Daily Archives: April 1, 2012

The 15 Trillion Dollar Party


If you knew that you could live in luxury for the rest of your life but that by doing so it would absolutely destroy the future for your children, your grandchildren and your great-grandchildren would you do it?  Well, that is exactly what we are doing as a nation.  Over the past several decades, we have stolen 15 trillion dollars from future generations so that we could enjoy a dramatically inflated level of prosperity.  Our 15 trillion dollar party has been a lot of fun, but what we have done to our children and our grandchildren has been beyond criminal.  We ran up the greatest mountain of debt in the history of the planet and we are sticking them with the bill.  Sadly, both political parties have been responsible for the big spending that has been going on.  Both Democrats and Republicans have run up huge budget deficits when in power.  But instead of learning the hard lessons of the past, both political parties continue to vote for even more debt.  They would rather continue to steal trillions of dollars from future generations than have the party end and have to face the consequences.

And the consequences will be dramatic when the party ends.  During fiscal year 2011, the U.S. government spent 3.7 trillion dollars but it only brought in 2.4 trillion dollars.  That means that the U.S. government spent about 1.3 trillion dollars that it did not have.  It is important to understand that even if the U.S. government spent that 1.3 trillion dollars on really stupid things, that money still got into the pockets of ordinary Americans who then spent it on things like food, gas, housing, etc.  In turn, most of those that received money from providing those goods and services would spend it on other things.

So extra government spending can definitely stimulate the economy.  The problem is that we have been doing it permanently.  Since 1975, we have added more than 15 trillion dollars to the national debt.  This has fueled a false prosperity that was way beyond what we could afford.

If the U.S. government tried to go to a balanced budget now, our standard of living would crash and there would be riots in the streets.  The American people have been enjoying false prosperity for so long that they have lost any notion of what “normal” actually is.

Think of it this way.  If your family makes $40,000 this year and you spend an extra $20,000 on your credit cards, your family would be enjoying a false sense of prosperity.

You could do that year after year as long as the credit card companies keep loaning you more money.

But debt always catches up with you in the end.

It is the same thing with the United States.

We have been running up our national credit card balance and the interest payments have become quite painful.

The U.S. government spent over 454 billion dollars just on interest on the national debt during fiscal 2011.

That is 454 billion dollars that the people of the United States do not receive anything in return for.

So in order to keep up with interest on the national debt and to enjoy a standard of living that is beyond our means we now have to run deficits that are in excess of a trillion dollars every single year.

And a trillion dollars is a staggering amount of money.

If right this moment you went out and started spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.

Since Barack Obama was elected, the U.S. government has added about 5 trillion more dollars to the national debt.

That kind of debt is a recipe for national financial suicide.

How are we supposed to explain to our children that we are passing a debt of $15,579,852,946,457.64 down to them?

At this point, the United States government is responsible for more than a third of all the government debt in the entire world.

The 15 trillion dollar party that we have been enjoying has been amazing, but all of that debt is soon going to bring us a tremendous amount of pain.

And there is really no way out under our current financial system.  As our population ages, government budget deficits are projected to spiral wildly out of control in future years.

Already, entitlement programs are starting to cause massive problems.  For example, mandatory federal spending surpassed total federal revenue for the first time ever in fiscal 2011.  That was not supposed to happen until 50 years from now.

If the federal government used GAAP (Generally Accepted Accounting Principles) like all publicly-traded corporations are required to do, the situation would be much worse.

The truth is that the U.S. government never had a “balanced budget” during the end of the Clinton administration.  The federal government was borrowing gigantic amounts of money from the Social Security trust fund to finance regular government operations.  It was a big fraud.  Under GAAP, there would have been huge budget deficits during those years.

And even under the non-GAAP numbers used by the U.S. Treasury Department, the U.S. national debt still increased every single year during the Clinton administration.

So let’s get real.

Our national financial situation has always been much worse than we have been told.

It has been estimated that our current budget deficits would be in the neighborhood of 4 to 5 trillion dollars under GAAP.

And looking down the road a bit, we are facing a tsunami of unfunded liabilities that is absolutely nightmarish.

In other words, we have committed ourselves to tens of trillions of dollars of expenses that we don’t have any money for.

According to Professor Laurence J. Kotlikoff, the U.S. is facing a “fiscal gap” of over 200 trillion dollars in the coming years.  The following is a brief excerpt from a recent article that he did for CNN….

