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Uncensored Opinions: September 2008

Saturday, September 27, 2008

Causes and Cures for our Current Debt Crisis

It is touching to see Mr. Bernanke and Mr. Paulson getting credit for their proposed solution to the financial crisis we now face, especially since it was caused by policies which they and previous government officials had purposely followed knowing full-well that this current calamity could be the result.

FED chairmen, in particular Alan Greenspan in his erstwhile promotion of the interests of America's rich, have constantly flirted with a depression by employing interest rate and monetary policy practices designed to support an overvalued dollar or to cause a recession in order to reduce purchase of foreign-made goods. The FED, under Mr. Greenspan, has constantly increased interest rates during otherwise normal business cycles, under the pretext of preventing an undesired inflation which he alone supposedly understood (or experienced), when his true interest were in preventing a market-induced devaluation of the dollar. These interest rate increases simply shut down needed business activities and, together with corresponding monetary policies designed to decrease consumption, created systemic weaknesses increasing the possibilities of a depression.

This may seem quite preposterous to you, the reader, so I will briefly explain the reasons for these policies.

When “globalization”, the scheme of multinational corporations to extend the exploitation of laborer's wage rates to the entire world (beginning 30 years ago), began to produce unsustainable trade deficits in the western world there were, practically speaking, only 3 ways to resolve the resulting trade imbalances. They were protection (tariffs, quotas,etc.), a devaluation of the nation's currency, or a recession, which would cause unemployment and a resulting loss of consumer's purchasing power (hopefully for foreign products).

U.S. legislators, in the interests of U.S. multinationals who were manufacturing goods overseas to sell in the U.S. (the ever-increasing outsourced products and services), were “persuaded” to discontinue these tariffs, quotas, subsidies, etc. protective of American industries (a process known as “globalization”). They also were directed by U.S. wealthholders, their sponsors, to resist any devaluation of the dollar, and to cooperate with our trading partners in their efforts to keep their own currency values lower (ignoring the fact that their industries would, as a consequence, gain a major portion of the world's product manufacturing and services.) The sole solution left to resolve the trade deficits , in the opinion of the U.S. policymakers, was to drive the U.S. into what turned out to be a series of low-level recessions. This would not only tend to limit U.S. consumer's purchases of foreign products and services (unfortunately products made in the U.S. as well) and would (presumably) result in a decline in the trade deficits. In this scheme, only the wealthy could afford considerable purchases of foreign-made goods. This would not alone solve the fundamental trade problems, however. The trade imbalances would continue until America's workers could again compete fairly with their foreign counterparts.

Under these policies, U.S. wage rates would be expected to fall. Unfortunately, they would have to fall to around $3/ hour to effect any change in the trade imbalances. It did not happen (and could not happen given living costs in the U.S.). As long as trade protection was not allowed (a cornerstone of globalization), the only solution remaining to correct trade imbalances was for the dollar to depreciate. This solution was resisted by the rich and was not resorted to until recently (and grudgingly). This solution to the trade imbalance was, in effect, done “too little too late” . By having forced serial recessions for 30 years without trade deficit resolution, the middle class in the U.S. had been essentially pauperized by mounting debt. Instead of decreasing consumption during these “recessions” the middle class attempted to “keep up with the Jones” on borrowed money or previous savings. This finally culminated in the sub-prime lending fiasco and current debt crisis. These practices had essentially wiped out any “cushion” of accumulated financial assets, credit card loan limits, and home equity loans, culminating in a $1 trillion credit card debt and extensive non-performing home loans. There is no longer any way to avoid facing the fact that the middle class is no longer able to sustain an adequate consumer demand for a healthy growing economy.

The only solution possible now, short of trade protection policies, is for the government to provide the consumption dollars necessary to sustain a healthy economy which,current tax policy being what it is, will result in substantial deficit spending. Unfortunately, the rich don't like this solution either, now contesting the “last, best, chance” for the survival of a high American standard of living, the proposed bailout. As soon as the rich realize that this “consumption-supporting” deficit will have to be continued indefinitely, now that the middle class's resources have been permanently compromised, they will be even more unwilling to provide this needed financial support. Consequentially, unless a new administration “gets serious” about serving the interests of the general public rather than the short-sighted and ultimately destructive policies demanded by the rich, the U.S. will be facing a never ending decline in it's standard of living ( a fact well understood by Wall Street.)

