The coming social revolution

Just wanted to recommend this excellent article by Eric Walberg on the Greek / PIGS / EU crisis.

If you haven't been following it, basically Greece is being screwed because they no longer have their own currency, which means they can't take the usual action (currency devaluation) to stave off what promises to be a severe economic depression. Latvia has long been in the same situation, with its stupid government insisting on maintaining a peg to the euro even though it means sinking their people into poverty. This isn't going to fly in the long term (or even the fairly short term). From the article:

Last week saw a succession of strikes and protests throughout Europe: Lufthansa’s pilots, French air traffic controllers and oil refinery workers, protest rallies in Madrid, Barcelona and Valencia against the austerity measures of the Spanish Socialist Workers Party government. Trade unions in the Czech Republic announced that public transport would be halted this week. A one-day general strike of the public sector in Portugal protested measures to cut the deficit to 3 per cent of GDP by 2013. A truly pan-European movement is being born. The Independent's Sean O’Grady predicts such actions “promise to be just the start of the greatest demonstration of public unrest seen on the continent since the revolutionary fervour of 1968.”

Clinging to the first world

[Photo by the excellent journalistic photographer Harvey Finkle -- check out his site.]

By the standards of developed nations, America has a shocking level of poverty, even while we host a great many of the filthy rich. As was pointed out on Washington's Blog:

A report by University of California, Berkeley economics professor Emmanuel Saez concludes that income inequality in the United States is at an all-time high, surpassing even levels seen during the Great Depression.

The report shows that:

• Income inequality is worse than it has been since at least 1917

• "The top 1 percent incomes captured half of the overall economic growth over the period 1993-2007"
  

• "In the economic expansion of 2002-2007, the top 1 percent captured two thirds of income growth."

As others have pointed out, the average wage of Americans, adjusting for inflation, is lower than it was in the 1970s. The minimum wage, adjusting for inflation, is lower than it was in the 1950s. See this.

On the other hand, billionaires have never had it better (and see this).

Of the 535 members of Congress, over 44% - 237 to be exact - are millionaires. Fifty have net worths of at least $10 million, and seven are worth more than $100 million. By comparison, around 1% of Americans are millionaires. There is no other minority group that is as overrepresented in Congress. See this.

Impoverished Americans are largely invisible since they are rarely on TV or in the movies, but there are a hell of a lot of poor people in the US. We tend not to be aware of those who are worse off, because Americans are highly segregated by income. Here's a small example of that segregation: on one side of town, there's a grocery store with such astronomically high prices (e.g., $6 for a teeny 1-cup container of fresh-made salsa) that I can't quite believe it's been in business for 2 years. Where I live, that store would go under-- and yet I still live in a fairly well-off area. On the opposite side of town the people are poorer, and there's a grocery store out that way where I never have to return my empties, because there is always someone hanging around by the recycling machines who is grateful to take them as a donation. The first time this happened I was rather stupid about it; I was waiting for an available machine and this very thin man made a comment or two, in a sympathetic vein, about how lousy it was to have to wait, especially when you have kids with you (meaning mine). Eventually he came right out and said he'd been collecting cans and bottles to try to make his room rent, at which point I finally said "Oh! Well, here, take my stuff...."

And really, that store is still not in an impoverished area, just a slowly decaying section of suburbia. That store doesn't sell to the rural poor, nor to the inner city.

To remind us all, some statistics:

1 in 8 Americans is on food stamps (source)

Only 2 out of 3 Americans eligible for food stamps receive them (source)

As many as 10% of workers are under the table, and will never be eligible for food stamps, regardless of their level of poverty (source)

Half of all American children will receive food stamps at some point in childhood (source)


90% of all African-American children will receive food stamps at some point in childhood (source)


7% of all mortgages are more than 2 months behind on payments (source)

1 in 50 American children experiences homelessness in a given year (source)


The true unemployment rate is over 21% (source)

Meanwhile, in mainstream news: Green shoots! Recovery! Worst is past! Back from the brink! Losses slowing! Signs of improvement!

Uh-huh. Right. In a way, you have to laugh at the absurd stupidity of the uber-rich. Every brainless parasite knows you don't kill your host if you want to go on collecting free food. But these uber-rich got so damned greedy and took so much for themselves that they have collapsed the Western economies from which they drew their wealth in the first place. The stupid fools! Only such psychopaths (see here) could be so blithely inattentive to the suppliers of their stolen wealth.

In the early 20th century, not only Henry Ford but the whole class of industry titans learned that if they wanted to sell things and have a prosperous society, the little people would have to be reasonably well paid. I'm not saying they just woke up one day and realized this like an epiphany out of the blue; it was more like they were forced to understand this by strikes, sit-ins, demonstrations, riots, and so forth. And it looks like it's time for the titans to learn these economic realities all over again. They should consider themselves lucky if they get through it this time without revolution.

Dumber than a box of rocks

My title refers to unknown persons in my state legislature-- but I'll get to that in a minute.