The government’s total indebtedness — its fiscal gap — now stands at $211 trillion, by my arithmetic. The fiscal gap is the difference, measured in present value, between all projected future spending obligations — including our huge defense expenditures and massive entitlement programs, as well as making interest and principal payments on the official debt — and all projected future taxes.

And it just keeps getting worse.  Recently it was revealed that Obamacare will add 17 trillion dollars more to our long-term unfunded obligations.

Basically what we have done is we have committed future generations to a life of endless debt slavery to pay for our debts and for the financial promises that we have made.

How could we be so stupid?

Of course this entire fraudulent system is going to completely collapse before we get too much farther down the road anyway.  Right now the whole thing is essentially being held together by chicken wire and duct tape.

Most Americans do not realize this, but the Federal Reserve bought approximately 61 percent of all government debt issued by the U.S. Treasury Department in 2011.

Normally, the Federal Reserve is not supposed to be doing this.

But right now there are not nearly enough buyers of U.S. government debt at the super low interest rates that the U.S. government wants to pay.  A recent Money News article explained that foreigners have been increasingly shying away from U.S. debt….

“In 2009, such foreign purchases of U.S. debt amounted to 6 percent of GDP and has since falled by over eighty percent to a paltry 0.9 percent.”

Instead of interest rates on U.S. Treasuries rising to attract additional investors, the U.S. Federal Reserve has been intervening to make up the difference.

This is essentially “monetizing the debt” and it is something that Ben Bernanke promised that he would never do.

But he is doing it.

If the Federal Reserve was not buying up all this debt, interest rates on U.S. debt would soar and so would U.S. government interest payments.

Yes, this is a giant Ponzi scheme and it cannot last for long.

Of course all of this could have been avoided if our politicians had not been running up such massive amounts of debt all these years.

Some have suggested that our problems could be solved by simply increasing taxes on the wealthy.

Well, the truth is that the top 5 percent of all income earners already pay nearly 50 percent of all federal taxes and soaking them even more will not even come close to solving the federal budget crisis.

For example, if Bill Gates gave every single penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for 15 days.

And as Bill Whittle has shown, you could take every single penny that every American earns above $250,000 and it would only fund about 38 percent of the federal budget.

So taxing the wealthy will certainly not solve all of our problems.

In fact, when you tax the wealthy and the “somewhat wealthy” it slows economic growth in a number of different ways.

Number one, they have less money to spend into the economy.

Number two, they have less money to invest in business activities.

Number three, it gives wealthy individuals and corporations more of an incentive to move out of the United States.  As I have written about previously, the global elite are already hiding about 18 trillion dollars in offshore banks.  The U.S. government keeps trying to tap into all of that offshore wealth, but the elite always seem to be a few steps ahead of the game.

Yes, we should try to close loopholes in the tax system, but the truth is that the root cause of our problem is that the federal government is simply spending way, way too much money.

Right now, spending by the federal government accounts for about 24 percent of GDP.  Back in 2001, it accounted for just 18 percent.

But our politicians always want to put off spending cuts for another day because they know that immediate spending cuts would really hurt the economy.

For example, just check out this recent quote from White House Chief of Staff Jack Lew….

“The time for austerity is not today,” Lew told NBC News “Meet the Press.” “If we were to put in austerity measures right now, it would take the economy in the wrong way.”

Yes, the Obama administration definitely does not want to hurt the economy with an election coming up in a few months.

So when will it be time to seriously cut government spending?

The day never seems to arrive.

But even though the federal government has been pumping more than a trillion extra dollars into the economy every year, the economy has not shown much improvement.  The percentage of working age Americans that have jobs has barely budged for over two years.

Yes, the policies of the Obama administration have stabilized the U.S. economy for the moment, but if he was actually going to tell the truth he would say something like this….

“By mortgaging the future of our children and our grand-children I have stabilized our economic statistics for the short-term.   Unfortunately, I am going to have to continue to financially abuse future generations to keep us from falling into another Great Depression.  Meanwhile, I am making our long-term financial problems far, far worse.  But the most important thing is that I win re-election so that I can continue to be president.  Thank you for being so selfish and so willing to destroy the future of your children.  Vote for me in 2012 and let the party continue!”

Unfortunately, the party is going to come crashing to an end at some point.

Right now, the global financial system is based on the U.S. dollar and on U.S. government debt.

There will come a time when the rest of the world is going to get sick and tired of watching this Ponzi scheme play out and they are going to completely lose faith in the U.S. dollar and in U.S. government debt.  In fact, there are already signs that this is starting to happen.