I have a solution which would eliminate the sub-prime interest rate problem as well as the “BTC” (before the crisis) fiscal deficit as a bonus. U.S. citizens now pay about $3,800 per person more than the citizens of their prosperous (western) trading partners for health care services. This amounts to an outlay of about $1.2 trillion more for our insurance-dominated , “pay for as you go” health services than other western countries citizens pay in their single-pay health systems. The U.S. citizen, as a further insult, experiences a far-lower quality of health care than citizens in these (government administered) “single pay” systems. The U.S. health care system was rated 26 in the quality of health services among the developed western nations by the World Health Organization in 2008. Of the resulting $1.2 trillion excess payments, the U.S. government pays about 40 percent, and the private citizen 60 percent. This amounts to $480 billion from the government (via taxes) and $720 billion from U.S. families, about $500 per month more per family.

By reverting to a single-pay health care system the projected $480 billion fiscal deficit would disappear. With $720 billion more in the pockets of American consumers (and mortgage holders), the proposed $700 billion federal bailout of our financial sector would be unnecessary.
These problems could be solved in a single day by the U.S. congress. They only need to give up the AMA's, ADA's, hospital's, insurance company's, and pharmaceutical companies' more-than-generous “contributions” to their political campaigns and vote for a single-payer health system developed in the interest of all the country's citizens.

An even-more important single law would quickly solve the U.S. trade imbalance (at least eliminating the unfair wage advantage of foreign workers over their their counterparts in the U.S.). The U.S. congress simply needs to promote legislation requiring a worldwide (living) minimum wage for workers producing internationally-traded goods, with a proviso that products of non-complying countries be subject to an “equalizing” tariff based upon wage and benefit differentials. Not only would U.S. and other western countries' trade imbalances disappear, but workers worldwide would benefit. It's time for all good people everywhere to demand a living wage for workers of all countries. Every man working in full faith for 40 hours a week deserves, as a matter of morality and justice, to receive a living wage for himself and his family! Anyone tolerating or condoning less than this should be recognized as an “exploiter” and suffer the disdain of his fellow citizens.

Tuesday, September 16, 2008

Popular Scams of the Rich and Famous

There are an ever-increasing number of linkages between politicians, big businesses, and rich individuals designed to promote their joint prosperity at the expense of the general public. Money flows in both directions between these “players” under various “pay for play” schemes. Because they unfairly absorb federal tax revenue or deprive the general public of legitimately earned benefits, I refer to these schemes as “scams'. Most are technically “legal' being based upon law or statute, or founded upon government policy and practice, but have been set up in ways designed to benefit favored individuals. In most cases, these practices are promoted by Republican politicians serving their primary clients, rich individuals and “big business”. Hopefully, in the coming elections, legislators will be chosen which will have the courage to rectify these abuses. The following are just a few of the more popular scams.


Social laws, uncertain as to constitutionality, have been passed to control the general populace, and are generally ignored by those creating them, as evident in many recent court cases. Prostitutes do quite a brisk business during political party conventions, and a “madam” recently interviewed claimed that the "family values" group, the Republicans, are the the best customers. But all this has been pretty well hidden from public awareness by the establishment media, and grudgingly and belatedly disclosed, if at all, after previously promulgated on blogger sites. This situation was not reported during the 2004 conventions by a single major U.S. media, and I read about it only in foreign news sources, the Guardian and Reuters. So much for the fearless American press! But news media in the U.S . practice self-censorship because they are fully aware of what they can and cannot report. Anything critical of the rich and famous is forbidden.


There has been no effort to contain medical expenses that have caused a great many of the financial problems currently plaguing the U.S. The AMA and ADA have so well financed the campaigns of our legislators that we are now facing multiple financial crises substantially directly cause by health care costs. The 2007 federal government deficit of approximately $180 billion would have become a $300 billion surplus simply with a reform of this sector. Americans pay, on average, nearly $7,000 per person for medical costs, whereas citizens in the next-highest-cost developed pay around $3,200 per person. Bringing the U.S. health costs in line with those of the rest of the western world would save U.S. citizens directly $720 billion and the federal government $480 billion more. The U.S. physician's claim is that costs are so high because we get the best health care in the world. This is a real con job. The World Health Organization ranks the U.S. 26th in quality of health care of the advanced countries. The major problem is that a monopoly has been created by limiting the number of teaching hospitals as well as the number of students who are entitled to enroll. The selection process for medical school positions involves the usual custom of picking predominantly children of those politically connected. The "special" qualifier for positions in the few medical schools places offered, that determines appointment more often than demonstrated academic excellence, is participation in extra-curricular activities indicating "leadership" abilities. This is a standard trick for all appointments in this vast conspiracy, made to benefit unqualified candidates supported by political elites. It avoids the serious business of determining the truly deserving (who are frequently passed over because they are considered “nerds” (because they study so much)) and for admission committees to give preference to candidates whose academic performance is not quite up to par. George W. qualified as a possible “leader” because he was a cheerleader at Andover, and others are selected because of their participation in college political activities. When training people for highly technical and critical jobs (e.g., physicians), the last thing the candidate should be doing is playing political tricks or scheming for political office. They should be studying.