The kids and I visited our local food bank a couple of days ago, on a field trip. The bank receives food from various sources: surplus produce from wholesalers, goods that grocers know they can't sell before the expiration date, surplus food from restaurants, and donations from the community. They also use cash donations to buy certain items in bulk, and last year they dug up a garden plot and produced 20,000 pounds of their own vegetables. All this food is distributed to about 40 food pantries across the county, which pass it along to those in need. In addition, they've worked out some kind of token system with the farmer's market, where needy families can buy units of veggies with their tokens. People are trying really hard to get healthy protein, fruits, and vegetables to these families, since relying on cheap carbs is a sure path to health problems.

The food bank is most definitely a success story, and I was really glad to visit them and have my kids put our donated food onto their shelves. But they are struggling to keep up with a 138% increase in people asking for assistance over the past three years. That's considerably worse than in the country as a whole, where requests have increased 46% over the past three years. (No surprise here-- I live in Michigan.) On top of the rise in people needing help, food costs are going up. Our local food bank now needs three times the budget that it did in 2006.

While I was reading about food banks, I discovered that there are some people in the Michigan legislature who are so disconnected from reality that apparently only the glare of torches in the window is going to wake them up. Quoting from a report from last August (available here as a Word document):

Despite record levels of need, food banks forced to turn away fresh produce from local farmers

LANSING – Due to pending state cuts to a surplus crop donation program, food banks across the state are left with no choice but to turn away fresh produce as Michigan’s bounty of seasonal crops reach their peak.

. . .

Annually, an average of six million pounds of food are distributed to local pantries, soup kitchens and shelters that would otherwise go to waste or end up in a landfill. MASS [Michigan Agricultural Surplus System] stimulates Michigan’s economy by assisting farmers, extending the growing season and adding agricultural-based jobs, while also providing low-income families with nutritious food. The state Legislature has proposed cutting the program for the 2010 budget.

Michigan food banks are seeing up to a 30 percent increase in food distribution so far this year and it is particularly painful for the food banks to know that there is surplus food that can’t be acquired in this time when so many people are struggling financially. For example, Marshall said Michigan’s tart cherry industry is looking at likely producing 100 million more pounds of fruit this year than last year.

“We normally would have funds to get these cherries canned or processed somehow, but not this year,” she said. “Michigan producers are exceedingly generous. They hate to see food go to waste and offer it to us at a very low cost. We have been blessed with this generosity towards our MASS program for 17 years now and it kills us to have to turn down food, especially when the need is so great.”

MASS normally costs the state $635,000 annually and the funding covers the harvesting, packaging and shipping of the produce. The dollar amount is miniscule and only accounts for .05 percent of the total funding cut.

$635,000???? Seriously, they can't swing $635,000?

Food is one of the most basic needs of the citizens. If government is (ostensibly) by the people and for the people (hello!!!), the legislature would never have cut such a no-brainer food program. For 10 cents a pound, we can pay farmers, preserve food, employ workers, and distribute that food to the poor. All for a fricking dime a pound-- and this is where they imagine they see fat that can be cut? This is where they see unnecessary waste?

Fer chrissake, $635,000 is only 5 or 6 high-level school administrators. Guess what happens if you cut school administrators? Fewer meetings, same education. Cry me a river.

But instead they chose, first of all, to take money from farmers. This is typical of our cultural inability to understand what wealth is (i.e. production, food, tangible assets). The Michigan Legislature has a message for us all: If you produce something tangible, then fuck you. If you push paper all day, come see us in Lansing!

And the legislature chose, secondly, to take 6 million pounds of produce out of the mouths of the poor and to dump it into the landfill. They just couldn't manage to find that last 1/20 of a percent of the budget cut amongst the overpaid anti-producers in administrative positions. (And I mean anti-producers, I do not mean non-producers.)

If you're among those in need, the only way a trip to Lansing can help you, apparently, is if you bring along your pitchforks and your torches.

Under the table workers

Something is being left unsaid in reporting about unemployment benefits, Medicaid, food stamps, and other government aid during this burgeoning Depression. Under-the-table workers, who (according to an older article) may make up roughly 10% of the work force, often cannot apply for any of this aid. If you have to bring in official pay stubs and proof of expenses, and your official income can't explain how you pay your bills, then you've just announced to the government that you've been violating tax laws. You might qualify for food stamps even with your undeclared income, but due to the IRS you can't apply. Should you lose your job, you might be desperate to feed your children and avoid homelessness, but there won't be any unemployment benefits available.

People tend to see undeclared workers as strictly an immigrant issue, which isn't right. It's also a poverty issue. I know 7 people who are regularly paid under the table, and none of them is an illegal immigrant. (One of them is an immigrant, but he came to the US many, many years ago.) All of these people are in constant struggle to keep their heads above water.

I'm not saying that everyone working in the black market is poor, but I would venture that the vast majority are in poverty or close to it. A disproportionate number of them would qualify for food stamps or Medicaid, relative to above-board workers. And given that unemployment has hit less educated workers the hardest, I assume that undeclared workers would find themselves out of work disproportionately often.

So when you read statistics like "38 million Americans rely on food stamps" as an indication of poverty in the US, remember that a tenth of all workers (and sometimes their children) are not represented in that calculation, even though they're more likely to be poor enough to qualify. People ask "What are the jobless supposed to do when their emergency benefits run out?" But the other question is, what on earth do the black market workers do when there are no unemployment benefits?

