Anyone who follows financial markets has to wonder at times, “What are people thinking? How did they come to make those decisions?”
It’s hard to imagine that John Muth and Robert Lucas came up with what’s known as the “rational-expectations theory,” wherein, as explained in Wikipedia,
it is assumed that outcomes that are being forecast do not differ systematically from the market equilibrium results. That is, it assumes that people do not make systematic errors when predicting the future, and deviations from perfect foresight are only random.
Muth and Lucas should watch daily programs on the financial channels like Jim Cramer’s Mad Money, which is supposedly to help individual investors, or CNBC’s Fast Money, a show clearly geared toward speculators. No viewer can watch these shows and walk away believing, “people do not make systematic errors when predicting the future.”
So while financial markets have been a series of speculative bubbles as the Federal Reserve creates money ad infinitum, rational-expectations economists Robert Flood and Robert Hodrick daringly conclude, “The current empirical tests for bubbles do not successfully establish the case that bubbles exist in asset prices.”
For over a decade, accountant Walter Burien has been trying to rouse the public over what he contends is a massive conspiracy and cover-up, involving trillions of dollars squirreled away in funds maintained at every level of government. His numbers may be disputed, but these funds definitely exist, as evidenced by the Comprehensive Annual Financial Reports (CAFRs) required of every government agency. If they don’t represent a concerted government conspiracy, what are they for? And how can they be harnessed more efficiently to help allay the financial crises of state and local governments?
The Elusive CAFR Money
Burien is a former commodity trading adviser who has spent many years peering into government books. He notes that the government is composed of 54,000 different state, county, and local government entities, including school districts, public authorities, and the like; and that these entities all keep their financial assets in liquid investment funds, bond financing accounts and corporate stock portfolios. The only income that must be reported in government budgets is that from taxes, fines and fees; but the investments of government entities can be found in official annual reports (CAFRs), which must be filed with the federal government by local, county and state governments. These annual reports show that virtually every U.S. city, county, and state has vast amounts of money stashed away in surplus funds. Burien maintains that these slush funds have been kept concealed from taxpayers, even as taxes are being raised and citizens are being told to expect fewer government services.
The 2009 Financial Report Of The U.S. Government has finally been released, and the news is not good. It basically confirms much of what we already know – that the United States government is a complete financial mess. The U.S. government budget deficit for 2009 was a record-setting 1.417 trillion dollars. The total liabilities of the U.S. government rose from 12.178 trillion dollars at the end of 2008 to 14.123 trillion dollars by the end of 2009. At their present rates of growth, the interest on the national debt and spending on entitlement programs will gobble up almost every single dollar of federal revenue by the end of the decade. Throughout the report, the word “unsustainable” is repeatedly used. The authors of the report understand that the U.S. government simply cannot keep spending and borrowing like it has been recently. But if the U.S. government slows down this reckless spending even a little bit it could literally plunge the U.S. economy into a deflationary depression. In fact, even with all of the “bailouts” and “stimulus packages” there are many who would argue that we are already in a depression. In any event, the authors of the report make it clear that the United States government is facing a financial crisis of unprecedented magnitude.
Just consider the following chart below. This chart comes straight out of the 2009 Financial Report Of The U.S. Government, and it shows how explosively federal deficits have grown in recent years….
“We say in our platform that we believe that the right to coin money and issue money is a function of government…. Those who are opposed to this proposition tell us that the issue of paper money is a function of the bank and that the government ought to go out of the banking business. I stand with Jefferson … and tell them, as he did, that the issue of money is a function of the government and that the banks should go out of the governing business.”
- William Jennings Bryan, Democratic Convention, 1896
William Jennings Bryan would have been pleased. The government is now officially in the banking business. On March 30, 2010, President Obama signed the reconciliation “fix” to the health care reform bill passed by Congress last week, which includes student loan legislation called by the President “one of the most significant investments in higher education since the G.I. Bill.” Under the Student Aid and Fiscal Responsibility Act (SAFRA), the federal government will lend directly to students, ending billions of dollars in wasteful subsidies to firms providing student loans. The bill will save an estimated $68 billion over 11 years.
Money for the program will come from the US Treasury, which will lend it to the Education Department at 2.8 percent interest. The money will then be lent to students at 6.8 percent interest. Eliminating the middlemen allows the Education Department to keep its 4 percent spread as profit, money that will be used to help impoverished students. If the Department were to actually set up its own bank, on the model of the Green Bank being proposed in the Energy Bill, it could generate even more money for higher education.
For Europe’s poorest countries, European Union membership has long held out the promise of tranquil prosperity. The current Greek financial crisis ought to dispel some of their illusions.
There are two strikingly significant levels to the current crisis. While primarily economic, the European Economic Community also claims to be a community, based on solidarity — the sisterhood of nations and brotherhood of peoples. However, the economic deficit is nothing compared to the human deficit it exposes.