The whole system of "globalization" is simply a way to exploit workers worldwide thereby maximizing the profits of essentially western-owned multinationals. The results are now coming in, as demonstrated by the current disinflation in the western countries. By allowing multinationals special tax breaks and accounting practices the U.S. government has encouraged the transfer of almost all high wage U.S. jobs overseas to low wage(exploited) workers. By simply calling these lost jobs "low skilled" they have convinced U.S. workers that they really deserve less for their labor, which in many cases were the most stressful and demanding in the country, Soon middle level professional jobs will be moved overseas as well, and similarly described, no doubt, as "low skilled". This includes engineering and product design, paralegal and brokerage back office jobs, and accounting and auditing jobs as well. Even radiologists will miraculously end up as "low tech" workers.


Still extant farm subsidies unfortunately not only violate those “economically sacrosanct” principles of globalization but result in higher prices for the American consumer as well as increased cost to the American taxpayer. As a bonus, they frequently produce serious economic consequences for other "global" players, especially for our South American "partners" (and incur their resentment).


The U.S. government has made no effort whatsoever to assist in providing support for displaced U.S. workers by demanding reciprocity of employment opportunity with those countries whose citizens are flooding the U.S. labor market. While surveying foreign papers in Europe and Australia/New Zealand for jobs in the IT business, I found loads of ads promising unlimited amount of IT opportunities in the U.S. But ads for IT jobs in these same countries all ended with statements that these local jobs are reserved for their own citizens. Recently the U.S. government passed an amendment to its visa rules allowing other country's workers to enter the U.S. for 6 months without a prior job offer. Most other western countries did the same I believe, offering job opportunities for U.S. workers. But there was a limit to the ages of these workers, 27 years I believe, suspiciously approximating the average age of the children of our current members of Congress. These job opportunities can not possibly benefit those most damaged by U.S. outsourcing policies, those who had irreplaceable (at their ages) experience, without finances to retrain, and facing huge and continuing family bills in the U.S. They still have no realistic possibilities to work overseas even though the great god “globalization” based its legitimacy on the free movement of capital and labor. What a joke!


The entire USAID program has become an excellent way to feed money to political supporters. This scam involves granting taxpayers money as USAID “aid money” to friendly foreign governments with "tied" aid (agreements to purchase in most cases U.S.-made products and services). The so-called "aid" money never reaches the country supposedly receiving it. The "receiving" country gets products and "advice" from U.S. corporations and individuals selected from the U.S. governments "preferred list" of suppliers. The organizations providing these services and products are basically weapons suppliers and "international" accounting and law firms providing "advice" to the recipient country's government. These “select” suppliers and “advisers” are, of course, those companies and individuals who are the major suppliers of campaign finance funds. The recipient country gets weapons systems and armaments used by the local military to control discontented locals (and also expected to support U.S. regional political goals). The result is a lot of money is transferred to American multinationals and private companies located in the U.S. with the bill payed out of taxpayers funds. This is an excellent way to create campaign finance funds with the bill paid by U.S. taxpayers.


Flight of capital from the U.S., (unrestrained by laws regularly established by other more prudent governments) is increasing the risk of a banking default in the U.S. and a drastic drop in the dollar. It is accelerating at the same time that foreigners dollar holders (private and public) are thinking twice about keeping their funds here because the U.S. government has shown no interest or willingness to restrain this process.


The much ballyhooed one-man, one-vote election under a democracy simply does not exist. With the caucus system still being practiced in many states, the candidates the public finally gets to vote for (essentially one of 2 choices) have been chosen by the powers-that-be within each state, and under these conditions, the private citizen's vote is practically meaningless.

Most of the efforts of the U.S. government to contain Communism have involved the setting up of American-friendly foreign governments who were willing to turn a blind eye to exploitation of their country's resources and populace by U.S. corporations. To make matters worse, the U.S. Government, which has established these regimes, insist on calling the resulting U.S.-friendly governments (oligarchies of the rich at best) as "democracies" when,in reality, the government which it replaced was far more democratic than the one established by the U.S. government. This was all done under the pretext of constraining Communism, but was also a handy scheme for U.S. businesses to gain possession or control of the few assets these poor countries possessed and a new supply of exploitable local workers. Now that Communism is no longer a realistic treat there is no longer any pretext for doing this. No governments should be overthrown by actions of the U.S. government regardless of its having a political or economic system inimical to presumed western interests, and certainly no one should be going around bragging about setting up a "democracy" when the opposite occurred.