We assume we have safety nets, that there's a government agency or at least a food pantry somewhere that will take care of these unfortunate souls who fall through the holes in the safety net. This is sometimes known as the "bystander effect," when people stand by and watch a tragedy unfolding without thinking to give any help themselves. Partly, people feel disconnected from the emergency, as if they're watching it on TV. And partly, we've all been taught to trust the experts, wait for the experts, leave it to the cops or the social workers or the nurses. And so, even when we're good people, sometimes we see an emergency and do nothing. I hope we can get past that. There are many people the government can't help -- again, maybe a tenth of all workers and some of their dependents -- and they need somebody's help.

One grim thing to keep in mind in the years to come is that nobody dies of poverty, per se. They die because they're 80 and can't afford to run the AC, and die of heart attack. They die because malnutrition leaves them vulnerable to diseases we thought we'd seen the last of after the previous Great Depression. They die because they drink themselves to death or commit suicide. I recently read somewhere (no doubt in something Dmitry Orlov wrote) that in Russia after its collapse, the life expectancy for men fell to 10 years less than for women, largely due to self-destruction and violence. But no institution counts such deaths as being due to poverty, except in some far-distant academic paper which looks back, years later, and estimates the surplus deaths.

The reason I'm being so terribly depressingly (sorry, Mom) is that -- should we go the route Dmitry Orlov imagines -- the little things we can do for each other might actually save lives, when people have come to the end of their rope. Eggs for the kids down the road, poker with the depressed guy across the street, a little help with an electric bill or a heat bill here or there... that stuff might truly make a difference. Read some novels from the 19th century, and you discover that people acted this way all the time. I don't hold myself up as a paragon, I just think that we'll have to make a mental shift toward providing more charity. You know, the strong caring for the least among us. I think some religions used to talk about that, back before charity got replaced by judgment.

Reality returns

Some hideous consumer confidence numbers came out today. For one of the confidence measures, economists had predicted a slight fall from 56.5 55.9 (in January) to 55.0. Instead it fell drastically to 46, and one of its components -- how respondents feel about their present situation -- is at a low point not seen since February 1983. The other measure of confidence also fell, to just a hair above its all-time low, set 24 years ago.

A very famous trader and an expert in gold, Jim Sinclair, sums up the world's economic situation this way:

The media can play all the games they wish. Just keep firmly in mind that:

1. Towns are broke.
2. Cities are broke.
3. States are broke.
4. Main Street is in dire pain.
5. The apparent improvement in the financial industry is accounting smoke and mirrors.
6. Most corporate improvements are not sales driven but cost cutting based. You can also call that "firing the help."

Greece or any state of the United States that goes under must be supported by QE to infinity as a country bankruptcy of the Iceland type will sweep across the Western World faster than Lehman Brothers locked up the credit markets.

QE to infinity means money printing to infinity. Bankers like to call it "Quantitative Easing" so that it's harder for the public to understand what's going on. Destroying the currency also means destroying the debts that are denominated in that currency, so it's like a jubilee, which will wind up being a good thing for some people. On the other hand, it also destroys savings, and much worse than that, the lack of a stable currency means economic activity grinds to a stop. The people who get through it best will be those who "get it" that tangible assets are now far more desirable than paper assets. You don't want more stocks and bonds in your 401k, you want land and non-perishable food and bits of silver.

While all this destruction of currencies is going on, we've still got a decline in economic activity. On the jobs front, this animation about unemployment says it best. Darker colors mean worse unemployment. See the contagion spread over the land....

Where is your money?

Citigroup has recently notified its customers that it might take 7 days to receive withdrawals from checking accounts at their banks. Specifically:

"Effective April 1, 2010, we reserve the right to require (7) days advance notice before permitting a withdrawal from all checking accounts. While we do not currently exercise this right and have not exercised it in the past, we are required by law to notify you of this change."

Apparently this only applies to Texas, but was mistakenly sent out to every Citi bank customer nationwide. I'd call that a heck of an error. And it's a convenient mistake, since at least some of their customers (even outside Texas) will be slightly more likely to accept delays in receiving their cash, since they were warned in advance. As I wrote last month, a dollar in hand is worth 20 in the bank.

Meanwhile, Zero Hedge alerts us to other troubles in getting our hands on our own damned money in Expecting A Tax Refund? If You Live In Hawaii Or North Carolina (And Soon New York) You Will Have To Wait:

Two weeks ago we warned readers who wanted to get 2009 tax refunds to file their taxes asap. It appears we were prescient. The state budget crisis is about to hit home. Again. Last year California delayed tax refunds due to simply not having any money which to refund. This year, the first states to announce a hold in refund processing for just the same reason are Hawaii and North Carolina. New York State is also considering a comparable action. If you have delayed filing your taxes, it is high time to do so now regardless of where you live as the same "money-saving" approach of halting refunds is likely about to become prevalent now that "everyone is doing it."