When faith in our currency and our debt is completely gone, it will be nearly impossible to get back and the game will be over.

The false prosperity that we are experiencing right now is about as good as things are going to get.

Enjoy it while you still can, because when it is gone that will be the end of it.

Both the Democrats and the Republicans have failed us.  They played fast and loose with our future and they never planned for the long-term.

Now we are facing a collapse of unprecedented magnitude that most Americans will never even see coming.

A horrifying economic collapse is coming.

You better get ready for it.


Insight: In Sinai, militant Islam flourishes – quietly


By Tamim Elyan
NORTH SINAI, Egypt | Sun Apr 1, 2012 6:08am EDT

(Reuters) – The group of 50 young men who had blocked off access to a small international military base in the Sinai desert would say nothing of who they were but their appearance held a few clues.

Dressed in army fatigues and armed with AK-47s, they wore the long beards of the hardline Islamists who are increasingly a law unto themselves in this part of Egypt.


Quietly, barely noticed by outsiders fascinated by upheavals in Cairo and other Arab capitals, they are building a presence in Sinai that might offer a new haven for anti-Western militancy at the strategic junction of the Mediterranean, Africa and Asia.

When finally one of the men broke a silence that hung heavy on the barren plain, it was to explain to a reporter their demands: for the government to release five comrades jailed for bombings of tourist resorts in Sinai more than six years ago.

“We are ready to die under tanks for this,” he said, refusing to give his name and saying little else beyond muttering Islamic mottos as he toured the positions the militants had established to surround the base, inconveniencing dozens of troops from the Multinational Observer Force, a unit set up in 1979 to monitor Egypt’s U.S.-brokered peace treaty with Israel.

Under a rare rainy sky on a Thursday night in March, the men would only speak with the permission of a man they simply referred to as “sheikh”. A wolf’s cry pierced the otherwise tranquil scene outside the remote base that is home to foreign peace observers including Fijians, Americans and Spaniards.

Not a shot was fired in anger, however, and the next day, the group lifted their eight-day siege. It was not because they feared arrest or attack by the authorities. But instead they had secured their demands. The government agreed to free the men accused of being part of a group which carried out the 2004 and 2005 attacks that killed some 125 people at the Red Sea beach resorts of Sharm el-Sheikh, Dahab and Taba.

It was a scenario unthinkable a year or so ago.

But with Hosni Mubarak‘s removal from power after three decades, government authority has collapsed in much of Sinai, leaving a vacuum where Islamist militant groups are flourishing, posing a security risk to Egypt, neighbors including Israel, and the Suez Canal, the busy waterway linking Asia and Europe.

In Sinai, an arid peninsula the size of Ireland but home to fewer than a million people, groups at the extreme fringe of the Islamist spectrum are expanding, even as Islamists long outlawed by the state enter the political mainstream in Cairo, where they now dominate parliament and are poised to enter government.

In towns where police stations have stood deserted since Mubarak was swept from office after a popular revolt, hardline Islamists are imposing their own authority. They are preaching a strict interpretation of Islam that has brought with it religious intolerance of a kind that shocks even some of the more conservative forces in the Muslim world.

Hardliners were blamed for bomb attack last year on a shrine revered by Sufi Muslim mystics – the kind of attack more familiar in restive Pakistan Egypt.

Though some of the militants here appear to be inspired by al Qaeda, experts do not yet believe the network is operating in the peninsula that separates Africa and Asia. But as time passes and the Egyptian state in far-off Cairo struggles to assert itself, there seems a growing risk they may align more closely with the global movement now led by Ayman al-Zawahiri, himself an Egyptian, though long assumed to be based abroad.

Egypt has already paid an economic price for lawlessness in Sinai – a pipeline exporting natural gas eastwards to Jordan and Israel has been blown up 13 times in the last year.

There are fears the economic impact could run deeper still. With its Red Sea resorts, Sinai’s southern province is one of the main assets of a tourist industry that employs one in eight Egyptians and would be hit hard by more insecurity.

“I’d say there is genuine potential for this threat to grow and become a much bigger issue than it is now,” said Henri Wilkinson, head of intelligence and analysis at the Risk Advisory group.

“I suspect al Qaeda … sees great opportunity in Sinai.”


For now, militant Islamist influence has been restricted to mostly impoverished towns in northern Sinai. Some are drawing on the example of groups that made Egypt a pioneer in the world of extremism as they seek to impose their vision of Islamic law.