Bidding on all levels of government contracts is also riddled with ways to allow the contract manager to give the contract to a friend. If the manager's friend is not the low bidder, the manager can simply reopen the bidding on any number of pretexts and advise his friend what he needs to bid to get the contract. Bids can be thrown out as "non-serious" bids without notice, on the basis that the bidder is incapable of performing at that price. This device is used when the winning bid is so low that even the manager's friend can't compete even knowing the prospective winning bid price. This is because he is really a 'prime contractor', won't be doing the work, and needs extra funds to cover his “cut” and to cover possible gratuities for the contract manager. The government has even set up a separate agency, at taxpayer expense, to "prove" this type of fraud can not occur. All the public exposure over the years of these practices puts the lie to the honesty of this organization.


The FED's constant claim of incipient inflation over the last 18 years (when none has ever materialized) has finally resulted in our current economic crises. The latest FD-sponsored recession might well be the final straw that breaks the back of U.S. consumers. There is a serious "moral hazard" involved in improper disclosures of these continuing, unpredictable, and totally uncalled- for adjustments in interest rates as well.


The federal government has been playing footsie with fascism for quite a long time, supported only by the inability of the general public to recognize it. Ecclesiastic appointments, corporate management, charity, "brain trust" ,foundations, university appointments, and even scholarship awards are controlled by political elites, with the consequent assurances that these appointees will play ball with the politicians and their “sponsors”. The Pols now essentially control everything under the direction of the rich and famous.


No one needs reminding that the lobbying crowd and PACs are distorting the legislative process, but every effort of reform is soundly trounced. The lawmakers will not vote against their own power bases and the "favors" they can offer and receive under this system. The only attempt to remedy this was the establishment of limits on 'hard money" campaign money while leaving the door wide open for "soft money" contributions with their oh-so-easily-evaded prohibitions. The “attempt” to control the "revolving door" practice of members of the government (receiving miraculously-compensated position by lobbying organizations upon retirement) by restricting the period in which they could be hired to one year after leaving office is a real joke. There seems to be no sincere effort to restrict members of Congress and the agencies from accepting high-paying jobs from the companies they had previously regulated. Likewise, the law limiting "gifts" while politicians are in office, with no restraint on them after leaving office, is an even bigger joke. The results of these practices have demonstrated their fundamental dishonesty in too many well-publicized instances.


The attempts to trick the public by entering legislative bills that their sponsors know will be voted down (but designed to pacify offended parties) are so widespread and well known as to be an open scandal. But with the media's connivance, these practices (tricks) are never fully understood by the public. I hope that the never-quite-successful attempt to reform the health care system is finally recognized as this type of trickery. The attempted reforms of education,drug abuse, and campaign finance should likewise be recognized as fundamentally dishonest. In every case, one house can take credit for a valiant effort to effect a reform ... and the other house fail to pass it, as planned. Another great trick which is quite effective is to set up a panel, committee, or specially selected individual to deal with a problem, with the understanding that the party so selected will simply sits on its duff until the issue is no longer current.


The “justness” of the U.S. legal system can be compromised by anyone with unlimited funds. The Constitution certainly would not have countenanced the use of multiple lawyer (with political connections) for any one case, for jury selection advisors, and the abusive use (and misuse) of expert witnesses.


Failure to properly assess federal income taxes result in increased prices not reflected in the COLAs used to adjust retirement,pension, and social-welfare payments. These increased prices affect the middle class the most because they are stuck with buying overpriced real estate and a broad range of items otherwise not included in COLA adjustments. They try to maintain an average standard of living by patronizing various civic, sports, and charities whose prices have been, over the past decade, driven up 4-fold while their incomes have been stagnant or falling. The FED is forceful in suppressing price increase on normal necessities while any many items previously affordable by the middle classes soar out of the reach of any but the rich. Inflation in these newly-created luxury items is around 15 percent while inflation in those broad range of standard necessities (and the salary levels of those people supplying them) is prudently restrained by the FED at 2 to 3 percent.. Purchasing power for citizens worldwide will remain stagnant as long as these globalization, tax, and FED policies continue.


Foundations, “brain trusts”, charities, and other non-profits are the most dangerous potential source of political influence-buying of all these “scamers”. Foundations, formed by individuals to avoid inheritance taxes, can provide jobs, grant contracts, and purchase goods and services from a large number of politically-sponsored individuals and companies. They pay no taxes even when they accumulate funds, which they call “surplus”. These surpluses can be invested with the proceeds not subject to taxes. Their employees are well compensated and live quite luxuriously while on 'company business'. Contract awards and grants tend be generous, and the foundations can purchase supplies and services without oversight. Most recipients of this largess are politically-connected and are expected to promote political goals and to funnel funds to political campaigns.