Meanwhile, Illinois has not been making its mandatory payments to schools, universities, and various other agencies. California is likely to run into similar cash flow problems in 2 or 3 months, and perhaps this time they won't even bother with official IOU's, but will simply take the Illinois route and just not make payments. So far, school districts and state universities have juggled funds in order to keep paying their workers, but you can see where this is headed. One day, in some state or another, certain state-employed workers will simply not be paid. The money they have earned under contract will simply not arrive.

Speaking of employment contracts, pension funds are vastly underfunded, and the government entity that is supposed to guarantee pension funds (the Pension Benefit Guaranty Corporation) is... right, utterly underfunded. Social Security is underfunded, and will go into deficit (meaning we can only make payments using borrowed money or by hiking withdrawals) this year. And our own, private retirement funds are in danger of being stolen over the long term, as I wrote about in Nationalizing our 401k's.

Are you beginning to see a pattern? You might be worth a certain amount on paper, but what do you have in hand? What money or assets do you have in your house, in a safe, squirreled away at a relative's house, or whatever? What have you actually got in hand?

And now for the ultimate question: what have you got in hand that doesn't depend on the value of the dollar? What do you have that is not denominated in Federal Reserve Notes? Because a couple of years from now, the value of all that green cotton/linen blend could be dwindling fast. Or even sooner than a couple of years.

It's time to think 19th century for at least some of your wealth (should you still be so lucky as to have any wealth). You know: Land, tools, wheat and rice, salt and sugar, firewood, silver and gold, the family jewels (in the literal sense), cows, pigs, chickens. More people would see this if they weren't blinded by a knee-jerk disdain of "survivalists," and by the "Everything Is Normal" meta-message of television.

Potemkin retail

Potemkin village: an impressive facade or show
designed to hide an undesirable fact or condition

In spite of the poor economy, the remaining stores in my area look about the same as they always have. True, there are fewer little shops in the strip malls, but the big chain stores seem unchanged. Until you pick something up, that is.

I used to buy casual clothes at Target. I got some jeans there last fall, only to discover that the pockets had been sewn shut. They weren't fake pockets-- after I got my little seam-ripper out and undid the damage, the pockets functioned as normal. It was just a goof. A pair of denim shorts bled blue dye for multiple washings and wound up a much different color by the time I would risk wearing them. And the socks seem to last through only 8 or 10 wearings before developing holes in the heels. As for T-shirts, forget it. The material has gotten very thin and chintzy, and half the time there are threads coming out of the seams.

I'm not trying to pick on a particular chain; it's like this at all the big box stores. I tried ordering shirts from Land's End instead, unaware that they too had cut their quality pretty drastically. The shirts that arrived were... well, okay, you couldn't literally read a newspaper through them, but close. Big headlines, maybe.

I bought some Hanes sweatpants for my son, who still crawls around much of the time. On the first day he wore them, they turned out to be not actually woven material but a sort of felt or other fuzzy stuff attached to a gauzy network of threads. The knees didn't exactly wear through, it was more like they rubbed off. Incidentally, I also once bought a blanket that I thought was microfleece but which turned out to be fuzz attached to a plasticky network in the middle. I washed it once and half the fluff came off. They don't even bother weaving cloth anymore, it appears. And yet the blanket had appeared to be of better quality, as seen through its plastic case (un-openable) on the store shelves.

As the story goes, it's all China's fault. They swindle us with their bad products. But actually, the crappy clothes I've unwittingly bought have come from Singapore and Guatemala, El Salvador and Malaysia as well. It's not all China's fault. Something else is going on here.

Food, as we all know, has been declining in quality steadily for decades, but is now also declining in quantity. The 32-oz jars are now 28 oz, the 7-oz tuna cans are down to 5 or 6 ounces, the 16-oz container of ricotta cheese is now 14 ounces. And yet, prices are up.

Loss of quality is happening across the board. I now prefer to spend money on all-stainless kitchen gadgets or to buy them from (say) a Swiss manufacturer like Kuhn-Rikon. It seems like more money, but it actually isn't, because at least that way you don't have to buy it again in 2 years. And quality kitchen items, like my pressure canner or my Squeez-o, can be found used.

I've replaced bathroom fixtures only to wish I'd kept the dated 1960's stuff because at least the old fixtures didn't constantly come unscrewed, rust in unexpected places, or turn out to contain plastic where you'd expected steel. Must everything be made with planned obsolescence?

But it isn't just intentional obsolescence, any more than it's "all China's fault." In truth, this is hidden inflation. American dollars used to buy steel instead of aluminum, glass instead of plastic, wood instead of particle board, goosedown instead of fiber-fill, silk instead of rayon. Today American dollars buy you stuff that looks good in the store, but which falls apart once you begin using it.

Inflation, on paper, has been bad enough. We all just accept that prices go up every year, and that our wages and salaries don't quite keep pace. But meanwhile the things in our houses, and the houses themselves (think toxic drywall or disintegrating faux-wood siding) have gone to hell, quality-wise. That, too, is inflation, but not the sort that shows up on price tags.

Ironically, the government looks at quality, but only when quality is improving. If you spent $1500 on a computer a few years ago, and this year you bought another computer for $1500, they'll claim that you actually got it cheaper. The new computer, you see, has a bigger hard drive and more memory and a faster processor, so you actually got more computer for the money. They adjust for that; it's called a "hedonic adjustment." They're telling us that we're not actually paying the same prices... not if you measure it per gigabyte or per gigahertz.

