Crisis after crisis, the latest whodunnit partisan blame game in Washington ended somewhat abruptly after massive finger pointing by both sides as to whose idea this horrible sequester really was; and Bob Woodward of the Washington Post strode in and showed he is a lapdog of neither party nor any administration. The facts he laid out from extensive reporting for his book "The Price of Politics" showed the administration had no business trying to blame anyone other than themselves for this new crisis they are continuing to ellicit fear upon the American populace about the ramifications of this sequester.
Meanwhile, the continuation of the massive transfer of wealth, as the value is squeezed from the working and poor classes, while the very elite rich get richer; and the erosion of living standards of the common people across the country goes on, and has now become the de facto way of life for our nation and our expectations. Hey, it's gone on for decades, and while accelerating over the past few years, can the pendulum ever swing to the other direction?
After all, we are in the Information Age, so is it possible that we are coming upon the information revolution? People seek answers. People seek the truth. We all understand at the least the banks were gambling our money, lost a lot of money, and had to be bailed out, or too much more money would be lost - they were "too big" to be allowed to fail. We then proceeded to see nobody prosecuted, while lobbying efforts and money were doubled and the executives bonuses increased from these same financial institutions. Of course, everyone is outraged and still to this day it is debated on the "necessity" of those bailouts.
Henry Ford once said "People of the nation do not understand our banking and monetary system, for if they did there would be a revolution before tomorrow morning." This is true, but there can be peaceful revolutions, too. The truth is within grasp, enough facts are out there to reach logical conclusions, and it's still not too late. Or is it?
So How Huge is This Sequester?
We've heard of possible shortages from everything from bullets to soldiers; from social security checks to releasing prisoners on the street. We were told there would be longer lines at airports because of TSA delays according to Janet Napolateno. Or meat shortages according to the Agriculture Secretary Tom Vilsack. Or the loss of 170 million American jobs hilariously predicted by Congresswoman Maxine Walters (even though there are only approximately 143 million jobs in America). There has been very specific threats of lack of service and mass job loss & terminations and of course it all sounds so scary at a time of such economic uncertainty. What is the reality of these scary "possibilities"? Well, the delays never happened, though they blamed that on the slow travel season. The Dept. of Homeland Security has ordered 1.6 B hollow point (yes the kind banned by the Geneva Convention) bullets, enough to sustain a 20 year war, and our TSA ordered $50 million in new uniforms the night before the sequester began. Releasing prisoners was a true story, however possibly a publicity stunt, hundreds of illegal immigrants were released from prison.
The reality is that the Sequester is a drop in the bucket, so insignificant of a 'cut' that in reality it isn't even a cut at all. According to the CBO the Federal government spent $3.538 trillion in 2012. An $85 billion reduction from that number would represent a 2.4% budget cut, however when factoring in baseline budgeting, a method that began in the 1980's, which allows budgets of programs to increase with last year's budget, multiplied by the expected inflation rate and expected population growth. This currently gives the federal budget about a yearly automatic 6% increase without any Congressional approval. This means, as we deducted this "meat cleaver approach" (as President Obama put it) of $85 billion from Federal spending, in actuality we are adding $212 billion to bring the pending 2013 spending levels up to $3.75 trillion.
This baseline budgeting is now expected and a normality to Washington - if your budget causes government growth of less than that 6%, you get to call it a cut. Essentially, it means, these cuts, really aren't even cuts at all. Just the tip of the iceberg of the funny math that goes on in Washington.
One thing to note in these regularly scheduled financial showdowns in Washington where no American benefit is off the table, is what is off the table. The plan to put 30,000 drones over our nation with infrared cameras and chemical 'sniffing' technology is still on. Foreign Aid to China (even though they hold $1.1 trillion of our debt) is still on . Foreign Aid to Egypt, is increased; our new Secretary of State John Kerry announced another $250 million immediately with $260 million more to come, just a couple weeks after the Sequester began.
We still plan to keep over 700 military bases on foreign soil, protect the sovereignty of Europe and Japan, all on your tax dollar.... and the erosion of value of the rest of the dollars in your bank account.