One group calls itself Al-Tawhid wal Jihad, the name first taken by al Qaeda’s affiliate in Iraq. Blamed for the Sinai bomb attacks in 2004 and 2005, the group was accused last year of launching an attack on a police station in the town of el-Arish in which five members of the Egyptian security forces were killed.

Another is Takfir wal Higra, a name first heard in Egypt in the 1960s when the country emerged as a breeding ground for militant Islamist ideas that spread beyond its borders and supplied ideological fuel for al Qaeda and others.

Takfir wal Higra believes that even Muslims, if they do not share its beliefs, are infidels. The group’s influence has grown in northern Sinai in the last year, locals say. “Sometimes violence is the way to achieve your objectives,” said a man in his 30s who joined the group a year ago.

He comes from a mountain village outside el-Arish, the main town in northern Sinai where residents have long complained of neglect by the Egyptian state.

Wearing a short beard, jeans and a black jacket, the Takfir wal Higra recruit declined to be named as he recounted stories of how members of the group from one family had forced their parents to separate after declaring their father an infidel.

“I am ready to participate in blowing up the pipelines … attacking police stations,” he said. But when pressed about his goals, he appeared uncertain, blending vague talk of freeing Jerusalem from Israeli control with the idea of establishing an “Islamic emirate” in the Sinai Peninsula.

In Sheikh Zuweid, a few kilometers (miles) from the border with the Palestinian Gaza Strip, that idea appears to have become a partial reality.

A newly renovated but empty police station in the town’s central square is a powerful symbol of the collapse of state control. Slogans daubed on walls declare Sinai an independent Islamic state.


“The police left the city on January 29, 2011 at 4 p.m. heading to Cairo and never came back,” said Saeed Eteg, a liberal political activist from Sheikh Zuweid, recalling the day the state disappeared at the height of the uprising against Mubarak.

Sheikh Zuweid is a collection of mud brick buildings connected by a network of predominantly dirt roads. Locals say both state neglect and the collapse of traditional structures of tribal authority have allowed the spread of hardline influence.

Here, clerics apply their own interpretation of Islamic law at sharia courts independent of the state. “Decisions are for Allah alone,” declares a banner outside one of the courts.

“People need someone to solve their disputes and they found the answer in religious courts,” said Hamden Abu Faisal, a Salafi cleric who doubles as a judge in Sheikh Zuweid.

The Salafis are Muslims with a puritanical approach to their faith inspired by the official Wahhabi ideology of Saudi Arabia. Their brand of political Islam is a step removed from the more pragmatic, modernist Muslim Brotherhood, the biggest party in the Egyptian parliament, which is more moderate in its approach.

A Salafi group, the Nour Party, is the second largest party in the parliament following Egypt’s historic free elections late last year. It eschews violence in pursuit of its goal of tighter application of sharia religious law in the country of 80 million.

But even the Nour Party is beyond the pale for some in Sheikh Zuweid. Mohsen Abu Hassan, a member of the party, says he was declared an infidel by one young man, a member of Takfir wal Higra, during an election campaign rally in the town last year.

“There is a phenomenon we must confront,” Abu Hassan, now a member of parliament in Cairo, told Reuters.

“We shouldn’t turn a blind eye.”

A pile of rubble at a local shrine bears witness to the lengths to which zealots will go to impose their vision on how religion should be practiced here. On May 15 last year, five men blew up the shrine revered by Sufi mystics, whose beliefs are viewed as heretical by the puritanical Islamists.

A white flag raised by the Sufis flutters over what is left of the shrine of Sheikh Zuweid, viewed as one of the earliest Muslims in Egypt and after whom the town is named.


Abdel Wahab Mabrouk, governor of North Sinai province, says religious groups are behind the trouble but denies the presence of al Qaeda or what he described as other “terrorist elements”.

But Israel is worried. It is building a barrier along its 266 km (165 mile) border with the peninsula. One Israeli officer described the frontier today as “a hot border”. Last August, Israel blamed Islamist militants from Sinai for attacks which killed eight Israelis. An Israeli counterstrike which left five Egyptian border guards dead did nothing to ease tense relations.

Israeli authority held sway in Sinai after it captured the region in the 1967 Middle East war. A theatre for more tank battles in 1973, the peninsula was restored to Egyptian control by the 1979 peace agreement brokered by the United States.