But -- get this -- they never adjust for declines in quality. If you had to spend $10 for a T-shirt made with 50% fewer threads than the $10 T-shirt you bought last year, tough luck. The government doesn't "adjust" to indicate that you're paying more per thread.

That lets the government hide inflation, as long as almost everything we're buying gets crappier with every passing year. Which it most certainly does.

And again, it isn't wholly China's fault. We can't pay the Chinese good money for good quality, because we haven't got good money... we have slowly failing currency. The price tag may look the same, but the dollars themselves have lost value. As the dollar has fallen, it's squeezed Chinese companies. Wal-Mart has demanded the same stuff for less real money, and naturally the Chinese have cut every corner they could. What we get from them today is largely what our currency is worth.

And thus, America's well-stocked, cheery retail stores are in fact full of junk. It's all just Potemkin retail.

Pillaging Haiti

Let me start with the blatant propaganda:

Jan. 26 (Bloomberg) -- The earthquake that killed more than 150,000 people in Haiti this month may have left clues to petroleum reservoirs that could aid economic recovery in the Western Hemisphere’s poorest nation, a geologist said.

The Jan. 12 earthquake was on a fault line that passes near potential gas reserves, said Stephen Pierce, a geologist.... The quake may have cracked rock formations along the fault, allowing gas or oil to temporarily seep toward the surface....

Haitian Prime Minister Jean-Max Bellerive met yesterday in Montreal with diplomats, including U.S. Secretary of State Hillary Clinton, to discuss redevelopment initiatives.

Oh puh-leeze. Are we going to claim we just discovered oil there, just at the moment when we happened to be invading the country? The Pentagon comes and takes over the ports and airports of a tiny nation and-- hey! What do you know, there's oil there! What a surprise.

As I've recently been learning, we've known there was oil in Haiti for years. Check it out:

There is evidence that the United States found oil in Haiti decades ago and due to the geopolitical circumstances and big business interests of that era made the decision to keep Haitian oil in reserve for when Middle Eastern oil had dried up. This is detailed by Dr. Georges Michel in an article dated March 27, 2004 outlining the history of oil explorations and oil reserves in Haiti and in the research of Dr. Ginette and Daniel Mathurin.

There is also good evidence that these very same big US oil companies and their inter-related monopolies of engineering and defense contractors made plans, decades ago, to use Haiti's deep water ports either for oil refineries or to develop oil tank farm sites or depots where crude oil could be stored and later transferred to small tankers to serve U.S. and Caribbean ports. This is detailed in a paper about the Dunn Plantation at Fort Liberte in Haiti.

[These are] the economic and strategic reasons the US has constructed its fifth largest embassy in the world - fifth only besides the US embassies in China, Iraq, Afghanistan and Germany - in tiny Haiti, post the 2004 Haiti Bush regime change.

The 2004 Bush regime change was when the US faked a coup attempt in Haiti, kidnapped the democratically elected president (claiming it was for his own safety), and put American agents in power. The current prime minister, we're to believe, is meeting with Hillary Clinton to discuss "redevelopment" projects. If by "redevelopment" one means letting the US come in and steal oil and minerals from Haiti for pennies on the dollar, then yes, that's what the guy is doing.

But how much oil could such a tiny nation have? Perhaps more than you think:

“The Central Plateau, including the region of Thomonde, the plain of the Cul-de-Sac and the bay of Port-au-Prince are full of hydrocarbons” he said, adding that “the oil reserves of Haiti are more important than those of Venezuela.”

“An Olympic pool compared to a glass of water; that is the comparison to illustrate the importance of Haitian oil compared with those of Venezuela,” he explains.

“Venezuela is one of the world’s largest producers of oil.”

And it isn't just oil, but also minerals.


Remember how it was such a big deal that the US moved 30,000 more troops to Afghanistan? Well, we now have over 15,000 troops in Haiti, a country the size of Massachusetts. And there were already well-informed suspicions that the US was after Haiti's natural resources, months and years before the earthquake.

So, I have to take back my earlier statement that perhaps the US really is so incompetent that we don't know how to distribute food and water. That's not the case. We're just tied up with other details, like securing the oil fields and the future gold and silver mines. Thievery first... humanitarian missions a distant second.

You are on your own

What happened in New Orleans in the wake of Hurricane Katrina was so bad that some have theorized it was an intentional failure, an experiment. How do Americans react when put into concentration camps? How do police officers react when told to fire on US citizens trying to find food and water? How do police and residents react when the cops are asked to go door to door confiscating guns illegally? How do parents react when they are put on a bus and their children are taken to a separate bus, to be relocated to a different state for no discernible reason? How do internally displaced Americans behave in their new communities?

But perhaps it was no experiment. Perhaps, here at the end of our empire, we are simply that stupid, that incompetent, that frightened, that bureaucratic, that inhuman. I direct you to Greg Palast's excellent piece on the miserably lousy US response to the Haiti disaster:

6.
From my own work in the field, I know that FEMA has access to ready-to-go potable water, generators, mobile medical equipment and more for hurricane relief on the Gulf Coast. It's all still there. Army Lt. Gen. Russel Honoré, who served as the task force commander for emergency response after Hurricane Katrina, told the Christian Science Monitor, “I thought we had learned that from Katrina, take food and water and start evacuating people." Maybe we learned but, apparently, Gates and the Defense Department missed school that day.

