Jesse’s Take is Identical to Mine (Or, is it the other Way Round?)
First, futures update: Dow futures are down 289 and S&P futures are down about 32. I would say, it is not as bad as many feared. We just have to wait till Monday and see how things will shape up. [I would venture to guess, the markets will be down big at the open and immediately recover.]
Jesse is a veteran of Wall Street. I believe he is retired and invests his own money. He always writes thought provoking essays, often with supporting data. Being a gold bug, off late he has been putting up only gold charts. Jesse broke his silence today (emphasis mine).
07 August 2011
It’s the Unfunded Wars and the Financial Fraud, and the Unwillingness to Reform
Yes, the US has some very real long term issues with Social Security and Medicare.
Social Security is being strangled by the refusal to raise the income limit on the Social Security withholding tax in response to the gradual creep of inflation. If this limit was raised periodically the Social Security ‘problem’ would be resolved.
One could consider ‘means-testing,’ not providing benefits to the better off, but that strikes to the heart of the program, which is not an ‘entitlement’ but as an insurance trust, distributed uniformly to all participants based in part on their contributions over the years.
Medicare and in particular the drug portions of the program added by the Bush II administration are driving costs much higher. And this is more of a problem because of the structural cost problems in US healthcare system. Big Pharma in the US is a powerful lobbying force, and Americans pay MUCH higher costs per benefit for their health care services. This is inhibiting the steps that are needed to restructure the US healthcare system.
But Social Security and Medicare, without the drug program, have not substantially changed since the 1990’s, when the US was running a budget surplus, and then Fed Chairman Greenspan was reassuring the public that the Fed had a plan to deal with the lack of debt.
So what changed?
The repeal of Glass-Steagall and the growth of unregulated financial products, the co-opting of the regulatory agencies, the growth of corporate influence in Washington, and two unfunded and very costly wars of long duration, based largely on lies and distortions based on a terror attack by a small group of people, coupled with tax cuts for the wealthy.
There is relatively little discussion, much less investigation, indictments and convictions, from one of the largest financial frauds in history.
And within twelve months of the crisis breaking, Wall Street bonuses were back to record levels, even as the rest of the country began its long downward spiral into debt, downgrade, and despair.
That is the long and short of it. And it bodes ill that these issues are so infrequently mentioned in the political and economic discussions circling Washington and New York today.
Rational discussion and factual analysis has been overwhelmed by a well funded program of propaganda and sloganeering, and bought and paid for politicians and media which serve to direct the discussions according to the program of the monied interests.
And this is why the outlook for the US is so negative. Governance has failed, the system has been thoroughly corrupted or co-opted, and the planning and discussions cannot gain traction. Some have recently referred to Obama’s clarity gap because it is so unclear what he stands for, what principles he is willing to fight for.
The politicians of both parties, the media, and the business leadership are caught in a credibility trap in which the root causes cannot even be discussed, must less addressed, because they have all been involved in or benefited from a massive injustice in the financial frauds. They are complicit, and cannot act openly and honestly for fear of losing control of the debate, and of subsequent discovery.
“Every thing secret degenerates, even the administration of justice; nothing is safe that does not show how it can bear discussion and publicity.” -Lord ActonAnd who do we see on American television this morning, providing economic advice and promoting the Wall Street prescription for a cure through a return to more bank deregulation? The angel of economic death, Alan Greenspan, a man without shame or honor as one of the great authors of the misrepresentations and mismanagement that led US into the financial crisis which rewarded the few at the expense of the many.
The real issue at the end of the day is reform. The US has been led down a dark alley and strangled in what history may recognize as a financial coup d’etat, and a campaign of economic war against the common people.
My thoughts, exactly.