The Real Rate of Inflation
Our Federal Reserve Chairman Ben Bernanke has assured us keeping the interest rate at 0% for the years that he has, is not damaging, as inflation is low, and some inflation is good. This is somewhat the common notion that we see in our text books about inflation. Free Market Economists have been warning that these quantitative easing and expansions of the money supply is causing inflation, but the Keynesian Economists like Paul Krugman have pointed out with 2% inflation as "proof" that these free market economists and their talk of inflation were all wrong. Yet this doesn't even scratch the surface of the truth.
The CPI is no longer a fair representation of inflation. Prices are rising much more rapidly than the CPI would suggest. The methodology created for the CPI calculation has been done to hide the true effects inflation has on consumer prices. So we are being rescued by the officials at the Fed who are too busy staring at a broken barometer, rather than actually looking at what's happening with market prices.
The average gas prices have doubled over the past 10 years. People talk about gas prices all the time as their volatility regularly affects the budgets of those, especially in the poorer classes, but food prices have also taken a hit, as the Commodity Food Price Index has doubled over the last 10 years as well. How is this possible with an average inflation rate of 2.32% from 2002 to 2012 as reported by our government? Inflation at that rate means we shouldn't see prices doubling but every 30 years, so why did we see it in 10?
This is where I have to refer you back to funny math. As it goes in Washington, if you don't like the numbers you're getting, just change the formula. In the early 1990's the Fed did just that, again, and made more (they previously did this in 1980, though not affecting the CPI rate as drastically) changes to their formula to remove food and energy from this calculation. Yes, that's right, 2 things that every family needs no longer count as inflation when their prices go up. This effectively cut the CPI in half and they could all pat each other on the back for how much easier they just made the life of everyday citizens by lowering inflation for us.
In addition to changing the calculation, there is other funny numbers going on here, as CEO of Euro Pacific Capital investment banker Peter Schiff pointed out to the Yahoo! Finance News "Newspaper and Magazine prices, which are a component of the CPI, over a 12 year period, the government claims these prices rose by 37.1%. Yet we actually looked at the cover prices of those newspaper and magazines, they actually went up over 131%. The actual rate of increase was 3.5X what the government says it was." Schiff also notes they used America's 10 most popular newspapers and magazines, and the prices on their covers.
In his YouTube video posted in January, "Inflation Propaganda Exposed," Schiff further notes that our government also tells us that our health insurance rates have only increased at 4.3% over the past five years (actually lower than their reported rate of inflation). But again to be apparently contradicted by the truth, according to Kaiser Research, insurance premiums they were monitoring increased 24.1% over the same period. 5.5X faster than what the government tells us those prices have increased. Those who pay the premiums wonder where to purchase this insurance our government notes has only rose 4.3% over the past five years?
Fox News did a presidential poll a month before the last election polling over 1,000 people. In that poll people identified their primary economic concern by an almost 2:1 margin of the unemployment runner up - rising prices were peoples primary concern. Yet this doesn't make headlines. The headlines indicate that inflation is very low, and as Peter Schiff notes, of the same publications that must not know their own price history.
Our Staged Recovery
We are constantly assured of the value of our dollar and vibrancy of the recovery of our economy by comparing the dollar to the Euro, or looking at the Dow Jones Industrial. These two daily referenced stats are very misleading. First, the latter, as it is much easier to see through the hype on the market rallying to close on gains.
The Dow Jones Industrial is very rarely interpreted to allow for inflation, only separately, and usually free market analyses is where you will find a breakdown of looking at the Dow Jones, adjusted for inflation. With the recent rallies the Dow Jones is only now reaching the highs prior to the 2008 meltdown. When factoring for inflation, the picture is not so pretty. Of course if you adjust it for inflation with the 1990 formula for inflation, the picture looks much bleaker..
So the very best scenario you get out of your average stock on the market, in this new bailout world, is that it's dollar value will increase at less of a rate than that dollar will lose it's spending value. This means that the overall purchasing power of the money you have invested is actually decreasing even though the numbers are going up. But good old Uncle Sam will still see these numbers going up as a gain, and of course tax you on it, and leave you with even less. This is where you need to be very aware of what is going on in your portfolio.
Many more people now have more of their investments smartly tied to gold, and historically this is a good move to 'retain' the value of your savings. The reason being is before the Keynesians took over writing our text books, gold was always the measure of a currency's stability - we were on a gold standard here in America which kept inflation fairly stable. Yet, since that link to gold has been cut in the 1970's, we have seen massive inflation, although now it is masked under fancy formula changes for CPI to mislead you on what is going on even though you see it right in front of your eyes. The gold boom has been nothing more than a dollar bust.