7.
Send in the Marines. That's America's response. That's what we're good at. The aircraft carrier USS Carl Vinson finally showed up after three days. With what? It was dramatically deployed — without any emergency relief supplies. It has sidewinder missiles and 19 helicopters.

8.
But don't worry, the International Search and Rescue Team, fully equipped and self-sufficient for up to seven days in the field, deployed immediately with ten metric tons of tools and equipment, three tons of water, tents, advanced communication equipment and water purifying capability. They're from Iceland.

9.
Gates wouldn't send in food and water because, he said, there was no "structure ... to provide security." For Gates, appointed by Bush and allowed to hang around by Obama, it's security first. That was his lesson from Hurricane Katrina. Blackwater before drinking water.

Iceland, as we all know, has been economically crippled by currency collapse and massive deflation. But they still managed to be far more helpful to civilians on the ground than the US, which behaves like the cartoon elephant scared of a mouse, and isn't willing to deploy food and water until the police state apparatus is well underway. Blackwater before drinking water.

Take note. If we run out of diesel, if hyperinflation shuts down food production, if we can no longer import food (we are net importers of food), if we can no longer properly fertilize and harvest our crops due to the absence of bank credit-- if, in short, the food runs out--

You Are On Your Own.

Ain't nobody gonna be distributing sacks of rice in the town square, unless Iceland cares to fly in on a humanitarian mission. Our sad government isn't capable. All the soldiers and planes and MREs in the world are no match for stupidity at the top, and we have stupidity in spades.



ADDENDUM:

Another report from Haiti (January 17):

Thousands - or tens of thousands - more are still trapped under the rubble and need rescue. Today is an absolutely critical day. If these people don't get water today they will die....

President Barack Obama, flanked by his predecessors George W. Bush and Bill Clinton said, "By coming together in this way, these two leaders send an unmistakable message to the people of Haiti and to the people of the world."

Finally we hear the truth on a major foreign policy issue from Obama. A message has been sent: we have come to pillage your country in its greatest hour of need....

Yesterday, Secretary Hillary Clinton was sent to Haiti and gave a speech saying that the US is doing "every thing we can" to help the Haitian people. But that fact that her trip to the Haitian airport stopped all aid from arriving for three hours - three critical hours on a day when the difference between life and death for tens of thousands is a drink of water - should tell you everything you need to know about the US relief effort.

Remember that the rich are post-national; they don't care whether the poor are Haitian or American... either way, they're the nameless rabble. George Carlin's message was "They don't care about you," which -- harsh as it is -- is true. So do something to protect yourself, and to help the Haitians. (I went through Medecins sans frontieres / Doctors without Borders, here, but I don't honestly know which charities are best.)

Nationalizing our 401k's

Of all the economic possibilities I've mentioned to people, the one that gets the quickest "No, that'll never happen" reply is when I suggest the government will nationalize our retirement accounts. By "nationalize" I don't mean outright confiscation-- I am not saying they'd simply seize the contents of our 401k's. But they might, for instance, mandate certain investments: we'd all have to buy our fair share of Treasury bonds. They might limit withdrawals, limit investment options, and/or impose egregious fees and taxes. In short, the government may begin controlling our retirement money in ways which amount to a de facto nationalization.

They are not, obviously, going to use the word 'nationalization.'

The power elite are masters of the incremental approach. You don't just suddenly announce you're going to make all airline passengers go through roughly the same treatment afforded to incoming prisoners. People would be outraged. No, you just slowly introduce one damned thing after another until you arrive at the prisoner treatment, having suffered no more public protest than a bunch of kvetching. Similarly, they aren't going to suddenly impose 20 new controls on our retirement accounts, but you can bet it's at the end of their road map.

And so it begins:

The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams....

It sounds so innocent. Convert your retirement into a simple, safe annuity that pays you X amount on a set schedule, and you never have to worry about a stocks crash again. But what exactly will they be putting your money into, behind the scenes, in order to guarantee you those safe, set payments?

Treasuries. Which they're having a hell of a time offloading just about now.

Here's Karl Denninger's take (boldface is his):

Let me tell you what this is - it is an attempt to prevent the collapse of the Treasury market!

. . .

I have no quarrel with the government mandating that you have a choice in your IRA or 401k account to buy short-duration Treasuries....

But - "choices" have a funny way of turning into mandates, and this looks to me like a raw admission that Treasury knows it will not be able to sell its debt in the open market - so they will effectively tax you by forcing your "retirement" money to buy them!

This may be the only way for Treasury to hold down interest rates to something reasonable in the intermediate term, but doing so will instantaneously remove a major source of funding for the stock market - that is, the monthly and quarterly inflows from retirement accounts.

. . .

This "proposal" can only mean one thing - Treasury smells smoke.

Jesse over at Jesse's Café Américain weighs in as well:

As a rule of thumb, the worst possible time to convert lump sum savings into a fixed income annuity would be when interest rates are historically low....