One of Israel’s concerns is that its Palestinian enemies in the Gaza Strip, including the governing Hamas Islamists, could use Sinai as a back door for attacks on southern Israel.

But the ideas spreading in Sinai could also present a threat to stability in Egypt itself and to Hamas, which looks to the Muslim Brotherhood for ideological inspiration and which has waged its own war against al Qaeda-inspired militancy in Gaza.

As in other waves of Islamist militancy that have swept Egypt in the past decades – it was Islamist gunmen who killed peacemaking President Anwar Sadat in 1981 – experts believe heavy-handed police tactics have only made the problem worse.

The security forces’ campaign to find the culprits in the 2004 and 2005 Sinai bombings has left a bitter taste. Police staged mass arrests, even rounding up suspects’ wives to force them to hand themselves in.


For the most part, South Sinai is a different story from the northern region. Bedouin in the mountainous south on the Red Sea maintain a nomadic lifestyle that differs to the urban development in the north, where many have settled in towns along the Mediterranean coast and have mingled with outsiders from Egypt’s Nile Valley heartlands and from neighboring Gaza.

Yet in southern Sinai, which is more sparsely populated than the north, Bedouin have similarly been alienated by years of state neglect and oppression. They too are staging acts of rebellion, though not in the Islamist form found in the north.

Seeking the release of jailed relatives, Bedouin have kidnapped two Americans, three Koreans and two Brazilians in the last two months, believing it is the only way they can get the Cairo government’s attention. They did not ask for ransoms and all were released unharmed after talks with the authorities.

The Bedouin say traditional tribal structures in the south have guarded against the infiltration of violent militant ideas. But their grievances against the state are just as profound.

The Bedouin say they have not felt the benefit of the income brought by tourist resorts such as Sharm el-Sheikh, which have given many thousands of jobs to Egyptians from the Nile Valley.

“We don’t feel like Egyptian citizens,” said Sheikh Ahmed Hussein, a member of the Qararsha tribe, one of the biggest in the southern Sinai. A government report compiled in 2010 said a quarter of all Sinai’s population of some 600,000 did not carry a national ID card. The Bedouin, who make up the bulk of that number, are not allowed to own land or serve in the army.

Sensing the urgency of the problem, the military-appointed government of Prime Minister Kamal al-Ganzouri has taken action in the few months since it took office in November.

Seeking to alleviate tensions, Ganzouri has ordered the retrial of those imprisoned after the Sinai bombings. He also ordered the revival of development projects in the region, including a railway and a canal to supply water to central Sinai.

Abdullah Abu Ghama, a member of parliament from Sinai, says it cannot come too soon:

“The state has to speed up the process of development,” he said. “If not, the mother of all problems will occur and extremists will increase in numbers.”

(Editing by Tom Perry and Alastair Macdonald)

Obama energy officials funded solar firms despite ‘junk bond’ ratings from S&P, Fitch


With oil pump jacks as a backdrop, President Barack Obama speaks at an oil and gas field on federal lands Wednesday, March 21, 2012, in Maljamar, N.M. (AP Photo/Ross D. Franklin)By Gene J. Koprowski

The U.S. Department of Energy backed hundreds of millions of dollars in loans for discredited solar power start-ups whose corporate debt was already sullied with “junk” ratings by Standard & Poor’s and Fitch Ratings, two of the world’s leading credit agencies, a federal government investigation has shown.

Despite the finding, Energy Secretary Steven Chu vigorously defended the ethics of his agency in a hearing last week held by House Oversight Committee Chairman Rep. Darrell Issa.

Details are emerging this week about the Energy Department’s practices that indicate the agency spent a disproportionate amount of funding on these tainted solar power projects.

Congressional aides interviewed personnel at Fitch and S&P, and officials inside Obama’s Energy Department, as part of their investigation.

A company called Solopower was cited in a “dire” warning by S&P, which accurately forecast that the firm would “fail to meet its debt obligations.” Nonetheless, it received $170 million in federal funding guarantees, investigators told The Daily Caller.

Another company, Abound Solar, was approved for a $400 million loan guarantee by Obama officials, investigators said. Fitch Ratings, however, had earlier assigned a “junk credit” rating to Abound. Fitch deemed the firm “highly speculative” and “lagging in technology” behind its competitors.

It was also rated less creditworthy than Solyndra, another infamous administration solar power investment, which caused scandal for the White House last year when it declared bankruptcy.


%d bloggers like this: