MUST READ--- IS THERE NO LIMIT? Illegal Public Seizure of Mortgages Via Eminent Domain in the Spotlight

Illegal Public Seizure of Mortgages Via Eminent Domain in the Spotlight

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Bloomberg reports Richmond Escalates Eminent Domain Plan With Loan Offers. 

Richmond, California, is backing a plan to buy mortgages in low-income areas for as little as 25 cents on the dollar and may force the sales under eminent domain laws, moving forward with a controversial program that would potentially seize control of home loans from investors.

Richmond is the farthest along in a plan advocated by Steven Gluckstern’s Mortgage Resolution Partners LLC for U.S. cities to confiscate mortgages and write them down in an effort to help homeowners escape oversized debt burdens. The idea has drawn opposition from bondholders such as Pacific Investment Management Co. and DoubleLine Capital LP and at least 18 trade groups representing the finance industry, homebuilders and real estate firms.

None of the 32 servicer and bond trustees that oversee the loans will likely sell willingly, Chris Killian, head of the securitization group for the Securities Industry and Financial Markets Association, Wall Street’s largest lobbying group, said in a phone interview.

“You just can’t really sell performing loans out of securitizations,” Killian said. “Additionally, everybody we talk to in the industry thinks this is a bad idea that will be bad for the mortgage markets.”

Eminent Domain

Eminent domain (confiscation of private property for the public good), have been upheld time and time again, most recently in the infamous US Supreme Court decision Kelo v. City of New London. 

Kelo v. City of New London, 545 U.S. 469 (2005) was a case decided by the Supreme Court of the United States involving the use of eminent domain to transfer land from one private owner to another private owner to further economic development. In a 5–4 decision, the Court held that the general benefits a community enjoyed from economic growth qualified private redevelopment plans as a permissible "public use" under the Takings Clause of the Fifth Amendment.

The case arose in the context of condemnation by the city of New London, Connecticut, of privately owned real property, so that it could be used as part of a “comprehensive redevelopment plan.” However, the private developer was unable to obtain financing and abandoned the redevelopment project, leaving the land as an empty lot, which was eventually turned into a temporary dump.

Public reaction to the decision was highly unfavorable. Much of the public viewed the outcome as a gross violation of property rights and as a misinterpretation of the Fifth Amendment, the consequence of which would be to benefit large corporations at the expense of individual homeowners and local communities. Some in the legal profession construed the public's outrage as being directed not at the interpretation of legal principles involved in the case, but at the broad moral principles of the general outcome. Federal appeals court judge Richard Posner wrote that the political response to Kelo is "evidence of [the decision's] pragmatic soundness." Judicial action would be unnecessary, Posner suggested, because the political process could take care of the problem."

Prior to Kelo, seven states specifically prohibited the use of eminent domain for economic development except to eliminate blight: Arkansas, Florida, Kansas, Kentucky, Maine, New Hampshire, South Carolina and Washington. As of June 2012, 44 states had enacted some type of reform legislation in response to the Kelo decision. Of those states, 22 enacted laws that severely inhibited the takings allowed by the Kelo decision, while the rest enacted laws that place some limits on the power of municipalities to invoke eminent domain for economic development. The remaining eight states have not passed laws to limit the power of eminent domain for economic development.

End Result of Seizure: A Dump

There you have it. The result of the seizure (whose intent was a mall), turned useful tax-payer property into a vacant lot, then a dump when the developer could not get financing.

44 states passed laws restricting eminent domain as a response to that poor US supreme court decision. One of those states was California.

Proposition 99

California passed Proposition 99 in 2008.

Summary Prepared by the Attorney General

• Bars state and local governments from using eminent domain to acquire an owner-occupied residence, as defined, for conveyance to a private person or business entity.
• Creates exceptions for public work or improvement, public health and safety protection, and crime prevention.

Ridiculously Broad Interpretations

What constitutes "public work or improvement, public health and safety protection, and crime prevention"?

The statement is so broad as to be 100% meaningless. Was that the intent of Prop 99 all along? 

Non-Fair Value Seizures

The law requires the owner to receive "fair value" for the seizure. Of course it is the state that gets to define "fair value".

Richmond does not even want to pay fair value for the mortgages. Please consider these additional details in the New York Times article A City Invokes Seizure Laws to Save Homes. 

On Monday, the city sent a round of letters to the owners and servicers of the loans, offering to buy 626 underwater loans. In some cases, the homeowner is already behind on the payments. Others are considered to be at risk of default, mainly because home values have fallen so much that the homeowner has little incentive to keep paying.

Many cities, particularly those where minority residents were steered into predatory loans, face a situation similar to that in Richmond, which is largely black and Hispanic. About two dozen other local and state governments, including Newark, Seattle and a handful of cities in California, are looking at the eminent domain strategy, according to a count by Robert Hockett, a Cornell University law professor and one of the plan’s chief proponents. Irvington, N.J., passed a resolution supporting its use in July. North Las Vegas will consider an eminent domain proposal in August, and El Monte, Calif., is poised to act after hearing out the opposition this week.

 The city is offering to buy the loans at what it considers the fair market value. In a hypothetical example, a home mortgaged for $400,000 is now worth $200,000. The city plans to buy the loan for $160,000, or about 80 percent of the value of the home, a discount that factors in the risk of default.

Then, the city would write down the debt to $190,000 and allow the homeowner to refinance at the new amount, probably through a government program. The $30,000 difference goes to the city, the investors who put up the money to buy the loan, closing costs and M.R.P. The homeowner would go from owing twice what the home is worth to having $10,000 in equity.
All of the loans in question are tied up in what are called private label securities, meaning they were bundled and sold to private investors. Such loans are generally the most unfavorable to borrowers and the most likely to default, Mr. Gluckstern said. But they are also the most difficult to modify because they are controlled by loan servicers and trustees for the investors, not the investors themselves.

