Following the Eurozone summit meeting in Brussels, European Council President Herman Van Rompuy announced the results of the late-night negotiations: "From a series of national debt crises, the situation was evolving into a systemic concern, threatening the stability of the Eurozone as a whole. This threat has been contained."
First, the holders of Greek sovereign debt have voluntarily agreed to accept a write-down of their holdings by 50 percent which would be sufficient, he said, to bring down Greece’s debt-to-GDP ratio from its current level of 150 percent to 120 percent by the year 2012.
Second, in exchange for additional austerity measures, Greece will receive another $140 billion from the IMF by the end of the year.
Third, the “rescue fund,” or European Financial Stability Facility (EFSF), will be leveraged so that it will have available approximately $1.4 trillion to loan to countries that get into financial trouble in the future.
Next, the banks affected by the write-downs will be required to raise their net capital ratios from the current five percent to nine percent by next summer, and further austerity measures will be applied to those states applying for financial help in order to qualify for it.
House Committee on Oversight and Government Reform Chairman Rep. Darrell Issa (R-Calif.) is probing a $730 million conditional loan commitment to Severstal, a Russian company operating mainly in the steel and mining industry. Writing to Energy Secretary Steven Chu, the California Congressman questioned whether Severstal North America, a subsidiary of the powerhouse Russian manufacturer, should benefit from public financing to improve and expand facilities in Dearborn, Michigan.
The North American division of the company has struggled to penetrate the U.S. steel market, and it sold three of its U.S. mills in March. Consequently, Severstal North America received a conditional loan approval from the U.S. Energy Department in July to help retool and expand its factory in Dearborn.
Severstal is owned and controlled by Alexei Mordashov, who is worth $18.5 billion and is one of the wealthiest people in the world, according to Forbes magazine. In Issa’s letter, he asked Secretary Chu why taxpayer money is needed when "announcements made by Severstal during the loan consideration process indicated that the company had ample means to carry out the project."
In Commerce Secretary John Bryson’s announcement that the nation’s Gross Domestic Product (GDP) grew at an annual rate of 2.5% last quarter, he came close to disclosing the real driver of the economy: producers:
In spite of headwinds hitting the U.S. economy, today’s GDP report — the ninth straight positive quarter — reflects strong consumer spending and export growth and continued investment by American businesses (emphasis added).
But then he had to go and spoil it all by touting the Keynesian response to lack of jobs and turning to shill for more government spending:
Despite today’s encouraging numbers, we must do more to create jobs. That’s why it’s critical that Congress act to pass the measures in the president’s Jobs Act.
It’s the Keynesian approach that puts the matter upside down, but continues to be the only ideology considered as a solution: demand creates supply. If that is so, then putting spending power into the hands of consumers will drive the economy. History shows that that leads to all kinds of mischief, including taking of money from those who earned it and giving it to those who didn’t, all in the name of “fairness” and “economic justice.” The fact that the Keynesian approach doesn’t work, never has worked, and never can work, doesn’t bother the statists who favor more government, regardless.
The New York Times and CBS has come out with a new poll that shows Americans have a strong mistrust of government. Almost 90% of Americans do not trust government to do the right thing and almost three quarters say that they believe the nation is on the wrong track. As the poll probes deeper into what Americans believe the government ought to do, partisan differences appear. Nearly 9 out of 10 Democrats believe that the distribution of wealth in the country should be fairer, while 2 out of three independents agree with that, though only 1 out of 3 Republicans believe that to be true. This poll also showed that a significant percentage of Americans support the “Occupy Wall Street” movement while a much smaller percentage support the Tea Party Movement.
Gallup has come out with a poll this September that may narrow down discontent with government more. The overwhelming majority of Americans, 2 out of 3, have a “great deal” or a “fair amount” of confidence in local government — a percentage that has remained very stable over the last fifteen years. A clear majority of Americans, 57%, feel the same way about state government, although that confidence did nosedive in 2009. Faith in the federal government, by contrast, is very low.
Another September Gallup Poll sheds light on part of the reason for the low confidence in the federal government. Since 1979 Gallup has asked respondents “Of every tax dollar that goes to the federal government in Washington, D.C., how many cents of each dollar would you say were wasted?”
Presidential candidate and former Godfather’s Pizza CEO Herman Cain fielded questions from voters in Concord, New Hampshire, on October 12. Cain’s rise in the polls has created intense interest in the businessman’s 9-9-9 plan, which has become the centerpiece of his campaign. And the question-and-answer sessions seemed unremarkable until one voter asked: “So sir, if you bought under 9-9-9 an Apple computer designed in the United States, with components made in Malaysia and assembled in China, would you get to deduct it?” Cain amazingly replied: “I have no idea.”
