVERYTHING together????

May 10, 2011 | Unregistered CommenterJamesW

having your father Jack at our Rotterdam apartment these days, 05/14/2011,

our elites (elected, and electors at once), get better from the financial policies and global undertakings. they are smart enough to mine the game of ruling short term. are they intelligent enough to consider their next generation survival? as long as they believe survival of their own descendents is not at stake, they will abide by their inward rules. as for (Noam Chomsky) us unpersons, we have and will be played either way.

The frustration to write about what is of relevance, and seen clearly by you must be abrupt. A life too short, no leverage, apparently, intellectuals of today must have an agenda that caters to the elite or are not.

success in your next endeavor of publishing a novel.


May 14, 2011 | Unregistered Commenterm.

This will inevitably reap us huge profit beyond our wildest expectations and leave every American a contributor to this fraud, which we will call 'Social Insurance'. Without realising it, every American will unknowingly be our servant, however begrudgingly.

May 30, 2011 | Unregistered Commenterbuy runescape gold
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