Sappy Details

The Times article disclosed the sappy details of a person who paid $420,000 for a home now worth $125,000.

To what extent should government intervene in such affairs?

The obvious answer is "none". The homeowner can walk away is he wants, and if he doesn't want, then he can keep paying the mortgage. 

Questionable Details

As long as someone is willing to keep paying the mortgage, then the value of the loan is more than the alleged "fair value" offered by the city. 

And note the $30,000 difference to the city and the new investors in the proposed scheme.

In essence, the city wants to confiscate private property not for the "public good" but for the good of its own finances, for the good of new lenders, for the good of one set of private persons, at the expense of another set of private persons, at a very questionable "fair value" price.

I contend this is not only morally wrong, but blatantly illegal.

Should this socialist wealth redistribution scheme actually be upheld by the courts, it will unleash a torrent of increasingly ridiculous schemes, while further undermining property ownership rights, the very thing governments ought to protect. 

A 280,000% Mark Up For... Water? A Look Inside The Bottled Water Industry

zero hedge | by Tyler Durden  /  9h  //  keep unread  //  preview A 280,000% Mark Up For... Water? A Look Inside The Bottled Water Industry +TAG Imagine there was a time when bottled water didn't exist in our catalog of popular commodities. Perhaps the trend started in 1976 when the chic French sparkling water, Perrier made its introduction. There it was seductively bottled in its emerald green glass amongst the era of disco and the spectacle of excesses... who could resist right?! What could be more decadent than to package, sell and consume what most consider (in the western world) a common human right easily supplied through a home faucet! It’s absurd that the cost of designer water is at a "280,000% markup" to your tap water and it's reaching record heights in consumption. 15 The Beginning of the Insanity It wasn't until the 1990s when bottled H2O became an everyday common sight and a symbol of our cultural desire towards fitness and "health-consciousness". Even today health enthusiasts claim drinking water often helps to "detox and boost the metabolism!" There have been controversies about chemicals leeching into the water from the soft plastic material of bottles, but the FDA determined the containers "do not pose a health risk to consumers." IBISWorld reports that the "U.S. is the largest consumer for bottled water in the world, followed by Mexico, China, and Brazil". 14 The Bottled Water Scheme Regular drinking water competes with itself in a bottle, but reviewing the cost difference, you've got to wonder why or how? As for the water piped into your home or work place, it costs less than one penny per gallon! Fairfax Water organization, (FCWA) states, "The average price of water in the U.S. is about $1.50 for 1,000 gallons." Let's look at your favorite 20 oz. bottled H2O, it will run you up to $3 per bottle at the corner convenience store and up to $4 at a posh restaurant or nightclub. If you buy bulk at Costo or other markets, the price averages are .31 cents per bottle, but that still remains enormously expensive when compared to tap water. Granted many don't like tap water quality, but modern technology allows for an array of water filters. In the mid-1990s, soda companies found that the niche market for bottled water could be huge, why not? The profits were obvious! Pepsi and Coca-Cola jumped into a race with their brands Aquafina and Dasani; they led the way to making bottled water what it is today. 13 What's in an Ad? It appears people really love their bottled water, today there are dozens of brands and that merits big advertising! The Huffington Post stated that in 2013 Americans drank 58 gallons of bottled water per capita! With the help of advertisements, bottled water has gone from "reservoir to faddish luxury item to mass commodity." Bottled H2O is being directly or indirectly sold as: healthy, smart, pure, sexy, clean and simple, it is "the stuff of life." Ad slogans go like this, Dasani by Coca-Cola: "Treat yourself well. Everyday." Volvic: "Fills you with volcanicity." Aquafina by Pepsi-Cola: "So pure, we promise nothing." Arrowhead by Mountain Spring Water, USA: "Arrowhead. It's Better Up Here!" Evian: "Approved by your body as a source of youth." Pure Life by Nestle: "DRINK BETTER. LIVE BETTER." No matter how much emotion an advertisements conjures, be it love, fear or rage, in the end water is just water whether bottled or tap. The difference is only in taste, and Evian has to be the only one tastier than tap water, but that's only if tap water hasn't been filtered. "Taste comes from negligible amounts of minerals" and filtered tap water removes minerals and chemicals rendering it with no hint of aftertaste, even at room temperature and most importantly the "2 hydrogen to 1 oxygen" part of water we need never changes. 12 The Costs: Beyond Money It’s absurd that the cost of designer water is at a "280,000% markup" to your tap water and it's reaching record heights in consumption. The comforting illusion of better water (bottled water) requires a lot of resource to manufacture and merchandise. The industry requires the cost of natural rivers and streams, semi-truck exhaust and diesel fuel, packaging, labeling, pollution of non-biodegradable plastic and the managing of recycling centers. If you visit a gas station store or grocery store, you're bound to see that a full third of all cold beverages on sale are bottled water. The Sierra Club explains, “Annually the water bottles themselves take about 1.5 million tons of plastic to manufacture for the global market.” Did you know plastics come from oil and therefore it takes 1.5 million barrels of oil a year? Additionally the manufacturing process releases toxins into the environment, such as nickel, ethylbenzene, ethylene oxide and benzene. Even with current plastic recycling centers, “most used bottles end up in landfills, adding to the landfill crisis." 