When Bank of America announced that it was moving its derivatives-laden portfolio at its subsidiary Merrill Lynch over to its bank holding company, it said it was merely responding to pressure from some of its partners to take advantage of the holding company’s higher credit rating. It would also reduce the need for the bank to post an additional $3.3 billion in collateral because of the recent downgrade it suffered at the hands of Moody’s last month.
But the real reason, according to Bloomberg, is that the FDIC insures the bank but not Merrill Lynch, and in the event of a failure in its derivatives holdings, the FDIC, courtesy of the U.S. taxpayer, would pay off depositors who suffered losses.
Bloomberg notes, "Derivatives are financial instruments used to hedge risks or for speculation. They’re derived from stocks, bonds, loans, currencies and commodities, or linked to specific events such as changes in the weather or interest rates." But since the early 1990s banks have more and more moved to the “speculation” part of the equation, generating an estimated $35 billion in trading profits annually.
The Occupy Wall Street demonstrators are continuing their march toward globalism as they have now endorsed a global tax system, to be instituted and monitored by a new global government. With the G20 summit set to take place November 3 in France, the directors of the Wall Street protests are now setting their sights on the implementation of the “Robin Hood tax” on all transactions involving shares, bonds, and derivatives, and possibly other items as well.
China has the world's second-largest economy and grew at more than 10 percent last year, yet Congress continues to dole out foreign aid to a country that holds more than one trillion dollars of U.S. government debt. Although long overdue, two U.S. lawmakers are speaking out against this seemingly illogical notion, as they pose the question: Why should the United States continue to shovel out taxpayers’ dollars to a communist nation that holds more than one trillion dollars of U.S. debt and competes in the same economic spheres?
"Why in the world would we be borrowing money and then turn[ing] around and giving it back to the countries that we’re borrowing it from?" asked Sen. Tom Coburn (R-Okla.). "If they have enough of a surplus to loan us money, they have enough of a surplus to take care of their own needs." Sen. Jim Webb (D-Va.) echoed his Republican colleague, telling Fox News, "Hey, in the crisis that we’re in right now, should we really be continuing to send American taxpayer dollars over to China for these purposes?"
U.S. foreign aid to the People’s Republic of China (PRC) is siphoned off in the form of bilateral and multilateral developmental assistance and aid to individual recipients. Some of the aid exits to the PRC in the form of social and economic development assistance through the United Nations.
Faced with widespread criticism of his once-vaunted “9-9-9” tax scheme, former pizza maker Herman Cain has changed a few ingredients. 9-9-9, readers will recall, was an attempt to simplify America’s Byzantine tax system by replacing the current system of graduated income and corporate taxes with three flat taxes, all assessed at 9 percent: a personal income tax, a corporate income tax, and a national sales tax. Social Security and Medicare taxes would be eliminated, and a bewildering array of deductions and schedules would be abolished. Today’s misnamed “progressive” tax system would be replaced by a simple, straightforward levy that would allegedly reduce both the time and expense of paying taxes for both individuals and corporations. Such a system — especially in comparison with rival Rick Perry’s newly-announced 20 percent flat tax, might seem like a beleaguered taxpaying public’s deliverance.
But others have done the math and concluded that, for many Americans, Cain’s new tax would constitute a tax increase. The Tax Policy Center, a non-partisan Washington think tank, claims that, far from relieving the tax burden on America’s middle class, Cain’s scheme would raise taxes on roughly 80 percent of American families.
David Galland’s article for the Daily Reckoning painted a picture of imminent collapse of America’s monetary system, which was followed four days later by Clive Maund’s possible scenario of bank failures following on the heels of a eurozone collapse. Mamta Badkar raised the specter of hyperinflation in his Business Insider article by reviewing the “10 Worst Hyper-Inflation Horror-Stories of the Past Century,” reflecting interest in whether, or how, the economic disaster of hyperinflation would affect the United States.
According to Badkar, the runaway inflation of Germany in the early 1920s is one of the worst cases in history, where, at its nadir, the monthly inflation rate reached 29,500 percent in October 1923. In post-World War II Greece, inflation peaked at 20.9 percent a month in October 1944, while in July 1946, inflation in Hungary hit 207 percent daily. In China, following the Second World War, inflation reached 2,178 percent in May 1949, equivalent to a daily rate of 11 percent.
In the mid-1970s, Chile suffered from an inflation rate of 746 percent annually, while Argentina’s inflation rate in 1989 hit 12,000 percent. Bolivia’s inflation between May and August 1985 hit 60,000 percent on an annual basis. Nicaragua’s inflation rate in 1987 exceeded 30,000 percent; Yugoslavia’s daily rate of inflation reached 64.6 percent between 1989 and 1994; and in perhaps the most famous hyperinflation of all time, the purchasing power of Zimbabwean dollars was virtually obliterated, with inflation reaching 416 quintillion percent annually.