August 23, 2010
By now, you are probably more than familiar with the “backdoor bailouts” of the Wall Street Banks – the most infamous of which, Maiden Lane III, included a $13 billion gift to Goldman Sachs as a counterparty to AIG’s bad paper. Despite Goldman’s claims of having repaid the money it received from TARP, the $13 billion obtained via Maiden Lane III was never repaid. Goldman needed it for bonuses.
On August 21, my favorite reporter for The New York Times, Gretchen Morgenson, discussed another “bank bailout”: a “secret tax” that diverts money to banks at a cost of approximately $350 billion per year to investors and savers. Here’s how it works:
Sharply cutting interest rates vastly increases banks’ profits by widening the spread between what they pay to depositors and what they receive from borrowers. As such, the Fed’s zero-interest-rate policy is yet another government bailout for the very industry that drove the economy to the brink.
Todd E. Petzel, chief investment officer at Offit Capital Advisors, a private wealth management concern, characterizes the Fed’s interest rate policy as an invisible tax that costs savers and investors roughly $350 billion a year. This tax is stifling consumption, Mr. Petzel argues, and is pushing investors to reach for yields in riskier securities that they wouldn’t otherwise go near.
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“If we thought this zero-interest-rate policy was lowering people’s credit card bills it would be one thing but it doesn’t,” he said. Neither does it seem to be resulting in increased lending by the banks. “It’s a policy matter that people are not focusing on,” Mr. Petzel added.
One reason it’s not a priority is that savers and people living on fixed incomes have no voice in Washington. The banks, meanwhile, waltz around town with megaphones.
Savers aren’t the only losers in this situation; underfunded pensions and crippled endowments are as well.
Many commentators have pointed out that zero-interest-rate-policy (often referred to as “ZIRP”) was responsible for the stock market rally that began in the Spring of 2009. Bert Dohmen made this observation for Forbes back on October 30, 2009:
There is very little, if any, investment buying. In my view, we are seeing a mini-bubble in the stock market, fueled by ZIRP, the “zero interest rate policy” of the Fed.
At this point, retail investors (the “mom and pop” customers of discount brokerage firms) are no longer impressed. After the “flash crash” of May 6 and the revelations about stock market manipulation by high-frequency trading (HFT), retail investors are now avoiding mutual funds. Graham Bowley’s recent report for The New York Times has been quoted and re-published by a number of news outlets. Here is the ugly truth:
Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year, according to the Investment Company Institute, the mutual fund industry trade group. Now many are choosing investments they deem safer, like bonds.
The pretext of providing “liquidity” to the stock markets is no longer viable. The only remaining reasons for continuing ZIRP are to mitigate escalating deficits and stopping the spiral of deflation. Whether or not that strategy works, one thing is for certain: ZIRP is enriching the banks — at the public’s expense.
Keeping Americans Dumb
August 26, 2010
Much has been written lately about the fact that Americans are becoming increasingly dumb. How has this happened? Some commentators have expressed the opinion that young people spend too much time playing video games and not enough time reading. Whatever the cause, the statistics are shocking. Lloyd de Vries recently did a report for CBS News concerning a Roper Poll of people aged 18-24, conducted for National Geographic. Despite the wall-to-wall coverage of Hurricane Katrina, one-third of those polled could not locate Louisiana on a map. Only 50 percent could locate New York State on a map. Sixty percent could not locate Iraq on a map of the Middle East. A recent Gallup Poll revealed more of the same:
My favorite result from that poll was the revelation that 18 percent of the respondents believe that the sun revolves around the earth. Roll over, Copernicus!
After reading so much of the news coverage concerning the Deepwater Horizon catastrophe in the Gulf of Mexico (it’s west of Florida and south of the Alabama – Mississippi border) I’m beginning to suspect that the news and entertainment industries are responsible for dumbing-down Americans. While we’re at it – we should be mindful of the role of the United States government in this effort. Consider what our President said on August 4th:
Beth Daley of the Boston Globe gave us another example of what our government told us about all that oil:
On August 20, we learned about the falsity of the government’s claims that the oil had magically disappeared. The Washington Post put it this way:
As time drags on, it is becoming more apparent that both BP and the federal government are deliberately trying to conceal the extent of the damage caused by the Deepwater Horizon blowout. Lisa Hooper-Bui is a professor of entomology at Louisiana State University. She recently wrote an op-ed piece for The New York Times, discussing the frustration experienced by scientists (including herself) who are attempting to measure the impact of this event on the environment. As it turns out, unless you know “the secret handshake” – you might as well give up because you ain’t findin’ out nuttin’:
America’s dumbed-down “sheeple” have been conditioned by the news media to disregard accounts of cover-ups, unless such accounts have been authorized by the corporate sponsors of those news outlets. The expression “conspiracy theory” is invoked to serve as a stamp of falsehood on any factual account running contrary to a mainstream-approved narrative. The usual tactics involve the use of such terms as “grassy knoll” or “Oliver Stone” as though the evidence disputing the “single bullet theory” of President Kennedy’s assassination has been conclusively discredited and that anyone who rejects the Warren Report is a fool. (In fact, the most recent of the thousands of books on this subject — Head Shot by physicist G. Paul Chambers, PhD — demonstrates that the physics behind the lone-gunman theory is not only wrong — but scientifically impossible.)
Uncritical reliance of the authority of the “mainstream” news media (and – for that matter – whatever can be found on the Internet) has also served to “dumb-down” Americans in a big way. The horizons of our reality have been crimped to exclude “troublesome” information and our attention has been focused on American Idol drivel. I was reminded of another example of the “conspiracy theory” stigma when I stumbled across this piece, appearing in the Financial Times, which was co-authored by President Clinton’s former Chief of Staff, John Podesta. The article presented a great argument for allowing the Bush tax cuts to expire for the wealthiest two percent of households. When I saw Podesta’s name, I was reminded of his position on another so-called, “cover-up conspiracy theory” — the subject of UFOs and what the government really knows about them. Here is a video clip of John Podesta making the case for disclosure of data compiled by the United States government on the subject. In a speech before the National Press Club on November 14, 2007, Mr. Podesta said this:
Yes, the truth is out there — but if you limit your information intake to what you are fed by the mainstream media (or any other authoritarian source) – you might not find it.