11 What About Health and Safely? There are relatively few regulations on what bottled water contains. The Natural Resources Defense Council's scientific study showed over 1/3 of the tested brands contain contaminants like arsenic and carcinogenic compounds. Scientists agreed though that the contaminants were negligible amounts and all of the bottled water was safe to drink, but importantly the study clearly showed how "bottled water purity" can be misleading. On the World Health Organization's (WHO) website, they claimed many Europeans believe natural mineral waters have medicinal or health properties. Although WHO didn't find evidence to support the mineral water benefits. Many researchers conclude that the benefits of bottled water are based mainly on a common misconception. A large majority of consumers drink bottled water because they believe it has better health benefits, as well as better taste. Interestingly the Environmental News Network reported, on the TV show Good Morning America, a taste test revealed that NYC tap water was chosen as the favorite over the oxygenated water 02, Poland Spring and Evian! 10 Reviewing Ecosystems Corporations like Coca-cola, Nestle, Pepsi, Evian and Fiji Water are making billions of dollars on water. Many people are unhappy with their practices, such as sucking up spring water from underground aquifers that are the source of water for nearby streams, wells, and farms. In Mecosta County, Michigan, Nestle was court-ordered to stop taking spring water as it proved threatening to the surrounding ecosystem. They have around 75 springs in the U.S. and are actively searching to take on more. They own water rights in Aurora County, Colorado, in which they’ve built a diversion of water to the Arkansas River to replace water there, which they are siphoning from underground aquifers that would normally feed into that river. What's important about the aquifers is that they safely store precious water underground throughout Colorado during the dry seasons. Sarah Olson, producer of the documentary 'Tapped,' notes, "Nestle has a history of pumping more water than its permits allow." She claims the situation is difficult to monitor and easy for Nestle to take advantage of. Aquifers are significant to the state's community survival, especially with current warming climate trends. 9 Nestles' Monopoly In order to sell and make money from water you have to own or lease the land to which it's found. Nestle has contracts with various small towns for which they own water rights; these towns are often also small in capital and influence. Are we in the U.S. not thinking about the bigger picture? Nestle's powerful army of scientists, PR consultants, lawyers and lobbyists allow them to stifle and suppress local opposition to its operations. In California, it took 6 years for the tiny town of McCloud to defeat Nestles plans to build a facility and take 1,250 gallons per minute of Mount Shasta spring water. Nestle then swiftly moved its plan to Sacramento with more success, ‘The Sacramento News and Review' reported that Michelle Smira, one of the mayor's top volunteer advisors, "stepped down to run her consulting business, MMS Strategies. Guess who her big client was? That would be Nestle." Evidently she was hired by Nestle Waters to win the "hearts and minds, and gain building permits" for the controversial water bottling facility. Sacramento exists currently in a drought and residents are asked to conserve water, all-the-while Nestle by contract has no limit on how much water they can pump, they're on a flat rate. The City Councilmember Kevin McCarty calculated "their profits margin will be roughly 10,000 percent!" 8 Nestle As The Multinational In Pakistan, Nestle controls a town’s water supply, forcing local residents to dig deeper for any non-polluted water that remains or they must pay Nestle’s high price to get their water back. In the documentary film 'Bottled Life', director Res Gehriger explains that in the U.S. and E.U., Nestle mainly sells spring water in the location that it originates. Although in developing countries, it's gone another route by extracting local water and enriching it with minerals. This bottled water is the company’s Pure Life brand, it’s the top-selling bottled water brand internationally. Filmmaker, Gehriger was prevented from entering into Pakistan’s bottling facility, although he researched the area and found that the water levels had indeed dramatically fallen. This is concerning because Pakistan's public water system is known to be failing or is "close to collapse." Pure Life is harvested, manufactured and marketed locally, but it's price is too high for the natives to afford. In places like Nigeria, where Nestle has also set up camp, African families spend half their salaries on water. Only the very wealthy can afford to purchase Nestle's Pure Life. 7 The Case of Nestle/Perrier in Brazil France's bottled mineral water Perrier made it's debut in the 1770s, but by 1990 the company ran into trouble when it was tested in a U.S. lab, and the carcinogen, Benzene was found. Soon after in 1992, Nestle bought Perrier and today the green emerald bottle sells in 140 counties worldwide. Nestle also since acquired Poland Spring, San Pellegrino and numerous other bottled water brands. Nestle/Perrier, the corporation opened a bottling plant in Sao Lourenco, Brazil. The area is well known for its, "water circuits, and it's has the country's most historic sources of mineral water. This was perfect for the Nestle/Perrier's Pure Life brand, as the natural spring had what many believed to be healing minerals. But natives accused the company of over-pumping and drying up the local waters. Then a member of the International Free Water Academy, Franklin Frederick said, "If the water is pumped in quantities greater than nature can replace it, its mineral content will gradually decrease, bringing the change in taste that we were noticing". In 2006, four years later, the Federal Government found Nestle/Perrier in violation of constitutional prohibitions on de-mineralizing water; they were stopped and fined. 6 It's All About The Filter! The thing about tap water is it's treated with chlorine to kill bacteria. The other part of the treatment is a filtration process, which is more or less the same as what the bottled water company’s use. Tap water is good and safe to drink, that's unless there’s fracking in your state, then there’s fracking fluid seeping into the ground and that can't be good! If you don't care for the taste or "feel" of chlorine coming through your tap, then it can be removed easily enough with a filter. In fact, a Brita water filter works wonders and if you'd like to keep the skin on your face soft and younger looking, fill a washbasin with home filtered water and wash you face! Also to save money, keep the Brita filters longer than the company recommends, it just the tap water will drain through the filter a bit slower. We wouldn't recommend walking about with a big Brita jug and chugging from it, like in the image. Instead, consider getting those Aluminum Water Bottles that are quite inexpensive and come in various sizes; they'll last forever! 