For some reason the Obama Administration is promoting the idea now that there should be some encouragement for Americans to start converting their 401K's and IRA's into annuities, to provide themselves with lifetime income.

Interest on your savings, currently, is just about zilch. Why lock in that crappy interest rate by converting to an annuity? You'd be turning your money over to the government in return for payments which would not keep up with inflation. You'd have less and less purchasing power as time went on. This is not being done for the benefit of the American people.

And it's not just the people who already have retirement accounts. If you don't have any retirement funds, don't assume this won't affect you.

Jesse highlights an article from last June which suggests that the Obama administration wants to mandate retirement contributions:

Officials in the Obama administration are moving quickly to develop the investment infrastructure behind the president’s proposal for mandatory automatic enrollment in individual retirement accounts, which could be supported by the creation of Treasury-issued retirement bonds [emphasis mine].

J. Mark Iwry, deputy assistant secretary for retirement and health policy at the Department of the Treasury, said that administration officials are exploring some “conservative” options for investing the assets of 78 million Americans that he estimates could be automatically enrolled in this “universal” workplace retirement system.

The initial proposal allows for employees to opt out of the plan, but I'm skeptical about that. Consider that some versions of the health care bill suggest prison time for not buying insurance, even though insurance may cost up to $15,000 per year per family. Now consider how likely it is that employees will be allowed, without penalty, to opt out of the retirement plan. Not too likely, in my opinion.

No... the US Treasury wants its cut of the money made by 78 million Americans who do not currently save for retirement. Your sole option, initially, may be to purchase "R bonds" (government retirement bonds), with the ability to "graduate" to other conservative funds once you've saved enough money. Your distributions will come in the form of an annuity, with no say over the rate of draw-downs. If that isn't nationalization then I don't know what is. This will not be the plan for everyone, but once it's the plan for some, their foot is in the door. You have to think like an incrementalist. We've got annuity plans, mandatory enrollments, R bonds... you can see where this is going, right?

But hey, keep contributing if you think it can't happen here.

UK Telegraph, October 21st, 2008:

Here is a warning to us all. The Argentine state is taking control of the country’s privately-managed pension funds in a drastic move to raise cash.

It is a foretaste of what may happen across the world as governments discover that tax revenue [is plunging], and discover that the bond markets are unwilling to plug the gap....

President Kirchner has been eyeing the pension pool for some time. Last year she pushed through new rules forcing them to invest more money inside the country – always a warning signal.

My fear is that governments in the US, Britain, and Europe will display similar reflexes. Indeed, they have already done so.

Anything is possible in a banana republic

From the Wall St. Journal's Fund-flows firm suggests government manipulated stocks:

The unusual circumstances that led the U.S. market to rally powerfully in 2009 might be explained by secret government moves to buy stocks, according to Charles Biderman, the founder and chief executive of TrimTabs, a research firm that tracks liquidity flows in the market.

"We cannot identify the source of the new money that pushed stock prices up so far so fast," Biderman said in a statement Tuesday.

The source of approximately $600 billion net new cash necessary to lift the market's overall capitalization by $6 trillion last year could not be identified by TrimTabs, Biderman said. The money, he said, didn't come from traditional players such as companies, retail investors, foreign investors, hedge funds or pension funds [my emphasis].

So that rules out... well, practically everybody. Who the heck is buying this crap?

According to Biderman, the Fed would have done this by purchasing stock futures, which are traded after hours. This caught my eye because Zero Hedge has recently argued that the past 3 months' worth of stock market gains have been entirely due to after-hours futures trading:

Furthermore, if anyone was merely looking at the trading action in regular hours, one would think there was absolutely no profit made since early September. The reason for that: all the upside since September 14th has come exclusively from after hours action. The chart below demonstrates the relative performance of regular hour trading in the SPY as well as that in the extended session. The notable observations: gaps, gaps, gaps. Every single day, minimal volume pushes the futures index higher. Good news, bad news, it don't matter to the Goldman S&P and Russell 1000 futures desk: they just lift every micro offer, giving the impression that the market is unstoppable, often leapfrogging each other as the latest viagra'ed GDP or unemployment rumor is spread. Come morning, it is time for the HFT brigade to come in and scalp their trillions of pennies while leaving the market unchanged, then at 4pm handing it off again to leveraged futures manipulation and dark pools. In a nutshell, this is the secret of the past quarter's phenomenal market performance.

The red line is how stocks have performed during normal trading hours. The green line represents the rise in stock markets that came from futures trading during the off hours. And as Zero Hedge says, it's all coming from the futures.

There seems to be some argument about whether it's the Fed direct, or the Plunge Protection Team, or Golden Sacks who's behind the futures buying. As if there is any daylight between these guys! The pseudo-government plutocracy is the pseudo-government plutocracy, regardless of the official titles.

What's evil about this is that the prolonged rally will have sucked investors back into stocks in their 401k and other retirement accounts. And the rich, in case you weren't aware, can make just as much money as the market falls as they can while the market is rising. We may become poorer, but the rich always get richer.