To put it simply, the Greek crisis shows what happens when a weak member of this Union is in trouble. It is the same as what happens on the world scale, where there is no such morally pretentious union perpetually congratulating itself on its devotion to human rights. The economically strong protect their own interests at the expense of the economically weak.
The crisis broke last autumn after George Papandreou’s PASOK party won elections, took office and discovered that the cupboard was bare. The Greek government had cheated to get into the EU’s euro zone in 2001 by cooking the books to cover deficits that would have disqualified it from membership in the common currency. The European Treaties capped the acceptable budget deficit at 3 per cent and public debt at 60 per cent of GDP respectively. In fact, this limit is being widely transgressed, quite openly by France. But major scandal arrived with revelations that Greece’s budget deficit reached 12.7 per cent in 2009, with a gross debt forecast for 2010 amounting to 125 per cent of GDP.
Joseph Stiglitz – former head economist at the International Monetary Fund (IMF) and a nobel-prize winner – said yesterday that the very structure of the Federal Reserve system is so fraught with conflicts that it is “corrupt” and undermines democracy.
If we [i.e. the IMF] had seen a governance structure that corresponds to our Federal Reserve system, we would have been yelling and screaming and saying that country does not deserve any assistance, this is a corrupt governing structure.
Stiglitz pointed out that – if another country had presented a plan to reform its financial system, and included a regulatory regime that copied the makeup of the Federal Reserve system – “it would have been a big signal that something is wrong.”
Stiglitz stressed that the Fed banks have clear conflicts of interest, since the banks are largely governed by a board of directors that includes officers of the very banks they’re supposed to be overseeing:
So, these are the guys who appointed the guy who bailed them out … Is that a conflict of interest?
If you are one of the millions of Americans locked into long term debt service, your road to debt serfdom was likely paved by a mortgage, home equity loan, credit cards, or a combination of all three.
When the U.S. economy began to melt down in 2007 and entered a rapid period of decline in 2008, all eyes were fixed on the subprime mortgage crisis. Though the mortgage crisis, triggered by spurious lending practices and unprecedented risky investment bank practices, was undoubtedly the dominant factor affecting the American consumer in 2008, credit card debt and default was also making a contribution to the deteriorating economy and collapsing standard of living. As the subprime mortgage crisis accelerated, the increasing number of people falling behind on payments or defaulting on credit card debt was largely ignored by the media, with only a sporadic story or two being aired or printed by the major news outlets. Stories finally started receiving vastly more media attention in 2009 as the problem became too large to ignore. Credit cards, once a status symbol and the prized possession of the American consumer, had quickly become the bane of the American consumer.
Credit cards, while omnipresent now, were not always widely used by consumers to make purchases. At one time the credit card was seen as a novel and trendy idea, with a limited number of cardholders who were in effect members of a special club. Now, credit cards are viewed as essential purchasing tools that everyone must have, for status, transactional ease, and even necessity in some instances. Many purchases, particularly those related to travel and lodging, absolutely require credit cards. The overwhelming majority of internet vendors require a credit card for the purchases. In essence, it is nearly impossible not to have a credit card in the 21 st century. The credit card has come a long way in its short history.
by Iloilo Marguerite Jones
Fully Informed Jury Association
Tuesday, February 16, 2010
Yes, it is true that jurors are terribly underpaid compared to all the other players in the courtroom. Look who is not giving up their salary for that day: no one expects judges, bailiffs, clerks, or lawyers to come to the courtroom and work for $6 to $20 per day, so why does the government threaten jurors unless they do this?
Further, compare the salaries of these private working jurors with those of the government employees: most of those called for jury duty make about half as much as those government employees in the courtroom.
Most politicians are lawyers, and therefore have no interest in raising the pay of jurors, strengthening the concept of juries or jury service. Politicians have no interest in mere housekeeping that protects the human rights of the individual, you see.
Yet, if a juror does not show up when summoned, giving up their day’s wages, they can be fined, jailed, and maybe even worse, if they resist.
Jean Saint-Vil: Canada should own up to hosting 2003 summit to plot Aristide’s overthrow
Last week, CBC’s Radio One’s The Current featured a panel discussion that included Ottawa-area resident Jean Saint-Vil, who is active with the solidarity network Canada Haiti Action. Afterwards, we invited him to visit at the Straight Goods News Ottawa bureau.
Media coverage of and political reaction to the Haitian disaster don’t offer much perspective on the situation. Saint-Vil explained that Haitian realities that go beyond the stereotypes of endemic poverty and corruption. He pointed to a racist subtext that subtly portrays Haitians as incompetent and ignores a centuries-old history of oppression and foreign meddling.
Saint-Vil said, for instance, that Haiti has never recovered from reparations it was forced to pay to France, totaling $40 billion in modern currency. Returning that money to the Haitians would help them recover much better than a patchwork of foreign “aid” with all the vested interests and strings inevitably attached.
Jean Saint-Vil talks to Pat Van Horne about Haiti’s realities, part 1