5 California's Water Water and water rights is an on going political issue for The Golden State. It holds 30 million people and there are over 5,680,000 acres of agricultural farmland. The question California rubs up against, is whether to increase the redistribution of water to agricultural and urban sectors, or increase conservation and preserve the natural ecosystems of the water sources. The majority of California’s water supply (75%) comes from north of Sacramento, while 80% of the water feeds the southern 2/3rds of the state. We've mention that Nestle has a legal grip on a large portion of Sacramento water, and the city is battling it out after realizing in hindsight that they agreed to more than they should give. The farming industry is huge in California and 80-85% of all its water is being used for agricultural purposes. The Los Angeles Aqueduct carries water from the Eastern Sierra Nevada down to Los Angeles. The drinking water quality has less chlorine and is noticeably "softer" nearer to its source. Although controversial, 30% of all public water providers in the state, fluoridate their water. 4 Is It or Is It Not?! There’s a good chance that fancy water you’ve just forked out a couple bucks for comes from the same place, a municipal water supply! Yes, there's an estimated 25% of bottled water that actually comes from the municipal water supply. Of course the water goes through a filtering process, like reverse osmosis, deionization, activated carbon filtration and other treatments. Look at the label carefully, does it read "purified" or "drinking water"? If so, chances are it is from a municipal water supply, and unless the water has been “substantially” altered, it’s required to be stated on the label, that the water’s from a municipal source. Here's a list of bottled waters which are from municipal sources: Pepsi's Aquafina, Coke’s Dasani, and now it looks like Nestle's Ice Mountain Natural Spring Water is up in the air with a class action lawsuit for a document revealing a 5 gal water bottle that was defined by Nestle as, "municipal water and/or well water" processed by Nestle's treatment plants and repackaged with images of pristine glacial lakes and mountains. 3 Should Water Be Privatized? Peter Brabeck-Letmathe, is the CEO and current Chairman of the $65 million Nestle Corporation. In a youtube video he describes that people's access to water as being a basic human right is "extreme". He also argues that the water supply ought to have a market value and be privatized, "because people have a sense of entitlement that causes them to waste copious amounts of water." This would mean the price we pay today for our home tap would be small in comparison. Corporations like Nestle, Pepsi and Coca-cola are pining to buy up or lease land and water rights globally, some of us in the end could be obligated to their fees! Brabeck-Letmathe is quoted in The Guardian saying that he would allow people a limited amount of water as a human right, and this would be, "five liters of water for daily hydration and 25 liters for minimum hygiene and he would charge for the remainder of the 98.5% of the water if used." What would happen to the poor who cannot afford to pay these said corporations? Should they suffer from starvation due to their lack of financial wealth? 2 Water Wars? With climate change, it seems that reports show droughts are our new reality. Mark Twain wrote, “Whiskey is for drinking; water is for fighting over”. Water seems to be everywhere, but throughout history it's always been a precious resource. The water source taken from the Colorado River is divided up for U.S. states, and they’re running at abnormally low water levels. The river feeds the upper states (Colorado, Utah, Wyoming) and then it delivers a certain amount of water to the Lower Basin (New Mexico, Arizona, California, Nevada). An early provision also allows California and its rapidly growing coastal cities to grab excess water coming off the Colorado River, but since Arizona and Nevada cities have expanded, the surplus has disappeared and California is left with no water. If the Nestle’s Colorado bottled water operation doesn’t appear totally irrational, consider CEO Peter Brabeck-Letmathe strict ideas on water rights. It kind of all falls into place, his reasoning behind “water privatization”. Nestle knows first hand as they pine for water around the world that the golden source is getting precarious. 1 End the Insanity! The Goethe University at Frankfurt conducted another study: they found that a high percentage of the bottled water contained in plastic containers was polluted with estrogenic chemicals. The Environmental Working Group (EWG) is a U.S. research and advocacy organization that acts as a watchdog on behalf of citizens. They report, "Unlike tap water, where consumers are provided with test results every year, the bottled water industry is not required to disclose results of contaminant testing it conducts." They felt the water bottle industry is not held to the same safety standards of tap water. Their tests revealed 10 brands that had pollutants, including not only disinfection byproducts, but also common urban wastewater pollutants like caffeine and pharmaceuticals (Tylenol); heavy metals and minerals including arsenic and radioactive isotopes; fertilizer residue (nitrate and ammonia); and a broad range of other, tentatively identified industrial chemicals used as solvents, plasticizers, viscosity decreasing agents, and propellants. The Natural Resources Defense Council (NRDC) is a U.S. non-profit, non-partisan international environmental advocacy group and in 1999 they tested 22% of brands and at least one sample of bottled drinking water contained chemical contaminants at levels above strict FDA health limits. What can we do to drink with confidence? Buy a good filter and use it! Source: Likes.com

The Obamacare “lower premiums” shell game

You don’t have to look much further than the usual list of suspects to discover that new marching orders have been issued in an effort to salvage the tanking national support of the President’s health care bill. The next line of attack is to begin spreading (dis)information on how Obamacare is already working. How do we know? Because, as featured at one of the President’s biggest cheer leading sites, people are already seeing lower premiums for their coverage!

Growing Number Of States Are Reporting Lower Than Expected Health Care Premiums

Health premiums in Maryland’s exchanges will be “among the lowest of the 12 states that have available proposed or approved rates for comparison,” the state’s exchange — Maryland Health Connection — announced Friday. The news comes just as New York,Oregon, Montana, California, and Louisiana are also reporting lower than expected premiums.

And the good news is out west, also, as seen in Sin City!

Health Exchange insurance plans to cost less in Las Vegas than other parts of state

CARSON CITY — Preliminary costs for the upcoming mandatory federal health insurance coverage show it will be cheaper for Las Vegas residents to buy a policy than it will be for residents of other parts of the state.

State officials gave a preview Friday of how the Affordable Care Act will affect Nevadans. Four companies have signed up to offer health coverage through the state’s Silver State Health Exchange.

Wow. And here we had been saying all along that premiums were going to go up under Obamacare. So I guess we were all wrong and everyone can just go home and begin enjoying their benefits now, right? Well… not so fast. The headlines are carefully scripted to give one impression, but the reality is something else. You have to check with a few sources to find it, though.

Insurance premiums for some consumers in Maryland will go up by as much as 25 percent once ObamaCare takes full effect next year.

The state on Friday released final insurance rates for the private insurance policies available next year through the new insurance exchange created by ObamaCare…

The filings provide grist for both sides of the ObamaCare debate: prices for some consumers will go up next year, but the increases are far lower than what insurance companies initially proposed.

(emphasis mine)

As you see, the prices aren’t actually going down anywhere. They’re just going up less than projected in some places. And beyond that, the first article linked above demonstrates why even that isn’t thanks to Obamacare. It’s from blue state governments trying to bring the hammer down as hard as possible to put some lipstick on this pig.

Officials say they used their authority to deny rate increases to reduce the proposed premiums by “more than 50 percent.” Thirty other states have have similar authority.

So the headlines being pitched attempt to make you think costs are going down. They aren’t. In fact, they are going up everywhere. But hey… it’s not like anyone promised us that Obamacarewould actually reduce rates, right?

Let’s go back in time to when President Obama first began to make the case for his health care overhaul. Here’s how he touted his health plan in May 2007, early in his run for office. “If you already have health insurance, the only thing that will change for you under this plan is the amount of money you will spend on premiums. That will be less.” On the campaign trail in 2008, Obama continued to sell the law as a way to lower health premiums, promising at least 15 times to reduce health premiums for families by $2500 on average. And as Buzzfeed notes, Obama didn’t stop pointing to lower premiums when he made it into the White House in 2009. In May of that year, he told C-SPAN that if health industry groups commit to savings—“we end up saving $2 trillion…a lot of those savings can go back into the pockets of American consumers in the form of lower premiums. That’s what we are driving for.”

Far more recently, as Erika already pointed out, Nancy Pelosi was caught flat footed, claiming she didn’t remember anyone ever saying that premiums would go down. Except, of course, that Pelosi herself was saying it as recently as last year. So it should come as no surprise that you’re now going to see a barrage of headlines and talking heads spinning stories about “lower premiums” under Obamacare.

But they’re still lying about it. The people I work with on a weekly basis have already found out about this the hard way, and the rest of you will also.

MYWashington's Blog by JimQ  /  4min  //  keep unread  //  preview TRYING TO STAY SANE IN AN INSANE WORLD – PART 1 +TAG “I mean—hell, I been surprised how sane you guys all are. As near as I can tell you’re not any crazier than the average asshole on the street.” – R.P. McMurphy – One Flew Over the Cuckoo’s Nest “Years ago, it meant something to be crazy. Now everyone’s crazy.” – Charles Manson “In America, the criminally insane rule and the rest of us, or the vast majority of the rest of us, either do not care, do not know, or are distracted and properly brainwashed into acquiescence.” – Kurt Nimmo I have to admit to being baffled by the aptitude of the Wall Street and K Street financial elite to keep their Ponzi scheme growing. I consider myself to be a rational, sane human being who understands math and bases his assessments upon facts and a sensible appraisal of the relevant information obtained from trustworthy sources. Of course, finding trustworthy sources is difficult when you live in a corrupt, crony-capitalist, fascist state, controlled by banking, corporate and military interests who retain absolute control over the mainstream media and governmental propaganda agencies. Those seeking truth must pursue it through the alternative media and seeking out unbiased critical thinkers who relentlessly abide by what the facts expose. This is no time for wishful thinking, delusions and fantasies. In the end, the facts are all that matter. As Heinlein noted decades ago, the future is uncertain so facts are essential in navigating a course that doesn’t lead you to ruin upon the shoals of ignorance. “What are the facts? Again and again and again – what are the facts? Shun wishful thinking, ignore divine revelation, forget what “the stars foretell,” avoid opinion, care not what the neighbors think, never mind the un-guessable “verdict of history” – what are the facts, and to how many decimal places? You pilot always into an unknown future; facts are your single clue. Get the facts!” ― Robert A. Heinlein Facts are treasonous and dangerous in an empire of lies, fraud and propaganda. It is maddening to watch the country spiral downward, driven to ruin by a psychotic predator class, while the plebs choose to remain willfully ignorant of reality and distracted by their lust for cheap Chinese crap and addicted to the cult of techno-narcissism. We are a country running on heaping doses of cognitive dissonance and normalcy bias, an irrational belief in our national exceptionalism, an absurd trust in the same banking class that destroyed the finances of the country, and a delusionary belief that with just another trillion dollars of debt we’ll be back on the exponential growth track. The American empire has been built on a foundation of cheap easily accessible oil, cheap easily accessible credit, the most powerful military machine in human history, and the purposeful transformation of citizens into consumers through the use of relentless media propaganda and a persistent decades long dumbing down of the masses through the government education system. This national insanity is not a new phenomenon. Friedrich Nietzsche observed the same spectacle in the 19th century. “In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule.” The “solutions” imposed by the supposed brightest financial Ivy League educated minds and corrupt bought off political class upon people of the United States since the Wall Street created 2008 worldwide financial collapse are insane and designed to only further enrich the crony capitalists and their banker brethren. The maniacs are ruling the asylum. John Lennon saw the writing on the wall forty five years ago. “Our society is run by insane people for insane objectives…. I think we’re being run by maniacs for maniacal ends … and I think I’m liable to be put away as insane for expressing that. That’s what’s insane about it.” – John Lennon, Interview BBC-TV (June 22, 1968) The world is most certainly ruled by a small group of extremely wealthy evil men who desire ever more treasure, supremacy and control, but the vast majority of Americans have stood idly by mesmerized by their iGadgets and believing buying shit they don’t need with money they don’t have is the path to happiness and prosperity, while their wealth, liberty and self-respect were stolen by the financial elite. Our idiot culture, that celebrates reality TV morons, low IQ millionaires playing children’s sports, egomaniacal Hollywood hacks, self-promoting Wall Street financers, and self-serving corrupt ideologue politicians, has been degenerating for decades. “We are in the process of creating what deserves to be called the idiot culture. Not an idiot sub-culture, which every society has bubbling beneath the surface and which can provide harmless fun; but the culture itself. For the first time, the weird and the stupid and the coarse are becoming our cultural norm, even our cultural ideal.” - Carl Bernstein -1992 The examples of our national insanity are almost too vast to document, but any critical assessment of what we’ve done over the last one hundred years reveals the idiocracy that has engulfed our collapsing empire. The Madness of Crowds “In reading The History of Nations, we find that, like individuals, they have their whims and their peculiarities, their seasons of excitement and recklessness, when they care not what they do. We find that whole communities suddenly fix their minds upon one object and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first.” – Charles MacKay – Extraordinary Popular Delusions and the Madness of Crowds We have become a nation that seamlessly goes mad every five years in pursuit of some new delusionary fantasy sold to us by the ruling class, only to see those dreams shattered like a wooden ship on the reef of reality. You can never underestimate the power of human stupidity. The Ben Bernanke and his Federal Reserve cronies have printed $2.6 trillion of new money out of thin air since September 2008 in order to prop up their Wall Street owners, who had engineered the largest control fraud (mortgage debt/housing bubble) in world history, recklessly gambled in their ravenous appetite for sordid profits, and drove their firms into insolvency. It took the Federal Reserve 95 years to accumulate a balance sheet of $900 billion of safe U.S. Treasuries. They have insanely quadrupled their balance sheet in the last 5 years by accumulating toxic mortgage debt from Wall Street banks and purchasing the majority of new Treasury debt being issued to fund the Federal government’s insane trillion dollar annual deficits. Bernanke, the corporate media, government apparatchiks, and captured political class act as if this is normal, when it is clearly the act of a desperate ruling class in its final death throes. Bernanke has leveraged his balance sheet 60 to 1. Lehman and Bear Stearns were leveraged 30 to 1 when they collapsed. The 100 basis point move in rates over the space of two months has resulted in Bernanke losing $200 billion and effectively wiping out his $55 billion of capital. Of course, in a corrupt regime accounting fraud is encouraged and applauded by the status quo. Just as the spineless accountants on the FASB buckled to threats from Bernanke and Paulson in early 2009 and reversed the requirement that assets be marked to market so the felonious Wall Street banks could fraudulently hide their insolvency, the Federal Reserve has decided their losses don’t matter. The Federal Reserve classifies their losses as an asset. Don’t you wish you could classify your 401k losses and your home value losses as an asset? The tapering bullshit storyline is just another attempt to distract the masses from focusing on the fact that Bernanke will never stop expanding his balance sheet because if he stops the financial system will collapse in a catastrophic implosion. The Ponzi scheme will continue until loss of faith leads to a scramble away from the U.S. dollar. Since the infamous creation of the Federal Reserve by a secretive cabal of bankers and politicians in 1913, the ultimate destination of the American empire was set. Every fiat currency in world history has collapsed. Our entire system has been based on infinite exponential growth. The fallacy of American exceptionalism has been built on an underpinning of pure stupid luck and the issuance of more and more debt. The American empire grew to epic proportions due to the discovery of cheap easily accessible oil in the late 19th century and the physical and economic destruction of Europe, Russia and Japan during World War II. The accumulation of debt was fairly moderate during the glory years after World War II, but began to accelerate after the fateful year of 1971 when U.S. oil production peaked and Tricky Dick Nixon removed the last vestiges of restraint from central bankers and politicians by closing the gold window. With the shackles removed from the wrists of corruptible knaves and shysters, America’s future depended upon the wisdom, honest and financial acumen of Washington politicians and Wall Street financers. Once the citizens realized they could vote for more bread and circuses, our ultimate demise was set in motion. A nation that had produced real annual growth of 4% during the 1950’s and 1960’s has seen a steady decline for the last four decades. The term pushing on a string describes the Quantitative Easing (literally money printing) and Keynesian debt financed pork spending efforts of our increasingly frantic owners. The insanity of what we’ve done since 1971 is almost too crazy to comprehend. In the first 182 years of our existence the leaders we elected to steward the nation accumulated $400 billion of national debt. By 1981, unleashed from any semblance of spending control, the politicians and bankers had added another $600 billion of debt, a 150% increase in 10 years. By 1991 our beloved leaders had added another $2.6 trillion of debt, another 160% increase in 10 years. By 2001 another $2.2 trillion had been accumulated, only a 60% increase due to the end of the Cold War and a one-time tax surge from the Dot.com stock bubble. Bush’s worldwide War on Terror, expansion of the police state, tax rebate stimulus idiocy, and expansion of the welfare state (Medicare Part D) drove the national debt up by another $2.2 trillion in just eight years, a 40% increase. The insane amassing of debt since 2008 has put a final nail in the coffin of the ridiculous Keynesian theory, as the Federal government has increased annual spending by 35% over the last five years and the economy is still moribund. Our fearless leaders have driven the national debt from $7.8 trillion to $16.7 trillion in less than five years, a 110% increase. The country continues to add $2 to $3 billion of debt per day. Consider how insane it is that we now accumulate more debt in half a year than we did cumulatively over the first 182 years of our existence as a country. And our elected, or should I say selected, leaders, cheer on the intellectually bankrupt academics like Bernanke whose only solution to every crisis is to print moar and then lie to the American people about his true purpose, act as if annually spending $1 trillion more than we collect while knowing there are over $200 trillion of unfunded promises to fulfill is a reasonable and realistic way to manage the national finances. Any sane person knows our current path will lead to ruin. When you need to issue new debt in order to honor old debt, the end is in sight. The multitude of insane responses to a financial crisis created by a few greedy psychopathic bankers will be looked upon by historians with contempt and scorn. Future generations will wonder “What were they thinking?” Trillions in wealth were vaporized due to the actions of a small secretive league of highly educated, egocentric psychopaths whose warped sense of morality led them to pillage the wealth of the nation through fraudulent financial products, bribing regulatory agencies, stabbing clients and competitors in the back, and peddling lies, propaganda and misinformation to the public through their captured media mouthpieces. Not only haven’t any predator bankers been thrown in jail, but these villains have grown their parasitic entities to enormous proportions while paying themselves obscene billion dollar bonuses. Jon Corzine stole $1.2 billion directly from the accounts of his customers to cover his gambling losses and he remains free to laze about in one of his five gated mansions. The largest banks on earth have been caught red handed forging mortgage documents, rigging LIBOR, front running the muppets with non-public economic information, insider dealing, and using their HFT supercomputers to manipulate the markets at their whim. Government spy agencies regularly use the U.S. Constitution like toilet paper while accumulating electronic dossiers on every citizen in the country. The rule of law does not exist for the ruling class. Only in a world gone insane would we be celebrating Wall Street generating all-time high profits through the use of accounting fraud and Bernanke filling their coffers with trillions of interest free money while bilking senior citizens out of $400 billion per year of interest income through his dastardly ZIRP “save a Wall Street banker” scheme. Bernanke has stolen close to $2 trillion from the bank accounts of little old ladies since 2008 and given it to Jamie Dimon, Lloyd Blankfien and the rest of the Wall Street scumbags. While Wall Street and the crony capitalist mega-corporations report record profits, Main Street is left with 5 million less full-time jobs than they had in 2007 and a real unemployment rate exceeding 20%. While the government has insanely reported a recovering economy since mid-2009, the food stamp rolls have grown from 33 million to 47 million. The ruling class cheers the record highs in the stock market that overwhelmingly benefit the top .1% because they are the .1%. Meanwhile, the average schmuck out in the hinterlands is paying double the price they were paying for gas in 2009 and their everyday living costs are rising by greater than 5% annually. Luckily for the financial elite, the average American would rather watch Honey Boo Boo than try to understand the evilness of Federal Reserve created inflation. The economic recovery storyline is obliterated by the fact that real household income is still 9% below its 2008 peak and amazingly 8% below its 2000 level. Since the 2009 low, the household net worth of the wealthiest 7% has grown by 28%, while the other 93% have seen their net worth decline by a further 4%. The profits accrue to those who run the show, buy the politicians, write the laws, command the media propaganda machine and control the currency. As a sane person in this insane world I’m flabbergasted that there is virtually no outrage at the perpetrators of these crimes against humanity. Americans have earned the moniker – ignorant masses. Bread and circuses have won the day in our declining empire. The oligarchs thank you. The blame doesn’t rest solely on the shoulders of the evil men running the show. They have only done what we allowed them to do. From top to bottom our society has hopped on the crazy train. The lack of national morality, sense of civic duty, inter-generational responsibility, and willful ignorance regarding sensible financial policies has led us to a tipping point. Decades of feckless self-serving political leadership making entitlement promises they could never honor to win votes, combined with a parasitic financial class peddling debt to millions of witless, narcissistic, math challenged, materialistic morons, has left the country in debt up to its eyeballs with no escape other than cataclysmic default. Michael Lewis documents the bleeding out of our society in his recent book: “The people who had the power in the society, and were charged with saving it from itself, had instead bled the society to death. The problem with police officers and firefighters isn’t a public sector problem; it isn’t a problem with government; it’s a problem with the entire society. It’s what happened on Wall Street in the run-up to the subprime crisis. It’s a problem of taking what they can, just because they can, without regard to the larger social consequences. It’s not just a coincidence that the debts of cities and states spun out of control at the same time as the debts of individual Americans. Alone in a dark room with a pile of money, Americans knew exactly what they wanted to do, from the top of the society to the bottom. They’d been conditioned to grab as much as they could, without thinking about the long-term consequences. Afterward, the people on Wall Street would privately bemoan the low morals of the American people who walked away from their subprime loans, and the American people would express outrage at the Wall Street people who paid themselves a fortune to design the bad loans.” – Michael Lewis – Boomerang The insanity of our debt accumulation in relation to our pathetic economic growth is clearly evident to even an Ivy League educated economist or a bubble headed CNBC anchorwoman. Since 1971 nominal GDP has grown by a factor of 14. Over this same time frame total credit market debt (household, corporate, government) has grown by a factor of 32. Real GDP (even using the fraudulent BLS manipulated CPI) has only expanded by a factor of 3.5 since 1971. The exponential growth model is clearly failing, with debt going hyperbolic, while GDP has stagnated. Since 2007 real GDP has gone up $500 billion while total credit market debt has gone up by $6 trillion. Only an insane society would allow itself to be convinced by the perpetrators of the financial crimes that collapsed our economic system that accelerating the level of debt in our system will resolve the dilemma of Too Big to Trust banker insolvency. Transferring the immense losses of greedy sham capitalist gambling addicts from their insolvent balance sheets onto the balance sheets of the taxpayer has allowed the criminals to retain and expand their wealth, while sovereign states shift the pain and suffering onto the backs of the sinking middle class. This is a worldwide phenomenon perpetuated by central bankers at the behest of their crony capitalist co-conspirators. They call it capitalism when the scams, dodges and swindles work and the profits accrue to the schemers. When the gamblers and extreme risk addicts roll craps they use their crony capitalist connections, bought with blood money, to socialize their losses. The game is rigged and your owners don’t care about your hopes and dreams or your children’s future. They care about their own wealth and lifestyles of luxury. When the richest 300 people in the world have a greater net worth than the poorest 3 billion people on earth, a sane person realizes a chaotic end of the existing social order beckons. “All over the world people borrowed vast sums of money they could never repay. The honest toting up, and taking, of the losses is being delayed. There’s a reason for this. The bad debts are owed, largely, to big banks. The big banks (even bigger than they were at the start of this crisis) and the people who own them enjoy a wildly disproportionate amount of political influence. And so, even now, five years into this mess, we remain at the mercy of the failed financial institutions that sit at the center of our capitalism. Geithner & Bernanke, along with their European counterparts, are doing everything in their power to prevent banks from failing. But the effect of this new financial order is bizarre: capitalism for everyone but the capitalists. Ordinary workers remain fully exposed to the increasingly harsh collisions in the marketplace while the highest paid financial elites ride protected by a passenger airbag.” – Michael Lewis – Boomerang Clearly we’ve entered the final phase of our debt financed orgy of narcissistic materialism and self-absorbed avarice. The unsustainability of our course is a fact. Our society has gone mad en-masse but we are only recovering our sanity one by one. The global financial system is insolvent. A fractional reserve fiat money based system requires continuous growth or it collapses. The global banking system is overleveraged and real global growth is stagnant. Central bankers are not smart men. They have one response to every crisis – print!!! Bernanke and his fellow banker cronies are printing at hyper-speed in order to prop up the terminally ill mega-banks. Bernanke feigns confusion at the fact that his QE to infinity and ZIRP have only benefitted his banker puppet masters and the richest .1%, while further impoverishing senior citizen savers and the working middle class. The anger at the true Wall Street malefactors manifested itself in the Tea Party movement and Occupy Wall Street movement, but both efforts were quickly hijacked by neo-con right wingers and socialist left wingers for their own ideological purposes. The existing social order continues to hold the reins of power, but their grip is growing precarious. The anger, dismay and resentment in the country simmer beneath the surface. The average person senses that all is not well, but most absurdly continue to believe the lies and propaganda spewed at them on a daily basis by the ruling class and their corporate media pawns. When the next shoe drops and billions of stock market and housing wealth are wiped out again, the national anger will sweep away the corrupt social order in a torrent of blood and retribution. Innocent and guilty alike will suffer the consequences. Michael Lewis is somewhat perplexed by the lack of outrage and violence so far. “A lot has happened. And yet, given the provocation, it’s amazing how little has happened. No one on Wall Street has been shot, or even jailed – and the existing social order has not been seriously challenged. There’s a reason for this, too. The anger arising from the financial crisis finds no natural channel. In another era – an era before catastrophic experiments with radical socialism and nationalism – we would be watching market capitalism being displaced by something far uglier. But today there is no natural place for anger to flow, and so the anger flows haphazardly, like raindrops down a windowpane. The only political ideology that anger benefits these days is anarchy. From the point of view of those who enjoy political stability, it’s a stroke of luck that anarchists have no natural talent for organizing themselves. But how long will it take them to learn?” – Michael Lewis – Boomerang Staying sane in a society gone mad is not easy. Millions of people believe themselves to be sane, but they have really just adapted to an insane society, so they appear sane within the warped paradigm of that insane society. The truly sane people appear to be insane in an insane society. It’s enough to drive a man crazy. The immense forces of normalcy bias and social inertia have led millions to refuse to understand the mathematical certainty of the coming collapse. The worldwide banking system is like a great white shark that needs to keep moving or it dies. Exponential growth and continuous credit expansion have been the essential ingredients to expanding the American empire, but the growth has stopped, while the debt keeps growing. Infinite growth on a finite planet is impossible. As natural resources deplete and become more expensive to obtain, while the planet’s population continues to grow, the fractional reserve banking system and the nation states who continue to pile up trillions in debt will suddenly suffer a catastrophic collapse. We are in the end stages of a confidence game. Your government will not give you warning. We need to come to our senses one by one, until there are enough sane people to tip the scales in our favor. I’ve concluded that I live in a dishonest, insane, intolerable world and consider it my duty to spread discontent among those I can reach. I’m a dangerous man in the eyes of our corporate fascist surveillance state. So be it. “The most dangerous man, to any government, is the man who is able to think things out for himself without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane and intolerable, and so, if he is romantic, he tries to change it. And even if he is not romantic personally he is apt to spread discontent among those who are.” – H.L. Mencken In Part 2 of this article I will attempt to figure out why mass insanity has gripped the world and ponder what might happen when sanity returns.