A dollar in hand is worth twenty in the bank

Customers wait in line to remove their savings from a branch of The Northern Rock bank on September 17, 2007 in Kingston-Upon-Thames, England. Approximately £2bn has been withdrawn by customers since the bank applied to the Bank of England for emergency funds.

In a much-publicized post, the folks at Zero Hedge have alerted us that money market funds, one of the safest and most liquid investments available, may soon be neither safe nor liquid. The Obama administration, it turns out, wants to allow money market managers to halt redemptions. "Halt redemptions" is a nice way of saying that they can decide not to give you your money back, indefinitely.

From This Is the Government: Your Legal Right to Redeem Your Money Market Account Has Been Denied:

A key proposal in the overhaul of money market regulation suggests that money market fund managers will have the option to "suspend redemptions to allow for the orderly liquidation of fund assets." . . . The next time there is a market crash, and you try to withdraw what you thought was "absolutely" safe money, a back office person will get back to you saying, "Sorry - your money is now frozen. Bank runs have become illegal."

It was money market accounts, if you recall, which nearly imploded the US financial system in September of 2008. If you haven't seen the video of the Congressman who spilled the beans on this, you can see it here (under 2 minutes). He said:

On Thursday [September 18, 2008] at about 11 o'clock in the morning, the Federal Reserve noticed a tremendous draw-down of money market accounts in the United States, to the tune of 550 billion dollars was being drawn out in the matter of an hour or two.

The Treasury opened its window to help. They pumped 105 billion dollars into the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts, and announce a guarantee of $250,000 per account so there wouldn't be further panic out there. And that's what actually happened. If they had not done that, their estimation was that by two o'clock that afternoon, five and a half trillion dollars would have been drawn out of the money market system of the United States, would have collapsed the entire economy of the United States, and within 24 hours the world economy would have collapsed.

Now we talked at that time about what would happen if that happened. It would have been the end of our economic system and our political system as we know it.

The Obama administration want to prepare for the next leg down, the next panic in the markets, by making the same sort of run on money market accounts impossible. And I suspect that, more generally, if the banks get wind that we want our money out, rules will come into play that prevent withdrawals. In the UK, in October of 2008, they had their own near disaster, and reportedly came within 2 hours of a total banking shutdown, including ATMs.

It's hard to imagine such a shutdown, I know. Here's an old New York Times report on a surprise banking shutdown in Argentina in 1987:

The crisis that has crippled the Argentine economy for the past five months took a sudden turn for the worse over the weekend after the government suspended bank and foreign exchange operations indefinitely....

The sweeping embargo on banking and foreign exchange transactions, announced late Friday, goes into effect Monday and is expected to aggravate the economic crisis further.... A similar decision in December to freeze bank deposits led to huge street protests and food riots that left 27 people dead and ushered in a period of chaos in which the country had five presidents in less than two weeks.

Argentina had banking shutdowns of varying lengths over and over again, with long periods where withdrawals were possible but limited to small amounts. As I understand it, during the most recent currency crisis there were many who never were able to reclaim their savings in full. Some part of their money was simply confiscated by the banks.

And although it's not an explicit policy, it is reportedly already very difficult to obtain large sums of cash from banks, and it's been this way for a year or two. Banks have extremely little physical cash on hand. They resist withdrawals of as little as a few thousand dollars, and if a wealthy individual wanted to withdraw (say) $25,000 in cash on a given day, the bank would likely be unable to accommodate such a request.

For most Americans this may not be much of a consideration, as they might not have much money in the bank, let alone any savings in money market accounts. But if you happen to have savings, you might: 1) withdraw physical cash, 2) diversify holdings into several banks, 3) utilize smaller community banks or credit unions (with caution), 4) spend the money to pay down debts, or 5) make necessary purchases or home repairs today, rather than waiting.

I'm no fan of fiat paper currency, but there is likely to be a period of time when credit systems freeze and only physical cash is accepted. And we really have nowhere near enough cash to maintain commerce. Not even fricking close.

Let's do the math here. John Williams has estimated that the US might contain only $200 billion in physical cash, or less than $700 per person. (Most physical US dollars are in use outside the US, in the drug trade, in Russia, by Hezbollah... the list goes on.) Over the past decade, the estimated "velocity of money," or the number of times that a given dollar would change hands in a year, ranged from about 8.5 to 10.5. In other words, in order for everyone to pay their bills and make their purchases, each dollar had to change hands close to 10 times.

But hang on-- if we were using actual physical cash at that rate of money velocity, we'd only have $700/person x 10 exchanges/year = $7,000 to spend per year. Which clearly is not enough.

Having to go to solely physical cash -- let us fervently hope this never happens -- would be catastrophic. On the one hand the deflation would be crushing; commerce would crash and there would be shortages of everything. On the other hand, money velocity would skyrocket and presumably the printing presses -- the real, actual, printing presses -- would be run full throttle. At some point this would lead to price instability, with prices for the most necessary goods rising quickly.

Physical cash would be infinitely more valuable than some 0's and 1's at the bank that you can never withdraw. And in this case, I am using the term "infinitely" with mathematical precision, since the value of your binary digits would approach zero.

Don't wait till everyone else figures this out. By then the emergency banking shut-down will already be underway.