There are literally hundreds of thousands of other varieties of non-profits,categorized as NGOs, which conduct their businesses in essentially the same way. They are set up to perform certain socially-beneficial services, but after all the above-mentioned expenses, only a small percentage of their income are used in this way. Typically, 30 percent of their income (tax deductible write offs from corporations and individuals, and government giveaways) are spent on salary and payroll taxes to top employees and their generous “business expenses” (5-star hotel accommodations, chic restaurant and 1st class air travel costs). The remaining 70 percent can be used for “public relation fees” (to supporters) and some is even spent on legitimate promotion programs. What is left, perhaps 50 percent, can, by the “50 percent rule” be passed on to another tax-exempt having similar expenses, with the result that the claimed public-service, used to obtain tax-exempt status, can end up with practically nothing. Certain charities are particularly offensive perpetrators of this same scheme, disbursing for political purposes the monies donated for the most-needy individuals of all, the poor and defenseless, mostly children. Principles of those organizations practicing this blatant “welfare to the rich” scheme should be, but seldom are, prosecuted.


Government workers in the state and defense departments regularly abuse per-diem TDY privileges. Congressmen on "boondoggles" to exotic foreign locations also are in on the act. These government employees receive $250-$300 per day (tax free and unaccountable) when providing government "services" overseas. The trick is to assume this status even when their overseas assignment may last for years. In practice they rent out luxurious but low cost apartments while living in low-cost countries instead of using their big per-diem allocations for hotel quarters, and live high on the hog on peanuts, pocketing the difference. Congressmen use their "boondoggles" to visit exotic sites under the pretext of the need to be there and having legitimate work to do at the site. They generally go first class air, stay at the fanciest and most expensive hotels, and patronize the best restaurants. Their expenses, if not covered directly by U.S. Government agency or international organization money, are well financed by lavish per-diem allowances.


No real effort has been made for he past 30 years or so to pass legislation that the congress acknowledges are necessary. Health care reform, educational reform, drug reform, and term and campaign election reform have been continually proposed throughout this period, and not one of these issues has been satisfactorily resolved. It is painfully evident that the Congresses involved were acting in bad faith in proposing them.


The president elect has the right to grant 3000 top-level federal (patronage) jobs as payoffs to friends and supporters, and federal judgeships control quite a few more. Top officials in all agencies and government departments are chosen in this way and each lucky appointee in turn picks other friends-of-the-family for subordinate jobs. The results are a government completely under the control of the “in” party and manned by appointees with little or no substantive administrative experience. The consequences of this practice have been the mishandling of the Katrina disaster and security, defense, and other government screwups. This is however, a sure- fire guarantee of easy (if any) work with generous salary for otherwise inexperienced and uneducated wives, relatives, and friends of all sorts.


I just mention contract fraud briefly because it is so well-known by now that I need little elaboration. The GAO has, as yet, 5 years later, not done anything about the letting of the most-well-known and abusive "no-bid" contract, that to Halliburton subsidiary Kellogg, Brand, and Root for a variety of services which could have been provided by anyone, but which were granted on the basis that only they could perform them (e.g.,serving meals to servicemen). Evidence was proffered long-ago that most of these "services" were finally performed simply by the lowest biding subcontractor irrespective of capability, and at a fraction of the price given to the prime contractor This is a common way of "whitewashing" a blatant fraud, the "problem" being "handled by" some agency/committee, which essentially buries it until the issue is no longer on anyone's radar scope. The latest estimate of no-bid contracts for 2008 is in excess of $150 billion.


Trickery and favoritism in the granting of Small Business Administration loans is, likewise, never investigated or prosecuted. Big organizations set up "small business" subsidiaries that, not so surprisingly, get many the loans meant for genuine small entrepreneurs. The practice of forgiving defaulted loans lets the door wide open for fraud as well.


All in all, most of the American populace's problems derive from a lack of understanding of how
their job opportunities and financial success are being jeopardized by these practices. A great deal of the blame for these scam's success can be attributed to the establishment media's self-censorship on these important issues, with a consequent inability of the public to correctly determine what is going on. Thankfully, there is now a self-appointed group who are now providing the news so instrumental in allowing the public to make necessary political decisions. They are called "blog sites" and are America's version of the old soviet "samizdat". Hopefully the government can be prevented from meddling with them.