That of course leads to the other stat which is the equivalent of having two terminally sick patients and the doctor declaring the one that is dying less quickly as "strong." Both the Euro and the Dollar are fiat currencies, neither linked to any precious metal, or anything of value other than the good faith and promise of their governments that are all greatly overextending their budget of taxes they received and purposely devaluing to cover it; it's called monetizing the debt.
If you make the value of the debt worth less by putting more dollars in existence to make payment on said debt you have just reduced the debt in two ways: The numerical number representing that debt is lowered from your payment, and the purchasing power of said overall debt is also reduced.
Keynesian economists will have you believe the incredible complexity of what happens at the Federal Reserve is in fact quite good for the collective good of us. It's actually really not that complex. They control one thing, and artificially so - the interest rate, this is fueled by the volume of new money created, and artificial demand for bonds as they continue to purchase about $85 billion in treasury bonds monthly. For those of you that don't understand, the Federal Reserve themselves are a private cartel of banks that manage our monetary policy, or in other words, they determine the rate your dollars lose their value. They do this by creating money, both printing it, and adding digits to bank accounts, and loan it back to us. $1.7 trillion of Federal Government debt is directly owed to our Federal Reserve, and they are now purchasing it at a rate of almost $1 trillion per year and own another $1 trillion in mortgage backed securities. Seems as though it is in their financial interest to create money for U.S. debt which siphons the wealth from the citizens in the form of inflation, while delivering it to the central bankers in the form of interest, and first use of low/no interest loans to them and their friends.
The Dollar's Last Stand?
The international voices calling to move off of the dollar as default currency is growing. China and Brazil signed $30b/year currency swaps in what many view as a move to remove the dollar as the standard for emerging markets. Of course there are countries like Iran, calling to end the "Petrodollar", and our response seems to be propaganda for war with them, despite international and US science and intelligence communities assuring us they are far from pursuing nuclear weaponry; and language experts assuring us their leader did not say he wanted to wipe Israel off the map, but referred to Zionism (which many Jews are also against).
Few realize unlike Libya, Iraq, Egypt, and Yemen who have all expelled Jews, Iran has a Jewish population of about 10,000, and Mahmoud Ahmadinejad has been presented with awards thanking him for his obvious tolerance that the Mainstream Media just doesn't show you. You can find the videos on YouTube where the Jewish Elders are presenting him with awards when he was in NY for a UN meeting. The mainstream media doesn't seem to want to acknowledge this, or that all the experts on the matter seem to agree - Iran is not pursuing a weapon; but the war drums beat on...
Most economists whether Keynesian or Austrian (free market) agree, if the world moves off of the dollar, it will be tragic for us. Overspending will screech to a halt. Benefits and services will lapse. So one way or another, our country will wake up from this drunken spending rampage, either on our own terms by holding our politicians accountable and getting them to change the overspending status quo; or we will wake like cold water to the face to realize the status quo is no more.
This could be disastrous and chaotic for our society to experience any cuts that occur that way. Your savings of course would be long gone, not just by inflation, but also annexed in a way like the Cyprus bank accounts (endorsed by the IMF so don't think it can't happen here) but that would be minor compared to the problems that we would face. Prices going through the roof effectively shutting down most of the transportation and commerce, which would lead to food shortages, and no doubt riots, possibly martial law.
The only hope to stop the direction of our country, with troops on the ground in over 100 countries and over 700 foreign bases, in both attempting to stop the new war our politicians and media are pushing for, and continuing the massive increases in spending evaporating the wealth from our pockets, and the value of our wages is spreading the truth. And getting involved.
Both parties need to make it a high priority to balance the budget. We need a common premise that this sneaky inflation tax that the government and Federal Reserve has worked to hide by modifying formulas and trying to fool us into believing it's not really there is bad, and has to be halted as much as possible. And stop the misleading talk of 'cuts' that really aren't cuts at all...
Both Republicans and Democrats need to work on serious alternatives to the status quo to truly balance the budget. Not all defense is necessarily defense nor wise for our country's best interest. Not all welfare is either good for the country or moral, especially when it is bailing out criminal corporations that are never held accountable. There are plenty of concessions for both parties to make, but both should be eyeing the goal of a balance budget as a necessity not an option, just like every family and business (albeit bailout recipients) in America.